Limelight Networks stock slides after quarterly earnings report

Shares in content delivery network Limelight Networks fell by 20% after the company reported a bigger loss than financial analysts had forecasted for its quarter ending in March.

The reaction came despite Limelight reporting revenue of $58 million, an increase of 13% compared to the previous financial year, which was better than the expectations of financial analysts ahead of the release.

"First quarter 2022 results were ahead of plan as we continue building on the momentum established in the second half of 2021," Bob Lyons, Limelight's Chief Executive Officer, said in a statement released on Thursday.

Limelight said it was able to narrow its GAAP loss from $25.5 million (14 cents per share) one year ago to $19.2 million (14 cents per share). But the loss was still larger than what Wall Street expected: Financial analysis surveyed by various research firms had the expected per-share loss between 5 cents and 9 cents per share.

Limelight provides numerous technologies to media businesses, including software platforms that enable media companies to deliver live and on-demand video to smartphones, tablets, smart TVs and computers. The company counts AMC Networks, Fox, the BBC, Cinedigm, Lionsgate and Comcast's Sky among its clients.

Earlier this year, Limelight spent around $300 million in stock to acquire rival software and services provider Edgecast from Yahoo and its parent companies Verizon Media and Apollo Global Management.

In a conference call with investors on Thursday, Lyons said the Edgecast acquisition will help it better round out its offering of streaming video solutions.

"When you look at our video delivery business, we're very strong in broad over-the-top video streaming," Lyons said. "They do much more live events...that's an area we're pretty weak."

The Edgecast acquisition is expected to close within the next one to two months, and Limelight said it is maintaining its full year financial guidance accordingly.

"We expect to begin working with the Edgecast team on a bottom-up forecast for the remainder of the year immediately after we close and will provide combined guidance for the year as we finish that process," Dan Boncel, the company's chief financial officer, said on Thursday. "In the short term, we expect second quarter revenue to be consistent with the first."

Over the last three months, Limelight said it has experienced a spike in online traffic, with 17 of its top 20 days falling within this quarter. That success has been both good and bad for the company, in that it helped justify the Edgecast acquisition while also creating challenges to meet customer demands and expectations.

"In our business, you have to build capacity in order to continue that momentum, and we're seeing a lot of supply chain disruption — it takes us 9 to 12 months to get servers" Lyons said.

The company said it expects revenue to range from $240 million to $250 million for the full year, a loss of 1 cent to 6 cents per share. It also said on Thursday that it will maintain its financial guidance for the short-term, with Lyons saying on the conference call that the financial guidance will likely be reset in three months after the Edgecast acquisition is finalized.