Akamai Reports Second Quarter 2015 Financial Results

Jul 28, 2015, 16:01 ET from Akamai Technologies, Inc.

CAMBRIDGE, Mass., July 28, 2015 /PRNewswire/ --

  • Revenue of $541 million, up 14% year-over-year and up 18% adjusted for foreign exchange*
  • GAAP EPS of $0.37 per diluted share, down 8% year-over-year and down 2% adjusted for foreign exchange*
  • Non-GAAP EPS of $0.57 per diluted share, down 2% year-over-year and up 3% adjusted for foreign exchange*

Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader in Content Delivery Network (CDN) services, today reported financial results for the second quarter ended June 30, 2015.

"Akamai delivered a solid second quarter with strong revenue growth across every geography and solution category, with particularly strong growth in our Cloud Security Solutions," said Dr. Tom Leighton, Chief Executive Officer.  "We are continuing to make major investments in innovation and the expansion of our platform to develop new products and to accommodate the potential for substantially increased OTT traffic in 2016."

Akamai delivered the following results for the second quarter ended June 30, 2015:

Revenue: Revenue was $541 million, a 14% increase over second quarter 2014 revenue of $476 million and an 18% increase when adjusted for foreign exchange*.

Revenue by Solution Category:

  • Media Delivery Solutions revenue was $244 million, up 12% year-over-year and up 17% when adjusted for foreign exchange*
  • Performance and Security Solutions revenue was $256 million, up 15% year-over-year and up 19% when adjusted for foreign exchange*, which includes Cloud Security Solutions revenue of $61 million, up 39% year-over-year and up 44% when adjusted for foreign exchange*
  • Service and Support Solutions revenue was $41 million, up 14% year-over-year and up 18% when adjusted for foreign exchange*

Revenue by Geography:

  • U.S. revenue was $399 million, a 16% increase over second quarter 2014
  • International revenue was $142 million, a 7% increase over second quarter 2014 and a 22% increase when adjusted for foreign exchange*

Income from operations: GAAP income from operations was $106 million, a decrease over second quarter 2014 GAAP income from operations of $112 million. GAAP operating margin for the second quarter of 2015 was 20%, down four percentage points from the same period last year.

Non-GAAP income from operations* was $150 million, a decrease from $156 million in the second quarter 2014. Non-GAAP operating margin* for the second quarter of 2015 was 28%, down five percentage points from the same period last year.

Net income: GAAP net income was $67 million, an 8% decrease over second quarter 2014 GAAP net income of $73 million. Non-GAAP net income* was $102 million, a 3% decrease over second quarter 2014 non-GAAP net income of $106 million.

EPS: GAAP EPS was $0.37 per diluted share, an 8% decrease over second quarter 2014 GAAP EPS of $0.40, and down 2% when adjusted for foreign exchange*.

Non-GAAP EPS was $0.57 per diluted share, a 2% decrease over second quarter 2014 non-GAAP EPS of $0.58 and up 3% when adjusted for foreign exchange*.

Adjusted EBITDA*: Adjusted EBITDA was $214 million, up from $204 million in the second quarter of 2014. Adjusted EBITDA margin* for the second quarter of 2015 was 40%, down three percentage points from the same period last year.

Other second quarter 2015 results included:

  • Cash from operations was $264 million, or 49% of revenue
  • Cash, cash equivalents and marketable securities as of June 30, 2015 was $1.5 billion
  • The Company spent $63 million to repurchase 0.9 million shares of its common stock at an average price of $74.12 per share
  • The Company had approximately 179 million shares of common stock outstanding as of June 30, 2015

*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 1-877-703-6102 (or 1-857-244-7301 for international calls) and using passcode No. 86468839. 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. 51036774.

About Akamai

As the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere. To learn how Akamai solutions and its team of Internet experts are helping businesses move faster forward, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 30,  2015

December 31, 2014

ASSETS

Cash and cash equivalents

$

257,448

$

238,650

Marketable securities

386,055

519,642

Accounts receivable, net

342,930

329,578

Prepaid expenses and other current assets

119,365

128,981

Deferred income tax assets

45,678

45,704

Current assets

1,151,476

1,262,555

Property and equipment, net

704,571

601,591

Marketable securities

881,452

869,992

Goodwill and acquired intangible assets, net

1,301,677

1,183,706

Deferred income tax assets

1,890

1,955

Other assets

90,039

81,747

Total assets

$

4,131,105

$

4,001,546

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses

$

290,684

$

282,098

Other current liabilities

57,558

51,913

Current liabilities

348,242

334,011

Deferred income tax liabilities

38,833

39,299

Convertible senior notes

614,484

604,851

Other liabilities

84,234

78,050

Total liabilities

1,085,793

1,056,211

Stockholders' equity

3,045,312

2,945,335

Total liabilities and stockholders' equity

$

4,131,105

$

4,001,546

 

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Six Months Ended

(in thousands, except per share data)

June 30,  2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Revenue

$

540,723

$

526,536

$

476,035

$

1,067,259

$

929,537

Costs and operating expenses:

Cost of revenue (1) (2)

179,910

169,294

149,318

349,204

288,930

Research and development (1)

36,693

35,828

32,052

72,521

60,286

Sales and marketing (1)

111,501

103,479

91,462

214,980

172,527

General and administrative (1) (2)

99,152

89,592

81,880

188,744

158,041

Amortization of acquired intangible assets

6,752

6,780

8,403

13,532

15,251

Restructuring charges

455

42

569

497

1,304

Total costs and operating expenses

434,463

405,015

363,684

839,478

696,339

Income from operations

106,260

121,521

112,351

227,781

233,198

Interest income

2,541

3,001

1,740

5,542

3,379

Interest expense

(4,678)

(4,576)

(4,516)

(9,254)

(6,457)

Other expense, net

(1,605)

(301)

(899)

(1,906)

(1,780)

Income before provision for income taxes

102,518

119,645

108,676

222,163

228,340

Provision for income taxes

35,318

41,899

35,790

77,217

82,654

Net income

$

67,200

$

77,746

$

72,886

$

144,946

$

145,686

Net income per share:

Basic

$

0.38

$

0.44

$

0.41

$

0.81

$

0.82

Diluted

$

0.37

$

0.43

$

0.40

$

0.80

$

0.80

Shares used in per share calculations:

Basic

178,682

178,545

178,081

178,614

178,393

Diluted

180,738

180,825

180,841

180,782

181,439

(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

Six Months Ended

(in thousands)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Cash flows from operating activities:

Net income

$

67,200

$

77,746

$

72,886

$

144,946

$

145,686

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

Depreciation and amortization

73,989

70,460

58,712

144,449

112,228

Stock-based compensation

32,251

29,669

31,678

61,920

56,792

Excess tax benefits from stock-based compensation

(9,609)

(13,128)

(4,483)

(22,737)

(19,661)

(Benefit) provision for deferred income taxes

(24,580)

8,305

20,180

(16,275)

21,840

Amortization of debt discount and issuance costs

4,677

4,576

4,516

9,253

6,457

Other non-cash reconciling items, net

703

443

893

1,146

1,195

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

Accounts receivable

18,260

(32,552)

(23,117)

(14,292)

(41,254)

Prepaid expenses and other current assets

13,839

(1,817)

7,963

12,022

(12,998)

Accounts payable and accrued expenses

84,376

(52,703)

43,970

31,673

21,459

Deferred revenue

76

6,947

(409)

7,023

4,750

Other current liabilities

157

42

132

199

1,419

Other non-current assets and liabilities

2,684

1,741

(12,697)

4,425

(8,666)

Net cash provided by operating activities

264,023

99,729

200,224

363,752

289,247

Cash flows from investing activities:

Cash paid for acquired businesses, net of cash acquired

(106,883)

(16,062)

115

(122,945)

(386,532)

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

(96,013)

(137,069)

(70,519)

(233,082)

(154,525)

Purchases of short- and long-term marketable securities

(308,685)

(97,304)

(204,648)

(405,989)

(863,591)

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

222,030

307,655

138,152

529,685

538,122

Other non-current assets and liabilities

(1,827)

(82)

2,860

(1,909)

2,028

Net cash (used in) provided by investing activities

(291,378)

57,138

(134,040)

(234,240)

(864,498)

 

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

Three Months Ended

Six Months Ended

(in thousands)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Cash flows from financing activities:

Proceeds from the issuance of convertible senior notes, net

(868)

678,735

Proceeds from the issuance of warrants

77,970

Payment for bond hedge

(101,292)

Repayment of acquired debt and capital leases

(17,862)

Proceeds from the issuance of common stock under stock plans

12,072

24,440

13,670

36,512

57,999

Excess tax benefits from stock-based compensation

9,609

13,128

4,483

22,737

19,661

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

(8,253)

(31,101)

(7,977)

(39,354)

(34,248)

Repurchases of common stock

(63,388)

(62,680)

(71,344)

(126,068)

(187,491)

Other non-current assets and liabilities

(1,250)

(1,250)

Net cash (used in) provided by financing activities

(51,210)

(56,213)

(62,036)

(107,423)

493,472

Effects of exchange rate changes on cash and cash equivalents

3,456

(6,747)

1,291

(3,291)

2,053

Net (decrease) increase in cash and cash equivalents

(75,109)

93,907

5,439

18,798

(79,726)

Cash and cash equivalents at beginning of period

332,557

238,650

248,726

238,650

333,891

Cash and cash equivalents at end of period

$

257,448

$

332,557

$

254,165

$

257,448

$

254,165

 

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND ADJUSTED EBITDA

Three Months Ended

Six Months Ended

(in thousands, except per share data)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Income from operations

$

106,260

$

121,521

$

112,351

$

227,781

$

233,198

GAAP operating margin

20

%

23

%

24

%

Amortization of acquired intangible assets

6,752

6,780

8,403

13,532

15,251

Stock-based compensation

32,251

29,669

31,678

61,920

56,792

Amortization of capitalized stock-based compensation and capitalized interest expense

3,636

3,108

2,034

6,744

3,962

Other operating expenses(1)

1,439

1,709

1,361

3,148

5,488

Operating adjustments

44,078

41,266

43,476

85,344

81,493

Non-GAAP income from operations

$

150,338

$

162,787

$

155,827

$

313,125

$

314,691

Non-GAAP operating margin

28

%

31

%

33

%

29

%

34

%

Net income

$

67,200

$

77,746

$

72,886

$

144,946

$

145,686

Operating adjustments (from above)

44,078

41,266

43,476

85,344

81,493

Amortization of debt discount and issuance costs

4,678

4,576

4,516

9,254

6,457

Loss on investments

25

393

25

393

Income tax-effect of above non-GAAP adjustments and certain discrete tax items

(13,788)

(12,437)

(15,721)

(26,225)

(23,562)

Non-GAAP net income

102,168

111,176

105,550

213,344

210,467

Depreciation and amortization

63,601

60,572

48,275

124,173

93,015

Interest income

(2,541)

(3,001)

(1,740)

(5,542)

(3,379)

Other expense, net

1,605

276

506

1,881

1,387

Provision for GAAP income taxes

35,318

41,899

35,790

77,217

82,654

Income tax-effect of above non-GAAP adjustments and certain discrete tax items

13,788

12,437

15,721

26,225

23,562

Adjusted EBITDA

$

213,939

$

223,359

$

204,102

$

437,298

$

407,706

Adjusted EBITDA margin

40

%

42

%

43

%

41

%

44

%

Non-GAAP net income per share:

Basic

$

0.57

$

0.62

$

0.59

$

1.19

$

1.18

Diluted

$

0.57

$

0.61

$

0.58

$

1.18

$

1.16

Shares used in non-GAAP per share calculations:

Basic

178,682

178,545

178,081

178,614

178,393

Diluted

180,738

180,825

180,841

180,782

181,439

(1)  Other operating expenses excluded from non-GAAP results include: acquisition-related costs, restructuring charges and certain legal matter costs.  See the non-GAAP adjustment definitions below for additional information.

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY

Three Months Ended

Six Months Ended

(in thousands)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Revenue by solution category

Media Delivery Solutions

$

243,503

$

241,842

$

217,600

$

485,345

$

433,489

Performance and Security Solutions

256,039

244,982

222,162

501,021

424,341

Service and Support Solutions

41,181

39,712

36,273

80,893

71,707

Total revenue

$

540,723

$

526,536

$

476,035

$

1,067,259

$

929,537

Cloud Security Solutions revenue

$

60,973

$

55,040

$

43,724

$

116,013

$

73,887

Revenue growth rates year-over-year(1):

Media Delivery Solutions

12

%

12

%

21

%

12

%

20

%

Performance and Security Solutions

15

21

31

18

30

Service and Support Solutions

14

12

24

13

30

Total revenue

14

%

16

%

26

%

15

%

25

%

Cloud Security Solutions revenue growth rates

39

%

82

%

57

%

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(1)(2):

Media Delivery Solutions

17

%

16

%

20

%

16

%

20

%

Performance and Security Solutions

19

25

30

22

30

Service and Support Solutions

18

16

24

17

30

Total revenue

18

%

20

%

25

%

19

%

24

%

Cloud Security Solutions revenue growth rates(2)

44

%

87

%

62

%

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY

Three Months Ended

Six Months Ended

(in thousands)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Revenue by geography

U.S.

$

399,103

$

388,973

$

343,228

$

788,076

$

668,412

International

141,620

137,563

132,807

279,183

261,125

Total revenue

$

540,723

$

526,536

$

476,035

$

1,067,259

$

929,537

Revenue growth rates year-over-year(1):

U.S.

16

%

20

%

25

%

18

%

24

%

International

7

7

27

7

26

Total revenue

14

%

16

%

26

%

15

%

25

%

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(1)(2):

U.S.

16

%

20

%

25

%

18

%

24

%

International

22

21

24

21

25

Total revenue

18

%

20

%

25

%

19

%

24

%

(1)  Growth rates for the six months ended June 30, 2014 exclude the impact of revenue from the Advertising Decision Solutions (ADS) business that was        divested during the three months ended March 31, 2013

(2)  See Use of Non-GAAP Financial Measures below for a definition

 

 

AKAMAI TECHNOLOGIES, INC.

OTHER SUPPLEMENTAL FINANCIAL DATA

Three Months Ended

Six Months Ended

(in thousands, except end of period statistics)

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Stock-based compensation:

Cost of revenue

$

3,502

$

3,163

$

3,076

$

6,665

$

5,871

Research and development

6,009

5,366

5,061

11,375

9,538

Sales and marketing

12,847

12,983

12,796

25,830

23,328

General and administrative

9,893

8,157

10,745

18,050

18,055

Total stock-based compensation

$

32,251

$

29,669

$

31,678

$

61,920

$

56,792

Depreciation and amortization:

Network-related depreciation

$

50,145

$

48,988

$

38,496

$

99,133

$

75,161

Other depreciation and amortization

13,456

11,584

9,779

25,040

17,854

Depreciation of property and equipment

63,601

60,572

48,275

124,173

93,015

Capitalized stock-based compensation amortization

3,435

2,952

2,016

6,387

3,944

Capitalized interest expense amortization

201

156

18

357

18

Amortization of acquired intangible assets

6,752

6,780

8,403

13,532

15,251

Total depreciation and amortization

$

73,989

$

70,460

$

58,712

$

144,449

$

112,228

Capital expenditures(1):

Purchases of property and equipment

$

76,492

$

89,129

$

50,963

$

165,621

$

110,246

Capitalized internal-use software development costs

30,835

33,983

28,265

64,818

52,966

Capitalized stock-based compensation

4,471

4,144

3,943

8,615

7,727

Capitalized interest expense

619

675

597

1,294

834

Total capital expenditures

$

112,417

$

127,931

$

83,768

$

240,348

$

171,773

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

$

9,816

$

(113,145)

$

73,001

$

(103,329)

$

245,480

End of period statistics:

Number of employees

5,733

5,409

4,558

Number of deployed servers

189,136

175,094

154,079

(1)  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 income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin, capital expenditures, revenue adjusted for ADS divestiture and impact of foreign currency exchange rates, 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 or not reflective of Akamai's ongoing operating results. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may also facilitate comparing financial results across accounting periods and to those of peer companies.

The non-GAAP financial measures do not replace the presentation of Akamai's GAAP financial results and should only be used as a supplement to, not as a substitute for, Akamai'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 Akamai 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 from its non-GAAP financial measures 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 paid to Akamai's employees and executives, the grant date fair value varies based on the stock price 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 from its non-GAAP financial measures in order to highlight the performance of Akamai's core business and to be consistent with the way investors evaluate its performance and compare its operating results to peer companies.
  • Acquisition-related costs – Acquisition-related costs include transaction fees, due diligence costs and other direct costs associated with strategic activities. In addition, subsequent adjustments to Akamai's initial estimated amounts of contingent consideration and indemnification 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 from its non-GAAP financial measures to provide a useful comparison of Akamai's operating results to prior periods and to its peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions.
  • Restructuring charges – Akamai has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments. Akamai excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items are not consistently recurring and do not reflect expected future operating expense, nor provide meaningful insight into the fundamentals of current or past operations of its business.
  • Amortization of debt discount and issuance costs and amortization of capitalized interest expense – In February 2014, Akamai issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rate of the convertible senior notes was approximately 3.2%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, thereby reducing the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt which are recorded as an asset in the consolidated balance sheet. All of Akamai's interest expense is comprised of these non-cash components and is excluded from management's assessment of the company's operating performance because management believes the non-cash expense is not indicative of ongoing operating performance.
  • Loss on investments and legal matters – Akamai has incurred losses from the impairment of certain investments and the settlement of legal matters. In addition, Akamai has incurred costs with respect to its internal investigation relating to sales practices in a country outside the U.S. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them occur infrequently and are not representative of Akamai's core business operations.
  • Income tax effect of non-GAAP adjustments and certain discrete tax items – 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 Akamai to highlight income attributable to its core operations.   

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

Non-GAAP income from operations – GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; other operating expenses (comprised of acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S); and other non-recurring or unusual items that may arise from time to time.

Non-GAAP operating margin – Non-GAAP income from operations stated as a percentage of revenue.

Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; other operating expenses (comprised of acquisition-related costs, restructuring charges, benefit from adoption of software development activities, gains and other activity related to divestiture of a business, gains and losses on legal settlements, and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S.);  loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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 basic weighted average or diluted common shares outstanding. Basic weighted average shares outstanding are those used in GAAP net income per share calculations. Diluted weighted average shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transaction entered into in connection with the issuance of $690 million of convertible senior notes due 2019. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, the company would receive a benefit from the note hedge transaction and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of net income per share. Until Akamai's weighted average stock price is greater than $89.56, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Adjusted EBITDA – GAAP net income excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; other operating expenses (comprised of acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements;  and costs incurred with respect to Akamai's internal investigation relating to sales practices in a country outside the U.S.); foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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.

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

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

Impact of Foreign Currency Exchange Rates – Revenue and earnings from international operations have historically been an important contributor to Akamai's financial results.  Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates.  For example, when the local currencies of Akamai's foreign subsidiaries weaken, consolidated results stated in U.S. dollars are negatively impacted.

Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of financial results and evaluation of performance in comparison to prior periods. The information presented is calculated by translating current period results using the same average foreign currency exchange rates per month from the comparative period.

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.

 

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

 

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SOURCE Akamai Technologies, Inc.



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