AKAMAI TECHNOLOGIES, INC. 
By CAMBRIDGE, Mass., May 1, 2014 /PRNewswire/ --
-- First quarter revenue of $454 million, up 23% year-over-year
-- First quarter GAAP net income of $73 million, or $0.40 per diluted
share, up 2% year-over-year
-- First quarter non-GAAP net income* of $105 million, up 13%
year-over-year, or $0.58 per diluted share, up 14% year-over-year
Akamai Technologies, Inc. (NASDAQ: AKAM), the leading provider of cloud services for delivering, optimizing and securing online content and business applications, today reported financial results for the first quarter ended March 31, 2014. Revenue for the first quarter of 2014 was $454 million, a 23% increase over first quarter 2013 revenue of $368 million.
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"Our first quarter results demonstrated continued momentum across all our solution offerings and geographies, driven by traffic acceleration in Media Delivery Solutions and strong traction across our Security portfolio," said Tom Leighton, CEO of Akamai. "We believe that our unparalleled technology for optimizing and securing the delivery of online content and business applications, along with our continued investments across the business, enable us to provide more value to our customers than ever before."
GAAP net income for the first quarter of 2014 was $73 million, or $0.40 per diluted share, a 9% decrease from the prior quarter's GAAP net income of $80 million, or $0.44 per diluted share, and a 2% increase over first quarter 2013 GAAP net income of $71 million, or $0.39 per diluted share.
Non-GAAP net income* for the first quarter of 2014 was $105 million, or $0.58 per diluted share, a 5% increase from the prior quarter's non-GAAP net income of $100 million, or $0.55 per diluted share, and a 13% increase over first quarter 2013 non-GAAP net income of $93 million, or $0.51 per diluted share.
Adjusted EBITDA* for the first quarter of 2014 was $204 million, an increase from the prior quarter's Adjusted EBITDA of $192 million, and up from $166 million in the first quarter of 2013. Adjusted EBITDA margin* for the first quarter of 2014 was 45%, up a percentage point from the prior quarter and consistent with the same period last year.
Cash from operations for the first quarter of 2014 was $89 million, or 20% of revenue. Reflecting the closing of the Prolexic acquisition and the issuance of convertible senior notes in February 2014, the Company had $1.4 billion of cash, cash equivalents and marketable securities at the end of the first quarter.
During the first quarter of 2014, under the share repurchase program authorized by the Board of Directors in October 2013, the Company spent approximately $116 million to repurchase 2.0 million shares of its common stock, at an average price of $58.77 per share. The Company had approximately 179 million shares of common stock outstanding as of March 31, 2014.
*See Use of Non-GAAP Financial Measures below for definitions.
Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-510-0712 (or 1-617-597-5380 for international calls) and using passcode No. 65944812. A live Webcast of the call may be accessed at www.akamai.com in the Investor section. In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 15531734.
About Akamai
Akamai(®) is the leading provider of cloud services for delivering, optimizing and securing online content and business applications. At the core of the Company's solutions is the Akamai Intelligent Platform(TM) providing extensive reach, coupled with unmatched reliability, security, visibility and expertise. Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud. To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) March 31, December
31,
2014 2013
---- ----
ASSETS
Cash and cash equivalents $248,726 $333,891
Marketable securities 449,404 340,005
Accounts receivable, net 301,954 271,988
Prepaid expenses and other
current assets 89,198 62,096
Deferred income tax assets 38,018 21,734
------ ------
Current assets 1,127,300 1,029,714
Property and equipment, net 503,601 450,287
Marketable securities 721,271 573,026
Goodwill and acquired
intangible assets, net 1,208,401 834,797
Deferred income tax assets 2,476 2,325
Other assets 88,443 67,536
------ ------
Total assets $3,651,492 $2,957,685
======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses $192,154 $224,095
Other current liabilities 52,032 39,071
------
Current liabilities 244,186 263,166
Convertible senior notes 590,714 -
Other liabilities 104,447 65,088
------
Total liabilities 939,347 328,254
Stockholders' equity 2,712,145 2,629,431
Total liabilities and
stockholders' equity $3,651,492 $2,957,685
======== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
------------------
(in March December March
thousands, 31, 31, 31,
except
per
share
data)
2014 2013 2013
---- ---- ----
Revenue $453,502 $435,980 $368,046
Costs and
operating
expenses:
Cost of
revenue
(1) (2) 139,612 133,951 120,392
Research
and
development
(1) 28,234 26,520 21,905
Sales
and
marketing
(1) 81,065 82,054 62,690
General
and
administrative
(1) (2) 76,161 71,853 55,380
Amortization
of
acquired
intangible
assets 6,848 4,894 6,060
Restructuring
charges 735 952 431
--- --- ---
Total
costs
and
operating
expenses 332,655 320,224 266,858
------- ------- -------
Income
from
operations 120,847 115,756 101,188
Interest
income 1,639 1,534 1,608
Interest
expense (1,941) - -
Other
expense,
net (881) (395) (132)
---- ---- ----
Income
before
provision
for
income
taxes 119,664 116,895 102,664
Provision
for
income
taxes 46,864 36,546 31,177
------ ------ ------
Net
income $72,800 $80,349 $71,487
======= ======= =======
Net income per
share:
Basic $0.41 $0.45 $0.40
Diluted $0.40 $0.44 $0.39
Shares used in
per share
calculations:
Basic 178,705 178,758 177,899
Diluted 182,038 182,258 181,562
(1) Includes stock-based compensation (see supplemental table for figures)
(2) Includes depreciation and amortization (see supplemental table for
figures)
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
------------------
(in March December March
thousands) 31, 31, 31,
2014 2013 2013
---- ---- ----
Cash
flows
from
operating
activities:
Net
income $72,800 $80,349 $71,487
Adjustments
to activities:
reconcile
net
income
to
net
cash
provided
by
operating
Depreciation
and
amortization 53,516 49,976 42,375
Stock-
based
compensation 25,114 23,673 22,931
Provision
for
doubtful
accounts 87 280 320
Excess
tax
benefits
from
stock-
based
compensation (15,178) (4,649) (4,119)
Provision
for
deferred
income
taxes 1,660 27,343 -
Amortization
of
debt
discount
and
issuance
costs 1,941 - -
Loss
(gain)
on
disposal
of
property
and
equipment 215 429 (71)
Gain
from
divestiture
of a
business - - (1,188)
Noncash
portion
of
restructuring
charges - 781 -
Changes
in and
operating divestitures:
assets
and
liabilities,
net
of
effects
of
acquisitions
Accounts
receivable (18,137) (15,863) (28,355)
Prepaid
expenses
and
other
current
assets (20,961) 5,424 (11,447)
Accounts
payable
and
accrued
expenses (22,511) (3,197) (4,528)
Deferred
revenue 5,159 504 8,225
Other
current
liabilities 1,287 20 (111)
Other
non-
current
assets
and
liabilities 4,031 6,662 (2,295)
----- ----- ------
Net
cash
provided
by
operating
activities 89,023 171,732 93,224
------ ------- ------
Cash
flows
from
investing
activities:
Cash
paid
for
acquired
businesses,
net
of
cash
acquired (386,647) (3,237) -
Purchases
of costs
property
and
equipment
and
capitalization
of
internal-
use
software (84,006) (62,335) (60,829)
Purchases
of
short-
and
long-
term
marketable
securities (658,943) (91,329) (145,350)
Proceeds
from securities
sales
and
maturities
of
short-
and
long-
term
marketable 399,970 130,433 121,680
Proceeds
from
the
sale
of
property
and
equipment 166 66 260
Other
non-
current
assets
and
liabilities (998) (135) -
---- ---- ---
Net
cash
used
in
investing
activities (730,458) (26,537) (84,239)
-------- ------- -------
Cash
flows
from
financing
activities:
Proceeds
from
the
issuance
of
convertible
senior
notes 679,603 - -
Proceeds
from
the
issuance
of
warrants 77,970 - -
Payment
for
bond
hedge (101,292) - -
Repayment
of
acquired
debt
and
capital
leases (17,862) - -
Proceeds
from
the
issuance
of
common
stock
under
stock
plans 44,329 9,289 10,364
Excess
tax
benefits
from
stock-
based
compensation 15,178 4,649 4,119
Employee
taxes awards
paid
related
to
net
share
settlement
of
stock-
based (26,271) (12,773) (17,315)
Repurchases
of
common
stock (116,147) (48,011) (40,278)
-------- ------- -------
Net
cash
provided
by
(used
in)
financing
activities 555,508 (46,846) (43,110)
------- ------- -------
Effects
of
exchange
rate
changes
on
cash
and
cash
equivalents 762 527 (2,589)
Net
(decrease)
increase
in
cash
and
cash
equivalents (85,165) 98,876 (36,714)
Cash
and
cash
equivalents
at
beginning
of
period 333,891 235,015 201,989
------- ------- -------
Cash
and
cash
equivalents
at
end
of
period $248,726 $333,891 $165,275
======== ======== ========
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND ADJUSTED EBITDA
Three Months Ended
------------------
(in thousands, except per share data) March 31, December
31, March 31,
2014 2013 2013
---- ---- ----
Net income $72,800 $80,349 $71,487
Amortization of acquired intangible assets 6,848 4,894 6,060
Stock-based compensation 25,114 23,673 22,931
Amortization of capitalized stock-based compensation 1,928 1,974 1,901
Acquisition-related costs 3,392 1,266 337
Restructuring charges 735 952 431
Gain from divestiture of a business - - (1,188)
Amortization of debt discount and issuance costs 1,941 - -
Income tax-effect of above non-GAAP adjustments and certain
discrete tax items (7,841) (13,233) (8,726)
------ ------- ------
Non-GAAP net income 104,917 99,875 93,233
Depreciation and amortization 44,740 43,108 34,414
Interest income (1,639) (1,534) (1,608)
Other expense, net 881 395 132
Provision for GAAP income taxes 46,864 36,546 31,177
Income tax-effect of above non-GAAP adjustments and certain
discrete tax items 7,841 13,233 8,726
Adjusted EBITDA $203,604 $191,623 $166,074
====== ======== ======
Adjusted EBITDA margin 45% 44% 45%
Non-GAAP net income per share:
Basic $0.59 $0.56 $0.52
Diluted $0.58 $0.55 $0.51
Shares used in non-GAAP per share calculations:
Basic 178,705 178,758 177,899
Diluted 182,038 182,258 181,562
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL FINANCIAL DATA
Three Months Ended
------------------
(in thousands, except end of period statistics) March December March
31, 31, 31,
2014 2013 2013
---- ---- ----
Stock-based compensation:
Cost of revenue $2,795 $2,637 $2,627
Research and development 4,477 4,653 4,369
Sales and marketing 10,532 10,012 9,431
General and administrative 7,310 6,371 6,504
Total stock-based compensation $25,114 $23,673 $22,931
======= ======= =======
Depreciation and amortization:
Network-related depreciation $36,665 $35,066 $28,920
Other depreciation and amortization 8,075 8,042 5,494
----- ----- -----
Depreciation of property and equipment 44,740 43,108 34,414
Capitalized stock-based compensation amortization 1,928 1,974 1,901
Amortization of acquired intangible assets 6,848 4,894 6,060
----- ----- -----
Total depreciation and amortization $53,516 $49,976 $42,375
======= ======= =======
Capital expenditures:
Purchases of property and equipment $59,283 $42,751 $46,478
Capitalized internal-use software 24,701 20,118 16,998
Capitalized stock-based compensation 3,784 3,073 2,938
Capitalized interest expense 237 - -
Total capital expenditures* $88,005 $65,942 $66,414
======= ======= =======
Net increase (decrease) in cash, cash equivalents and marketable securities $172,479 $60,403 $(12,806)
End of period statistics:
Number of employees 4,290 3,908 3,207
Number of deployed servers 149,533 147,468 132,442
* See Use of Non-GAAP Financial Measures below for a definition
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin and capital expenditures, as discussed below.
Management believes that these non-GAAP financial measures reflect Akamai's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in its business, as they exclude expenses and gains that may be infrequent, unusual in nature and not reflective of Akamai's ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating Akamai's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
The non-GAAP financial measures do not replace the presentation of Akamai's GAAP financial results and should only be used as a supplement to, not as a substitute for, Akamai's financial results presented in accordance with GAAP. Akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting to the most directly comparable GAAP financial measure. This reconciliation captioned "Reconciliation of GAAP to Non-GAAP Financial Measures" can be found on the Investor Relations section of Akamai's website.
The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:
-- Amortization of acquired intangible assets - Akamai has incurred
amortization of intangible assets, included in its GAAP financial
statements, related to various acquisitions Akamai has made. The amount
of an acquisition's purchase price allocated to intangible assets and
term of its related amortization can vary significantly and are unique
to each acquisition; therefore, Akamai excludes amortization of acquired
intangible assets to provide investors with a consistent basis for
comparing pre- and post-acquisition operating results.
-- Stock-based compensation and amortization of capitalized stock-based
compensation - Although stock-based compensation is an important aspect
of the compensation paid to Akamai's employees and executives, the
expense varies with changes in the stock price and market conditions at
the time of grant, varying valuation methodologies, subjective
assumptions and the variety of award types. This makes the comparison of
Akamai's current financial results to previous and future periods
difficult to interpret; therefore, Akamai believes it is useful to
exclude stock-based compensation and amortization of capitalized
stock-based compensation in order to better understand the performance
of Akamai's core business performance and to be consistent with the way
the investors evaluate its performance and comparison of its operating
results to peer companies.
-- Restructuring charges - Akamai has incurred restructuring charges that
are included in its GAAP financial statements, primarily related to
workforce reductions and estimated costs of exiting facility lease
commitments. Akamai excludes these items from non-GAAP financial
measures when evaluating its continuing business performance as such
items are not consistently recurring and do not reflect expected future
operating expense, nor provide meaningful insight into the fundamentals
of current or past operations.
-- Acquisition-related costs - Acquisition-related costs include
transaction fees, due diligence costs and other one-time direct costs
associated with strategic activities. In addition, subsequent
adjustments to Akamai's initial estimated amount of contingent
consideration associated with specific acquisitions are included within
acquisition-related costs. These amounts are impacted by the timing and
size of the acquisitions. Akamai excludes acquisition-related costs from
non-GAAP financial measures to provide a useful comparison of Akamai's
operating results to prior periods and to its peer companies because
such amounts vary significantly based on the magnitude of its
acquisition transactions.
-- Gains and other activity related to divestiture of a business - Akamai
recognized a gain and other activity related to the divestiture of
Advertising Decision Solutions business. Akamai excludes gains and other
activity related to divestiture of a business from non-GAAP financial
measures because transactions of this nature occur infrequently and are
not considered part of Akamai's core business operations.
-- Amortization of debt discount and issuance costs and amortization of
capitalized interest expense - Akamai issued $690.0 million of
convertible senior notes due 2019 with a coupon interest rate of 0%. The
imputed interest rate of the convertible senior notes was approximately
3.2%. This is a result of the debt discount recorded for the conversion
feature that is required to be separately accounted for as equity,
thereby reducing the carrying value of the convertible debt instrument.
The debt discount is amortized as interest expense together with the
issuance costs of the debt which are recorded as an asset in the
consolidated balance sheet. All of Akamai's interest expense is
comprised of these non-cash components and is excluded from management's
assessment of the company's operating performance because management
believes the non-cash expense is not indicative of ongoing operating
performance.
-- Income tax-effect of non-GAAP adjustments and certain discrete tax items
- The non-GAAP adjustments described above are reported on a pre-tax
basis. The income tax effect of non-GAAP adjustments is the difference
between GAAP and non-GAAP income tax expense. Non-GAAP income tax
expense is computed on non-GAAP pre-tax income (GAAP pre-tax income
adjusted for non-GAAP adjustments) and excludes certain discrete tax
items (such as recording or release of valuation allowances), if any.
Akamai believes that applying the non-GAAP adjustments and their related
income tax effect allows Akamai to more properly reflect the income
attributable to its core operations.
Akamai's definitions of its non-GAAP financial measures are outlined below:
Non-GAAP net income - GAAP net income adjusted for the following tax-effected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring charges; acquisition-related costs; certain gains and losses on investments; gains and other activity related to divestiture of a business; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.
Non-GAAP net income per share - Non-GAAP net income divided by basic weighted average or diluted common shares outstanding. Basic weighted average shares outstanding are those used in GAAP net income per share calculations. Diluted weighted average shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transaction entered into in connection with the issuance of $690.0 million of convertible senior notes due 2019. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully diluted share calculation until they are delivered. However, the company would receive a benefit from the note hedge transaction and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of net income per share.
Adjusted EBITDA - GAAP net income excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring charges; acquisition-related costs; certain gains and losses on investments; gains and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.
Adjusted EBITDA margin - Adjusted EBITDA stated as a percentage of revenue.
Capital expenditures - Purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation.
Akamai Statement Under the Private Securities Litigation Reform Act
This release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements about future business plans and opportunities. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.
In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.
Contacts:
Jeff Young Tom Barth
Media Relations Investor Relations
Akamai Technologies Akamai Technologies
617-444-3913 617-274-7130
jyoung@akamai.com tbarth@akamai.com
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SOURCE Akamai Technologies, Inc.
