First quarter revenue
of $916 million, up 1%
year-over-year and up 4% when adjusted for foreign
exchange*
Security and compute revenue represented 57%
of total revenue in the first quarter and grew 13% year-over-year
and 16% when adjusted for foreign exchange*
GAAP EPS of $0.62, down 24% year-over-year and down 18% when
adjusted for foreign exchange*, and non-GAAP EPS* of
$1.40, up 1% year-over-year and up 4%
when adjusted for foreign exchange*
Guidance raised for full-year revenue and
non-GAAP net income per diluted share*
CAMBRIDGE, Mass., May 9, 2023
/PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the cloud
company that powers and protects life online, today reported
financial results for the first quarter ended March 31,
2023.
"Akamai had a strong start to 2023, with both revenue and
earnings above our expectations," said Dr. Tom Leighton, Chief Executive Officer. "We
reached a significant milestone during the first quarter when, for
the first time in Akamai's 25-year history, security became our
largest revenue stream. Looking ahead, we remain committed to
driving efficiency and profitability as we focus investment in
areas with the strongest potential for future
growth."
Akamai delivered the following results for the first quarter
ended March 31, 2023:
Revenue: Revenue was $916
million, a 1% increase over first quarter 2022 revenue of
$904 million and a 4% increase when
adjusted for foreign exchange.*
Revenue by solution:
- Security revenue was $406
million, up 6% year-over-year and up 9% when adjusted for
foreign exchange*
- Delivery revenue was $394
million, down 11% year-over-year and down 9% when adjusted
for foreign exchange*
- Compute revenue was $116 million,
up 49% year-over-year and up 51% when adjusted for foreign
exchange*
Revenue by geography:
- U.S. revenue was $474 million,
down 1% year-over-year
- International revenue was $442
million, up 5% year-over-year and up 9% when adjusted for
foreign exchange*
Income from operations: GAAP income from operations was
$127 million, a 27% decrease from
first quarter 2022. GAAP operating margin for the first quarter was
14%, down 5 percentage points from the same period last year.
Non-GAAP income from operations* was $264
million, a 2% decrease from first quarter 2022. Non-GAAP
operating margin* for the first quarter was 29%, down 1 percentage
point compared to the same period last year.
Net income: GAAP net income was $97 million, a 27% decrease from first quarter
2022. Non-GAAP net income* was $218
million, a 3% decrease from first quarter 2022.
EPS: GAAP net income per diluted share was $0.62, a 24% decrease from first quarter 2022 and
a 18% decrease when adjusted for foreign exchange.* Non-GAAP net
income per diluted share* was $1.40,
a 1% increase from first quarter 2022 and a 4% increase when
adjusted for foreign exchange.*
Adjusted EBITDA*: Adjusted EBITDA* was $376 million, a 4% decrease from first quarter
2022.
Restructuring charge: The Company recorded a
$45 million restructuring charge in
the first quarter of 2023. This charge primarily related to
severance costs in connection with a workforce reduction to enable
prioritization of investments in the fastest growing areas of the
business. In addition, the Company continues to record
facility-related charges as it reduces its real estate footprint
due to its flexible workspace strategy.
Supplemental cash information: Cash from
operations for the first quarter of 2023 was $233 million, or 25% of revenue. Cash, cash
equivalents and marketable securities was $1.1 billion as of March 31, 2023.
Share repurchases: The Company spent $349 million in the first quarter of 2023 to
repurchase 4.6 million shares of its common stock at an average
price of $76.52 per share. The
Company had 153 million shares of common stock outstanding as of
March 31, 2023.
Financial guidance: The Company reports the following
financial guidance for the second quarter and full year
2023:
|
Three Months
Ended
June 30,
2023
|
|
Year Ended
December 31,
2023
|
|
Low End
|
|
High End
|
|
Low End
|
|
High End
|
Revenue (in
millions)
|
$ 923
|
|
$ 937
|
|
$
3,740
|
|
$
3,785
|
Non-GAAP operating
margin*
|
28.5 %
|
|
28.5 %
|
|
28.0 %
|
|
29.0 %
|
Non-GAAP net income per
diluted share*
|
$ 1.38
|
|
$ 1.42
|
|
$ 5.69
|
|
$ 5.84
|
Non-GAAP tax
rate*
|
17.5 %
|
|
18.0 %
|
|
17.5 %
|
|
18.0 %
|
Shares used in non-GAAP
per diluted share calculations* (in millions)
|
153
|
|
153
|
|
153
|
|
153
|
Capex as a percentage
of revenue*
|
21.0 %
|
|
22.0 %
|
|
18.5 %
|
|
19.0 %
|
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 the 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, such as 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.
* 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 1-833-634-5020 (or 1-412-902-4238 for
international calls) and using passcode Akamai Technologies call. A
live webcast of the call may be accessed at www.akamai.com in the
Investor Relations section. In addition, a replay of the call will
be available for two weeks following the conference by calling
1-877-344-7529 (or 1-412-317-0088 for international calls) and
using passcode: 8994850. The archived webcast of this event may be
accessed through the Akamai website.
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 cloud computing, security, and content delivery solutions
at akamai.com and akamai.com/blog, or follow Akamai Technologies on
Twitter and LinkedIn.
AKAMAI TECHNOLOGIES,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
298,800
|
|
$
542,337
|
Marketable
securities
|
453,113
|
|
562,979
|
Accounts receivable,
net
|
705,817
|
|
679,206
|
Prepaid expenses and
other current assets
|
239,981
|
|
185,040
|
Total current
assets
|
1,697,711
|
|
1,969,562
|
Marketable
securities
|
298,699
|
|
320,531
|
Property and equipment,
net
|
1,654,608
|
|
1,540,182
|
Operating lease
right-of-use assets
|
850,282
|
|
813,372
|
Acquired intangible
assets, net
|
432,233
|
|
441,716
|
Goodwill
|
2,781,859
|
|
2,763,838
|
Deferred income tax
assets
|
334,733
|
|
337,677
|
Other assets
|
133,208
|
|
116,522
|
Total
assets
|
$ 8,183,333
|
|
$ 8,303,400
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
202,129
|
|
$
145,420
|
Accrued
expenses
|
256,924
|
|
367,017
|
Deferred
revenue
|
140,927
|
|
105,109
|
Operating lease
liabilities
|
205,055
|
|
196,094
|
Other current
liabilities
|
31,218
|
|
5,228
|
Total current
liabilities
|
836,253
|
|
818,868
|
Deferred
revenue
|
23,754
|
|
22,117
|
Deferred income tax
liabilities
|
20,439
|
|
18,400
|
Convertible senior
notes
|
2,286,369
|
|
2,285,258
|
Operating lease
liabilities
|
735,808
|
|
693,265
|
Other
liabilities
|
109,369
|
|
105,305
|
Total
liabilities
|
4,011,992
|
|
3,943,213
|
Total stockholders'
equity
|
4,171,341
|
|
4,360,187
|
Total liabilities and
stockholders' equity
|
$ 8,183,333
|
|
$ 8,303,400
|
AKAMAI TECHNOLOGIES,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
(3)
|
Revenue
|
$
915,698
|
|
$
927,779
|
|
$
903,647
|
Costs and operating
expenses:
|
|
|
|
|
|
Cost of revenue
(1) (2)
|
361,316
|
|
357,968
|
|
332,752
|
Research and
development (1)
|
91,863
|
|
105,382
|
|
99,935
|
Sales and marketing
(1)
|
129,107
|
|
129,090
|
|
122,719
|
General and
administrative (1) (2)
|
146,139
|
|
150,300
|
|
153,262
|
Amortization of
acquired intangible assets
|
15,912
|
|
16,993
|
|
13,644
|
Restructuring
charge
|
44,723
|
|
571
|
|
8,016
|
Total costs and
operating expenses
|
789,060
|
|
760,304
|
|
730,328
|
Income from
operations
|
126,638
|
|
167,475
|
|
173,319
|
Interest and
marketable securities income (loss), net
|
5,292
|
|
5,018
|
|
(211)
|
Interest
expense
|
(2,681)
|
|
(2,684)
|
|
(2,695)
|
Other expense,
net
|
(2,363)
|
|
(1,409)
|
|
(9,565)
|
Income before provision
for income taxes
|
126,886
|
|
168,400
|
|
160,848
|
Provision for income
taxes
|
(29,780)
|
|
(39,638)
|
|
(19,837)
|
Loss from equity
method investment
|
—
|
|
—
|
|
(7,635)
|
Net income
|
$
97,106
|
|
$
128,762
|
|
$
133,376
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
Basic
|
$
0.62
|
|
$
0.82
|
|
$
0.83
|
Diluted
|
$
0.62
|
|
$
0.82
|
|
$
0.82
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
Basic
|
155,637
|
|
157,109
|
|
160,494
|
Diluted
|
156,135
|
|
157,451
|
|
163,637
|
|
|
(1)
|
Includes stock-based
compensation (see supplemental table for figures)
|
(2)
|
Includes depreciation
and amortization (see supplemental table for figures)
|
(3)
|
Provision for income
taxes, net income and basic and diluted net income per share for
the three months ended March 31, 2022 have been revised to reflect
the correction of an error of provision for income taxes related to
an intercompany sale of intellectual property that occurred in
2022.
|
AKAMAI TECHNOLOGIES,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
(1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
97,106
|
|
$
128,762
|
|
$
133,376
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
135,457
|
|
148,570
|
|
142,595
|
Stock-based
compensation
|
61,883
|
|
58,374
|
|
56,227
|
Provision (benefit)
for deferred income taxes
|
4,925
|
|
(22,368)
|
|
(27,792)
|
Amortization of debt
issuance costs
|
1,098
|
|
1,099
|
|
1,119
|
(Gain) loss on
investments
|
(174)
|
|
—
|
|
16,536
|
Other non-cash
reconciling items, net
|
21,602
|
|
5,969
|
|
12,598
|
Changes in operating
assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
Accounts
receivable
|
(25,251)
|
|
(48,063)
|
|
(39,198)
|
Prepaid expenses and
other current assets
|
(26,009)
|
|
22,746
|
|
(64,695)
|
Accounts payable and
accrued expenses
|
(97,263)
|
|
38,228
|
|
(66,938)
|
Deferred
revenue
|
36,449
|
|
(6,790)
|
|
55,394
|
Other current
liabilities
|
25,834
|
|
(1,510)
|
|
(1,441)
|
Other non-current
assets and liabilities
|
(2,158)
|
|
16,481
|
|
4,670
|
Net cash provided by
operating activities
|
233,499
|
|
341,498
|
|
222,451
|
Cash flows from
investing activities:
|
|
|
|
|
|
Cash paid for
acquisitions, net of cash acquired
|
(20,070)
|
|
—
|
|
(872,099)
|
Purchases of property
and equipment and capitalization of internal-use
software development costs
|
(222,245)
|
|
(110,788)
|
|
(131,359)
|
Purchases of short-
and long-term marketable securities
|
(134,191)
|
|
(17,975)
|
|
—
|
Proceeds from sales,
maturities and redemptions of short- and long-term
marketable securities
|
276,886
|
|
36,225
|
|
691,802
|
Other, net
|
(20,268)
|
|
(2,119)
|
|
(5,242)
|
Net cash used in
investing activities
|
(119,888)
|
|
(94,657)
|
|
(316,898)
|
Cash flows from
financing activities:
|
|
|
|
|
|
Proceeds from
borrowings under revolving credit facility
|
—
|
|
—
|
|
75,000
|
Proceeds from the
issuance of common stock under stock plans
|
21,257
|
|
10,473
|
|
21,941
|
Employee taxes paid
related to net share settlement of stock-based awards
|
(29,894)
|
|
(10,580)
|
|
(54,819)
|
Repurchases of common
stock
|
(348,600)
|
|
(177,741)
|
|
(102,853)
|
Other, net
|
(52)
|
|
(112)
|
|
(104)
|
Net cash used in
financing activities
|
(357,289)
|
|
(177,960)
|
|
(60,835)
|
Effects of exchange
rate changes on cash, cash equivalents and restricted
cash
|
2,297
|
|
14,319
|
|
(1,462)
|
Net (decrease) increase
in cash, cash equivalents and restricted cash
|
(241,381)
|
|
83,200
|
|
(156,744)
|
Cash, cash equivalents
and restricted cash at beginning of period
|
543,022
|
|
459,822
|
|
537,751
|
Cash, cash equivalents
and restricted cash at end of period
|
$
301,641
|
|
$
543,022
|
|
$
381,007
|
|
|
(1)
|
Net income and benefit
for deferred income taxes for the three months ended March 31, 2022
have been revised to reflect the correction of an error of
provision for income taxes related to an intercompany sale of
intellectual property that occurred in 2022.
|
AKAMAI TECHNOLOGIES,
INC.
SUPPLEMENTAL REVENUE
DATA – REVENUE BY SOLUTION
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Security
|
$ 405,552
|
|
$ 400,201
|
|
$ 381,567
|
Delivery
|
394,384
|
|
415,183
|
|
444,148
|
Compute
|
115,762
|
|
112,395
|
|
77,932
|
Total
revenue
|
$ 915,698
|
|
$ 927,779
|
|
$ 903,647
|
Revenue growth rates
year-over-year:
|
|
|
|
|
|
Security
|
6 %
|
|
10 %
|
|
23 %
|
Delivery
|
(11)
|
|
(12)
|
|
(6)
|
Compute
|
49
|
|
61
|
|
32
|
Total
revenue
|
1 %
|
|
2 %
|
|
7 %
|
Revenue growth rates
year-over-year, adjusted for the impact of foreign
exchange rates (1):
|
|
|
|
|
|
Security
|
9 %
|
|
14 %
|
|
26 %
|
Delivery
|
(9)
|
|
(8)
|
|
(4)
|
Compute
|
51
|
|
65
|
|
35
|
Total
revenue
|
4 %
|
|
6 %
|
|
9 %
|
AKAMAI TECHNOLOGIES,
INC.
SUPPLEMENTAL REVENUE
DATA – REVENUE BY GEOGRAPHY
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
U.S.
|
$ 473,833
|
|
$ 482,803
|
|
$ 481,007
|
International
|
441,865
|
|
444,976
|
|
422,640
|
Total
revenue
|
$ 915,698
|
|
$ 927,779
|
|
$ 903,647
|
Revenue growth rates
year-over-year:
|
|
|
|
|
|
U.S.
|
(1) %
|
|
1 %
|
|
4 %
|
International
|
5
|
|
4
|
|
11
|
Total
revenue
|
1 %
|
|
2 %
|
|
7 %
|
Revenue growth rates
year-over-year, adjusted for the impact of foreign
exchange rates (1):
|
|
|
|
|
|
U.S.
|
(1) %
|
|
1 %
|
|
4 %
|
International
|
9
|
|
12
|
|
16
|
Total
revenue
|
4 %
|
|
6 %
|
|
9 %
|
|
|
(1)
|
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,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
General and
administrative expenses:
|
|
|
|
|
|
Payroll and related
costs
|
$
57,690
|
|
$
53,769
|
|
$
53,317
|
Stock-based
compensation
|
17,165
|
|
16,210
|
|
17,436
|
Depreciation and
amortization
|
16,721
|
|
17,442
|
|
19,678
|
Facilities-related
costs
|
23,989
|
|
23,981
|
|
26,579
|
(Benefit) provision for
doubtful accounts
|
(83)
|
|
4,046
|
|
1,288
|
Acquisition-related
costs
|
4,703
|
|
2,767
|
|
10,616
|
Software and related
service costs
|
13,871
|
|
13,445
|
|
11,024
|
Other
expenses
|
12,083
|
|
18,640
|
|
13,324
|
Total general and
administrative expenses
|
$ 146,139
|
|
$ 150,300
|
|
$ 153,262
|
|
|
|
|
|
|
General and
administrative expenses–functional (1):
|
Global
functions
|
$
56,950
|
|
$
56,545
|
|
$
56,131
|
As a percentage of
revenue
|
6 %
|
|
6 %
|
|
6 %
|
Infrastructure
|
84,569
|
|
86,942
|
|
85,199
|
As a percentage of
revenue
|
9 %
|
|
9 %
|
|
9 %
|
Other
|
4,620
|
|
6,813
|
|
11,932
|
Total general and
administrative expenses
|
$ 146,139
|
|
$ 150,300
|
|
$ 153,262
|
As a percentage of
revenue
|
16 %
|
|
16 %
|
|
17 %
|
|
|
|
|
|
|
Stock-based
compensation:
|
|
|
|
|
|
Cost of
revenue
|
$
9,329
|
|
$
7,750
|
|
$
6,233
|
Research and
development
|
21,844
|
|
21,778
|
|
20,232
|
Sales and
marketing
|
13,545
|
|
12,636
|
|
12,326
|
General and
administrative
|
17,165
|
|
16,210
|
|
17,436
|
Total stock-based
compensation
|
$
61,883
|
|
$
58,374
|
|
$
56,227
|
|
|
(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 related service
costs, business insurance and taxes. Our network infrastructure
function is responsible for network planning, sourcing,
architecture evaluation and platform security. Other expense
includes acquisition-related costs and provision for doubtful
accounts.
|
AKAMAI TECHNOLOGIES,
INC.
OTHER SUPPLEMENTAL
DATA
|
|
|
Three Months
Ended
|
(in thousands,
except end of period statistics)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Depreciation and
amortization:
|
|
|
|
|
|
Network-related
depreciation
|
$
52,176
|
|
$
65,265
|
|
$
61,386
|
Capitalized
internal-use software development amortization
|
43,477
|
|
41,816
|
|
40,650
|
Other depreciation and
amortization
|
16,233
|
|
16,974
|
|
19,152
|
Depreciation of
property and equipment
|
111,886
|
|
124,055
|
|
121,188
|
Capitalized stock-based
compensation amortization (1)
|
7,534
|
|
7,407
|
|
7,648
|
Capitalized interest
expense
amortization
(1)
|
125
|
|
115
|
|
115
|
Amortization of
acquired intangible assets
|
15,912
|
|
16,993
|
|
13,644
|
Total depreciation and
amortization
|
$ 135,457
|
|
$ 148,570
|
|
$ 142,595
|
|
|
|
|
|
|
Capital
expenditures, excluding stock-based compensation and interest
expense (2) (3):
|
|
|
|
|
|
Purchases of property
and equipment
|
$ 157,530
|
|
$
93,547
|
|
$
63,225
|
Capitalized
internal-use software development costs
|
66,264
|
|
50,956
|
|
53,190
|
Total capital
expenditures, excluding stock-based compensation and
interest expense
|
$ 223,794
|
|
$ 144,503
|
|
$ 116,415
|
Capex as a
percentage of revenue (3)
|
24 %
|
|
16 %
|
|
13 %
|
|
|
|
|
|
|
End of period
statistics:
|
|
|
|
|
|
Number of
employees
|
9,960
|
|
9,811
|
|
9,180
|
|
|
(1)
|
Amortization of
capitalized stock-based compensation and interest expense in this
table excludes amortization of capitalized stock-based compensation
and interest expense capitalized as part of the implementation of
cloud-computing arrangements and contract fulfillment costs.
However, the amounts are included in our total amortization of
capitalized stock-based compensation and interest expense that is
excluded from our non-GAAP measures (see reconciliations of GAAP to
non-GAAP measures).
|
(2)
|
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 versus prior periods.
|
(3)
|
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 TAX
RATE
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
(1)
|
Income from
operations
|
$ 126,638
|
|
$ 167,475
|
|
$ 173,319
|
GAAP operating
margin
|
14 %
|
|
18 %
|
|
19 %
|
Amortization of
acquired intangible assets
|
15,912
|
|
16,993
|
|
13,644
|
Stock-based
compensation
|
61,883
|
|
58,374
|
|
56,227
|
Amortization of
capitalized stock-based compensation and capitalized
interest expense
|
7,913
|
|
7,786
|
|
7,947
|
Restructuring
charge
|
44,723
|
|
571
|
|
8,016
|
Acquisition-related
costs
|
6,768
|
|
6,439
|
|
10,943
|
Operating
adjustments
|
137,199
|
|
90,163
|
|
96,777
|
Non-GAAP income from
operations
|
$ 263,837
|
|
$ 257,638
|
|
$ 270,096
|
Non-GAAP operating
margin
|
29 %
|
|
28 %
|
|
30 %
|
|
|
|
|
|
|
Net income
|
$
97,106
|
|
$ 128,762
|
|
$ 133,376
|
Operating adjustments
(from above)
|
137,199
|
|
90,163
|
|
96,777
|
Amortization of debt
issuance costs
|
1,098
|
|
1,099
|
|
1,119
|
(Gain) loss on
investments
|
(174)
|
|
—
|
|
8,901
|
Loss from equity
method investment
|
—
|
|
—
|
|
7,635
|
Income tax effect of
above non-GAAP adjustments and certain discrete
tax items
|
(16,915)
|
|
(3,579)
|
|
(23,013)
|
Non-GAAP net
income
|
$ 218,314
|
|
$ 216,445
|
|
$ 224,795
|
|
|
|
|
|
|
GAAP tax
rate
|
23 %
|
|
24 %
|
|
12 %
|
Income tax-effect of
non-GAAP adjustments and certain discrete
tax items
|
(5)
|
|
(7)
|
|
4
|
Non-GAAP tax
rate
|
18 %
|
|
17 %
|
|
16 %
|
|
|
(1)
|
Net income, income tax
effect of above non-GAAP adjustments and certain discrete tax items
and GAAP tax rate for the three months ended March 31, 2022 have
been revised to reflect the correction of an error of provision for
income taxes related to an intercompany sale of intellectual
property that occurred in 2022.
|
AKAMAI
TECHNOLOGIES, INC.
RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE
|
|
|
Three Months
Ended
|
(in thousands,
except per share data)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
(1)
|
GAAP net income per
diluted share
|
$
0.62
|
|
$
0.82
|
|
$
0.82
|
Adjustments to net
income:
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
0.10
|
|
0.11
|
|
0.08
|
Stock-based
compensation
|
0.40
|
|
0.37
|
|
0.34
|
Amortization of
capitalized stock-based compensation and capitalized
interest expense
|
0.05
|
|
0.05
|
|
0.05
|
Restructuring
charge
|
0.29
|
|
—
|
|
0.05
|
Acquisition-related
costs
|
0.04
|
|
0.04
|
|
0.07
|
Amortization of debt
issuance costs
|
0.01
|
|
0.01
|
|
0.01
|
(Gain) loss on
investments
|
—
|
|
—
|
|
0.05
|
Loss from equity
method investment
|
—
|
|
—
|
|
0.05
|
Income tax effect of
above non-GAAP adjustments and certain discrete
tax items
|
(0.11)
|
|
(0.02)
|
|
(0.14)
|
Adjustment for shares
(2)
|
—
|
|
—
|
|
0.02
|
Non-GAAP net income per
diluted share
|
$
1.40
|
|
$
1.37
|
|
$
1.39
|
|
|
|
|
|
|
Shares used in GAAP per
diluted share calculations
|
156,135
|
|
157,451
|
|
163,637
|
Impact of benefit from
note hedge transactions (2)
|
—
|
|
—
|
|
(1,822)
|
Shares used in non-GAAP
per diluted share calculations (2)
|
156,135
|
|
157,451
|
|
161,815
|
|
|
(1)
|
GAAP net income per
diluted share and per share adjustment for income tax effect of
above non-GAAP adjustments and certain discrete tax items for the
three months ended March 31, 2022 have been revised to reflect the
correction of an error of provision for income taxes related to an
intercompany sale of intellectual property that occurred in
2022.
|
(2)
|
Shares used in non-GAAP
per diluted share calculations have been adjusted for the three
months ended March 31, 2022 for the benefit of Akamai's note hedge
transactions. During that period, Akamai's average stock price was
in excess of $95.10, which is the initial conversion price of
Akamai's convertible senior notes due in 2025. See Use of
Non-GAAP Financial Measures below for further
definition.
|
AKAMAI TECHNOLOGIES,
INC.
RECONCILIATION OF
GAAP NET INCOME TO ADJUSTED EBITDA
|
|
|
Three Months
Ended
|
(in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
(1)
|
Net income
|
$
97,106
|
|
$ 128,762
|
|
$ 133,376
|
Net income
margin
|
11 %
|
|
14 %
|
|
15 %
|
Interest and
marketable securities (income) loss, net
|
(5,292)
|
|
(5,018)
|
|
211
|
Provision for income
taxes
|
29,780
|
|
39,638
|
|
19,837
|
Depreciation and
amortization
|
111,887
|
|
124,055
|
|
121,188
|
Amortization of
capitalized stock-based compensation and capitalized
interest expense
|
7,913
|
|
7,786
|
|
7,947
|
Amortization of
acquired intangible assets
|
15,912
|
|
16,993
|
|
13,644
|
Stock-based
compensation
|
61,883
|
|
58,374
|
|
56,227
|
Restructuring
charge
|
44,723
|
|
571
|
|
8,016
|
Acquisition-related
costs
|
6,768
|
|
6,439
|
|
10,943
|
Interest
expense
|
2,681
|
|
2,684
|
|
2,695
|
(Gain) loss on
investments
|
(174)
|
|
—
|
|
8,901
|
Loss from equity
method investment
|
—
|
|
—
|
|
7,635
|
Other expense,
net
|
2,537
|
|
1,409
|
|
664
|
Adjusted
EBITDA
|
$ 375,724
|
|
$ 381,693
|
|
$ 391,284
|
Adjusted EBITDA
margin
|
41 %
|
|
41 %
|
|
43 %
|
|
|
(1)
|
Net income, net income
margin and provision for income taxes for the three months ended
March 31, 2022 have been revised to reflect the correction of an
error of provision for income taxes related to an intercompany sale
of intellectual property that occurred in 2022.
|
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. These non-GAAP financial measures are non-GAAP income
from operations, non-GAAP operating margin, non-GAAP net income,
non-GAAP net income per diluted share, Adjusted EBITDA, Adjusted
EBITDA margin, non-GAAP tax rate, 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 comparison of financial results across accounting
periods and to those of our 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, 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 peer companies because
such amounts vary significantly based on the magnitude of the
acquisition transactions and do not reflect Akamai's core
operations.
- Restructuring charge – 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 cancelled 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 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 issuance costs of the convertible senior notes are
amortized to interest expense and are 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.
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; 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; amortization of debt 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.
Non-GAAP tax rate – GAAP tax rate excluding the tax
effect of non-GAAP adjustments and certain discrete tax items.
Non-GAAP net income per diluted share, or EPS –
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.
Adjusted EBITDA – GAAP net income excluding the
following items: interest and marketable securities income and
losses; income taxes; depreciation and amortization of tangible and
intangible assets; stock-based compensation; amortization of
capitalized stock-based compensation; acquisition-related costs;
restructuring charges; foreign exchange gains and losses; interest
expense; amortization of capitalized interest expense; certain
gains and losses on investments; income and losses on equity method
investment; 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 versus prior periods.
Capex as a percentage of revenue – Capital
expenditures, or capex, excluding stock-based compensation and
interest expense, stated as a percentage of revenue.
Impact of foreign currency exchange rate – 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 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 expected
future financial performance, 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, inability to
continue to generate cash at the same level as prior years; 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; effects of competition, including
pricing pressure and changing business models; impact of
macroeconomic trends, including economic uncertainty, turmoil in
the financial services industry, the effects of inflation, rising
and fluctuating interest rates, foreign currency exchange rate
fluctuations, securities market volatility and monetary supply
fluctuations; conditions and uncertainties in the geopolitical
environment, including sanctions and disruptions resulting from the
ongoing war in Ukraine; continuing
supply chain and logistics costs, constraints, changes or
disruptions; defects or disruptions in our products or IT systems,
including cyber-attacks, 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; our ability to attract and retain key
personnel; impact of the COVID-19 pandemic; 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
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.
Contacts:
|
Gina Sorice
|
|
Tom Barth
|
Media
Relations
|
|
Investor
Relations
|
Akamai
Technologies
|
|
Akamai
Technologies
|
646-320-4107
|
|
617-274-7130
|
gsorice@akamai.com
|
|
tbarth@akamai.com
|
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SOURCE Akamai Technologies, Inc.