Limelight Networks(R) Reports Financial Results for the Fourth Quarter and Full Year of 2014

TEMPE, Ariz.--(BUSINESS WIRE)--February 2, 2015--Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $40.7 million for the fourth quarter which ended December 31, 2014, compared to $42.2 million in the fourth quarter of 2013 and $39.0 million in the third quarter of 2014.

Fourth quarter 2013 included $2.9 million of revenue from the Company’s Web Content Management (WCM) business divested in December 2013. Netflix revenue was $4.5 million in the fourth quarter of 2013, and $1.2 million in the third quarter of 2014. Revenue was negatively impacted by foreign exchange fluctuations of $0.4 million from the fourth quarter of 2013 and $0.5 million from the third quarter of 2014.

On a GAAP basis, the Company reported a loss from continuing operations of $5.0 million or $0.05 per basic share for the fourth quarter of 2014, compared to a loss from continuing operations of $4.7 million, or $0.05 per basic share in the fourth quarter of 2013. Fourth quarter 2013 included a $3.8 million gain from the sale of WCM.

Non-GAAP net loss was $2.1 million or $0.02 per basic share for the fourth quarter of 2014 compared to a non-GAAP net loss of $5.1 million or $0.05 per basic share in the fourth quarter of 2013.

EBITDA from continuing operations was negative $1.2 million for the fourth quarter of 2014 compared to negative $2.9 million for the fourth quarter of 2013. Adjusted EBITDA was positive $1.5 million for the fourth quarter of 2014 compared to negative $0.1 million for the fourth quarter of 2013.

For the full year ending December 31, 2014, the Company reported revenue of $162.3 million compared to $173.4 million for the year ending on December 31, 2013. Revenue in 2013 included $12.5 million from the WCM business, and $20.2 million from Netflix. Revenue in 2014 included $11.3 million of Netflix revenues.

On a GAAP basis, the Company reported a loss from continuing operations of $24.9 million, or $0.25 per basic share for the year ended December 31, 2014, compared to a loss from continuing operations of $35.0 million, or $0.36 per basic share in the same period of 2013.

Non-GAAP net loss was $12.3 million, or $0.13 per basic share for the year ended December 31, 2014, compared to a non-GAAP net loss of $23.0 million or $0.24 per basic share in the same period of 2013.

During the fourth quarter of 2014, Limelight purchased 0.8 million shares under its repurchase authorization in the open market at an average price of $2.83, for a total of $2.0 million. The Company has $10.3 million remaining under its previously announced repurchase authorization.

Limelight ended the fourth quarter with 520 employees, up from 509 employees at the end of the third quarter of 2014, and up from 482 employees in the year ago period.

Based on current conditions, the Company is providing revenue guidance of between $156 million and $164 million for 2015. To support the growth opportunities, the Company expects higher capital expenditures in 2015, compared to 2014. Non-GAAP net loss is expected to be between $0.10 and $0.20 per share.

Commenting on the fourth quarter and full year results, Chief Executive Officer Robert Lento said, “We ended the year on a strong note with rising confidence and positive business momentum. Our focus on revenue capture, operational efficiency, a customer centric engagement model, and employee retention is having a definite impact, and this is reflected in our improving performance.”

He added, “We are entering 2015 with an improved market position, a richer set of product capabilities, a stronger team to take these to the market, and a recovering set of business and financial metrics. As reflected in our guidance, we expect to build on this momentum and further advance our operational and financial profile. Our priorities remain unchanged and our resolve is stronger. We will be working hard to make 2015 materially better than 2014 for our customers, our employees and for our shareholders. Our industry is healthy and our position in it is advancing.”

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	December 31,			December 31,
	2014			2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	57,767		$	85,956
Marketable securities		35,317			32,506
Accounts receivable, net		22,622			21,430
Income taxes receivable		237			371
Deferred income taxes		78			93
Prepaid expenses and other current assets		9,625			8,192
Total current assets		125,646			148,548
Property and equipment, net		32,636			32,905
Marketable securities, less current portion		40			46
Deferred income taxes, less current portion		1,364			1,307
Goodwill		76,133			77,035
Other intangible assets, net		1,071			2,354
Other assets		4,451			6,103
Total assets	$	241,341		$	268,298

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	7,065		$	5,473
Deferred revenue		3,509			3,523
Capital lease obligations		223			466
Income taxes payable		248			799
Other current liabilities		14,383			15,022
Total current liabilities		25,428			25,283
Capital lease obligations, less current portion		135			358
Deferred income taxes		170			321
Deferred revenue, less current portion		405			1,500
Other long-term liabilities		3,040			3,505
Total liabilities		29,178			30,967
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 at December 31, 2014 and December 31, 2013; 98,409 and 97,677 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively		98			98
Additional paid-in capital		464,294			458,748
Accumulated other comprehensive loss		(7,786	)		(1,663	)
Accumulated deficit		(244,443	)		(219,852	)
Total stockholders' equity		212,163			237,331
Total liabilities and stockholders' equity	$	241,341		$	268,298

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
	2014			2014			Change		2013			Change		2014			2013			Change

Revenues	$	40,727		$	39,020		4	%	$	42,200		-3	%	$	162,259		$	173,433		-6	%
Cost of revenue:
Cost of services (1)		20,613			18,672		10	%		22,061		-7	%		82,176			88,783		-7	%
Depreciation - network		3,985			4,207		-5	%		4,864		-18	%		16,673			22,942		-27	%
Total cost of revenue		24,598			22,879		8	%		26,925		-9	%		98,849			111,725		-12	%
Gross profit		16,129			16,141		0	%		15,275		6	%		63,410			61,708		3	%
Gross profit percentage		39.6	%		41.4	%				36.2	%				39.1	%		35.6	%
Operating expenses:
General and administrative (1)		6,210			7,295		-15	%		7,882		-21	%		28,176			31,904		-12	%
Sales and marketing (1)		9,103			8,731		4	%		9,929		-8	%		37,458			41,474		-10	%
Research & development (1)		6,014			5,514		9	%		5,189		16	%		20,965			22,003		-5	%
Depreciation and amortization		661			825		-20	%		1,479		-55	%		3,529			5,804		-39	%
Total operating expenses		21,988			22,365		-2	%		24,479		-10	%		90,128			101,185		-11	%

Operating loss		(5,859	)		(6,224	)	-6	%		(9,204	)	-36	%		(26,718	)		(39,477	)	-32	%

Other income (expense):
Interest expense		(6	)		(7	)	-14	%		(12	)	-50	%		(32	)		(76	)	-58	%
Interest income		73			66		11	%		82		-11	%		276			321		-14	%
Other, net		807			1,192		-32	%		4,489		-82	%		1,821			4,643		-61	%
Total other income (expense)		874			1,251		-30	%		4,559		-81	%		2,065			4,888		-58	%

Loss from continuing operations before income taxes		(4,985	)		(4,973	)	0	%		(4,645	)	7	%		(24,653	)		(34,589	)	-29	%
Income tax provision		22			98		-78	%		59		-63	%		203			387		-48	%

Loss from continuing operations		(5,007	)		(5,071	)	-1	%		(4,704	)	6	%		(24,856	)		(34,976	)	-29	%

Discontinued operations:
(Loss) income from discontinued operations, net of income taxes		-			(4	)	-100	%		(411	)	-100	%		265			(426	)	-162	%

Net loss	$	(5,007	)	$	(5,075	)	-1	%	$	(5,115	)	-2	%	$	(24,591	)	$	(35,402	)	-31	%

Net loss per share:
Basic and diluted
Continuing operations	$	(0.05	)	$	(0.05	)			$	(0.05	)			$	(0.25	)	$	(0.36	)
Discontinued operations	$	-		$	(0.00	)			$	(0.00	)			$	0.00		$	(0.01	)
Total	$	(0.05	)	$	(0.05	)			$	(0.05	)			$	(0.25	)	$	(0.37	)

Weighted average shares used in per share calculation:
Basic and diluted		98,637			98,458					97,380					98,365			96,851


(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,
	2014			2014			2013		2014			2013
Supplemental financial data (in thousands):

Share-based compensation:

Cost of services	$	490		$	464		$	356	$	1,956		$	1,873
General and administrative		1,202			1,174			1,154		4,741			5,971
Sales and marketing		624			567			348		2,317			2,245
Research and development		375			382			687		1,477			2,256

Total share-based compensation	$	2,691		$	2,587		$	2,545	$	10,491		$	12,345

Depreciation and amortization:

Network-related depreciation	$	3,985		$	4,207		$	4,864	$	16,673		$	22,942
Other depreciation and amortization		457			566			797		2,391			2,961
Amortization of intangible assets		204			259			682		1,138			2,843

Total depreciation and amortization	$	4,646		$	5,032		$	6,343	$	20,202		$	28,746


Net (decrease) increase in cash, cash equivalents and marketable securities:	$	(8,172	)	$	(6,200	)	$	6,237	$	(25,384	)	$	(9,465	)


End of period statistics:

Approximate number of active customers		1,095			1,134			1,295		1,095			1,295

Number of employees		520			509			482		520			482

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,
			2014			2014			2013			2014			2013

Operating activities
	Net loss		$	(5,007	)	$	(5,075	)	$	(5,115	)	$	(24,591	)	$	(35,402	)
	(Loss) income from discontinued operations			-			(4	)		(411	)		265			(426	)
	Net loss from continuing operations			(5,007	)		(5,071	)		(4,704	)		(24,856	)		(34,976	)

	Adjustments to reconcile net loss from continuing operations to net cash (used in) provided by operating activities of continuing operations:
		Depreciation and amortization		4,646			5,032			6,343			20,202			28,746
		Share-based compensation		2,691			2,587			2,545			10,491			12,345
		Deferred income taxes		(174	)		17			(119	)		(359	)		(328	)
		Foreign currency remeasurement gain		(1,100	)		(1,207	)		(27	)		(2,167	)		(531	)
		Loss on disposal of property and equipment		-			-			417			-			442
		Accounts receivable charges		(75	)		(29	)		206			408			965
		Amortization of premium on marketable securities		85			88			176			459			639
		Non cash tax benefit associated with sale of discontinued operations		-			-			-			(59	)		-
		Gain on sale of the Web Content Management business		-			-			(3,836	)		-			(3,836	)
		Changes in operating assets and liabilities:
		Accounts receivable		(104	)		1,652			2,404			(1,600	)		2,581
		Prepaid expenses and other current assets		(747	)		(1,617	)		(707	)		(1,792	)		1,222
		Income taxes receivable		95			(53	)		(27	)		150			105
		Other assets		616			63			(390	)		1,607			519
		Accounts payable		(2,486	)		1,466			(3,293	)		2,276			(2,192	)
		Deferred revenue		(216	)		(86	)		(252	)		(1,109	)		4
		Other current liabilities		1,509			(844	)		822			(2,154	)		384
		Income taxes payable		(19	)		(95	)		(149	)		(233	)		305
		Other long term liabilities		(251	)		(310	)		(350	)		(796	)		(798	)
	Net cash (used in) provided by operating activities of continuing operations			(537	)		1,593			(941	)		468			5,596

Investing activities
		Purchases of marketable securities		(7,813	)		(2,986	)		(9,236	)		(25,482	)		(59,047	)
		Maturities of marketable securities		6,600			2,685			9,580			22,150			44,901
		Purchases of property and equipment		(4,597	)		(5,075	)		(5,890	)		(18,581	)		(18,575	)
		Proceeds from the sale of cost basis investment		-			-			1,237			-			1,237
		Proceeds from sale of the Web Content Management business		-			-			12,341			-			12,341
		Proceeds from the sale of discontinued operations		-			-			-			414			124
	Net cash (used in) provided by investing activities of continuing operations			(5,810	)		(5,376	)		8,032			(21,499	)		(19,019	)

Financing activities
		Payments on capital lease obligations		(54	)		(89	)		(177	)		(466	)		(1,301	)
		Proceeds from exercise of stock options and employee stock plan		414			233			234			1,381			263
		Cash paid for purchase of common stock		(2,042	)		(1,296	)		-			(4,542	)		(5,512	)
		Payment of employee tax withholdings related to restricted stock		(340	)		(284	)		(64	)		(1,795	)		(2,372	)
	Net cash used in financing activities of continuing operations			(2,022	)		(1,436	)		(7	)		(5,422	)		(8,922	)
	Effect of exchange rate changes on cash and cash equivalents			(892	)		(1,153	)		(350	)		(1,732	)		(606	)
Discontinued Operations
	Cash used in operating activities of discontinued operations			-			(4	)		-			(4	)		(8	)
Net (decrease) increase in cash and cash equivalents				(9,261	)		(6,376	)		6,734			(28,189	)		(22,959	)
Cash and cash equivalents, beginning of period				67,028			73,404			79,222			85,956			108,915
Cash and cash equivalents, end of period			$	57,767		$	67,028		$	85,956		$	57,767		$	85,956

To evaluate our business, we consider and use Non-GAAP net income (loss) and Adjusted EBITDA as a supplemental measure 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 because it allows us to illustrate the impact of the effects of share-based compensation, litigation expenses, amortization of intangibles, acquisition related expenses, gain (loss) on sale of WCM business and discontinued operations. We define EBITDA from continuing operations as GAAP net income (loss) before interest income, interest expense, gain (loss) on sale of WCM business, other income and expense, provision for income taxes, depreciation and amortization, and discontinued operations. We believe that EBITDA from continuing operations provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA from continuing operations adjusted for share-based compensation, litigation expenses and acquisition related expenses. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period as well as across companies.

The terms Non-GAAP net income (loss), EBITDA from continuing operations and Adjusted EBITDA are not defined under United States generally accepted accounting principles, or United States GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with United States GAAP. Our Non-GAAP net income (loss), EBITDA from continuing operations and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net income (loss), EBITDA from continuing operations 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 United States GAAP. Some of these limitations include, but are not limited to:

We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP net income (loss) and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income (loss), EBITDA from continuing operations and Adjusted EBITDA are calculated as follows for the periods presented in thousands:

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net Loss
(In thousands)
(Unaudited)


	Three Months Ended									Twelve Months Ended

	December 31,			September 30,			December 31,			December 31,			December 31,
	2014			2014			2013			2014			2013

U.S. GAAP net loss	$	(5,007	)	$	(5,075	)	$	(5,115	)	$	(24,591	)	$	(35,402	)

Share-based compensation		2,691			2,587			2,545			10,491			12,345
Litigation defense expenses		(3	)		10			151			817			450
Amortization of intangible assets		204			259			682			1,138			2,843
(Gain) loss on sale of the Web Content Management business		-			-			(3,836	)		62			(3,836	)
Acquisition related expenses		-			-			63			-			176
Loss (income) from discontinued operations		-			4			411			(265	)		426

Non-GAAP net loss	$	(2,115	)	$	(2,215	)	$	(5,099	)	$	(12,348	)	$	(22,998	)

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,
		2014			2014			2013			2014			2013

U.S. GAAP net loss		$	(5,007	)	$	(5,075	)	$	(5,115	)	$	(24,591	)	$	(35,402	)

	Depreciation and amortization		4,646			5,032			6,343			20,202			28,746
	Interest expense		6			7			12			32			76
	(Gain) loss on sale of the Web Content Management business		-			-			(3,836	)		62			(3,836	)
	Interest and other (income) expense		(880	)		(1,258	)		(735	)		(2,159	)		(1,128	)
	Income tax provision		22			98			59			203			387
	Loss (income) from discontinued operations		-			4			411			(265	)		426

EBITDA from continuing operations			(1,213	)		(1,192	)		(2,861	)		(6,516	)		(10,731	)

	Share-based compensation		2,691			2,587			2,545			10,491			12,345
	Litigation defense expenses		(3	)		10			151			817			450
	Acquisition related expenses		-			-			63			-			176

Adjusted EBITDA		$	1,475		$	1,405		$	(102	)	$	4,792		$	2,240

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 877-388-8480 within the United States or +1 678-809-1592 outside of the U.S. The conference call will also be audiocast live from http://www.limelight.com and a replay will be available following the call from the Company's website.

This press release contains forward-looking statements concerning, among other things, the outlook for the Company's revenues, net loss and stock-based compensation expenses, customer growth, market growth, pricing pressures, expansion into additional market segments, product and services improvements, the integration of acquired businesses and litigation and acquisition related expenses. Forward-looking statements represent the current judgment and expectations of Limelight Networks and are not guarantees and are subject to a number of risks and uncertainties that could cause actual results to differ materially including, but not limited to, risks and uncertainties discussed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission and the final review of the results and amendments and preparation of quarterly or annual financial statements, including consultation with our outside auditors. Accordingly, readers are cautioned not to place undue reliance on any forward-looking statements. The Company assumes no duty or obligation to update or revise any forward-looking statements for any reason.

Limelight Networks (NASDAQ: LLNW), a global leader in digital content delivery, empowers customers to better engage digital audiences by enabling them to manage and deliver digital content on any device, anywhere in the world. The Company's award winning Limelight Orchestrate™ platform includes an integrated suite of content delivery technology and services that helps organizations 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, and be sure to follow us on Twitter at www.twitter.com/llnw.

Exhibit Number		Description
99.1		Limelight Networks, Inc. Press Release dated February 2, 2015 (furnished herewith).

		LIMELIGHT NETWORKS, INC.

Dated:	February 2, 2015		By:	/s/ Philip C. Maynard
				Philip C. Maynard
				Senior Vice President, Chief Legal Officer and Secretary

Exhibit Number		Description
99.1		Limelight Networks, Inc. Press Release dated February 2, 2015 (furnished herewith).