Limelight Networks quarterly revenue, earnings falls ahead of Edgecast integration

The leap in expenses is due to an increase in spending for operating expenses, particularly general and administrative, and research & development. Limelight reports spending 34 percent more overall on expenses compared to Q4 2021. The company says it ended the first quarter of 2022 with 556 employees and employee equivalents, up from 552 at the end of the fourth quarter of 2021, and from 510 at the end of the first quarter of 2021.

In the first quarter of 2021, Limelight laid off 16 percent of its workforce in a bid to raise profitability and accelerate growth for the coming year. The company appears to have made hires after this strategy.

Its Q1 2022 results are an improvement over its results from a year ago however, with a 13 percent increase in year-over-year revenue from $51.2 million in Q1 2021.

It also ran Q1 2022 at a $10.9 million EBIDTA loss versus a $2.8 million net income gain in Q4 2021. For adjusted EBIDTA, its Q1 2022 showed $2 million in net income against $10 million in Q4 2021. Though Limelight did record a $17.6 million EBIDTA loss in Q1 2021 and $3.3 million loss in Q4 2021, suggesting improvement on the EBIDTA front from last year.

Bob Lyons, president and CEO of Limelight, comments, “In the quarter, our operational improvements and renewed client focus have driven record traffic with 17 of Limelight’s top 20 highest historical traffic days landing in the quarter. We are proud of achieving the top performance spot in the world for edge CDN networks. This distinction anchors the transformation of Limelight from a media CDN to a leading edge enabled technology solutions company.”

Dan Boncel, chief financial officer, says the company is maintaining its full year guidance. He expects a bottom-up forecast for the rest of the year after they close the acquisition of Edgecast in the coming weeks. For the short term, Limelight anticipates second quarter revenue to be consistent with the first and for gross margin and adjusted EBITDA margin to continue its “methodical expansion.”

For the 2022 fiscal year, Limelight forecasts $240 million to $250 million in revenue and adjusted to stand from $24 million to $28 million in a guidance statement.

On the Edgecast acquisition, Lyons says the company believes the merger “will be uniquely positioned to provide unmatched performance, productivity, and security value at the edge for the outcome buyer,” through a diversified set of clients with “better end-to-end services, a more complete edge solutions platform and an exceptionally scaled global network.”

Analysis: Limelight transitioning from video CDN to ‘Edgio’

The integration of the Limelight and Edgecast will more than double the size of Limelight’s revenue to over $500M, presenting some unique integration challenges from both a business and technology perspective. For the business itself, Lyons said they would provide guidance later on in the year. Executives remarked that there were performance and monetary savings to be gained as Limelight moved to “upgrade our network to a Linux-based system.” Moving to Linux in 2022 to save money doesn’t sound cutting edge — it sounds behind the times.

Another point: Limelight noted that delivery services represented approximately 75% of total revenue during the quarter. The other 25% came from the sale of “professional services and other infrastructure services, such as transit, rack space services, and hardware to help our clients build out edge solutions.” Those are lower margin offerings that other vendors are trying to avoid; note that Limelight’s cash gross margins are in the 40% range compared to the higher margins of companies like Cloudflare (79%) and Akamai (76%) have recently reported. In other words, competitors are making more money off each customer than Limelight is able to.

That’s why the Layer0 acquisition, though small in terms of revenue, is very important. Layer0’s offerings can be sold more quickly and at higher margins than content delivery services.

In an interview with EdgeIR last year, Limelight executives remarked that the company is best known as a video cdn, and lacked the software to be web or app delivery CDN.

Layer0’s focus on ‘headless’ (meaning content management systems that are decoupled from presenting content to a site’s visitors) and Jamstack addresses a future need that streamlines edge code development and delivery, Ishan Anand, vice president of product development told EdgeIR.

In terms of revenue, Limelight reported that Layer0 contributed $3.8 million in the first quarter quarter and is tracking to their guidance of “at least” $20 million.

Some Wall Street analysts on the company’s earnings call were skeptical that Layer0 growth would reach 18% quarter over quarter growth. Executives said they were pleased with progress they were making in creating developer awareness of the Layer0 product, but they are going up against well-established companies like Fastly and Cloudflare which offer a variety of edge function services as well as newer front-end development and delivery platforms from companies like Netlify and Vercel.

Jim Davis is managing editor of EdgeIR. He has covered the CDN industry for over 15 years and authored numerous reports and market forecasts on the subject.

Article Topics

Akamai  |  CDN  |  Cloudflare  |  DevOps  |  Edgecast  |  Jamstack  |  Limelight Networks  |  Verizon