AKAMAI TECHNOLOGIES, INC. CAMBRIDGE, Mass., Oct. 27, 2015 /PRNewswire/ --
-- Revenue of $551 million, up 11% year-over-year and up 15% adjusted for
foreign exchange*
-- GAAP EPS of $0.49 per diluted share, down 2% year-over-year and up 3%
adjusted for foreign exchange*
-- Non-GAAP EPS of $0.62 per diluted share, consistent year-over-year and
up 5% adjusted for foreign exchange*
Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader in Content Delivery Network (CDN) services, today reported financial results for the third quarter ended September 30, 2015.
http://photos.prnewswire.com/prnvar/20100225/AKAMAILOGO
"The third quarter was another solid quarter for Akamai on both the top and bottom lines. We delivered earnings that exceeded our expectations, even as we continued to invest in innovation, new products and global infrastructure to meet future demand," said Dr. Tom Leighton, Chief Executive Officer. "We were particularly pleased with the continued, very strong growth of our Cloud Security Solutions. Revenue from our Cloud Security Solutions grew 44% year-over-year in constant currency, and now exceeds an annualized run rate of $250 million, making Akamai one of the world's largest cloud security service providers."
Akamai delivered the following results for the third quarter ended September 30, 2015:
Revenue: Revenue was $551 million, an 11% increase over third quarter 2014 revenue of $498 million and a 15% increase when adjusted for foreign exchange*.
Revenue by Solution Category:
-- Media Delivery Solutions revenue was $245 million, up 5% year-over-year
and up 10% when adjusted for foreign exchange*
-- Performance and Security Solutions revenue was $263 million, up 15%
year-over-year and up 18% when adjusted for foreign exchange*
-- Cloud Security Solutions revenue, a component of Performance and
Security, was $65 million, up 39% year-over-year and up 44% when
adjusted for foreign exchange*
-- Service and Support Solutions revenue was $43 million, up 19%
year-over-year and up 24% when adjusted for foreign exchange*
Revenue by Geography:
-- U.S. revenue was $401 million, a 10% increase over third quarter 2014
-- International revenue was $150 million, a 12% increase over third
quarter 2014 and a 27% increase when adjusted for foreign exchange*
Income from operations: GAAP income from operations was $116 million, a 4% decrease over third quarter 2014 GAAP income from operations of $120 million. GAAP operating margin for the third quarter of 2015 was 21%, down three percentage points from the same period last year.
Non-GAAP income from operations* was $157 million, relatively consistent with third quarter 2014 non-GAAP income from operations of $158 million. Non-GAAP operating margin* for the third quarter of 2015 was 29%, down three percentage points from the same period last year.
Net income: GAAP net income was $88 million, a 3% decrease over third quarter 2014 GAAP net income of $91 million. Non-GAAP net income* was $112 million, relatively consistent with third quarter 2014 non-GAAP net income of $111 million.
EPS: GAAP EPS was $0.49 per diluted share, a 2% decrease over third quarter 2014 GAAP EPS of $0.50, and a 3% increase when adjusted for foreign exchange*. GAAP EPS for the quarter included a $0.06 per diluted share tax benefit from the retroactive application of a U.S. tax court ruling with respect to the treatment of stock-based compensation in intercompany transactions.
Non-GAAP EPS was $0.62 per diluted share, consistent with third quarter 2014 non-GAAP EPS and a 5% increase when adjusted for foreign exchange*.
Adjusted EBITDA*: Adjusted EBITDA was $222 million, a 4% increase over third quarter 2014 Adjusted EBITDA of $213 million. Adjusted EBITDA margin* for the third quarter of 2015 was 40%, down three percentage points from the same period last year.
Other third quarter 2015 results included:
-- Cash from operations was $183 million, or 33% of revenue
-- Cash, cash equivalents and marketable securities as of September 30,
2015 was $1.5 billion
-- The Company spent $76 million to repurchase 1.1 million shares of its
common stock at an average price of $72.02 per share
-- The Company had approximately 178 million shares of common stock
outstanding as of September 30, 2015
*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 1-877-703-6109 (or 1-857-244-7308 for international calls) and using passcode No. 16030768. 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 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 32698839. 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) September 30, December 31,
2015 2014
---- ----
ASSETS
Cash and cash
equivalents $256,471 $238,650
Marketable
securities 411,382 519,642
Accounts
receivable, net 365,957 329,578
Prepaid expenses
and other
current assets 115,601 128,981
Deferred income
tax assets 61,574 45,704
------ ------
Current assets 1,210,985 1,262,555
Property and
equipment, net 734,540 601,591
Marketable
securities 837,020 869,992
Goodwill and
acquired
intangible
assets, net 1,294,478 1,183,706
Deferred income
tax assets 1,888 1,955
Other assets 105,898 81,747
------- ------
Total assets $4,184,809 $4,001,546
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
and accrued
expenses $276,192 $282,098
Other current
liabilities 55,814 51,913
Current
liabilities 332,006 334,011
Deferred income
tax liabilities 49,925 39,299
Convertible
senior notes 619,365 604,851
Other
liabilities 97,850 78,050
Total
liabilities 1,099,146 1,056,211
Stockholders'
equity 3,085,663 2,945,335
Total
liabilities and
stockholders'
equity $4,184,809 $4,001,546
========== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands, except per share data) September June 30, September September September
30, 2015 2015 30, 2014 30, 2015 30, 2014
-------- ---- -------- -------- --------
Revenue $551,030 $540,723 $498,042 $1,618,289 $1,427,579
Costs and operating expenses:
Cost of revenue (1) (2) 183,204 179,910 158,812 532,408 447,742
Research and development (1) 38,396 36,693 32,583 110,917 92,869
Sales and marketing (1) 107,426 111,501 96,215 322,406 268,742
General and administrative (1) (2) 99,543 99,152 81,905 288,287 239,946
Amortization of acquired intangible assets 6,752 6,752 8,403 20,284 23,654
Restructuring charges (benefits) 20 455 (115) 517 1,189
--- --- ---- --- -----
Total costs and operating expenses 435,341 434,463 377,803 1,274,819 1,074,142
------- ------- ------- --------- ---------
Income from operations 115,689 106,260 120,239 343,470 353,437
Interest income 2,723 2,541 2,010 8,265 5,389
Interest expense (4,630) (4,678) (4,482) (13,884) (10,939)
Other income (expense), net 204 (1,605) (188) (1,702) (1,968)
--- ------ ---- ------ ------
Income before provision for income taxes 113,986 102,518 117,579 336,149 345,919
Provision for income taxes 25,946 35,318 26,424 103,163 109,078
------ ------ ------ ------- -------
Net income $88,040 $67,200 $91,155 $232,986 $236,841
======= ======= ======= ======== ========
Net income per share:
Basic $0.49 $0.38 $0.51 $1.30 $1.33
Diluted $0.49 $0.37 $0.50 $1.29 $1.31
Shares used in per share calculations:
Basic 178,547 178,682 178,186 178,591 178,324
Diluted 180,364 180,738 180,955 180,642 181,278
(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
30, 2015 2015 30, 2014 30, 2015 30, 2014
-------- ---- -------- -------- --------
Cash flows from operating activities:
Net income $88,040 $67,200 $91,155 $232,986 $236,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 74,785 73,989 67,415 219,234 179,643
Stock-based compensation 31,046 32,251 28,008 92,966 84,800
Excess tax benefits from stock-based compensation (2,114) (9,609) (4,297) (24,851) (23,958)
(Benefit) provision for deferred income taxes (1,666) (24,580) (11,218) (17,941) 10,622
Amortization of debt discount and issuance costs 4,630 4,677 4,482 13,884 10,939
Other non-cash reconciling items, net 2,126 703 1,340 3,271 2,535
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (26,415) 18,260 (8,959) (40,707) (50,213)
Prepaid expenses and other current assets 4,097 13,839 (9,348) 16,119 (22,346)
Accounts payable and accrued expenses (5,575) 84,376 15,417 26,098 36,876
Deferred revenue (115) 76 2,938 6,908 7,688
Other current liabilities (53) 157 (2,122) 146 (703)
Other non-current assets and liabilities 13,822 2,684 (1,529) 18,247 (10,195)
------ ----- ------ ------ -------
Net cash provided by operating activities 182,608 264,023 173,282 546,360 462,529
------- ------- ------- ------- -------
Cash flows from investing activities:
Cash received (paid) for acquired businesses, net of cash acquired 500 (106,883) - (122,445) (386,532)
Purchases of property and equipment and capitalization of internal-use software
development costs (133,064) (96,013) (71,782) (366,146) (226,307)
Purchases of short- and long-term marketable securities (178,200) (308,685) (204,607) (584,189) (1,068,198)
Proceeds from sales and maturities of short- and long-term marketable securities 197,440 222,030 93,300 727,125 631,422
Other non-current assets and liabilities (1,128) (1,827) 5,194 (3,037) 7,222
------ ------ ----- ------ -----
Net cash used in investing activities (114,452) (291,378) (177,895) (348,692) (1,042,393)
-------- -------- -------- -------- ----------
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands) September June 30, September September September 30,
30, 2015 2015 30, 2014 30, 2015 2014
-------- ---- -------- -------- ----
Cash flows from financing activities:
Proceeds from the issuance of convertible senior notes, net - - - - 678,735
Proceeds from the issuance of warrants - - - - 77,970
Payment for bond hedge - - - - (101,292)
Repayment of acquired debt and capital leases - - - - (17,862)
Proceeds from the issuance of common stock under stock plans 17,776 12,072 17,362 54,288 75,361
Excess tax benefits from stock-based compensation 2,114 9,609 4,297 24,851 23,958
Employee taxes paid related to net share settlement of stock-based awards (7,817) (8,253) (8,957) (47,171) (43,205)
Repurchases of common stock (76,358) (63,388) (39,022) (202,426) (226,513)
Other non-current assets and liabilities (800) (1,250) (1,575) (2,050) (1,575)
---- ------ ------ ------ ------
Net cash (used in) provided by (65,085) (51,210) (27,895) (172,508) 465,577
financing activities
Effects of exchange rate changes on cash and cash equivalents (4,048) 3,456 (7,318) (7,339) (5,265)
------ ----- ------ ------ ------
Net (decrease) increase in cash and cash equivalents (977) (75,109) (39,826) 17,821 (119,552)
Cash and cash equivalents at beginning of period 257,448 332,557 254,165 238,650 333,891
------- ------- ------- ------- -------
Cash and cash equivalents at end of period $256,471 $257,448 $214,339 $256,471 $214,339
======== ======== ======== ======== ========
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND ADJUSTED EBITDA
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands, except per share data) September June 30, September September September
30, 2015 2015 30, 2014 30, 2015 30, 2014
Income from operations $115,689 $106,260 $120,239 $343,470 $353,437
GAAP operating margin 21% 20% 24% 21% 25%
Amortization of acquired intangible assets 6,752 6,752 8,403 20,284 23,654
Stock-based compensation 31,046 32,251 28,008 92,966 84,800
Amortization of capitalized stock-based compensation and capitalized
interest expense 3,152 3,636 3,601 9,896 7,563
Other operating expenses(1) 708 1,439 (2,515) 3,856 2,973
Operating adjustments 41,658 44,078 37,497 127,002 118,990
Non-GAAP income from operations $157,347 $150,338 $157,736 $470,472 $472,427
======== ======== ======== ======== ========
Non-GAAP operating margin 29% 28% 32% 29% 33%
Net income $88,040 $67,200 $91,155 $232,986 $236,841
Operating adjustments (from above) 41,658 44,078 37,497 127,002 118,990
Amortization of debt discount and issuance costs 4,630 4,678 4,482 13,884 10,939
Loss on investments - - - 25 393
Income tax-effect of above non-GAAP adjustments and certain
discrete tax items (22,453) (13,788) (21,771) (48,678) (45,333)
------- ------- ------- ------- -------
Non-GAAP net income 111,875 102,168 111,363 325,219 321,830
Depreciation and amortization 64,881 63,601 55,411 189,054 148,426
Interest income (2,723) (2,541) (2,010) (8,265) (5,389)
Other (income) expense, net (204) 1,605 188 1,677 1,575
Provision for GAAP income taxes 25,946 35,318 26,424 103,163 109,078
Income tax-effect of above non-GAAP adjustments and certain
discrete tax items 22,453 13,788 21,771 48,678 45,333
Adjusted EBITDA $222,228 $213,939 $213,147 $659,526 $620,853
======== ======== ======== ======== ========
Adjusted EBITDA margin 40% 40% 43% 41% 43%
Non-GAAP net income per share:
Basic $0.63 $0.57 $0.62 $1.82 $1.80
Diluted $0.62 $0.57 $0.62 $1.80 $1.78
Shares used in non-GAAP per share calculations:
Basic 178,547 178,682 178,186 178,591 178,324
Diluted 180,364 180,738 180,955 180,642 181,278
(1) Other operating expenses excluded from non-GAAP results include: acquisition-related costs, restructuring charges and certain legal matter costs. See the
non-GAAP adjustment definitions below for additional information.
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands) September June 30, September September September
30, 2015 2015 30, 2014 30, 2015 30, 2014
-------- ---- -------- -------- --------
Revenue by solution category:
Media Delivery Solutions $244,887 $243,503 $232,368 $730,232 $665,857
Performance and Security Solutions 262,696 256,039 229,204 763,717 653,545
Service and Support Solutions 43,447 41,181 36,470 124,340 108,177
------ ------ ------ ------- -------
Total revenue $551,030 $540,723 $498,042 $1,618,289 $1,427,579
======== ======== ======== ========== ==========
Cloud Security Solutions revenue $64,672 $60,973 $46,517 $180,684 $120,404
Revenue growth rates year-over-year(1):
Media Delivery Solutions 5% 12% 22% 10% 21%
Performance and Security Solutions 15 15 30 17 30
Service and Support Solutions 19 14 21 15 27
Total revenue 11% 14% 26% 13% 25%
=== === === === ===
Cloud Security Solutions revenue growth rates 39% 39% 50%
Revenue growth rates year-over-year, adjusted
for the impact of foreign exchange rates(1)(2):
Media Delivery Solutions 10% 17% 23% 14% 21%
Performance and Security Solutions 18 19 30 21 30
Service and Support Solutions 24 18 21 19 27
Total revenue 15% 18% 26% 17% 25%
=== === === === ===
Cloud Security Solutions revenue growth rates(2) 44% 44% 55%
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands) September June 30, September September September
30, 2015 2015 30, 2014 30, 2015 30, 2014
-------- ---- -------- -------- --------
Revenue by geography:
U.S. $400,581 $399,103 $363,469 $1,188,657 $1,031,878
International 150,449 141,620 134,573 429,632 395,701
------- ------- ------- ------- -------
Total revenue $551,030 $540,723 $498,042 $1,618,289 $1,427,579
======== ======== ======== ========== ==========
Revenue growth rates year-over-year(1):
U.S. 10% 16% 25% 15% 24%
International 12 7 28 9 26
---
Total revenue 11% 14% 26% 13% 25%
=== === === === ===
Revenue growth rates year-over-year, adjusted
for the impact of foreign exchange rates(1)(2):
U.S. 10% 16% 25% 15% 24%
International 27 22 27 23 26
Total revenue 15% 18% 26% 17% 25%
=== === === === ===
(1) Growth rates for the nine months ended September 30, 2014 exclude the impact of revenue from the Advertising Decision Solutions (ADS) business that
was divested during the three months ended March 31, 2013
(2) See Use of Non-GAAP Financial Measures below for a definition
AKAMAI TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL FINANCIAL DATA
Three Months Ended Nine Months Ended
------------------ -----------------
(in thousands, except end of period statistics) September June 30, September September September
30, 2015 2015 30, 2014 30, 2015 30, 2014
-------- ---- -------- -------- --------
Stock-based compensation:
Cost of revenue $3,579 $3,502 $3,030 $10,244 $8,901
Research and development 5,982 6,009 4,979 17,357 14,517
Sales and marketing 13,465 12,847 12,110 39,295 35,438
General and administrative 8,020 9,893 7,889 26,070 25,944
Total stock-based compensation $31,046 $32,251 $28,008 $92,966 $84,800
======= ======= ======= ======= =======
Depreciation and amortization:
Network-related depreciation $50,937 $50,145 $44,617 $150,070 $119,778
Other depreciation and amortization 13,944 13,456 10,794 38,984 28,648
------ ------ ------ ------ ------
Depreciation of property and equipment 64,881 63,601 55,411 189,054 148,426
Capitalized stock-based compensation amortization 2,916 3,435 3,556 9,303 7,500
Capitalized interest expense amortization 236 201 45 593 63
Amortization of acquired intangible assets 6,752 6,752 8,403 20,284 23,654
----- ----- ----- ------ ------
Total depreciation and amortization $74,785 $73,989 $67,415 $219,234 $179,643
======= ======= ======= ======== ========
Capital expenditures(1)(2):
Purchases of property and equipment $65,429 $76,492 $47,034 $231,050 $157,280
Capitalized internal-use software development costs 33,401 30,835 31,466 98,219 84,432
Capitalized stock-based compensation 4,518 4,471 3,850 13,133 11,577
Capitalized interest expense 760 619 679 2,054 1,513
Total capital expenditures $104,108 $112,417 $83,029 $344,456 $254,802
======== ======== ======= ======== ========
Net (decrease) increase in cash, cash equivalents and marketable securities $(20,082) $9,816 $69,357 $(123,411) $314,837
End of period statistics:
Number of employees 5,943 5,733 4,858
Number of deployed servers 199,962 189,136 161,273
(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 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 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, revenue adjusted for ADS divestiture 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 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 and executives, 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, 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 expense, nor 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 which are recorded
as an asset in the consolidated balance sheet. All of Akamai's interest
expense is comprised of these non-cash components and is excluded from
management's assessment of the company's operating performance because
management believes the non-cash expense is not indicative of ongoing
operating performance.
-- Loss on investments and legal matters - Akamai has incurred losses from
the impairment of certain investments and the settlement of legal
matters. In addition, Akamai has incurred costs with respect to its
internal investigation relating to sales practices in a country outside
the U.S. 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; other operating expenses (comprised of 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; and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S); 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; other operating expenses (comprised of 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, and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S.); 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 net income per share. 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; other operating expenses (comprised of 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; and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S.); 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.
Revenue, adjusted for ADS divestiture - Revenue excluding the impact of Akamai's Advertising Decision Solutions (ADS) divestiture.
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 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; failure to maintain growth in cloud security revenue, inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.
In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.
Contacts:
Jeff Young Tom Barth
Media Relations Investor Relations
Akamai Technologies Akamai Technologies
617-444-3913 617-274-7130
jyoung@akamai.com tbarth@akamai.com
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SOURCE Akamai Technologies, Inc.
