Limelight Networks Reports Financial Results for the Third Quarter of 2020

• Record third quarter revenue of $59.2 million, up 15% year over year
• GAAP basic EPS of $(0.03) and Non-GAAP EPS of $(0.01)
• Adjusted EBITDA of $5.6 million
• Issued $125.0 million senior convertible notes due 2025

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of video delivery and edge cloud services, today reported record revenue of $59.2 million for the third quarter of 2020, up 15 percent, compared to $51.3 million in the third quarter of 2019.

Limelight reported a GAAP net loss of $4.0 million, or $(0.03) per basic share for the third quarter of 2020, compared to a net loss of $2.8 million, or $(0.02) per basic share in the third quarter of 2019. GAAP net loss included $1.7 million of interest expense related to our convertible notes issued during the third quarter of 2020.

Non-GAAP net loss was $1.2 million or $(0.01) per basic share for the third quarter of 2020, compared to non-GAAP net income of $0.6 million, or $0.01 per basic share in the third quarter of 2019. Non-GAAP net loss excluded $0.9 million of interest expense related to our convertible notes issued during the third quarter of 2020.

EBITDA was $3.7 million for the third quarter of 2020, compared to $2.5 million for the third quarter of 2019. Adjusted EBITDA was $5.6 million for the third quarter of 2020 compared to $5.8 million for the third quarter of 2019.

Limelight ended the third quarter with 620 employees and employee equivalents, down from 627 at the end of the second quarter of 2020, and up from 609 at the end of the third quarter of 2019.

“Q3 was a very strong quarter for us on a number of fronts as we experienced our second highest quarter of revenue ever and made material progress across our strategic imperatives. Most notable in the quarter was the expansion of our edge capabilities with the launch of Edge Functions and gains in our automated traffic engineering efforts to optimize network performance and customer experience. As we have consistently done all year, we continue to make investments in the business to support our strategy of doubling down on edge innovation with focus on video, media and gaming customers. We are on track to deliver record revenue and revenue growth for 2020, along with meaningful increases across multiple financial and operational metrics. We are well-positioned to continue delivering value for our customers and growth for our shareholders.” said Robert Lento, Chief Executive Officer.

We are leaving our full-year 2020 guidance unchanged, except for the impact of the convertible debt offering interest expense on GAAP and Non-GAAP EPS. The ranges for GAAP and Non-GAAP EPS have been adjusted by $0.03 and $0.02, respectively.

Limelight Networks, Inc.
2020 Guidance
	Current Guidance	Previous Guidance	Actual 2019
Revenue	$230 to $240 million	$230 to $240 million	$200.6 million
GAAP Basic EPS	$(0.13) to $(0.03)	$(0.10) to break-even	$(0.14)
Non-GAAP EPS	$(0.02) to $0.08	Break-even to $0.10	$(0.02)
Adjusted EBITDA	$28 to $35 million	$28 to $35 million	$18.1 million
Capital expenditures	$25 to $30 million	$25 to $30 million	$34.7 million

Financial Tables

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
	September 30,			June 30,			December 31,
		2020			2020			2019
	(Unaudited)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	75,169		$	18,200		$	18,335
Marketable securities		49,623			-			-
Accounts receivable, net		42,222			45,246			34,476
Income taxes receivable		81			68			82
Prepaid expenses and other current assets		12,561			10,241			9,920
Total current assets		179,656			73,755			62,813
Property and equipment, net		47,493			48,908			46,136
Operating lease right of use assets		10,844			11,449			12,842
Marketable securities, less current portion		40			40			40
Deferred income taxes		1,428			1,328			1,319
Goodwill		77,126			77,113			77,102
Other assets		7,459			7,915			9,117
Total assets	$	324,046		$	220,508		$	209,369
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12,437		$	17,004		$	12,020
Deferred revenue		797			934			976
Operating lease liability obligations		2,654			2,390			2,056
Income taxes payable		153			169			178
Other current liabilities		17,584			17,028			13,398
Total current liabilities		33,625			37,525			28,628
Convertible senior notes, net		99,937			-			-
Operating lease liability obligations, less current portions		11,745			12,316			13,488
Deferred income taxes		251			283			239
Deferred revenue, less current portion		230			265			161
Other long-term liabilities		579			304			316
Total liabilities		146,367			50,693			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; 122,824, 121,692 and 118,368 shares issued and
outstanding at September 30, 2020, June 30, 2020 and December 31, 2019, respectively		123			122			118
Additional paid-in capital		552,559			541,363			530,285
Accumulated other comprehensive loss		(9,379	)		(10,031	)		(9,210	)
Accumulated deficit		(365,624	)		(361,639	)		(354,656	)
Total stockholders' equity		177,679			169,815			166,537
Total liabilities and stockholders' equity	$	324,046		$	220,508		$	209,369

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
	Three Months Ended													Nine Months Ended
	September 30,			June 30,			Percent Change		September 30,			Percent Change		September 30,			September 30,			Percent Change
	2020			2020					2019					2020			2019
Revenue	$	59,243		$	58,546		1	%	$	51,321		15	%	$	174,801		$	140,505		24	%
Cost of revenue:
Cost of services (1)		31,905			29,389		9	%		25,602		25	%		92,406			71,311		30	%
Depreciation - network		5,602			5,360		5	%		4,961		13	%		16,112			13,905		16	%
Total cost of revenue		37,507			34,749		8	%		30,563		23	%		108,518			85,216		27	%
Gross profit		21,736			23,797		-9	%		20,758		5	%		66,283			55,289		20	%
Gross profit percentage		36.7	%		40.6	%				40.4	%				37.9	%		39.4	%
Operating expenses:
General and administrative (1)		7,751			8,187		-5	%		7,356		5	%		23,820			23,231		3	%
Sales and marketing (1)		10,456			10,929		-4	%		10,713		-2	%		33,279			32,679		2	%
Research & development (1)		5,425			5,572		-3	%		5,160		5	%		16,614			17,075		-3	%
Depreciation and amortization		384			323		19	%		172		123	%		1,049			545		92	%
Total operating expenses		24,016			25,011		-4	%		23,401		3	%		74,762			73,530		2	%
Operating loss		(2,280	)		(1,214	)	NM			(2,643	)	NM			(8,479	)		(18,241	)	NM
Other income (expense):
Interest expense		(1,674	)		(71	)	NM			(10	)	NM			(1,756	)		(30	)	NM
Interest income		10			6		NM			81		NM			40			402		NM
Other, net		25			(312	)	NM			(13	)	NM			(396	)		(89	)	NM
Total other (expense) income		(1,639	)		(377	)	NM			58		NM			(2,112	)		283		NM
Loss before income taxes		(3,919	)		(1,591	)	NM			(2,585	)	NM			(10,591	)		(17,958	)	NM
Income tax expense		66			136		NM			166		NM			377			544		NM
Net loss	$	(3,985	)	$	(1,727	)	NM		$	(2,751	)	NM		$	(10,968	)	$	(18,502	)	NM
Net loss per share:
Basic	$	(0.03	)	$	(0.01	)			$	(0.02	)			$	(0.09	)	$	(0.16	)
Diluted	$	(0.03	)	$	(0.01	)			$	(0.02	)			$	(0.09	)	$	(0.16	)
Weighted average shares used in per share calculation:
Basic		122,363			120,230					116,270					120,519			115,318
Diluted		122,363			120,230					116,270					120,519			115,318
(1) Includes share-based compensation (see supplemental table for figures)

LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
	Three Months Ended								Nine Months Ended
	September 30,		June 30,			September 30,			September 30,		September 30,
	2020		2020			2019			2020		2019
Share-based compensation:
Cost of services	$	130	$	792		$	331		$	1,685	$	1,119
General and administrative		1,272		2,257			2,006			5,770		6,240
Sales and marketing		206		1,322			584			2,756		1,666
Research and development		315		880			437			2,027		1,438
Total share-based compensation	$	1,923	$	5,251		$	3,358		$	12,238	$	10,463
Depreciation and amortization:
Network-related depreciation	$	5,602	$	5,360		$	4,961		$	16,112	$	13,905
Other depreciation and amortization		384		323			172			1,049		545
Total depreciation and amortization	$	5,986	$	5,683		$	5,133		$	17,161	$	14,450
Net increase (decrease) in cash, cash equivalents and marketable securities:	$	106,592	$	(3,221	)	$	(10,872	)	$	106,457	$	(32,416	)
End of period statistics:
Approximate number of active customers		534		560			609			534		609
Number of employees and employee equivalents		620		627			609			620		609

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
			Three Months Ended									Nine Months Ended
			September 30,			June 30,			September 30,			September 30,			September 30,
				2020			2020			2019			2020			2019
Operating activities
	Net loss		$	(3,985	)	$	(1,727	)	$	(2,751	)	$	(10,968	)	$	(18,502	)
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization		5,986			5,683			5,133			17,161			14,450
		Share-based compensation		1,923			5,251			3,358			12,238			10,463
		Foreign currency remeasurement loss (gain)		27			257			21			(113	)		(104	)
		Deferred income taxes		(95	)		59			(61	)		(80	)		(30	)
		Gain on sale of property and equipment		(1	)		-			(5	)		(1	)		(56	)
		Accounts receivable charges		163			155			580			476			1,274
		Amortization of premium on marketable securities		87			-			9			87			29
		Noncash interest expense		868			-			-			868			-
		Changes in operating assets and liabilities:
		Accounts receivable		2,862			(10,798	)		(5,300	)		(8,221	)		(11,051	)
		Prepaid expenses and other current assets		(2,232	)		986			(885	)		(2,679	)		(777	)
		Income taxes receivable		(10	)		10			45			3			43
		Other assets		757			1,121			781			2,504			(2,641	)
		Accounts payable and other current liabilities		1,222			1,045			(2,798	)		8,159			3,675
		Deferred revenue		(172	)		313			(112	)		(109	)		(557	)
		Income taxes payable		(17	)		-			61			(15	)		204
		Payments related to litigation, net		-			-			-			-			(3,040	)
		Other long term liabilities		276			(15	)		16			265			(137	)
	Net cash provided by (used in) operating activities			7,659			2,340			(1,908	)		19,575			(6,757	)
Investing activities
		Purchases of marketable securities		(52,690	)		-			-			(52,690	)		(10,279	)
		Sale and maturities of marketable securities		2,900			-			1,000			2,900			32,153
		Purchases of property and equipment		(7,180	)		(8,085	)		(7,750	)		(22,128	)		(24,224	)
		Proceeds from sale of property and equipment		1			-			5			1			51
	Net cash provided by (used in) investing activities			(56,969	)		(8,085	)		(6,745	)		(71,917	)		(2,299	)
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		(784	)		-			-			(784	)		-
		Payment of employee tax withholdings related to restricted stock vesting		(1,041	)		(1,430	)		(1,015	)		(3,987	)		(2,528	)
		Proceeds from employee stock plans		2,598			3,954			13			8,691			1,116
	Net cash provided by (used in) financing activities			105,960			2,524			(1,002	)		109,107			(1,412	)
	Effect of exchange rate changes on cash and cash equivalents			319			-			(211	)		69			(83	)
Net increase (decrease) in cash and cash equivalents				56,969			(3,221	)		(9,866	)		56,834			(10,551	)
Cash and cash equivalents, beginning of period				18,200			21,421			24,698			18,335			25,383
Cash and cash equivalents, end of period			$	75,169		$	18,200		$	14,832		$	75,169		$	14,832

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 Loss to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)
	Three Months Ended																		Nine Months Ended
	September 30, 2020						June 30, 2020						September 30, 2019						September 30, 2020						September 30, 2019
	Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share			Amount			Per Share
U.S. GAAP net loss	$	(3,985	)	$	(0.03	)	$	(1,727	)	$	(0.01	)	$	(2,751	)	$	(0.02	)	$	(10,968	)	$	(0.09	)	$	(18,502	)	$	(0.16	)
Share-based compensation		1,923			0.02			5,251			0.04			3,358			0.03			12,238			0.10			10,463			0.09
Non-cash interest expense		868			0.01			-			-			-			-			868			0.01			-			-
Non-GAAP net (loss) income	$	(1,194	)	$	(0.01	)	$	3,524		$	0.03		$	607		$	0.01		$	2,138		$	0.02		$	(8,039	)	$	(0.07	)
Weighted average basic shares used in per share calculation					122,363						120,230						116,270						120,519						115,318

LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
		Three Months Ended									Nine Months Ended
		September 30,			June 30,			September 30,			September 30,			September 30,
		2020			2020			2019			2020			2019
U.S. GAAP net loss		$	(3,985	)	$	(1,727	)	$	(2,751	)	$	(10,968	)	$	(18,502	)
	Depreciation and amortization		5,986			5,683			5,133			17,161			14,450
	Interest expense		1,674			71			10			1,756			30
	Interest and other (income) expense		(35	)		306			(68	)		356			(313	)
	Income tax expense		66			136			166			377			544
EBITDA		$	3,706		$	4,469		$	2,490		$	8,682		$	(3,791	)
	Share-based compensation		1,923			5,251			3,358			12,238			10,463
Adjusted EBITDA		$	5,629		$	9,720		$	5,848		$	20,920		$	6,672

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 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 October 22, 2020, 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) 2020 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.