Limelight Networks Reports Fourth-Quarter and Full Year 2007 Results

TEMPE Ariz., Feb. 19, 2008 – Limelight Networks, Inc. (Nasdaq: LLNW) today reported fourth quarter and full year results for the period ended December 31, 2007.

“2007 was a year of strong growth for Limelight Networks. We added over 450 new customers, substantially expanding our domestic and international market presence and winning key new customers in the online game, social media, and mainstream entertainment market segments, all while growing our peak traffic levels over 90%,” said Jeff Lunsford, chairman and CEO, Limelight Networks, Inc.

For the fourth quarter 2007, the Company generated $29.1 million of GAAP (generally accepted accounting principles) revenue with a net loss of $0.08 per basic share. For the full year, the Company reported GAAP revenue of $103.1 million with a GAAP net loss of $0.41 per basic share.

The Company generated non-GAAP revenue for the fourth quarter 2007 of $29.9 million, adjusted EBITDA of $4.9 million and non-GAAP net income of $0.01 per basic share. For the full year, the Company reported non-GAAP revenue of $106.2 million, adjusted EBITDA of $21.5 million and non-GAAP net income of $0.09 per basic share — see reconciliation to GAAP measures attached.

During the fourth quarter, the Company:
Signed contracts with over 200 new customers.
Added over 170 net new customers into production, a new quarterly record, raising the total number of production customers to over 1,150.
Was named the exclusive content delivery network for the world’s first studio-backed feature film to be released online, in conjunction with Blockbuster, Inc., and Microsoft Silverlight.
Announced Brightcove, Fox Interactive Media, MSN Video and Rajshri.com as customers for the LimelightHD service.
Introduced support for Adobe Flash Media Streaming Server 3.
Strengthened the Company’s senior leadership team, with the appointment of Philip C. Maynard as senior vice president, chief legal officer, and secretary; and Roxanne Ivory, as vice president of global marketing.

“More organizations are moving digital assets online and looking to make them instantly available in high-fidelity to end-users. Limelight Networks’ scalable architecture uniquely addresses the challenges inherent in this task. We believe we have a strong and compelling solution to continue supporting our customers’ high-growth initiatives within this exciting market,” added Lunsford.

First Quarter 2008 Outlook

The Company anticipates revenue to be in the range of $30.0 million to $32.0 million, non-GAAP net income to be in the range of $0.02 to $0.03 per basic share and adjusted EBITDA to be in the range of $2.0 million to $4.0 million, after including litigation-related costs during the quarter of $3.5 to $4.0 million.

Conference Call and Web Audiocast

Management will host a quarterly conference call for investors beginning at 2:00 p.m. PST (5 p.m. EST) on Tuesday, February 19, 2008. This call can be accessed toll-free at 1-877-574-8878 within the United States or 1-706-634-6364 outside of the U.S. using Conference ID 33463019. The conference call will also be audiocast live at http://www.llnw.com and a replay will be available following the call from the Company’s website.
Financial Statements

LIMELIGHT NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2007 2006
Assets
Cash and cash equivalents $113,824 $7,611
Marketable securities, short-term 83,273 -
Accounts receivable, net 22,338 17,526
Income tax receivable 1,190 2,980
Deferred income taxes – 362
Prepaid expenses and other current assets 4,469 3,011
Current assets 225,094 31,490
Property and equipment, net 46,968 41,784
Investment in marketable securities 87 285
Deferred income taxes – 106
Other assets 1,440 759
Total assets $273,589 $74,424

Liabilities and stockholders’ equity
Accounts payable $8,522 $6,419
Accounts payable, related parties 230 781
Deferred revenue, current portion 4,237 197
Credit facilities, current portion – 2,938
Capital lease obligations, current portion – 245
Other current liabilities 9,312 6,314
Current liabilities 22,301 16,894
Deferred revenue, less current portion 8,189 -
Credit facilities, less current portion – 20,456
Capital lease obligations, less current portion – 5
Other liabilities – 30
Total liabilities 30,490 37,385
Stockholders’ equity 243,099 37,039
Total liabilities and stockholders’ equity $273,589 $74,424

LIMELIGHT NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
Revenues $29,132 $29,190 $22,110 $17,454 $103,111 $65,243
Costs and
operating
expenses:
Cost of
revenues
(1)(3) 18,435 17,773 13,232 10,200 65,541 35,978

General and
administrative
(1)(3) 7,030 8,117 10,061 4,679 31,752 18,614
Sales and
marketing (1) 8,619 7,421 2,450 1,860 25,462 6,841
Research and
development
(1) 1,385 1,294 1,200 1,193 5,504 3,151
Total costs
and
operating
expenses 35,469 34,605 26,943 17,932 128,259 64,584
Operating income
(loss) (6,337) (5,415) (4,833) (478) (25,148) 659
Interest
expense (2) (6) (18) (431) (373) (1,418) (1,828)
Interest income 2,035 2,456 129 79 5,153 208
Other income (177) 33 105 70 (144) 175

Income (loss)
before income
taxes (4,485) (2,944) (5,030) (702) (21,557) (786)
Income tax
expense 1,798 181 (51) 688 2,401 2,591
Net loss $(6,283) $(3,125) $(4,979) $(1,390) $(23,958) $(3,377)
Net loss
allocable to
common
stockholders $(6,283) $(3,125) $(4,979) $(1,390) $(23,958) $(3,377)
Net loss per share:
Basic $(0.08) $(0.04) $(0.25) $(0.09) $(0.41) $(0.13)
Diluted $(0.08) $(0.04) $(0.25) $(0.09) $(0.41) $(0.13)
Shares used in
per share
calculations:
Basic 82,140 82,045 19,882 15,670 57,982 25,597
Diluted 82,140 82,045 19,882 15,670 57,982 25,597

(1) Includes share-based compensation (see supplemental table for
figures)

(2) Includes zero and approximately $424K of deferred financing fees for
the three and twelve month periods ended December 31, 2007

(3) Includes depreciation (see supplemental table for figures)

LIMELIGHT NETWORKS, INC.
Supplemental Financial Data
(In thousands)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
Supplemental
financial
data (in thousands):
Share-based
compensation:
Cost of revenues $479 $422 $201 $136 $1,489 $459
General and
administrative 1,454 1,702 4,655 2,097 10,653 6,794
Sales and marketing 1,272 1,289 143 84 3,948 334
Research and
development 420 542 856 735 2,820 1,661

Total share-based
Compensation $3,625 $3,955 $5,855 $3,052 $18,910 $9,248

Depreciation and
amortization:
Network-related
depreciation $5,428 $5,602 $3,908 $2,900 $20,739 $10,316
Other depreciation 278 268 91 63 857 226
Total
depreciation
and
amortization $5,706 $5,870 $3,999 $2,963 $21,596 $10,542
Capital
expenditures:

Capital Expenditures
(cash & accrual) $5,136 $7,291 $17,109 $12,710 $26,771 $40,339

Net increase
(decrease)
in cash, cash
equivalents and
marketable
securities $3,032 $6,370 $(3,501) $9,471 $189,288 $6,005
End of period
statistics:
Number of
production
customers under
recurring
contract 1,159 988 693 625 1,159 693
Number of
employees 239 219 123 108 239 123

LIMELIGHT NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
Cash flows from
operating
activities:
Net loss $(6,283) $(3,125) $(4,979) $(1,390) $(23,958) $(3,377)
Adjustments
to reconcile
net loss to
net cash
provided by
(used in)
operating
activities:
Depreciation
and
amortization 5,706 5,870 3,999 2,963 21,596 10,542

Share-based
compensation 3,625 3,955 5,855 3,052 18,910 9,248
Deferred income
tax expense
(benefit) 33 (294) (470) (1) 319 (471)
Accounts
receivable
charges 1,337 1,689 743 242 4,873 1,162

Accretion of
debt discount – – 74 33 424 143
Accretion of
marketable
securities (530) (277) – – (807) -
Gain on sale
of property
and equipment – – (175) – – (175)
Loss on foreign
exchange 42 – – – 42 -
Loss on
investment 387 – – – 387 -
Changes in
operating assets
and liabilities:
Accounts
receivable (5,244) 1,202 (6,313) (2,978) (9,685) (14,415)

Prepaid
expenses
and other
current
assets 1,037 (143) (499) (908) (1,458) (2,071)

Income taxes
receivable 2,946 412 (3,124) 144 2,820 (2,980)
Other assets 7 (153) (162) (25) (691) (423)
Accounts
payable 3,614 (1,883) (6,074) 8,785 (1,981) 3,725
Accounts
payable,
related
parties 230 (19) 781 (958) (551) 419
Deferred
revenue and
Other current
liabilities (4,314) 10,471 2,161 860 15,824 4,966
Other long
term
liabilities (30) – – – (30) -

Net cash provided
(used in) by
operating
activities: 2,563 17,705 (8,183) 9,819 26,034 6,293
Cash flows from
investing
activities:
Purchase of
marketable
securities (37,569) (43,411) – – (109,570) -
Sale of
marketable
securities 20,300 7,000 – – 27,300 -
Purchases of
property and
equipment (2,081) (12,094) (13,282) (16,895) (22,731) (40,609)

Net cash used
in investing
activities (19,350) (48,505) (13,282) (16,895) (105,001) (40,609)
Cash flows from
financing
activities:
Borrowings on
credit
facilities – – 23,818 2,500 – 32,873

Payments on
credit
facilities – – (7,749) (11,435) (23,818) (19,682)

Borrowings on
line of credit – – – – 1,500 -

Payments on
line of credit – – – (1,000) (1,500) (1,000)
Payments on
capital lease
obligations – – (71) (72) (250) (242)

Payments on notes
payable -
related parties – – – – – (195)

Escrow funds
returned from
share
repurchase 1,190 1,029 317 412 4,608 729

Tax benefit from
share-based
compensation 543 – 1,627 – 566 1,627
Proceeds from
exercise of
stock options 128 4 200 1,840 162 2,086

Net proceeds
from preferred
stock issuance – – (107) 126,423 – 126,316

Repurchase of
common stock – – – (102,121) – (102,121)
Proceeds from
initial public
offering, net
of issuance
costs – (586) – – 203,912 -
Net cash provided by
financing
activities 1,861 447 18,035 16,547 185,180 40,391

Net increase
(decrease) in
cash and cash
equivalents (14,926) (30,353) (3,430) 9,471 106,213 6,075
Cash and cash
equivalents,
beginning of
period 128,750 159,103 11,041 1,570 7,611 1,536
Cash and cash
equivalents, end
of period $113,824 $128,750 $7,611 $11,041 $113,824 $7,611

Use of Non-GAAP Financial Measures

In evaluating our business, we consider and use non-GAAP revenue, non-GAAP net income and Adjusted EBITDA as a supplemental measure of our operating performance. We consider non-GAAP revenue and net income measurements to be an important indicator of overall performance of the Company because it allows us to illustrate the impact of revenue generated from our multi-element contract as well as to eliminate the effects of share-based compensation and litigation expense. We define EBITDA as GAAP net income before net interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA plus income from our multi-element contract and expenses that we do not consider reflective of our ongoing operations. We use Adjusted EBITDA as a supplemental measure to review and assess our operating performance. We also believe use of Adjusted EBITDA facilitates investors’ use of operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in such items as capital structures (affecting relative interest expense and share-based compensation expense), the book amortization of intangibles (affecting relative amortization expense), the age and book value of facilities and equipment (affecting relative depreciation expense) and other non cash expenses. We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

The terms non-GAAP revenue and net income, EBITDA and Adjusted EBITDA are not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Our non-GAAP revenue and net income, EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, you should not consider non-GAAP revenue and net income, EBITDA and Adjusted EBITDA 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;
they do not reflect changes in, or cash requirements for, our working capital needs;
they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
they 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 often will have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
while stock-based compensation is a component of operating expenses, the impact on our financial statements compared to other companies can vary significantly due to such factors as assumed life of the options and assumed volatility of our common stock; and
compared to other companies can vary significantly due to such factors as assumed life of the options and assumed volatility of our common stock; and
other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP Net Income and Adjusted EBITDA only supplementally. Non-GAAP Net Income, 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 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.

Reconciliation of GAAP Revenue to Non-GAAP Revenue
(In thousands)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
GAAP Revenue $29,132 $29,190 $22,110 $17,454 $103,111 $65,243

Deferred
Traffic Revenue – (2,645) – – – -
Deferred Custom
CDN Services 722 1,504 – – 3,047 -

Non-GAAP Revenue $29,854 $28,049 $22,110 $17,454 $106,158 $65,243

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
GAAP net loss $(6,283) $(3,125) $(4,979) $(1,390) $(23,958) $(3,377)

Share-based
compensation 3,625 3,955 5,855 3,052 18,910 9,248
Litigation
expenses 2,772 2,002 2,296 825 7,295 3,121
Deferred revenue 722 (1,141) – – 3,047 -
Deferred cost
of traffic and
services 21 649 – – (205) -

Non-GAAP net
income $857 $2,340 $3,172 $2,487 $5,089 $8,992
Non-GAAP net income
basic share $0.01 $0.03 $0.16 $0.16 $0.09 $0.35

Reconciliation of GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)

Three Months Ended Twelve Months Ended
December September December September December December
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
GAAP net loss $(6,283) $(3,125) $(4,979) $(1,390) $(23,958) $(3,377)

Add:
depreciation
and
amortization 5,706 5,870 3,999 2,963 21,596 10,542
Add: interest
expense 6 18 431 373 1,418 1,828
Less: interest/
other income (1,858) (2,490) (234) (149) (5,009) (383)
Plus income
tax expense
(benefit) 1,798 181 (51) 688 2,401 2,591
EBITDA $(631) $454 $(834) $2,485 $(3,552) $11,201
Add: share-based
compensation 3,625 3,955 5,855 3,052 18,910 9,248
Add: litigation
expenses
recoverable from
escrow (1) 1,132 1,001 1,148 413 3,394 1,561
Add: deferred
traffic and
services revenue 722 (1,141) – – 3,047 -
Less: deferred
traffic and
service costs (21) (649) – – 265 -
Adjusted EBITDA $4,869 $4,918 $6,169 $5,950 $21,534 $22,010

(1) During 2006, we repurchased stock in a transaction with a total value
of $102.1 million. Selling stockholders agreed to hold
$10.1 million of the proceeds to offset specific claims for
reimbursement associated with the Akamai lawsuit and other undisclosed
obligations that may arise. For the three month periods ended
December 31, 2007 and 2006, we had $1.1 million and $1.1 million,
respectively, of litigation costs subject to reimbursement from this
escrow. For the twelve month periods ended December 31, 2007 and 2006,
we had $3.4 million and $1.6 million, respectively, of litigation
costs subject to reimbursement from this escrow.