CAMBRIDGE, Mass., Oct. 11, 2017 /PRNewswire/ -- Akamai
Technologies, Inc. (NASDAQ: AKAM) today announced the company has
entered into an agreement to acquire Nominum, a market leader
in DNS and enterprise security solutions for carriers.
The acquisition is intended to add complementary capabilities
to Akamai's portfolio of security offerings while expanding
Akamai's distribution to carriers that serve enterprise
customers. The all-cash transaction is expected to close
later this quarter.
Carriers and enterprises are increasingly targeted by attackers
attempting to exploit weaknesses and gaps in cybersecurity
defenses. By combining Nominum's carrier-grade cybersecurity
solutions with Akamai's enterprise security offerings and threat
intelligence, Akamai intends to serve a larger base of carrier and
enterprise customers with more comprehensive security
products. These products will be designed to more effectively
identify, block, and mitigate cybersecurity threats such as
malware, ransomware, phishing, and data exfiltration.
"Akamai knows how critical it is for carriers and enterprises to
ensure their online experiences are safe, reliable and fast for
their users," said Robert Blumofe,
Executive Vice President, Platform & General Manager,
Enterprise and Carrier Division. "We believe this acquisition
is a key investment in our security capabilities because Nominum
will bring complementary technology, engineering, technical support
and sales talent to better reach and serve our carrier partners and
their enterprise customers."
Nominum is a privately-funded company headquartered in Redwood
City, CA. Akamai expects the acquisition to be dilutive to
non-GAAP earnings in the fiscal fourth quarter and 2018 due to
integration costs and the impact purchase accounting has on revenue
recognition. The dilutive impact in the fiscal fourth quarter
of 2017 is expected to be approximately $0.05, and approximately $0.11 for fiscal 2018. Akamai expects the
acquisition to be accretive in 2019.
Akamai reiterates its intention to manage the Company's EBITDA
margins within its previously stated range of mid-30s while it
integrates Nominum.
To learn more about the acquisition, Akamai CEO Dr. Tom Leighton's keynote address from Akamai EDGE
2017, the Company's tenth annual customer conference, will be
available at 12:00 noon PT today at
edge.akamai.com/tomleightonkeynote.
About Akamai
As the world's largest and most trusted
cloud delivery platform, Akamai makes it easier for its customers
to provide the best and most secure digital experiences on any
device, anytime, anywhere. Akamai's massively distributed platform
is unparalleled in scale with over 200,000 servers across 130
countries, giving customers superior performance and threat
protection. Akamai's portfolio of web and mobile performance, cloud
security, enterprise access, and video delivery solutions are
supported by exceptional customer service and 24/7 monitoring. To
learn why the top financial institutions, e-commerce leaders, media
& entertainment providers, and government organizations trust
Akamai please visit www.akamai.com, blogs.akamai.com, or
@Akamai on Twitter.
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,
to measure executive compensation and to evaluate Akamai's
financial performance. The non-GAAP financial measures used in this
release are non-GAAP net income per share and Adjusted EBITDA
margin.
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 the business, as
they facilitate comparing financial results across accounting
periods and to those of peer companies. 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 exclude
expenses and gains that may be unusual in nature, infrequent or not
reflective of Akamai's ongoing operating results.
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 and investor presentations 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.
Akamai provides forward-looking statements in the form of
guidance. This guidance is provided on a non-GAAP basis and cannot
be reconciled to the closest GAAP measures without unreasonable
effort because of the unpredictability of the amounts and timing of
events affecting the items we exclude from non-GAAP measures. For
example, stock-based compensation is unpredictable for Akamai's
performance-based awards, which can fluctuate significantly based
on current expectations of future achievement of performance-based
targets. Amortization of intangible assets, acquisition-related
costs and restructuring costs are all impacted by the timing and
size of potential future actions, which are difficult to predict.
In addition, from time to time, Akamai excludes certain items that
occur infrequently, which are also inherently difficult to predict
and estimate. It is also difficult to predict the tax effect of the
items we exclude and to estimate certain discrete tax items, like
the resolution of tax audits or changes to tax laws. As such, the
costs that are being excluded from non-GAAP guidance are difficult
to predict and a reconciliation or a range of results could lead to
disclosure that would be imprecise or potentially misleading.
Material changes to any one of the exclusions could have a
significant effect on our guidance and future GAAP results.
Akamai's definitions of the non-GAAP financial measures used in
this press release are outlined below:
- 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; 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;
costs incurred with respect to Akamai's internal FCPA
investigation; 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 operating performance. Unless and 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;
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; costs incurred with respect to Akamai's internal
FCPA investigation; 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.
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, 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 many
investors evaluate its performance and compare its operating
results to peer companies.
- Acquisition-related costs – Acquisition-related costs
include transaction fees, advisory 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 vary significantly
based on the magnitude of the restructuring action and do not
reflect expected future operating expenses. In addition, these
charges do not necessarily 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 under GAAP,
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. 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
representative of ongoing operating performance.
- Legal matter costs – Akamai has incurred losses from the
settlement of legal matters and costs with respect to its internal
U.S. Foreign Corrupt Practices Act ("FCPA") investigation in
addition to the disgorgement Akamai was required to pay to resolve
it. Akamai believes excluding these amounts from its non-GAAP
financial measures is useful to investors as the types of events
giving rise to them 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 releasing 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.
The 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 expected benefits to Akamai from
the acquisition. Actual results may differ materially from those
indicated by these forward-looking statements as a result of
various important factors including, but not limited to, failure to
close the transaction expeditiously or at all, inability to
successfully integrate the technology and personnel of Nominum,
failure to achieve expected post-closing financial results, failure
to provide expected benefits of combined solutions, 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.
Contacts:
|
Jeff Young
Media Relations
617-444-3913
jyoung@akamai.com
|
|
Tom Barth
Investor Relations
617-274-7130
tbarth@akamai.com
|
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SOURCE Akamai Technologies, Inc.