I’ve been saying for some time on CNBC appearances, and here on this site, that Limelight’s IPO is coming, and it’s going to be an interesting one. The S-1 has now been filed, so let’s have a look.
Quick background first: Limelight provides high-performance content delivery. In essence, it competes with Akamai and others in providing a rich-media-centric network that accelerates the transit of responsiveness of everything from online games (Microsoft/Valve as customers) to user-generated content (MySpace is a customer).
Turning to the numbers, the company has zoomed from $11m in revenues in 2004 to $64m in 2006. The company was GAAP profitable until last year, when expenses for stock-based compensation took the company into the red. If you net that out then the company remained profitable on cash-flow in 2006, although the company’s capital expenses are big and growing, with equipment purchases hitting $40m in 2006, up fromt $11m a year earlier.
While being a CDN for rich media definitely puts the wind at Limelight’s back, there are big risks here. Highest among those risks is a suit filed last year by competitor Akamai, alleging that Limelight infringes on two of its core CDN patents. As Limelight concedes in the S-1, that could lead to monster damages, at the very least.
In other risks, the company’s top ten customers represent 58% of revenues, which isn’t that unusual, although I’m betting a high percentage of ’em are ephemeral Web 2.0 companies. More intriguingly, a single Limelight reseller handles a “large content provider” that makes up 21% of revenues. Given that number is forecast to decline in 2007, could it be Google-owned YouTube? Whoever it is, they’re incurring at least $13m annually in bandwidth costs.