Limelight Networks Provides Steps To Profitability; Street Sees 25.4% Upside

Limelight Networks, a provider of video delivery and cloud services, announced the path the company is taking to improve profitability and growth.

Limelight Networks’ (LLNW) President and CEO, Bob Lyons said, “The actions we are announcing today are the first step, and we expect to continue to improve our growth and profitability by also expanding our core business, securing greater share of traffic and spend from existing customers while also growing our pipeline of new opportunities.”

Lyons further added, “We are exploring opportunities that extend our core business. I am encouraged by the progress we have made in our first 30 days and the actions we have taken.”

To improve client performance and operating efficiency in its core CDN business Limelight has taken a three-pronged approach. This includes a simplified operating model, resource prioritization and annual cash cost savings of about $15 million.

The cash cost saving involves a targeted reduction in headcount which  shrank the workforce by 16% and will lead to a 1Q pre-tax cash charge of about $3 million associated with severance, benefits and transition assistance.

Commenting on the reduction in workforce, Lyons said, “This reduction in force, while difficult, is an essential part of the disciplined planning and work we need to accomplish to capture the significant opportunity ahead of us. Our efforts to date give us confidence that we will be able to achieve 2021 adjusted EBITDA between $20 million and $30 million. We will provide additional financial guidance in connection with our first quarter earnings release.”  (See Limelight Networks stock analysis on TipRanks)

On March 19, Northland Securities analyst Michael Latimore reiterated a Hold rating on the stock with a $5 (45.1% upside potential) price target. Latimore said, “LLNW’s new CEO indicated the company could get more efficient, helping EBITDA but also helping give the company more pricing flexibility to capture share. LLNW announced a 16% workforce reduction…the actions help protect LLNW’s core CDN prospects. Next steps are extending and expanding the business.”

Turning to rest of the Street, the stock has a Hold consensus rating alongside an average analyst price target of $4.32 (25.4% upside potential) based on 1 Buy, 7 Holds and 1 Sell.

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