Limelight Networks Management Discusses Q2 2012 Results - Earnings Call Transcript

Limelight Networks (LLNW)

Q2 2012 Earnings Call

August 02, 2012 8:30 am ET

Executives

Douglas S. Lindroth - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer

Jeffrey W. Lunsford - Executive Chairman, Chief Executive Officer and President

Analysts

David M. Hilal - FBR Capital Markets & Co., Research Division

Michael J. Olson - Piper Jaffray Companies, Research Division

Michael Turits - Raymond James & Associates, Inc., Research Division

Donna Jaegers - D.A. Davidson & Co., Research Division

Fatima Boolani - Jefferies & Company, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen. Welcome to the Limelight Networks 2012 Second Quarter Financial Results Conference Call. [Operator Instructions] I will now turn the call over to Doug Lindroth, CFO. Please go ahead.

Douglas S. Lindroth

Good morning, and thank you for joining the Limelight Networks Second Quarter 2012 Financial Results Conference Call. This call is being recorded on August 2, 2012, and will be archived on our website for approximately 10 days. If you are online, we have updated our standard investor presentation, and you can find it in PDF format within the investor section of our website.

Some portions of this conference call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements that are not strictly statements of historical facts such as statements regarding future events or future financial performance, including but not limited to, statements relating to Limelight Networks market opportunity and future business prospects, guidance on financial results, statements concerning anticipated future growth and profitability, as well as management's plans, goals, strategies, expectations, hopes and beliefs, and statements concerning the anticipated effects of pending or completed business combinations or other strategic transactions. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those contained, projected or implied in the forward-looking statements, including the inherent risks associated with litigation, particularly intellectual-property-based litigation. Reported results should not be considered an indication of future performance. Factors that could cause actual results to differ are included in the company's periodic filings with the Securities and Exchange Commission.

I would now like to introduce Jeff Lunsford, Limelight's Chief Executive Officer.

Jeffrey W. Lunsford

Good morning. In the second quarter, Limelight continued to make steady progress in our transformation from a provider of Internet infrastructure services to provider of high-value Software-as-a-Service and cloud-based solutions that help companies manage their digital presence across all customer interaction channels.

Revenue dollar came in slightly below our expectations as result of lower revenue on the CDN side of the business, and another soft quarter from professional services held back growth of our overall value-added services portfolio. Despite of this, we operated in a disciplined manner and achieved our targeted bottom line results for the reporting period.

Most importantly, for the prospects of long-term value creation, our digital presence management strategy continued to be validated by pipeline growth by the fact that almost half of our Q2 bookings over software-as-a-service and cloud-based services related to digital presence management.

Companies around the globe were focused on improving the management of their digital presence across web, mobile, social and large screen channels. 5 years ago, companies could rely on 1 content management software package to manage their digital presence because the website was the only digital channel for customer interaction.

Today, in an attempt to keep up with the increasing ubiquity and complexity of mobile devices, increasing importance and influence of social channels, broadband fueled growth over the top delivery to large screens, companies have ended up working with 4 to 6 different content management, publishing and processing systems and different infrastructure services providers. This approach is expensive, impedes efficient workflow, FX consistency and leads to a suboptimal digital presence.

Limelight is the first company to envision and build an integrated digital presence management solution, which allows our customers to accomplish all of this and more and do at the top one of the world's preeminent high performance digital presence delivery platforms.

YouTube brought many positive endorsements of our digital presence management strategy, including, one, a multi-year agreement with Broadridge Financial, a leading provider of investor communications and technology-driven solutions that leverages a full range of our digital presence management suite. Broadridge also engage Limelight's global services team for their expertise, orchestrating their digital presence with a focus on website marketing acceleration. Two, an extension of our agreement with BMC Software to add video delivery in addition to web content management. BMC has been a CDN customer of Limelight's for several years. Three, a recently expanded reseller agreement with Ray Networks, a strategic partner in Israel, to sell our entire digital presence management solution set. Both companies see growing opportunities in Israel for our digital presence management suite of services, and we have already signed new customers as part of this 3-year extended agreement.

Additional digital customers are embracing our digital presence strategy and utilizing one or more modules of the suite included 5 networks: SunTrust Banks, Rhapsody International, InterfaceFLOR, TMZ and Deluxe Digital. We're excited to be thought leaders in digital presence management. We are helping define this new category and are unique in providing a comprehensive solution to a problem that so clearly needs to be solved.

Let's review a few highlights regarding specific applications within the suite. In the online video and mobile area, combined revenue for Limelight video platform and Limelight mobile, which are key components of our orchestrate digital presence management solution through an excess of 45% year-over-year. IDC estimates that online video platform's revenue will grow at a CAGR of 27% from over $400 million in 2011 to over $1 billion in 2015. Our online video platform service is differentiated through the integration of the service with our outher SaaS services and through the efficiencies and advantages our customers enjoy through our global high performance network.

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