CAMBRIDGE, Mass., April 30, 2018 /PRNewswire/ -- Akamai
Technologies, Inc. (NASDAQ: AKAM), the world's largest and most
trusted cloud delivery platform, today reported financial results
for the first quarter ended March 31, 2018.
"We are very pleased with the results of our first quarter
performance, which featured continued outstanding growth in our
security business, substantial improvement in our media business,
margin expansion and accelerated revenue growth overall," said Dr. Tom
Leighton, Chief Executive Officer.
Akamai delivered the following financial results for the first
quarter ended March 31, 2018.
Revenue: Revenue was $669
million, an 11% increase over first quarter 2017 revenue of
$600 million and a 9% increase when
adjusted for foreign exchange.*
Revenue by Division(1):
- Web Division revenue was $353
million, up 16% year-over-year and up 13% when adjusted for
foreign exchange*
- Media and Carrier Division revenue was $316 million, up 6% year-over-year and up 4% when
adjusted for foreign exchange*
Revenue from Cloud Security Solutions(2):
- Cloud Security Solutions revenue was $149 million, up 36% year-over-year and up 32%
when adjusted for foreign exchange*
Revenue from Internet Platform
Customers(3):
- Revenue from Internet Platform Customers was $44 million, down 14% year-over-year and when
adjusted for foreign exchange*
- Revenue excluding Internet Platform Customers was $624 million, up 14% year-over-year and up 11%
when adjusted for foreign exchange*
Revenue by Geography:
- U.S. revenue was $423 million, up
6% year-over-year
- International revenue was $245
million, up 22% year-over-year and up 14% when adjusted for
foreign exchange*
Income from operations: GAAP income from operations was
$69 million, a 35% decrease from
first quarter 2017. GAAP operating margin for the first quarter was
10%, down 8 percentage points from the same period last year.
The first quarter of 2018 was impacted by a $15 million restructuring charge and $23 million for legal settlements and
non-recurring professional advisory fees associated with a
non-routine stockholder matter.
Non-GAAP income from operations* was $167
million, a 5% increase from fourth quarter 2017 and a 7%
increase from first quarter 2017. Non-GAAP operating margin* for
the first quarter was 25%, up 1 percentage point from the fourth
quarter of 2017 due to operational efficiency improvements, but
down 1 percentage point from the same period last year due to two
acquisitions that were completed subsequent to the first quarter of
2017.
Net income: GAAP net income was $54 million, a 28% decrease from first quarter
2017. Non-GAAP net income* was $136
million, a 19% increase from first quarter 2017.
EPS: GAAP EPS was $0.31 per
diluted share, a 28% decrease from first quarter 2017 and a 33%
decrease when adjusted for foreign exchange.* Non-GAAP EPS
was $0.79 per diluted share, a 22%
increase from first quarter 2017 and a 17% increase when adjusted
for foreign exchange.*
Adjusted EBITDA*: Adjusted EBITDA was $256 million, an 11% increase from first quarter
2017. Adjusted EBITDA margin* was 38%, flat compared to the first
quarter of 2017.
Other first quarter 2018 results:
- Cash from operations was $192
million, or 29% of revenue
- Cash, cash equivalents and marketable securities was
$1.3 billion as of March 31,
2018
- The Company spent $20 million to
repurchase 0.3 million shares of its common stock at an average
price of $67.38 per share
- The Company had approximately 171 million shares of common
stock outstanding as of March 31, 2018
Adoption of new revenue recognition standard: Prior
period results have been revised for the adoption of the new
revenue recognition standard. Under this standard, the way
revenue is recognized changed for some of Akamai's customers and
primarily impacts the revenue timing of a small number of licensed
software customers. The way Akamai recognizes revenue for its
core Web and Media products is substantially unchanged.
Akamai will also begin capitalizing certain commission and
incentive payments. The revisions as a result of the new
standard did not have a material impact on Akamai's annual revenue
or results of operations, but did cause quarter-to-quarter
fluctuations. For more information, see the posted revisions
to the consolidated statements of income and other key
disaggregated revenue amounts in the Investor Relations section of
Akamai's website at www.akamai.com.
* See Use of Non-GAAP Financial
Measures below for definitions
(1)
|
Revenue by Division –
A customer-focused reporting view that reflects revenue from
customers that are managed by the division. As of January 1, 2018,
Akamai now reports its revenue in two divisions compared to the
three divisions reported in 2017; the Media Division and Enterprise
and Carrier Division were combined to form the new Media and
Carrier Division. In addition, as the purchasing patterns and
required account expertise of customers changes over time, Akamai
may reassign a customer's division from one to another. In 2018
Akamai reassigned some of its customers from the Media and Carrier
Division to the Web Division and revised historical results in
order to reflect the most recent categorization and to provide a
comparable view for all periods presented.
|
(2)
|
Revenue from Cloud
Security Solutions – A product-focused reporting view that
illustrates revenue from Cloud Security Solutions separately from
all other solution categories. During 2018, Akamai updated
its methodology for allocating revenue to specific solutions when
solutions are sold as a bundle. During 2018, Akamai
reassigned amounts from CDN and other solutions revenue to Cloud
Security Solutions revenue and revised historical results in order
to reflect the most recent allocation methodologies and to provide
a comparable view for all periods presented.
|
(3)
|
Revenue from Internet
Platform Customers – Revenue from six customers that are large
Internet platform companies: Amazon, Apple, Facebook, Google,
Microsoft and Netflix.
|
Quarterly Conference Call
Akamai will host a
conference call today at 4:30 p.m. ET
that can be accessed through 1-844-578-9671 (or 1-508-637-5655 for
international calls) and using passcode 4695086. 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 two weeks
following the conference by calling 1-855-859-2056 (or
1-404-537-3406 for international calls) and using passcode 4695086.
The archived webcast of this event may be accessed through the
Akamai website.
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.
AKAMAI
TECHNOLOGIES, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
363,703
|
|
|
$
|
313,382
|
|
Marketable
securities
|
447,850
|
|
|
398,554
|
|
Accounts receivable,
net
|
484,617
|
|
|
461,457
|
|
Prepaid expenses and
other current assets
|
163,556
|
|
|
172,853
|
|
Total current
assets
|
1,459,726
|
|
|
1,346,246
|
|
Property and
equipment, net
|
845,118
|
|
|
862,535
|
|
Marketable
securities
|
512,270
|
|
|
567,592
|
|
Goodwill
|
1,498,906
|
|
|
1,498,688
|
|
Acquired intangible
assets, net
|
193,228
|
|
|
201,259
|
|
Deferred income tax
assets
|
44,490
|
|
|
36,231
|
|
Other
assets
|
133,166
|
|
|
136,365
|
|
Total
assets
|
$
|
4,686,904
|
|
|
$
|
4,648,916
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
81,239
|
|
|
$
|
80,278
|
|
Accrued
expenses
|
253,075
|
|
|
283,743
|
|
Deferred
revenue
|
95,490
|
|
|
70,495
|
|
Convertible senior
notes
|
668,745
|
|
|
—
|
|
Other current
liabilities
|
32,046
|
|
|
22,178
|
|
Total current
liabilities
|
1,130,595
|
|
|
456,694
|
|
Deferred
revenue
|
7,049
|
|
|
6,062
|
|
Deferred income tax
liabilities
|
17,675
|
|
|
17,823
|
|
Convertible senior
notes
|
—
|
|
|
662,913
|
|
Other
liabilities
|
145,328
|
|
|
142,955
|
|
Total
liabilities
|
1,300,647
|
|
|
1,286,447
|
|
Total stockholders'
equity
|
3,386,257
|
|
|
3,362,469
|
|
Total liabilities and
stockholders' equity
|
$
|
4,686,904
|
|
|
$
|
4,648,916
|
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. Akamai will
also begin capitalizing costs associated with obtaining customer
contracts, specifically commission and incentive payments. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
AKAMAI
TECHNOLOGIES, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Revenue
|
$
|
668,724
|
|
|
$
|
658,470
|
|
|
$
|
600,293
|
|
Costs and operating
expenses:
|
|
|
|
|
|
Cost of
revenue(2) (3)
|
234,825
|
|
|
229,940
|
|
|
205,727
|
|
Research and
development(2)
|
65,065
|
|
|
59,673
|
|
|
52,162
|
|
Sales and
marketing(2)
|
122,553
|
|
|
131,223
|
|
|
114,492
|
|
General and
administrative(2) (3)
|
154,385
|
|
|
146,115
|
|
|
115,009
|
|
Amortization of
acquired intangible assets
|
8,431
|
|
|
7,829
|
|
|
7,569
|
|
Restructuring
charges
|
14,908
|
|
|
51,581
|
|
|
—
|
|
Total costs and
operating expenses
|
600,167
|
|
|
626,361
|
|
|
494,959
|
|
Income from
operations
|
68,557
|
|
|
32,109
|
|
|
105,334
|
|
Interest
income
|
3,965
|
|
|
4,487
|
|
|
4,624
|
|
Interest
expense
|
(4,850)
|
|
|
(4,850)
|
|
|
(4,597)
|
|
Other income
(expense), net
|
21
|
|
|
473
|
|
|
(684)
|
|
Income before
provision for income taxes
|
67,693
|
|
|
32,219
|
|
|
104,677
|
|
Provision for income
taxes
|
13,979
|
|
|
4,699
|
|
|
30,094
|
|
Net income
|
$
|
53,714
|
|
|
$
|
27,520
|
|
|
$
|
74,583
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
Basic
|
$
|
0.32
|
|
|
$
|
0.16
|
|
|
$
|
0.43
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
0.16
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
Basic
|
170,116
|
|
|
169,429
|
|
|
173,158
|
|
Diluted
|
172,004
|
|
|
170,727
|
|
|
175,171
|
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. Akamai will
also begin capitalizing costs associated with obtaining customer
contracts, specifically commission and incentive payments. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
(2)
|
Includes stock-based
compensation (see supplemental table for figures)
|
(3)
|
Includes depreciation
and amortization (see supplemental table for figures)
|
AKAMAI
TECHNOLOGIES, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
|
53,714
|
|
|
$
|
27,520
|
|
|
$
|
74,583
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
104,095
|
|
|
99,396
|
|
|
86,533
|
|
Stock-based
compensation
|
44,686
|
|
|
42,205
|
|
|
38,986
|
|
(Benefit) provision
for deferred income taxes
|
(7,814)
|
|
|
(30,378)
|
|
|
28,425
|
|
Amortization of debt
discount and issuance costs
|
4,850
|
|
|
4,850
|
|
|
4,597
|
|
Restructuring-related
software charges
|
2,818
|
|
|
31,965
|
|
|
—
|
|
Other non-cash
reconciling items, net
|
4,379
|
|
|
6,413
|
|
|
(129)
|
|
Changes in operating
assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
Accounts
receivable
|
(18,419)
|
|
|
(40,631)
|
|
|
(19,876)
|
|
Prepaid expenses and
other current assets
|
(4,927)
|
|
|
7,612
|
|
|
(47,172)
|
|
Accounts payable and
accrued expenses
|
(31,312)
|
|
|
11,082
|
|
|
(23,940)
|
|
Deferred
revenue
|
25,243
|
|
|
1,410
|
|
|
10,043
|
|
Other current
liabilities
|
13,701
|
|
|
12,727
|
|
|
3,516
|
|
Other non-current
assets and liabilities
|
996
|
|
|
23,270
|
|
|
(12,948)
|
|
Net cash provided by
operating activities
|
192,010
|
|
|
197,441
|
|
|
142,618
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Cash paid for
acquired businesses, net of cash acquired
|
(79)
|
|
|
(171,872)
|
|
|
(10)
|
|
Purchases of property
and equipment and capitalization of internal-use software
development costs
|
(113,075)
|
|
|
(106,852)
|
|
|
(91,181)
|
|
Purchases of short-
and long-term marketable securities
|
(73,352)
|
|
|
(77,399)
|
|
|
(92,306)
|
|
Proceeds from sales
and maturities of short- and long-term marketable
securities
|
75,736
|
|
|
154,390
|
|
|
324,138
|
|
Other non-current
assets and liabilities
|
(715)
|
|
|
(420)
|
|
|
(335)
|
|
Net cash used in
(provided by) investing activities
|
(111,485)
|
|
|
(202,153)
|
|
|
140,306
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
Proceeds from the
issuance of common stock under stock plans
|
22,738
|
|
|
13,940
|
|
|
17,530
|
|
Employee taxes paid
related to net share settlement of stock-based awards
|
(29,714)
|
|
|
(10,273)
|
|
|
(33,921)
|
|
Repurchases of common
stock
|
(19,785)
|
|
|
(54,565)
|
|
|
(72,467)
|
|
Other non-current
assets and liabilities
|
(3,900)
|
|
|
—
|
|
|
—
|
|
Net cash used in
financing activities
|
(30,661)
|
|
|
(50,898)
|
|
|
(88,858)
|
|
Effects of exchange
rate changes on cash, cash equivalents and restricted
cash
|
1,165
|
|
|
631
|
|
|
5,019
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
51,029
|
|
|
(54,979)
|
|
|
199,085
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
314,429
|
|
|
369,408
|
|
|
324,626
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
365,458
|
|
|
$
|
314,429
|
|
|
$
|
523,711
|
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. Akamai will
also begin capitalizing costs associated with obtaining customer
contracts, specifically commission and incentive payments. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
|
|
|
On January 1, 2018,
Akamai also adopted Accounting Standards Update No. 2016-18,
Statement of Cash Flows. Under this standard, restricted
cash is included with cash and cash equivalents when reconciling
the beginning-of-period and end-of-period cash on the statement of
cash flows. Akamai retrospectively adopted this standard and
revised cash flows from investing activities by ($0.2) million and
$0.8 million for the three months ended December 31, 2017 and March
31, 2017, respectively, with a corresponding revision to total
cash, cash equivalents and restricted cash.
|
AKAMAI
TECHNOLOGIES, INC.
SUPPLEMENTAL
REVENUE DATA – REVENUE BY DIVISION
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Web
Division
|
$
|
352,837
|
|
|
$
|
354,821
|
|
|
$
|
303,488
|
|
Media and Carrier
Division
|
315,887
|
|
|
303,649
|
|
|
296,805
|
|
Total
revenue
|
$
|
668,724
|
|
|
$
|
658,470
|
|
|
$
|
600,293
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
Web
Division
|
16
|
%
|
|
16
|
%
|
|
13
|
%
|
Media and Carrier
Division
|
6
|
|
|
—
|
|
|
(2)
|
|
Total
revenue
|
11
|
%
|
|
8
|
%
|
|
5
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
Web
Division
|
13
|
%
|
|
15
|
%
|
|
14
|
%
|
Media and Carrier
Division
|
4
|
|
|
(1)
|
|
|
(1)
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
6
|
%
|
AKAMAI
TECHNOLOGIES, INC.
SUPPLEMENTAL
REVENUE DATA – REVENUE FROM CLOUD SECURITY SOLUTIONS
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Cloud Security
Solutions
|
$
|
149,205
|
|
|
$
|
135,842
|
|
|
$
|
110,006
|
|
CDN and other
solutions
|
519,519
|
|
|
522,628
|
|
|
490,287
|
|
Total
revenue
|
$
|
668,724
|
|
|
$
|
658,470
|
|
|
$
|
600,293
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
Cloud Security
Solutions
|
36
|
%
|
|
34
|
%
|
|
34
|
%
|
CDN and other
solutions
|
6
|
|
|
3
|
|
|
—
|
|
Total
revenue
|
11
|
%
|
|
8
|
%
|
|
5
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
Cloud Security
Solutions
|
32
|
%
|
|
33
|
%
|
|
36
|
%
|
CDN and other
solutions
|
3
|
|
|
2
|
|
|
1
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
6
|
%
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
(2)
|
See Use of Non-GAAP
Financial Measures below for a definition
|
AKAMAI
TECHNOLOGIES, INC.
SUPPLEMENTAL
REVENUE DATA – REVENUE FROM INTERNET PLATFORM
CUSTOMERS
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017(1)
|
|
March 31,
2017(1)
|
Revenue from Internet
Platform Customers
|
$
|
44,391
|
|
|
$
|
49,992
|
|
|
$
|
51,391
|
|
Revenue excluding
Internet Platform Customers
|
624,333
|
|
|
608,478
|
|
|
548,902
|
|
Total
revenue
|
$
|
668,724
|
|
|
$
|
658,470
|
|
|
$
|
600,293
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
Revenue from Internet
Platform Customers
|
(14)
|
%
|
|
(14)
|
%
|
|
(29)
|
%
|
Revenue excluding
Internet Platform Customers
|
14
|
|
|
10
|
|
|
10
|
|
Total
revenue
|
11
|
%
|
|
8
|
%
|
|
5
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
Revenue from Internet
Platform Customers
|
(14)
|
%
|
|
(14)
|
%
|
|
(29)
|
%
|
Revenue excluding
Internet Platform Customers
|
11
|
|
|
9
|
|
|
11
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
6
|
%
|
AKAMAI
TECHNOLOGIES, INC.
SUPPLEMENTAL
REVENUE DATA – REVENUE BY GEOGRAPHY
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
U.S.
|
$
|
423,339
|
|
|
$
|
425,744
|
|
|
$
|
398,870
|
|
International
|
245,385
|
|
|
232,726
|
|
|
201,423
|
|
Total
revenue
|
$
|
668,724
|
|
|
$
|
658,470
|
|
|
$
|
600,293
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
U.S.
|
6
|
%
|
|
2
|
%
|
|
—
|
%
|
International
|
22
|
|
|
22
|
|
|
19
|
|
Total
revenue
|
11
|
%
|
|
8
|
%
|
|
5
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
U.S.
|
6
|
%
|
|
2
|
%
|
|
—
|
%
|
International
|
14
|
|
|
18
|
|
|
21
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
6
|
%
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
(2)
|
See Use of Non-GAAP
Financial Measures below for a definition
|
AKAMAI
TECHNOLOGIES, INC.
SUPPLEMENTAL
OPERATING EXPENSE DATA
|
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
General and
administrative expenses:
|
|
|
|
|
|
Payroll and related
costs
|
$
|
51,894
|
|
|
$
|
50,187
|
|
|
$
|
44,891
|
|
Stock-based
compensation
|
12,922
|
|
|
11,359
|
|
|
10,115
|
|
Depreciation and
amortization
|
19,888
|
|
|
19,845
|
|
|
18,528
|
|
Facilities-related
costs
|
21,795
|
|
|
21,071
|
|
|
18,798
|
|
Provision for
doubtful accounts
|
521
|
|
|
805
|
|
|
153
|
|
Acquisition-related
costs
|
1,143
|
|
|
19,995
|
|
|
(209)
|
|
Legal and stockholder
matter costs
|
23,091
|
|
|
—
|
|
|
—
|
|
License of
patent
|
(4,215)
|
|
|
(4,169)
|
|
|
(4,035)
|
|
Professional and
other expenses
|
27,346
|
|
|
27,022
|
|
|
26,768
|
|
Total general and
administrative expenses
|
$
|
154,385
|
|
|
$
|
146,115
|
|
|
$
|
115,009
|
|
|
|
|
|
|
|
General and
administrative expenses–functional(1):
|
|
|
|
|
|
Global
functions
|
$
|
55,653
|
|
|
$
|
52,818
|
|
|
$
|
48,727
|
|
As a percentage of
revenue
|
8
|
%
|
|
8
|
%
|
|
8
|
%
|
Infrastructure
|
78,192
|
|
|
76,666
|
|
|
70,373
|
|
As a percentage of
revenue
|
12
|
%
|
|
12
|
%
|
|
12
|
%
|
Other
|
20,540
|
|
|
16,631
|
|
|
(4,091)
|
|
Total general and
administrative expenses
|
$
|
154,385
|
|
|
$
|
146,115
|
|
|
$
|
115,009
|
|
As a percentage of
revenue
|
23
|
%
|
|
22
|
%
|
|
19
|
%
|
|
|
|
|
|
|
Stock-based
compensation:
|
|
|
|
|
|
Cost of
revenue
|
$
|
5,296
|
|
|
$
|
5,259
|
|
|
$
|
4,685
|
|
Research and
development
|
10,509
|
|
|
10,121
|
|
|
9,029
|
|
Sales and
marketing
|
15,959
|
|
|
15,466
|
|
|
15,157
|
|
General and
administrative
|
12,922
|
|
|
11,359
|
|
|
10,115
|
|
Total stock-based
compensation
|
$
|
44,686
|
|
|
$
|
42,205
|
|
|
$
|
38,986
|
|
|
|
(1)
|
Global functions
expense includes payroll, stock-based compensation and other
employee-related costs for administrative functions, including
finance, purchasing, order entry, human resources, legal,
information technology and executive personnel, as well as
third-party professional service fees. Infrastructure expense
includes payroll, stock-based compensation and other
employee-related costs for our network infrastructure functions, as
well as facility rent expense, depreciation and amortization of
facility and IT-related assets, software and software-related
costs, business insurance and taxes. Our network infrastructure
function is responsible for network planning, sourcing,
architecture evaluation and platform security. Other expenses
includes acquisition-related costs, provision for doubtful
accounts, the license of a patent and legal and stockholder matter
costs.
|
AKAMAI
TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL
DATA
|
|
|
|
Three Months
Ended
|
(in thousands,
except end of period statistics)
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
Depreciation and
amortization:
|
|
|
|
|
|
Network-related
depreciation
|
$
|
38,235
|
|
|
$
|
37,223
|
|
|
$
|
35,255
|
|
Capitalized
internal-use software development amortization
|
31,668
|
|
|
29,096
|
|
|
21,589
|
|
Other depreciation
and amortization
|
19,498
|
|
|
19,498
|
|
|
18,209
|
|
Depreciation of
property and equipment
|
89,401
|
|
|
85,817
|
|
|
75,053
|
|
Capitalized
stock-based compensation amortization
|
5,569
|
|
|
5,029
|
|
|
3,471
|
|
Capitalized interest
expense amortization
|
694
|
|
|
721
|
|
|
440
|
|
Amortization of
acquired intangible assets
|
8,431
|
|
|
7,829
|
|
|
7,569
|
|
Total depreciation
and amortization
|
$
|
104,095
|
|
|
$
|
99,396
|
|
|
$
|
86,533
|
|
|
|
|
|
|
|
Capital
expenditures, excluding stock-based compensation and interest
expense(1)(2):
|
|
|
|
|
|
Purchases of property
and equipment
|
$
|
26,597
|
|
|
$
|
50,716
|
|
|
$
|
56,500
|
|
Capitalized
internal-use software development costs
|
49,257
|
|
|
43,074
|
|
|
37,085
|
|
Total capital
expenditures, excluding stock-based compensation and interest
expense
|
$
|
75,854
|
|
|
$
|
93,790
|
|
|
$
|
93,585
|
|
|
|
|
|
|
|
End of period
statistics:
|
|
|
|
|
|
Number of
employees
|
7,454
|
|
|
7,650
|
|
|
6,672
|
|
|
|
(1)
|
Capital expenditures
presented in this table are reported on an accrual basis, which
differs from the cash-basis presentation in the statements of cash
flows. The primary difference between the two is the change
in purchases of property and equipment and capitalization of
internal-use software development costs accrued for, but not paid,
at period end.
|
(2)
|
See Use of Non-GAAP
Financial Measures below for a definition
|
AKAMAI
TECHNOLOGIES, INC.
RECONCILIATION OF
GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND NET INCOME
PER DILUTED SHARE
|
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Income from
operations
|
$
|
68,557
|
|
|
$
|
32,109
|
|
|
$
|
105,334
|
|
GAAP operating
margin
|
10
|
%
|
|
5
|
%
|
|
18
|
%
|
Amortization of
acquired intangible assets
|
8,431
|
|
|
7,829
|
|
|
7,569
|
|
Stock-based
compensation
|
44,686
|
|
|
42,205
|
|
|
38,986
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
6,263
|
|
|
5,750
|
|
|
3,911
|
|
Restructuring
charges
|
14,908
|
|
|
51,581
|
|
|
—
|
|
Acquisition-related
costs
|
1,143
|
|
|
19,995
|
|
|
(208)
|
|
Legal and stockholder
matter costs
|
23,091
|
|
|
—
|
|
|
—
|
|
Operating
adjustments
|
98,522
|
|
|
127,360
|
|
|
50,258
|
|
Non-GAAP income from
operations
|
$
|
167,079
|
|
|
$
|
159,469
|
|
|
$
|
155,592
|
|
Non-GAAP operating
margin
|
25
|
%
|
|
24
|
%
|
|
26
|
%
|
|
|
|
|
|
|
Net income
|
$
|
53,714
|
|
|
$
|
27,520
|
|
|
$
|
74,583
|
|
Operating adjustments
(from above)
|
98,522
|
|
|
127,360
|
|
|
50,258
|
|
Amortization of debt
discount and issuance costs
|
4,850
|
|
|
4,850
|
|
|
4,597
|
|
Gain on
investments
|
—
|
|
|
(450)
|
|
|
—
|
|
Income tax-effect of
above non-GAAP adjustments and certain discrete tax
items
|
(21,283)
|
|
|
(38,574)
|
|
|
(15,467)
|
|
Non-GAAP net
income
|
$
|
135,803
|
|
|
$
|
120,706
|
|
|
$
|
113,971
|
|
|
|
|
|
|
|
GAAP net income per
diluted share
|
$
|
0.31
|
|
|
$
|
0.16
|
|
|
$
|
0.43
|
|
Amortization of
acquired intangible assets
|
0.05
|
|
|
0.05
|
|
|
0.04
|
|
Stock-based
compensation
|
0.25
|
|
|
0.25
|
|
|
0.22
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
0.04
|
|
|
0.03
|
|
|
0.02
|
|
Restructuring
charges
|
0.09
|
|
|
0.30
|
|
|
—
|
|
Acquisition-related
costs
|
0.01
|
|
|
0.12
|
|
|
—
|
|
Legal and stockholder
matter costs
|
0.13
|
|
|
—
|
|
|
—
|
|
Amortization of debt
discount and issuance costs
|
0.03
|
|
|
0.03
|
|
|
0.03
|
|
Gain on
investments
|
—
|
|
|
—
|
|
|
—
|
|
Income tax effect of
above non-GAAP adjustments and certain discrete tax
items
|
(0.12)
|
|
|
(0.23)
|
|
|
(0.09)
|
|
Non-GAAP net income
per diluted share
|
$
|
0.79
|
|
|
$
|
0.71
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
Shares used in
diluted per share calculations
|
172,004
|
|
|
170,727
|
|
|
175,171
|
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. Akamai will
also begin capitalizing costs associated with obtaining customer
contracts, specifically commission and incentive payments. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
AKAMAI
TECHNOLOGIES, INC.
RECONCILIATION OF
GAAP NET INCOME TO ADJUSTED EBITDA
|
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2018
|
|
December 31,
2017 (1)
|
|
March 31,
2017 (1)
|
Net income
|
$
|
53,714
|
|
|
$
|
27,520
|
|
|
$
|
74,583
|
|
Interest
income
|
(3,965)
|
|
|
(4,487)
|
|
|
(4,624)
|
|
Provision for income
taxes
|
13,979
|
|
|
4,699
|
|
|
30,094
|
|
Depreciation and
amortization
|
89,401
|
|
|
85,817
|
|
|
75,053
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
6,263
|
|
|
5,750
|
|
|
3,911
|
|
Amortization of
acquired intangible assets
|
8,431
|
|
|
7,829
|
|
|
7,569
|
|
Stock-based
compensation
|
44,686
|
|
|
42,205
|
|
|
38,986
|
|
Restructuring
charges
|
14,908
|
|
|
51,581
|
|
|
—
|
|
Acquisition-related
costs
|
1,143
|
|
|
19,995
|
|
|
(208)
|
|
Legal and stockholder
matter costs
|
23,091
|
|
|
—
|
|
|
—
|
|
Amortization of debt
discount and issuance costs
|
4,850
|
|
|
4,850
|
|
|
4,597
|
|
Gain on
investments
|
—
|
|
|
(450)
|
|
|
—
|
|
Other (income)
expense, net
|
(21)
|
|
|
(23)
|
|
|
684
|
|
Adjusted
EBITDA
|
$
|
256,480
|
|
|
$
|
245,286
|
|
|
$
|
230,645
|
|
Adjusted EBITDA
margin
|
38
|
%
|
|
37
|
%
|
|
38
|
%
|
|
|
(1)
|
Prior period
information has been restated for the adoption of Accounting
Standards Update No. 2014-09, Revenue from Contracts with
Customers, which Akamai adopted retrospectively on January 1,
2018. Under this standard, the way revenue is recognized changed
for some of Akamai's contracts with customers. Akamai will
also begin capitalizing costs associated with obtaining customer
contracts, specifically commission and incentive payments. For more
information, see the posted revisions to the consolidated
statements of income and other key disaggregated revenue amounts in
the Investor Relations section of Akamai's website at
www.akamai.com.
|
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. 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 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 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.
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 is 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 and do not reflect
Akamai's core operations.
- 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 and stockholder matter costs –Akamai has incurred
losses related to the settlement of legal matters, costs from
professional service providers related to a non-routine stockholder
matter and costs with respect to its internal U.S. Foreign Corrupt
Practices Act ("FCPA") investigation. 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.
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; 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 from professional service providers related to a non-routine
stockholder matter; costs incurred with respect to Akamai's
internal FCPA investigation; 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; 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 from professional service providers related to a non-routine
stockholder matter; 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 from professional service providers
related to a non-routine stockholder matter; 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.
Capital expenditures, or capex, excluding stock-based
compensation and interest expense – Purchases of property and
equipment and capitalization of internal-use software development
costs presented on an accrual basis, which differs from the
cash-basis presentation included in the statements of cash flows.
The primary difference between the two is the change in purchases
of property and equipment and capitalization of internal-use
software development costs accrued for, but not paid, at period
end.
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 our foreign subsidiaries weaken, our 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 our financial results and
evaluation of performance in comparison to prior periods. The
dollar impact of changes in foreign currency exchange rates
presented is calculated by translating current period results using
monthly average foreign currency exchange rates from the
comparative period and comparing them to the reported amount.
The percentage change at constant currency presented is calculated
by comparing the prior period amounts as reported and the current
period amounts translated using the same monthly average foreign
currency exchange rates from the comparative period.
Akamai Statement Under the Private Securities Litigation
Reform Act
This release and/or our quarterly earnings conference call
scheduled for later today contain 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 revenue growth and
future profitability levels. 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 of our investments in innovation to generate solutions that
are accepted in the market; 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; 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 and on such
call 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:
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Chris
Nicholson
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Tom Barth
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Media
Relations
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Investor
Relations
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Akamai
Technologies
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Akamai
Technologies
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617-444-2987
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617-274-7130
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cnichols@akamai.com
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tbarth@akamai.com
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SOURCE Akamai Technologies, Inc.