CAMBRIDGE, Mass., Feb. 11, 2020 /PRNewswire/ -- Akamai
Technologies, Inc. (NASDAQ: AKAM), the intelligent edge platform
for securing and delivering digital experiences, today
reported financial results for the fourth quarter and full-year
ended December 31, 2019.
"We were very pleased with our 2019 performance. Both revenue
and earnings exceeded our expectations due to the rapid growth of
our cloud security business, robust seasonal traffic on our network
and our continued focus on operational excellence," said Dr.
Tom Leighton, Chief Executive
Officer of Akamai. "As a result, we achieved another year of strong
revenue growth and operating margin expansion, and we believe that
we are well-positioned to achieve our 30% non-GAAP operating margin
goal in 2020, as we continue to invest in innovation and new
products to drive future growth."
Akamai delivered the following results for the fourth quarter
and full-year ended December 31, 2019:
Revenue: Revenue for the fourth quarter was $772 million, an 8% increase over fourth quarter
2018 revenue of $713 million and a 9%
increase when adjusted for foreign exchange.* Total revenue for
2019 was $2.894 billion compared to
$2.714 billion for 2018, up 7%
year-over-year and up 8% when adjusted for foreign exchange.*
Revenue by
Division(1):
- Web Division revenue for the fourth quarter was $420 million, up 9% year-over-year and when
adjusted for foreign exchange.* Web Division revenue for 2019 was
$1.566 billion, up 8% year-over-year
and up 9% when adjusted for foreign exchange.*
- Media and Carrier Division revenue for the fourth quarter was
$353 million, up 8% year-over-year
and when adjusted for foreign exchange.* Media and Carrier Division
revenue for 2019 was $1.327 billion,
up 5% year-over-year and up 6% when adjusted for foreign
exchange.*
Revenue from Cloud Security
Solutions(2):
- Cloud Security Solutions revenue for the fourth quarter was
$238 million, up 29% year-over-year
and when adjusted for foreign exchange.* Cloud Security Solutions
revenue for 2019 was $849 million, up
29% year-over-year and up 30% when adjusted for foreign
exchange.*
Revenue from Internet Platform
Customers(3):
- Revenue from Internet Platform Customers for the fourth quarter
was $52 million, up 20%
year-over-year and when adjusted for foreign exchange.* Internet
Platform Customers revenue for 2019 was $189
million, up 8% year-over-year and when adjusted for foreign
exchange.*
- Revenue excluding Internet Platform Customers for the fourth
quarter was $720 million, up 7%
year-over-year and up 8% when adjusted for foreign exchange.*
Revenue excluding Internet Platform Customers for 2019 was
$2.704 billion, up 6% year-over-year
and up 8% when adjusted for foreign exchange.*
Revenue by Geography:
- U.S. revenue for the fourth quarter was $446 million, up 3% year-over-year. U.S. revenue
for 2019 was $1.694 billion, up 1%
year-over-year.
- International revenue for the fourth quarter was $326 million, up 17% year-over-year and up 18%
when adjusted for foreign exchange.* International revenue for 2019
was $1.199 billion, up 16%
year-over-year and up 20% when adjusted for foreign exchange.*
2019 items: Effective January 1,
2019, the expected average useful life of our network
assets, primarily servers, increased from four years to five years,
due to software and hardware initiatives undertaken to manage our
global network more efficiently. As a result, fourth quarter
year-over-year growth rates for GAAP and non-GAAP income from
operations, net income and EPS in the paragraphs below were
benefited by $7 million, or
$6 million net of tax and
$0.04 per share. Full-year growth
rates for GAAP and non-GAAP income from operations, net income and
EPS in the paragraphs below were benefited by $32 million, or $26
million net of tax and $0.16
per share.
Full-year GAAP growth rates were also impacted by a one-time
$50 million endowment to the Akamai
Foundation recognized in the second quarter of 2018, which did not
recur in 2019.
Income from operations: GAAP income from operations for
the fourth quarter was $135 million,
a 12% increase from fourth quarter 2018 income from operations of
$120 million. GAAP operating margin
for the fourth quarter was 18%, up 1 percentage point from the same
period last year. GAAP income from operations for 2019 was
$549 million, a 51% increase from the
prior year's GAAP income from operations of $362 million. Full-year GAAP operating margin was
19%, up 6 percentage points from the same period last year.
Non-GAAP income from operations* for the fourth quarter was
$222 million, a 10% increase from
fourth quarter 2018 non-GAAP income from operations of $201 million. Non-GAAP operating margin* for the
fourth quarter was 29%, up 1 percentage point from the same period
last year. Non-GAAP income from operations* for 2019 was
$844 million, a 17% increase from the
prior year's non-GAAP income from operations of $720 million. Full year non-GAAP operating
margin* was 29%, up 2 percentage points from the same period last
year.
Net income: GAAP net income for the fourth quarter was
$119 million, a 27% increase from
fourth quarter 2018 GAAP net income of $94
million. GAAP net income for 2019 was $478 million, a 60% increase from the prior
year's GAAP net income of $298
million.
Non-GAAP net income* for the fourth quarter was $202 million, a 15% increase from fourth quarter
2018 non-GAAP net income of $176
million. Non-GAAP net income* for 2019 was $739 million, a 21% increase from the prior
year's non-GAAP net income of $612
million.
EPS: GAAP EPS for the fourth quarter was $0.73 per diluted share, a 28% increase from
fourth quarter 2018 GAAP EPS of $0.57
and a 29% increase when adjusted for foreign exchange.* GAAP EPS
for 2019 was $2.90 per diluted share,
a 65% increase from prior year's GAAP EPS of $1.76 per diluted share and a 69% increase when
adjusted for foreign exchange.*
Non-GAAP EPS* for the fourth quarter was $1.23 per diluted share, a 15% increase from
fourth quarter 2018 non-GAAP EPS of $1.07 and a 16% increase when adjusted for
foreign exchange.* Non-GAAP EPS* for 2019 was $4.49 per diluted share, a 24% increase from
prior year's non-GAAP EPS of $3.62
per diluted share and a 26% increase when adjusted for foreign
exchange.*
Adjusted EBITDA*: Adjusted EBITDA* for the fourth quarter
was $319 million, a 6% increase from
fourth quarter 2018 Adjusted EBITDA of $301
million. Adjusted EBITDA margin* for the fourth quarter was
41%, down 1 percentage point from the same period last year.
Adjusted EBITDA* for 2019 was $1.211
billion, an 11% increase from the prior year's Adjusted
EBITDA of $1.092 billion. Adjusted
EBITDA margin* was 42%, up 2 percentage points from the same period
last year.
Supplemental cash information: Cash from operations for
the quarter was $282 million, or 37%
of revenue. Cash from operations for 2019 was $1.058 billion, or 37% of revenue. Cash, cash
equivalents and marketable securities was $2.4 billion as of December 31, 2019.
Share repurchases: The Company spent $43 million in the fourth quarter to repurchase
0.5 million shares of its common stock at an average price of
$88.48 per share. For the full-year,
the Company spent $335 million to
repurchase 4.0 million shares of its common stock at an average
price of $82.90 per share. The
Company had 162 million shares of common stock outstanding as of
December 31, 2019.
* 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
(2) Revenue from Cloud Security Solutions – A
product-focused reporting view that reflects revenue from Cloud
Security Solutions separately from all other solution
categories
(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 7619277. 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 7619277.
The archived webcast of this event may be accessed through the
Akamai website.
About Akamai
Akamai secures and delivers digital
experiences for the world's largest companies. Akamai's intelligent
edge platform surrounds everything, from the enterprise to the
cloud, so customers and their businesses can be fast, smart and
secure. Top brands globally rely on Akamai to help them realize
competitive advantage through agile solutions that extend the power
of their multi-cloud architectures. Akamai keeps decisions, apps
and experiences closer to users than anyone – and attacks and
threats far away. Akamai's portfolio of edge security, web and
mobile performance, enterprise access and video delivery solutions
is supported by unmatched customer service, analytics and 24/7/365
monitoring. To learn why the world's top brands trust Akamai, visit
www.akamai.com, blogs.akamai.com, or @Akamai on Twitter.
AKAMAI
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
(in
thousands)
|
December
31,
2019
(1)
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
543,745
|
|
|
$
|
1,036,455
|
|
Marketable
securities
|
993,249
|
|
|
855,650
|
|
Accounts receivable,
net
|
551,943
|
|
|
479,889
|
|
Prepaid expenses and
other current assets
|
142,676
|
|
|
163,360
|
|
Total current
assets
|
2,231,613
|
|
|
2,535,354
|
|
Marketable
securities
|
835,384
|
|
|
209,066
|
|
Property and
equipment, net
|
1,152,153
|
|
|
910,618
|
|
Operating lease
right-of-use assets
|
758,450
|
|
|
—
|
|
Acquired intangible
assets, net
|
179,431
|
|
|
168,348
|
|
Goodwill
|
1,600,265
|
|
|
1,487,404
|
|
Deferred income tax
assets
|
76,528
|
|
|
34,913
|
|
Other
assets
|
173,062
|
|
|
116,067
|
|
Total
assets
|
$
|
7,006,886
|
|
|
$
|
5,461,770
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
138,946
|
|
|
$
|
99,089
|
|
Accrued
expenses
|
334,861
|
|
|
328,304
|
|
Deferred
revenue
|
71,223
|
|
|
69,083
|
|
Convertible senior
notes
|
—
|
|
|
686,552
|
|
Operating lease
liabilities
|
139,463
|
|
|
—
|
|
Other current
liabilities
|
8,843
|
|
|
27,681
|
|
Total current
liabilities
|
693,336
|
|
|
1,210,709
|
|
Deferred
revenue
|
4,368
|
|
|
4,557
|
|
Deferred income tax
liabilities
|
29,187
|
|
|
19,624
|
|
Convertible senior
notes
|
1,839,791
|
|
|
874,080
|
|
Operating lease
liabilities
|
692,181
|
|
|
—
|
|
Other
liabilities
|
90,065
|
|
|
160,940
|
|
Total
liabilities
|
3,348,928
|
|
|
2,269,910
|
|
Total stockholders'
equity
|
3,657,958
|
|
|
3,191,860
|
|
Total liabilities and
stockholders' equity
|
$
|
7,006,886
|
|
|
$
|
5,461,770
|
|
|
|
(1)
|
On January 1, 2019,
Akamai adopted the new lease accounting standard on a modified
retrospective basis by applying the new standard to its lease
portfolio as of January 1, 2019, while continuing to apply legacy
guidance in the comparative periods. Adoption of the standard
required Akamai to record right-of-use assets and lease liabilities
for its operating leases related to real estate and co-location
arrangements. The adoption of the standard also resulted in
elimination of related accrued expenses and deferred rent
liabilities, as of January 1, 2019, that are now included in the
new lease balances.
|
AKAMAI
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in thousands,
except per share data)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Revenue
|
$
|
772,123
|
|
|
$
|
709,912
|
|
|
$
|
713,363
|
|
|
$
|
2,893,617
|
|
|
$
|
2,714,474
|
|
Costs and operating
expenses:
|
|
|
|
|
|
|
|
|
|
Cost of revenue
(1) (2)
|
257,750
|
|
|
246,938
|
|
|
243,927
|
|
|
987,624
|
|
|
953,485
|
|
Research and
development (1)
|
68,898
|
|
|
64,887
|
|
|
60,342
|
|
|
261,365
|
|
|
246,165
|
|
Sales and marketing
(1)
|
140,243
|
|
|
122,258
|
|
|
137,797
|
|
|
523,883
|
|
|
517,353
|
|
General and
administrative (1) (2)
|
149,926
|
|
|
123,216
|
|
|
129,565
|
|
|
516,093
|
|
|
574,067
|
|
Amortization of
acquired intangible assets
|
9,710
|
|
|
9,624
|
|
|
8,292
|
|
|
38,581
|
|
|
33,311
|
|
Restructuring charge
(benefit)
|
10,274
|
|
|
(300)
|
|
|
13,152
|
|
|
17,153
|
|
|
27,594
|
|
Total costs and
operating expenses
|
636,801
|
|
|
566,623
|
|
|
593,075
|
|
|
2,344,699
|
|
|
2,351,975
|
|
Income from
operations
|
135,322
|
|
|
143,289
|
|
|
120,288
|
|
|
548,918
|
|
|
362,499
|
|
Interest
income
|
11,402
|
|
|
7,908
|
|
|
7,308
|
|
|
34,355
|
|
|
26,940
|
|
Interest
expense
|
(16,675)
|
|
|
(12,127)
|
|
|
(14,582)
|
|
|
(49,364)
|
|
|
(43,202)
|
|
Other (expense)
income, net
|
(609)
|
|
|
(752)
|
|
|
59
|
|
|
(1,428)
|
|
|
(3,148)
|
|
Income before
(provision) benefit for income taxes
|
129,440
|
|
|
138,318
|
|
|
113,073
|
|
|
532,481
|
|
|
343,089
|
|
(Provision) benefit
for income taxes
|
(10,632)
|
|
|
960
|
|
|
(19,058)
|
|
|
(53,350)
|
|
|
(44,716)
|
|
Income (loss) from
equity method investment
|
292
|
|
|
(1,388)
|
|
|
—
|
|
|
(1,096)
|
|
|
—
|
|
Net income
|
$
|
119,100
|
|
|
$
|
137,890
|
|
|
$
|
94,015
|
|
|
$
|
478,035
|
|
|
$
|
298,373
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.74
|
|
|
$
|
0.85
|
|
|
$
|
0.58
|
|
|
$
|
2.94
|
|
|
$
|
1.78
|
|
Diluted
|
$
|
0.73
|
|
|
$
|
0.84
|
|
|
$
|
0.57
|
|
|
$
|
2.90
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
Basic
|
161,737
|
|
|
162,445
|
|
|
162,958
|
|
|
162,706
|
|
|
167,312
|
|
Diluted
|
163,930
|
|
|
164,558
|
|
|
164,540
|
|
|
164,573
|
|
|
169,188
|
|
|
|
(1)
|
Includes stock-based
compensation (see supplemental table for figures)
|
(2)
|
Includes depreciation
and amortization (see supplemental table for figures)
|
AKAMAI
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
119,100
|
|
|
$
|
137,890
|
|
|
$
|
94,015
|
|
|
$
|
478,035
|
|
|
$
|
298,373
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
115,800
|
|
|
110,604
|
|
|
116,294
|
|
|
440,674
|
|
|
434,520
|
|
Stock-based
compensation
|
46,878
|
|
|
46,815
|
|
|
44,998
|
|
|
187,140
|
|
|
183,813
|
|
(Benefit) provision
for deferred income taxes
|
(23,648)
|
|
|
(27)
|
|
|
(10,567)
|
|
|
933
|
|
|
2,339
|
|
Amortization of debt
discount and issuance costs
|
15,096
|
|
|
11,133
|
|
|
14,114
|
|
|
45,857
|
|
|
41,958
|
|
Restructuring-related
software charges
|
3,784
|
|
|
—
|
|
|
2,122
|
|
|
3,784
|
|
|
4,940
|
|
Other non-cash
reconciling items, net
|
966
|
|
|
2,598
|
|
|
2,718
|
|
|
4,744
|
|
|
12,078
|
|
Changes in operating
assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(26,327)
|
|
|
(17)
|
|
|
(16,834)
|
|
|
(64,471)
|
|
|
(30,445)
|
|
Prepaid expenses and
other current assets
|
23,352
|
|
|
11,624
|
|
|
(2,048)
|
|
|
11,689
|
|
|
(4,132)
|
|
Accounts payable and
accrued expenses
|
38,210
|
|
|
23,348
|
|
|
34,317
|
|
|
8,769
|
|
|
42,238
|
|
Deferred
revenue
|
(30,261)
|
|
|
(11,259)
|
|
|
(24,846)
|
|
|
(13,547)
|
|
|
(919)
|
|
Other current
liabilities
|
4,620
|
|
|
(3,111)
|
|
|
7,392
|
|
|
(17,230)
|
|
|
9,422
|
|
Other non-current
assets and liabilities
|
(5,430)
|
|
|
(32,213)
|
|
|
24,480
|
|
|
(28,073)
|
|
|
14,142
|
|
Net cash provided by
operating activities
|
282,140
|
|
|
297,385
|
|
|
286,155
|
|
|
1,058,304
|
|
|
1,008,327
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
Cash paid for
acquired businesses, net of cash acquired
|
(43,920)
|
|
|
—
|
|
|
—
|
|
|
(165,329)
|
|
|
(79)
|
|
Cash paid for equity
method investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,008)
|
|
|
—
|
|
Purchases of property
and equipment and capitalization of internal-use software
development costs
|
(133,666)
|
|
|
(152,633)
|
|
|
(117,334)
|
|
|
(562,077)
|
|
|
(405,741)
|
|
Purchases of short-
and long-term marketable securities
|
(466,585)
|
|
|
(981,805)
|
|
|
(91,611)
|
|
|
(1,840,148)
|
|
|
(873,697)
|
|
Proceeds from sales
and maturities of short- and long-term marketable
securities
|
205,903
|
|
|
229,796
|
|
|
380,034
|
|
|
1,085,229
|
|
|
775,050
|
|
Other non-current
assets and liabilities
|
(1,496)
|
|
|
(342)
|
|
|
612
|
|
|
399
|
|
|
(2,066)
|
|
Net cash (used in)
provided by investing activities
|
(439,764)
|
|
|
(904,984)
|
|
|
171,701
|
|
|
(1,517,934)
|
|
|
(506,533)
|
|
AKAMAI
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS, continued
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from the
issuance of convertible senior notes
|
—
|
|
|
1,135,629
|
|
|
—
|
|
|
1,135,629
|
|
|
1,132,185
|
|
Proceeds from the
issuance of warrants
|
—
|
|
|
185,150
|
|
|
—
|
|
|
185,150
|
|
|
119,945
|
|
Purchase of note
hedge related to convertible senior notes
|
—
|
|
|
(312,225)
|
|
|
—
|
|
|
(312,225)
|
|
|
(261,740)
|
|
Repayment of
convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
(690,000)
|
|
|
—
|
|
Proceeds from the
issuance of common stock under stock plans
|
13,908
|
|
|
14,432
|
|
|
10,111
|
|
|
57,112
|
|
|
62,608
|
|
Employee taxes paid
related to net share settlement of stock-based awards
|
(14,150)
|
|
|
(11,160)
|
|
|
(12,160)
|
|
|
(75,266)
|
|
|
(64,305)
|
|
Repurchases of common
stock
|
(42,731)
|
|
|
(175,541)
|
|
|
(124,075)
|
|
|
(334,519)
|
|
|
(750,000)
|
|
Other non-current
assets and liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,558)
|
|
|
(5,085)
|
|
Net cash (used in)
provided by financing activities
|
(42,973)
|
|
|
836,285
|
|
|
(126,124)
|
|
|
(35,677)
|
|
|
233,608
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
5,116
|
|
|
(5,328)
|
|
|
(1,316)
|
|
|
2,466
|
|
|
(12,844)
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
(195,481)
|
|
|
223,358
|
|
|
330,416
|
|
|
(492,841)
|
|
|
722,558
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
739,627
|
|
|
516,269
|
|
|
706,571
|
|
|
1,036,987
|
|
|
314,429
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
544,146
|
|
|
$
|
739,627
|
|
|
$
|
1,036,987
|
|
|
$
|
544,146
|
|
|
$
|
1,036,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AKAMAI
TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA –
REVENUE BY DIVISION
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December
31,
2018
(1)
|
|
December 31,
2019
|
|
December
31,
2018
(1)
|
Web
Division
|
$
|
419,529
|
|
|
$
|
390,223
|
|
|
$
|
386,268
|
|
|
$
|
1,566,401
|
|
|
$
|
1,448,644
|
|
Media and Carrier
Division
|
352,594
|
|
|
319,689
|
|
|
327,095
|
|
|
1,327,216
|
|
|
1,265,830
|
|
Total
revenue
|
$
|
772,123
|
|
|
$
|
709,912
|
|
|
$
|
713,363
|
|
|
$
|
2,893,617
|
|
|
$
|
2,714,474
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
|
|
|
|
Web
Division
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
8
|
%
|
|
11
|
%
|
Media and Carrier
Division
|
8
|
|
|
2
|
|
|
8
|
|
|
5
|
|
|
7
|
|
Total
revenue
|
8
|
%
|
|
6
|
%
|
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
|
|
|
|
Web
Division
|
9
|
%
|
|
10
|
%
|
|
10
|
%
|
|
9
|
%
|
|
10
|
%
|
Media and Carrier
Division
|
8
|
|
|
3
|
|
|
9
|
|
|
6
|
|
|
7
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
10
|
%
|
|
8
|
%
|
|
9
|
%
|
AKAMAI
TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA –
REVENUE FROM CLOUD SECURITY SOLUTIONS
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December
31,
2018
(3)
|
|
December 31,
2019
|
|
December
31,
2018
(3)
|
Cloud Security
Solutions
|
$
|
237,913
|
|
|
$
|
215,916
|
|
|
$
|
184,769
|
|
|
$
|
848,733
|
|
|
$
|
658,747
|
|
CDN and other
solutions
|
534,210
|
|
|
493,996
|
|
|
528,594
|
|
|
2,044,884
|
|
|
2,055,727
|
|
Total
revenue
|
$
|
772,123
|
|
|
$
|
709,912
|
|
|
$
|
713,363
|
|
|
$
|
2,893,617
|
|
|
$
|
2,714,474
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
|
|
|
|
Cloud Security
Solutions
|
29
|
%
|
|
28
|
%
|
|
35
|
%
|
|
29
|
%
|
|
35
|
%
|
CDN and other
solutions
|
1
|
|
|
(1)
|
|
|
1
|
|
|
(1)
|
|
|
3
|
|
Total
revenue
|
8
|
%
|
|
6
|
%
|
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(2):
|
|
|
|
|
|
|
|
|
|
Cloud Security
Solutions
|
29
|
%
|
|
29
|
%
|
|
37
|
%
|
|
30
|
%
|
|
35
|
%
|
CDN and other
solutions
|
1
|
|
|
(1)
|
|
|
2
|
|
|
1
|
|
|
2
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
10
|
%
|
|
8
|
%
|
|
9
|
%
|
|
|
(1)
|
As of January 1,
2019, 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. As the purchasing
patterns and required account expertise of customers change over
time, Akamai may reassign a customer's division from one to
another.
|
(2)
|
See Use of Non-GAAP
Financial Measures below for a definition
|
(3)
|
As of January 1,
2019, Akamai updated its methodology for allocating revenue to
specific solutions when solutions are sold as a bundle. Revenue
amounts were reassigned from CDN and other solutions revenue to
Cloud Security Solutions revenue as a result of this change and
historical results were revised in order to reflect the most recent
allocation methodologies and to provide a comparable view for all
periods presented.
|
AKAMAI
TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA –
REVENUE FROM INTERNET PLATFORM CUSTOMERS
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Revenue from Internet
Platform Customers
|
$
|
51,927
|
|
|
$
|
44,156
|
|
|
$
|
43,218
|
|
|
$
|
189,428
|
|
|
$
|
174,757
|
|
Revenue excluding
Internet Platform Customers
|
720,196
|
|
|
665,756
|
|
|
670,145
|
|
|
2,704,189
|
|
|
2,539,717
|
|
Total
revenue
|
$
|
772,123
|
|
|
$
|
709,912
|
|
|
$
|
713,363
|
|
|
$
|
2,893,617
|
|
|
$
|
2,714,474
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
|
|
|
|
Revenue from Internet
Platform Customers
|
20
|
%
|
|
2
|
%
|
|
(14)
|
%
|
|
8
|
%
|
|
(14)
|
%
|
Revenue excluding
Internet Platform Customers
|
7
|
|
|
6
|
|
|
10
|
|
|
6
|
|
|
11
|
|
Total
revenue
|
8
|
%
|
|
6
|
%
|
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(1):
|
|
|
|
|
|
|
|
|
|
Revenue from Internet
Platform Customers
|
20
|
%
|
|
2
|
%
|
|
(14)
|
%
|
|
8
|
%
|
|
(14)
|
%
|
Revenue excluding
Internet Platform Customers
|
8
|
|
|
7
|
|
|
11
|
|
|
8
|
|
|
11
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
10
|
%
|
|
8
|
%
|
|
9
|
%
|
AKAMAI
TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA –
REVENUE BY GEOGRAPHY
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
U.S.
|
$
|
446,036
|
|
|
$
|
413,116
|
|
|
$
|
434,231
|
|
|
$
|
1,694,211
|
|
|
$
|
1,683,272
|
|
International
|
326,087
|
|
|
296,796
|
|
|
279,132
|
|
|
1,199,406
|
|
|
1,031,202
|
|
Total
revenue
|
$
|
772,123
|
|
|
$
|
709,912
|
|
|
$
|
713,363
|
|
|
$
|
2,893,617
|
|
|
$
|
2,714,474
|
|
Revenue growth
rates year-over-year:
|
|
|
|
|
|
|
|
|
|
U.S.
|
3
|
%
|
|
—
|
%
|
|
2
|
%
|
|
1
|
%
|
|
3
|
%
|
International
|
17
|
|
|
15
|
|
|
20
|
|
|
16
|
|
|
21
|
|
Total
revenue
|
8
|
%
|
|
6
|
%
|
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
Revenue growth
rates year-over-year, adjusted for the impact of foreign exchange
rates(1):
|
|
|
|
|
|
|
|
|
|
U.S.
|
3
|
%
|
|
—
|
%
|
|
2
|
%
|
|
1
|
%
|
|
3
|
%
|
International
|
18
|
|
|
18
|
|
|
23
|
|
|
20
|
|
|
20
|
|
Total
revenue
|
9
|
%
|
|
7
|
%
|
|
10
|
%
|
|
8
|
%
|
|
9
|
%
|
|
|
(1)
|
See Use of Non-GAAP
Financial Measures below for a definition
|
AKAMAI
TECHNOLOGIES, INC. SUPPLEMENTAL OPERATING EXPENSE
DATA
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
General and
administrative expenses:
|
|
|
|
|
|
|
|
|
|
Payroll and related
costs
|
$
|
48,984
|
|
|
$
|
47,892
|
|
|
$
|
43,001
|
|
|
$
|
194,232
|
|
|
$
|
188,635
|
|
Stock-based
compensation
|
12,808
|
|
|
12,825
|
|
|
13,269
|
|
|
52,826
|
|
|
53,514
|
|
Depreciation and
amortization
|
22,167
|
|
|
19,269
|
|
|
20,273
|
|
|
78,587
|
|
|
80,014
|
|
Facilities-related
costs
|
27,196
|
|
|
21,413
|
|
|
22,216
|
|
|
90,674
|
|
|
86,107
|
|
(Benefit) provision
for doubtful accounts
|
(414)
|
|
|
623
|
|
|
1,079
|
|
|
1,924
|
|
|
2,672
|
|
Acquisition-related
costs
|
726
|
|
|
219
|
|
|
896
|
|
|
1,920
|
|
|
2,868
|
|
Legal and stockholder
matter costs
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
23,091
|
|
License of
patent
|
—
|
|
|
—
|
|
|
(4,355)
|
|
|
(8,855)
|
|
|
(17,146)
|
|
Endowment of Akamai
Foundation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
Professional fees and
other expenses
|
28,459
|
|
|
20,975
|
|
|
33,186
|
|
|
94,785
|
|
|
104,312
|
|
Total general and
administrative expenses
|
$
|
149,926
|
|
|
$
|
123,216
|
|
|
$
|
129,565
|
|
|
$
|
516,093
|
|
|
$
|
574,067
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses–functional(1):
|
|
|
|
|
|
|
|
|
|
Global
functions
|
$
|
51,416
|
|
|
$
|
47,731
|
|
|
$
|
47,547
|
|
|
$
|
198,077
|
|
|
$
|
197,377
|
|
As a percentage of
revenue
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
Infrastructure
|
88,198
|
|
|
74,643
|
|
|
80,659
|
|
|
307,500
|
|
|
308,915
|
|
As a percentage of
revenue
|
11
|
%
|
|
11
|
%
|
|
11
|
%
|
|
11
|
%
|
|
11
|
%
|
Other
|
10,312
|
|
|
842
|
|
|
1,359
|
|
|
10,516
|
|
|
67,775
|
|
Total general and
administrative expenses
|
$
|
149,926
|
|
|
$
|
123,216
|
|
|
$
|
129,565
|
|
|
$
|
516,093
|
|
|
$
|
574,067
|
|
As a percentage of
revenue
|
19
|
%
|
|
17
|
%
|
|
18
|
%
|
|
18
|
%
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation:
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$
|
5,562
|
|
|
$
|
5,555
|
|
|
$
|
5,549
|
|
|
$
|
22,479
|
|
|
$
|
21,892
|
|
Research and
development
|
12,742
|
|
|
12,842
|
|
|
11,350
|
|
|
49,685
|
|
|
44,034
|
|
Sales and
marketing
|
15,766
|
|
|
15,593
|
|
|
14,830
|
|
|
62,150
|
|
|
64,373
|
|
General and
administrative
|
12,808
|
|
|
12,825
|
|
|
13,269
|
|
|
52,826
|
|
|
53,514
|
|
Total stock-based
compensation
|
$
|
46,878
|
|
|
$
|
46,815
|
|
|
$
|
44,998
|
|
|
$
|
187,140
|
|
|
$
|
183,813
|
|
|
|
(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 expense
includes acquisition-related costs, provision for doubtful
accounts, the license of a patent, legal and stockholder matter
costs, transformation costs and the endowment to the Akamai
Foundation.
|
AKAMAI
TECHNOLOGIES, INC. OTHER SUPPLEMENTAL DATA
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in thousands,
except end of period statistics)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Depreciation and
amortization:
|
|
|
|
|
|
|
|
|
|
Network-related
depreciation (1)
|
$
|
34,186
|
|
|
$
|
31,840
|
|
|
$
|
37,592
|
|
|
$
|
125,588
|
|
|
$
|
150,458
|
|
Capitalized
internal-use software development amortization
|
41,501
|
|
|
41,842
|
|
|
42,440
|
|
|
165,240
|
|
|
143,752
|
|
Other depreciation
and amortization
|
21,703
|
|
|
18,843
|
|
|
19,802
|
|
|
76,827
|
|
|
78,396
|
|
Depreciation of
property and equipment
|
97,390
|
|
|
92,525
|
|
|
99,834
|
|
|
367,655
|
|
|
372,606
|
|
Capitalized
stock-based compensation amortization
|
7,747
|
|
|
7,500
|
|
|
7,175
|
|
|
30,613
|
|
|
25,237
|
|
Capitalized interest
expense amortization
|
953
|
|
|
955
|
|
|
993
|
|
|
3,825
|
|
|
3,366
|
|
Amortization of
acquired intangible assets
|
9,710
|
|
|
9,624
|
|
|
8,292
|
|
|
38,581
|
|
|
33,311
|
|
Total depreciation
and amortization
|
$
|
115,800
|
|
|
$
|
110,604
|
|
|
$
|
116,294
|
|
|
$
|
440,674
|
|
|
$
|
434,520
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures, excluding stock-based compensation and interest
expense(2)(3):
|
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
$
|
122,560
|
|
|
$
|
104,345
|
|
|
$
|
74,262
|
|
|
$
|
406,854
|
|
|
$
|
229,744
|
|
Capitalized
internal-use software development costs
|
50,497
|
|
|
49,754
|
|
|
50,920
|
|
|
202,691
|
|
|
198,327
|
|
Total capital
expenditures, excluding stock-based compensation and interest
expense
|
$
|
173,057
|
|
|
$
|
154,099
|
|
|
$
|
125,182
|
|
|
$
|
609,545
|
|
|
$
|
428,071
|
|
|
|
|
|
|
|
|
|
|
|
End of period
statistics:
|
|
|
|
|
|
|
|
|
|
Number of
employees
|
7,724
|
|
|
7,579
|
|
|
7,519
|
|
|
|
|
|
|
|
(1)
|
As of January 1,
2019, due to the software and hardware initiatives undertaken to
manage global network more efficiently, Akamai changed the
estimated useful life of its network assets, primarily servers,
from 4 years to 5 years. This prospective change decreased
depreciation expense in 2019, as compared to the comparative
periods presented in 2018.
|
(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 AND NET INCOME
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Income from
operations
|
$
|
135,322
|
|
|
$
|
143,289
|
|
|
$
|
120,288
|
|
|
$
|
548,918
|
|
|
$
|
362,499
|
|
GAAP operating
margin
|
18
|
%
|
|
20
|
%
|
|
17
|
%
|
|
19
|
%
|
|
13
|
%
|
Amortization of
acquired intangible assets
|
9,710
|
|
|
9,624
|
|
|
8,292
|
|
|
38,581
|
|
|
33,311
|
|
Stock-based
compensation
|
46,878
|
|
|
46,815
|
|
|
44,998
|
|
|
187,140
|
|
|
183,813
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
8,700
|
|
|
8,455
|
|
|
8,168
|
|
|
34,438
|
|
|
28,603
|
|
Restructuring charge
(benefit)
|
10,274
|
|
|
(300)
|
|
|
13,152
|
|
|
17,153
|
|
|
27,594
|
|
Acquisition-related
costs
|
726
|
|
|
219
|
|
|
896
|
|
|
1,920
|
|
|
2,868
|
|
Legal and stockholder
matter costs
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
23,091
|
|
Endowment of Akamai
Foundation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
Transformation
costs
|
—
|
|
|
—
|
|
|
5,178
|
|
|
5,527
|
|
|
7,730
|
|
Operating
adjustments
|
86,288
|
|
|
64,813
|
|
|
80,684
|
|
|
294,759
|
|
|
357,010
|
|
Non-GAAP income from
operations
|
$
|
221,610
|
|
|
$
|
208,102
|
|
|
$
|
200,972
|
|
|
$
|
843,677
|
|
|
$
|
719,509
|
|
Non-GAAP operating
margin
|
29
|
%
|
|
29
|
%
|
|
28
|
%
|
|
29
|
%
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
119,100
|
|
|
$
|
137,890
|
|
|
$
|
94,015
|
|
|
$
|
478,035
|
|
|
$
|
298,373
|
|
Operating adjustments
(from above)
|
86,288
|
|
|
64,813
|
|
|
80,684
|
|
|
294,759
|
|
|
357,010
|
|
Amortization of debt
discount and issuance costs
|
15,096
|
|
|
11,133
|
|
|
14,114
|
|
|
45,857
|
|
|
41,958
|
|
Loss on
investments
|
500
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
1,481
|
|
(Income) loss from
equity method investment
|
(292)
|
|
|
1,388
|
|
|
—
|
|
|
1,096
|
|
|
—
|
|
Income tax-effect of
above non-GAAP adjustments and certain discrete tax
items
|
(19,099)
|
|
|
(34,631)
|
|
|
(12,959)
|
|
|
(80,488)
|
|
|
(86,391)
|
|
Non-GAAP net
income
|
$
|
201,593
|
|
|
$
|
180,593
|
|
|
$
|
175,854
|
|
|
$
|
739,319
|
|
|
$
|
612,431
|
|
AKAMAI
TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP NET
INCOME PER DILUTED SHARE
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in thousands,
except per share data)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
GAAP net income per
diluted share
|
$
|
0.73
|
|
|
$
|
0.84
|
|
|
$
|
0.57
|
|
|
$
|
2.90
|
|
|
$
|
1.76
|
|
Amortization of
acquired intangible assets
|
0.06
|
|
|
0.06
|
|
|
0.05
|
|
|
0.23
|
|
|
0.20
|
|
Stock-based
compensation
|
0.29
|
|
|
0.28
|
|
|
0.27
|
|
|
1.14
|
|
|
1.09
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
0.05
|
|
|
0.05
|
|
|
0.05
|
|
|
0.21
|
|
|
0.17
|
|
Restructuring charge
(benefit)
|
0.06
|
|
|
—
|
|
|
0.08
|
|
|
0.10
|
|
|
0.16
|
|
Acquisition-related
costs
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
Legal and stockholder
matter costs
|
0.06
|
|
|
—
|
|
|
—
|
|
|
0.06
|
|
|
0.14
|
|
Endowment of Akamai
Foundation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.30
|
|
Transformation
costs
|
—
|
|
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|
0.05
|
|
Amortization of debt
discount and issuance costs
|
0.09
|
|
|
0.07
|
|
|
0.09
|
|
|
0.28
|
|
|
0.25
|
|
Loss on
investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
(Income) loss from
equity method investment
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Income tax effect of
above non-GAAP adjustments and certain discrete tax
items
|
(0.12)
|
|
|
(0.21)
|
|
|
(0.08)
|
|
|
(0.49)
|
|
|
(0.51)
|
|
Non-GAAP net income
per diluted share
|
$
|
1.23
|
|
|
$
|
1.10
|
|
|
$
|
1.07
|
|
|
$
|
4.49
|
|
|
$
|
3.62
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
diluted per share calculations
|
163,930
|
|
|
164,558
|
|
|
164,540
|
|
|
164,573
|
|
|
169,188
|
|
AKAMAI
TECHNOLOGIES, INC. RECONCILIATION OF GAAP NET INCOME TO
ADJUSTED EBITDA
|
|
|
Three Months
Ended
|
|
Year Ended
|
(in
thousands)
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December
31,
2019
|
|
December
31,
2018
|
Net income
|
$
|
119,100
|
|
|
$
|
137,890
|
|
|
$
|
94,015
|
|
|
$
|
478,035
|
|
|
$
|
298,373
|
|
Interest
income
|
(11,402)
|
|
|
(7,908)
|
|
|
(7,308)
|
|
|
(34,355)
|
|
|
(26,940)
|
|
Provision (benefit)
for income taxes
|
10,632
|
|
|
(960)
|
|
|
19,058
|
|
|
53,350
|
|
|
44,716
|
|
Depreciation and
amortization
|
97,390
|
|
|
92,525
|
|
|
99,834
|
|
|
367,655
|
|
|
372,606
|
|
Amortization of
capitalized stock-based compensation and capitalized interest
expense
|
8,700
|
|
|
8,455
|
|
|
8,168
|
|
|
34,438
|
|
|
28,603
|
|
Amortization of
acquired intangible assets
|
9,710
|
|
|
9,624
|
|
|
8,292
|
|
|
38,581
|
|
|
33,311
|
|
Stock-based
compensation
|
46,878
|
|
|
46,815
|
|
|
44,998
|
|
|
187,140
|
|
|
183,813
|
|
Restructuring charge
(benefit)
|
10,274
|
|
|
(300)
|
|
|
13,152
|
|
|
17,153
|
|
|
27,594
|
|
Acquisition-related
costs
|
726
|
|
|
219
|
|
|
896
|
|
|
1,920
|
|
|
2,868
|
|
Legal and stockholder
matter costs
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
23,091
|
|
Endowment of Akamai
Foundation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
Transformation
costs
|
—
|
|
|
—
|
|
|
5,178
|
|
|
5,527
|
|
|
7,730
|
|
Interest
expense
|
16,675
|
|
|
12,127
|
|
|
14,582
|
|
|
49,364
|
|
|
43,202
|
|
Loss on
investments
|
500
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
1,481
|
|
(Income) loss from
equity method investment
|
(292)
|
|
|
1,388
|
|
|
—
|
|
|
1,096
|
|
|
—
|
|
Other expense
(income), net
|
109
|
|
|
752
|
|
|
(59)
|
|
|
1,368
|
|
|
1,667
|
|
Adjusted
EBITDA
|
$
|
319,000
|
|
|
$
|
300,627
|
|
|
$
|
300,806
|
|
|
$
|
1,211,332
|
|
|
$
|
1,092,115
|
|
Adjusted EBITDA
margin
|
41
|
%
|
|
42
|
%
|
|
42
|
%
|
|
42
|
%
|
|
40
|
%
|
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 are unique to each acquisition; therefore, Akamai
excludes amortization of acquired intangible assets from its
non-GAAP financial measures to provide investors with a consistent
basis for comparing pre- and post-acquisition operating
results.
- Stock-based compensation and amortization of capitalized
stock-based compensation – Although stock-based compensation is
an important aspect of the compensation paid to Akamai's employees,
the grant date fair value varies based on the stock price at the
time of grant, varying valuation methodologies, subjective
assumptions and the variety of award types. This makes the
comparison of Akamai's current financial results to previous and
future periods difficult to interpret; therefore, Akamai believes
it is useful to exclude stock-based compensation and amortization
of capitalized stock-based compensation from its non-GAAP financial
measures in order to highlight the performance of Akamai's core
business and to be consistent with the way many investors evaluate
its performance and compare its operating results to peer
companies.
- Acquisition-related costs – Acquisition-related costs
include transaction fees, advisory fees, due diligence costs and
other direct costs associated with strategic activities. In
addition, subsequent adjustments to Akamai's initial estimated
amounts of contingent consideration and indemnification associated
with specific acquisitions are included within acquisition-related
costs. These amounts are impacted by the timing and size of the
acquisitions. Akamai excludes acquisition-related costs from its
non-GAAP financial measures to provide a useful comparison of
Akamai's operating results to prior periods and to its peer
companies because such amounts vary significantly based on the
magnitude of the acquisition transactions 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 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%. In February 2014, Akamai issued $690 million of convertible senior notes due 2019
with a coupon interest rate of 0%. The imputed interest rates of
these convertible senior notes were 3.10%, 4.26% and 3.20%,
respectively. This is a result of the debt discounts recorded for
the conversion features that are required to be separately
accounted for as equity under GAAP, thereby reducing the carrying
value of the convertible debt instruments. The debt discounts are
amortized as interest expense together with the issuance costs of
the debt. The interest expense excluded from Akamai's non-GAAP
results 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.
- 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 them are not representative
of Akamai's core business operations and ongoing operating
performance.
- Legal and stockholder matter costs – Akamai has incurred
losses related to the settlement of legal matters and costs from
professional service providers related to a non-routine stockholder
matter. 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.
- Endowment of Akamai Foundation – During the second
quarter of 2018, Akamai incurred a charge to endow the Akamai
Foundation. Akamai believes excluding this amount from non-GAAP
financial measures is useful to investors as this one-time expense
is not representative of its core business operations.
- Transformation costs – Akamai has incurred professional
services fees associated with internal transformation programs
designed to improve its operating margins and that are part of a
planned program intended to significantly change the manner in
which business in conducted. Akamai believes excluding these
amounts from its non-GAAP financial measures is useful to investors
as the types of events and activities giving rise to them occur
infrequently and 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 of its
equity method investment. Akamai excludes such income and losses
because it lacks 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; gains and losses on legal settlements; costs
from professional service providers related to a non-routine
stockholder matter; costs incurred related to the establishment of
an endowment to the Akamai Foundation; transformation costs; 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; gains and losses on legal settlements; costs
from professional service providers related to a non-routine
stockholder matter; costs incurred related to the establishment of
an endowment to the Akamai Foundation; transformation costs;
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.
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 transactions entered into in connection
with the issuances of $1,150 million
of convertible senior notes due 2027 and 2025. 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 and
until 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 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; gains and losses
on legal settlements; costs from professional service providers
related to a non-routine stockholder matter; costs incurred related
to the establishment of an endowment to the Akamai Foundation;
transformation costs; 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.
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 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
margin improvement. 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 and
manage our expenses as planned; 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; competitive factors; financial impact of completed and
potential future acquisitions; 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:
|
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.