AKAMAI TECHNOLOGIES, INC. 
By CAMBRIDGE, Mass., Oct. 23, 2013 /PRNewswire/ --
-- Third quarter revenue of $396 million, up 15% year-over-year, or up 18%
year-over-year adjusted for ADS divestiture
-- Third quarter GAAP net income of $80 million, up 65% year-over-year, or
$0.44 per diluted share, up 63% year-over-year (includes $8 million, or
$0.04 per diluted share, depreciation benefit and $17 million, or $0.09
per diluted share, tax benefit)
-- Third quarter non-GAAP net income* of $90 million, up 31%
year-over-year, or $0.50 per diluted share, up 32% year-over-year
(includes $8 million, or $0.04 per diluted share, depreciation benefit
and $5 million, or $0.03 per diluted share, tax benefit)
-- Board of Directors authorizes new $750 million share repurchase program
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 third quarter ended September 30, 2013. Revenue for the third quarter of 2013 was $396 million, a 15% increase over third quarter 2012 revenue of $345 million, or up 18% adjusted for the Advertising Decision Solutions (ADS) divestiture.
(Logo: http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the third quarter of 2013 was $80 million, or $0.44 per diluted share, a 29% increase from the prior quarter's GAAP net income of $62 million, or $0.34 per diluted share, and a 65% increase over third quarter 2012 GAAP net income of $48 million, or $0.27 per diluted share.
The Company generated non-GAAP net income* of $90 million, or $0.50 per diluted share, in the third quarter of 2013, a 7% increase from the prior quarter's non-GAAP net income of $84 million, or $0.46 per diluted share, and a 31% increase over third quarter 2012 non-GAAP net income of $69 million, or $0.38 per diluted share.
GAAP and non-GAAP net income results for the third quarter of 2013 include an $8 million, or $0.04 per diluted share, benefit from the previously-announced change in depreciation methodology effective on January 1, 2013. In addition, GAAP and non-GAAP net income results for the third quarter of 2013 include a tax benefit associated with the Company's retroactive adoption of a tax deduction related to its software development activities. The tax benefit due to this deduction was $17 million, or $0.09 per diluted share, included in GAAP net income, and $5 million, or $0.03 per diluted share included in non-GAAP net income.
"Akamai's strong third quarter and year-to-date financial performance highlights our ability to deliver innovative solutions to leading enterprises globally," said Tom Leighton, CEO of Akamai. "We intend to continue to invest in the business, while also effectively managing the cost and efficiency of our network, to help our customers capitalize on the opportunities enabled by the hyperconnected world."
Adjusted EBITDA* for the third quarter of 2013 was $173 million, an increase from the prior quarter's Adjusted EBITDA of $166 million, and up from $157 million in the third quarter of 2012. Adjusted EBITDA margin* for the third quarter of 2013 was 44%, consistent with the prior quarter and down a point from the same period last year.
Cash from operations for the third quarter of 2013 was $158 million, or 40% of revenue. At the end of the third quarter of 2013, the Company had $1.2 billion of cash, cash equivalents and marketable securities.
Sales through resellers and sales outside the United States accounted for 21% and 28%, respectively, of revenue for the third quarter of 2013.
Share Repurchase Program
The Company also announced today that its Board of Directors has authorized a new $750 million share repurchase program, effective from October 16, 2013 through December 31, 2016. The Company's goal for this program is to offset the dilution created by its employee equity compensation programs and provide the flexibility to increase capital distributions to its shareholders as business and market conditions warrant.
The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Repurchases will be executed in the open market subject to Rule 10b-18, and may also be made under a Rule 10b5-1 plan, which would permit the Company to repurchase shares when the Company might otherwise be precluded from doing so under insider trading laws. Other structured repurchase programs may be considered from time to time. The Company may choose to suspend, expand or discontinue the repurchase program at any time.
During the third quarter of 2013, under the share repurchase program replaced by the one announced today, the Company spent approximately $30 million to repurchase 0.7 million shares of its common stock, at an average price of $45.32 per share. During the first three quarters of 2013, the Company spent approximately $112 million to repurchase 2.8 million shares of its common stock, at an average price of $39.65 per share.
The Company had approximately 179 million shares of common stock outstanding as of September 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 1-877-415-3184 (or 1-857-244-7327 for international calls) and using passcode No. 51318276. 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. 10768137.
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.
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
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) September December
31,
30, 2013 2012
-------- ----
ASSETS
Cash and cash equivalents $235,015 $201,989
Marketable securities 331,300 235,592
Accounts receivable, net 256,453 218,777
Prepaid expenses and other
current assets 67,452 51,604
Deferred income tax assets 20,422 20,422
------ ------
Current assets 910,642 728,384
Property and equipment, net 424,605 345,091
Marketable securities 620,204 657,659
Goodwill and acquired
intangible assets, net 831,074 808,255
Deferred income tax assets 20,672 21,427
Other assets 77,928 39,811
------ ------
Total assets $2,885,125 $2,600,627
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses $220,600 $176,378
Other current liabilities 64,824 26,566
Current liabilities 285,424 202,944
Other liabilities 56,571 51,929
Total liabilities 341,995 254,873
Stockholders' equity 2,543,130 2,345,754
--------- ---------
Total liabilities and
stockholders' equity $2,885,125 $2,600,627
======== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
------------------ -----------------
(in June
thousands, 30,
except per
share data) September September September September
2013
30, 2013 30, 2012 30, 2013 30, 2012
-------- -------- -------- --------
Revenue $395,790 $378,106 $345,321 $1,141,942 $996,075
Costs and operating
expenses:
Cost of
revenue (1)
(2) 132,039 124,705 134,221 377,136 390,406
Research and
development
(1) 24,857 20,597 19,351 67,359 54,373
Sales and
marketing
(1) 67,811 67,825 55,206 198,326 160,681
General and
administrative
(1) (2) 66,634 61,351 51,003 183,365 156,241
Amortization
of acquired
intangible
assets 4,859 5,734 5,381 16,653 15,611
Restructuring
charges 69 391 - 891 14
--- --- --- --- ---
Total costs
and
operating
expenses 296,269 280,603 265,162 843,730 777,326
------- ------- ------- ------- -------
Income from
operations 99,521 97,503 80,159 298,212 218,749
Interest
income, net 1,458 1,477 1,593 4,543 4,865
Other
(expense)
income, net (305) 341 (241) (96) 449
---- --- ---- --- ---
Income
before
provision
for income
taxes 100,674 99,321 81,511 302,659 224,063
Provision
for income
taxes 20,918 37,426 33,280 89,521 88,366
------ ------ ------ ------ ------
Net income $79,756 $61,895 $48,231 $213,138 $135,697
======= ======= ======= ======== ========
Net income per share:
Basic $0.45 $0.35 $0.27 $1.20 $0.76
Diluted $0.44 $0.34 $0.27 $1.17 $0.75
Shares used in per
share calculations:
Basic 178,235 177,891 177,455 178,008 178,040
Diluted 181,922 181,388 181,053 181,623 181,738
(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 Nine Months Ended
------------------ -----------------
(in thousands) September June 30, September September September
2013
30, 2013 30, 2012 30, 2013 30, 2012
-------- -------- -------- --------
Cash flows from
operating activities:
Net income $79,756 $61,895 $48,231 $213,138 $135,697
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation
and
amortization 47,954 44,126 53,457 134,455 149,203
Stock-based
compensation 24,479 24,801 22,635 72,211 69,180
Provision for
doubtful
accounts (310) 879 (345) 889 (61)
Excess tax
benefits from
stock-based
compensation (8,530) (5,503) (2,540) (18,152) (17,589)
Provision for
deferred
income taxes - - 826 - 826
(Gain) loss on
disposal of
property and
equipment (324) 380 142 (15) (62)
Gain and other
activity
related to
divestiture of
a business 1,093 (1,093) - (1,188) -
Changes in operating
assets and liabilities,
net of effects of
acquisitions and
divestitures:
Accounts
receivable (16,118) (6,848) (27,974) (51,321) (21,587)
Prepaid
expenses and
other current
assets 7,190 (4,969) 2,125 (11,739) 9,790
Accounts
payable and
accrued
expenses 20,035 28,223 39,810 43,730 49,149
Deferred
revenue 4,379 (1,613) 1,401 10,991 5,542
Other current
liabilities 255 (112) (28) 32 (2,897)
Other non-
current assets
and
liabilities (1,722) 689 (897) (3,328) (104)
------ --- ---- ------ ----
Net cash
provided by
operating
activities 158,137 140,855 136,843 389,703 377,087
------- ------- ------- ------- -------
Cash flows from
investing activities:
Cash (paid)
received for
acquired
businesses,
net of cash
acquired (27,500) 80 (14,392) (27,420) (306,030)
Purchases of
property and
equipment and
capitalization
of internal-
use software
costs (60,638) (76,311) (60,626) (195,265) (158,817)
Purchases of
short- and
long-term
marketable
securities (93,681) (164,525) (137,809) (403,556) (554,303)
Proceeds from
sales and
maturities of
short- and
long-term
marketable
securities 57,509 165,513 98,567 344,702 350,152
Proceeds from
the sale of
property and
equipment 335 166 - 761 12
Other non-
currents
assets and
liabilities (2,959) (361) (29) (3,320) 979
------ ---- --- ------ ---
Net cash used
in investing
activities (126,934) (75,438) (114,289) (284,098) (668,007)
-------- ------- -------- -------- --------
Cash flows from
financing activities:
Proceeds from
the issuance
of common
stock under
stock plans 26,157 17,897 11,080 54,418 33,760
Excess tax
benefits from
stock-based
compensation 8,530 5,503 2,540 18,152 17,589
Employee taxes
paid related
to net share
settlement of
stock-based
awards (7,434) (3,810) (2,370) (28,559) (26,566)
Repurchases of
common stock (29,626) (42,504) (36,523) (112,408) (111,649)
------- ------- ------- -------- --------
Net cash used
in financing
activities (2,373) (22,914) (25,273) (68,397) (86,866)
------ ------- ------- ------- -------
Effects of
exchange rate
changes on
cash and cash
equivalents 1,319 (2,912) 2,373 (4,182) 1,239
Net increase
(decrease) in
cash and cash
equivalents 30,149 39,591 (346) 33,026 (376,547)
Cash and cash
equivalents at
beginning of
period 204,866 165,275 182,996 201,989 559,197
------- ------- ------- ------- -------
Cash and cash
equivalents at
end of period $235,015 $204,866 $182,650 $235,015 $182,650
======== ======== ======== ======== ========
Note: Revisions have been made to all prior periods presented to reclassify immaterial amounts among operating, investing and
financing cash flow categories.
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND ADJUSTED EBITDA
Three Months Ended Nine Months Ended
------------------ -----------------
(in
thousands,
except per
share data) September June 30, September September September
2013
30, 2013 30, 2012 30, 2013 30, 2012
-------- -------- -------- --------
Net income $79,756 $61,895 $48,231 $213,138 $135,697
Amortization
of acquired
intangible
assets 4,859 5,734 5,381 16,653 15,611
Stock-based
compensation 24,479 24,801 22,635 72,211 69,180
Amortization
of
capitalized
stock-based
compensation 2,224 1,978 2,025 6,103 5,719
Acquisition
related
costs 219 31 279 587 5,107
Restructuring
charges 69 391 - 891 14
Gain and
other
activity
related to
divestiture
of a
business 1,093 (1,093) - (1,188) -
Income tax-
effect of
above non-
GAAP
adjustments (22,439) (9,726) (9,674) (40,891) (30,007)
------- ------ ------ ------- -------
Non-GAAP
net income 90,260 84,011 68,877 267,504 201,321
Interest
income, net (1,458) (1,477) (1,593) (4,543) (4,865)
Provision
for GAAP
income
taxes 20,918 37,426 33,280 89,521 88,366
Income tax-
effect of
above non-
GAAP
adjustments 22,439 9,726 9,674 40,891 30,007
Depreciation
and
amortization 40,871 36,414 46,051 111,699 127,873
Other
expense
(income),
net 305 (341) 241 96 (449)
--- ---- --- --- ----
Adjusted
EBITDA $173,335 $165,759 $156,530 $505,168 $442,253
====== ====== ====== ====== ======
Adjusted
EBITDA
margin 44% 44% 45% 44% 44%
Non-GAAP net income
per share:
Basic $0.51 $0.47 $0.39 $1.50 $1.13
Diluted $0.50 $0.46 $0.38 $1.47 $1.11
Shares used in non-
GAAP per share
calculations:
Basic 178,235 177,891 177,455 178,008 178,040
Diluted 181,922 181,388 181,053 181,623 181,738
RECONCILIATION OF REVENUE TO REVENUE ADJUSTED FOR ADS DIVESTITURE
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands) September June
30, September September September
30, 2013 2013 30, 2012 30, 2013 30, 2012
-------- ---- -------- -------- --------
Revenue $395,790 $378,106 $345,321 $1,141,942 $996,075
Less: ADS
revenue - - (10,045) (2,747) (30,621)
Revenue,
adjusted for
ADS
divestiture $395,790 $378,106 $335,276 $1,139,195 $965,454
======== ====== ======== ======== ========
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL FINANCIAL DATA
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands, June
except end of 30,
period statistics) September September September September
2013
30, 2013 30, 2012 30, 2013 30, 2012
-------- -------- -------- --------
Stock-based compensation:
Cost of revenue $2,885 $2,718 $2,834 $8,230 $8,604
Research and
development 4,583 3,867 4,427 12,819 13,258
Sales and marketing 10,048 9,799 8,746 29,278 25,671
General and
administrative 6,963 8,417 6,628 21,884 21,647
Total stock-based
compensation $24,479 $24,801 $22,635 $72,211 $69,180
======= ======= ======= ======= =======
Depreciation and
amortization:
Network-related
depreciation $33,909 $30,299 $41,022 $93,128 $113,616
Other depreciation
and amortization 6,962 6,115 5,029 18,571 14,257
----- ----- ----- ------ ------
Depreciation of
property and
equipment 40,871 36,414 46,051 111,699 127,873
Capitalized stock-
based compensation
amortization 2,224 1,978 2,025 6,103 5,719
Amortization of
acquired
intangible assets 4,859 5,734 5,381 16,653 15,611
----- ----- ----- ------ ------
Total depreciation
and amortization $47,954 $44,126 $53,457 $134,455 $149,203
======= ======= ======= ======== ========
Capital expenditures:
Purchases of
property and
equipment $40,594 $58,182 $46,967 $140,094 $118,896
Capitalized
internal-use
software 20,044 18,129 13,659 55,171 39,921
------ ------ ------ ------ ------
Capital
expenditures,
excluding stock-
based compensation 60,638 76,311 60,626 195,265 158,817
Capitalized stock-
based compensation 3,069 3,245 2,561 9,252 6,694
----- ----- ----- ----- -----
Total capital
expenditures* $63,707 $79,556 $63,187 $204,517 $165,511
======= ======= ======= ======== ========
Net increase
(decrease) in
cash, cash
equivalents and
marketable
securities $68,107 $35,978 $39,889 $91,279 $(171,621)
End of period statistics:
Number of employees 3,769 3,453 2,884
Number of deployed
servers 141,353 137,788 119,370
* 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 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 used by 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 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,
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, do not reflect
expected future operating expense, nor provide meaningful insight into
the current and past operations of its business.
-- 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 the Company'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 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 a gain and other activity associated with 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; 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; 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; acquisition related costs; 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 stated as a percentage of revenue.
Revenue, adjusted for ADS divestiture - Revenue excluding the impact of Akamai's Advertising Decision Solutions (ADS) divestiture.
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.
SOURCE Akamai Technologies, Inc.
