Akamai Reports Third Quarter 2011 Financial Results

CAMBRIDGE, Mass., Oct. 26, 2011 /PRNewswire/ --

  • Revenue of $281.9 million, up 11 percent year-over-year
  • GAAP net income of $42.3 million, or $0.23 per diluted share, up 6 percent year-over-year
  • Normalized net income* of $63.4 million, or $0.34 per diluted share, down 1 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 third quarter ended September 30, 2011.  Revenue for third quarter 2011 was $281.9 million, an 11 percent increase over third quarter 2010 revenue of $253.6 million, and a 2 percent increase over second quarter 2011 revenue of $277.0 million

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

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the third quarter of 2011 was $42.3 million, or $0.23 per diluted share, a 6 percent increase from third quarter 2010 GAAP net income of $39.7 million, or $0.21 per diluted share, and a 12 percent decrease from second quarter 2011 GAAP net income of $47.9 million, or $0.25 per diluted share. 

The Company generated normalized net income* of $63.4 million, or $0.34 per diluted share, in the third quarter of 2011, down 1 percent from third quarter 2010 normalized net income of $64.2 million, or $0.34 per diluted share, and down 4 percent from second quarter 2011 normalized net income of $65.8 million, or $0.35 per diluted share.  (*See Use of Non-GAAP Financial Measures below for definitions.) 

"We are pleased with Akamai's performance in the third quarter, as more customers adopted the Akamai Platform for their online businesses," said Paul Sagan, president and CEO of Akamai.  "We have continued to develop the platform of choice for businesses seeking to capitalize on opportunities in mobile, cloud, security, and video, as well as manage the risks of the hyperconnected world."  

Adjusted EBITDA* for the third quarter of 2011 was $122.4 million, up 7 percent from $114.1 million in the third quarter of 2010 and down 3 percent from $126.2 million in the prior quarter.  Adjusted EBITDA margin* for the third quarter of 2011 was 43 percent, down 2 points from the same period last year.  (*See Use of Non-GAAP Financial Measures below for definitions.) 

Cash from operations was $116.3 million in the third quarter of 2011, or 41 percent of revenue.  At the end of the third quarter of 2011, the Company had approximately $1.2 billion in cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 19 percent and 29 percent, respectively, of revenue for the third quarter 2011.

Akamai also announced today that David Kenny resigned as president and director of the Company.  

"As a director, David was a strong advocate for innovation, mobile capabilities and global expansion.  As president, he helped to re-align the organization to deliver faster on those critical strategies," Mr. Sagan said. "Thanks in part to David's leadership, we have established a strong path for growth that we intend to follow for many years to come."

Mr. Kenny said, "It has been a privilege to serve Akamai as a director and to be a part of the management team to help Paul strengthen the Company's foundation for future growth.  While I now want to return to my first passion of pursuing emerging opportunities on the consumer Internet, I will miss the great people at Akamai and their relentless pursuit of excellence in everything they do. I believe Akamai is well-positioned to capture the opportunities ahead in the enterprise marketplace."

Mr. Kenny, who will serve as a consultant to the Company on business strategy, joined Akamai as president in September 2010 after previously serving as a member of the Company's Board of Directors for three years.  

Akamai also announced today that the Board re-appointed Mr. Sagan as president, a title that he will hold in addition to CEO and director.  

Share Repurchase Program

During the third quarter of 2011, under a share repurchase program that was approved by the Board of Directors in April 2011 and expanded in August 2011, the Company repurchased approximately 6.8 million shares of its common stock for $155.1 million, an average price of $22.75 per share.  As of September 30, 2011, the Company had repurchased 15.2 million shares of its common stock for $406 million, at an average price of $26.82 per share, since the commencement of the current repurchase program.

As of September 30, 2011, the Company had approximately 179.5 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 1-800-573-4754 (or 1-617-224-4325 for international calls) and using passcode No. 35896882.  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. 90643566.

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 and follow @Akamai on Twitter.

Financial Statements

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)







Sept. 30, 2011


Dec. 31, 2010


Assets





Cash and cash equivalents

$           355,599


$           231,866


Marketable securities

331,916


374,733


Restricted marketable securities

51


272


Accounts receivable, net

182,665


175,366


Deferred income tax assets, current portion

7,163


28,201


Prepaid expenses and other current assets

47,085


48,029


Current assets

924,479


858,467


Marketable securities

503,384


636,486


Restricted marketable securities

45


45


Property and equipment, net

285,476


255,929


Goodwill and other intangible assets, net

502,616


515,370


Other assets

9,210


11,153


Deferred income tax assets, net

76,747


75,226


Total assets

$        2,301,957


$        2,352,676







Liabilities and stockholders' equity





Accounts payable and accrued expenses

$           115,614


$           120,046


Other current liabilities

23,264


25,105


Current liabilities

138,878


145,151


Other liabilities

41,068


29,920


Total liabilities

179,946


175,071


Stockholders' equity

2,122,011


2,177,605


Total liabilities and stockholders' equity

$        2,301,957


$        2,352,676













Condensed Consolidated Statements of Operations




(amounts in thousands, except per share data)




(unaudited)

















Three Months Ended


Nine Months Ended



Sept. 30,


June 30,


Sept. 30,


Sept. 30,


Sept. 30,



2011


2011


2010


2011


2010













Revenues

$           281,856


$           276,989


$           253,551


$           834,798


$           738,898













Costs and operating expenses:  











Cost of revenues * +

93,284


89,647


77,812


271,999


217,126


Research and development *

13,542


11,006


14,235


37,142


40,991


Sales and marketing *

54,520


52,837


55,603


160,722


160,474


General and administrative * +

50,834


45,975


42,729


140,710


125,986


Amortization of other intangible assets

4,185


4,292


4,130


12,754


12,390


Restructuring charge

158


-


-


158


-


Total costs and operating expenses

216,523


203,757


194,509


623,485


556,967


Operating income

65,333


73,232


59,042


211,313


181,931













Interest income, net

(3,002)


(3,096)


(2,636)


(9,058)


(8,069)


Loss on early extinguishment of debt

-


-


-


-


294


Other loss, net

188


107


1,366


1,330


1,319


Income before provision for income taxes

68,147


76,221


60,312


219,041


188,387


Provision for income taxes

25,862


28,300


20,603


78,218


69,677


Net income

$             42,285


$             47,921


$             39,709


$           140,823


$           118,710













Net income per share:











   Basic

$                 0.23


$                 0.26


$                 0.22


$                 0.76


$                 0.68


   Diluted

$                 0.23


$                 0.25


$                 0.21


$                 0.74


$                 0.63













Shares used in per share calculations:











   Basic

183,085


186,612


181,457


185,515


175,292


   Diluted

185,704


190,179


191,271


189,089


190,254













* 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


Nine Months Ended







Sept. 30,


June 30,



Sept. 30,


Sept. 30,


Sept. 30,







2011


2011



2010


2011


2010


















Cash flows from operating activities:













Net income

$             42,285


$             47,921



$                 39,709


$           140,823


$           118,710



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














Depreciation and amortization of intangible assets and deferred financing costs

41,761


41,333



36,542


124,228


104,570




Stock-based compensation

15,141


11,612



18,589


42,465


57,973




Provision for deferred income taxes, net

20,906


-



22,287


20,906


66,898




Excess tax benefits from stock-based compensation

(610)


(1,838)



(9,456)


(11,460)


(22,379)




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

(176)


(113)



22


(172)


(223)




Provision for doubtful accounts

782


132



662


1,236


2,107




Non-cash portion of loss on early extinguishment of debt

-


-



-


-


294




Changes in operating assets and liabilities:















Accounts receivable

(8,277)


(7,101)



10,064


(7,821)


(6,342)





Prepaid expenses and other current assets

(919)


6,917



(1,109)


(78)


(41,393)





Accounts payable, accrued expenses and other current liabilities

445


2,678



8,695


(5,268)


20,573





Accrued restructuring

(148)


(32)



(74)


(180)


(167)





Deferred revenue

796


1,271



(5,807)


(1,386)


(7,126)





Other noncurrent assets and liabilities  

4,303


9,068



(2,161)


13,355


(1,399)



Net cash provided by operating activities

116,289


111,848



117,963


316,648


292,096


















Cash flows from investing activities:














Cash paid for acquired business, net of cash received

-


(375)



(200)


(550)


(12,210)




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

(47,317)


(42,740)



(42,058)


(136,292)


(143,345)




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

388,983


263,870



284,460


900,120


789,182




Purchases of short- and long-term marketable securities

(149,318)


(302,520)



(285,408)


(727,453)


(900,087)




Proceeds from the sale of property and equipment

47


63



14


135


52




Increase in other investments

-


-



-


-


(500)




Decrease in restricted investments held for security deposits

-


-



-


221


8



Net cash provided by (used in) in investing activities

192,395


(81,702)



(43,192)


36,181


(266,900)


















Cash flows from financing activities:














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

1,183


8,163



10,953


13,305


31,946




Excess tax benefits from stock-based compensation

610


1,838



9,456


11,460


22,379




Taxes paid related to net share settlement of equity awards

(2,173)


(3,507)



-


(5,680)


-




Repurchase of common stock

(155,125)


(48,935)



(22,505)


(247,738)


(65,126)



Net cash used in financing activities

(155,505)


(42,441)



(2,096)


(228,653)


(10,801)



















Effects of exchange rate changes on cash and cash equivalents

(3,209)


750



4,386


(443)


1,867



















Net increase (decrease) in cash and cash equivalents

149,970


(11,545)



77,061


123,733


16,262



Cash and cash equivalents, beginning of period

205,629


217,174



120,506


231,866


181,305



Cash and cash equivalents, end of period

$           355,599


$           205,629



$               197,567


$           355,599


$           197,567





















Three Months Ended


Nine Months Ended


Sept. 30,


June 30,


Sept. 30,


Sept. 30,



Sept. 30,


2011


2011


2010


2011



2010

Supplemental financial data (in thousands):






















Stock-based compensation:











Cost of revenues

$                  634


$                  590


$                  702


$               1,779



$               2,110

Research and development

2,629


2,124


3,687


7,515



11,222

Sales and marketing

6,951


5,315


8,862


19,112



26,662

General and administrative

4,927


3,583


5,338


14,059



17,979

    Total stock-based compensation

$             15,141


$             11,612


$             18,589


$             42,465



$             57,973












Depreciation and amortization:











Network-related depreciation

$             31,662


$             31,245


$             26,504


$             93,594



$             74,264

Capitalized stock-based compensation amortization

1,592


1,938


1,817


5,595



5,522

Other depreciation and amortization

4,322


3,858


4,028


12,285



11,937

Amortization of other intangible assets

4,185


4,292


4,130


12,754



12,390

Total depreciation and amortization

$             41,761


$             41,333


$             36,479


$           124,228



$           104,113












Capital expenditures:











Purchases of property and equipment

$             37,244


$             32,925


$             33,145


$           105,769



$           119,591

Capitalized internal-use software

10,073


9,815


8,913


30,523



23,754

Capitalized stock-based compensation

1,941


1,641


1,918


5,406



5,597

Total capital expenditures

$             49,258


$             44,381


$             43,976


$           141,698



$           148,942












Net (decrease) increase in cash, cash equivalents, marketable securities and restricted marketable securities

$           (94,478)


$             28,236


$             77,930


$           (52,407)



$           128,721












End of period statistics:











Number of employees

2,356


2,244


2,108






Number of deployed servers

100,770


95,811


77,885



















*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 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 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 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


Nine Months Ended



Sept. 30


June 30,


Sept. 30,


Sept. 30


Sept. 30



2011


2011


2010


2011


2010
























Net income

$             42,285


$             47,921


$             39,709


$           140,823


$           118,710













Amortization of other intangible assets

4,185


4,292


4,130


12,754


12,390


Stock-based compensation

15,141


11,612


18,589


42,465


57,973


Amortization of capitalized stock-based compensation

1,592


1,938


1,817


5,595


5,522


Loss on early extinguishment of debt

-


-


-


-


294


Acquisition related costs (benefits)

-


-


-


(440)


345


Restructuring charge

158


-


-


158


-













Total normalized net income:

63,361


65,763


64,245


201,355


195,234













Interest income, net

(3,002)


(3,096)


(2,636)


(9,058)


(8,069)


Provision for income taxes

25,862


28,300


20,603


78,218


69,677


Depreciation and amortization

35,984


35,103


30,532


105,879


86,201


Other loss, net

188


107


1,366


1,330


1,319













Total Adjusted EBITDA:

$           122,393


$           126,177


$           114,110


$           377,724


$           344,362













Normalized net income per share:











   Basic

$                 0.35


$                 0.35


$                 0.35


$                 1.09


$                 1.11


   Diluted

$                 0.34


$                 0.35


$                 0.34


$                 1.06


$                 1.03













Shares used in normalized per share calculations:











   Basic

183,085


186,612


181,457


185,515


175,292


   Diluted

185,704


190,179


191,271


189,089


190,254




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 at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues, 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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