Content delivery veteran Limelight Networks (NASDAQ:LLNW) reported fourth-quarter results on Wednesday. The company edged out Wall Street's consensus estimates across the board and raised its full-year revenue guidance by a hair. The stock opened Thursday morning's trading session 4.2% higher.

Limelight Networks' fourth-quarter results by the numbers


Q4 2019

Q4 2018


Analyst Consensus


$60 million

$44 million


$59 million

GAAP net income (loss)

$2.5 million

($5.2 million)



Adjusted EPS





Data source: Limelight Networks. GAAP = generally accepted accounting principles.

Limelight reported revenue of $201 million for the full fiscal year, a 3% year-over-year increase. An adjusted full-year net loss of $0.02 per share was a significant improvement over the loss of $0.12 per share in 2018.

The company continued to double down on edge services and video content delivery. You know that glut of video streaming services that was supposed to kill Netflix (NASDAQ:NFLX) this winter, like Walt Disney's (NYSE:DIS) Disney+ and Apple's (NASDAQ:AAPL) Apple TV+? Limelight took part in many of these launches, including the Apple and Disney platforms I just mentioned. The company is also looking forward to upcoming launches such as HBO Max and NBC's Peacock, because Limelight will play an active part in those as well.

In other words, Limelight pursued a sharper focus on video content just in time to benefit from a plethora of potentially game-changing launches of digital video platforms. You can already see the results of these important client contracts in Limelight's skyrocketing revenue line.

Network quality leads to more and better client deals

To deliver high-quality video services in key markets around the world, Limelight is investing in its content delivery infrastructure. Capital expenses landed at $10.5 million in the fourth quarter, one of the highest single-quarter capex budgets in company history. This investment helped Limelight double its network capacity to 60 terabits per second in 2019. The company also expects to boost this global traffic capacity by another 50% in 2020.

The capacity improvements are paying dividends. Total traffic across Limelight's edge routers set a record in the fourth quarter, 25% above the previous record, which in turn was set in the third quarter. Customer churn was the lowest on record; average revenue per customer rose from $67,000 in the year-ago period to $83,000 in the third quarter and $100,000 in this report.

"Our quality is better, the demand is absolutely there, the market is growing, and we are growing at our best rate ever," CFO Sajid Malhotra said in a phone interview with The Motley Fool. "Most importantly, our growth is not limited just to revenue but also to the bottom line."

Malhotra also underscored how Limelight should see a more cost-effective type of network improvements, taking advantage of lessons learned as well as its budding economies of scale. In some cases, Limelight can boost its network presence by something as simple as a software upgrade.

"Even though we are projecting the highest growth rate on the top line, we are suggesting that capex will be lower than the capex we had in 2019 to actually deliver that revenue," he said.

Computer rendering of a cartoon-style rocket taking off from an outstretched hand.

Image source: Getty Images.

What's next for Limelight Networks?

Limelight's stock nearly doubled over the last year, despite a hit-and-miss series of earnings reports. Investors are looking past temporary flaws in the headline numbers to see a healthy growth trajectory developing for the long haul.

It's not always easy to pin a fair value on fast-growing companies with negative full-year earnings, but I think it's pretty clear that Limelight is going places after investing in digital video infrastructure at exactly the right time. The company should enjoy plenty of organic growth as the streaming video wars rage on over the next few years, since Limelight serves nearly every competitor in that sector except Netflix.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.