Limelight Networks(R) Reports Financial Results for the Third Quarter of 2019

Published

  • Revenue of $51.3 million, up 4 percent year over year, up 12% sequentially
  • GAAP basic EPS of $(0.02) and Non-GAAP EPS of $0.01
  • Confirming accelerated growth in revenue, profitability and free cash flow for Q4 2019
  • Delivered record traffic, exceeding previous record by approximately 20%

SCOTTSDALE, Ariz.--(BUSINESS WIRE)-- Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a leading provider of edge cloud services, today reported revenue of $51.3 million for the third quarter of 2019, up 4% compared to $49.3 million in the third quarter of 2018. Currency negatively impacted year-over-year comparison by $0.2 million.

Limelight reported a net loss of $2.8 million, or $(0.02) per basic share for the third quarter of 2019, compared to a net loss of $0.3 million, or break-even per basic share, in the third quarter of 2018.

Non-GAAP net income was $0.6 million, or $0.01 per basic share, for the third quarter of 2019, compared to non-GAAP net income of $3.2 million, or $0.03 per basic share, in the third quarter of 2018.

EBITDA was $2.5 million for the third quarter of 2019, compared to $4.3 million for the third quarter of 2018. Adjusted EBITDA was $5.8 million for the third quarter of 2019, compared to $7.7 million for the third quarter of 2018.

Limelight ended the third quarter with 609 employees and employee equivalents, up from 594 at the end of the second quarter of 2019, and up from 551 in the year ago period.

“We are extremely pleased with our third quarter results. Our revenue was the highest third quarter revenue ever and our second highest revenue in any quarter. We also set a new record for traffic in the quarter, continuing the rapid growth that we have demonstrated throughout the year. We achieved these results by accelerating investments in infrastructure and significantly growing capacity, while still maintaining fiscal discipline by controlling expenses,” said Bob Lento, Chief Executive Officer at Limelight.

“We believe the fourth quarter will see year-over-year acceleration in revenue growth and meaningful improvements in gross margin and overall profitability. Even at the low end of our guidance, fourth quarter growth rates exceed 35% year-over-year and in excess of 15% sequentially. These healthy trends validate our strategy to focus on video-based edge services. We believe this positions us for a strong 2020 and beyond and will lead to the creation of tremendous shareholder value,” Mr. Lento added.

Based on current conditions, we expect 2019 revenue to be between $200 and $210 million dollars. GAAP net loss is expected to be approximately $0.10 per share and Non-GAAP earnings per share should be near breakeven. Capital expenditures should be approximately $30 million dollars.

Financial Tables

LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 

September 30,

June 30,

December 31,

 

2019

 

 

 

2019

 

 

 

2018

 

(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents

$

14,832

 

$

24,698

 

$

25,383

 

Marketable securities

 

3,218

 

 

4,224

 

 

25,083

 

Accounts receivable, net

 

35,818

 

 

31,098

 

 

26,041

 

Income taxes receivable

 

77

 

 

125

 

 

122

 

Prepaid expenses and other current assets

 

9,522

 

 

8,739

 

 

14,789

 

Total current assets

 

63,467

 

 

68,884

 

 

91,418

 

Property and equipment, net

 

46,304

 

 

35,531

 

 

27,378

 

Operating lease right of use assets

 

12,667

 

 

2,701

 

 

-

 

Marketable securities, less current portion

 

40

 

 

40

 

 

40

 

Deferred income taxes

 

1,474

 

 

1,443

 

 

1,462

 

Goodwill

 

77,051

 

 

76,848

 

 

76,407

 

Other assets

 

7,394

 

 

5,848

 

 

2,220

 

Total assets

$

208,397

 

$

191,295

 

$

198,925

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

20,641

 

$

14,346

 

$

9,216

 

Deferred revenue

 

1,205

 

 

1,331

 

 

1,883

 

Operating lease liability obligations

 

1,870

 

 

1,579

 

 

-

 

Income taxes payable

 

325

 

 

270

 

 

124

 

Provision for litigation

 

-

 

 

-

 

 

9,000

 

Other current liabilities

 

12,516

 

 

15,227

 

 

12,922

 

Total current liabilities

 

36,557

 

 

32,753

 

 

33,145

 

Operating lease liability obligations, less current portions

 

13,331

 

 

1,325

 

 

-

 

Deferred income taxes

 

123

 

 

140

 

 

152

 

Deferred revenue, less current portion

 

162

 

 

149

 

 

42

 

Other long-term liabilities

 

300

 

 

283

 

 

435

 

Total liabilities

 

50,473

 

 

34,650

 

 

33,774

 

Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued and outstanding

 

-

 

 

-

 

 

-

 

Common stock, $0.001 par value; 300,000 shares authorized; 116,513, 115,760 and 114,246 shares issued and
outstanding at September 30, 2019, June 30, 2019 and December 31, 2018, respectively

 

117

 

 

116

 

 

114

 

Additional paid-in capital

 

524,758

 

 

520,375

 

 

513,682

 

Accumulated other comprehensive loss

 

(9,837

)

 

(9,483

)

 

(10,033

)

Accumulated deficit

 

(357,114

)

 

(354,363

)

 

(338,612

)

Total stockholders' equity

 

157,924

 

 

156,645

 

 

165,151

 

Total liabilities and stockholders' equity

$

208,397

 

$

191,295

 

$

198,925

 

 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, June 30, Percent September 30, Percent September 30, September 30, Percent

 

2019

 

 

2019

 

Change

 

2018

 

Change

 

2019

 

 

2018

 

Change

 
Revenue

$

51,321

 

$

45,904

 

12

%

$

49,315

 

4

%

$

140,505

 

$

151,678

 

-7

%

Cost of revenue:
Cost of services (1)

 

25,602

 

 

22,769

 

12

%

 

21,519

 

19

%

 

71,311

 

 

63,779

 

12

%

Depreciation - network

 

4,961

 

 

4,628

 

7

%

 

3,761

 

32

%

 

13,905

 

 

12,337

 

13

%

Total cost of revenue

 

30,563

 

 

27,397

 

12

%

 

25,280

 

21

%

 

85,216

 

 

76,116

 

12

%

Gross profit

 

20,758

 

 

18,507

 

12

%

 

24,035

 

-14

%

 

55,289

 

 

75,562

 

-27

%

Gross profit percentage

 

40.4

%

 

40.3

%

 

48.7

%

 

39.4

%

 

49.8

%

Operating expenses:
General and administrative (1)

 

7,356

 

 

8,340

 

-12

%

 

7,851

 

-6

%

 

23,231

 

 

24,890

 

-7

%

Sales and marketing (1)

 

10,713

 

 

10,994

 

-3

%

 

9,766

 

10

%

 

32,679

 

 

30,068

 

9

%

Research & development (1)

 

5,160

 

 

6,013

 

-14

%

 

5,882

 

-12

%

 

17,075

 

 

18,294

 

-7

%

Depreciation and amortization

 

172

 

 

127

 

35

%

 

616

 

-72

%

 

545

 

 

1,837

 

-70

%

Total operating expenses

 

23,401

 

 

25,474

 

-8

%

 

24,115

 

-3

%

 

73,530

 

 

75,089

 

-2

%

 
Operating (loss) income

 

(2,643

)

 

(6,967

)

NM

 

 

(80

)

NM

 

 

(18,241

)

 

473

 

NM

 

 
Other income (expense):
Interest expense

 

(10

)

 

(10

)

NM

 

 

(10

)

NM

 

 

(30

)

 

(76

)

NM

 

Interest income

 

81

 

 

110

 

NM

 

 

177

 

NM

 

 

402

 

 

440

 

NM

 

Settlement and patent license income

 

-

 

 

-

 

NM

 

 

-

 

NM

 

 

-

 

 

14,900

 

NM

 

Other, net

 

(13

)

 

(70

)

NM

 

 

(246

)

NM

 

 

(89

)

 

(355

)

NM

 

Total other income (expense)

 

58

 

 

30

 

NM

 

 

(79

)

NM

 

 

283

 

 

14,909

 

NM

 

 
(Loss) income before income taxes

 

(2,585

)

 

(6,937

)

NM

 

 

(159

)

NM

 

 

(17,958

)

 

15,382

 

NM

 

Income tax expense

 

166

 

 

255

 

NM

 

 

113

 

NM

 

 

544

 

 

347

 

NM

 

 
Net (loss) income

$

(2,751

)

$

(7,192

)

NM

 

$

(272

)

NM

 

$

(18,502

)

$

15,035

 

NM

 

 
Net (loss) income per share:
Basic

$

(0.02

)

$

(0.06

)

$

(0.00

)

$

(0.16

)

$

0.13

 

Diluted

$

(0.02

)

$

(0.06

)

$

(0.00

)

$

(0.16

)

$

0.13

 

 
Weighted average shares used in per share calculation:
Basic

 

116,270

 

 

115,275

 

 

112,760

 

 

115,318

 

 

111,626

 

Diluted

 

116,270

 

 

115,275

 

 

112,760

 

 

115,318

 

 

120,025

 

 
(1) Includes share-based compensation (see supplemental table for figures)
 
 
LIMELIGHT NETWORKS, INC.
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, June 30, September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

2019

 

 

2018

 
 
Share-based compensation:
 
Cost of services

$

331

 

$

377

 

$

352

$

1,119

 

$

1,059

General and administrative

 

2,006

 

 

2,140

 

 

1,887

 

6,240

 

 

5,666

Sales and marketing

 

584

 

 

598

 

 

638

 

1,666

 

 

1,874

Research and development

 

437

 

 

534

 

 

544

 

1,438

 

 

1,746

 
Total share-based compensation

$

3,358

 

$

3,649

 

$

3,421

$

10,463

 

$

10,345

 
Depreciation and amortization:
 
Network-related depreciation

$

4,961

 

$

4,628

 

$

3,761

$

13,905

 

$

12,337

Other depreciation and amortization

 

172

 

 

127

 

 

616

 

545

 

 

1,837

 
Total depreciation and amortization

$

5,133

 

$

4,755

 

$

4,377

$

14,450

 

$

14,174

 
 
Net increase (decrease) in cash, cash equivalents and marketable securities:

$

(10,872

)

$

(9,719

)

$

7,065

$

(32,416

)

$

3,319

 
 
End of period statistics:
 
Approximate number of active customers

 

609

 

 

621

 

 

667

 

609

 

 

667

 
Number of employees and employee equivalents

 

609

 

 

594

 

 

551

 

609

 

 

551

 
LIMELIGHT NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, June 30, September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 
Operating activities
Net (loss) income

$

(2,751

)

$

(7,192

)

$

(272

)

$

(18,502

)

$

15,035

 

 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization

 

5,133

 

 

4,755

 

 

4,377

 

 

14,450

 

 

14,174

 

Share-based compensation

 

3,358

 

 

3,649

 

 

3,421

 

 

10,463

 

 

10,345

 

Settlement and patent license income

 

-

 

 

-

 

 

-

 

 

-

 

 

(14,900

)

Foreign currency remeasurement (gain) loss

 

21

 

 

(135

)

 

64

 

 

(104

)

 

(97

)

Deferred income taxes

 

(61

)

 

82

 

 

(16

)

 

(30

)

 

(86

)

(Gain) loss on sale of property and equipment

 

(5

)

 

(21

)

 

(18

)

 

(56

)

 

(131

)

Accounts receivable charges

 

580

 

 

437

 

 

157

 

 

1,274

 

 

453

 

Amortization of premium on marketable securities

 

9

 

 

8

 

 

24

 

 

29

 

 

82

 

Changes in operating assets and liabilities:
Accounts receivable

 

(5,300

)

 

(2,031

)

 

5,558

 

 

(11,051

)

 

5,781

 

Prepaid expenses and other current assets

 

(885

)

 

582

 

 

(2,757

)

 

(777

)

 

(2,530

)

Income taxes receivable

 

45

 

 

-

 

 

7

 

 

43

 

 

(56

)

Other assets

 

781

 

 

(1,685

)

 

(192

)

 

(2,641

)

 

(759

)

Accounts payable and other current liabilities

 

(2,798

)

 

4,230

 

 

3,058

 

 

3,675

 

 

(2,526

)

Deferred revenue

 

(112

)

 

(148

)

 

(82

)

 

(557

)

 

85

 

Income taxes payable

 

61

 

 

81

 

 

(113

)

 

204

 

 

(350

)

Payments related to litigation, net

 

-

 

 

(1,520

)

 

(1,520

)

 

(3,040

)

 

(7,540

)

Other long term liabilities

 

16

 

 

22

 

 

(4

)

 

(137

)

 

(173

)

Net cash (used in) provided by operating activities

 

(1,908

)

 

1,114

 

 

11,692

 

 

(6,757

)

 

16,807

 

 
Investing activities
Purchases of marketable securities

 

-

 

 

(1,013

)

 

(15,962

)

 

(10,279

)

 

(15,962

)

Sale and maturities of marketable securities

 

1,000

 

 

18,929

 

 

8,850

 

 

32,153

 

 

20,365

 

Purchases of property and equipment

 

(7,750

)

 

(11,456

)

 

(4,214

)

 

(24,224

)

 

(10,495

)

Proceeds from sale of property and equipment

 

5

 

 

17

 

 

18

 

 

51

 

 

131

 

Net cash (used in) provided by investing activities

 

(6,745

)

 

6,477

 

 

(11,308

)

 

(2,299

)

 

(5,961

)

 
Financing activities
Payment of employee tax withholdings related to restricted stock vesting

 

(1,015

)

 

(619

)

 

(996

)

 

(2,528

)

 

(3,808

)

Cash paid for purchase of common stock

 

-

 

 

-

 

 

-

 

 

-

 

 

(3,800

)

Proceeds from employee stock plans

 

13

 

 

1,095

 

 

737

 

 

1,116

 

 

4,799

 

Net cash (used in) provided by financing activities

 

(1,002

)

 

476

 

 

(259

)

 

(1,412

)

 

(2,809

)

Effect of exchange rate changes on cash and cash equivalents

 

(211

)

 

132

 

 

(166

)

 

(83

)

 

(271

)

Net (decrease) increase in cash and cash equivalents

 

(9,866

)

 

8,199

 

 

(41

)

 

(10,551

)

 

7,766

 

Cash and cash equivalents, beginning of period

 

24,698

 

 

16,499

 

 

28,719

 

 

25,383

 

 

20,912

 

Cash and cash equivalents, end of period

$

14,832

 

$

24,698

 

$

28,678

 

$

14,832

 

$

28,678

 

 

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss), EBITDA and Adjusted EBITDA as supplemental measures of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income (loss) to be an important indicator of overall business performance. We define Non-GAAP net income (loss) to be U.S. GAAP net income (loss) adjusted to exclude the settlement and patent license income, share-based compensation and litigation expenses. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define EBITDA as U.S. GAAP net income (loss) adjusted to exclude depreciation and amortization, interest expense, interest and other (income) expense, and income tax expense. We define Adjusted EBITDA as EBITDA adjusted to exclude the settlement and patent license income, share-based compensation and litigation expenses. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. Our management uses these Non-GAAP financial measures because, collectively, they provide valuable information on the performance of our on-going operations, excluding non-cash charges, taxes and non-core activities (including interest payments related to financing activities). These measures also enable our management to compare the results of our on-going operations from period to period, and allow management to review the performance of our on-going operations against our peer companies and against other companies in our industry and adjacent industries. We believe these measures also provide similar insights to investors, and enable investors to review our results of operations “through the eyes of management.”

Furthermore, our management uses these Non-GAAP financial measures to assist them in making decisions regarding our strategic priorities and areas for future investment and focus.

The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Our Non-GAAP net income (loss), EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net income (loss), EBITDA and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

  • EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • these measures do not reflect changes in, or cash requirements for, our working capital needs;
  • Non-GAAP net income (loss) and Adjusted EBITDA do not reflect the cash requirements necessary for litigation costs, including provision for litigation and litigation expenses;
  • these measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
  • these measures do not reflect income taxes or the cash requirements for any tax payments;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
  • while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and
  • other companies may calculate Non-GAAP net income (loss), EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income (loss), EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are calculated as follows for the periods presented in thousands:

Reconciliation of Non-GAAP Financial Measures

Limelight is presenting the most directly comparable U.S. GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable U.S. GAAP measures. Per share amounts may not foot due to rounding.

 
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
(In thousands)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
 
U.S. GAAP net (loss) income

$

(2,751

)

$

(0.02

)

$

(7,192

)

$

(0.06

)

$

(272

)

$

(0.00

)

$

(18,502

)

$

(0.16

)

$

15,035

 

$

0.13

 

 
Settlement and patent license income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(14,900

)

 

(0.13

)

Share-based compensation

 

3,358

 

 

0.03

 

 

3,649

 

 

0.03

 

 

3,421

 

 

0.03

 

 

10,463

 

 

0.09

 

 

10,345

 

 

0.09

 

Litigation expenses

 

-

 

 

-

 

 

-

 

 

-

 

 

19

 

 

0.00

 

 

-

 

 

-

 

 

2,904

 

 

0.03

 

 
Non-GAAP net income (loss)

$

607

 

$

0.01

 

$

(3,543

)

$

(0.03

)

$

3,168

 

$

0.03

 

$

(8,039

)

$

(0.07

)

$

13,384

 

$

0.12

 

 
 
Weighted average basic shares used in per share calculation

 

116,270

 

 

115,275

 

 

112,760

 

 

115,318

 

 

111,626

 

 
LIMELIGHT NETWORKS, INC.
Reconciliation of U.S. GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA
(In thousands)
(Unaudited)
 
 
Three Months Ended Nine Months Ended
 
September 30, June 30, September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 
U.S. GAAP net (loss) income

$

 

(2,751

)

$

 

(7,192

)

$

 

(272

)

$

 

(18,502

)

$

 

15,035

 

 
Depreciation and amortization

 

5,133

 

 

4,755

 

 

4,377

 

 

14,450

 

 

14,174

 

Interest expense

 

10

 

 

10

 

 

10

 

 

30

 

 

76

 

Interest and other (income) expense

 

(68

)

 

(40

)

 

69

 

 

(313

)

 

(85

)

Income tax expense

 

166

 

 

255

 

 

113

 

 

544

 

 

347

 

 
EBITDA

$

 

2,490

 

$

 

(2,212

)

$

 

4,297

 

$

 

(3,791

)

$

 

29,547

 

 
Settlement and patent license income

 

-

 

 

-

 

 

-

 

 

-

 

 

(14,900

)

Share-based compensation

 

3,358

 

 

3,649

 

 

3,421

 

 

10,463

 

 

10,345

 

Litigation expenses

 

-

 

 

-

 

 

19

 

 

-

 

 

2,904

 

 
Adjusted EBITDA

$

 

5,848

 

$

 

1,437

 

$

 

7,737

 

$

 

6,672

 

$

 

27,896

 

 

For future periods, we are unable to provide a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) as a result of the uncertainty regarding, and the potential variability of, the amounts of depreciation and amortization, interest expense, interest and other (income) expense and income tax expense, that may be incurred in the future.

Conference Call

At approximately 4:30 p.m. EST (1:30 p.m. PST) today, management will host a quarterly conference call for investors. Investors can access this call toll-free at 877-296-5190 within the United States or +1 412-317-5233 outside of the U.S. The conference call will also be audio cast live from http://www.limelight.com and a replay will be available following the call from the Limelight website.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These statements include, among others, statements regarding our expectations regarding revenue, gross margin, non-GAAP net income, capital expenditures, and our future prospects. Our expectations and beliefs regarding these matters may not materialize. The potential risks and uncertainties that could cause actual results or outcomes to differ materially from the results or outcomes predicted include, among other things, reduction of demand for our services from new or existing customers, unforeseen changes in our hiring patterns, adverse outcomes in litigation, and experiencing expenses that exceed our expectations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Forms 10-K and 10-Q, particularly under the heading “Risk Factors.” Copies of these filings are available online on our investor relations website at investors.limelightnetworks.com and on the SEC website at www.SEC.gov. All information provided in this release and in the attachments is as of October 16, 2019, and we undertake no duty to update this information in light of new information or future events, unless required by law.

About Limelight

Limelight Networks Inc., (NASDAQ: LLNW), a leading provider of digital content delivery, video, cloud security, and edge computing services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows. For more information, visit www.limelight.com, follow us on Twitter, Facebook, and LinkedIn.

Copyright (C) 2019 Limelight Networks, Inc. All rights reserved. All product or service names are the property of their respective owners.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191016005734/en/

Limelight Networks, Inc. Sajid Malhotra, 602-850-5778 ir@llnw.com

Source: Limelight Networks

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