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8-K - FORM 8-K - AKAMAI TECHNOLOGIES INCd572107d8k.htm

Exhibit 99.1

 

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

AKAMAI REPORTS SECOND QUARTER 2013

FINANCIAL RESULTS

 

   

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)

CAMBRIDGE, Mass. July 24, 2013 – 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,
2013
     Mar. 31,
2013
    Jun. 30,
2012
    Jun. 30,
2013
     Jun. 30,
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,
2013
    Mar. 31,
2013
    Jun. 30,
2012
    Jun. 30,
2013
    Jun. 30,
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,
2013
    Mar. 31,
2013
    Jun. 30,
2012
    Jun. 30,
2013
    Jun. 30,
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,
2013
     Mar. 31,
2013
    Jun. 30,
2012
     Jun. 30,
2013
     Jun. 30,
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 securities and restricted marketable securities

   $ 35,978       $ (12,806   $ 39,725       $ 23,172       $ (211,510

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 divestitures 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.