Limelight revenues drop and losses widen

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Limelight forecast revenue of $220 to $230 million in its second quarter and a GAAP loss of 25 to 35 cents a share. (Getty/monsitj)

Limelight Networks reported a disappointing first quarter, with revenues and net losses coming in notably worse than in Q1 of 2020 and management offering a turnaround-in-progress message in its earnings call Thursday afternoon.

The Scottsdale, Ariz., firm reported revenue of $51.2 million, 10% below the $57 million it earned in the year-ago quarter, and a net loss under generally accepted accounting principles of $25.5 million, or 21 cents per basic share, compared to the $5.3 million GAAP net loss (4 cents per basic share) it reported back then.

Limelight forecast revenue of $220 to $230 million in its second quarter and a GAAP loss of 25 to 35 cents a share.

“Price compression has been a significant contributor,” CEO Bob Lyons said at the start of the firm’s earnings call Thursday afternoon. “Additionally, we have seen some reductions in our traffic from client SLA performance.”

Lyons then offered a simpler explanation for what he called a loss of momentum over the last three quarters: “We simply lost our focus.”

The new CEO—Lyons started Feb. 1—continued: “Over the past 30 days, we have gotten refocused and are again fully committed and resourced to support our best-in-class performance heritage.”

Lyons said on the call that the firm was both cutting expenses—it sent 16% of its employees packing in the quarter, a move that should save $15 million a year—and is striving to address customer complaints about its network performance.

“We slipped on some of those things—things like rebuffering rate,” he said. “We had clients put us in jail and turn some of the traffic down”—as in, downranking Limelight’s CDN to a lower-tier status.

Limelight’s earnings release noted a drop in rebuffering rates of about 30%, which Lyons said had already yielded positive results.

“Two of our marquee customers are taking us out of jail,” he said.

Limelight is also working to get more value out of its existing infrastructure by finding customers for it outside of peak TV-viewing hours.

“The reason why doing more OTT doesn’t necessarily improve our utilization is because it’s really about the demand curve,” Lyons said. “You can never really get the utilization of your network over 20%.”

Instead of giving Limelight’s network a break the other 18 or so hours of the day in any given time zone—“we’re paying for that bandwidth even though it’s not being used,” Lyons said—the company will seek to fill that capacity with non-video customers.

In particular, this beyond-video strategy will have Limelight seeking CDN customers in such markets as gaming—a survey it commissioned this spring touted a pandemic-boosted boom in that area—enterprise connectivity and cybersecurity.

Limelight also aims to boost its business outside the U.S., where the aforementioned “price compression” hurt it especially badly in this quarter. Lyons noted that traffic in Latin America was up by 40%, and later in the call Boncel commented “We actually have a pretty nice premium on the pricing down there.”

But neither executive would forecast better than a relatively flat second quarter, with each emphasizing their intention to avoid being too optimistic (or pessimistic) in those predictions.

Lyons closed the call by saying: “In my first 90 days, we have made meaningful progress, with much more to do.”