AKAMAI TECHNOLOGIES, INC. CAMBRIDGE, Mass., July 26, 2016 /PRNewswire/ --
-- Revenue of $572 million, up 6% year-over-year and also up 6% when
adjusted for foreign exchange*
-- GAAP EPS of $0.42 per diluted share, up 14% year-over-year and up 10%
when adjusted for foreign exchange*
-- Non-GAAP EPS of $0.64 per diluted share, up 12% year-over-year and up
11% when adjusted for foreign exchange*
Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader in Content Delivery Network (CDN) services, today reported financial results for the second quarter ended June 30, 2016.
http://photos.prnewswire.com/prnvar/20100225/AKAMAILOGO
"The second quarter was another solid quarter for Akamai, with strong year-over-year earnings growth and cash flow generation," said Dr. Tom Leighton, Chief Executive Officer. "We were particularly pleased with the continued strength of our Cloud Security Solutions, which grew 42% year over year and exited the quarter at a $360 million annualized revenue run rate."
Akamai delivered the following results for the second quarter ended June 30, 2016:
Revenue: Revenue was $572 million, a 6% increase over second quarter 2015 revenue of $541 million and also a 6% increase when adjusted for foreign exchange.*
Revenue by Solution Category:**
-- Performance and Security Solutions revenue was $327 million, up 16%
year-over-year and also up 16% when adjusted for foreign exchange*
-- Cloud Security Solutions revenue, a component of Performance and
Security, was $87 million, up 42% year-over-year and also up 42% when
adjusted for foreign exchange*
-- Media Delivery Solutions revenue was $197 million, down 9%
year-over-year and down 10% when adjusted for foreign exchange*
-- Services and Support Solutions revenue was $48 million, up 18%
year-over-year and up 17% when adjusted for foreign exchange*
Revenue by Geography:
-- U.S. revenue was $395 million, down 1% year-over-year
-- International revenue was $177 million, up 25% year-over-year and up 24%
when adjusted for foreign exchange*
Customer Revenue by Division:***
Effective in the second quarter of 2016, the Company is now managing the business in a new division structure. Revenue from customers in the Company's three major divisions is reported below.
-- Media Division revenue was $288 million, down 2% year-over-year and also
down 2% when adjusted for foreign exchange*
-- Web Division revenue was $271 million, up 15% year-over-year and also up
15% when adjusted for foreign exchange*
-- Enterprise and Carrier Division revenue was $12 million, up 22%
year-over-year and also up 22% when adjusted for foreign exchange*
Income from operations: GAAP income from operations was $110 million, a 4% increase from second quarter 2015. GAAP operating margin for the second quarter was 19%, down a percentage point from the same period last year.
Non-GAAP income from operations* was $157 million, a 4% increase from second quarter 2015. Non-GAAP operating margin* for the second quarter was 27%, down a percentage point from the same period last year.
Net income: GAAP net income was $74 million, a 10% increase from second quarter 2015. Non-GAAP net income* was $112 million, a 10% increase from second quarter 2015.
EPS: GAAP EPS was $0.42 per diluted share, a 14% increase from second quarter 2015 and a 10% increase when adjusted for foreign exchange.* Non-GAAP EPS was $0.64 per diluted share, a 12% increase from second quarter 2015 and an 11% increase when adjusted for foreign exchange.*
Adjusted EBITDA*: Adjusted EBITDA was $231 million, an 8% increase from second quarter 2015. Adjusted EBITDA margin* was 40%, consistent with the second quarter of 2015.
Other second quarter 2016 results included:
-- Cash from operations was $243 million, or 42% of revenue
-- Cash, cash equivalents and marketable securities as of June 30, 2016 was
$1.6 billion
-- The Company spent $91 million to repurchase 1.7 million shares of its
common stock at an average price of $52.55 per share
-- The Company had approximately 175 million shares of common stock
outstanding as of June 30, 2016
* See Use of Non-GAAP Financial Measures below for definitions
** Revenue by solution category - A product-focused reporting view that reflects revenue by solution purchased.
*** Customer revenue by division - A customer-focused reporting view that reflects revenue from customers that are managed by the division. Historical division revenue can be found on the Investor Relations section of Akamai.com.
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 No. 40398195. 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 by calling 1-855-859-2056 (or 1-404-537-3406 for international calls) and using passcode No. 40398195. The archived webcast of this event may be accessed through the Akamai website.
About Akamai
As the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere. To learn how Akamai solutions and its team of Internet experts are helping businesses move faster forward, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, December 31,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash equivalents $326,644 $289,473
Marketable securities 542,062 460,088
Accounts receivable, net 364,401 380,399
Prepaid expenses and other
current assets 132,477 123,228
-------
Total current assets 1,365,584 1,253,188
Property and equipment, net 786,835 753,180
Marketable securities 731,232 774,674
Goodwill 1,150,137 1,150,244
Acquired intangible assets,
net 142,668 156,095
Deferred income tax assets 2,455 4,700
Other assets 90,811 89,603
------ ------
Total assets $4,269,722 $4,181,684
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $68,249 $61,982
Accrued expenses 234,013 216,166
Deferred revenue 67,163 54,154
Other current liabilities 7,117 138
----- ---
Total current liabilities 376,542 332,440
Deferred revenue 3,735 4,163
Deferred income tax
liabilities 10,248 12,888
Convertible senior notes 628,970 618,047
Other liabilities 99,754 93,268
------ ------
Total liabilities 1,119,249 1,060,806
--------- ---------
Total stockholders' equity 3,150,473 3,120,878
--------- ---------
Total liabilities and
stockholders' equity $4,269,722 $4,181,684
========== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands, except per share data) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Revenue $572,135 $567,725 $540,723 $1,139,860 $1,067,259
Costs and operating expenses:
Cost of revenue (1) (2) 206,323 194,736 179,910 401,059 349,204
Research and development (1) 37,690 40,842 36,693 78,532 72,521
Sales and marketing (1) 103,223 102,211 111,501 205,434 214,980
General and administrative (1) (2) 107,538 102,283 99,152 209,821 188,744
Amortization of acquired intangible assets 6,711 6,716 6,752 13,427 13,532
Restructuring charges 470 6,818 455 7,288 497
--- ----- --- ----- ---
Total costs and operating expenses 461,955 453,606 434,463 915,561 839,478
------- ------- ------- ------- -------
Income from operations 110,180 114,119 106,260 224,299 227,781
Interest income 3,393 3,320 2,541 6,713 5,542
Interest expense (4,639) (4,653) (4,678) (9,292) (9,254)
Other income (expense), net 415 (189) (1,605) 226 (1,906)
--- ---- ------ --- ------
Income before provision for income taxes 109,349 112,597 102,518 221,946 222,163
Provision for income taxes 35,714 37,739 35,318 73,453 77,217
------ ------ ------ ------ ------
Net income $73,635 $74,858 $67,200 $148,493 $144,946
======= ======= ======= ======== ========
Net income per share:
Basic $0.42 $0.42 $0.38 $0.84 $0.81
Diluted $0.42 $0.42 $0.37 $0.84 $0.80
Shares used in per share calculations:
Basic 175,499 176,403 178,682 175,951 178,614
Diluted 176,420 177,539 180,738 176,980 180,782
(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 Six Months Ended
------------------ ----------------
(in thousands) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income $73,635 $74,858 $67,200 $148,493 $144,946
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 85,114 80,669 73,989 165,783 144,449
Stock-based compensation 34,911 31,741 32,251 66,652 61,920
Excess tax benefits from stock-based compensation (1,497) (1,135) (9,609) (2,632) (22,737)
Provision (benefit) for deferred income taxes 1,713 1,072 (24,580) 2,785 (16,275)
Amortization of debt discount and issuance costs 4,639 4,653 4,677 9,292 9,253
Other non-cash reconciling items, net 749 2,752 703 3,501 1,146
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable 1,880 15,906 18,260 17,786 (14,292)
Prepaid expenses and other current assets (7,510) (3,481) 13,839 (10,991) 12,022
Accounts payable and accrued expenses 44,659 (32,377) 84,376 12,282 31,673
Deferred revenue 1,473 10,653 76 12,126 7,023
Other current liabilities 95 6,876 157 6,971 199
Other non-current assets and liabilities 3,011 (1,949) 2,684 1,062 4,425
----- ------ ----- ----- -----
Net cash provided by operating activities 242,872 190,238 264,023 433,110 363,752
------- ------- ------- ------- -------
Cash flows from investing activities:
Cash paid for acquired businesses, net of cash acquired - - (106,883) - (122,945)
Purchases of property and equipment and capitalization of internal-use
software development costs (78,141) (82,340) (96,013) (160,481) (233,082)
Purchases of short- and long-term marketable securities (288,742) (95,843) (308,685) (384,585) (405,989)
Proceeds from sales and maturities of short- and long-term marketable
securities 227,234 125,109 222,030 352,343 529,685
Other non-current assets and liabilities 842 (2,354) (1,827) (1,512) (1,909)
--- ------ ------ ------ ------
Net cash used in investing activities (138,807) (55,428) (291,378) (194,235) (234,240)
-------- ------- -------- -------- --------
Cash flows from financing activities:
Proceeds from the issuance of common stock under stock plans 8,745 18,350 12,072 27,095 36,512
Excess tax benefits from stock-based compensation 1,497 1,135 9,609 2,632 22,737
Employee taxes paid related to net share settlement of stock-based awards (5,914) (26,496) (8,253) (32,410) (39,354)
Repurchases of common stock (90,985) (108,725) (63,388) (199,710) (126,068)
Other non-current assets and liabilities - - (1,250) - (1,250)
--- --- ------ --- ------
Net cash used in financing activities (86,657) (115,736) (51,210) (202,393) (107,423)
------- -------- -------
Effects of exchange rate changes on cash and cash equivalents (3,676) 4,365 3,456 689 (3,291)
------ ----- ----- --- ------
Net increase (decrease) in cash and cash equivalents 13,732 23,439 (75,109) 37,171 18,798
Cash and cash equivalents at beginning of period 312,912 289,473 332,557 289,473 238,650
------- ------- ------- ------- -------
Cash and cash equivalents at end of period $326,644 $312,912 $257,448 $326,644 $257,448
======== ======== ======== ======== ========
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND ADJUSTED EBITDA
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands, except per share data) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
Income from operations $110,180 $114,119 $106,260 $224,299 $227,781
GAAP operating margin 19% 20% 20% 20% 21%
Amortization of acquired intangible assets 6,711 6,716 6,752 13,427 13,532
Stock-based compensation 34,911 31,741 32,251 66,652 61,920
Amortization of capitalized stock-based compensation and capitalized interest
expense 4,071 3,608 3,636 7,679 6,744
Restructuring charges 470 6,818 455 7,288 497
Acquisition-related costs (benefits) 361 (79) (530) 282 (135)
Legal matter costs 101 789 1,514 890 2,786
Operating adjustments 46,625 49,593 44,078 96,218 85,344
Non-GAAP income from operations $156,805 $163,712 $150,338 $320,517 $313,125
======== ======== ======== ======== ========
Non-GAAP operating margin 27% 29% 28% 28% 29%
Net income $73,635 $74,858 $67,200 $148,493 $144,946
Operating adjustments (from above) 46,625 49,593 44,078 96,218 85,344
Amortization of debt discount and issuance costs 4,639 4,653 4,678 9,292 9,254
Loss on investments - - - - 25
Income tax-effect of above non-GAAP adjustments and certain discrete tax items (12,832) (11,323) (13,788) (24,155) (26,225)
------- ------- ------- ------- -------
Non-GAAP net income 112,067 117,781 102,168 229,848 213,344
Depreciation and amortization 74,332 70,345 63,601 144,677 124,173
Interest income (3,393) (3,320) (2,541) (6,713) (5,542)
Other (income) expense, net (415) 189 1,605 (226) 1,881
Provision for GAAP income taxes 35,714 37,739 35,318 73,453 77,217
Income tax-effect of above non-GAAP adjustments and certain discrete tax items 12,832 11,323 13,788 24,155 26,225
Adjusted EBITDA $231,137 $234,057 $213,939 $465,194 $437,298
======== ======== ======== ======== ========
Adjusted EBITDA margin 40% 41% 40% 41% 41%
Non-GAAP net income per share:
Basic $0.64 $0.67 $0.57 $1.31 $1.19
Diluted $0.64 $0.66 $0.57 $1.30 $1.18
Shares used in non-GAAP per share calculations:
Basic 175,499 176,403 178,682 175,951 178,614
Diluted 176,420 177,539 180,738 176,980 180,782
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Revenue by solution category(1):
Performance and Security Solutions $326,642 $315,863 $282,391 $642,505 $554,350
Media Delivery Solutions 197,077 205,939 217,151 403,016 432,016
Services and Support Solutions 48,416 45,923 41,181 94,339 80,893
------ ------ ------ ------ ------
Total revenue $572,135 $567,725 $540,723 $1,139,860 $1,067,259
======== ======== ======== ========== ==========
Cloud Security Solutions revenue $86,980 $80,660 $61,462 $167,640 $116,645
Revenue growth rates year-over-year:
Performance and Security Solutions 16% 16% 14% 16% 16%
Media Delivery Solutions (9)% (4) 13 (7)% 13
Services and Support Solutions 18% 16 14 17% 13
Total revenue 6% 8% 14% 7% 15%
=== === === === ===
Cloud Security Solutions revenue growth rates 42% 46% 41% 44% 58%
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
Performance and Security Solutions 16% 17% 18% 16% 20%
Media Delivery Solutions (10) (4) 18 (7) 17
Services and Support Solutions 17 16 18 17 17
--- --- ---
Total revenue 6% 9% 18% 7% 19%
=== === === === ===
Cloud Security Solutions revenue growth rates(2) 42% 47% 45% 44% 63%
(1) See 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 Six Months Ended
------------------ ----------------
(in thousands) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Customer revenue by division(1):
Media Division $288,432 $291,933 $294,551 $580,365 $588,517
Web Division 271,327 263,743 236,017 535,070 460,257
Enterprise and Carrier Division 12,376 12,049 10,155 24,425 18,485
------ ------ ------ ------ ------
Total revenue $572,135 $567,725 $540,723 $1,139,860 $1,067,259
======== ======== ======== ========== ==========
Revenue growth rates year-over-year:
Media Division (2)% (1)% 10% (1)% 12%
Web Division 15 18 18 16 18
Enterprise and Carrier Division 22 45 27 32 29
--- --- --- --- ---
Total revenue 6% 8% 14% 7% 15%
=== === === === ===
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
Media Division (2)% - % 14% (1)% 16%
Web Division 15 18 23 16 22
Enterprise and Carrier Division 22 44 28 32 30
Total revenue 6% 9% 18% 7% 19%
=== === === === ===
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Revenue by geography:
U.S. $395,085 $397,283 $399,103 $792,368 $788,076
International 177,050 170,442 141,620 347,492 279,183
------- ------- ------- ------- -------
Total revenue $572,135 $567,725 $540,723 $1,139,860 $1,067,259
======== ======== ======== ========== ==========
Revenue growth rates year-over-year:
U.S. (1)% 2% 16% 1% 18%
International 25 24 7 24 7
---
Total revenue 6% 8% 14% 7% 15%
=== === === === ===
Revenue growth rates year-over-year, adjusted for the impact
of foreign exchange rates(2):
U.S. (1)% 2% 16% 1% 18%
International 24 27 22 25 21
Total revenue 6% 9% 18% 7% 19%
=== === === === ===
(1) See customer revenue by division definition in press release
(2) See Use of Non-GAAP Financial Measures below for a definition
AKAMAI TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL FINANCIAL DATA
Three Months Ended Six Months Ended
------------------ ----------------
(in thousands, except end of period statistics) June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Stock-based compensation:
Cost of revenue $4,553 $3,970 $3,502 $8,523 $6,665
Research and development 6,752 6,438 6,009 13,190 11,375
Sales and marketing 13,259 12,352 12,847 25,611 25,830
General and administrative 10,347 8,981 9,893 19,328 18,050
------ ----- ----- ------ ------
Total stock-based compensation $34,911 $31,741 $32,251 $66,652 $61,920
======= ======= ======= ======= =======
Depreciation and amortization:
Network-related depreciation $58,615 $55,174 $50,145 $113,789 $99,133
Other depreciation and amortization 15,717 15,171 13,456 30,888 25,040
------ ------ ------ ------ ------
Depreciation of property and equipment 74,332 70,345 63,601 144,677 124,173
Capitalized stock-based compensation amortization 3,628 3,257 3,435 6,885 6,387
Capitalized interest expense amortization 443 351 201 794 357
Amortization of acquired intangible assets 6,711 6,716 6,752 13,427 13,532
----- ----- ----- ------ ------
Total depreciation and amortization $85,114 $80,669 $73,989 $165,783 $144,449
======= ======= ======= ======== ========
Capital expenditures(1)(2):
Purchases of property and equipment $50,726 $50,067 $76,492 $100,793 $165,621
Capitalized internal-use software development costs 36,288 35,172 30,835 71,460 64,818
Capitalized stock-based compensation 6,209 5,203 4,471 11,412 8,615
Capitalized interest expense 868 785 619 1,653 1,294
--- --- --- ----- -----
Total capital expenditures $94,091 $91,227 $112,417 $185,318 $240,348
======= ======= ======== ======== ========
Net increase (decrease) in cash, cash equivalents and marketable securities $76,706 $(1,003) $9,816 $75,703 $(103,329)
End of period statistics:
Number of employees 6,263 6,119 5,733
Number of deployed servers 219,595 216,435 189,136
(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
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 its business, as they exclude expenses and gains that may be infrequent, unusual in nature or not reflective of Akamai's ongoing operating results. 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 also facilitate 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 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.
-- Loss on investments and legal matter costs - Akamai has incurred losses
from the impairment of certain investments and the settlement of legal
matters. Akamai has also incurred costs with respect to its internal
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 occur
infrequently and 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 release 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; 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; 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 - Purchases of property and equipment, capitalization of internal-use software development costs, capitalization of stock-based compensation and capitalization of interest expense.
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 Akamai's foreign subsidiaries weaken, 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 financial results and evaluation of performance in comparison to prior periods. The information presented is calculated by translating current period results using the same average foreign currency exchange rates per month 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. 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, 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
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SOURCE Akamai Technologies, Inc.
