2014

Akamai Reports Second Quarter 2011 Financial Results

CAMBRIDGE, Mass., July 27, 2011 /PRNewswire/ --

  • Revenue of $277.0 million, up 13 percent year-over-year
  • GAAP net income of $47.9 million, or $0.25 per diluted share, up 26 percent year-over-year
  • Normalized net income* of $65.8 million, or $0.35 per diluted share, up 1 percent year-over-year

(Logo:  http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading provider of cloud optimization services, today reported financial results for the second quarter ended June 30, 2011.  Revenue for second quarter 2011 was $277.0 million, a 13 percent increase over second quarter 2010 revenue of $245.3 million, and slightly above first quarter 2011 revenue of $276.0 million

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the second quarter of 2011 was $47.9 million, or $0.25 per diluted share, a 26 percent increase from second quarter 2010 GAAP net income of $38.1 million, or $0.20 per diluted share, and a 5 percent decrease from first quarter 2011 GAAP net income of $50.6 million, or $0.26 per diluted share. 

The Company generated normalized net income* of $65.8 million, or $0.35 per diluted share, in the second quarter of 2011, a 1 percent improvement over second quarter 2010 normalized net income of $65.0 million, or $0.34 per diluted share, and down 9 percent from first quarter 2011 normalized net income of $72.2 million, or $0.38 per diluted share.  (*See Use of Non-GAAP Financial Measures below for definitions.) 

Included in these results for the second quarter of 2011 is a tax charge of $28.3 million, based on a full-year GAAP tax rate of 35 percent.  This tax rate is higher than the previous forecast of 32 to 33 percent, due to increased costs attributable to investment in the Company's network outside of North America.  The impact of the higher tax rate on net income in the second quarter of 2011 was approximately $5.0 million, or $0.03 per diluted share.

"Trends in cloud computing, Internet security, mobile connectivity, and the proliferation of online video have continued to drive our customers' online initiatives and our business success," said Paul Sagan, CEO of Akamai.  "With the scale, data and software underlying the Akamai intelligent platform, combined with our deep industry expertise, we believe Akamai is uniquely capable of enabling our customers' online businesses to grow revenues and reduce costs.  We continue to position Akamai to lead the next evolution of cloud computing by investing in the business to build new and innovative solutions that leverage the Company's core competencies."

Adjusted EBITDA* for the second quarter of 2011 was $126.2 million, up 13 percent from $112.1 million in the second quarter of 2010 and down about 2 percent from $129.2 million in the prior quarter.  Adjusted EBITDA margin* for the second quarter of 2011 was 46 percent, consistent with the same period last year.  (*See Use of Non-GAAP Financial Measures below for definitions.) 

Cash from operations was $111.8 million in the second quarter of 2011 or 40 percent of revenue.  At the end of the second quarter of 2011, the Company had approximately $1.3 billion in cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 19 percent and 30 percent, respectively, of revenue for the second quarter 2011.

During the second quarter of 2011, under a share repurchase program that was approved by the Board of Directors in April 2009 and extended in April 2011, the Company repurchased approximately 1.5 million shares of common stock for $50.5 million at an average price of $32.90 per share.  As of June 30, 2011, the Company had repurchased 8.3 million shares of common stock for $251.5 million at an average price of $30.15 per share.

As of June 30, 2011, the Company had approximately 186.0 million shares of common stock outstanding.

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-800-8652 (or 1-617-614-2705 for international calls) and using passcode No. 92064685.  A live Webcast of the call may be accessed at www.akamai.com in the Investor section.  In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 65335286.

About Akamai

Akamai® provides market-leading, cloud-based services for optimizing Web and mobile content and applications, online HD video, and secure e-commerce.  Combining highly-distributed, energy-efficient computing with intelligent software, Akamai's global platform is transforming the cloud into a more viable place to inform, entertain, advertise, transact and collaborate.  To learn how the world's leading enterprises are optimizing their business in the cloud, please visit www.akamai.com and follow @Akamai on Twitter.

Financial Statements

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)







June 30, 2011


Dec. 31, 2010


Assets





Cash and cash equivalents

$                              205,629


$                              231,866


Marketable securities

291,596


374,733


Restricted marketable securities

51


272


Accounts receivable, net

178,260


175,366


Deferred income tax assets, current portion

28,069


28,201


Prepaid expenses and other current assets

47,348


48,029


Current assets

750,953


858,467


Marketable securities

788,152


636,486


Restricted marketable securities

45


45


Property and equipment, net

274,377


255,929


Goodwill and other intangible assets, net

506,801


515,370


Other assets

9,540


11,153


Deferred income tax assets, net

74,281


75,226


Total assets

$                           2,404,149


$                           2,352,676







Liabilities and stockholders' equity





Accounts payable and accrued expenses

$                              115,962


$                              120,046


Other current liabilities

22,746


25,105


Current liabilities

138,708


145,151


Other liabilities

37,126


29,920


Total liabilities

175,834


175,071


Stockholders' equity

2,228,315


2,177,605


Total liabilities and stockholders' equity

$                           2,404,149


$                           2,352,676













Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)














Three Months Ended


Six Months Ended



June 30,


Mar. 31,


June 30,


June 30,


June 30,



2011


2011


2010


2011


2010













Revenues

$              276,989


$             275,953


$        245,318


$        552,942


$              485,347













Costs and operating expenses:  











Cost of revenues * **

89,647


89,068


71,840


178,715


139,314


Research and development *

11,006


12,594


13,577


23,600


26,756


Sales and marketing *

52,837


53,365


55,203


106,202


104,871


General and administrative * **

45,975


43,901


43,707


89,876


83,257


Amortization of other intangible assets

4,292


4,277


4,152


8,569


8,260


Total costs and operating expenses

203,757


203,205


188,479


406,962


362,458


Operating income

73,232


72,748


56,839


145,980


122,889













Interest income, net

(3,096)


(2,960)


(2,771)


(6,056)


(5,433)


Loss on early extinguishment of debt

-


-


294


-


294


Other loss (income), net

107


1,035


(122)


1,142


(47)


Income before provision for income taxes

76,221


74,673


59,438


150,894


128,075


Provision for income taxes

28,300


24,056


21,315


52,356


49,074


Net income

$                47,921


$               50,617


$          38,123


$          98,538


$                79,001













Net income per share:











   Basic

$                    0.26


$                   0.27


$              0.22


$              0.53


$                    0.46


   Diluted

$                    0.25


$                   0.26


$              0.20


$              0.52


$                    0.42













Shares used in per share calculations:











   Basic

186,612


186,849


173,317


186,731


172,209


   Diluted

190,179


191,383


190,479


190,781


189,746













* Includes stock-based compensation (see supplemental table for figures)


** Includes depreciation and amortization (see supplemental table for figures)



Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


































Three Months Ended


Six Months Ended






June 30,


Mar. 31


June 30,


June 30,


June 30,






2011


2011


2010


2011


2010















Cash flows from operating activities:











Net income

$               47,921


$           50,617


$           38,123


$        98,538


$             79,001


Adjustments to reconcile net income to net cash provided by operating activities:












Depreciation and amortization of intangible assets and deferred financing costs

41,333


41,134


34,858


82,467


68,028



Stock-based compensation

11,612


15,712


20,276


27,324


39,384



Provision for deferred income taxes, net

-


-


19,973


-


44,611



Excess tax benefits from stock-based compensation

(1,838)


(9,012)


(9,750)


(10,850)


(12,923)



(Gain) loss on investments and disposal of property and equipment, net

(113)


117


(264)


4


(245)



Provision for doubtful accounts

132


322


292


454


1,445



Non-cash portion of loss on early extinguishment of debt

-


-


294


-


294



Changes in operating assets and liabilities:













Accounts receivable

(7,101)


7,557


(18,988)


456


(16,406)




Prepaid expenses and other current assets

6,917


(6,076)


(28,906)


841


(40,284)




Accounts payable, accrued expenses and other current liabilities

2,678


(8,391)


25,198


(5,713)


11,878




Accrued restructuring

(32)


-


(48)


(32)


(93)




Deferred revenue

1,271


(3,453)


1,090


(2,182)


(1,319)




Other noncurrent assets and liabilities  

9,068


(16)


4,232


9,052


762


Net cash provided by operating activities

111,848


88,511


86,380


200,359


174,133















Cash flows from investing activities:












Cash paid for acquired business, net of cash received

(375)


(175)


(12,010)


(550)


(12,010)



Purchases of property and equipment and capitalization of internal-use software costs

(42,740)


(46,235)


(66,097)


(88,975)


(101,287)



Proceeds from sales and maturities of short- and long-term marketable securities

263,870


247,267


317,165


511,137


504,722



Purchases of short- and long-term marketable securities

(302,520)


(275,615)


(382,614)


(578,135)


(614,679)



Proceeds from the sale of property and equipment

63


25


15


88


38



Increase in other investments

-


-


-


-


(500)



Decrease in restricted investments held for security deposits

-


221


-


221


8


Net cash used in investing activities

(81,702)


(74,512)


(143,541)


(156,214)


(223,708)















Cash flows from financing activities:












Proceeds from the issuance of common stock under stock option and employee stock purchase plans

8,163


3,959


16,947


12,122


20,993



Excess tax benefits from stock-based compensation

1,838


9,012


9,750


10,850


12,923



Taxes paid related to net share settlement of equity awards

(3,507)


-


-


(3,507)


-



Repurchase of common stock

(48,935)


(43,678)


(20,376)


(92,613)


(42,621)


Net cash (used in) provided by financing activities

(42,441)


(30,707)


6,321


(73,148)


(8,705)
















Effects of exchange rate changes on cash and cash equivalents

750


2,016


(1,878)


2,766


(2,519)
















Net decrease in cash and cash equivalents

(11,545)


(14,692)


(52,718)


(26,237)


(60,799)


Cash and cash equivalents, beginning of period

217,174


231,866


173,224


231,866


181,305


Cash and cash equivalents, end of period

$             205,629


$         217,174


$         120,506


$      205,629


$           120,506






















































Three Months Ended


Six Months Ended


June 30,


Mar. 31,


June 30,


June 30,



June 30,


2011


2011


2010


2011



2010

Supplemental financial data (in thousands):






















Stock-based compensation:











Cost of revenues

$                    590


$                   555


$                 707


$             1,145



$             1,408

Research and development

2,124


2,762


3,542


4,886



7,535

Sales and marketing

5,315


6,846


8,776


12,161



17,800

General and administrative

3,583


5,549


7,251


9,132



12,641

    Total stock-based compensation

$               11,612


$              15,712


$            20,276


$           27,324



$           39,384












Depreciation and amortization:











Network-related depreciation

$               31,245


$              30,687


$            24,705


$           61,932



$           47,760

Capitalized stock-based compensation amortization

1,938


2,065


1,830


4,003



3,705

Other depreciation and amortization

3,858


4,105


3,987


7,963



7,909

Amortization of other intangible assets

4,292


4,277


4,152


8,569



8,260

Total depreciation and amortization

$               41,333


$              41,134


$            34,674


$           82,467



$           67,634












Capital expenditures:











Purchases of property and equipment

$               32,925


$              35,600


$            58,243


$           68,525



$           86,446

Capitalized internal-use software

9,815


10,635


7,854


20,450



14,841

Capitalized stock-based compensation

1,641


1,824


2,202


3,465



3,679

Total capital expenditures

$               44,381


$              48,059


$            68,299


$           92,440



$         104,966












Net increase in cash, cash equivalents, marketable











securities and restricted marketable securities

$               28,236


$              13,835


$            15,894


$           42,071



$           50,791












End of period statistics:











Number of employees

2,244


2,225


1,976






Number of deployed servers

95,811


89,331


73,197



















*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 has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Legislative and regulatory changes discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. We believe that the inclusion of these non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in its financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which may make comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.

Akamai defines "Adjusted EBITDA" as net income, before interest, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt and gains on legal settlements. Akamai considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance of its business and a good measure of the Company's historical operating trend.

Adjusted EBITDA eliminates items that are either not part of the Company's core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment and net interest income, or do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on the historical cost incurred to build out the Company's deployed network, and may not be indicative of current or future capital expenditures.

Akamai defines "Adjusted EBITDA margin" as a percentage of Adjusted EBITDA as a percentage of revenues. Akamai considers Adjusted EBITDA margin to be an indicator of the Company's operating trend and performance of its business in relation to its revenue growth.

Akamai defines "capital expenditures" or "capex" as purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai's consolidated Statement of Cash Flows in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Akamai defines "normalized net income" as net income before amortization of other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments and loss on early extinguishment of debt. Akamai considers normalized net income to be another important indicator of the overall performance of the Company because it eliminates the effects of events that are either not part of the Company's core operations or are non-cash.

Akamai defines "normalized net income per share" as normalized net income, plus interest add-back for diluted share calculation, divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations. Akamai considers normalized net income per share to be another important indicator of overall performance of the Company because it eliminates the effect of a non-cash item.

Adjusted EBITDA and normalized net income should be considered in addition to, not as a substitute for, the Company's operating income and net income, as well as other measures of financial performance reported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.












Reconciliation of GAAP net income to normalized net income

and Adjusted EBITDA

(amounts in thousands, except per share data)













Three Months Ended


Six Months Ended



June 30,


Mar. 31,


June 30,


June 30,


June 30,



2011


2011


2010


2011


2010
























Net income

$                     47,921


$                   50,617


$                38,123


$                98,538


$                 79,001













Amortization of other intangible assets

4,292


4,277


4,152


8,569


8,260


Stock-based compensation

11,612


15,712


20,276


27,324


39,384


Amortization of capitalized stock-based compensation

1,938


2,065


1,830


4,003


3,705


Loss on early extinguishment of debt

-


-


294


-


294


Acquisition related costs (benefits)

-


(440)


345


(440)


345













Total normalized net income:

65,763


72,231


65,020


137,994


130,989













Interest income, net

(3,096)


(2,960)


(2,771)


(6,056)


(5,433)


Provision for income taxes

28,300


24,056


21,315


52,356


49,074


Depreciation and amortization

35,103


34,792


28,692


69,895


55,669


Other loss (income), net

107


1,035


(122)


1,142


(47)













Total Adjusted EBITDA:

$                   126,177


$                 129,154


$              112,134


$              255,331


$               230,252













Normalized net income per share:











   Basic

$                         0.35


$                       0.39


$                    0.38


$                    0.74


$                     0.76


   Diluted

$                         0.35


$                       0.38


$                    0.34


$                    0.72


$                     0.69













Shares used in normalized per share calculations:











   Basic

186,612


186,849


173,317


186,731


172,209


   Diluted

190,179


191,383


190,479


190,781


189,746















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 concerning the anticipated growth and development of our business and the markets in which we operate.  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 to maintain the prices we charge for our services, loss of significant customers, failure of the markets we address or plan to address to develop as we expect or at all, inability to increase our revenue and keep our expenses consistent with revenues, inability to continue to generate positive cash flow,  changes in estimates we make about tax liabilities and other contingencies, 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, 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

Media Relations

Akamai Technologies, Inc.

617-444-3913

jyoung@akamai.com


--or--

Natalie Temple

Investor Relations

Akamai Technologies, Inc.

617-444-3635

ntemple@akamai.com





SOURCE Akamai Technologies, Inc.



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