Combined solutions expected to deliver complete API
visibility and security coverage across all of the OWASP API top 10
attacks
CAMBRIDGE, Mass., April 19,
2023 /PRNewswire/ -- Akamai Technologies, Inc.
(NASDAQ: AKAM), the cloud company that powers and protects life
online, today announces that it has entered into a definitive
agreement to acquire Neosec, an API detection and response
platform based on data and behavioral analytics.
Neosec's API security solution will complement
Akamai's market leading application and API security
portfolio by dramatically extending Akamai's visibility into the
rapidly growing API threat landscape. The combination is designed
to make it easy for customers to secure their API's by helping them
discover all of their APIs, assess their risk, and respond to
vulnerabilities and attacks.
"With rapidly accelerating digital transformation, APIs are the
new frontier for digital business and the enablement of critical
business functions," said Mani
Sundaram, executive vice president and general manager,
Security Technology Group, Akamai Technologies. "Enterprises expose
full business logic and process data via APIs, which, in a
cloud-based economy, are vulnerable to cyberattacks. Neosec's
platform and Akamai's application security portfolio will allow
customers to gain visibility into all APIs, analyze their behavior
and protect against API attacks."
The combined API solutions are expected to put Akamai at the
forefront of a critical emerging category of API security for which
customers are actively seeking support. The rapidly growing global
market for API security solutions is driven by the proliferation of
APIs and the associated increase in cybersecurity threats.
API-based architectures and microservices are the core of every
application developed today, from B2B to web and mobile
applications, and therefore are a primary target for attackers.
Additionally, regulatory compliance laws such as FFIEC, SOC, GDPR,
HIPAA and PCI DSS require enterprises to strengthen their security
measures on APIs.
"What sets Neosec apart from other API security providers is the
complete visibility into all API activity and the use of behavioral
analytics that detect threats others miss," said Giora Engel, co-founder and chief executive
officer, Neosec. "Unlike other solutions, Neosec delivers rich,
XDR-like API visibility combined with detection and response
capabilities that enable full investigation and threat hunting.
Ultimately, Akamai customers will have a better view into all of
their API activity, to identify vulnerabilities and threats before
they are exposed, and detect attacks in runtime."
Neosec, headquartered in Palo Alto,
California and Tel Aviv,
Israel, is a privately funded company. Neosec's employees,
including co-founder and CEO, Giora
Engel, and co-founder and chief technology officer,
Ziv Sivan, are expected to join
Akamai's Security Technology business.
The acquisition is expected to close in the second quarter of
2023. For the fiscal year 2023, the acquisition is anticipated to
be slightly dilutive to non-GAAP EPS by approximately $0.04 to $0.06 and
is not expected to add any material revenue. On its next quarterly
earnings call currently scheduled for May 9,
2023, Akamai plans to provide first quarter financial
results and full year 2023 financial guidance including any
expected impact from Neosec.
For more information, visit the Akamai application and API
security page.
About Akamai
Akamai powers and protects life online. Leading companies
worldwide choose Akamai to build, deliver, and secure their digital
experiences — helping billions of people live, work, and play every
day. Akamai Connected Cloud, a massively distributed edge and cloud
platform, puts apps and experiences closer to users and keeps
threats farther away. Learn more about Akamai's security, compute,
and delivery solutions at akamai.com and akamai.com/blog, or
follow Akamai Technologies on Twitter and LinkedIn.
Akamai Statement Under the Private Securities Litigation
Reform Act
This release contains statements that are not statements of
historical fact and constitute forward-looking statements for
purposes of the safe harbor provisions under The Private Securities
Litigation Reform Act of 1995, including, but not limited to,
statements about expectations, plans and prospects of Akamai.
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, the failure of our investments in
innovation to generate solutions that are accepted in the market;
effects of competition, including pricing pressure and changing
business models; impact of macroeconomic trends, including economic
uncertainty; conditions and uncertainties in the geopolitical
environment; continuing supply chain and logistics costs,
constraints, changes or disruptions; defects or disruptions in our
products or IT systems, including cyberattacks, data breaches or
malware; failure to realize the expected benefits of any of our
acquisitions or reorganizations; changes to economic, political and
regulatory conditions in the United
States and internationally; 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 our 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 our quarterly earnings conference 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.
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 financial measures). Management uses
non-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 measure used in this release is
non-GAAP net income per diluted share.
Management believes that this non-GAAP financial measure
reflects Akamai's ongoing business in a manner that allows for
meaningful comparisons and analysis of trends in the business, as
it facilitates comparing financial results across accounting
periods and to those of our peer companies. Management also
believes that this non-GAAP financial measure enables investors to
evaluate Akamai's operating results and future prospects in the
same manner as management. The non-GAAP net income per diluted
share metric may exclude expenses and gains that may be unusual in
nature, infrequent or not reflective of Akamai's ongoing operating
results.
This non-GAAP financial measure does 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. For historical
non-GAAP measures, 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. These reconciliations can be found under the
caption "Reconciliation of GAAP to Non-GAAP Financial Measures" on
the Investor Relations section of Akamai's website.
Akamai provides forward-looking statements in the form of
guidance during its quarterly earnings conference calls. This
guidance is provided on a non-GAAP basis and cannot be reconciled
to the closest GAAP measure 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 definition of the non-GAAP measure used in this press
release is outlined below:
Non-GAAP net income per diluted share – Non-GAAP net income
divided by weighted average diluted common shares outstanding.
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 transactions entered
into in connection with the issuances of $1,150 million of convertible senior notes due
2027 and 2025, respectively. 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
transactions and would not allow the dilution to occur, so
management believes that adjusting for this benefit provides a
meaningful view of operating performance. With respect to the
convertible senior notes due in each of 2027 and 2025, unless
Akamai's weighted average stock price is greater than $116.18 and $95.10,
respectively, the initial conversion price, there will be no
difference between GAAP and non-GAAP diluted weighted average
common shares outstanding.
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;
amortization of debt discount and issuance costs; amortization of
capitalized interest expense; certain gains and losses on
investments; income and losses from equity method investment; and
other non-recurring or unusual items that may arise from time to
time.
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, as well as
certain additional compensation costs payable to employees acquired
from the Linode acquisition if employed for a certain period of
time. The additional compensation cost was initiated by and
determined by the seller, and is in addition to normal levels of
compensation, including retention programs, offered by Akamai.
Acquisition-related costs are impacted by the timing and size of
the acquisitions, and Akamai excludes acquisition-related costs
from its non-GAAP financial measures to provide a useful comparison
of 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 from programs that have significantly changed either the
scope of the business undertaken by the Company or the manner in
which that business is conducted. These charges include severance
and related expenses for workforce reductions, impairments of
long-lived assets that will no longer be used in operations
(including right-of-use assets, other facility-related property and
equipment and internal-use software) and termination fees for any
contracts canceled as part of these programs. 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 August 2019, Akamai issued $1,150 million of convertible senior notes due
2027 with a coupon interest rate of 0.375%. In May 2018, Akamai issued $1,150 million of convertible senior notes due
2025 with a coupon interest rate of 0.125%. The imputed interest
rates of these convertible senior notes were 3.10% and 4.26%,
respectively. This is a result of the debt discounts recorded for
the conversion features that, prior to January 1, 2022, were required to be separately
accounted for as equity under GAAP, thereby reducing the carrying
value of the convertible debt instruments. The debt discounts were
amortized as interest expense. On January 1,
2022, Akamai adopted the new guidance for accounting for
convertible instruments. This new guidance eliminated separate
accounting for the equity portion, and thus the amortization of the
debt discount that was recorded as interest expense. Prior to
January 1, 2022, Akamai excluded this
non-cash interest expense from its non-GAAP results because it was
not representative of ongoing operating performance. After
January 1, 2022, this interest
expense is no longer included in or excluded from GAAP or non-GAAP
results. Additionally, the issuance costs of the convertible
senior notes are amortized to interest expense and are also
excluded from Akamai's non-GAAP results because management believes
the non-cash amortization expense is not representative of
ongoing operating performance.
- Gains and losses on investments – Akamai has recorded gains and
losses from the disposition, changes to fair value and impairment
of certain investments. Akamai believes excluding these amounts
from its non-GAAP financial measures is useful to investors as the
types of events giving rise to these gains and losses are not
representative of Akamai's core business operations and ongoing
operating performance
- Income and losses from equity method investment – Akamai
records income or losses on its share of earnings and losses from
its equity method investment. Akamai excludes such income and
losses because it does not have direct control over the operations
of the investment and the related income and losses are not
representative of its 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.
Media Relations
Gina
Sorice
(646) 320-4107
gsorice@akamai.com
Investor Relations
Tom
Barth
(617) 274-7130
tbarth@akamai.com
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SOURCE Akamai Technologies, Inc.