Limelight Networks, Inc.
Q2 2017 Earnings Call Transcript

Published: 27 Jul 2017

[Operator:]

Good afternoon and welcome to the Limelight Networks Second Quarter 2017 Earnings Conference Call and Webcast. All participants will be in listen-only-mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Dan Boncel, Limelight’s Chief Accounting Officer. Please go ahead.

[Dan Boncel:]

Good afternoon and thank you for joining the Limelight Networks' second quarter 2017 financial results conference call. This call is being recorded on July 26, 2017 and will be archived on our Web site for approximately 10 days. Let me start by quickly covering the Safe Harbor. We’d 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 2017 and beyond, our priorities, our expectations and our operational plans, business strategies and future 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 the prepared remarks from Bob and Sajid. I'd now like to turn the call over to Bob Lento.

[Bob Lento:]

Thanks, Dan, and good afternoon. I am pleased to say, this was another great quarter. Our 2017 plan focused on accelerating revenue growth and margin improvement by continuing to focus on the success and satisfaction of our customers. The first quarter results were strong and this momentum continued through the second quarter as well. Revenue was up 4% and was our highest quarterly revenue in over four years. GAAP gross margin was up over 390 basis points over last year and we reported our highest ever non-GAAP earnings and adjusted EBITDA. We're confident that the trend of solid year-over-year improvement in our financial and operating performance will continue in the second half of 2017. We're very pleased with these results. We continue to build a solid foundation and believe that our strong financial performance is sustainable positioning us well to achieve our financial goals this year and beyond. Customer satisfaction continue to improve in the second quarter. Customers trusted us with more traffic and we again delivered record traffic volume that was up over 20% from the second quarter of 2016, while incident tickets were down by more than 20%. Employee satisfaction continue to be strong as our attrition levels remain low and price in Limelight continues to grow. During the second quarter, we made good progress on expanding our network capacity. We completed our expansion goals for this year in India, growing our capacity by 650% in the last 12 months. We also successfully upgraded our presence in Canada and continue to expand our capacity globally through software enhancements. We launched projects to add capacity in South America, the Middle East, as well as South Africa during the second half of 2017. Based on feedback from our customers, these geographic locations represent an important opportunity for additional growth. During the second quarter, we continue to improve our network performance and expand feature functionality. We deployed a tremendous amount of software changes, generating more software innovation in Q2 than at any other time in Limelight's history. Through these efforts our network efficiency and performance are at an all-time high and we delivered differentiating software features at a fast pace. While improving performance, these innovations also drove down the capital intensity of our business. We are able to expand both our services and network capacity with fewer servers supporting our belief that we are the greenest and most efficient CDN in the world. For example, over the last several months our server count is down slightly, while our capacity is up by more than 2 terabits per second. I’m proud of these efforts and excited that we have more to come in the second half of 2017. We have a number of important network efficiencies in software enhancements scheduled for release over the next few months that we expect will be important to our customers. During the second quarter, we announced a few product and research related developments that I’d like to share. In April, we introduced Limelight Security Alert and Limelight WAF Express, two new additions to our cloud security services that enhance protection against attacks on Web sites and unauthorized access or theft of content. We followed that up in May, by announcing breakthrough performance and functionality advancements to our Limelight Orchestrate Platform that cuts rebuffer time by more than 25% and provide superior quality of experience for customers over any network connection, especially in emerging regions were lower quality bandwidth can create issues. We also develop new software technology to accelerate and improve the consistency of video delivery speeds, which will lead to a higher end-user satisfaction. We believe this new technology makes us the highest performing Video CDN in the world. To prove it, we introduced the money back guarantee in Q2 for new customers. In June, we continued our thought leadership research with our state of digital downloads research report, the latest in the series of semi-annual surveys that explores consumer perceptions and behaviors. Looking ahead to the -- at the remainder of 2017 and beyond, we will continue to focus on our long-term strategic priorities, creating customers for life, growing profitable revenue while generating cash and improving our position as employer of choice. I'm very encouraged by our solid momentum on these priorities over the past few quarters, and I expect this trend to continue. Customer demand is healthy, market trends are positive and customer and employee satisfaction continues to improve. With our core business stable and growing, we're exploring potential new higher margin revenue streams. Let ,me talk about two opportunities. Distributed computing at the edge and data mining and analytics, we believe that our IT assets and expertise uniquely position us to solve complex business problems. We intend to use our platform to underpin our customers distributed computing needs. We are conducting trials and validating the business model with several large customers. This effort could add meaningful revenue in the years to come. Similarly, we collect a wealth of relevant traffic related information. Over 100 terabytes of data per day that we believe is valuable to our customers. We are currently exploring ways to monetize this important data to our customers in support of their analytics efforts. If we are successful, these efforts will add to our growth and profitability. They do not require heavy investments or inorganic pursuits. We look forward to sharing our progress as these initiatives developed over the coming quarters. In summary, this was another very good quarter that I believe is sustainable given the foundational changes we've made over the past few years. Our performance in the first half and our increasing confidence for the second half, demonstrates that our strategy, focus, and discipline are working. We have a strong team in place that is aligned and focused confident about Limelight's ability to meet our goals and strengthen our competitive position. To be a more reliable business partner and a stable and secure employer, our goal is to grow the company responsibly and profitably and generate above market returns for our shareholders. I’m very proud of the work and commitment that the Limelight team demonstrates every day. With that, I will turn the call over to Sajid to discuss the second quarter's financial performance in greater detail, and our guidance for the rest of 2017. Sajid?

[Sajid Malhotra:]

Thank you, Bob, and good afternoon, everyone. We are excited to report another excellent quarter in terms of operational and financial results. As you recall, last quarter we achieved many significant milestones on revenue, GAAP gross margin, GAAP net loss, and adjusted EBITDA. We continue to build on that momentum and in many cases exceeded the results from last quarter. The second quarter was the highest reported revenue since the first quarter of 2013. We continued a trend of reducing our GAAP net loss, non-GAAP net income and earnings per share and adjusted EBITDA were the highest we have ever reported in our 10-years as a public company. All this reinforces our view, the operate in the healthy and growing industry and our position in it is improving at an accelerating pace. Let's take a deeper dive into how we achieved these results. Revenue in the quarter of $45.4 million increased 4% year-over-year. We experience foreign exchange headwinds in the quarter also brought some of the $300,000 or almost 1% primarily due to the devaluation of the British pound. International customers accounted for 37% of total revenue in Q2 compared to 40% a year-ago. And approximately 17% of our second quarter revenue was in non U.S dollar denominated currencies. Our top 20 customers accounted for approximately 65% of total revenue in Q2, delivered revenue, well that’s all Top 20 customers in the second quarter of 2017 grew 14% compared to the prior year period. As I said last quarter, we remain focused on our largest customers and this focus is being well rewarded. We continue to win market share in the CDN segment, we serve. This separation from our competitors is increasingly based on quality, feature functionality, account management, and total cost of ownership. We're maintaining price discipline and are confident in our competitive position. GAAP gross margin was 47.1% in the second quarter, an increase of 390 basis points year-over-year -- cash gross margin was 57.9%, an increase of 340 basis points year-over-year. We continue to see year-over-year cost reductions in our co-location fees as a result of server efficiency and throughput improvement. We believe that continues to be opportunity in this area, the technological advancement of the equipment installed in a network, as well as software enhancements. We are also focused on reducing our bandwidth costs, through changes in our network architecture and contract negotiations as a result of increased volumes while experiencing. This is very, very strong margin performance for the first six months and follows a huge improvement in 2016. We expect margin expansion to continue throughout the remainder of the year and are substantially increasing our guidance in this area, which I will discuss a little later. Total operating expenses were $23.1 million, which is an increase of $800,000 from the second quarter of 2016 and exclude the $54 million settlement provision with Akamai reported in the second quarter of last year. G&A expense decreased by $400,000, sales and marketing expense increased by $900,000, and R&D expense increased by $400,000 year-over-year. With the strong performance, variable compensation expense is up significantly and is captured in operating expense across all departments. At the same time we had the positive impact from a one-time state sales tax refund. The positive and negative impact from both of these items is essentially equal in the quarter. We had net interest income of $100,000 in the second quarter of 2017 compared to $300,000 of net interest expense last year. We have other income of $150,000 in the second quarter of 2017 compared to $100,000 of expense last year. This change was primarily due to foreign currency fluctuations from 2016. GAAP net Loss was $0.01 o per share in the second quarter of 2017 and we achieved positive $0.03 in non-GAAP earnings per-share. This is our best non-GAAP net income and EPS ever reported. In the second quarter of 2016, we reported a $0.56 -- GAAP net loss and a $0.01 per share non-GAAP income. Adjusted EBITDA was approximately $7.9 million, up 27% from $6.2 million in the second quarter of 2016. This is the highest adjusted EBITDA ever reported. Moving to the balance sheet and cash flow, we had cash and marketable securities of $60.6 million at the second quarter down just $200,000 from the first quarter, driven by improved profitability cash flows provided from operations would have been $8.7 million excluding the $4.5 million payment under a settlement agreement with Akamai. This compares to $6.8 million in the second quarter last year. We spent $4.7 million in capital expenditures during the quarter. DSO as of June 30, 2017 was 52 days, compared to 55 at the end of the fourth quarter 2016. We typically expect DSO in the range of 50 to 55 days based on our global revenue distribution. We had approximately 109 million shares outstanding as of June 30th. Total headcount at the end of the quarter was $533, up 21 from the second quarter of 2016 and up 23%, from the end of last year. We have said we intend to increase headcount to support our sales efforts in addition to overall operational support. Believe touched on our improving capabilities and initiatives in H computing and data mining. Let me just expand a little on how we are improving our capabilities and expanding our addressable market, and why the -- pick these adjacent opportunities. We’ve been very focused on improving our core delivery capabilities. We have what very hard to ensure stability for our customers. We’ve also undertaken projects in what we call first middle and last mile of delivery. In the first mile, we have improved how we get content from the customers origin. This includes our recent innovation in our object storage product and allow customers a no touch transition to using our on network object storage system as their region, even if they use multiple CDNs for delivery. In the middle mile we’ve completed projects for the improvement of efficiency in our software and be have scaled up our private bank born note network. The use of our own network is a strategic advantage as it allows us to carry traffic directly instead of relying on the public internet. Customers get the benefit of a secure, private environment. And as shown, network delivery. In the last file, we have significant legal in our interconnection and egress capacity and have introduced methods to prioritize latency sensitive traffic. In addition we have tuned our software for our content, for a current and future hardware mix, from storage to servers to switches through routers and beyond. This differentiates us. This gives our customers and their customers better availability, highest throughput, lower latency and high quality. It is our ambition to deliver the best internet experience at extraordinary efficiency through the actual end user client, 24 x 7 x 365 anywhere in the world. Remember, we cater pretty much to every use case there is, that page is firmware update, life sports, premium video and so forth. And that software includes a number of special features in order to serve our diverse and highly demanding user base. Now let me switch to expanding into adjacencies. We test to seek out the biggest opportunities where our existing investments in infrastructure give us a headscarf with limited additional investment and a sustainable competitive advantage. We have scalable distributed internet-based standards-based IT asset. We use them primarily for deliver -- delivery of our content. But they can be rearranged to fall other technical business problems. We are exploring the customers ways to solve difficult problems by leveraging different combinations of those assets. We have seven unique id capabilities to leverage. CDN, globally distributed points of presence, more than 20 Terrabytes per second of Ingress and Egress connectivity, secure private backbone, worldwide object storage, dynamic rules capability and the edge and real-time analytics. These capabilities are backed up by a team of advanced service architects, who can help our customers combine the capabilities to solve their own unique business problems. This is Edge compute and more. I think the exciting thing we're doing is unbundling the component parts that we used to provide CDN service and using the parts in any combination that our customers value. We will start our effort on the project by project basis. We expect that as we work on projects with customers we will identified repeatable products to efficiently make available to a wider customer base. Similarly today we’re focused on transmitting the information in the most efficient manner. The purpose of a content delivery network. As you can imagine, the information about the content itself is a data rich environment. Today we process 1.5 trillion internet activity efforts, a date, performing some 17% billion compensation. The second, across our network resulting in a fast capability to support real-time analytics. We are seeing how we can work with our customers to help them use this data to provide a rich, targeted, personalized experience. We have both real-time APIS and access to our analytics data stores. Lots of opportunity and we are in at an early stage. We believe these persons can be material in the coming years. If we look forward to sharing our success as these initiatives develop further. These opportunities provide a lot of excitement about a long-term future. I'm equally enthusiastic about improving near-term results, after putting in place in aggressive plan for 2017 and raising guidance after the first. Current forecast suggests we can again raise guidance for the full-year. Based on current conditions for the full-year of 2017, we are increasing our revenue guidance to between $180 million and $182 million, up from previous guidance provided last quarter of between $177 and $181 million. We now expect gross margin to increase by more than 300 basis points over 2016 compared to prior guidance of 200 basis point improvement. We are also raising non-GAAP earnings per share to be between $0.05 and $0.07 per share. Adjusted EBITDA range is also raised to $24 million to $28 million, from previous guidance of $23 million to $27 million. Capital expenditures will be approximately $20 million unchanged from previous guidance. Our company is performing at its best level in the years. The revenue had $45.4 million was the highest in 17 quarters. GAAP gross margin of 47.1% was the second highest in company history and was up 390 basis points over last year. Cash gross margin came in at 57.9%, second highest since 2018. GAAP net loss of $1.6 million was the lowest in 20 quarters. Non-GAAP net income of $2.9 million resulted in the best non-GAAP net income and EPS performance in the company's history. Adjusted EBITDA, up $7.9 million was the highest in company history and if we meet our upward revised guidance, 2017 should be our best overall financial performance ever. Sometime next month we will be prepared to share with you the potential long-term financial model for limelight. Over a short period of time we've made very consequential improvements toward operational and financial performance. At the same time we're convinced there's a lot more to be done internally and our industry is growing fast and remains opportunity which we have architectural advantages over our competitors and remain focused on the core CDN business. We see adjacent market opportunities using our asset base. There is always risk. However, we believe the opportunity as far outweigh the risks and the possibility of creating significant shareholder value from these levels is real and tangible. With that, I will open the call for your questions.

[Operator:]

[Operator Instructions] Our first question comes from Michael Turits with Raymond James. Please go ahead.

[Austin Dietz:]

Hey, guys. This is Austin Dietz on for Michael. So your competitor Akamai began to talk about going to market a little bit more aggressively last night. Are you beginning to see any evidence of that? Thanks.

[Bob Lento:]

We don’t really see any change in competitive landscape. I haven't had the chance to fully digest what they announced last night. But in terms of customers that we work with and the activities that we have going on regarding acquiring new, we don't see any significant change to the competitive landscape.

[Sajid Malhotra:]

And just add to that, our industry has been competitive all along. You’re just seeing that the players have been different at some point, at different points, we’ve been the lowest price offering. And at other times it's been others. It is obviously surprising to see the largest player with incumbency and brand and all of the money that they spent kind of have to revert to the pricing point that I hear you repeat, but at the same time BM more focused on total cost of ownership and on building a premier offering for our customers and that seems to be going well and paying a dividend.

[Austin Dietz:]

Great. Thanks.

[Operator:]

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

[Bob Lento:]

Hi, Mark.

[Mark Kelleher:]

Thanks for taking -- Hi. Thanks for taking the questions and congrats on a nice quarter. One quick question is whether any 10% customers in the quarter?

[Bob Lento:]

Yes, it were same as the first quarter. I think Amazon continues to be a 10% customer in the second quarter.

[Mark Kelleher:]

Okay. And how about - can you give us any insight into which sectors we’re doing particularly well. I know - referring back again to last night, the gaming sector seemed weak. Are you seeing that or not?

[Bob Lento:]

We are not really seeing weakness there. I’d say in the video, whether its video on demand or live streaming. We are probably seeing the most amount of growth there, but for us I wouldn’t call the gaming or the software download which would include gaming unless you’re talking live gaming. We see those as being healthy for us and I wouldn’t say that it was any segment that was particularly weak. Strength coming from the video side for sure.

[Sajid Malhotra:]

Yes. Traffic is growing, Mark. And I think what you’ve might have heard is the even years tend to have the big gaming events like the Olympics and FIFA etcetera. And so that seasonality obviously is absent in the odd years. But there is plenty of traffic in the industry.

[Mark Kelleher:]

Okay, great. Thanks.

[Operator:]

The next question comes from Jonathan Charbonneau with Cowen & Company. Please go ahead.

[Jonathan Charbonneau:]

Great. Thanks for taking the questions. At this point in the year, how much of visibility or line of sight would you say you have into 2017 revenue guidance, especially given the fact that you will increase it again this quarter. Thanks.

[Sajid Malhotra:]

Jonathan, I think we started the year off with a pretty good view of what history is, what traffic is, our customers telling us what kind of traffic they anticipate giving us. We then go ahead and model that and build a plan around it. I would say that we feel pretty confident around the numbers that we’ve suggested here. By that I mean, we obviously you can have variances, but I would be more susceptible to variances within the quarter. So a large software upgrade or a firmware upgrade if it happens in or a launch of a new product or a new game. If it happens in Q3 versus Q4, that can kind of shift revenue between quarters. But I think overall, if we continue to perform we should make these numbers. That’s the way this business goes. You have to go ahead and perform every year. We have agreements with our customers, but I think of them as hunting licenses. Customers go ahead and suggest what commitment they expect to give us and what kind of traffic. But you have to go earn it every day.

[Jonathan Charbonneau:]

Yes. In terms of the guidance, what sort of traffic growth are you expecting within it for the second half of this year? Is it basically similar to what we saw in the first half or is it a little bit different?

[Bob Lento:]

Those would be similar, with the exception that Q4 -- seasonally, Q4 is always the highest quarter of the year. And so now its -- I’m almost a month into Q3 and we are very focused on making sure that we don't repeat the mistakes from those years. And we feel good about where we are. So we kind of suggested to you that both these quarters can see revenue growth approaching 10%. I would have said 10% or more if I thought that that was the number, but I think we can get close to that double-digit number from a revenue growth standpoint in both of these quarters. And I think the third quarter is when you look at it, if we are able to deliver that the biggest difference compared to the third quarter last year.

[Jonathan Charbonneau:]

Great. Thank you.

[Bob Lento:]

Yes, thank you.

[Operator:]

The next question comes from Sameet Sinha with B. Riley. Please go ahead.

[Bob Lento:]

Hi, Sameet.

[Sameet Sinha:]

Hey, thank you very much for taking my questions. A couple of questions here. So, if you exclude the litigation expense and the payments to Akamai, your free cash flow margins were kind of 22%, which is pretty good. Can you give us kind of a range for free cash flow excluding these two expenses for the full-year based on your guidance? And my second question is you spoke about bandwidth and colo, that's -- if I remember correctly about 30% of your cost of save. What is the potential there and how much -- what sort of efficiency can you gain from that? And then I’ve one follow-up question.

[Sajid Malhotra:]

Okay. So in terms of free cash flow, I think I’m going to layout a model and I will share with everybody shortly. We are just kind of finalizing that. I'm going to discuss some of this with the Board next week. But then we should be able to come back to you and tell you here are the targets that we see that the company can get to over the course of the next few years. And they won't be all even. It's not all of a sudden on a particular date in a particular year we hit them all. We will get to some early -- some later, but I will go ahead and detail all of that and what we expect on all of those line items, right. Your second question was around colo and bandwidth. Yes you’re right, but I don't think we're done. So Bob talked about the fact that we actually took server count down in the quarter and delivered more traffic. And we still have servers that we’re trying to take out of our installed base and as we take those out, we still anticipate more bandwidth availability, more CDN capacity availability, more network availability. So we're still working on all of that. When we talk to the software engineers in our R&D shop, they tell us they still got a long way to go. So our ability to go get a lot more from what we have deployed, I think it's there in space. If I saw that it was approaching the end, I'd let you know. But when we’re suggesting 300 basis points margin improvement, its coming from the same buckets where it has them. And before it begins to top out or flatten, at some quarter, some year we will have maybe 50 and before that we will have a 150 kind of a year. I think 300 is a pretty strong number and suggest that there is more to go.

[Sameet Sinha:]

Okay. My final question …

[Sajid Malhotra:]

I agree on the bandwidth side, we’re -- we’ve just started to really aggressively manage that in a more comprehensive fashion. And so, while we are doing a much, much better job today than we’ve done in the past, we're still -- I would still say we’re early days on that and there's a lot more to go.

[Sameet Sinha:]

Great. And …

[Sajid Malhotra:]

And it will be interesting, some of these other initiatives that we're talking about, right because it's all one segment. We’ve got one leader, one sales team, we are organized as just one group here. And so some of the initiatives we are undertaking they could change the profile of the business overall. If we're successful in the analytics for example, it's low bandwidth usage, its low CDN capacity usage. If it's successful in the edge compute initiatives similar answer there. You could get revenue without much usage on the bandwidth. So I think there is more to come, it's a shifting game, but we look forward to continuing growth across the spectrum.

[Sameet Sinha:]

Just a quick question on new products. Can you talk about some use cases for your edge computing and data mining initiatives that you’re talking about, so we get -- kind of get a sense of which direction you’re headed?

[Bob Lento:]

Yes, so on the edge compute side, we’re really talking to customers who have a need for the computing power to be very, very close to the end user. So I think the first step was going from, massive corporate data centers and to cloud providers, that might have had a handful or so big data centers around the world, then you could distribute that computing to large data centers around the world. And we’re seeing applications today where customers want to get even closer to the end user, and there are particularly used cases that will talk about in the coming quarters, as we hopefully close some of these deals that are very interesting and very exciting. A lot of its around the Internet of Things, IoT, providers and so there are very few companies like Limelight that has computing resources in as many locations around the world that we do. And so we think that’s a fairly unique set of assets. On the analytics side, especially when it comes to video, we know that our customers really want to better understand user behavior, quality metrics and what we’re finding is they have some pretty good systems on their side. But they’re missing a lot of the data that we’re collecting every day. And so we’re talking to customers about -- in many cases how do we combine the data that we’ve with the data that they have to provide a more comprehensive picture of what’s happening with the content around the world. So early days on both, but pretty exciting opportunity given the uniqueness of the position that we’ve.

[Sameet Sinha:]

Thank you very much.

[Bob Lento:]

Thanks, Sameet.

[Operator:]

[Operator Instructions] Our next question is from Rishi Jaluria with JMP Securities. Please go ahead.

[Sajid Malhotra:]

Hi, Rishi.

[Rishi Jaluria:]

Hey, guys. Hi, Sajid. Thanks for taking my questions. It's nice to see some continued margin expansion here. Just wanted to get -- for starters wanted to get an idea of what sort of momentum you’re seeing with some of your partnerships? And I know you talked about the Neustar partnership around this time last year. So maybe if you could dive into the partner side a little bit?

[Bob Lento:]

Sure. I think that’s another area that’s exciting for us. Obviously, like we talk about Neustar in particular we announced that about a year-ago over the last year we've been building out their capabilities, the requirements inside of our data centers. We are about half way towards giving them the full capability and capacity that they're looking for. And so as we go into 2018, I think we will be fully deployed and fully ramped up with Neustar including the ability for our sales force to resell their capabilities and their sales force. Having the ability to resell our capabilities, but obviously this is a long-term relationship and it's literally going to take us 12 to 18 months from sign to full effectiveness. But when we get there and as I said we’re about halfway or more there in terms of the number of locations that they are embedded in within our network around the world. I think both of us will have something that’s very unique.

[Sajid Malhotra:]

And keep in mind, I mean, this took a little bit longer because they had a take private transaction in the middle of the announcement. So this could have, because that suggested before that this would be about a year, but we still think that within the year, year and a half, we will be up and running with everything that we set out to do with them.

[Bob Lento:]

And I think that while we’re doing them is possible with other companies and we’ve been initiated some discussions along those lines with some other companies as well. And so, we don’t really view what we view the Neustar deal as very important to both companies. We don’t view it as being a one off or unique in any way in terms of our ability to do that with other companies.

[Rishi Jaluria:]

Okay, got it. And on the international side, and I know Bob you talked about the new PoPs in India and a few of the other expansion opportunities. Can you give us an idea for maybe how your international business and momentum has been trending? And is the focus on the international business with existing customers, or is there a potential shift here to start getting some net new logos that you weren't able to reach before?

[Bob Lento:]

Yes, so there is two ways to think about international, from our perspective. One is what is the traffic that we deliver by geography and so for example many for U.S customers rely on us to deliver into India, Japan, Korea, other points around the world. And then to your point its -- customers in region that are relying on us to deliver content in the region and using our global CDN to deliver out of region. So in the case of India specifically we’ve grown capacity by a tremendous amount as we said, 650% over the last 12 months. We are starting to see that till up from our existing clients, but at the same time, we are adding new people and building pipeline inside of India to help build our business on the ground. They are in utilize those assets for companies that are located in India. So we're seeing both.

[Rishi Jaluria:]

All right. And then, Sajid, you talked about the pricing discipline that you’ve been able to maintain just -- have you seen any changes in the general pricing environment when it comes to CDN.

[Sajid Malhotra:]

I think we saw pricing pressures last year. I think we saw pricing pressures the year before and the customers expected, I mean, if you have a lot of volume and you've got a couple of people who are willing to go ahead and Take that Volume on at low prices. The customers want to know why you cannot match it or why they should pay a slightly higher price for you. In some cases it's because we’ve more quality or we may have capacity in a particular region, or because we are providing them with some features that others cannot. So I think that price battle has continued for some time. I think the differences are becoming smaller. There is no -- in the industry we should just be clear, I mean, this is not secret. What price some of the largest customers are getting, gets known and is very visible across the industry. So it's -- there is always awareness that this is what the price is available in the marketplace and we’ve done well with that, because of the discipline.

[Bob Lento:]

The other thing I would add is, the price compression for example that we’ve seen in the first two quarters of this year is no different than what we’ve historically seen as a percent. And it is in the range that we expected from a budget perspective. So we’re not seeing anything crazy there. And as we said in the past, I think and we think that price compression is a good thing for the industry. It helps our customers expand as they look to move more and more of their content online. What we’ve to do is make sure that it happens in a managed way, so that as our costs are lowered we can then lower price, good for our customers and we still have the ability to make enough money to reinvest in the business, that’s really our goal. It isn't trying -- to try to get price compression to zero. I think that long-term is better for our customers, but it isn't to have it get out of control either where it affects our ability to invest in delivering quality for our customers.

[Rishi Jaluria:]

Okay, got it. That’s helpful. Thanks so much, Bob and Sajid.

[Bob Lento:]

Yes, thank you. Any more questions?

[Operator:]

This concludes -- I’m showing no further questions. So at this point, we will conclude today’s conference. We thank you for attending today’s presentation and you may now disconnect your lines.

[Bob Lento:]

Thank you everyone.