Content delivery veteran Limelight Networks (EGIO -0.21%) reported first-quarter results this Thursday evening, and it was a humdinger. The company, which helps other businesses deliver digital data such as file downloads and video streams in a more efficient manner, crushed Wall Street's consensus estimates and raised its full-year guidance targets.

Investors embraced the results, driving Limelight's share prices as much as 15% higher in after-hours trading.

Let's have a closer look at the quarter, shall we?

Limelight Networks' first quarter by the numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$52.1 million

$44.7 million


Adjusted net income

$6.2 million

$1.6 million


Adjusted earnings per diluted share




Data source: Limelight Networks.

Wall Street analysts would have settled for earnings of $0.02 per share on sales in the neighborhood of $48 million. Limelight left both of these targets far behind.

How the sausage is made

The adjusted profits above are backing out $2.7 million of litigation expenses and $3.4 million of share-based compensation from the bottom line, and both of these figures were significantly higher than their year-ago counterparts. Without these modifications, Limelight's GAAP earnings swung from a $0.03 loss per share to a just-above-breakeven result.

During the first quarter, Limelight settled the last of its legal battles with rival Akamai Technologies (AKAM -1.02%). The terms of this settlement were not publicly addressed, but Limelight was the plaintiff and Akamai the defendant in the last patent infringement case, though Akamai also returned fire with several counterclaims. If the settlement had any financial effects, we'll see those on Akamai's and Limelight's financial statements over time. If not, the two companies just removed a source of financial uncertainty.

In other legal news, Limelight sent another $4.5 million payment to Akamai to address an older settlement, the seventh such payment in a planned series of 12. Limelight's earnings will get a large boost when that obligation expires, five quarters from now.

Young man working on a laptop and wiping his brow, with a necktie tied around his forehead. In the background, two of his female peers cheer him on.

Let's get to work! Image source: Getty Images.

The upshot: Limelight is firing on all cylinders

Gross margins expanded from 47.3% to 51.2%, year over year. The year-ago period's negative 7.6% operating margins landed just a hair short of breakeven this time, at a negative 0.1%. These profitability improvements were achieved while growing the top-line revenue stream -- the best of both worlds. And as CFO Sajid Malhotra reiterated in the fourth quarter, this is done by focusing on high-quality products and services.

Defense wins championships, right? Blocking and tackling work wonders in the field of business, too. Go back to the basics, offer solid content delivery services with low downtime and excellent customer service, and the financial results will follow.

Looking ahead, Limelight raised the midpoint of its full-year revenue guidance from $198 million to $200 million. Adjusted earnings are now seen landing near $0.15 per share, up from $0.13 per share in last quarter's presentation. The company will also tap the brakes on its capital expenditures from roughly $23 million to $21 million, which will boost Limelight's free cash flows by the same amount. That's still a slight acceleration from the steady capex run rate of approximately $5 million per quarter in recent years.

The quality focus is here to stay, the end of Akamai-based legal drama and expenses is coming to a close soon enough, and Limelight Networks looks like a legit investment idea these days.