Akamai Reports Second Quarter 2012 Financial Results

Jul 25, 2012, 16:01 ET from Akamai Technologies, Inc.

CAMBRIDGE, Mass., July 25, 2012 /PRNewswire/ -- 

  • Second quarter revenue of $331 million, up 20 percent year-over-year
  • GAAP net income of $44 million, down 8 percent year-over-year; or $0.24 per diluted share, down 4 percent year-over-year
  • Normalized net income* of $78 million, up 18 percent year-over-year; or $0.43 per diluted share, up 23 percent year-over-year

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the second quarter ended June 30, 2012.  Revenue for the second quarter of 2012 was $331 million, a 20 percent increase over second quarter 2011 revenue of $277 million.

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

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the second quarter of 2012 was $44 million, or $0.24 per diluted share, an 8 percent decrease from second quarter 2011 GAAP net income of $48 million, or $0.25 per diluted share, and a 2 percent increase from first quarter 2012 GAAP net income of $43 million, or $0.24 per diluted share.

The Company generated normalized net income* of $78 million, or $0.43 per diluted share, in the second quarter of 2012, an 18 percent increase over second quarter 2011 normalized net income of $66 million, or $0.35 per diluted share, and a 3 percent increase from the prior quarter normalized net income of $75 million, or $0.41 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

"Akamai's very strong second quarter results were driven on the top line by increased adoption of our cloud infrastructure solutions as well as continued growth of content delivery solutions," said Paul Sagan, President and CEO of Akamai. "Our bottom line performance was the result of significant benefits we have begun to realize from improvements we are making to scale our network operations."

Adjusted EBITDA* for the second quarter of 2012 was $143 million, up 13 percent from $126 million in the second quarter of 2011, and flat with the prior quarter.  Adjusted EBITDA margin* for the second quarter was 43 percent, down 2 points from the prior quarter and down 3 points from the same period last year.  (*See Use of Non-GAAP Financial Measures below for definitions.)

Cash from operations was $150 million in the second quarter of 2012, or 45 percent of revenue.  At the end of the second quarter of 2012, the Company had just over $1 billion in cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 21 percent and 27 percent, respectively, of revenue for the second quarter of 2012.

Share Repurchase Program

During the second quarter of 2012, under a share repurchase program that was approved by the Board of Directors in April 2011 and expanded in May 2012, the Company repurchased approximately 2 million shares of its common stock for $67 million, at an average price of $30.78 per share.  As of June 30, 2012, the Company had repurchased 20 million shares of its common stock for $558 million, at an average price of $27.27 per share since April 2009.

The Company had approximately 178 million shares of common stock outstanding as of June 30, 2012. 

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-800-291-5365 (or 1-617-614-3922 for international calls) and using passcode No. 94771540.  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. 25706113.

About Akamai

Akamai® is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere.  At the core of the Company's solutions is the Akamai Intelligent Platform™ providing extensive reach, coupled with unmatched reliability, security, visibility and expertise.  Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud.  To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

Jun. 30, 2012

Dec. 31, 2011

Assets

Cash and cash equivalents

$                             182,996

$                        559,197

Marketable securities

313,564

290,029

Accounts receivable, net 

206,316

210,936

Deferred income tax assets, current portion

6,444

6,444

Prepaid expenses and other current assets

47,285

55,414

Current assets

756,605

1,122,020

Marketable securities

521,885

380,729

Property and equipment, net 

315,866

293,043

Goodwill and other intangible assets, net

793,724

498,300

Other assets

14,314

7,924

Deferred income tax assets, net

43,182

43,485

Total assets

$                          2,445,576

$                     2,345,501

Liabilities and stockholders' equity

Accounts payable and accrued expenses

$                             139,154

$                        123,618

Other current liabilities

26,698

24,774

Current liabilities

165,852

148,392

Other liabilities

65,091

40,859

Total liabilities

230,943

189,251

Stockholders' equity

2,214,633

2,156,250

Total liabilities and stockholders' equity

$                          2,445,576

$                     2,345,501

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)

-------------------------------------Three Months Ended-------------------------------------

----------Six Months Ended----------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2012

2012

2011

2012

2011

Revenues

$               331,306

$                   319,448

$                   276,989

$           650,754

$           552,942

Costs and operating expenses:  

Cost of revenues * +

107,457

102,566

89,647

210,023

178,715

Research and development *

17,542

17,480

11,006

35,022

23,600

Sales and marketing *

75,882

67,290

52,837

143,172

106,202

General and administrative * +

57,997

55,706

45,975

113,703

89,876

Amortization of other intangible assets

5,463

4,767

4,292

10,230

8,569

Restructuring (benefit) charge

(46)

60

-

14

-

Total costs and operating expenses

264,295

247,869

203,757

512,164

406,962

Operating income

67,011

71,579

73,232

138,590

145,980

Interest income, net

1,626

1,646

3,096

3,272

6,056

Other income (expense) , net

1,131

(441)

(107)

690

(1,142)

Income before provision for income taxes

69,768

72,784

76,221

142,552

150,894

Provision for income taxes

25,529

29,557

28,300

55,086

52,356

Net income

$                 44,239

$                     43,227

$                     47,921

$             87,466

$             98,538

Net income per share:

    Basic

$                     0.25

$                         0.24

$                         0.26

$                 0.49

$                 0.53

    Diluted

$                     0.24

$                         0.24

$                         0.25

$                 0.48

$                 0.52

Shares used in per share calculations:

    Basic

178,547

178,120

186,612

178,333

186,731

    Diluted

181,817

182,342

190,179

182,080

190,781

* 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----------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2012

2012

2011

2012

2011

Cash flows from operating activities: 

 Net income 

$              44,239

$            43,227

$            47,921

$            87,466

$           98,538

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

        Depreciation and amortization 

50,112

45,634

41,333

95,746

82,467

        Stock-based compensation 

25,621

20,924

11,612

46,545

27,324

        Excess tax benefits from stock-based compensation

(1,635)

(13,414)

(1,838)

(15,049)

(10,850)

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

(107)

(97)

(113)

(204)

4

         Provision for doubtful accounts 

(86)

370

132

284

454

                Accounts receivable 

7,803

(1,416)

(7,101)

6,387

456

                Prepaid expenses and other current assets 

4,663

4,309

6,917

8,972

841

                Accounts payable, accrued expenses and other current liabilities 

15,939

(5,798)

2,678

10,141

(5,713)

                Accrued restructuring 

(725)

(2,144)

(32)

(2,869)

(32)

                Deferred revenue 

2,667

1,474

1,271

4,141

(2,182)

                Other noncurrent assets and liabilities  

1,061

(566)

9,068

495

9,052

Net cash provided by operating activities 

149,552

92,503

111,848

242,055

200,359

Cash flows from investing activities: 

        Cash paid for acquired businesses, net of cash received 

-

(291,638)

(375)

(291,638)

(550)

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

(55,539)

(43,344)

(42,740)

(98,883)

(88,975)

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

134,171

117,414

263,870

251,585

511,137

        Purchases of short- and long-term marketable securities 

(135,845)

(280,649)

(302,520)

(416,494)

(578,135)

        Proceeds from the sale of property and equipment 

2

10

63

12

88

        Decrease in restricted investments held for security deposits 

-

-

-

-

221

           Net cash used in investing activities 

(57,211)

(498,207)

(81,702)

(555,418)

(156,214)

 Cash flows from financing activities: 

        Proceeds from the issuance of common stock under stock option 

                and employee stock purchase plans 

15,491

7,078

8,163

22,569

12,122

        Excess tax benefits from stock-based compensation 

1,635

13,414

1,838

15,049

10,850

        Taxes paid related to net share settlement of equity awards 

(2,541)

(21,655)

(3,507)

(24,196)

(3,507)

        Repurchase of common stock 

(67,213)

(7,913)

(48,935)

(75,126)

(92,613)

Net cash used in financing activities 

(52,628)

(9,076)

(42,441)

(61,704)

(73,148)

Effects of exchange rate changes on cash and cash equivalents 

(1,441)

307

750

(1,134)

2,766

Net increase (decrease) in cash and cash equivalents 

38,272

(414,473)

(11,545)

(376,201)

(26,237)

Cash and cash equivalents, beginning of period 

144,724

559,197

217,174

559,197

231,866

Cash and cash equivalents, end of period 

$            182,996

$          144,724

$          205,629

$          182,996

$         205,629

 

 

-------------------------Three Months Ended-------------------------

----------Six Months Ended----------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2012

2012

2011

2012

2011

Supplemental financial data (in thousands):

Stock-based compensation:

Cost of revenues 

$                  884

$                 683

$                590

$               1,567

$              1,145

Research and development 

4,901

3,930

2,124

8,831

4,886

Sales and marketing 

10,994

10,134

5,315

21,128

12,161

General and administrative 

8,842

6,177

3,583

15,019

9,132

     Total stock-based compensation 

$             25,621

$            20,924

$           11,612

$             46,545

$            27,324

Depreciation and amortization:

Network-related depreciation

$             37,989

$            34,605

$           31,245

$             72,594

$            61,932

Capitalized stock-based compensation amortization

1,939

1,755

1,938

3,694

4,003

Other depreciation and amortization

4,721

4,507

3,858

9,228

7,963

Amortization of other intangible assets

5,463

4,767

4,292

10,230

8,569

Total depreciation and amortization

$             50,112

$            45,634

$           41,333

$             95,746

$            82,467

Capital expenditures:

Purchases of property and equipment

$             42,188

$            30,433

$           32,925

$             72,621

$            68,525

Capitalized internal-use software

13,351

12,911

9,815

26,262

20,450

Capitalized stock-based compensation

1,835

2,298

1,641

4,133

3,465

Total capital expenditures

$             57,374

$            45,642

$           44,381

$           103,016

$            92,440

Net increase (decrease) in cash, cash equivalents, marketable

securities and restricted marketable securities

$             39,725

$        (251,235)

$           28,236

$         (211,510)

$            42,071

End of period statistics:

Number of employees

2,654

2,539

2,244

Number of deployed servers

115,008

108,507

95,811

*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 pronouncements 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 and our earnings call 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 and losses 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 that 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,  loss on early extinguishment of debt and gains and losses on legal settlements. 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 non-cash items. 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----------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2012

2012

2011

2012

2011

Net income

$                     44,239

$              43,227

$        47,921

$        87,466

$        98,538

Amortization of other intangible assets

5,463

4,767

4,292

10,230

8,569

Stock-based compensation

25,621

20,924

11,612

46,545

27,324

Amortization of capitalized stock-based compensation

1,939

1,755

1,938

3,694

4,003

Acquisition related costs (benefits)

376

4,452

-

4,828

(440)

Restructuring (benefit) charge

(46)

60

-

14

-

Total normalized net income:

77,592

75,185

65,763

152,777

137,994

Interest income, net

(1,626)

(1,646)

(3,096)

(3,272)

(6,056)

Provision for income taxes

25,529

29,557

28,300

55,086

52,356

Depreciation and amortization

42,710

39,112

35,103

81,822

69,895

Other (income) expense, net

(1,131)

441

107

(690)

1,142

Total Adjusted EBITDA:

$                   143,074

$            142,649

$      126,177

$      285,723

$      255,331

Normalized net income per share:

    Basic

$                         0.43

$                  0.42

$            0.35

$            0.86

$            0.74

    Diluted

$                         0.43

$                  0.41

$            0.35

$            0.84

$            0.72

Shares used in normalized per share calculations:

    Basic

178,547

178,120

186,612

178,333

186,731

    Diluted

181,817

182,342

190,179

182,080

190,781

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 revenue growth. 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 potentially failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release.  Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change.  However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.  These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.

Contacts:

Jeff Young

Media Relations

Akamai Technologies 617-444-3913 jyoung@akamai.com

--or--

Natalie Temple

Investor Relations

Akamai Technologies 617-444-3635

ntemple@akamai.com

SOURCE Akamai Technologies, Inc.



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