Limelight Networks (LLNW) Q2 2018 Earnings Conference Call Transcript

Limelight Networks (EGIO -6.90%)
Q2 2018 Earnings Conference Call
Jul. 19, 2018 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Welcome to the Limelight Networks 2018 second-quarter financial results conference call. [Operator Instructions] I would now turn the call over to Dan Boncel, Limelight's chief accounting officer.

Dan Boncel -- Chief Accounting Officer

Good afternoon and thank you for joining the Limelight Networks second-quarter 2018 financial results conference call. This call is being recorded on July 19, 2018 and will be archived on our website for approximately 10 days.

Let me start by quickly covering the safe harbor. We would 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 outlook for 2018 and beyond, our priorities, our expectations, our operational plans, business strategies, and feature functionality announcements. Actual results could differ materially from those contemplated by our forward-looking statements, 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 report on Form 10-K. 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 Lento, our chief executive officer, and Sajid Malhotra, our chief financial officer. We will be available during the Q&A session at the end of prepared remarks from Bob and Sajid.

I would now like to turn the call over to Bob Lento.

Bob Lento -- Chief Executive Officer

Thanks, Dan, and good afternoon. Today we announced our second quarter results. This was another excellent quarter, building on the strong momentum of our record performance last quarter. Revenue in the second quarter was up 11% year over year, continuing our recent trend of double-digit revenue growth.

GAAP gross margin was up 230 basis points over the year-ago quarter and was second only to our record-high performance last quarter. I'm very pleased that we were profitable again this quarter, generating GAAP net income, both with and without the one-time legal settlement gain. Our non-GAAP earnings and adjusted EBITDA were also second only to our record-high performance last quarter, with non-GAAP income up 39% year over year and our adjusted EBITDA up 16% from the year-ago quarter.

We're proud of these quarterly results and the continued momentum in our business. We have established a solid foundation for future financial performance, and we continue to believe we are well positioned to achieve our financial goals in 2018 and beyond. During the quarter, we executed well on our long-term strategic priorities, creating customers for life, growing profitable revenue while generating cash, delivering significant and innovative features and capabilities and improving our position as the employer of choice. We made progress on creating customers for life and growing profitable revenue during the quarter with our strong focus on serving our customers' needs in various ways. For our customers, we continued to expand our capacity and improve our performance during the quarter, both through software optimization and deployment of our new server technology throughout our network. We also expanded our geographic reach by adding new locations in countries that are important to our customers.

We are currently scoping new locations across all regions based on the needs of our customers, which we believe will provide an important opportunity for growth. Also, for our customers, we continue to develop and launch feature functionality across our product portfolio to improve customer experience and better position us as the market leader. We have exciting new technology coming out soon, which I'll discuss in a moment. As we continued to focus on our customers, traffic volumes grew to near record levels while incident tickets continued to decline year over year. We're pleased that our efforts to meet customer needs has resulted in more traffic as the quality and performance of our network continues to improve. These efforts also had an impact on customer churn, which declined this quarter to its lowest level on record. Our focus on customers during the quarter also included successful contract renegotiations for six of our top 10 customers.

The expected price compression from these negotiations is a norm in our industry and may limit revenue growth in the already seasonally low third quarter. The new pricing for most of the contracts is effective early in the third quarter. We are pleased with the outcome, having successfully removed uncertainty around these contracts and solidified our position with these important customers. We expect more traffic from this group of customers going forward, which our infrastructure can absorb, given our expanded capacity and improvements in network efficiencies and performance. During the quarter, we made progress on other strategic priorities.

We coupled our focus on customers with continued improvements in cost of service to drive more efficiencies across our network, resulting in our margin improvement year over year. We also maintained strong discipline in expense management and increased our cash position during the quarter. Employee morale remained healthy, and turnover was stable and at satisfactory levels. Our employees continue to impress our customers with their dedication and hard work. We believe our core business has hit its stride. These highlights demonstrate solid momentum on our long-term strategic priorities, and we are proud of these accomplishments. Looking back at the first half of 2018, we gained momentum in our core business even while managing other significant demands on our attention.

Earlier in the year, we assisted Goldman Sachs, then our largest investor, in exiting their ownership position. Also, as announced last quarter, we successfully concluded our long-standing legal dispute with Akamai. With stability in our core business and these distractions behind us, we now have more management bandwidth to look at investment opportunities across the marketplace in key areas to accelerate growth and profitability, namely edge services and video. In edge services, we continue to make progress. It's a new space for us that leverages our existing infrastructure to address our customers' needs at the edge for low latency and connectivity. We're pleased with the traction we are gaining this market and expect to gain momentum as the year progresses. In video, we are investing heavily to become the leading provider at scale.

We believe in the strong future of the OTT market and its potential to drive significant growth in video. We see strong demand in video and the potential to increase our market share with our existing customers as well as expand beyond our current customer base. This market is especially attractive given its focus on quality first, and while price is important, customer decisions are driven by quality, scale, support, and then price. We're confident in our strong capabilities and are working hard to enhance our product offering with new technologies and feature functionality. We're most excited about our soon-to-be-released WebRTC-based real-time streaming solution, which we believe will be a differentiator for us.

We expect to be first to offer scalable, global, sub-second live video delivery using open and scalable technology that is supported on standard web browsers. This offering will allow content distributors to easily implement scalable live video streaming workflows that require the lowest possible latency, such as gaming, sports broadcasting, live auctions, and gambling. In addition to low latency, we will also deliver features as part of this release that will provide greater control by the end user, creating a much richer user experience. We intend to continue to build out our video capabilities. In summary, we generated a great second quarter, and we're on track to meet our financial goals for the year. Customer demand is healthy, and our competitive position is strong.

We believe that we are well positioned for continued revenue growth and margin expansion, and we'll remain disciplined in managing costs and pricing across our customer base. We intend to continue to drive momentum in our core business while making strategic investments in edge services and video to expand our technologies and customer base. We believe this will translate into sustainable, above-market shareholder returns. With that, I'll turn the call over to Sajid to discuss the second quarter's financial performance in greater detail and our guidance for the remainder of 2018.

Sajid Malhotra -- Chief Financial Officer

Thanks, Bob, and good afternoon. I'm happy to discuss another great quarter for Limelight following our very strong first-quarter results. I will cover the second-quarter results, our 2018 forecast, an update to our long-term strategic priority and the resulting impact on our long-term financial goals. Let's get right to it. Starting with revenue, in the second quarter, we reported revenue of $50.2 million, up 11% from Q2 last year.

This is the fourth consecutive quarter of double-digit revenue growth. We experienced minor foreign exchange tailwinds in the quarter of approximately $100,000, or less than 0.5%. International customers accounted for 38% of total revenue in Q2 compared to 37% a year ago. Approximately 18% of our second-quarter revenue was in non-U.S. dollar-denominated currencies. Over the last several years, we have said we want to focus on large customers who value quality, performance, availability, and services, all while maintaining price discipline. We believe this methodology has paid off as we continue to show revenue growth with these largest customers. In Q2 2015, revenue from our top 20 customers was 59% of total revenue. Our top 20 customers in Q2 of this year accounted for approximately 70% of total revenue. Furthermore, we have seven new customers in the top 20 that did not achieve this distinction a year ago.

In Q2 this year, our ARPU has increased to $73,000 from $58,000 last year. It is my belief that we command the highest ARPU in the industry. While we will continue to focus on these largest customers, we are also turning more attention to customers of all sizes in the video and OTT segment. This requires higher quality, has a higher average price point and separates us further from our competition. At a company level, revenue from video delivery has increased from about 40% of total revenue at the start of 2017 to roughly 50% of total revenue today. Video customers are a growing percent of total customers and a growing proportion of total revenue and volume.

They continue to grow at a faster rate than the remaining base of business. In addition to these dynamics, we have intentionally shed some volume and some customers in the non-video category. Our edge services initiatives also continue to progress well. We are very optimistic about the possibilities with these customers, and I will return to this in a bit. Gross margin was 49.4% in the second quarter, an increase of 230 basis points over the same quarter last year. Cash gross margin was 58.5%, an increase of 60 basis points year over year.

We believe the adoption of OTT products as well as new revenue streams from edge services and low-latency live video streaming will continue to contribute to overall margin expansion for years to come. Total GAAP operating expenses were $24.2 million, which is an increase of $1.1 million from the second quarter of 2017. G&A expense increase of $700,000 is primarily due to a state sales tax refund we received in Q2 last year, partially offset by lower legal expenses in the second quarter this year. Sales and marketing expense increased, as expected, by $1 million due to increase in salary and variable comp as we expanded our sales force.

R&D decreased $700,000.Interest income, expense and other income and expense netted to a loss of $100,000 in Q2 this year compared to income of $300,000 last year. Upon a favorable resolution of the patent infringement lawsuit against Akamai, we recorded a $14.9 million settlement gain below the operating line in the second quarter of this year. Akamai is required to pay us five quarterly payments of approximately $3 million per quarter. These payments co-terminate with our $4.5 million payments to them, and the last quarter with impact will be the second quarter of 2019. On a GAAP basis, we again reported net income this quarter, our second consecutive quarter of achieving profitability.

GAAP EPS was $0.14 per share -- per basic share. Non-GAAP EPS was $0.04 per basic share compared to $0.03 in Q2 2017. As a reminder, the only reconciling items between our GAAP and non-GAAP results other than the previously mentioned settlement are stock-based compensation of $3.6 million and Akamai-related litigation expense of $200,000. As the Akamai litigation expense ends, GAAP and non-GAAP results will be close to each other, and the only reconciling item would be stock-based comp.

We have worked hard to make our results cleaner and better to understand and limit the adjustments and reconciling items between GAAP and non-GAAP results. Adjusted EBITDA was $9.2 million, up 16% from $7.9 million in the second quarter of 2017. Moving to the balance sheet and cash flow. We had cash and marketable securities of $45.6 million at the end of the second quarter, up from $43.7 million at the end of Q1. This was a very strong quarter for cash generation, one of our best based on operating results.

As discussed, we had a net outflow to Akamai of $1.5 million. In addition, accounts receivable was down $600,000, and accounts payable was down $4.2 million. We expect to see continuing increase to our cash balance, and I believe the company has transformed itself from a continuous user of cash to a sustained generator of cash, a major, major milestone. DSO as of June 2018 was 55 days, one day higher than Q1. As of June 30, we had approximately 112.5 million shares outstanding.

Some of you commented on the sudden jump in basic versus fully diluted share count last quarter. No, we did not just hand out a bunch of shares. When we were losing money, GAAP accounting does not allow us to include the fully diluted share count, as it would artificially reduce per share losses. On the other hand, now that we are profitable, all in-the-money distributed options are accounted for in the fully diluted share count.

The distribution of these over the last 10 years adds approximately 8 million shares to our fully diluted share count. Total employee count at the end of the quarter was 549, up 5 from the end of last quarter and up 16 from the second quarter of last year. The increase relates to additional operational support and sales personnel. Moving to forecast. We believe revenue for the full year will now be between $200 million and $203 million, an increase from our previous guidance of between $198 million and $202 million. We continue to expect gross margins to increase by more than 150 basis points over 2017.

GAAP EPS is expected to be between $0.07 and $0.11 per share and includes the positive impact of approximately $0.12 per share from the litigation settlement with Akamai that concluded in April. We expect non-GAAP EPS to be between $0.13 and $0.17. Adjusted EBITDA is expected to be between $33 million and $37 million, and we now expect capital expenditures to be below $20 million. Long-term priorities. The first priority is, of course, to finish the year strong.

Let me also shed some light on the other long-term priorities. Within the organic CDN business, video delivery continues to be a great opportunity and with a traffic growth trajectory that we do not see ending anytime soon. To capitalize on this opportunity, we have deployed capital and human resources and our efforts are yielding results. Later this year, we will launch our real-time streaming offering, further establishing our position in this space.

Look for it at the IBC conference starting September 17. This then takes us to the next initiative, around edge. Let me just say, all CDN providers should be at an advantage when serving edge content. The premise is move information closer to the user and reduce latency. But think about it.

This is what we have been doing for years. We take the central copy of a software, the master copy of a video, the gold copy of a game and push it to the edge, where it is closer to the consumer and where it is cached and, thereby, reduces latency. Consequently, we also dramatically reduce Internet congestion. Imagine life without CDN -- 1 billion devices wanting to do an iOS update hitting a server in Cupertino. You would eventually get your update but months later, and the Internet would be congested with the entire cross-traffic. To that, add another 125 million users trying to download Fortnight from a server in South Carolina and all the while competing with 500 million users trying to access the FIFA World Cup final stream online from Russia. You get the picture.

It is in our DNA to move content to the edge. And because of our global presence and location density and secure backbone, among the CDN providers, we believe our architecture is better suited to provide edge services at low latency. So far, we've helped businesses deliver their content to their consumers at the edge. Now we see the opportunity to deliver dynamic content from businesses to other businesses and consumers.

And it is not just delivering content, it is also making decisions at the edge, it's analyzing at the edge, it's computing at the edge, all with the singular purpose of reducing latency. We have a head start and are better prepared than some cloud companies that built a central cloud infrastructure and never developed the network and communications channels to connect with every last-mile provider. This is why this is exciting, and this is why we believe we will be able to build a sizable business in this space. We have been edge all along. The focus on reducing latency has now become a paramount driver of many new business models.

Many will struggle to build a solution. We have a great start. We're working toward becoming a recognized leader in the space. So what does that mean for our long-term goals? About 12 months ago, we established some long-term goals for the company. These were based on a three- to five-year time horizon.

Included in were top-line growth of 10% and GAAP gross margin greater than 50%. In light of the early achievement of some of these targets, we would like to update these targets. We believe top-line growth of 15% and gross margins in excess of 55% are attainable over the long term. Just as we did today, as we achieve elements of our long-term goals, where appropriate, we will update them.

These are not date-certain, they are goals we want to attain over the next three to five years. We continue to look at inorganic opportunities that would further differentiate our business, add scale and a customer base to our existing offerings and help us realize our financial goals at an accelerated pace. In summary, we continue to perform well, both financially and operationally, double-digit revenue growth on increasingly larger comps, continued margin expansion over the prior year, achieved profitability for the second consecutive quarter and generating cash. We are excited about our upcoming offerings and the market opportunity they create. We want our customers to do better than their competitors. This is how we will do better than our competitors.

This is a healthy industry with well-established trends, a finite set of competitors and an opportunity to create customer and shareholder value. We are doing both. With that, we'll open the call up for your questions. Brandon? 

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer-session [Operator Instructions]. Our first question comes from Michael Turits with Raymond James. Please go ahead.

Michael Turits -- Raymond James -- Analyst

Hey, guys, good evening. I know you don't break it out quantitatively but can you talk about the trends in volume growth and also any changes in the competitive landscape at all?

Bob Lento -- Chief Executive Officer

Competitive landscape, Michael, sort of from last quarter or even looking over the last year is pretty similar to the [Inaudible] companies that we compete with, both within our existing customers for share of wallet and in the market for new customers, really hasn't changed in any material way. And the other part of the question was around...

Michael Turits -- Raymond James -- Analyst

Volume growth, volume growth trends, and I don't know if you were involved in the World Cup but there were some big events, and just what you're seeing in terms of volume growth trends relative to the last couple of quarters?

Bob Lento -- Chief Executive Officer

So, obviously, there are events that happen from time to time. We were involved in the FIFA World Cup. We've been involved with Fortnite and things like wedding but, as you know, they tend to be burst traffic for a couple of hours, in the case of World Cup for a series of events, in a short period of time but I think the thing that's interesting is the number of people consuming that content online versus on a broadcast device. TV is continuing to grow year after year but what's more important to us is the ongoing use of our network for video-on-demand and a string of live linear programming as well as live events.

We do see that growing and really in the near-term don't see any slowdown in the growth of that traffic.

Michael Turits -- Raymond James -- Analyst

So, overall traffic growth rates, are you commenting on whether they accelerated, decelerated, or stayed the same?

Bob Lento -- Chief Executive Officer

For us or for the Internet in general?

Michael Turits -- Raymond James -- Analyst

For you guys.

Bob Lento -- Chief Executive Officer

Yes, so for us it's a little different because we are constantly looking at our mix of traffic, and so we may choose to take less of one type of traffic so that we can perform better and take more of another kind. So, I don't know that we are a good proxy for what's going on in the industry because we're trying to be very focused in certain areas, very disciplined about our approach. All of those caveats aside, traffic is growing for us both sequentially and year over year.

Sajid Malhotra -- Chief Financial Officer

And traffic is growing for the industry I think at the rates it has been and price compression is as one would expect, like nothing out of the ordinary.

Bob Lento -- Chief Executive Officer

Nothing out of the ordinary.

Michael Turits -- Raymond James -- Analyst

OK, thanks a lot.

Bob Lento -- Chief Executive Officer

Yup. Thanks, Michael.

Operator

Our next question comes from Mark Kelleher with D.A. Davidson. Please go ahead.

Mark Kelleher -- D.A. Davidson -- Analyst

Great. Thanks for taking my question. I was wondering if you could talk a little bit more about the Edge computing opportunity. I know you spent some time there discussing it but maybe some use cases, maybe when you expect some revenue ramp, was there any revenue from that in the quarter, does Neustar count in that category, just some more details on what your expectations are? Thanks.

Bob Lento -- Chief Executive Officer

Yes, so this is Bob. Let me -- thanks for the question, Mark. And let me sort of start with my view on that and then ask Sajid to weigh in. Part of what we are discussing internally is, how do we best define this? We've seen some of our competition, for example, now all of a sudden start talking about everything they do as edge services and they're an edge service company.

And overnight, they've gone from saying we're a CDN to an edge services company. So that gets a little bit confusing, because I think Gartner's and others talk about it as if it's a new industry. So we're trying to figure out how do we communicate this in a way that's meaningful. Specifically to your question, we are seeing more of our customers come to us with specialized applications that require low latency that, today, for example, might be running on a cloud provider data center, looking to move it closer to the edge. And so we're seeing more business that is different than our traditional business, I guess is the best way to say that.

And then with respect to Neustar, as you know, we have a two-way relationship with them. We provide the infrastructure that their offering runs on. And then in addition to that, we resell their capabilities to our customers that are looking for security types of capabilities. And they're not exclusively -- we don't sell them exclusively, but they are a key partner for us from that perspective as well. Sajid, any additional comments?

Sajid Malhotra -- Chief Financial Officer

Yes. No, I think you said it well, Bob. This is an exciting place to be. And I think when you think about the use cases, for example -- we can talk about the ones that we published, for example.

So we talked about GE/Avitas. You have a company, I mean, you can go read about them. But basically, what they're doing is using drones to capture high-definition videos of infrastructure.

Bob Lento -- Chief Executive Officer

Industrial inspection.

Sajid Malhotra -- Chief Financial Officer

Right. And then they come back at the edge, they store that content, they compare it to content over some time frame. They look for exceptions, structural fatigue, metal fatigue, corrosion, leaks, whatever, send messages out, come back in. And so you've got an entire industry being built around brand-new use cases.

Bob Lento -- Chief Executive Officer

Right. And think about the use case of, for example, even something like shooter surveillance. One of the problems that was reported with the last unfortunate incident in Florida was the latency between what their surveillance software was reporting was about 30 seconds. Obviously, in a crisis situation like that, 30 seconds is a lifetime.

And so we're seeing -- there are lots of applications where milliseconds matter, and so there are many different use cases coming to us for that reason.

Mark Kelleher -- D.A. Davidson -- Analyst

So just to clarify, this is an opportunity for next year? You're not looking for much revenue this year?

Bob Lento -- Chief Executive Officer

That's correct.

Sajid Malhotra -- Chief Financial Officer

Yes. So we've been -- we started to invest -- you've been following us, Mark. We started to talk about this last year. I think...

Bob Lento -- Chief Executive Officer

The second half of the year.

Sajid Malhotra -- Chief Financial Officer

Yes, I think we really like the idea that others in the industry also started to talk about this. I mean, you need a groundswell, and we want to convince the world that CDN providers in general, and us in particular, provide something rather unique in this space because of the infrastructure that we have. And we've noted that others have kind of caught on to that and are also repositioning themselves. And I think as we think about this, you're talking about building a brand-new business that may go from hundreds or thousands of dollars or $1 million to many times that over a fairly short period of time with very little new infrastructure being deployed, very high margins consequently from that business against a sales force that's looking out for new use cases.

So there's plenty of excitement. I have no doubt if this was independent and stand-alone and visible, people would really appreciate what's happening here because the customer base is rather unique and marquee names, the use cases are where all of the money flow is going, and we are right in the middle of it. And I think we'll make our mark in due course. And I suspect we'll be talking to you more about this in the coming quarters.

Mark Kelleher -- D.A. Davidson -- Analyst

OK, great. Thanks.

Sajid Malhotra -- Chief Financial Officer

Thanks.

Bob Lento -- Chief Executive Officer

Thanks, Mark

Operator

Our next question comes from Jon Charbonneau with Cowen and Company. Please go ahead.

Jon Charbonneau -- Cowen & Co. -- Analyst

Great. Thanks for taking the questions. I appreciate you don't provide quarterly guidance but can you give us a bit more color on how we should be thinking about revenue in the third quarter, given contract renewals and the seasonality maybe versus the second quarter? And then in terms of your new long-term revenue growth goal of 15%, what percent of that would you say, would you expect to come from newer products? Thanks.

Bob Lento -- Chief Executive Officer

Sure. Thanks. So here's what I would say. I think if you rolled back to the start of the year, when we gave guidance for this year, we said this is what we'll do, and we said that it was our hope that our quarters would get closer to each other. Because if you go back two years, three years, you see a lot of variation in our quarters, and particularly the third quarter kind of really sinking down and recovering to a strong fourth quarter and then back again.

And we were kind of in that cycle. So we've gone ahead and we put a stake in the ground, saying we would very much like our quarters to be as close to the $50 million mark, roughly thereabouts, for the four quarters. And I think at the end of two quarters, we've kind of achieved that. I think for the next two quarters, we hope to achieve that too.

That's how you kind of get to a blended answer that looks for the baseline of $200 million or somewhere thereabouts. So I expect less variation between the quarters. I still expect third quarter to be our weakest quarter out of the four if I have to think about that. But I don't expect it to have the huge dips that we've had historically in some of our third quarters.

And then as I think about the future, take, for example, edge, right? If we are able to get, let's just say somewhere between $5 million and $10 million or $10 million and $15 million, we'll let you know what the numbers are, but for a $200 million business, to add any number to that from a new business using the existing infrastructure, existing salespeople, existing marketing plans, existing presence in the market, etc., that has a margin flow. But adding $10 million, $15 million of revenue changes the revenue trajectory. So I think as that becomes a reality, we should be able to get to the numbers that we are suggesting over the long-term planning horizon.

Jon Charbonneau -- Cowen & Co. -- Analyst

OK. Thank you.

Bob Lento -- Chief Executive Officer

Yup. Thanks.

Operator

Our next question comes from Tim Horan with Oppenheimer. Please go ahead.

Tim Horan -- Oppenheimer & Co. -- Analyst

Thanks a lot, guys. Can you maybe just give a little more color around the quality versus your peers, and I'm assuming this is mostly for real-time, and how much of a premium are your customers willing to pay for quality now, just a little bit more color would be great?

Bob Lento -- Chief Executive Officer

So on real-time, I mean, today there aren't any real products that exist at a global scale. So we're going to be GA with our product September or October time frame. We've done POCs with about a half a dozen customers who evolved very favorably. We've gotten very, very favorable response both in terms of their desire to move forward with the product once it is GA and the willingness to deploy it very rapidly.

And so we're encouraged with what we're seeing so far. Today, the challenge is, you had a Flash technology out there that's been sunsetted. There's the ability with HOS to do very small chunks, but that gets expensive from a resource standpoint, not that reliable and it's still a 5- to 10-second delay. So sub-second capability is new.

But more importantly, or as importantly, is the feature functionality that we're coming out with from a business perspective beyond just technical capability around latency. So think about the opportunity, because it is WebRTC, and you can have both a video and audio and a data channel, the ability to watch a live event and be able to place a bet, if that's what you want to do. Or communicate with a group and basically creating social media on a real-time basis around an event. So to me, it's more than just the low latency, it's what does the platform give you the ability to do.

Can we have instead of one camera that everybody looks at, can we give the user two or three or four different cameras that they themselves can choose from to see the event from different angles. And so there are some use cases, like auctions and gambling, where low-latency is just required from a fraud protection-security standpoint. But there are others like gaming and live sports where it's really about enriching the user experience that I'm most excited about and that I think our customers will be most excited about. In terms of your question about how much they're willing to pay for that? That's yet to be seen.

Hopefully, in a couple of quarters from now we'll be able to report out on the number of customers that have initially taken it and how the price point varies from our traditional video delivery. But what I would tell you is, to us, it's more than just real-time streaming. It's all of the feature functionality and all the investments that we're making to create an improved user experience not only over what exists today in broadcast but what exists today on internet-enabled devices. And so look for us to be announcing more and more capability around helping our customers enrich their user experience through our video delivery.

Tim Horan -- Oppenheimer & Co. -- Analyst

And have you talked to the wireless carriers about this capability? Because it seems like 5G, a key component is enabling machine-to-machine IoT and all the things that you're talking about, as they start to build these networks out?

Bob Lento -- Chief Executive Officer

We obviously work close with all of the wireless providers around the world. But we haven't -- if you're asking are they involved in helping us develop this or do we have a partnership or we're announcing this together? We have not gone there.

Sajid Malhotra -- Chief Financial Officer

And Tim, we went out of our way. One, we are already pushing the limits of physics, right. Because you're talking about taking data, for example, from Amsterdam and getting it to Boston in less than half a second, right. So you're approaching speed of light kind of -- this is premium, ultra, whatever you want to call it from an offering standpoint.

And the second important thing to us as we develop this was that we did not want to lean on a device or a carrier for software or something that had to be deployed in addition to our offering. So we've gone out of our way to kind of stay agnostic in that. So if a consumer wants it, if a business wants it, if an individual wants it, they should have to do as little by way of incremental stuff. They should be able to rely on their standard browsers for the information.

Bob Lento -- Chief Executive Officer

Yes, so think about it this way. Just go back to Flash. Anytime you wanted to use Flash, you got an indication that you had to go download Flash, and you had to put a plug-in. This is going to work natively in all of the standard browsers.

So it gives us a lot of flexibility in terms of how we deploy this.

Tim Horan -- Oppenheimer & Co. -- Analyst

Thank you.

Operator

[Operator instructions] Our next question comes from Greg McDowell with JMP Securities. Please go ahead.

Greg McDowell -- JMP Securities --Analyst

Great. Thank you very much. Hi, Bob. Hi, Sajid.

I want to ask you a couple of questions. First, you mentioned successful price negotiations with I think six of your paid customers and removing uncertainty around contracts. I was just hoping you can expand a little bit on what that uncertainty was and how we should think about how you are negotiating contracts with your big customers today compared to how you would negotiate contracts two, three, four years ago? And then I have one follow-up. Thanks.

Bob Lento -- Chief Executive Officer

OK. So I don't think there was anything unique about this other than the fact that they all hit at the same time. I mean, obviously, every quarter, we have contracts that are being renegotiated. But some of our contracts are multi-year contracts.

Some after the initial year will go month-to-month. And it may take us 14 or 15 months until we reach -- get to the price negotiation. So the cadence is usually that they're a little bit more spread out, especially within our top 20. Last quarter, it just so happened that all of these negotiations came together at once, which is a little bit unusual.

So that's the unusual part. What wasn't unusual was the competition. What wasn't unusual was the amount of price compression. They were largely in line with our expectations for that.

And so there was nothing unusual about that compared to maybe the last time we did a contract renegotiation with that same customer. It's just unusual for us to have that many of our top 10 in a single quarter. And as I said in the prepared remarks, a lot of them -- some of them the pricing took effect in quarter 2, but for most of them, they have sort of a July 1 start to the pricing. So obviously, traffic will continue to grow both based on us outperforming our competitors and the customer themselves growing, so the pie itself getting bigger.

But it could take a little bit of time for the traffic to catch up to the decline in the price. But there is nothing unusual about the price compression other than, again, I don't want to just keep repeating myself, but other than the fact that an unusual amount of our revenue hit at the renegotiation point at the same time.

Sajid Malhotra -- Chief Financial Officer

Also just getting it done is good. I mean, till it's not done, you've got that overhead that it's not done, don't know what to expect. At some level, what the competition might do, how irrational might they get? When is the start point, what kind of volume commits will you get? So it's like there's plenty that goes into every contract negotiation, and that becomes larger and larger from a variability standpoint as you get to customers that are very large. So when you get to our top 10 customers, top 20 customers, it is really good for us to have these behind us.

That's the way I look at it. It's done. It's signed. It's sealed.

We know what to expect. We know what our charge is. We know what the model needs to look like. And there's less to get done and less uncertainty about what remains for the balance of the year.

Bob Lento -- Chief Executive Officer

Yes, I think the good news for us is -- I think as you know if you've sort of kept track of what our focus has been, we've been very, very quality focused and really trying to drive market share growth based on quality and our ability to support our customers and our performance. And while I wouldn't say that we have perfect intelligence, we're fairly certain that in every case, we are not the price leader in these renegotiations. So we're pleased with an -- the acknowledgment that we're getting from customers that because of our performance, they want to renegotiate and resign, and did. And again, while price is always important, and we need to be competitive, Limelight doesn't need to be the price leader to stay in the game.

Greg McDowell -- JMP Securities --Analyst

That's really helpful, thank you. And one quick follow-up, and a nice segue from your quality commentary is you mentioned the lowest customer churn, lowest level on record. And I'm sure some of that has to do with quality and improving NPS scores. But I was just hoping you can talk a little bit about some of the factors that have led to the lowest record of customer churn.

Thanks.

Bob Lento -- Chief Executive Officer

Yes, I appreciate the question. And it's really sort of -- you have to get it right on multiple dimensions. And so we've spent a lot of time in our sales organization building up our account management capabilities. If I go back to our original -- you mentioned NPS, if I go back to the original NPS survey, there were very negative comments about the support we provided for our account management organization.

That's very different today. Most of our customers have what we refer to as ASA services, advanced service architects. The customers that have ASAs tend to have higher NPS, and our market share tends to be higher. So we have some really strong, very strong group of ASAs around the world working with our customers.

And so we understand what's important to them, and we can fine tune through our configuration capabilities how we deliver that traffic to maximize for quality in their particular use case or scenario. Obviously, the network at its core has to operate at a very high level. And not only at a high level, but you have to have capacity in a location that the customer cares about connected to the ISPs that the customer cares about sort of 7 by 24. So when we look at what does it take to have a successful relationship with a customer? It's the personal interaction that we have with them, both day-to-day and at an executive level, the performance and capacity of the network, the feature functionality of our software and when things go bump in the night, because they invariably do, what is our ability and our culture around supporting our customers.

Do our customers feel like their problem is important to us and we're attacking it as if we worked for that company versus just another call that we receive. And we've been very -- working very hard across all those dimensions. And we may not be perfect across all of them every single day, but we've -- we are obviously much improved from where were, which may or may not be the right bar. The right bar is how we perform against our competition.

And based on the feedback we get from our customers, we've made really, really positive strides in that area. And we're very proud of what our employees have achieved.

Greg McDowell -- JMP Securities --Analyst

Very good. Thank you.

Operator

[Operator instructions] Our next question comes from Sameet Sinha with B. Riley FBR. Please go ahead.

Sameet Sinha -- B. Riley FBR -- Analyst

Yes. Thank you. A couple of questions. First is regarding guidance.

Sajid, as you mentioned $50 million equally distributed for the rest of the -- I mean, for all four quarters. If I put $50 million for the third quarter, that kind of implies sort of $51 million in the fourth quarter, which is seasonally the strongest quarter for you. And I guess if you can provide more clarity around does this repricing, as it happened, as it impacts the third quarter, when do we start to see where overall revenue starts to exceed the volume growth? I guess that's one of the explanations for it. The second thing is, and it was at the end of your prepared remarks, did you mention organic growth opportunities or inorganic growth opportunities? If it's the latter, then can you provide more clarity around it? This is the first time I heard you say something like that.

And then I have a follow-up question.

Sajid Malhotra -- Chief Financial Officer

Sure. So first, let's just talk about revenue distribution, right? I think I've said this before, and this is primarily the reason why we don't give quarterly guidance is because we don't manage to the quarter. We manage to the year, right? And so things can happen within quarters that can cause $1 million, $2 million to move around between one quarter or the other. An iOS upgrade happening in September versus October, big event.

A software download, a game introduction, how often or when Fortnight does an update, all of these things can cause -- and our revenue is not large enough where we can accommodate that and give you the precision of a guidance by quarter and then get penalized because we missed by $0.5 million or $1 million. So we go ahead and try to manage to the year. As you think about that, the revenue has gone from $168 million, $171 million to $184 million to a guidance that we gave, and now we've raised that guidance twice. So there is strength in the business compared to where we were at December, then in April, and where we are now.

I mean, three times we've given guidance for this year, and all times, we've raised the guidance. And so I feel like the business is on the right trend. I think -- you know us. I mean, we don't stop because we achieved results.

We go ahead and continue on and try to see what else and where and how and when as quickly as we can. So that's kind of the nature of our people and our business and the culture that we have that you want to go ahead and get everything. Based on where things stand for the year, we've raised guidance. I think we feel good about where we are.

I think Q3 is seasonally our weakest quarter. There is no reason why this one will be any different. I also think that the weakness that we've seen historically, we should not see this quarter. And this quarter should be closer to the $50 million number than, for example, being at a big dip compared to Q3 like we had in '15 or '16, maybe just go back and look at the numbers.

So that's where that sits, right? Then we get to the point on organic and inorganic. For the longest time, right, we could not afford to take a look at stuff that was inorganic. We have focused on organic, that is the best opportunity. We are in a good neighborhood.

We've corrected our house for -- on many fronts, and we feel good about where we are. We haven't become -- but that doesn't mean that over the course of the last two years, three years, we haven't gotten opportunities to participate in some small acquisition here or build a capability here or acquire some people here or there or some technology. And we've always been looking at that, and we continue to look at it. So that's really not changed.

I feel a little bit more confident about our capabilities, about our balance sheet, about the state of our business, about our customer base, about the revenue trajectory in the base business that I can kind of say, yes, these are things that all companies should always be looking at, and we can now finally start looking at them. I mean, we can't put blinders on and say, "Nope, not going to do that. Not going to look at that." So -- but there was a time here where all of that would just have been a bad idea because our base business was -- we were not even -- you wondered, like, is it capable of surviving. You remember the days when we were at $0.90 just a year and a half ago.

So we are at the point today where I think we have the benefit of having achieved what we have to go ahead and at least stay aware of what's going on in the marketplace, and that we are doing.

Sameet Sinha -- B. Riley FBR -- Analyst

So if you were to look into M&A opportunities, which specific sectors would you be looking at? Can you provide us some more information? Would it be more product or technology, or both?

Sajid Malhotra -- Chief Financial Officer

I can tell you what we would not do. Don't expect us to go ahead and get into some adjacency and try to explain to you why that's a really good idea. This company has done that before and not really done well when it has done that. But for example, if the customer base of a CDN company became available where we could go ahead and layer it on our infrastructure, we would absolutely go look at that.

I mean, that would be crazy not to jump on that opportunity to go ahead and take on a customer base and use our infrastructure to go deliver services to that base. So think of us where it's very, very tightly aligned with all of the things that we've been talking to you about.

Bob Lento -- Chief Executive Officer

So, video, edge services.

Sajid Malhotra -- Chief Financial Officer

Edge, right.

Bob Lento -- Chief Executive Officer

Right? I mean, in video, there's a lot of capabilities that our customers utilize that are beyond what we do. We'd look at those opportunities. We'd look at edge services. And then to Sajid's point, in the core CDN market, if it was an opportunity to add expansion both at the physical infrastructure layer as well as the customer, that would be important to us.

So we're not trying to signal like, "Hey, we're in a rush to go spend a bunch of money." But with Goldman Sachs out and Akamai settled and the core business in good shape, for the first time, cash moving in the right direction, for the first time since I've been here, we have the luxury at least of reading the emails that continue to come our way or take some of the calls that continue to come in. We're obviously going to be very careful, very choiceful, and very disciplined about pulling the trigger on anything. And to your point, it's the first time you ever heard us say that, because it's the first time we felt that we had the bandwidth from a management perspective to even look at it and, too, that the foundation of the business was strong enough that we could integrate something in and have one plus one be greater than two.

Sameet Sinha -- B. Riley FBR -- Analyst

OK. My final question. When you speak about these renewals, and I know you kind of shy away from reporting traffic figures, but can you give us a sense of what are maybe average or median traffic minimums that you have signed for this cohort of six customers? Traffic growth.

Sajid Malhotra -- Chief Financial Officer

I wouldn't give you a minimum, but I would tell you this, Sameet, that the industry basically behaves where the minimums carry very little meaning. And let me explain that. Somebody will, in the procurement departments or the companies or the customer base has been trained to go ahead and sign up for as small a minimum as possible over as long a time horizon as possible at the lowest possible price. That's kind of built in.

That's in their -- that's what they set out to do. So if you sign some kind of a minimum or whatever the threshold is, sometimes customers run through that in six months, four months, eight months, right? It doesn't even extend out through the length of the entire contract. So I don't want to give you a feeling that, "Oh, this minimum -- they signed the minimum." We had a big minimum signed with a customer that didn't have a minimum. Now all of a sudden, you can draw many inferences from that.

But I would say stay focused on the broader guidance, which is the trajectory of the revenue is actually improving. We raised our revenue guidance by more than a bp, guys. That's what's important. We feel confident about the business and where it's headed.

Sameet Sinha -- B. Riley FBR -- Analyst

Perfect. Thank you.

Sajid Malhotra -- Chief Financial Officer

Thanks.

Bob Lento -- Chief Executive Officer

Thanks, Sameet.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Sajid Malhotra for any closing remarks.

Sajid Malhotra -- Chief Financial Officer

Great. Thanks, Brandon. So net-net, we had a strong quarter, a strong first half, and we are on track to make 2018 the best ever on many operational and financial fronts. We are advantaged in the emerging edge opportunities because it is in our DNA.

And having quickly realized some long-term goals, we are raising both this year's guidance and our long-term targets. We will be at an industry infrastructure analyst Dan Rayburn's Edge Next Summit taking place October 15 in New York City, which will focus on content distribution at the edge and all that is taking place with low latency, CDN, security and more. I look forward to seeing some of you there. In addition, we are presenting at the Oppenheimer 21st Annual Technology, Internet & Communications Conference in Boston on August 8 and at the D.A. Davidson 10th Annual Technology Forum in New York on August 9.

Please visit the Investor Relations website at www.limelight.com for dates and venues of upcoming events. Of course, we appreciate all your support, and thank you for joining us today. And that concludes our call. Have a great day.

Bob Lento -- Chief Executive Officer

Thanks.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 58 minutes

Call Participants:

Dan Boncel -- Chief Accounting Officer

Bob Lento -- Chief Executive Officer

Sajid Malhotra -- Chief Financial Officer

Michael Turits -- Raymond James -- Analyst

Mark Kelleher -- D.A. Davidson -- Analyst

Jon Charbonneau -- Cowen & Co. -- Analyst

Tim Horan -- Oppenheimer & Co. -- Analyst

Greg McDowell -- JMP Securities --Analyst

Sameet Sinha -- B. Riley FBR -- Analyst

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