AKAMAI TECHNOLOGIES, INC. 
By CAMBRIDGE, Mass., July 24, 2013 /PRNewswire/ --
-- Second quarter revenue of $378 million, up 14 percent year-over-year, or
up 18 percent year-over-year adjusted for ADS divestiture
-- Second quarter GAAP net income of $62 million, up 40 percent
year-over-year, or $0.34 per diluted share, up 42 percent year-over-year
(includes $9 million, or $0.05 per diluted share, depreciation benefit)
-- Second quarter non-GAAP net income* of $84 million, up 25 percent
year-over-year, or $0.46 per diluted share, up 24 percent year-over-year
(includes $9 million, or $0.05 per diluted share, depreciation benefit)
(Logo: http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )
Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the second quarter ended June 30, 2013. Revenue for the second quarter of 2013 was $378 million, a 14 percent increase over second quarter 2012 revenue of $331 million, or up 18 percent adjusted for the Advertising Decision Solutions (ADS) divestiture.
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the second quarter of 2013 was $62 million, or $0.34 per diluted share, a 13 percent decrease from the prior quarter's GAAP net income of $71 million, or $0.39 per diluted share, and a 40 percent increase over second quarter 2012 GAAP net income of $44 million, or $0.24 per diluted share.
The Company generated non-GAAP net income* of $84 million, or $0.46 per diluted share, in the second quarter of 2013, a 10 percent decrease from the prior quarter's non-GAAP net income of $93 million, or $0.51 per diluted share, and a 25 percent increase over second quarter 2012 non-GAAP net income of $67 million, or $0.37 per diluted share.
Both GAAP and non-GAAP net income results for the second quarter of 2013 include a $9 million, or $0.05 per diluted share, benefit from the change in our depreciation methodology effective on January 1, 2013.
"Akamai delivered a strong second quarter, achieving the high end of our guidance range for both the top and bottom line," said Tom Leighton, CEO of Akamai. "We were especially pleased with the strong growth in our performance and security solutions, and we continue to invest in both sales capacity and innovation in an effort to drive further growth in this important area."
Adjusted EBITDA* for the second quarter of 2013 was $166 million, in line with the prior quarter, and up from $143 million in the second quarter of 2012. Adjusted EBITDA margin* for the second quarter of 2013 was 44 percent, down a point from the prior quarter and up a point from the same period last year.
Cash from operations for the second quarter of 2013 was $130 million, or 34 percent of revenue. At the end of the second quarter of 2013, the Company had over $1.1 billion of cash, cash equivalents and marketable securities.
Sales through resellers and sales outside the United States accounted for 20 percent and 29 percent, respectively, of revenue for the second quarter of 2013.
Share Repurchase Program
During the second quarter of 2013, under a share repurchase program that was extended by the Board of Directors in February 2013, the Company spent approximately $42.5 million repurchasing 1.1 million shares of its common stock, at an average price of just over $39 per share. The Company has $77 million remaining on its current authorization, which runs through January 31, 2014.
The Company had approximately 178 million shares of common stock outstanding as of June 30, 2013.
(*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 1-866-788-0542 (or 1-857-350-1680 for international calls) and using passcode No. 59331581. 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. 71794732.
About Akamai
Akamai(®) is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere. 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.
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
Jun. 30, 2013 Dec. 31, 2012
------------- -------------
Assets
Cash and cash equivalents $204,865 $201,989
Marketable securities 326,077 235,592
Accounts receivable, net 237,286 218,777
Deferred income tax assets, current portion 20,422 20,422
Prepaid expenses and other current assets 70,734 51,604
------ ------
Current assets 859,384 728,384
Marketable securities 587,470 657,659
Property and equipment, net 405,653 345,091
Goodwill and acquired intangible assets, net 797,949 815,879
Other assets 60,287 39,811
Deferred income tax assets, net 14,527 13,803
------ ------
Total assets $2,725,270 $2,600,627
========== ==========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $193,596 $176,378
Other current liabilities 32,978 26,566
------ ------
Current liabilities 226,574 202,944
Other liabilities 50,823 51,929
------ ------
Total liabilities 277,397 254,873
Stockholders' equity 2,447,873 2,345,754
--------- ---------
Total liabilities and stockholders' equity $2,725,270 $2,600,627
========== ==========
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
----------------------------Three
Months Ended------------------------- Ended--------------
--------- --------------Six Months
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Revenues $378,106 $368,046 $331,306 $746,152 $650,754
Costs and operating expenses:
Cost of revenues * + 124,705 120,392 131,260 245,097 256,185
Research and development * 20,597 21,905 17,542 42,502 35,022
Sales and marketing * 67,825 62,690 56,480 130,515 105,475
General and administrative * + 61,351 55,380 53,596 116,731 105,238
Amortization of acquired intangible assets 5,734 6,060 5,463 11,794 10,230
Restructuring charges (benefits) 391 431 (46) 822 14
---
Total costs and operating expenses 280,603 266,858 264,295 547,461 512,164
-------
Operating income 97,503 101,188 67,011 198,691 138,590
Interest income, net 1,477 1,608 1,626 3,085 3,272
Other income (expense), net 341 (132) 1,131 209 690
---
Income before provision for income taxes 99,321 102,664 69,768 201,985 142,552
Provision for income taxes 37,426 31,177 25,529 68,603 55,086
------
Net income $61,895 $71,487 $44,239 $133,382 $87,466
=======
Net income per share:
Basic $0.35 $0.40 $0.25 $0.75 $0.49
Diluted $0.34 $0.39 $0.24 $0.73 $0.48
Shares used in per share calculations:
Basic 177,891 177,899 178,547 177,895 178,333
Diluted 181,388 181,562 181,817 181,475 182,080
* Includes stock-based compensation (see supplemental table for figures)
+ Includes depreciation and amortization (see supplemental table for figures)
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
-----------------------------
Three Months Ended------------------- Months Ended------------
--- --------------Six
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income $61,895 $71,487 $44,239 $133,382 $87,466
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 44,126 42,375 50,112 86,501 95,746
Stock-based compensation 24,801 22,931 25,621 47,732 46,545
Excess tax benefits from stock-based compensation (5,503) (4,119) (1,635) (9,622) (15,049)
Loss (gain) on investments and disposal of property and equipment, net 380 (71) (107) 309 (204)
Gain on divestiture of a business, net - (1,188) - (1,188) -
Unrealized gain on convertible note receivable (1,093) - - (1,093) -
Provision for doubtful accounts 879 320 (86) 1,199 284
Changes in operating assets and liabilities, net of effects of acquisitions
and divestitures:
Accounts receivable (6,848) (28,355) 7,803 (35,203) 6,387
Prepaid expenses and other current assets (5,071) (14,035) 4,663 (19,106) 8,972
Accounts payable, accrued expenses and other current
liabilities 17,473 7,838 15,939 25,311 10,141
Accrued restructuring (112) (111) (725) (223) (2,869)
Deferred revenue (1,613) 8,225 2,667 6,612 4,141
Other noncurrent assets and liabilities 408 (2,257) 1,061 (1,849) 495
--- ------ ----- ------ ---
Net cash provided by operating activities 129,722 103,040 149,552 232,762 242,055
------- ------- ------- ------- -------
Cash flows from investing activities:
Cash paid for acquired businesses, net of cash received 80 - - 80 (291,638)
Purchases of property and equipment and capitalization of internal-use software
costs (72,498) (63,476) (55,539) (135,974) (98,883)
Proceeds from sales and maturities of short- and long-term marketable securities 165,513 121,680 134,171 287,193 251,585
Purchases of short- and long-term marketable securities (164,525) (145,350) (135,845) (309,875) (416,494)
Proceeds from the sale of property and equipment 166 260 2 426 12
Net cash used in investing activities (71,264) (86,886) (57,211) (158,150) (555,418)
------- ------- ------- -------- --------
Cash flows from financing activities:
Proceeds from the issuance of common stock under stock option and employee stock
purchase plans 24,855 3,195 15,491 28,050 22,569
Excess tax benefits from stock-based compensation 5,503 4,119 1,635 9,622 15,049
Taxes paid related to net share settlement of equity awards (3,810) (17,315) (2,541) (21,125) (24,196)
Repurchase of common stock (42,504) (40,278) (67,213) (82,782) (75,126)
------- -------
Net cash used in financing activities (15,956) (50,279) (52,628) (66,235) (61,704)
------- ------- ------- ------- -------
Effects of exchange rate changes on cash and cash equivalents (2,912) (2,589) (1,441) (5,501) (1,134)
Net increase (decrease) in cash and cash equivalents 39,590 (36,714) 38,272 2,876 (376,201)
Cash and cash equivalents, beginning of period 165,275 201,989 144,724 201,989 559,197
-------
Cash and cash equivalents, end of period $204,865 $165,275 $182,996 $204,865 $182,996
========
Reconciliation of GAAP net income to non-GAAP net income
and Adjusted EBITDA
(amounts in thousands, except per share data)
------------------------------Three ----------------Six
Months Ended--------------------------- Months Ended-------------
--
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Net income $61,895 $71,487 $44,239 $133,382 $87,466
Amortization of acquired intangible assets 5,734 6,060 5,463 11,794 10,230
Stock-based compensation 24,801 22,931 25,621 47,732 46,545
Amortization of capitalized stock-based compensation 1,978 1,901 1,939 3,879 3,694
Acquisition related costs 31 337 376 368 4,828
Restructuring charges (benefits) 391 431 (46) 822 14
Gain and other activity related to divestiture
of a business, net (1,093) (1,188) - (2,281) -
Income tax-effect of above non-GAAP adjustments (9,726) (8,726) (10,444) (18,452) (20,333)
------ ------ ------- ------- -------
Total non-GAAP net income: 84,011 93,233 67,148 177,244 132,444
Interest income, net (1,477) (1,608) (1,626) (3,085) (3,272)
Provision for GAAP income taxes 37,426 31,177 25,529 68,603 55,086
Income tax-effect of above non-GAAP adjustments 9,726 8,726 10,444 18,452 20,333
Depreciation and amortization 36,414 34,414 42,710 70,828 81,822
Other (income) expense, net (341) 132 (1,131) (209) (690)
---- --- ------ ---- ----
Total Adjusted EBITDA: $165,759 $166,074 $143,074 $331,833 $285,723
======== ======== ======== ======== ========
Adjusted EBITDA Margin 44% 45% 43% 44% 44%
Non-GAAP net income per share:
Basic $0.47 $0.52 $0.38 $1.00 $0.74
Diluted $0.46 $0.51 $0.37 $0.98 $0.73
Shares used in non-GAAP per share calculations:
Basic 177,891 177,899 178,547 177,895 178,333
Diluted 181,388 181,562 181,817 181,475 182,080
Supplemental Financial Data
(amounts in thousands, except end of period statistics)
----------------------Three ---------------Six
Months Ended-------------------- Months Ended-------------
--- -
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Stock-based compensation:
Cost of revenues $2,718 $2,627 $3,064 $5,345 $5,770
Research and development 3,867 4,369 4,901 8,236 8,831
Sales and marketing 9,799 9,431 8,814 19,230 16,925
General and administrative 8,417 6,504 8,842 14,921 15,019
----- ----- ----- ------ ------
Total stock-based compensation $24,801 $22,931 $25,621 $47,732 $46,545
Depreciation and amortization:
Network-related depreciation $30,299 $28,920 $37,989 $59,219 $72,594
Capitalized stock-based compensation amortization 1,978 1,901 1,939 3,879 3,694
Other depreciation and amortization 6,115 5,494 4,721 11,609 9,228
Amortization of acquired intangible assets 5,734 6,060 5,463 11,794 10,230
----- ----- ----- ------ ------
Total depreciation and amortization $44,126 $42,375 $50,112 $86,501 $95,746
Capital expenditures:
Purchases of property and equipment $54,369 $46,478 $42,188 $100,847 $72,621
Capitalized internal-use software 18,129 16,998 13,351 35,127 26,262
------ ------ ------ ------ ------
Capital expenditures, excluding stock-based compensation 72,498 63,476 55,539 135,974 98,883
Capitalized stock-based compensation 3,245 2,938 1,835 6,183 4,133
----- ----- ----- ----- -----
Total capital expenditures* $75,743 $66,414 $57,374 $142,157 $103,016
Net increase (decrease) in cash, cash equivalents, marketable $35,978 $(12,806) $39,725 $23,172 $(211,510)
securities and restricted marketable securities
End of period statistics:
Number of employees 3,453 3,207 2,654
Number of deployed servers 137,788 132,442 115,008
* See Use of Non-GAAP Financial Measures below for 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 the Company's ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company'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 the Company's GAAP financial results and should only be used as a supplement to, not as a substitute for, the Company'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 the Company 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 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 the Company'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 the
Company'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 (benefits) - Akamai has incurred restructuring
charges and benefits, included in its GAAP financial statements,
primarily due to workforce reductions and estimated costs of exiting
facility lease commitments. Akamai excludes these items when evaluating
its continuing business performance as such items are not consistently
recurring and not do reflect expected future operating expense, nor
provide meaningful evaluation of current and past operations of its
business.
-- Acquisition related costs (benefits) - Acquisition related costs and
benefits include transaction fees, due diligence costs and other
one-time direct costs associated with strategic activities. In addition,
subsequent adjustments to the Company's initial estimated amount of
contingent consideration associated with specific acquisitions are
included within acquisition related costs and benefits. These amounts
are impacted by the timing and size of the acquisitions. Akamai excludes
acquisition related costs and benefits to provide a useful comparison of
the Company's operating results to prior periods and to its peer
companies because such amounts vary significantly based on magnitude of
its acquisition transactions.
-- Gain and other activity related to divestiture of a business - Akamai
recognized gains associated with the divestiture of its Advertising
Decision Solutions business. In addition, subsequent adjustments to the
fair value of the convertible note receivable received in the
transaction are included as other activity related to the divestiture of
its Advertising Decision Solutions business. Akamai excludes gains and
other activity related to divestiture of a business because sales of
this nature occur infrequently and are not considered part of the
Company's core business operations.
-- Income tax-effect of non-GAAP adjustments - 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 the
Company 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 and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; loss on early extinguishment of debt; 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 the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations.
Adjusted EBITDA - GAAP net income excluding the following items: interest; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation ; amortization of capitalized stock-based compensation; restructuring charges and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; 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 as a percentage of revenues.
Capital expenditures (Capex) - 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 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 --or-- Natalie Temple
Media Relations Investor Relations
Akamai Technologies Akamai Technologies
617-444-3913 617-444-3635
jyoung@akamai.com
ntemple@akamai.com
SOURCE Akamai Technologies, Inc.
