Limelight Networks Is Still Hunting for a Turnaround

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Oct 31, 2014

Limelight Networks (LLNW, Financial) recently announced revenue of $41.3 million for the second quarter ended June 30, 2014 as compared to $42.8 million during the same period last year and $41.2 million in the first quarter of 2014.

Earnings analysis

Limelight Networks reported second quarter ended June 30, 2014 non-GAAP net loss of $3.6 million, or $0.04 per basic share compared to a non-GAAP net loss of $7.2 million or $0.07 per basic share during the second quarter of 2013.

Outlook

Limelight Networks employed strong efforts to improve account management and accelerate share acquisition for major accounts, enhanced feature functionality for its key products and control the customer churn rate as well as employee turnover.

Limelight adjusted for the divestment of Clickability amounting to approximately $3.1 million during the same quarter last year. Its revenue increased by 4% on a year-over-year basis. Moreover, its balance sheet looks robust with $107 million in marketable securities, cash equivalents and cash.

Limelight has also made significant progress in improving its non-financial efforts as clearly seen with a considerable improvement in customer satisfaction, and it is continually investing into improving the customer experience. Employee turnover, though extremely high, has corrected on a year-over-year basis. Simultaneously, Limelight is continuously making significant investments for improving its infrastructure and processes.

Netflix also plans to leave the Limelight network during the running quarter and being focused on building a unique self-made platform. Apart from Netflix, rest of the profile and revenue trends looks solid. Year-on-year, revenue from its top-100 customers rose by 9%, and simultaneously the growth from its new customers surpassed its expectations.

The investments and priorities of Limelight are converging with its customer expectations followed by healthy numerical trends. Its net customer churn in the second quarter was reported at 22, an enhancement from previous quarter's net churn of 37 for Clickability and previous year's second quarter net churn of 48.

Crucially, Limelight reported a net sequential increase in customers leveraging its key CDN services for the very first time from the fourth quarter of 2009. The company’s rate of winning is enhancing and its ins contract value is superior to the year ago period. Hence, Limelight’s keen focus on customer service is delivering excellent results.

Making positive moves

During the quarter, Limelight achieved some milestones including an award of its 100 patent by the U.S. Patent and Trademark Office, highlighting the unique innovative technologies of Limelight leading to a continued benefit of its customers and the company.

In addition, Limelight won its lawsuit against Akamai during the quarter. It was made clear of the charge for inducing infringement by the Supreme Court.

During the quarter, Limelight continues to solidify its management team being focused on accelerating the decline of voluntary employee churn rate, while also implementing key efforts to offer government opportunities for its employees and endorse Limelight to be the employer of choice.

During the World Cup games, Limelight delivered live coverage of the games to its broadcast customers. Limelight offered its customers a broadcast-quality experience for both the mobile and ultra-HD screens viewers.

Limelight’s network witnessed huge utilization peaks during the gaming hours, touching beyond four terabits per second at the time of game play. Several thousand users tuned online simultaneously, viewing from varied devices.

A major worldwide electronics manufacturer, established in South Korea, leveraged its dynamic web acceleration service during the quarter to power the software distribution to their mobile device and make software updates highly manageable and cost effective.

A key U.S. sports and entertainment solution provider selected its content delivery service to distribute both on-demand and live content, ensuring delivery of a world-class digital experience to fans globally.

A major European video games retail company chose its video and content delivery service for supporting the distribution of each of their video trailers to customers globally. Further, a Middle East financial institution selected its video and content delivery service to enable video on their website and allow live streaming.

Limelight introduced the innovative Limelight Orchestrate for Broadcasters and Media professionals, easing the Workflows and allowing global delivery of competent Broadcast-Quality to any Device.

Conclusion

Finally, investors should consider holding the stock till a major turnaround occurs looking at the weaker long-term growth prospects indicated by a CAGR for the next 5 years per annum of -3.00% as compared to the solid industry’s average of 20.40%.