2014

Akamai Reports Second Quarter 2013 Financial Results

CAMBRIDGE, Mass., July 24, 2013 /PRNewswire/ --

  • Second quarter revenue of $378 million, up 14 percent year-over-year, or up 18 percent year-over-year adjusted for ADS divestiture
  • Second quarter GAAP net income of $62 million, up 40 percent year-over-year, or $0.34 per diluted share, up 42 percent year-over-year (includes $9 million, or $0.05 per diluted share, depreciation benefit)
  • Second quarter non-GAAP net income* of $84 million, up 25 percent year-over-year, or $0.46 per diluted share, up 24 percent year-over-year (includes $9 million, or $0.05 per diluted share, depreciation benefit)

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

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, 2013.  Revenue for the second quarter of 2013 was $378 million, a 14 percent increase over second quarter 2012 revenue of $331 million, or up 18 percent adjusted for the Advertising Decision Solutions (ADS) divestiture.

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the second quarter of 2013 was $62 million, or $0.34 per diluted share, a 13 percent decrease from the prior quarter's GAAP net income of $71 million, or $0.39 per diluted share, and a 40 percent increase over second quarter 2012 GAAP net income of $44 million, or $0.24 per diluted share.

The Company generated non-GAAP net income* of $84 million, or $0.46 per diluted share, in the second quarter of 2013, a 10 percent decrease from the prior quarter's non-GAAP net income of $93 million, or $0.51 per diluted share, and a 25 percent increase over second quarter 2012 non-GAAP net income of $67 million, or $0.37 per diluted share.  

Both GAAP and non-GAAP net income results for the second quarter of 2013 include a $9 million, or $0.05 per diluted share, benefit from the change in our depreciation methodology effective on January 1, 2013.

"Akamai delivered a strong second quarter, achieving the high end of our guidance range for both the top and bottom line," said Tom Leighton, CEO of Akamai.  "We were especially pleased with the strong growth in our performance and security solutions, and we continue to invest in both sales capacity and innovation in an effort to drive further growth in this important area."

Adjusted EBITDA* for the second quarter of 2013 was $166 million, in line with the prior quarter, and up from $143 million in the second quarter of 2012.  Adjusted EBITDA margin* for the second quarter of 2013 was 44 percent, down a point from the prior quarter and up a point from the same period last year. 

Cash from operations for the second quarter of 2013 was $130 million, or 34 percent of revenue.  At the end of the second quarter of 2013, the Company had over $1.1 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 20 percent and 29 percent, respectively, of revenue for the second quarter of 2013.

Share Repurchase Program
During the second quarter of 2013, under a share repurchase program that was extended by the Board of Directors in February 2013, the Company spent approximately $42.5 million repurchasing 1.1 million shares of its common stock, at an average price of just over $39 per share.  The Company has $77 million remaining on its current authorization, which runs through January 31, 2014.

The Company had approximately 178 million shares of common stock outstanding as of June 30, 2013. 

(*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 1-866-788-0542 (or 1-857-350-1680 for international calls) and using passcode No. 59331581.  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. 71794732.

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, 2013


Dec. 31, 2012



Assets







Cash and cash equivalents


$                204,865


$                201,989



Marketable securities


326,077


235,592



Accounts receivable, net 


237,286


218,777



Deferred income tax assets, current portion


20,422


20,422



Prepaid expenses and other current assets


70,734


51,604



Current assets


859,384


728,384



Marketable securities


587,470


657,659



Property and equipment, net 


405,653


345,091



Goodwill and acquired intangible assets, net


797,949


815,879



Other assets


60,287


39,811



Deferred income tax assets, net


14,527


13,803



Total assets


$             2,725,270


$             2,600,627










Liabilities and stockholders' equity







Accounts payable and accrued expenses


$                193,596


$                176,378



Other current liabilities


32,978


26,566



Current liabilities


226,574


202,944



Other liabilities


50,823


51,929



Total liabilities


277,397


254,873



Stockholders' equity


2,447,873


2,345,754



Total liabilities and stockholders' equity


$             2,725,270


$             2,600,627










 

 

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,






2013


2013


2012


2013


2012



















Revenues

$             378,106


$             368,046


$             331,306


$             746,152


$             650,754



















Costs and operating expenses:  














Cost of revenues * +

124,705


120,392


131,260


245,097


256,185





Research and development *

20,597


21,905


17,542


42,502


35,022





Sales and marketing *

67,825


62,690


56,480


130,515


105,475





General and administrative * +

61,351


55,380


53,596


116,731


105,238





Amortization of acquired intangible assets

5,734


6,060


5,463


11,794


10,230





Restructuring charges (benefits)

391


431


(46)


822


14





Total costs and operating expenses

280,603


266,858


264,295


547,461


512,164





Operating income

97,503


101,188


67,011


198,691


138,590



















Interest income, net

1,477


1,608


1,626


3,085


3,272





Other income (expense), net

341


(132)


1,131


209


690





Income before provision for income taxes

99,321


102,664


69,768


201,985


142,552





Provision for income taxes

37,426


31,177


25,529


68,603


55,086





Net income

$               61,895


$               71,487


$               44,239


$             133,382


$               87,466



















Net income per share:














    Basic

$                   0.35


$                   0.40


$                   0.25


$                   0.75


$                   0.49





    Diluted

$                   0.34


$                   0.39


$                   0.24


$                   0.73


$                   0.48



















Shares used in per share calculations:














    Basic

177,891


177,899


178,547


177,895


178,333





    Diluted

181,388


181,562


181,817


181,475


182,080



















* 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, 







2013


2013


2012



2013


2012


















 Cash flows from operating activities: 













 Net income 

$              61,895


$              71,487


$              44,239



$            133,382


$              87,466



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














Depreciation and amortization  

44,126


42,375


50,112



86,501


95,746




Stock-based compensation 

24,801


22,931


25,621



47,732


46,545




Excess tax benefits from stock-based compensation

(5,503)


(4,119)


(1,635)



(9,622)


(15,049)




Loss (gain) on investments and disposal of property and equipment, net 

380


(71)


(107)



309


(204)




Gain on divestiture of a business, net 

-


(1,188)


-



(1,188)


-




Unrealized gain on convertible note receivable 

(1,093)


-


-



(1,093)


-




Provision for doubtful accounts 

879


320


(86)



1,199


284




Changes in operating assets and liabilities, net of effects of acquisitions

and divestitures: 















Accounts receivable 

(6,848)


(28,355)


7,803



(35,203)


6,387





Prepaid expenses and other current assets 

(5,071)


(14,035)


4,663



(19,106)


8,972





Accounts payable, accrued expenses and other current liabilities 

17,473


7,838


15,939



25,311


10,141





Accrued restructuring 

(112)


(111)


(725)



(223)


(2,869)





Deferred revenue 

(1,613)


8,225


2,667



6,612


4,141





Other noncurrent assets and liabilities  

408


(2,257)


1,061



(1,849)


495




Net cash provided by operating activities 

129,722


103,040


149,552



232,762


242,055


















 Cash flows from investing activities: 














Cash paid for acquired businesses, net of cash received 

80


-


-



80


(291,638)




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

(72,498)


(63,476)


(55,539)



(135,974)


(98,883)




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

165,513


121,680


134,171



287,193


251,585




Purchases of short- and long-term marketable securities 

(164,525)


(145,350)


(135,845)



(309,875)


(416,494)




Proceeds from the sale of property and equipment 

166


260


2



426


12




Net cash used in investing activities 

(71,264)


(86,886)


(57,211)



(158,150)


(555,418)


















 Cash flows from financing activities: 














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

24,855


3,195


15,491



28,050


22,569




Excess tax benefits from stock-based compensation 

5,503


4,119


1,635



9,622


15,049




Taxes paid related to net share settlement of equity awards 

(3,810)


(17,315)


(2,541)



(21,125)


(24,196)




Repurchase of common stock 

(42,504)


(40,278)


(67,213)



(82,782)


(75,126)




Net cash used in financing activities 

(15,956)


(50,279)


(52,628)



(66,235)


(61,704)



















 Effects of exchange rate changes on cash and cash equivalents 

(2,912)


(2,589)


(1,441)



(5,501)


(1,134)



















 Net increase (decrease) in cash and cash equivalents 

39,590


(36,714)


38,272



2,876


(376,201)



 Cash and cash equivalents, beginning of period 

165,275


201,989


144,724



201,989


559,197



 Cash and cash equivalents, end of period 

$            204,865


$            165,275


$            182,996



$            204,865


$            182,996


















 













Reconciliation of GAAP net income to non-GAAP 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,




2013


2013


2012


2013


2012



























Net income

$              61,895


$              71,487


$              44,239


$            133,382


$              87,466















Amortization of acquired intangible assets

5,734


6,060


5,463


11,794


10,230



Stock-based compensation

24,801


22,931


25,621


47,732


46,545



Amortization of capitalized stock-based compensation

1,978


1,901


1,939


3,879


3,694



Acquisition related costs

31


337


376


368


4,828



Restructuring charges (benefits)

391


431


(46)


822


14



Gain and other activity related to divestiture 












     of a business, net

(1,093)


(1,188)


-


(2,281)


-



Income tax-effect of above non-GAAP adjustments

(9,726)


(8,726)


(10,444)


(18,452)


(20,333)















Total non-GAAP net income:

84,011


93,233


67,148


177,244


132,444















Interest income, net

(1,477)


(1,608)


(1,626)


(3,085)


(3,272)



Provision for GAAP income taxes

37,426


31,177


25,529


68,603


55,086



Income tax-effect of above non-GAAP adjustments

9,726


8,726


10,444


18,452


20,333



Depreciation and amortization

36,414


34,414


42,710


70,828


81,822



Other (income) expense, net

(341)


132


(1,131)


(209)


(690)















Total Adjusted EBITDA:

$            165,759


$            166,074


$            143,074


$            331,833


$            285,723















Adjusted EBITDA Margin

44%


45%


43%


44%


44%















Non-GAAP net income per share:












    Basic

$                  0.47


$                  0.52


$                  0.38


$                  1.00


$                  0.74



    Diluted

$                  0.46


$                  0.51


$                  0.37


$                  0.98


$                  0.73















Shares used in non-GAAP per share calculations:












    Basic

177,891


177,899


178,547


177,895


178,333



    Diluted

181,388


181,562


181,817


181,475


182,080















 

 

Supplemental Financial Data

(amounts in thousands, except end of period statistics)












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


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


Jun. 30,


Mar. 31,


Jun. 30,


Jun. 30,


Jun. 30,


2013


2013


2012


2013


2012

Stock-based compensation:










Cost of revenues 

$             2,718


$             2,627


$             3,064


$             5,345


$             5,770

Research and development 

3,867


4,369


4,901


8,236


8,831

Sales and marketing 

9,799


9,431


8,814


19,230


16,925

General and administrative 

8,417


6,504


8,842


14,921


15,019

     Total stock-based compensation 

$           24,801


$           22,931


$           25,621


$           47,732


$           46,545











Depreciation and amortization:










Network-related depreciation

$           30,299


$           28,920


$           37,989


$           59,219


$           72,594

Capitalized stock-based compensation amortization

1,978


1,901


1,939


3,879


3,694

Other depreciation and amortization

6,115


5,494


4,721


11,609


9,228

Amortization of acquired intangible assets

5,734


6,060


5,463


11,794


10,230

Total depreciation and amortization

$           44,126


$           42,375


$           50,112


$           86,501


$           95,746











Capital expenditures:










Purchases of property and equipment

$           54,369


$           46,478


$           42,188


$         100,847


$           72,621

Capitalized internal-use software

18,129


16,998


13,351


35,127


26,262

Capital expenditures, excluding stock-based compensation

72,498


63,476


55,539


135,974


98,883

Capitalized stock-based compensation

3,245


2,938


1,835


6,183


4,133

Total capital expenditures*

$           75,743


$           66,414


$           57,374


$         142,157


$         103,016











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

$           35,978


$         (12,806)


$           39,725


$           23,172


$       (211,510)

securities and restricted marketable securities




















End of period statistics:










Number of employees

3,453


3,207


2,654





Number of deployed servers

137,788


132,442


115,008















* See Use of Non-GAAP Financial Measures below for 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 net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin, and capital expenditures, 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 and not reflective of the Company's ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

The non-GAAP financial measures do not replace the presentation of the Company's GAAP financial results and should only be used as a supplement to, not as a substitute for, the Company'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 the Company 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 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 to Akamai's employees and executives, the expense varies with changes in the stock price and market conditions at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types.  This makes the comparison of the Company'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 in order to better understand the performance of the Company's core business performance and to be consistent with the way the investors evaluate its performance and comparison of its operating results to peer companies.
  • Restructuring charges (benefits) – Akamai has incurred restructuring charges and benefits, included in its GAAP financial statements, primarily due to workforce reductions and estimated costs of exiting facility lease commitments.  Akamai excludes these items when evaluating its continuing business performance as such items are not consistently recurring and not do reflect expected future operating expense, nor provide meaningful evaluation of current and past operations of its business.
  • Acquisition related costs (benefits) – Acquisition related costs and benefits include transaction fees, due diligence costs and other one-time direct costs associated with strategic activities. In addition, subsequent adjustments to the Company's initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition related costs and benefits. These amounts are impacted by the timing and size of the acquisitions. Akamai excludes acquisition related costs and benefits to provide a useful comparison of the Company's operating results to prior periods and to its peer companies because such amounts vary significantly based on magnitude of its acquisition transactions.
  • Gain and other activity related to divestiture of a business – Akamai recognized gains associated with the divestiture of its Advertising Decision Solutions business. In addition, subsequent adjustments to the fair value of the convertible note receivable received in the transaction are included as other activity related to the divestiture of its Advertising Decision Solutions business.  Akamai excludes gains and other activity related to divestiture of a business because sales of this nature occur infrequently and are not considered part of the Company's core business operations.
  • Income tax-effect of non-GAAP adjustments – 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 the Company to more properly reflect the income attributable to its core operations.  

Akamai's definitions of its non-GAAP financial measures are outlined below:

Non-GAAP net income – GAAP net income adjusted for the following tax-effected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring charges and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; loss on early extinguishment of debt; gains and losses on legal settlements 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 the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations.

Adjusted EBITDA – GAAP net income excluding the following items: interest; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation ; amortization of capitalized stock-based compensation; restructuring charges and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.

Adjusted EBITDA margin – Adjusted EBITDA as a percentage of revenues.

Capital expenditures (Capex) – Purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation.

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 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; 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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