AKAMAI TECHNOLOGIES, INC. CAMBRIDGE, Mass., May 2, 2017 /PRNewswire/ --
-- Revenue of $609 million, up 7% year-over-year and up 8% when adjusted
for foreign exchange*
-- Revenue excluding Internet Platform Customers((1)) up 13% year-over-year
and when adjusted for foreign exchange*
-- GAAP EPS of $0.46 per diluted share, up 10% year-over-year and up 11%
when adjusted for foreign exchange*
-- Non-GAAP EPS of $0.69 per diluted share, up 5% year-over-year and when
adjusted for foreign exchange*
Akamai Technologies, Inc. (NASDAQ: AKAM), the world's largest and most trusted cloud delivery platform, today reported financial results for the first quarter ended March 31, 2017.
"Q1 was a very solid quarter for Akamai on both the top and bottom lines," said Dr. Tom Leighton, Chief Executive Officer. "We are especially pleased with the strong results of our performance and security solutions, which grew 17% year-over-year, or 18% in constant currency*, and now account for over 60% of our overall revenue. As we look forward, I remain excited about the opportunities that lie ahead, as Akamai is uniquely positioned to help our customers provide the highest quality and most secure digital experiences on the Internet."
Akamai delivered the following financial results for the first quarter ended March 31, 2017:
Revenue: Revenue was $609 million, a 7% increase over first quarter 2016 revenue of $568 million and an 8% increase when adjusted for foreign exchange.*
Revenue by Solution Category((2)):
-- Performance and Security Solutions revenue was $369 million, up 17%
year-over-year and up 18% when adjusted for foreign exchange*
-- Cloud Security Solutions revenue, a component of Performance and
Security, was $110 million, up 36% year-over-year and up 37% when
adjusted for foreign exchange*
-- Media Delivery Solutions revenue was $187 million, down 9%
year-over-year and when adjusted for foreign exchange*
-- Services and Support Solutions revenue was $53 million, up 15%
year-over-year and when adjusted for foreign exchange*
Revenue by Geography:
-- U.S. revenue was $407 million, up 2% year-over-year
-- International revenue was $203 million, up 19% year-over-year and up 21%
when adjusted for foreign exchange*
Customer Revenue by Division((3)):
-- Web Division revenue was $305 million, up 14% year-over-year and up 15%
when adjusted for foreign exchange*
-- Media Division revenue was $285 million, consistent year-over-year and
up 1% when adjusted for foreign exchange*
-- Enterprise and Carrier Division revenue was $19 million, up 24%
year-over-year and when adjusted for foreign exchange*
Revenue from Internet Platform Customers((1)):
-- Revenue from Internet Platform Customers was $51 million, down 29%
year-over-year and when adjusted for foreign exchange*
-- Revenue excluding Internet Platform Customers was $558 million, up 13%
year-over-year and when adjusted for foreign exchange*
Income from operations: GAAP income from operations was $115 million, a 1% increase from first quarter 2016. GAAP operating margin for the first quarter was 19%, down 1 percentage point from the same period last year.
Non-GAAP income from operations* was $165 million, a 1% increase from first quarter 2016. Non-GAAP operating margin* for the first quarter was 27%, down 2 percentage points from the same period last year.
Net income: GAAP net income was $81 million, an 8% increase from first quarter 2016. Non-GAAP net income* was $120 million, a 2% increase from first quarter 2016.
EPS: GAAP EPS was $0.46 per diluted share, a 10% increase from first quarter 2016 and an 11% increase when adjusted for foreign exchange.* Non-GAAP EPS was $0.69 per diluted share, a 5% increase from first quarter 2016 and when adjusted for foreign exchange.*
Adjusted EBITDA*: Adjusted EBITDA was $241 million, a 3% increase from first quarter 2016. Adjusted EBITDA margin* was 39%, down 2 percentage points from first quarter of 2016.
Other first quarter 2017 results:
-- Cash from operations was $143 million, or 23% of revenue
-- Cash, cash equivalents and marketable securities as of March 31, 2017
was $1.6 billion
-- The Company spent $72 million to repurchase 1.1 million shares of its
common stock at an average price of $65.78 per share
-- The Company had approximately 173 million shares of common stock
outstanding as of March 31, 2017
* See Use of Non-GAAP Financial Measures
below for definitions
(1) Internet Platform Customers - Six
customers that are large Internet
platform companies: Amazon, Apple,
Facebook, Google, Microsoft and
Netflix
(2) Revenue by solution category - A
product-focused reporting view that
reflects revenue by solution
purchased
(3) Customer revenue by division - A
customer-focused reporting view
that reflects revenue from customers
that are managed by the division.
During the first quarter of 2017,
the divisional categorization of
certain customers was adjusted based
on how those customer
categorizations are currently being
managed. The historical presentation
of divisional revenue was revised in
order to reflect the most recent
categorization and to provide a
comparable view for all periods
presented.
Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-844-578-9671 (or 1-508-637-5655 for international calls) and using passcode 7543905. 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 two weeks following the conference by calling 1-855-859-2056 (or 1-404-537-3406 for international calls) and using passcode 7543905. The archived webcast of this event may be accessed through the Akamai website.
About Akamai
As the world's largest and most trusted cloud delivery platform, Akamai makes it easier for its customers to provide the best and most secure digital experiences on any device, anytime, anywhere. Akamai's massively distributed platform is unparalleled in scale with over 200,000 servers across 130 countries, giving customers superior performance and threat protection. Akamai's portfolio of web and mobile performance, cloud security, enterprise access, and video delivery solutions are supported by exceptional customer service and 24/7 monitoring. To learn why the top financial institutions, e-commerce leaders, media & entertainment providers, and government organizations trust Akamai 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,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $522,319 $324,169
Marketable securities 322,750 512,849
Accounts receivable, net 400,792 368,596
Prepaid expenses and other
current assets 152,600 104,303
Total current assets 1,398,461 1,309,917
Property and equipment, net 824,724 801,017
Marketable securities 739,065 779,311
Goodwill 1,229,504 1,228,503
Acquired intangible assets,
net 141,894 149,463
Deferred income tax assets 7,332 8,982
Other assets 109,015 95,953
------- ------
Total assets $4,449,995 $4,373,146
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $90,179 $76,120
Accrued expenses 218,028 238,777
Deferred revenue 63,434 52,972
Other current liabilities 10,235 6,719
------ -----
Total current liabilities 381,876 374,588
Deferred revenue 4,505 3,758
Deferred income tax
liabilities 39,902 11,652
Convertible senior notes 645,719 640,087
Other liabilities 119,447 118,691
------- -------
Total liabilities 1,191,449 1,148,776
--------- ---------
Total stockholders' equity 3,258,546 3,224,370
--------- ---------
Total liabilities and
stockholders' equity $4,449,995 $4,373,146
========== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except per share data) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Revenue $609,237 $616,124 $567,725
Costs and operating expenses:
Cost of revenue(1) (2) 205,703 203,475 194,736
Research and development(1) 52,162 46,755 40,842
Sales and marketing(1) 113,566 118,907 102,211
General and administrative(1) (2) 115,009 116,775 102,283
Amortization of acquired intangible assets 7,569 6,617 6,716
Restructuring charges - 65 6,818
--- --- -----
Total costs and operating expenses 494,009 492,594 453,606
------- ------- -------
Income from operations 115,228 123,530 114,119
Interest income 4,624 4,180 3,320
Interest expense (4,597) (4,680) (4,653)
Other (expense) income, net (684) 2,784 (189)
---- ----- ----
Income before provision for income taxes 114,571 125,814 112,597
Provision for income taxes 33,641 34,175 37,739
------ ------ ------
Net income $80,930 $91,639 $74,858
======= ======= =======
Net income per share:
Basic $0.47 $0.53 $0.42
Diluted $0.46 $0.52 $0.42
Shares used in per share calculations:
Basic 173,158 173,337 176,403
Diluted 175,171 175,284 177,539
(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 thousands) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Cash flows from operating activities(1):
Net income $80,930 $91,639 $74,858
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 86,533 84,008 80,669
Stock-based compensation 38,986 39,202 31,741
Provision for deferred income taxes 31,972 21,169 1,072
Amortization of debt discount and issuance costs 4,597 4,680 4,653
Other non-cash reconciling items, net (129) 2,461 2,752
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (30,146) (19,375) 15,906
Prepaid expenses and other current assets (47,065) 19,867 (3,481)
Accounts payable and accrued expenses (23,940) (36,401) (32,377)
Deferred revenue 10,876 (8,098) 10,653
Other current liabilities 3,516 814 6,876
Other non-current assets and liabilities (13,512) (15,744) (1,949)
------- ------- ------
Net cash provided by operating activities 142,618 184,222 191,373
------- ------- -------
Cash flows from investing activities:
Cash paid for acquired businesses, net of cash acquired (10) (92,503) -
Purchases of property and equipment and capitalization of internal-use (91,181) (75,938) (82,340)
software development costs
Purchases of short- and long-term marketable securities (92,306) (166,253) (95,843)
Proceeds from sales and maturities of short- and long-term marketable 324,138 166,044 125,109
securities
Other non-current assets and liabilities (1,230) 3,927 (2,354)
------ ----- ------
Net cash used in investing activities 139,411 (164,723) (55,428)
------- -------- -------
Cash flows from financing activities:
Proceeds from the issuance of common stock under stock plans 17,530 17,221 18,350
Employee taxes paid related to net share settlement of stock-based awards (33,921) (6,985) (26,496)
Repurchases of common stock (72,467) (78,927) (108,725)
Net cash used in financing activities (88,858) (68,691) (116,871)
------- ------- --------
Effects of exchange rate changes on cash and cash equivalents 4,979 (8,442) 4,365
----- ------ -----
Net increase (decrease) in cash and cash equivalents 198,150 (57,634) 23,439
Cash and cash equivalents at beginning of period 324,169 381,803 289,473
------- ------- -------
Cash and cash equivalents at end of period $522,319 $324,169 $312,912
======== ======== ========
(1) On January 1, 2017, the Company adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, excess tax benefits are no longer classified as a reduction of cash flows from operating activities. The Company retrospectively
adopted this standard and revised cash flows from operating activities by $2.4 million and $1.1 million for the three months ended December 31, 2016 and March 31, 2016, respectively. The increase caused a corresponding decrease to cash flows from financing activities.
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY
Three Months Ended
(in thousands) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Revenue by solution category(1):
Performance and Security Solutions $369,148 $367,407 $315,863
Media Delivery Solutions 187,396 196,088 205,939
Services and Support Solutions 52,693 52,629 45,923
------ ------ ------
Total revenue $609,237 $616,124 $567,725
======== ======== ========
Cloud Security Solutions revenue $109,758 $102,072 $80,660
Revenue growth rates year-over-year:
Performance and Security Solutions 17% 17% 16%
Media Delivery Solutions (9) (10) (4)
Services and Support Solutions 15 14 16
Total revenue 7% 6% 8%
=== === ===
Cloud Security Solutions revenue growth rates 36% 41% 46%
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):
Performance and Security Solutions 18% 17% 17%
Media Delivery Solutions (9) (10) (4)
Services and Support Solutions 15 14 16
--- ---
Total revenue 8% 7% 9%
=== === ===
Cloud Security Solutions revenue growth rates 37% 41% 47%
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY
Three Months Ended
(in thousands) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Revenue by geography:
U.S. $406,565 $423,588 $397,283
International 202,672 192,536 170,442
------- ------- -------
Total revenue $609,237 $616,124 $567,725
======== ======== ========
Revenue growth rates year-over-year:
U.S. 2% 2% 2%
International 19 18 24
---
Total revenue 7% 6% 8%
=== === ===
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):
U.S. 2% 2% 2%
International 21 19 27
Total revenue 8% 7% 9%
=== === ===
(1) See customer revenue by solution category definition in press release
(2) See Use of Non-GAAP Financial Measures below for a definition
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY DIVISION
Three Months Ended
(in thousands) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Customer revenue by division(1):
Web Division $304,686 $304,196 $266,667
Media Division 285,401 292,394 285,614
Enterprise and Carrier Division 19,150 19,534 15,444
------ ------ ------
Total revenue $609,237 $616,124 $567,725
======== ======== ========
Revenue growth rates year-over-year:
Web Division 14% 13% 16%
Media Division - (1) -
Enterprise and Carrier Division 24 26 31
--- --- ---
Total revenue 7% 6% 8%
=== === ===
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):
Web Division 15% 13% 17%
Media Division 1 - 1
Enterprise and Carrier Division 24 27 32
Total revenue 8% 7% 9%
=== === ===
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA FOR INTERNET PLATFORM CUSTOMERS
Three Months Ended
(in thousands) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Revenue from Internet Platform Customers(3) $51,367 $58,378 $72,505
Revenue excluding Internet Platform Customers 557,870 557,746 495,220
------- ------- -------
Total revenue $609,237 $616,124 $567,725
======== ======== ========
Revenue growth rates year-over-year:
Revenue from Internet Platform Customers (29)% (36)% (24)%
Revenue excluding Internet Platform Customers 13 14 15
Total revenue 7% 6% 8%
=== === ===
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):
Revenue from Internet Platform Customers (29)% (36)% (24)%
Revenue excluding Internet Platform Customers 13 15 16
Total revenue 8% 7% 9%
=== === ===
(1) See customer revenue by division definition in press release
(2) See Use of Non-GAAP Financial Measures below for a definition
(3) See Internet Platform Customers definition in press release
AKAMAI TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL FINANCIAL DATA
Three Months Ended
(in thousands, except end of period statistics) March 31, December March 31,
2017 31, 2016 2016
---- -------- ----
Stock-based compensation:
Cost of revenue $4,685 $5,063 $3,970
Research and development 9,029 8,822 6,438
Sales and marketing 15,157 15,067 12,352
General and administrative 10,115 10,250 8,981
------ ------ -----
Total stock-based compensation $38,986 $39,202 $31,741
======= ======= =======
Depreciation and amortization:
Network-related depreciation $56,844 $56,205 $55,174
Other depreciation and amortization 18,209 17,409 15,171
------ ------ ------
Depreciation of property and equipment 75,053 73,614 70,345
Capitalized stock-based compensation amortization 3,471 3,323 3,257
Capitalized interest expense amortization 440 454 351
Amortization of acquired intangible assets 7,569 6,617 6,716
----- ----- -----
Total depreciation and amortization $86,533 $84,008 $80,669
======= ======= =======
Capital expenditures, excluding stock-based compensation and interest expense(1)(2):
Purchases of property and equipment $56,500 $44,646 $50,067
Capitalized internal-use software development costs 37,085 33,114 35,172
Total capital expenditures, excluding stock-based compensation and interest expense $93,585 $77,760 $85,239
======= ======= =======
End of period statistics:
Number of employees 6,672 6,490 6,119
(1) Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of cash flows. The primary difference between the two is the change in
purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.
(2) See Use of Non-GAAP Financial Measures below for a definition
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND NET INCOME PER DILUTED SHARE
Three Months Ended
(in thousands, except per share data) March 31, December March 31,
2017 31, 2016 2016
Income from operations $115,228 $123,530 $114,119
GAAP operating margin 19% 20% 20%
Amortization of acquired intangible assets 7,569 6,617 6,716
Stock-based compensation 38,986 39,202 31,741
Amortization of capitalized stock-based compensation and capitalized interest expense 3,911 3,777 3,608
Restructuring charges - 65 6,818
Acquisition-related (benefits) costs (208) 541 (79)
Legal matter costs - - 789
Operating adjustments 50,258 50,202 49,593
Non-GAAP income from operations $165,486 $173,732 $163,712
======== ======== ========
Non-GAAP operating margin 27% 28% 29%
Net income $80,930 $91,639 $74,858
Operating adjustments (from above) 50,258 50,202 49,593
Amortization of debt discount and issuance costs 4,597 4,680 4,653
Gain on investments - (4,807) -
Income tax-effect of above non-GAAP adjustments and certain discrete tax items (15,467) (15,567) (11,323)
Non-GAAP net income $120,318 $126,147 $117,781
======== ======== ========
GAAP net income per diluted share $0.46 $0.52 $0.42
Amortization of acquired intangible assets 0.05 0.05 0.03
Stock-based compensation 0.22 0.22 0.18
Amortization of capitalized stock-based compensation and capitalized interest expense 0.02 0.02 0.02
Restructuring charges - - 0.04
Acquisition-related (benefits) costs - - -
Legal matter costs - - -
Amortization of debt discount and issuance costs 0.03 0.03 0.03
Gain on investments - (0.03) -
Income tax effect of above non-GAAP adjustments and certain discrete tax items (0.09) (0.09) (0.06)
Non-GAAP net income per diluted share $0.69 $0.72 $0.66
===== ===== =====
Shares used in diluted per share calculations 175,171 175,284 177,539
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
Three Months Ended
(in thousands, except per share data) March 31, December March 31,
2017 31, 2016 2016
Net income $80,930 $91,639 $74,858
Interest income (4,624) (4,180) (3,320)
Provision for income taxes 33,641 34,175 37,739
Depreciation and amortization 75,053 73,614 70,345
Amortization of capitalized stock-based compensation and capitalized interest 3,911 3,777 3,608
expense
Amortization of acquired intangible assets 7,569 6,617 6,716
Stock-based compensation 38,986 39,202 31,741
Restructuring charges - 65 6,818
Acquisition-related (benefits) costs (208) 541 (79)
Legal matter costs - - 789
Amortization of debt discount and issuance costs 4,597 4,680 4,653
Gain on investments - (4,807) -
Other expense, net 684 2,023 189
--- ----- ---
Adjusted EBITDA $240,539 $247,346 $234,057
======== ======== ========
Adjusted EBITDA margin 39% 40% 41%
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, to measure executive compensation and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin, capital expenditures and impact of foreign currency exchange rates, 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 the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results.
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 and investor presentations 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 from its non-GAAP financial measures 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, the grant date fair
value varies based on the stock price 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 from its non-GAAP
financial measures in order to highlight the performance of Akamai's
core business and to be consistent with the way many investors evaluate
its performance and compare its operating results to peer companies.
-- Acquisition-related costs - Acquisition-related costs include
transaction fees, advisory fees, due diligence costs and other direct
costs associated with strategic activities. In addition, subsequent
adjustments to Akamai's initial estimated amounts of contingent
consideration and indemnification 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 its 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 the acquisition transactions.
-- 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 its non-GAAP financial
measures when evaluating its continuing business performance as such
items vary significantly based on the magnitude of the restructuring
action and do not reflect expected future operating expenses. In
addition, these charges do not necessarily provide meaningful insight
into the fundamentals of current or past operations of its business.
-- Amortization of debt discount and issuance costs and amortization of
capitalized interest expense - In February 2014, Akamai issued $690
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 under GAAP, 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. 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
representative of ongoing operating performance.
-- Gains and losses on investments - Akamai has recorded gains and losses
from the disposition and impairment of certain investments. Akamai
believes excluding these amounts from its non-GAAP financial measures is
useful to investors as the types of events giving rise to them occur
infrequently and are not representative of Akamai's core business
operations and ongoing operating performance.
-- Legal matter costs - Akamai has incurred losses from the settlement of
legal matters and costs with respect to its internal U.S. Foreign
Corrupt Practices Act ("FCPA") investigation in addition to the
disgorgement Akamai was required to pay to resolve it. Akamai believes
excluding these amounts from its non-GAAP financial measures is useful
to investors as the types of events giving rise to them are not
representative of Akamai's core business operations.
-- 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 releasing of valuation allowances), if any.
Akamai believes that applying the non GAAP adjustments and their related
income tax effect allows Akamai to highlight income attributable to its
core operations.
Akamai's definitions of its non-GAAP financial measures are outlined below:
Non-GAAP income from operations - GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; and other non-recurring or unusual items that may arise from time to time.
Non-GAAP operating margin - Non-GAAP income from operations stated as a percentage of revenue.
Non-GAAP net income - GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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 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 operating performance. Unless and until Akamai's weighted average stock price is greater than $89.56, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.
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; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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, or capex, excluding stock-based compensation and interest expense - Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.
Impact of Foreign Currency Exchange Rates - Revenue and earnings from international operations have historically been an important contributor to Akamai's financial results. Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.
Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage change at constant currency presented is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.
Akamai Statement Under the Private Securities Litigation Reform Act
This release and/or our quarterly earnings conference call scheduled for later today contain 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 plans for investment and portfolio expansion. 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, failure of our investments in innovation to generate solutions that are accepted in the market; 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; 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 and on such call 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
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/akamai-reports-first-quarter-2017-financial-results-300449929.html
SOURCE Akamai Technologies, Inc.
