Streaming the Olympics for NBC was a great catch for Limelight Networks: The content delivery network’s Q3 sales beat consensus and Q4 guidance is ahead of estimates, too. Limelight says it’s delivered more than 70 million video streams for NBCOlympics.com. Shares are up 5% after hours.
Also good news: CEO Jeff Lunsford says the company has set up technology workarounds that mean Limelight’s business is no longer infringing patents controlled by larger rival Akamai (AKAM), which is (so far) winning their patent war.
Lunsford says Limelight hasn’t been whacked by the economic slowdown yet — and that people might actually seek more online entertainment during the downturn, much of which is free — much of which is delivered by Limelight.
Revenue: $33.1 million vs. $30-32 million guidance, $31.15 consensus
EPS: -$0.1 vs. -$0.03 consensus
Q4 Revenue Guidance: $33-$34 million vs. $32.95 consensus
LIVE Conference call notes; refresh for the latest.
5:04 Joining the call on an actual phone because Limelight’s Webcast doesn’t work.
5:05 CEO Lunsford going over customer wins. Nintendo Wii, Olympics, etc.
5:07 Regarding network scale: Average traffic levels continue to rise. Set new records for peak traffic levels. Organic growth throughout customer base. Three weeks ago said 2 terabits per second of total egress capacity. One of the largest data delivery platforms in the world.
5:08 Now on the Webcast. (Using different browser.)
5:08 General market trends: Gathered lots of media people to talk about significant growth opportunities. General belief was that growth of online digital media will continue to be strong.
5:10 Not to date lessening in demand for service, slowdown in online services. Less likely for people to get rid of Internet access; think people will, if anything, use more Internet streaming. But, if recession hits us, we’ll experience more churn from smaller, less capitalised customers, and bigger customers asking for better rates.
5:11 Next court date with Akamai in mid November. Also have a motion pending for course for reconsideration. For Q3, approx 11% of revenue generated from methods alleged to infringe. As of Nov. 1, need no longer incrue damages. Have been making changes to CDN architecture in a manner we believe won’t infringe. Can’t discuss specific factors.
5:12 Patent trial with Level 3 to start Jan 5. Won’t comment.
5:12 Settled patent suit with another smaller company. In August, court dismissed shareholder suit.
5:13 Now going over results from release.
5:14 GM expected to decline in Q4. Why? Market pricing, less event revenue, etc.
5:18 Guidance: Revs $33-34 million in Q4. Stock based comp 5.5-5.6 millin. Capex 4-5 million.
5:18 Lot of questions about whether getting commoditized, etc. Content publishers pick CDNs on: scale, performance, platform capabilities, service levels, and price. Believe best positioned to continue growing, taking market share. We think a better of understanding of what we do will help you realise why not at risk of commodotization. Building a CDN is a huge undertaking as well as substantial amount of capital. Much much more than servers and datacenters and bandwidth contracts.
5:21 NOT a commodity. Lots of technology to support. See growth in market segments, will build to accomodate. But with discipline.
5:22 Q&A begins.
5:23 Multi sourcing? Sure, some of that occurs.
5:23 Pricing environment going to get tougher… is that as customers come up for renewal, or during contract? More so former, as well as large new deals.
5:24 Talked about potential margin pressure in Q3 but revenue helped. Prudent to model lower margins.
5:24 Cisco said October sucked. Seen things worsen? Traffic record in September, another in October. Still seeing traffic growth. We have seen business decision making in the form of new bookings slow down. When we are sitting there with more efficient network, sometimes strong incentive for people to move toward us.
5:26 No cost cuts or headcount reductions planned. Maybe moderate the pace of hiring or building. But we’re not seeing traffic reductions, people watching a lot of news like election, crazy market turmoil online.
5:29 Lots of activity with premium content; that’s where the higher CPMs are. Also gaming, which has bigger file sizes.
5:31 Guiding “flat” — well, some one-time events in Q3 that I’d back out. (Olympics.)
5:34 Gross adds over 100, higher churn of non-core, non-strategic accounts.
5:41 Any nuances in pricing? No, what we tell people is, if you’re focused on pricing, follow the gross margin. If anything, the peak of all the hype in blogs of CDN price wars was at beginning of Q3. Always has been a highly competitive market, very substantial new companies, small guys trying to get in and establish themselves. Hasn’t been a step function up in price competition this quarter. Sorta ops normal.
5:45 Some smaller Web2 customers having financial problems. Focusing on real companies with real revenue streams. Trying not to focus on emerging market segment as economy gets worse.
5:45 Call over.