LLNW Limelight Networks Inc

• Q1 Revenue of $44.7 million, up 8 percent year over year
• Q1 GAAP gross margin of 47.3%, up 710 basis points, year over year
• Q1 GAAP EPS of $(0.03) and Non-GAAP EPS of $0.02
• Cash and marketable securities of $60.9 million
• Raising 2017 revenue, gross margin, Non-GAAP earnings per share, and Adjusted EBITDA guidance

Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $44.7 million for the first quarter of 2017, up 8 percent, compared to $41.4 million in the first quarter of 2016, and up 2% compared to $43.8 million in the fourth quarter of 2016. Currency headwinds negatively impacted year-over-year comparison by $0.3 million and the sequential comparison by $0.1 million.

GAAP gross margin was 47.3% in the first quarter of 2017, an increase of 710 basis points from 40.2% in the first quarter of 2016.

Limelight reported a net loss of $3.3 million, or $0.03 per basic share, for the first quarter of 2017, compared to a net loss of $5.9 million, or $0.06 per basic share, for the first quarter of 2016.

Non-GAAP net income was $1.6 million, or $0.02 per basic share, for the first quarter of 2017, compared to a non-GAAP net loss of $1.3 million, or $0.01 per basic share, for the first quarter of 2016.

EBITDA was $1.7 million for the first quarter of 2017, compared to negative $0.7 million for the first quarter of 2016. Adjusted EBITDA was $6.7 million for the first quarter of 2017 compared to $4.0 million for the first quarter of 2016.

Limelight ended the first quarter with 528 employees and employee equivalents, up from 510 at the end of the fourth quarter of 2016, and up from 501 at the end of the first quarter of 2016.

“Our first quarter results were strong, and ahead of expectations. We have a clear strategy to deliver against aggressive targets for 2017. Strong execution in the first quarter demonstrates our ability to successfully navigate through continuous changes in a healthy industry. Our customers are trusting us with more of their business, our employee turnover is at the lowest level in years, our financial performance is improving across multiple dimensions, and overall our competitive position is stronger than ever,” said Bob Lento, Chief Executive Officer at Limelight.

“We are all very proud of the many operational achievements that Limelight’s talented staff are driving, which are manifesting in improving financial results, accelerating business growth, and increasing market share. Pricing discipline is evident in our robust gross margin improvement, and increasingly, we are winning business based on service quality and capabilities, rather than purely on pricing. Based on the strong foundation we have laid, and the strength of our first quarter, we are raising the full year guidance across multiple measures,” Mr. Lento added.

Based on current conditions, for the full-year 2017, we are providing the following updates to our previously announced guidance for 2017:

  Limelight Networks, Inc.2017 Guidance       2017 Guidance April 24, 2017 February 8, 2017 Revenue $177 to $181 million $175 to $180 million   Gross margin percentage

Expansion of 200 basispoints over 2016

Expansion of more than 150basis points over 2016

  Non-GAAP EPS $0.03 to $0.06 $0.02 to $0.06   Adjusted EBITDA $23 to $27 million $22 to $26 million   Capital expenditures Approx. $20 million Approx. $20 million  

Financial Tables

  LIMELIGHT NETWORKS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except per share data)       March 31,2017 December 31,2016 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 19,152 $ 21,734 Marketable securities 41,676 44,453 Accounts receivable, net 26,191 27,418 Income taxes receivable 99 125 Prepaid expenses and other current assets   3,989     4,865   Total current assets 91,107 98,595 Property and equipment, net 30,204 30,352 Marketable securities, less current portion 40 40 Deferred income taxes 1,193 1,105 Goodwill 76,702 76,243 Other assets   1,806     1,794   Total assets $ 201,052   $ 208,129     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,558 $ 8,790 Deferred revenue 1,845 2,138 Income taxes payable 193 188 Provision for litigation 18,000 18,000 Other current liabilities   10,600     12,836   Total current liabilities 39,196 41,952 Deferred income taxes 154 152 Deferred revenue, less current portion 13 22 Provision for litigation, less current portion 22,500 27,000 Other long-term liabilities   1,238     1,435   Total liabilities 63,101 70,561 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; 107,979 and 107,059 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively 108 107 Additional paid-in capital 493,567 490,819 Accumulated other comprehensive loss (10,067 ) (11,038 ) Accumulated deficit   (345,657 )   (342,320 ) Total stockholders' equity   137,951     137,568   Total liabilities and stockholders' equity $ 201,052   $ 208,129       LIMELIGHT NETWORKS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)               Three Months Ended   March 31,2017 December 31,2016 PercentChange March 31,2016 PercentChange   Revenues $ 44,735   $ 43,778   2 % $ 41,422   8 % Cost of revenue: Cost of services (1) 19,007 19,642 -3 % 20,110 -5 % Depreciation - network   4,557     4,474   2 %   4,668   -2 % Total cost of revenue   23,564     24,116   -2 %   24,778   -5 % Gross profit 21,171 19,662 8 % 16,644 27 % Gross profit percentage 47.3 % 44.9 % 40.2 % Operating expenses: General and administrative (1) 8,514 7,960 7 % 6,808 25 % Sales and marketing (1) 9,267 8,215 13 % 8,903 4 % Research & development (1) 6,220 6,094 2 % 6,325 -2 % Depreciation and amortization   589     590   0 %   623   -5 % Total operating expenses   24,590     22,859   8 %   22,659   9 %   Operating loss (3,419 ) (3,197 ) 7 % (6,015 ) -43 %   Other income (expense): Interest expense (14 ) (54 ) -74 % (179 ) -92 % Interest income 117 101 16 % 6 1850 % Other, net   87     (570 ) -115 %   400   -78 % Total other income (expense)   190     (523 ) -136 %   227   -16 %   Loss before income taxes (3,229 ) (3,720 ) -13 % (5,788 ) -44 % Income tax expense   108     199   -46 %   158   -32 %   Net loss $ (3,337 ) $ (3,919 ) -15 % $ (5,946 ) -44 %     Net loss per share: Basic and diluted $ (0.03 ) $ (0.04 ) $ (0.06 )   Weighted average shares used in per share calculation: Basic and diluted 107,363 105,942 102,693  

(1) Includes share-based compensation (see supplemental table for figures)

  LIMELIGHT NETWORKS, INC.SUPPLEMENTAL FINANCIAL DATA(In thousands)(Unaudited)           Three Months Ended   March 31,2017 December 31,2016 March 31,2016     Share-based compensation:   Cost of services $ 359 $ 375 $ 473 General and administrative 1,534 1,951 1,826 Sales and marketing 620 776 737 Research and development   562     581     460     Total share-based compensation $ 3,075   $ 3,683   $ 3,496     Depreciation and amortization:   Network-related depreciation $ 4,557 $ 4,474 $ 4,668 Other depreciation and amortization 589 590 617 Amortization of intangible assets   -     -     6     Total depreciation and amortization $ 5,146   $ 5,064   $ 5,291       Net decrease in cash, cash equivalents and marketable securities: $ (5,359 ) $ (8,213 ) $ (48,861 )     End of period statistics:   Approximate number of active customers 813 851 926   Number of employees and employee equivalents 528 510 501     LIMELIGHT NETWORKS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)           Three Months Ended   March 31,2017 December 31,2016 March 31,2016   Operating activities Net loss $ (3,337 ) $ (3,919 ) $ (5,946 )   Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 5,146 5,064 5,291 Share-based compensation 3,075 3,683 3,496 Foreign currency remeasurement loss (gain) 289 76 (301 ) Deferred income taxes (50 ) 195 82 Gain on sale of property and equipment (75 ) (218 ) - Accounts receivable charges (recoveries) 249 101 (116 ) Amortization of premium on marketable securities 83 48 19 Realized loss on sale of marketable securities - - 32 Changes in operating assets and liabilities: Accounts receivable 978 (4,661 ) (540 ) Prepaid expenses and other current assets 914 315 3,583 Income taxes receivable 29 (15 ) (13 ) Other assets (3 ) 22 342 Accounts payable and other current liabilities (1,160 ) (1,087 ) (4,005 ) Deferred revenue (302 ) 730 473 Income taxes payable (4 ) 68 (127 ) Payments for provision for litigation (4,500 ) (4,500 ) - Other long term liabilities   (197 )   (307 )   900   Net cash provided by (used in) operating activities   1,135     (4,405 )   3,170     Investing activities Purchases of marketable securities (4,526 ) (45,629 ) - Sale and maturities of marketable securities 7,250 1,000 28,315 Change in restricted cash - - (62,790 ) Purchases of property and equipment (5,745 ) (4,897 ) (1,421 ) Proceeds from sale of property and equipment   58     504     -   Net cash used in investing activities   (2,963 )   (49,022 )   (35,896 )   Financing activities Principal payments on capital lease obligations - - (159 ) Payment of employee tax withholdings related to restricted stock vesting (1,036 ) (676 ) (646 ) Proceeds from line of credit - - 12,790 Proceeds from employee stock plans   111     1,839     43   Net cash (used in) provided by financing activities   (925 )   1,163     12,028   Effect of exchange rate changes on cash and cash equivalents   171     (402 )   159   Net decrease in cash and cash equivalents (2,582 ) (52,666 ) (20,539 ) Cash and cash equivalents, beginning of period   21,734     74,400     44,680   Cash and cash equivalents, end of period $ 19,152   $ 21,734   $ 24,141    

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, litigation 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 and litigation 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

Limelight is presenting the most directly comparable U.S. GAAP financial measures and reconciling the 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   March 31, 2017 December 31, 2016 March 31, 2016 Amount Per Share Amount Per Share Amount Per Share   U.S. GAAP net loss $ (3,337 ) $ (0.03 ) $ (3,919 ) $ (0.04 ) $ (5,946 ) $ (0.06 )   Share-based compensation 3,075 0.03 3,683 0.03 3,496 0.03 Litigation expenses 1,909 0.02 1,998 0.02 1,178 0.01 Amortization of intangible assets   -     -     -     -     6     0.00     Non-GAAP net income (loss) $ 1,647   $ 0.02   $ 1,762   $ 0.02   $ (1,266 ) $ (0.01 )     Weighted average shares used in per share calculation 107,363 105,942 102,693         LIMELIGHT NETWORKS, INC.Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA(In thousands)(Unaudited)     Three Months Ended   March 31,2017 December 31,2016 March 31,2016   U.S. GAAP net loss $ (3,337 ) $ (3,919 ) $ (5,946 )   Depreciation and amortization 5,146 5,064 5,291 Interest expense 14 54 179 Interest and other (income) expense (204 ) 469 (406 ) Income tax expense   108     199     158     EBITDA $ 1,727 $ 1,867 $ (724 )   Share-based compensation 3,075 3,683 3,496 Litigation expenses   1,909     1,998     1,178     Adjusted EBITDA $ 6,711   $ 7,548   $ 3,950    

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net 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 888-317-6016 within the United States or +1 412-317-6016 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, capital expenditures, litigation, 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 April 24, 2017, 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 (NASDAQ: LLNW), a global leader in digital content delivery, empowers customers to better engage online audiences by enabling them to securely manage and globally deliver digital content, on any device. The Company’s award winning Limelight Orchestrate™ platform includes an integrated suite of content delivery technology and services that helps organizations secure digital content, deliver exceptional multi-screen experiences, improve brand awareness, drive revenue, and enhance customer relationships — all while reducing costs. For more information, please visit www.limelight.com, read our blog, follow us on Twitter, Facebook and LinkedIn and be sure to visit Limelight Connect.

Copyright (C) 2017 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

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Limelight Networks, Inc.Sajid Malhotra, 602-850-5778ir@llnw.com