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LIMELIGHT NETWORKS, INC. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 2, 2012 04:37PM

LIMELIGHT NETWORKS, INC. (LLNW) filed Annual Report for the period ended 2011-12-31. Limelight Netwk has a market cap of $426.9 million; its shares were traded at around $3.69 with and P/S ratio of 2.5.



Highlight of Business Operations:

Our international revenue has continued its growth, and we expect this trend to continue as we focus on our strategy of expanding our network and customer base internationally. For the years ended December 31, 2011, 2010 and 2009, respectively, revenue derived from customers outside North America accounted for approximately 30%, 27% and 22% respectively, of our total revenue. For the years ended December 31, 2011, 2010 and 2009, respectively, we derived approximately 50%, 57% and 69%, respectively of our international revenue from EMEA and approximately 50%, 43% and 31%, respectively of our international revenue from Asia Pacific. We anticipate that our Asia Pacific revenue may continue to grow as a percentage of our total international revenue. No single country outside of the United States accounted for 10% or more of our revenues during the years ended December 31, 2011, 2010 and 2009, respectively. We expect foreign revenue to continue to increase in absolute dollars in 2012. Our business is managed as a single segment, and we report our financial results on this basis.

We make our capital investment decisions based upon careful evaluation of a number of variables, such as the amount of traffic we anticipate on our network, the cost of the physical infrastructure required to deliver that traffic, and the forecasted capacity utilization of our network. Our capital expenditures have varied over time, in particular, as we purchased servers and other network equipment associated with our network build-out. For example, in 2009, 2010 and 2011, we made capital purchases of $20.4 million, $33.5 million and $30.4 million, respectively, which represented 16%, 22% and 18%, respectively, of total revenue for each of those years. We expect to have ongoing capital expenditure requirements, as we continue to invest in, refresh and expand our global computing platform. For 2012, we currently anticipate making aggregate capital expenditures of approximately 9%-11% of total revenue for the year.

Cost of revenue increased 16%, or $15.0 million, to $109.6 million for the year ended December 31, 2011 as compared to $94.6 million for the year ended December 31, 2010. These increases were primarily due to an increase in aggregate bandwidth and co-location fees of $6.1 million. This increase was primarily due to increased peering costs of approximately $7.6 million, increased costs associated with our transit backbone of approximately $0.7 million, and an increase in rack fees of approximately $0.5 million, associated with increased amounts of deployed network assets. These increases were offset by a decrease in our cost of bandwidth transit of approximately $2.3 million, and a decrease in other recurring cost of sales of approximately $0.4 million. In addition, depreciation increased approximately $5.8 million, due to increased amounts of deployed assets, as we continue to build-out our expanding network and to refresh our network equipment, and an increase in payroll and related employee costs of $2.9 million associated with increased staff to build and operate our global computing platform, as well as increased and professional services personnel. Additionally, we had increases in professional fees and outside services of $0.3 million, primarily due to an increase in outside consulting expense, an increase in royalty expense of $0.4 million and an increase in travel and travel-related expenses of $0.2 million. These increases were offset by a decrease in other costs of $0.7 million. The decrease in other costs is primarily related to $0.8 million of costs in 2010 associated with the sale of equipment to a customer and reduced fees and licenses of approximately $0.4 million in 2011. These decreases were offset by an increase of approximately $0.4 million in other costs associated with the delivery of our services and an increase in office and computer supplies of approximately $0.1 million.

Sales and marketing expenses increased 4%, or $1.5 million, to $40.1 million for the year ended December 31, 2011, as compared to $38.6 million for the year ended December 31, 2010. The increase in sales and marketing expenses was primarily due to an increase in marketing programs of approximately $0.8 million, an increase in travel and travel-related expenses of $0.2 million and an increase in other costs of $1.9 million. The increase in other costs was primarily due to increased employee events of $0.5 million, increased fees and licenses of $0.4 million, increased facility and facility-related costs of $0.3 million, increased training and seminars of $0.2 million and an increase in telephone costs of $0.2 million. These increases were offset by a decrease in share-based compensation of $1.0 million, a decrease in payroll and payroll-related expenses of $0.3 million, primarily due to increased salaries and related employee costs of $1.6 million, which included approximately $0.5 million of salaries and related employee costs from our business acquisitions, offset by lower variable compensation of $1.3 million and a lower annual bonus accrual of approximately $0.6 million. In addition, professional fees and outside services decreased $0.1 million.

Cost of revenue increased 10%, or $9.0 million, to $94.6 million for the year ended December 31, 2010 as compared to $85.6 million for the year ended December 31, 2009. These increases were primarily due to an increase in aggregate bandwidth and co-location fees of $5.4 million due to higher traffic levels and increased amounts of deployed network assets, an increase in payroll and related employee costs of $3.8 million associated with increased staff to build and operate our global computing platform, as well as increased operations personnel, whose primary focus is on our delivery of value-added services, an increase in travel and travel-related expenses of $0.4 million, and an increase in other costs of $1.5 million. The increase in other costs was primarily related to costs associated with value-added services and the sale of equipment to certain of our customers. These increases were offset by a reduction in depreciation expense of network equipment of $1.8 million and a reduction in royalty costs of $0.3 million.

Read the The complete Report



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