Edgio Inc (EGIO) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Limelight Networks 2011 first quarter financial results conference call. At this time all participants are in a listen-only mode. At the end of the prepared remarks, we will provide instructions for those interested in entering the queue for the question-and-answer session.

I will now turn the call over to Paul Alfieri, Vice President of Corporate Communications. Go ahead, Paul.

Good afternoon, and thank you for joining the Limelight Networks first quarter 2011 financial results conference call. Speaking today will be Jeff Lunsford, Chairman and Chief Executive Officer, and Doug Lindroth, Chief Financial Officer. This conference call is being recorded on May 5, 2011, and will be archived on our website for approximately 10 days.

Some portions of this conference call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements that are not strictly statements of historical fact, such as statements regarding future events or future financial performance, including but not limited to, statements related to Limelight Networks market opportunity and future business prospects, guidance on financial results, statements concerning anticipated future growth and profitability, as well as management's plans, goals, strategies, expectations, hopes and beliefs, and statements concerning the anticipated effects of pending or completed business combinations or other strategic transactions.

These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those contained, projected or implied in the forward-looking statements, including the inherent risks associated with litigation, particularly intellectual property-based litigation. Reported results should not be considered an indication of future performance. Factors that could cause actual results to differ are included in the Company's periodic fillings with the Securities and Exchange Commission.

I would now like to introduce Jeff Lunsford.

Thank you, Paul. Good afternoon and thank you for joining us. If you are online, we've updated our standard investor presentation and you can find it in PDF format within the Investor Section of our website under the Events and Presentations link.

Today, Limelight reported 49.8 million in revenue, 38% year-over-year growth on an as-reported basis, and 15% year-over-year growth on a pro forma as-if-combined basis, and a 3% pro forma EPS per share loss. Our innovative cloud-based services contributed approximately 33% of revenue in the quarter and as shown on slide 30 of that investor deck, these services are forecast to grow as a percentage of revenue for the rest of the year, as they gain traction in the marketplace amidst the three growth trends we've been citing for the last two years, the first of which is the shift of video and advertising dollars online. The second is the explosive growth of mobile and tablet-computing devices, and the third of which is the migration of software applications and IT services into the cloud.

After the quarter, we announced the acquisition of Clickability, a web-content management service provider whose services are highly complementary to our content delivery, video platform, site acceleration, mobility and EyeWonder solutions. This acquisition furthers our ability to capitalize on these trends and I'll provide comments on that transaction later, but first, I'd like to provide some highlights from this past quarter.

First, demand for our mobile and tablet solutions continue to increase at exciting rates. We saw over 35% growth quarter-over-quarter and a quadrupling of revenue year-over-year for our LimelightREACH and Limelight Ad Services. We expect this to continue in Q2 with a forecast of revenue to more than triple year-over-year from Q2 2010. New customers in the quarter include NBC Local, BET and How Stuff Works.

In addition to our bread-and-butter mobile video and ad optimization and delivery, we are seeing increasing demand for incorporating our technology into mobile apps. Examples of apps that you might run across that include interactivity in video powered by Limelight includes CBS's Survivor -- Redemption Island, MSNBC's Today Show app for the iPad, Meet the Press's app for Android and NBC's The Royal Wedding by NBC iPad app.

Second, our Limelight video platform also continues to see strong demand. Revenues grew 23% quarter-over-quarter. We have doubled the size of this business since we acquired it in August 2010 and we had a very strong bookings quarter in Q1 and are expecting year-over-year growth to actually accelerate in Q2. Our Q2 forecast has this service also almost tripling year-over-year. These numbers demonstrate the clear go-to market synergy we discussed when we acquired this OVP solution and joined forces with a great entrepreneurial team last year.

In the quarter, we integrated a Limelight video platform with Adobe's TV Everywhere technology to provide content producers the ability to offer premium content securely across multiple internet-based platforms, including mobile devices, tablets, connected televisions and desktop computers.

Also during the quarter, the South by Southwestern Music Conference and Festival utilized Limelight Video platform live streaming and video-on-demand capabilities to broadcast events from the conference live for the fist time ever, and make them available on demand after the performances.

New customers in the quarter for LVP included AEG, Hearst and Western Union and just after the quarter, we went live with Limelight video platform's spring 2011 software release, which included features related to live-streaming to web-based players and Apple IOS devices, enhanced mobile and device support, real-time analytics and localization.

Third in highlights, our cloud storage services continued to show good traction also, growing over 40% year-over-year. In the quarter, we deepened our relationship with Voodoo, which is part of Walmart, and added customers such as [Vosdoo] in South America. We are just getting started in cloud storage and believe that with our globally distributed high-performance network-based cloud storage platform, we are going to be (inaudible) disrupt the storage market the same way we disrupted the content delivery market in years past.

Fourth in highlights, we also continued to see demand for our site and application acceleration services which grew over 100% year-over-year. In the quarter, we announced that we will soon be offering a PCI-compliant service. This solution is targeted at companies who need to perform transactions online, enabling secure delivery of personal credit card information over Limelight's secure PCI-compliant network infrastructure. It will also help retailers reduce the transactional fees they pay to card processors. This solution will be available as a premium add-on to our commerce accelerator services. We added 15 new site and application acceleration customers in the quarter, including the advertising agency, Crispin, Porter and Bugosky and Harvard Business Publishing.

Fifth in highlights, our EyeWonder Interactive advertising team continued to grow and innovate also, delivering approximately 11 billion ad impressions during the quarter, supporting online campaigns for the launch of Internet Explorer 9, a March Madness event for a major auto manufacturer, the Sprint EVO Phone, Wrigley Gum and many others.

We were pleased to win a Webby Award for an innovative video campaign we powered for AT&T during the World Cup. We also worked with [Telesinara] to develop an interactive campaign for users of the Samsung Galaxy Tab, which allows users to play a level of the popular game, Angry Birds, from inside a banner ad.

Sixth in highlights, our core content delivery business also continued to grow. Year-over-year, core CDN revenue growth was -- in the quarter was 11% without the effect of our Microsoft contract trailing off in line with what we expected when factoring in the strategic three-year partnership we announced with NetFlix that commenced on January 1.

As discussed on previous calls, we continue to see improving business conditions in the CDM sector. Correspondingly, we see this growth rate improving to approximately 12 to 13% in Q2, which is in line with the growth underlying our $400 million target model.

We again achieved record traffic levels and hit a new milestone as we now have over 6 terabits per second of egress capacity available globally.

Finally, in the highlights, I'd like to give you two examples of how we are able to bundle our core and cloud-based services to provide value for our customers. The first example is Goodby Silverstein, the world-renowned ad agency for Sprint and other high-profile companies. Limelight is providing Goodby with core delivery services, premium mobile delivery, the Limelight video platform and EyeWonder interactive ad services. Goodby will use the Limelight video platform to upload, manage and deliver videos for Sprint's new 2011 campaign across Sprint's web and mobile sites and will be leveraging LimelightREACH to extend the campaign to mobile. EyeWonder Services and technology will power the advertising campaign.

The second example of bundling is the Middle East Broadcasting Company, which selected Limelight Video platform and our core delivery services to power live and on-demand television from the MBC web portal. To ensure that the Web pages perform well and users get a blazing fast page delivery experience, MBC is now also using the Limelight Portal Accelerator.

These bundled sales success stories, the exciting growth rates of all of Limelight's cloud-based services we just laid out, and the increasing growth rates in our core CDN business, all lead us to believe our strategy is working and that we are on a path to getting our organic growth back above 20%. Limelight is well positioned with cloud-based SaaS solutions and a globally distributed high-performance computing storage and delivery platform to benefit from the three trends I mentioned earlier. The entire Limelight team is laser-focused on taking great care of our customers and achieving our $400 million target model in 2014 or before.

Now I'll turn the call over to Doug for a financial update.

Thanks, Jeff. During the first quarter, Limelight Networks reported revenue of $49.8 million, up 38% from the first quarter of 2010 and down 10% from Q4, as you would expect, given the seasonality of our business. As Jeff mentioned, our non-core Microsoft CDN revenue grew approximately 11% during the first quarter compared to the same period last year. Including Microsoft, our core CDN revenue grew approximately 8%.

As a reminder, the revenue associated with our contract to license and assist Microsoft in building their in-house CDN, concluded at the end of February 2011. During the first quarter of 2011, revenue recognized specifically from this license and build was approximately $1.8 million. As we have discussed, you will see a one-time compression in margins in Q2, as this amortization disappears and then we expect margins to expand for the remainder of the year.

Our cloud-based and consulting services revenue increased to 33% of total revenue during the first quarter compared to 15% in the same period of 2010 and down from 36% in Q4. The decline from Q4 was in line with our expectations as a result of the seasonally strong Q4 demand for EyeWonder Services.

Cloud-based services revenue grew 29% on a year-over-year pro forma as-if combined basis.

During the first quarter, Limelight's international operations represented 31% of total revenue, which was up from 28% in the same period of 2010.

We reported first quarter adjusted EBITDA of $3.6 million compared to $5.1 million for the first quarter of 2010.

In Q1, our GAAP net loss was $9.8 million or $0.09 per basic share compared to a GAAP net loss of $5.8 million or $0.07 per basic share in the same period in 2010. We also reported first quarter non-GAAP net loss before stock-based compensation, litigation costs, amortization of intangibles and acquisition-related expenses of approximately $3.6 million or $0.03 per basic share compared to a non-GAAP net loss of approximately $275,000 or breakeven per basic share in Q1 2010.

Please refer to the tables in our press release for the reconciliation of GAAP measures to these non-GAAP measures.

GAAP gross margin was 48% during Q1 down from 46% last quarter. Gross margin declined in Q1 as a result of the seasonally strong fourth quarter of EyeWonder services and also due to an increase in network-related depreciation and the reduction in Microsoft license revenue. [GAAP] gross margin was 56% for Q1 down from 58% in Q4 and down from 57% in Q1 of 2010.

During the first quarter, our operating expenses were $30.3 million, an increase of approximately $200,000 from last quarter and $9.4 million from Q1 2010. Our operating expenses increased over Q4 as a result of employee benefit cost increases and our global sales conference offset by a reduction in our annual bonus accrual and professional fees.

Total depreciation and amortization for the first quarter was $8.7 million up from $8.3 million in the fourth quarter and up from $5.5 million in the first quarter of 2010. The increase in the year-over-year periods is related to increased network depreciation and intangible asset amortization from our acquisitions. Depreciation and amortization in the first quarter includes $6.7 million in network-related depreciation.

Stock-based compensation expenses for the quarter were $4.3 million compared to 4.3 million last quarter and in Q1 2010.

Moving on to the balance sheet, our combined cash and short-term marketable securities balance on March 31 was approximately $135 million up from approximately $69 million in the fourth quarter. The increase in cash and marketable securities is primarily related to the $77 million in proceeds from our follow-on stock offering, offset by capital expenditures of approximately $8 million and $5 million of prepayments related to backbone and bandwidth agreements.

Days sales outstanding for the quarter were 70 days, up from 68 days in the previous quarter and up from 64 days in Q1 2010.

Regarding guidance for Q2 of 2011, we expect to achieve revenues in the range of $51.8 million to $53.2 million including approximately $1 million of revenue from our acquisition of Clickability. Incremental revenue from Clickability is after the writedown of deferred revenue on the opening balance sheet.

Our cloud-based and consulting services revenue will be approximately 38 to 40% of total revenue in Q2. For this revenue range, we would expect gross margin to be 39 to 41%. Our gross margin will be impacted in Q2 as a result of the increase of our clod-based services as a percentage of total revenue offset by the reduction of Microsoft license fee revenue and increased costs as we build and expand our network.

As we mentioned on our last earnings call, we believe that both our gross margin and EBITDA margin will increase from Q2 through the end of the year as our cloud-based and consulting services revenue gradually continue to grow as a percentage of revenue and believe we'll pick up 8 to 10 percentage points of margin from Q1 levels by Q4 of 2011.

Stock-based compensation expenses for Q2 are expected to be approximately $3.9 million and capital expenditures are expected to be approximately 10 to $12 million.

We anticipate that our second quarter operating expenses excluding stock-based compensation, litigation expenses and acquisition-related expenses will be about $1.4 million higher than Q1. Our operating expenses will increase primarily due to the acquisition of Clickability and an increase in sales-related compensation associated with the sequential increase in revenue.

Finally, we anticipate acquisition and litigation-related expenses to be in the range of $1 million to $1.5 million in the second quarter of 2011.

With that, I'll turn it back to Jeff.

Thanks, Doug. As I mentioned earlier, this Monday we announced the acquisition of Clickability, a SaaS-based provider of web content management services. Clickability, now the Limelight web content management group, helps enterprise marketers and online publishers manage the entire website lifecycle in the cloud. Their web-based services helps anyone from non-technical users all the way to sophisticated global publishing entities create, manage and publish content globally, track visitor experiences and implement branding, social media and demand generation campaigns, all from a point-and-click interface.

Clickability has over 60 customers in markets such as media, high tech, financial services, government and manufacturing, including Amcor, BMC, Minneapolis Star Tribune, PR Newswire and Swiss Re. Their services are synergistic with our Limelight Video platform, mobile and tablet distribution site acceleration and EyeWonder advertising services. Traditional IT services like web content management are in the midst of a transition into the cloud where they can gain better scale, high performance and global reach. With this acquisition, we'll be able to help customers across all of the market segments we serve capitalize on this shift.

With the addition of web content management, Limelight can offer customers a complete cloud-based workflow for growing their online businesses, including content and video publishing, website hosting, site acceleration, mobility and effective monetization utilizing [close-linked] marketing. Our differentiator is our globally distributed computing storage and delivery platform which unifies these services and helps us offer better performance, global scale and insights which can accelerate time to revenue. We are able to solve more complex business problems than point solution vendors which will help us increase customer loyalty.

This acquisition is a continuation of our stated strategy of building our cloud-based services business to half of our revenue by 2014 which we believe, if achieved, will drive substantial margin expansion, as you can see on the 28th slide titled Target Model of the investor deck on the website I mentioned earlier.

As stated in our press releases, with these Q1 results and the addition of Limelight content management, we are currently projecting to achieve this target model ahead of our previously discussed timeline. However, since this is a long-term model, we only plan to update it once a year and will do so at our Annual Investor Day in New York this fall, which will be on September 29, and more logistics there will be forthcoming.

With this acquisition, we expanded our addressable market in cloud-based services by over $1 billion. In fact, Gartner expects the web content management section or segment the Limelight web content management group operates in to grow to 1.7 billion by 2014. This is an exciting sector where we believe we will be able to bring our highly efficient cloud resources to bear and replace many of the large monolithic, cumbersome and expensive in-house content management software installations that dot the enterprise landscape.

No clear leader exists today in on-demand cloud-based, SaaS-based, whatever you want to call it, web content management and we plan to become that leader.

In conclusion, Limelight Networks continues to execute well against the strategic plan we laid out for investors. We continue to target attractive and growing service segments such as web content management, OVP site acceleration, mobile ad delivery, cloud storage, rich media monetization and more, which are synergistic with our core content delivery services and we'll benefit from the leverage and scale of that global platform.

Limelight operates at the intersection of three long-term growth trends and as content consumption continues to grow, connected devices continue to proliferate, applications move to the cloud and enterprises move their advertising activities online, we believe Limelight and our shareholders are well positioned to benefit.

So thanks for your time. And operator, at this time, we will open the call for questions.

Thank you. (Operator Instructions). Our first question comes from Dave Hall from FBR. Your line is open.

First, Jeff, on the traditional CDN business or the core CDN business, there's been some talk about traffic growth potentially moderating online and I wanted to see what you guys saw in the quarter and more importantly, the outlook for the rest of the year. Do you see traffic growth moderating, accelerating, holding steady?

We saw good growth in the quarter, Dave. If you look -- I don't know if you were able to pull up the presentation, but we have an updated traffic graph there and it looks like it's looked most quarters, which is with substantial growth, and we believe that our traffic growth is going to continue throughout the year. We talked about sort of historically what we've seen and this year doesn't feel any different.

Okay. So obviously, it's going to continue to grow, but will the pace of growth moderate or you think it'll hold steady?

Well, again, if you look at -- I'm pulling up the presentation myself -- but if you look at the growth that we saw in Q1, it was substantial, and quarter-to-quarter, it's hard to say, but year-over-year, anywhere from 60 to 100% growth which is what we've seen in the past, is very attainable this year.

Okay, great. And then let me ask you about Clickability. Obviously, the LVP enables people to manage the video part of their sites and it looks like Clickability will allow them to manage the other pieces of content. When you think of your install base, have you guys done any work to think about what percent are logical buyers of Clickability? And is it more the OVP guys or -- walk us through what the cross-sell strategy is to get some early wins and success with that acquisition.

Sure. Yes, so we identified web content management in the cloud as -- when we did the Delve acquisition and began seeing such fantastic traction with the Limelight video platform, we said, this is a great place to be. It's clearly synergistic with CDN and if you take that Limelight video platform footprint and say, all right, I'm doing this half of the website; I want to do the other half, we had made the internal decision to build that organically, or acquire it, and that's what led to the Clickability. So it's a very attractive segment to us.

If you look back at the old enterprise software content management guys, every single one of them has been acquired and there have been -- those installations are being [milked] for maintenance now and covered up with hundreds of millions of dollars of consulting for support. So it's just a -- it's a huge opportunity and the fact that we're already doing content delivery and potentially LVP Limelight video platform for these guys gets us -- puts us in the pole position when they're talking about getting rid of that, as I said, monolithic, expensive, in-house implementation.

All right, great. Thank you, Jeff.

You're welcome.

Thank you. Our next question comes from Derek Bingham from Goldman Sachs. Your line is open.

Hi, guys. This is [Geo John] on behalf on Derek Bingham.

Hi, Geo.

A couple of questions -- hi -- a couple of questions -- I saw that there was a sequential decline in customers, about a 53 decline in customers. What do you attribute this to? Is (inaudible) picking up again?

So what you see there is there's seasonality of the customer count in our EyeWonder business. We define customers by a customer that we build in the quarter and so, you have seasonality in the advertising business. Q1 is much lower than Q4, so a good bit of it was there. There's also a small dynamic where the bookings we achieved in the new customer adds in Q1 were a little more back-end loaded at the end of March than we'd normally see in a pattern. And so since we signed those customers up in March, but for the second half of March, we actually didn't implement and bill them. They'll show up in the Q2 customer count. It's really probably those two dynamics were the biggest drivers, but again, we've talked about this.

We're focused on revenue growth, high-quality cloud-based service, higher margin expansion of the relationships with -- we have over 1800 customers. That's plenty to work with and we're not -- if we have someone paying us less than $1,000 a month and not paying their bills, we're not focused on retaining those customers.

Okay. Regarding your core CDN group, has competition changed or shifted, has pricing shifted with regards to your pricing power in the market or is it only concentration on large deals? And your view on media, contracts coming up for renewal earlier than you expected, any change in that environment?

It's really consistent. We track pricing trends and discounting trends and over the last, I don't know, eight or six quarters at least, we've seen improving trends there and we've seen the benefit of bundling solutions and we bundle one of our cloud-based services with core CDN. It's less discounted, so I'd say that your core question of has it changed, not dramatically since last quarter. Limelight is still tied, is number one or number two scale content delivery platform in the world with Akamai.

And the largest customers still tend to use two CDNs, the smaller ones tend to focus on one CDN and that business grew without the Microsoft effect 11% organically. And then if you kind of parse through our guidance and pick the midpoint of the range, and make assumptions about contribution based on the VAS contribution Doug gave you, you would come up with that it would, at the midpoint, grow about 12% organic year-over-year in Q2. So that business is -- the growth rate has been increasing and continues to increase if you look at the midpoint of guidance for Q2, so we feel good about it.

Okay. Finally, Global Crossing was acquired by Level 3. I know that it was a reseller of yours, a major reseller of yours. Did that have any impacts on revenues coming from the Global Crossing partnership?

Well, they announced that deal, but I think it'll -- we think it'll take six months to a year for that to close and Crossing is still a great reseller of ours. We actually through their selling, signed up a very high-profile customer in Q1 that we're not allowed to disclose the name of it, but it was a great team effort between Global Crossing and Limelight. And probably in 2012, if Level 3 gets that deal closed, then you would see them go away as a Limelight reseller, but it's nothing that's impacting us right now and we're still working with those guys every week on deals.

And that agreement that we have with them runs through the first half of 2012.

Okay, great. Thanks, Jeff, and thanks, Doug.

You're welcome.

Thank you. Our next question comes from Donna Jaegers from D.A. Davidson. Your line is open.

Hi, guys. Congratulations on a good quarter. On e-commerce, you guys were at the big E-tailing West Conference in February. Can you talk a little -- there was one press release about Quiksilver Europe becoming a new customer, but can you talk a little about other new customers? And then I have one quick follow-up after that.

Sure. So we added -- I think we said in the script -- 15 new site and app acceleration customers and that business grew 100% revenue year-over-year starting from smaller numbers last year, and we expect continued growth. So we still view that half of the market, site acceleration, as a 400 or $500 million market segment where the dominant player today is generating hundreds of millions of dollars in profitability, and where customers are eager for an alternative. We're usually welcome with open arms and we see a very bright future in the whole app acceleration site, acceleration sector. The customers we highlighted as new customers were Harvard Business Publishing and Crispin Porter Bugosky in the script.

Okay, great. And then obviously, there were a lot of rumors about Facebook and who is doing their tests with -- as they move from one movie to five movies. Can you guys shed any light on that?

No, we don't talk about particular customers ourselves and we -- if someone is 10 percenter, then we'll talk about it or material like the Microsoft or NefFlix partnership, but beyond that, Donna, we try to stay away from the rumor-mongering. There's plenty of folks out there in our sector to do that for us.

Okay, thanks.

You're welcome.

Thank you. Our next question comes from Kerry Rice from Wedbush. Your line is open.

Thanks a lot, a great quarter. Jeff, maybe a question for you or Doug. As you guys have talked, you mentioned bundling today. I don't remember hearing any kind of the metrics that you provided in the past regarding how many customers are taking bundling versus just the core CDN and how that's growing. If you can give us an update on that, and then maybe what your top kind of value-added service was in the quarter? And I think that's it for now.

Okay. Doug, keep me honest on the numbers, but I believe we had 15 points less discount when we sold a bundled deal in Q1 than we did when we sold core CDN unbundled, and that's the same -- that metric last quarter was, I believe, 19%.

It was 18 last quarter.

Okay, 18% last quarter. And so still, like I said, that's a pretty material -- and that's in absolute percentage points so let's say -- we don't give out the actual discount numbers, but let's say an average deal was 25% off standalone, it would have only been 10% off if we sold it bundled.

Right.

So, yes, there's real value creation there. And then, Doug, do you want to answer the second part of the question?

Yes. Well, and also to talk without giving the specifics, but on bundling, so we've seen five quarters in a row of the average number of products sold to customers increase, so each quarter, we're seeing a sequential increase in the average number of products sold. So that's a great trend that we're watching which shows us that our sales folks are doing a great job selling back into their existing customer base the new products that we're bringing to market.

And from cloud-based services, as we've talked about in the past, the EyeWonder component is still the largest followed by storage and professional services and then our site, our mobile and our Limelight video platform are all roughly now about the same size within that group. And in our press release and in just comments in the first part of the call, we went through the growth rates in those various different groups.

And is professional services, as I think about that as just kind of a standalone segment, has that reached 10% of revenue at this point?

Of overall revenue, no.

Okay.

And these cloud-based services as a bundle, we've talked about it and it's on the investor deck, that blended, we get about a 70, 80% gross margin contribution there. PSO would be the lowest of that right now. That's running in the 60s and then a couple of the others are running in the 90s, but it all blends to -- call it 70 to 80, and that's where you get -- that grew 29%, that non-CDN business grew 29% quarter-over-quarter and we're not cheating. We're not giving you the kind of as-reported stuff because of &A; when we give you that 29%, we're adding in there pre-acquisition revenue. We're trying to give investors full transparency in what the real organic growth is and so that SaaS business is -- plus the consulting has grown 29% organically year-over-year and that's going to obviously increase as a percentage of revenue and you're going to get the margin lift.

Great, thank you very much.

You're welcome. Thank you.

Thank you. (Operator Instructions).

Yes, and this is the last question, operator, we have time for today.

Our next question comes from Rod Ratliff from SunTrust Robinson. Your line is open.

Thank you very much. Congratulations on a well executed quarter.

Thank you, Rod.

If you would explain for me the customer count dynamic, we're pretty sure to get some questions about it. Is there a revenue threshold that's to be counted on there where you do or don't count a customer in the quarter?

Doug, do you want to give Rod that?

Yes. We'll count a customer if we bill them, so it's over the actual revenue recognized on a GAAP basis from that customer if we put them in the customer count.

So it's a zero?

Correct.

Okay.

If there's revenue -- I mean, we have policies in-house where we look at customer size and how we handle customers based on different sizes, but purely the counting metric is if there's revenue, we count it.

Yes, so Rod, the dynamic in the EyeWonder businesses, they tend to do over 40% of the revenue in Q4 and maybe 20% of the revenue in Q1. So it's literally half as much revenue, half as many campaigns, and many fewer agencies running campaigns, so that customer count -- that's why you get the sequential drop there.

Okay. That helps a lot, Jeff, thanks.

Sure.

Is there an average number of VAS sold in a bundle from the word go? How long typically for a follow-on and is there one or two that are typically sold right out of the box in a bundle?

What we do is we have solution bundles that we're focusing on target buyers and if we're talking to a technical buyer, like the CIO, CTO, then we're talking to them about content delivery, cloud storage, plot transcoding, possibly a mobile solution. If we're talking to a Chief Marketing Officer, we're talking about rich media monetization and online video platform, also including mobile. And if you use the Limelight video platform, you're also using CDN and storage, but we don't talk about that to the CMO because they don't really care. They just want it all to work and if it works in the cloud and they don't have to involve their IT guys, then all the better for them.

A couple of more, if I might -- they're pretty quick. You indicated a return to 20%-plus top line growth over the balance of the year and I think you possibly said that you weren't going to update anything beyond the guidance for the immediate quarter, but would that imply you're kind of embracing the upper end of the previously stated range of 15 to 20% top line growth that you set forth last quarter?

Yes. And so what -- in the script, we said we're focused on getting this business, this organic growth, above 20% and with the [as] grow and 29% year-over-year in Q1 and of course, the ingrown 11%, the total company growth -- and this is again without the Microsoft effect -- is 16.5% and we think we can get it to 20. I didn't say within the year because I don't want to be that granular, but we're not going to be happy when we get it to 20. We'll set a higher bar then.

The trick in growth rate in this business, all our cloud-based services are really -- software is the service model and if you look at the (inaudible) that space sales force, they're growing 26% year-over-year. They're obviously a lot larger than us, but I was in Web Analytics with websites during [Omniture]. You get up into kind of the 30 and 40% in a SaaS business and that's really rapid growth because it's all recurring revenue, but we feel like getting to 20 is very achievable because again, we've seen the improving conditions in the CDN business. The midpoint of Q2, that's 12%.

The VAS is a little complicated at the midpoint of Q2 because we have the Clickability contribution, but if you -- in the deferred revenue stuff, Doug talked about, but if you just think about that at the midpoint at about 30%, the total company at the midpoint without Microsoft would be sort of 18 to 19%. And as we continue to progress in the year and get more traction with the value-added services businesses, you could see -- or if the CDN conditions continue to improve, you could get the organic growth of the entire business up to 20 or higher.

Great. One last one -- I've just got to ask. I did pricing when I worked in the telecomm industry years and years ago. How do you manage to maintain less discounting in a bundle? Can you explain that dynamic to me? I mean, the rule of thumb for us always was never let a customer unbundle a bundle and get the higher level of discounting, but it seems to be working in reverse for you guys.

It is, and I think because we started as a content delivery provider and most of our business was large object delivery, video delivery, and that business, it's not super-sticky, it's reasonably sticky, but it's not hard for a large customer like a CNN or an ABC or somebody to split traffic.

Once you get into their workflow though with some of these software solutions, then it's sort of -- there's value there and the would much rather just give you all the content deliver business as well, and if you're giving them a complete solution with mobile -- and the number that we're giving you, the 15 absolute points of less discount, applies to the CDN business.

So we -- if you look at the bundle, we might actually discount the mobile and the OVP and the site and the storage stuff a little bit more because we're selling that bundle, but we get a major lift on the CDN component, which was the part where two years ago, there were people running around saying, is video CDN a commodity? We don't believe it is; we think it's a scale business and we and Akamai are there as the scale leaders, just like Fed Ex and UPS, and continuing to sort of distance ourselves from the smaller folks.

Great. Thanks a lot, Jeff.

Thank you, Rod. Thank you all for attending the call today and if you'd like to have one-on-ones follow up, I believe we have some scheduled and we look forward to talking to you then. And operator, that's it.

Ladies and gentlemen, thanks for participating in today's program. This concludes the program. You may all disconnect.