PR Newswire | Jul 29, 2021 04:03PM EDT

07/29 15:02 CDT

Limelight Networks Reports Financial Results for the Second Quarter of 2021 SCOTTSDALE, Ariz., July 29, 2021

SCOTTSDALE, Ariz., July 29, 2021 /PRNewswire/ -- Limelight Networks, Inc. (Nasdaq: LLNW) (Limelight), a leading provider of edge cloud services, today reported financial results for the second quarter ended June 30, 2021, delivering on several key milestones in its 2021 strategic plan, which resulted in over $3 million of adjusted EBITDA improvements quarter over quarter.

Highlights of Strategic Plan Progress - Improve, Expand & Extend to Position for Growth

Under the first full quarter with new leadership, Limelight made significant strides in a number of key areas to return momentum to the business, drive operational improvements and accelerate revenue growth and profitability.

* Achieved a 30% reduction in rebuffer rates and increased global network throughput by 20% through the newly formed performance operations team. * Improved the service level agreement position with 8 of our top 10 clients. * Achieved a 55% increase in our traffic in Latin America quarter over quarter; expecting to increase our capacity by 60% in the second half of the year to support growth in the region. * Identified over $8 million in annualized network operations cost savings, which is expected to contribute $4 million to gross profit in the second half of the year. * Key client winback expected to yield over $6 million in annualized revenue. This client was formerly a top 10 revenue client. * Appointed Eric Armstrong as Senior Vice President of Growth. Most recently, Eric was Vice President, North American Sales and Services at Harmonic, Inc., a global leader in streaming, broadcast and service provider video infrastructure. * Acquired Layer0, a leading provider of SaaS development and deployment tools for frontend web apps and API's to diversify product offering, clients and deliver an expected revenue contribution of over $20 million in 2022, while being accretive to gross margins and adjusted EBITDA. With the acquisition, Layer0's founder Ajay Kapur will join Limelight as Chief Technology Officer.

"It has been a very productive quarter and I am pleased with our ability to manage change while also aggressively executing on the plans outlined in our last earnings call," said Bob Lyons, President and Chief Executive Officer. "We were able to make a number of meaningful improvements in the business that position us well for a strong run-rate exiting 2021. We improved our adjusted EBITDA by over $3 million, as savings from the actions taken in the first quarter delivered material operational improvements and most importantly, we see strong early signs of client confidence returning. Our three-pillar framework of improving, expanding and extending the core will continue to guide us as we push for continued momentum in the last half of the year.

"Additionally, I am pleased to welcome both Eric and Ajay to the executive management team and welcome the entire Layer0 team to Limelight. I believe the simplified organization and operating structure we established has allowed us to move more quickly and efficiently. The addition of Eric, Ajay and the Layer0 team is a great infusion of diversified experience and talent. The Layer0 team is filled with innovative, results-oriented people and we look forward to what our new combined organization will accomplish together," said Lyons.

Second Quarter 2021 Financial Results

* Revenue of $48.3 million, down 6% compared to $51.2 million in the first quarter of 2021, and down 17% compared to $58.5 million in the second quarter of 2020. * GAAP net loss of $13.7 million, or $(0.11) per basic share, an improvement of $11.8 million from the net loss of $25.5 million, or $(0.21) per basic share, in the first quarter of 2021. GAAP net loss was $1.7 million, or $(0.01) per basic share in the second quarter of 2020. GAAP net loss included $2.2 million and $11.7 million in restructuring and transition related charges in the second and first quarters of 2021, respectively. * Non-GAAP net loss was $8.0 million, or $(0.06) per basic share, an improvement of $3.0 million from the net loss of 11.0 million, or (0.09) per basic share, in the first quarter of 2021. Non-GAAP net income was $3.5 million, or $0.03 per basic share in the second quarter of 2020. * EBITDA was $(5.3) million, an improvement of $12.3 million from $(17.6) million for the first quarter of 2021. EBITDA was $4.5 million for the second quarter of 2020. * Adjusted EBITDA was $0.2 million, an improvement of $3.5 million from $(3.3) million for the first quarter of 2021. Adjusted EBITDA was $9.7 million for the second quarter of 2020. * Cash and cash equivalents of $119.6 million increased $2.6 million from $117.0 million at the end of the first quarter 2021. * Limelight ended the second quarter of 2021 with 459 employees and employee equivalents, down from 510 at the end of the first quarter of 2021, and down from 627 at the end of the second quarter of 2020.

Based on current outlook, we are reducing the guidance on capital expenditures from $20-25 million to $15-20 million, but leaving all other components of our guidance unchanged:

July 2021 April 2021 Actual 2020

Revenue $220 to $230 million $220 to $230 million $230.2 million

GAAP Basic EPS $(0.35) to $(0.25) $(0.35) to $(0.25) $(0.16)

Non-GAAP EPS $(0.15) to $(0.05) $(0.15) to $(0.05) $(0.01)

Adjusted EBITDA $20 to $30 million $20 to $30 million $24.5 million

Capital expenditures $15 to $20 million $20 to $25 million $25.1 million

"While much has been accomplished in a very short time, we have more to do," said Lyons. "We will continue our pursuit of operational excellence, restoring client confidence, improving performance and returning value to our shareholders." On August 24, Limelight will provide a more detailed overview of its go-forward strategy and long-term business plans. A press release with participation details will be issued by August 10 and also made available on the Investor Relations section of Limelight's website (www.llnw.com).

Financial Tables

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

June 30, March 31, December 31,

2021 2021 2020

(Unaudited) (Unaudited)

ASSETS

Current assets:

Cash and cash $ 44,065 $ 35,620 $ 46,795equivalents

Marketable securities 75,471 81,308 76,928

Accounts receivable, 24,867 29,151 31,675net

Income taxes 57 102 68receivable

Prepaid expenses and 14,557 14,784 15,588other current assets

Total current assets 159,017 160,965 171,054

Property and equipment, 42,406 46,863 46,418net

Operating lease right 8,929 9,521 10,150of use assets

Marketable securities, 40 40 40less current portion

Deferred income taxes 1,604 1,577 1,530

Goodwill 77,642 77,421 77,753

Other assets 6,147 6,742 7,233

Total assets $ 295,785 $ 303,129 $ 314,178

LIABILITIES ANDSTOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 12,459 $ 8,029 $ 4,587

Deferred revenue 524 844 933

Operating lease 1,977 2,233 2,465liability obligations

Income taxes payable 388 322 253

Other current 16,877 19,264 17,560liabilities

Total current 32,225 30,692 25,798liabilities

Convertible senior 121,371 121,200 100,945notes, net

Operating leaseliability obligations, 10,358 10,781 11,265less current portions

Deferred income taxes 306 360 279

Deferred revenue, less 272 226 220current portion

Other long-term 369 476 479liabilities

Total liabilities 164,901 163,735 138,986

Commitments andcontingencies

Stockholders' equity:

Convertible preferredstock, $0.001 parvalue; 7,500 shares - - -authorized; no sharesissued and outstanding

Common stock, $0.001par value; 300,000shares authorized;126,705, 125,248 and123,653 shares issuedand

outstanding at June30, 2021, March 31, 127 125 1242021 and December 31,2020, respectively

Additional paid-in 550,205 545,516 556,512capital

Accumulated other (7,965) (8,462) (7,511)comprehensive loss

Accumulated deficit (411,483) (397,785) (373,933)

Total stockholders' 130,884 139,394 175,192equity

Total liabilities and $ 295,785 $ 303,129 $ 314,178stockholders' equity

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Six Months Ended

June 30, March 31, Percent June 30, Percent June 30, June 30, Percent

2021 2021 Change 2020 Change 2021 2020 Change

Revenue $ 48,348 $ 51,195 -6% $ 58,546 -17% $ 99,543 $ 115,558 -14%

Cost of revenue:

Cost of services (1) 32,976 33,021 0% 29,389 12% 66,021 60,502 9%

Depreciation - network 5,929 5,679 4% 5,360 11% 11,608 10,510 10%

Total cost of revenue 38,905 38,700 1% 34,749 12% 77,629 71,012 9%

Gross profit 9,443 12,495 -24% 23,797 -60% 21,914 44,546 -51%

Gross profit percentage 19.5% 24.4% 40.6% 22.0% 38.5%

Operating expenses:

General and administrative (1) 7,515 12,948 -42% 8,187 -8% 20,412 16,069 27%

Sales and marketing (1) 5,784 9,835 -41% 10,929 -47% 15,631 22,823 -32%

Research & development (1) 5,187 6,113 -15% 5,572 -7% 11,315 11,189 1%

Depreciation and amortization 549 540 2% 323 70% 1,089 665 64%

Restructuring charges 2,155 6,873 NM - NM 9,028 - NM

Total operating expenses 21,190 36,309 -42% 25,011 -15% 57,475 50,746 13%

Operating loss (11,747) (23,814) NM (1,214) NM (35,561) (6,200) NM

Other income (expense):

Interest expense (1,305) (1,286) NM (71) NM (2,591) (82) NM

Interest income 42 45 NM 6 NM 87 31 NM

Other, net (440) (214) NM (312) NM (655) (421) NM

Total other expense (1,703) (1,455) NM (377) NM (3,159) (472) NM

Loss before income taxes (13,450) (25,269) NM (1,591) NM (38,720) (6,672) NM

Income tax expense 248 260 NM 136 NM 507 311 NM

Net loss $ (13,698) $ (25,529) NM $ (1,727) NM $ (39,227) $ (6,983) NM

Net loss per share:

Basic $ (0.11) $ (0.21) $ (0.01) $ (0.31) $ (0.06)

Diluted $ (0.11) $ (0.21) $ (0.01) $ (0.31) $ (0.06)

Weighted average shares used inper share calculation:

Basic 126,050 124,290 120,230 125,170 119,597

Diluted 126,050 124,290 120,230 125,170 119,597

(1) Includes share-based compensation (see supplemental table forfigures)

LIMELIGHT NETWORKS, INC.

SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2021 2021 2020 2021 2020

Share-based compensation:

Cost of services $ 458 $ 246 $ 792 $ 704 $ 1,555

General and administrative 1,874 6,028 2,257 7,902 4,498

Sales and marketing 395 563 1,322 958 2,550

Research and development 614 371 880 985 1,712

Restructuring and transition related charges 917 1,354 - 2,271 -

Total share-based compensation $ 4,258 $ 8,562 $ 5,251 $ 12,820 $ 10,315

Depreciation and amortization:

Network-related depreciation $ 5,929 $ 5,679 $ 5,360 $ 11,608 $ 10,510

Other depreciation and amortization 549 540 323 1,089 665

Total depreciation and amortization $ 6,478 $ 6,219 $ 5,683 $ 12,697 $ 11,175

Net increase (decrease) in cash, cash $ 2,608 $ (6,795) $ (3,221) $ (4,187) $ (135)equivalents and marketable securities:

End of period statistics:

Approximate number of active clients 533 527 560 533 560

Number of employees and employee equivalents 459 510 627 459 627

LIMELIGHT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2021 2021 2020 2021 2020

Operating activities

Net loss $ (13,698) $ (25,529) $ (1,727) $ (39,227) $ (6,983)

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

Depreciation and amortization 6,478 6,219 5,683 12,697 11,175

Share-based compensation 4,258 8,562 5,251 12,820 10,315

Foreign currency remeasurement loss (gain) 257 (71) 257 186 (140)

Deferred income taxes (71) (10) 59 (81) 15

Gain on sale of property and equipment (107) - - (107) -

Accounts receivable charges 381 466 155 847 313

Amortization of premium on marketable securities 573 609 - 1,182 -

Non-cash interest expense 201 199 - 400 -

Changes in operating assets and liabilities:

Accounts receivable 3,903 2,059 (10,798) 5,962 (11,083)

Prepaid expenses and other current assets (7) 446 986 439 (447)

Income taxes receivable 46 (36) 10 10 13

Other assets 513 399 1,121 912 1,747

Accounts payable and other current liabilities 1,523 5,209 1,045 6,732 6,937

Deferred revenue (273) (84) 313 (357) 63

Income taxes payable 68 73 - 141 2

Other long term liabilities (108) (3) (15) (111) (11)

Net cash provided by (used in) operating activities 3,937 (1,492) 2,340 2,445 11,916

Investing activities

Purchases of marketable securities (20,537) (10,874) - (31,411) -

Sale and maturities of marketable securities 25,818 5,897 - 31,715 -

Purchases of property and equipment (2,986) (6,628) (8,085) (9,614) (14,948)

Proceeds from sale of property and equipment 107 - - 107 -

Net cash provided by (used in) investing activities 2,402 (11,605) (8,085) (9,203) (14,948)

Financing activities

Payment of debt issuance costs (30) - - (30) -

Payment of employee tax withholdings related to restricted (427) (671) (1,430) (1,098) (2,945) stock vesting

Proceeds from employee stock plans 2,613 2,847 3,954 5,460 6,092

Net cash provided by financing activities 2,156 2,176 2,524 4,332 3,147

Effect of exchange rate changes on cash and cash equivalents (50) (254) - (304) (250)

Net increase (decrease) in cash and cash equivalents 8,445 (11,175) (3,221) (2,730) (135)

Cash and cash equivalents, beginning of period 35,620 46,795 21,421 46,795 18,335

Cash and cash equivalents, end of period $ 44,065 $ 35,620 $ 18,200 $ 44,065 $ 18,200

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 and restructuring and transition related charges. 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 restructuring and transition related charges. 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 Six Months Ended

June 30, 2021 March 31, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share

U.S. GAAP net loss $ (13,698) $ (0.11) $ (25,529) $ (0.21) $ (1,727) $ (0.01) $ (39,227) $ (0.31) $ (6,983) $ (0.06)

Share-based compensation 3,341 0.03 2,644 0.02 5,251 0.04 5,985 0.05 10,315 0.09

Non-cash interest expense 201 0.00 199 0.00 - - 400 0.00 - -

Restructuring and transition 2,155 0.02 11,700 0.09 - - 13,855 0.11 - -related charges

Non-GAAP net (loss) income $ (8,001) $ (0.06) $ (10,986) $ (0.09) $ 3,524 $ 0.03 $ (18,987) $ (0.15) $ 3,332 $ 0.03

Weighted average basicshares used in per share 126,050 124,290 120,230 125,170 119,597calculation

LIMELIGHT NETWORKS, INC.

Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2021 2021 2020 2021 2020

U.S. GAAP net loss $ (13,698) $ (25,529) $ (1,727) $ (39,227) $ (6,983)

Depreciation and amortization 6,478 6,219 5,683 12,697 11,175

Interest expense 1,305 1,286 71 2,591 82

Interest and other (income) expense 398 169 306 568 390

Income tax expense 248 260 136 507 311

EBITDA $ (5,269) $ (17,595) $ 4,469 $ (22,864) $ 4,975

Share-based compensation 3,341 2,644 5,251 5,985 10,315

Restructuring and transition related charges 2,155 11,700 - 13,855 -

Adjusted EBITDA $ 227 $ (3,251) $ 9,720 $ (3,024) $ 15,290

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 +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 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 July 29, 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, visitwww.limelight.com, and follow us onTwitter, 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

Ticker Slug:Ticker: LLNWExchange: NASDAQ

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