2014

Akamai Reports Third Quarter 2013 Financial Results

CAMBRIDGE, Mass., Oct. 23, 2013 /PRNewswire/ -- 

  • Third quarter revenue of $396 million, up 15% year-over-year, or up 18% year-over-year adjusted for ADS divestiture
  • Third quarter GAAP net income of $80 million, up 65% year-over-year, or $0.44 per diluted share, up 63% year-over-year (includes $8 million, or $0.04 per diluted share, depreciation benefit and $17 million, or $0.09 per diluted share, tax benefit)
  • Third quarter non-GAAP net income* of $90 million, up 31% year-over-year, or $0.50 per diluted share, up 32% year-over-year (includes $8 million, or $0.04 per diluted share, depreciation benefit and $5 million, or $0.03 per diluted share, tax benefit)
  • Board of Directors authorizes new $750 million share repurchase program

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading provider of cloud services for delivering, optimizing and securing online content and business applications, today reported financial results for the third quarter ended September 30, 2013.  Revenue for the third quarter of 2013 was $396 million, a 15% increase over third quarter 2012 revenue of $345 million, or up 18% adjusted for the Advertising Decision Solutions (ADS) divestiture.

(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 2013 was $80 million, or $0.44 per diluted share, a 29% increase from the prior quarter's GAAP net income of $62 million, or $0.34 per diluted share, and a 65% increase over third quarter 2012 GAAP net income of $48 million, or $0.27 per diluted share.

The Company generated non-GAAP net income* of $90 million, or $0.50 per diluted share, in the third quarter of 2013, a 7% increase from the prior quarter's non-GAAP net income of $84 million, or $0.46 per diluted share, and a 31% increase over third quarter 2012 non-GAAP net income of $69 million, or $0.38 per diluted share. 

GAAP and non-GAAP net income results for the third quarter of 2013 include an $8 million, or $0.04 per diluted share, benefit from the previously-announced change in depreciation methodology effective on January 1, 2013. In addition, GAAP and non-GAAP net income results for the third quarter of 2013 include a tax benefit associated with the Company's retroactive adoption of a tax deduction related to its software development activities. The tax benefit due to this deduction was $17 million, or $0.09 per diluted share, included in GAAP net income, and $5 million, or $0.03 per diluted share included in non-GAAP net income.

"Akamai's strong third quarter and year-to-date financial performance highlights our ability to deliver innovative solutions to leading enterprises globally," said Tom Leighton, CEO of Akamai.  "We intend to continue to invest in the business, while also effectively managing the cost and efficiency of our network, to help our customers capitalize on the opportunities enabled by the hyperconnected world."

Adjusted EBITDA* for the third quarter of 2013 was $173 million, an increase from the prior quarter's Adjusted EBITDA of $166 million, and up from $157 million in the third quarter of 2012.  Adjusted EBITDA margin* for the third quarter of 2013 was 44%, consistent with the prior quarter and down a point from the same period last year. 

Cash from operations for the third quarter of 2013 was $158 million, or 40% of revenue.  At the end of the third quarter of 2013, the Company had $1.2 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 21% and 28%, respectively, of revenue for the third quarter of 2013.

Share Repurchase Program
The Company also announced today that its Board of Directors has authorized a new $750 million share repurchase program, effective from October 16, 2013 through December 31, 2016.  The Company's goal for this program is to offset the dilution created by its employee equity compensation programs and provide the flexibility to increase capital distributions to its shareholders as business and market conditions warrant.

The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Repurchases will be executed in the open market subject to Rule 10b-18, and may also be made under a Rule 10b5-1 plan, which would permit the Company to repurchase shares when the Company might otherwise be precluded from doing so under insider trading laws. Other structured repurchase programs may be considered from time to time.  The Company may choose to suspend, expand or discontinue the repurchase program at any time.

During the third quarter of 2013, under the share repurchase program replaced by the one announced today, the Company spent approximately $30 million to repurchase 0.7 million shares of its common stock, at an average price of $45.32 per share. During the first three quarters of 2013, the Company spent approximately $112 million to repurchase 2.8 million shares of its common stock, at an average price of $39.65 per share.

The Company had approximately 179 million shares of common stock outstanding as of September 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 1-877-415-3184 (or 1-857-244-7327 for international calls) and using passcode No. 51318276.  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. 10768137.

About Akamai
Akamai® is the leading provider of cloud services for delivering, optimizing and securing online content and business applications.  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.

 

Contacts:

Jeff Young


Tom Barth

Media Relations


Investor Relations

Akamai Technologies


Akamai Technologies

617-444-3913


617-274-7130

jyoung@akamai.com


tbarth@akamai.com

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)

September
30, 2013


December 31,
2012

ASSETS




Cash and cash equivalents

$

235,015



$

201,989


Marketable securities

331,300



235,592


Accounts receivable, net

256,453



218,777


Prepaid expenses and other current assets

67,452



51,604


Deferred income tax assets

20,422



20,422


Current assets

910,642



728,384


Property and equipment, net

424,605



345,091


Marketable securities

620,204



657,659


Goodwill and acquired intangible assets, net

831,074



808,255


Deferred income tax assets

20,672



21,427


Other assets

77,928



39,811


Total assets

$

2,885,125



$

2,600,627


LIABILITIES AND STOCKHOLDERS' EQUITY




Accounts payable and accrued expenses

$

220,600



$

176,378


Other current liabilities

64,824



26,566


Current liabilities

285,424



202,944


Other liabilities

56,571



51,929


Total liabilities

341,995



254,873


Stockholders' equity

2,543,130



2,345,754


Total liabilities and stockholders' equity

$

2,885,125



$

2,600,627


 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended


Nine Months Ended

(in thousands, except per share data)

September 

30, 2013


June 30,
2013


September 

30, 2012


September 

30, 2013


September 

30, 2012

Revenue

$

395,790



$

378,106



$

345,321



$

1,141,942



$

996,075


Costs and operating expenses:










Cost of revenue (1) (2)

132,039



124,705



134,221



377,136



390,406


Research and development (1)

24,857



20,597



19,351



67,359



54,373


Sales and marketing (1)

67,811



67,825



55,206



198,326



160,681


General and administrative (1) (2)

66,634



61,351



51,003



183,365



156,241


Amortization of acquired intangible assets

4,859



5,734



5,381



16,653



15,611


Restructuring charges

69



391





891



14


Total costs and operating expenses

296,269



280,603



265,162



843,730



777,326


Income from operations

99,521



97,503



80,159



298,212



218,749


Interest income, net

1,458



1,477



1,593



4,543



4,865


Other (expense) income, net

(305)



341



(241)



(96)



449


Income before provision for income taxes

100,674



99,321



81,511



302,659



224,063


Provision for income taxes

20,918



37,426



33,280



89,521



88,366


Net income

$

79,756



$

61,895



$

48,231



$

213,138



$

135,697












Net income per share:










Basic

$

0.45



$

0.35



$

0.27



$

1.20



$

0.76


Diluted

$

0.44



$

0.34



$

0.27



$

1.17



$

0.75












Shares used in per share calculations:










Basic

178,235



177,891



177,455



178,008



178,040


Diluted

181,922



181,388



181,053



181,623



181,738



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

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

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Three Months Ended


Nine Months Ended

(in thousands)

September 

30, 2013


June 30,
2013


September 

30, 2012


September 

30, 2013


September 

30, 2012

Cash flows from operating activities:










Net income

$

79,756



$

61,895



$

48,231



$

213,138



$

135,697


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










Depreciation and amortization

47,954



44,126



53,457



134,455



149,203


Stock-based compensation

24,479



24,801



22,635



72,211



69,180


Provision for doubtful accounts

(310)



879



(345)



889



(61)


Excess tax benefits from stock-based compensation

(8,530)



(5,503)



(2,540)



(18,152)



(17,589)


Provision for deferred income taxes





826





826


(Gain) loss on disposal of property and equipment

(324)



380



142



(15)



(62)


Gain and other activity related to divestiture of a business

1,093



(1,093)





(1,188)




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










Accounts receivable

(16,118)



(6,848)



(27,974)



(51,321)



(21,587)


Prepaid expenses and other current assets

7,190



(4,969)



2,125



(11,739)



9,790


Accounts payable and accrued expenses

20,035



28,223



39,810



43,730



49,149


Deferred revenue

4,379



(1,613)



1,401



10,991



5,542


Other current liabilities

255



(112)



(28)



32



(2,897)


Other non-current assets and liabilities

(1,722)



689



(897)



(3,328)



(104)


Net cash provided by operating activities

158,137



140,855



136,843



389,703



377,087


Cash flows from investing activities:










Cash (paid) received for acquired businesses, net of cash acquired

(27,500)



80



(14,392)



(27,420)



(306,030)


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

(60,638)



(76,311)



(60,626)



(195,265)



(158,817)


Purchases of short- and long-term marketable securities

(93,681)



(164,525)



(137,809)



(403,556)



(554,303)


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

57,509



165,513



98,567



344,702



350,152


Proceeds from the sale of property and equipment

335



166





761



12


Other non-currents assets and liabilities

(2,959)



(361)



(29)



(3,320)



979


Net cash used in investing activities

(126,934)



(75,438)



(114,289)



(284,098)



(668,007)


Cash flows from financing activities:










Proceeds from the issuance of common stock under stock plans

26,157



17,897



11,080



54,418



33,760


Excess tax benefits from stock-based compensation

8,530



5,503



2,540



18,152



17,589


Employee taxes paid related to net share settlement of stock-based awards

(7,434)



(3,810)



(2,370)



(28,559)



(26,566)


Repurchases of common stock

(29,626)



(42,504)



(36,523)



(112,408)



(111,649)


Net cash used in financing activities

(2,373)



(22,914)



(25,273)



(68,397)



(86,866)


Effects of exchange rate changes on cash and cash equivalents

1,319



(2,912)



2,373



(4,182)



1,239


Net increase (decrease) in cash and cash equivalents

30,149



39,591



(346)



33,026



(376,547)


Cash and cash equivalents at beginning of period

204,866



165,275



182,996



201,989



559,197


Cash and cash equivalents at end of period

$

235,015



$

204,866



$

182,650



$

235,015



$

182,650



Note: Revisions have been made to all prior periods presented to reclassify immaterial amounts among operating, investing and financing cash flow categories.

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND ADJUSTED EBITDA



Three Months Ended


Nine Months Ended

(in thousands, except per share data)

September 

30, 2013


June 30,
2013


September 

30, 2012


September 

30, 2013


September 

30, 2012

Net income

$

79,756



$

61,895



$

48,231



$

213,138



$

135,697


Amortization of acquired intangible assets

4,859



5,734



5,381



16,653



15,611


Stock-based compensation

24,479



24,801



22,635



72,211



69,180


Amortization of capitalized stock-based compensation

2,224



1,978



2,025



6,103



5,719


Acquisition related costs

219



31



279



587



5,107


Restructuring charges

69



391





891



14


Gain and other activity related to divestiture of a business

1,093



(1,093)





(1,188)




Income tax-effect of above non-GAAP adjustments

(22,439)



(9,726)



(9,674)



(40,891)



(30,007)


Non-GAAP net income

90,260



84,011



68,877



267,504



201,321












Interest income, net

(1,458)



(1,477)



(1,593)



(4,543)



(4,865)


Provision for GAAP income taxes

20,918



37,426



33,280



89,521



88,366


Income tax-effect of above non-GAAP adjustments

22,439



9,726



9,674



40,891



30,007


Depreciation and amortization

40,871



36,414



46,051



111,699



127,873


Other expense (income), net

305



(341)



241



96



(449)


Adjusted EBITDA

$

173,335



$

165,759



$

156,530



$

505,168



$

442,253












Adjusted EBITDA margin

44

%


44

%


45

%


44

%


44

%











Non-GAAP net income per share:










Basic

$

0.51



$

0.47



$

0.39



$

1.50



$

1.13


Diluted

$

0.50



$

0.46



$

0.38



$

1.47



$

1.11












Shares used in non-GAAP per share calculations:










Basic

178,235



177,891



177,455



178,008



178,040


Diluted

181,922



181,388



181,053



181,623



181,738


 

RECONCILIATION OF REVENUE TO REVENUE ADJUSTED FOR ADS DIVESTITURE



Three Months Ended


Nine Months Ended

(in thousands)

 

September 

30, 2013


June 30,

 2013


September 

30, 2012


September 

30, 2013


September 

30, 2012

Revenue

$

395,790



$

378,106



$

345,321



$

1,141,942



$

996,075


Less: ADS revenue





(10,045)



(2,747)



(30,621)


Revenue, adjusted for ADS divestiture

$

395,790



$

378,106



$

335,276



$

1,139,195



$

965,454


 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL FINANCIAL DATA



Three Months Ended


Nine Months Ended

(in thousands, except end of period statistics)

September 

30, 2013


June 30,
2013


September 

30, 2012


September 

30, 2013


September 

30, 2012

Stock-based compensation:










Cost of revenue

$

2,885



$

2,718



$

2,834



$

8,230



$

8,604


Research and development

4,583



3,867



4,427



12,819



13,258


Sales and marketing

10,048



9,799



8,746



29,278



25,671


General and administrative

6,963



8,417



6,628



21,884



21,647


Total stock-based compensation

$

24,479



$

24,801



$

22,635



$

72,211



$

69,180












Depreciation and amortization:










Network-related depreciation

$

33,909



$

30,299



$

41,022



$

93,128



$

113,616


Other depreciation and amortization

6,962



6,115



5,029



18,571



14,257


Depreciation of property and equipment

40,871



36,414



46,051



111,699



127,873


Capitalized stock-based compensation amortization

2,224



1,978



2,025



6,103



5,719


Amortization of acquired intangible assets

4,859



5,734



5,381



16,653



15,611


Total depreciation and amortization

$

47,954



$

44,126



$

53,457



$

134,455



$

149,203












Capital expenditures:










Purchases of property and equipment

$

40,594



$

58,182



$

46,967



$

140,094



$

118,896


Capitalized internal-use software

20,044



18,129



13,659



55,171



39,921


Capital expenditures, excluding stock-based compensation

60,638



76,311



60,626



195,265



158,817


Capitalized stock-based compensation

3,069



3,245



2,561



9,252



6,694


Total capital expenditures*

$

63,707



$

79,556



$

63,187



$

204,517



$

165,511












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

$

68,107



$

35,978



$

39,889



$

91,279



$

(171,621)












End of period statistics:










Number of employees

3,769



3,453



2,884






Number of deployed servers

141,353



137,788



119,370



















* See Use of Non-GAAP Financial Measures below for a definition

Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate Akamai's financial performance.  These non-GAAP financial measures are non-GAAP 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 used by 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 Akamai's current financial results to previous and future periods difficult to interpret.  Therefore, Akamai believes it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation in order to better understand the performance of Akamai'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 – Akamai has incurred restructuring charges, 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, do not reflect expected future operating expense, nor provide meaningful insight into the current and past operations of its business.
  • Acquisition related costs – Acquisition related costs 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. 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 a gain and other activity associated with 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; acquisition related costs; certain gains and losses on investments; gains 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; acquisition related costs; 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 stated as a percentage of revenue.

Revenue, adjusted for ADS divestiture – Revenue excluding the impact of Akamai's Advertising Decision Solutions (ADS) divestiture.

Capital expenditures – 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 plans and opportunities. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; 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.

SOURCE Akamai Technologies, Inc.



RELATED LINKS
http://www.akamai.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.