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Last updated on April 16, 2014 at 17:34 EDT

Akamai Reports First Quarter 2013 Financial Results

April 24, 2013

CAMBRIDGE, Mass., April 24, 2013 /PRNewswire/ –

  • First quarter revenue of $368 million, up 15 percent year-over-year, or up 18 percent year-over-year adjusted for ADS divestiture*
  • First quarter GAAP net income of $71 million, up 65 percent year-over-year, or $0.39 per diluted share, up 63 percent year-over-year (includes $15 million, or $0.08 per diluted share, tax and depreciation benefit)
  • First quarter non-GAAP net income* of $93 million, up 43 percent year-over-year, or $0.51 per diluted share, up 42 percent year-over-year (includes $15 million, or $0.08 per diluted share, tax and depreciation benefit)

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 first quarter ended March 31, 2013. Revenue for the first quarter of 2013 was $368 million, a 15 percent increase over first quarter 2012 revenue of $319 million, or up 18 percent 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 first quarter of 2013 was $71 million, or $0.39 per diluted share, a 5 percent increase over the prior quarter’s GAAP net income of $68 million, or $0.38 per diluted share, and a 65 percent increase over first quarter 2012 GAAP net income of $43 million, or $0.24 per diluted share.

The Company generated non-GAAP net income* of $93 million, or $0.51 per diluted share, in the first quarter of 2013, a 4 percent increase over the prior quarter’s non-GAAP net income of $90 million, or $0.50 per diluted share, and a 43 percent increase over first quarter 2012 non-GAAP net income of $65 million, or $0.36 per diluted share.

Both GAAP and non-GAAP net income results for the first quarter of 2013 include a $15 million, or $0.08 per diluted share, benefit from the retroactive reinstatement of the 2012 federal R&D tax credit and change in our depreciation methodology effective on January 1, 2013.

“We are very pleased with our first quarter results, delivering better than expected revenue growth and EPS expansion,” said Tom Leighton, CEO of Akamai. “We saw strong acceleration in our media delivery solutions, made further traction in our management of network costs, and continued our investments to capitalize on what we see as the opportunities and megatrends shaping online business: cloud, mobile, video and security.”

Adjusted EBITDA* for the first quarter of 2013 was $166 million, down from $173 million in the prior quarter, and up from $143 million in the first quarter of 2012. Adjusted EBITDA margin* for the first quarter of 2013 was 45 percent, down a point from the prior quarter and consistent with the same period last year.

Cash from operations for the first quarter of 2013 was $103 million, or 28 percent of revenue, down a point from the same period last year. At the end of the first quarter of 2013, the Company had over $1 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 20 percent and 30 percent, respectively, of revenue for the first quarter of 2013.

Share Repurchase Program
During the first quarter of 2013, under a share repurchase program that was extended by the Board of Directors in February 2013, the Company spent approximately $40 million repurchasing 1.1 million shares of its common stock, at an average price of $36.79 per share. The Company has $119 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 March 31, 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 1-866-384-8009 (or 1-617-597-5342 for international calls) and using passcode No. 99675413. 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. 71184323.

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(TM) 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)

                                                                                     Mar. 31, 2013                 Dec. 31, 2012
                                                                                     -------------                 -------------

                                                     Assets

    Cash and cash equivalents                                                                             $165,275                 $201,989

    Marketable securities                                                                                  347,951                  235,592

    Accounts receivable, net                                                                               232,328                  218,777

    Deferred income tax assets, current portion                                                             20,422                   20,422

    Prepaid expenses and other current assets                                                               65,677                   51,604
                                                                                                            ------                   ------

    Current assets                                                                                         831,653                  728,384

    Marketable securities                                                                                  569,208                  657,659

    Property and equipment, net                                                                            369,555                  345,091

    Goodwill and acquired intangible assets, net                                                           803,764                  815,879

    Other assets                                                                                            58,775                   39,811

    Deferred income tax assets, net                                                                         13,712                   13,803
                                                                                                            ------                   ------

    Total assets                                                                                        $2,646,667               $2,600,627
                                                                                                        ==========               ==========

                                      Liabilities and stockholders' equity

    Accounts payable and accrued expenses                                                                 $177,798                 $176,378

    Other current liabilities                                                                               34,111                   26,566
                                                                                                            ------                   ------

    Current liabilities                                                                                    211,909                  202,944

    Other liabilities                                                                                       49,981                   51,929
                                                                                                            ------                   ------

    Total liabilities                                                                                      261,890                  254,873

    Stockholders' equity                                                                                 2,384,777                2,345,754
                                                                                                         ---------                ---------

    Total liabilities and stockholders' equity                                                          $2,646,667               $2,600,627
                                                                                                        ==========               ==========

                                                                                  Condensed Consolidated Statements of Operations

                                                                                   (amounts in thousands, except per share data)

                                                                                                    (unaudited)

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

                                                                                       Mar. 31,                                   Dec. 31,          Mar. 31,

                                                                                                            2013                               2012              2012
                                                                                                            ----                               ----              ----

    Revenues                                                                                            $368,046                           $377,872          $319,448

    Costs and operating expenses:

    Cost of revenues * **                                                                                 120,392                            139,494           124,925

    Research and development *                                                                            21,905                             20,371            17,480

    Sales and marketing *                                                                                 62,690                             62,667            48,995

    General and administrative * **                                                                        55,380                             53,859            51,642

    Amortization of acquired intangible assets                                                             6,060                              5,351             4,767

    Restructuring charges                                                                                    431                                392                60
                                                                                                             ---                                ---               ---

    Total costs and operating expenses                                                                   266,858                            282,134           247,869
                                                                                                         -------                            -------           -------

    Operating income                                                                                     101,188                             95,738            71,579

    Interest income, net                                                                                   1,608                              1,590             1,646

    Other (expense) income, net                                                                             (132)                               200              (441)
                                                                                                            ----                                ---              ----

    Income before provision for income taxes                                                             102,664                             97,528            72,784

    Provision for income taxes                                                                            31,177                             29,236            29,557
                                                                                                          ------                             ------            ------

    Net income                                                                                           $71,487                            $68,292           $43,227
                                                                                                         =======                            =======           =======

    Net income per share:

        Basic                                                                                              $0.40                              $0.38             $0.24

        Diluted                                                                                            $0.39                              $0.38             $0.24

    Shares used in per share calculations:

        Basic                                                                                            177,899                            177,479           178,120

        Diluted                                                                                          181,562                            181,768           182,342

    * 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------------------------
                                                                                                                                                              --------

                                                                                                                                                         Mar. 31,                      Dec. 31,           Mar. 31,

                                                                                                                                                                               2013                 2012               2012
                                                                                                                                                                               ----                 ----               ----

    Cash flows from operating activities:

    Net income                                                                                                                                                              $71,487              $68,292            $43,227

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

    Depreciation and amortization                                                                                                                                            42,375               54,960             45,634

    Stock-based compensation                                                                                                                                                 22,931               21,405             20,924

    (Benefit) provision for deferred income taxes, net                                                                                                                            -               (6,645)                 -

    Excess tax benefits from stock-based compensation                                                                                                                        (4,119)              (5,426)           (13,414)

    (Gain) loss on investments and disposal of property and equipment, net                                                                                                      (71)                  65                (97)

    Gain on divestiture of a business, net                                                                                                                                   (1,188)                   -                  -

    Provision for doubtful accounts                                                                                                                                             320                 (255)               370

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

    Accounts receivable                                                                                                                                                     (28,355)              19,479             (1,416)

    Prepaid expenses and other current assets                                                                                                                               (14,035)              (5,037)             4,309

    Accounts payable, accrued expenses and other current liabilities                                                                                                          7,838                4,921             (5,798)

    Accrued restructuring                                                                                                                                                      (111)                (381)            (2,144)

    Deferred revenue                                                                                                                                                          8,225                 (990)             1,474

    Other noncurrent assets and liabilities                                                                                                                                  (2,257)              (3,534)              (566)
                                                                                                                                                                             ------               ------               ----

    Net cash provided by operating activities                                                                                                                               103,040              146,854             92,503
                                                                                                                                                                            -------              -------             ------

    Cash flows from investing activities:

    Cash paid for acquired businesses, net of cash received                                                                                                                       -              (30,650)          (291,638)

    Purchases of property and equipment and capitalization of internal-use software costs                                                                                   (63,476)             (60,669)           (43,344)

    Proceeds from sales and maturities of short- and long-term marketable securities                                                                                        121,680              179,913            117,414

    Purchases of short- and long-term marketable securities                                                                                                                (145,350)            (198,039)          (280,649)

    Proceeds from the sale of property and equipment                                                                                                                            260                    -                 10

    Increase in other investments                                                                                                                                                 -                 (250)                 -

    Net cash used in investing activities                                                                                                                                   (86,886)            (109,695)          (498,207)
                                                                                                                                                                            -------             --------           --------

    Cash flows from financing activities:

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

    stock purchase plans                                                                                                                                                      3,195               16,025              7,078

    Excess tax benefits from stock-based compensation                                                                                                                         4,119                5,426             13,414

    Taxes paid related to net share settlement of equity awards                                                                                                             (17,315)              (8,124)           (21,655)

    Repurchase of common stock                                                                                                                                              (40,278)             (29,819)            (7,913)
                                                                                                                                                                            -------                                  ------

    Net cash used in financing activities                                                                                                                                   (50,279)             (16,492)            (9,076)
                                                                                                                                                                            -------              -------             ------

    Effects of exchange rate changes on cash and cash equivalents                                                                                                            (2,589)              (1,328)               307

    Net (decrease) increase in cash and cash equivalents                                                                                                                    (36,714)              19,339           (414,473)

    Cash and cash equivalents, beginning of period                                                                                                                          201,989              182,650            559,197
                                                                                                                                                                            -------              -------            -------

    Cash and cash equivalents, end of period                                                                                                                               $165,275             $201,989           $144,724
                                                                                                                                                                           ========             ========           ========

                                                                           Reconciliation of GAAP net income to non-GAAP net income

                                                                                              and Adjusted EBITDA

                                                                                 (amounts in thousands, except per share data)

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

                                                         Mar. 31,                                              Dec. 31,                  Mar. 31,

                                                                             2013                                                  2012               2012
                                                                             ----                                                  ----               ----

    Net income                                                            $71,487                                               $68,292            $43,227

    Amortization of
     acquired
     intangible assets                                                      6,060                                                 5,351              4,767

    Stock-based
     compensation                                                          22,931                                                21,405             20,924

    Amortization of
     capitalized stock-
     based compensation                                                     1,901                                                 1,961              1,755

    Acquisition-
     related costs
     (benefits)                                                               337                                                   680              4,452

    Restructuring
     charges (benefits)                                                       431                                                   392                 60

    Gain on divestiture
     of a business, net                                                    (1,188)                                                    -                  -

    Income tax-effect
     of above non-GAAP
     adjustments                                                           (8,726)                                               (8,054)            (9,889)
                                                                           ------                                                ------             ------

    Total non-GAAP net
     income:                                                               93,233                                                90,027             65,296

    Interest income,
     net                                                                   (1,608)                                               (1,590)            (1,646)

    Provision for GAAP
     income taxes                                                          31,177                                                29,236             29,557

    Income tax-effect
     of above non-GAAP
     adjustments                                                            8,726                                                 8,054              9,889

    Depreciation and
     amortization                                                          34,414                                                47,648             39,112

    Other expense
     (income), net                                                            132                                                  (200)               441
                                                                              ---                                                  ----                ---

    Total Adjusted
     EBITDA:                                                             $166,074                                              $173,175           $142,649
                                                                         ========                                              ========           ========

    Non-GAAP net income per share:

        Basic                                                               $0.52                                                 $0.51              $0.37

        Diluted                                                             $0.51                                                 $0.50              $0.36

    Shares used in non-GAAP per share calculations:

        Basic                                                             177,899                                               177,479            178,120

        Diluted                                                           181,562                                               181,768            182,342

                                                                                Supplemental Financial Data

                                                                  (amounts in thousands, except end of period statistics)

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

                                                         Mar. 31,                                             Dec. 31,            Mar. 31,

                                                                             2013                                            2012               2012
                                                                             ----                                            ----               ----

    Stock-based compensation:

    Cost of revenues                                                       $2,627                                          $2,705             $2,706

    Research and development                                                4,369                                           4,017              3,930

    Sales and marketing                                                     9,431                                           8,651              8,111

    General and
     administrative                                                         6,504                                           6,032              6,177
                                                                            -----                                           -----              -----

         Total stock-based
          compensation                                                    $22,931                                         $21,405            $20,924

    Depreciation and amortization:

    Network-related
     depreciation                                                         $28,920                                         $42,143            $34,605

    Capitalized stock-based
     compensation
     amortization                                                           1,901                                           1,961              1,755

    Other depreciation and
     amortization                                                           5,494                                           5,505              4,507

    Amortization of acquired
     intangible assets                                                      6,060                                           5,351              4,767
                                                                            -----                                           -----              -----

    Total depreciation and
     amortization                                                         $42,375                                         $54,960            $45,634

    Capital expenditures:

    Purchases of property and
     equipment                                                            $46,478                                         $46,386            $30,433

    Capitalized internal-use
     software                                                              16,998                                          14,283             12,911
                                                                           ------                                          ------             ------

    Capital expenditures,
     excluding stock-based
     compensation                                                          63,476                                          60,669             43,344

    Capitalized stock-based
     compensation                                                           2,938                                           2,582              2,298
                                                                            -----                                           -----              -----

    Total capital
     expenditures                                                         $66,414                                         $63,251            $45,642

    Net (decrease) increase
     in cash, cash
     equivalents, marketable                                             $(12,806)                                        $36,906          $(251,235)

    securities and restricted marketable securities

    End of period statistics:

    Number of employees                                                     3,207                                           3,074              2,539

    Number of deployed
     servers                                                              132,442                                         127,638            108,507

*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.

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 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 on divestiture of a business – Akamai recognized gains associated with the divestiture of its Advertising Decision Solutions business. Akamai excludes gains on 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 - Akamai excludes the income tax impact of the non-GAAP adjustments described above to properly reflect the income attributable to its core operations. In addition, Akamai excludes tax benefits and charges which do not relate to the Company’s core operations, for example valuation allowances and purchase accounting items.

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 expense; amortization of capitalized internal-use software; restructuring charges and benefits; acquisition-related costs and benefits; certain gains and losses on investments; 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, 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.

Adjusted EBITDA - GAAP net income excluding the following items: 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; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.

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

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

Akamai Statement Under the Private Securities Litigation Reform Act
This release contains information about future expectations, plans and prospects of Akamai’s management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements about future business opportunities. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai’s services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai’s expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai’s expectations or beliefs as of any date subsequent to the date of this press release.


    Contacts:

    Jeff Young          --or-- Natalie Temple
    Media Relations              Investor Relations
    Akamai Technologies          Akamai Technologies
    617-444-3913                 617-444-3635
    jyoung@akamai.com
                               ntemple@akamai.com

SOURCE Akamai Technologies, Inc.


Source: PR Newswire