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LIMELIGHT NETWORKS, INC. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 5, 2012 04:11PM

LIMELIGHT NETWORKS, INC. (LLNW) filed Quarterly Report for the period ended 2012-09-30. Limelight Networks, Inc. has a market cap of $211.3 million; its shares were traded at around $2.085 with and P/S ratio of 1.2.



Highlight of Business Operations:

During any given fiscal period, a relatively small number of customers typically account for a significant percentage of our revenue. For example, in 2011, sales to our top 10 customers accounted for approximately 34% of our total revenue, and we had one customer, Netflix, Inc. (Netflix), which represented more than 10% of our total revenue. For the year ended December 31, 2011, Netflix represented approximately 11% of our total revenue. For the three month periods ended September 30, 2012 and 2011, sales to our top 10 customers accounted for approximately 35% of our total revenue. During each of those periods, we had one customer, Netflix who represented more than 10% of our total revenue. During those periods, Netflix represented approximately 11% and 12%, respectively, of our total revenue. For the nine month periods ended September 30, 2012 and 2011, sales to our top 10 customers accounted for approximately 32% and 34%, respectively, of our total revenue. During each of those periods, we had one customer, Netflix who represented more than 10% of our total revenue. During those periods, Netflix represented approximately 11% of our total revenue. In 2012, we anticipate that our top 10 customer concentration levels will remain consistent with 2011. In the past, the customers that comprised our top 10 customers have continually changed, and our large customers may not continue to be as significant going forward as they have been in the past.

We make our capital investment decisions based upon 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 our total revenue. For the nine month periods ended September 30, 2012 and 2011, we made capital investments of $17.4 million and $26.9 million, respectively, which represented 13% and 21%, respectively, of our total revenue. We expect to have ongoing capital expenditure requirements as we continue to invest in, refresh and expand our global computing platform and support our VAS. For 2012, we anticipate making aggregate capital expenditures of approximately 9% to 11% of our total revenue.

Cost of revenue increased 4%, or $1.0 million, to $28.3 million for the three months ended September 30, 2012 as compared to $27.3 million for the three months ended September 30, 2011. This increase was primarily due to an increase in payroll and related employee costs of approximately $0.7 million, primarily due to increased salaries and bonus accrual. Other costs increased approximately $0.2 million, primarily due to an increase in fees and licenses of $0.1 million and an increase in other employee costs of $0.1 million. In addition, we had an increase in professional fees of approximately $0.1 million, and an increase in royalty expenses of approximately $0.1 million. These increases were offset in part by a decrease in bandwidth and co-location fees of $0.1 million and a decrease in travel and travel related expenses of approximately $0.1 million. In addition, cost of revenue share-based compensation expense increased $0.1 million during the three month period ended September 30, 2012 compared to the same period of the prior year.

For the nine months ended September 30, 2012, cost of revenue increased 2%, or $1.3 million, to $83.2 million as compared to $81.9 million for the nine months ended September 30, 2011. This increase was primarily due to an increase in payroll and related employee costs of approximately $1.8 million primarily associated with increased salaries and bonus accrual, increased professional fees of approximately $0.5 million, consisting of approximately $0.4 million of consulting fees and approximately $0.1 million of recruiting fees, an increase in travel costs of approximately $0.1 million, and an increase in other costs of approximately $1.0 million. The increase in other costs was primarily due to $0.4 million of other costs associated with the delivery of our services and increased fees and licenses of approximately $0.4 million. These increases were offset by a decrease of approximately $2.0 million in bandwidth and co-location fees, which was the result of increased peering costs of approximately $2.1 million, offset by a reduction of approximately $4.1 million in transit and co-location fees. For the nine month period ended September 30, 2012 share-based compensation expense decreased $0.2 million compared to the same period of the prior year.

For the nine months ended September 30, 2012, sales and marketing expenses increased 15%, or $4.5 million, to $34.4 million as compared to $29.9 million for the nine months ended September 30, 2011. The increase in sales and marketing expenses for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 was primarily due to an increase in payroll and related employee costs of $2.8 million, primarily due to increased salaries and benefits of $1.9 million, and to a lesser extent increased variable compensation costs of $0.9 million, an increase in travel and travel-related expenses of $0.8 million, an increase in professional fees of $0.4 million, primarily for consulting, outside services and recruiting fees, and an increase in other costs of $1.0 million. The increase in other costs was primarily due to increased facility and facility-related costs, fees and licenses, office supplies and costs associated with our website design. These increases were offset by a decrease in marketing expenses of $0.1 million. Additionally, sales and marketing share-based compensation expense decreased $0.4 million for the nine month period ended September 30, 2012 compared to the same period of the prior year.

Read the The complete Report



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