Limelight Networks, Inc.

Good day, ladies and gentlemen. Welcome to the Limelight Network's 2022 First Quarter Financial Results Conference call. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will provide instructions for those interested in entering the queue for the question and answer session. I'll now turn the call over to Sumit Sinha, Vice President of Investor Relations and Corporate Development.

Good afternoon. Thank you for joining the Limelight Network's first quarter 2022 financial results conference call. The call is being recorded today, April 28, 2022, and will be archived on our website for approximately 10 days. Let me start by quickly covering the safe harbor. We'd like to remind everyone that we will be making forward-looking statements on this call. Forward-looking statements are all statements that are not strictly statements of historical fact, such as our priorities, our expectations, our operational plans, business strategies, secular trends, product and feature functionalities, pro forma results, acquisition activities, and contributions from acquired businesses. Actual results could differ materially from those contemplated by a forward-looking statement, and reported results should not be considered as an indication of future performance. For more information, please refer to the risk factors discussed in our periodic filings, including our most recent annual Form 10-K and quarterly reports Form 10-Q. The forward-looking statements on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward-looking statements except as required by law. Joining me on the call today are Bob Lyons, our President and CEO, and Dan Bonsell, EVP and CFO. Bob will start today's call with a brief discussion of the results and an update on our improved, expanded, and extended initiatives. Dan will then review financial results and guidance. Following that, Bob will use the remainder of the call to discuss aspects of our strategy and corporate initiatives going forward. We will then open the call for Q&A, where Ajay Kapoor, Limelight CTO, will also be available to answer your questions. I will now turn the call over to Bob.

Thank you, Samit, and welcome, everyone. The first quarter of 2022 continued to build on our positive momentum with three sequential quarters of profitability improvement and two sequential quarters of double-digit year-over-year revenue growth. Our operational improvements and renewed client focus have driven record traffic with 17 of LimeLight's top 20 highest all-time traffic days landing in the quarter. It is also important to note that the traffic improvements were broad-based in nature, spanning streaming, live events, software downloads, gaming, and spanned our diverse client base. In Q1, our financial results were well ahead of market expectations, as well as ahead of our management plan. Revenue was $58 million, an improvement of 13% year-over-year and well ahead of plan. Our cash gross margin of 40.2% was up 420 basis points year over year and consistent with our plan. Adjusted EBITDA was $2 million ahead of plan for the quarter and a meaningful $5.3 million improvement year over year. I can comfortably state today that our business continues to strengthen and we remain confident in our ability to continuously create meaningful value for our clients, shareholders, and employees alike. The underlying pillars supporting this momentum are threefold. First, our unwavering commitment to operational performance. As previously reported, third-party load balancing and data analytics firm PerpOps continues to rate Limelight's performance as best in class. Last quarter, we reported that we were number one in North America. Building on that, we have worked very hard to improve our standing in other regions as well. We have made notable progress in Latin America, a critical marker for us. Our efforts have resulted in achieving the number one rating in that region as well. As a result of almost a year of dedicated performance improvements, we can now proudly and confidently state that we consistently rank number one in the world. The performance of our network is critical to our success, and we will continue to be unwavering in our pursuit to consistently deliver best in class performance. Second, our commitment to delivering an unmatched client experience. In the many conversations I have with clients each quarter, I am frequently told that one of our towering strengths is our team and their focus on delivering great support. This is something that separates us from the pack, and we intend to continue building on that strength. Third, our strategic pivot has extended our ability to deliver high-growth, high-margin, edge-enabled application and security solutions. With Layer Zero, we added meaningful capabilities, products, and solutions to our edge platform. We now have what we believe to be the most complete app ops solution for developers who are focused on improving performance, protection, and productivity of their web applications by migrating them to an edge-enabled next-generation platform. And the market agrees. We replaced direct competitors in nine of our new logo deals this quarter. Our commitment to continuously improving across these three pillars results in more confidence and deeper relationships with our clients. With that confidence, they are more inclined to turn their traffic dial towards us and evaluate our high margin products. That in turn drives more traffic to our platform, improving our utilization and creating opportunities to deliver additional SaaS-like solutions. This all translates into a company that can sustainably and continuously create additional value for our clients and shareholders. In short, our recent success in creating shareholder value has been the direct result of addressing the performance, support, and app modernization needs of our clients. We will continue making them our first priority. They pay for that and should expect nothing less. Let me shift focus and share some detail around what we have done and plan on doing in the months and quarters ahead. I will frame my comments using our Improve, Expand, and Extend framework, as I have done in previous updates. As a reminder, our Improve program is focused on network performance and operating costs. Our Expand program is focused on client experience and the expanding relationships with them. And our Extend program is focused on introducing new best-in-class edge-enabled solutions that increase network utilization, growth, and gross margins. Let me highlight some of the things that we have focused on to continue building on our recent momentum. Under our improved program, we continue to make operational and architectural improvements toward improving performance and reducing our cost footprint. Improved highlights include last quarter, we introduced an initiative to upgrade our network to a Linux-based operating system. This initiative will improve throughput, increase capacity, and reduce operating costs. We are on track with this initiative and expect to see incremental improvements each quarter going forward. Further, this initiative accelerates our ability to pursue an asset-light model with ISPs and more rapidly consolidate the edgecast and limelight platforms as a service. We began executing a plan to increase our cash capacity and bandwidth capacity by over 40%, which will meaningfully improve our performance and allow us to gain more wallet share with existing clients and earn the business of new ones. We continue to focus on network utilization by improving traffic mix and traffic management. We have maintained our improved utilization levels achieved in the fourth quarter of 2021, despite seasonality trends in Q1. As a reminder, every point of utilization results in $5 to $9 million of adjusted EBITDA. Last, the year-over-year flow-through of revenue growth to adjusted EBITDA is approximately 77%. Highlights this quarter for our EXPAND program include, we previously discussed that two of our top 20 clients had not been growing and were flat in our annual plan. I am happy to report that both have delivered traffic above plan in Q1. Our largest client is starting to see the COVID-induced shortage of new content subside. In the quarter, they had a number of popular launches and anticipate many more in the second half of the year. Additionally, they continue to expand their focus on live content such as sports. Improving on the trends from previous quarters, 19 of our top 20 customers grew their revenue by more than 20% year over year. Client additions continue to trend in a positive direction with a five-quarter high achieved this quarter. In the quarter, we added 24 new logos, 15 of which were in the Americas. Of those, 60% were sourced and closed by our newly created channel team who are largely focused on AppOps. Of the new product sales, nine replaced direct competitors in this quarter. Our pipeline continues to grow as well. In the quarter, we grew our pipeline by more than 30%, with the AppOps portion growing by triple digits. We continue to attract large media companies for content delivery, but with our app ops solution, we are also relevant to a variety of company sizes and types that are looking for the best solution for their high stakes web applications. Layer Zero contributed $3.8 million in the quarter and is tracking well towards its full year guide of at least $20 million in high growth, high gross margin revenue. We have largely completed the planned rebuild of our sales and marketing teams. The second quarter will be the first full quarter for most of our quota-carrying reps, providing ample opportunity for continued momentum in the second half of the year. Our extend program was rich with headlines this quarter. We announced the transformational acquisition of Edgecast. Without question, we have taken another giant leap forward in our strategy to become a leading edge-enabled solutions company. With Edgecast, we will be one of the largest independent edge platforms with a significant increase in scale security, live events, and video capabilities. We strengthen our security capabilities with native WAF, DDoS, and basic bot detection. This coupled with our November app CDN launch enables us to lead the rapidly growing 4.4 billion web CDN and security market. With these newly added capabilities, we have increased the size of clients we can target and our reach across industries. Our edge-enabled platform will include edgecast enterprise-grade security solutions, the fastest edge logic in the market relative to our direct competitors, our developer and JAMstack APIs, and application operational tools, all seamlessly integrated with the world's most performant global edge platform. Oh, and by the way, this comprehensive set of capabilities are already integrated with over 40 of the most popular web development frameworks. We believe that the robustness of our solution platform and holistic and integrated approach to edge and cloud services will quickly be recognized as the most complete solution in the market, especially as developers continue to govern purchase decisions in our market. The evolution from a media CDN to an edge-enabled solutions company, anchored by the industry's most complete app-op solution and powered by the world's fastest edge network, has and will continue to build positive momentum in our business. The momentum and leading indicators underrated business that continues to strengthen. We are seeing organic revenue growth, improving gross margins, and growing adjusted EBITDA. While we have made meaningful progress in the past five quarters and have seen three quarters of positive momentum, much work remains to be done. Our combination with EDGECAST provides us with a rich set of opportunities for improved growth and profitability. We will continue to focus on the basics, client experience, operational discipline, and focusing our strategic investments into solutions where we can establish a clear right to win. Under the soon-to-be Egeo banner, we will be a growing technology solutions company with a $40 billion total addressable market, the most complete app ops solutions, all running on the world's most performant edge platform. I don't think it's too much of a stretch to say that the future of Egeo looks very bright. At this time, I will turn the call over to Dan to report first quarter financials.