Akamai Reports Second Quarter 2017 Financial Results
CAMBRIDGE, Mass., July 25, 2017 /PRNewswire/ --
-- Revenue of $609 million, up 6% year-over-year and 7% when adjusted for
foreign exchange*
-- Revenue excluding Internet Platform Customers((1)) up 9% year-over-year
and 10% when adjusted for foreign exchange*
-- GAAP EPS of $0.33 per diluted share, down 21% year-over-year and up 1%
when adjusted for foreign exchange and the dilutive effect of the Soasta
acquisition*
-- Non-GAAP EPS of $0.62 per diluted share, down 3% year-over-year and up
4% when adjusted for foreign exchange and the dilutive effect of the
Soasta acquisition*
Akamai Technologies, Inc. (NASDAQ: AKAM), the world's largest and most trusted cloud delivery platform, today reported financial results for the second quarter ended June 30, 2017.
"Akamai delivered another solid quarter for revenue and earnings as we continued to diversify our portfolio and customer base," said Dr. Tom Leighton, Chief Executive Officer. "Revenue from our Web Division customers grew 15% and now accounts for a majority of revenue. Revenue from our security products alone grew 32% year-over-year to an annualized revenue run rate of nearly half-a-billion dollars."
Akamai delivered the following financial results for the second quarter ended June 30, 2017:
Revenue: Revenue was $609 million, a 6% increase over second quarter 2016 revenue of $572 million and a 7% increase when adjusted for foreign exchange.*
Customer Revenue by Division((2)):
-- Web Division revenue was $315 million, up 15% year-over-year and up 16%
when adjusted for foreign exchange*
-- Media Division revenue was $276 million, down 2% year-over-year and down
1% when adjusted for foreign exchange*
-- Enterprise and Carrier Division revenue was $18 million, up 9%
year-over-year and up 10% when adjusted for foreign exchange*
Revenue by Solution Category((3)):
-- Performance and Security Solutions revenue was $376 million, up 15%
year-over-year and up 16% when adjusted for foreign exchange*
-- Cloud Security Solutions revenue, a component of Performance and
Security, was $115 million, up 32% year-over-year and up 34% when
adjusted for foreign exchange*
-- Media Delivery Solutions revenue was $179 million, down 9%
year-over-year and when adjusted for foreign exchange*
-- Services and Support Solutions revenue was $54 million, up 12%
year-over-year and up 13% when adjusted for foreign exchange*
Revenue by Geography:
-- U.S. revenue was $403 million, up 2% year-over-year
-- International revenue was $206 million, up 16% year-over-year and up 19%
when adjusted for foreign exchange*
Revenue from Internet Platform Customers((1)):
-- Revenue from Internet Platform Customers was $51 million, down 17%
year-over-year and when adjusted for foreign exchange*
-- Revenue excluding Internet Platform Customers was $558 million, up 9%
year-over-year and up 10% when adjusted for foreign exchange*
Income from operations: GAAP income from operations was $87 million, a 21% decrease from second quarter 2016. GAAP operating margin for the second quarter was 14%, down 5 percentage points from the same period last year.
Non-GAAP income from operations* was $147 million, a 6% decrease from second quarter 2016. Non-GAAP operating margin* for the second quarter was 24%, down 3 percentage points from the same period last year.
Net income: GAAP net income was $58 million, a 22% decrease from second quarter 2016. Non-GAAP net income* was $108 million, a 4% decrease from second quarter 2016.
EPS: GAAP EPS was $0.33 per diluted share, a 21% decrease from second quarter 2016 and an 18% decrease when adjusted for foreign exchange.* The year-over-year GAAP EPS growth rate, when adjusted for both foreign exchange* and the dilutive impact of the Company's acquisition of Soasta, Inc.,* was an increase of 1%.
Non-GAAP EPS was $0.62 per diluted share, a 3% decrease from second quarter 2016 and flat when adjusted for foreign exchange.* The year-over-year non-GAAP EPS growth rate, when adjusted for both foreign exchange* and the dilutive impact of the Company's acquisition of Soasta, Inc.,* was an increase of 4%.
Adjusted EBITDA*: Adjusted EBITDA was $224 million, a 3% decrease from second quarter 2016. Adjusted EBITDA margin* was 37%, down 3 percentage points from second quarter of 2016.
Other second quarter 2017 results:
-- Cash from operations was $225 million, or 37% of revenue
-- Cash, cash equivalents and marketable securities as of June 30, 2017 was
$1.4 billion
-- The Company spent $105 million to repurchase 2.0 million shares of its
common stock at an average price of $52.06 per share
-- The Company had approximately 172 million shares of common stock
outstanding as of June 30, 2017
* See Use of Non-GAAP Financial Measures below for definitions
(1) Internet Platform Customers - Six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix
(2) Customer revenue by division - A customer-focused reporting view that reflects revenue from customers that are managed by the division. During the first quarter of 2017, the divisional categorization of certain customers was adjusted based on how those customer categorizations are currently being managed. The historical presentation of divisional revenue was revised in order to reflect the most recent categorization and to provide a comparable view for all periods presented.
(3) Revenue by solution category - A product-focused reporting view that reflects revenue by solution purchased
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 45211864. 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 45211864. The archived webcast of this event may be accessed through the Akamai website.
About Akamai
As the world's largest and most trusted cloud delivery platform, Akamai makes it easier for its customers to provide the best and most secure digital experiences on any device, anytime, anywhere. Akamai's massively distributed platform is unparalleled in scale with over 200,000 servers across 130 countries, giving customers superior performance and threat protection. Akamai's portfolio of web and mobile performance, cloud security, enterprise access, and video delivery solutions are supported by exceptional customer service and 24/7 monitoring. To learn why the top financial institutions, e commerce leaders, media & entertainment providers, and government organizations trust Akamai please visit www.akamai.com, blogs.akamai.com, or @Akamai on Twitter.
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands) June 30, December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $352,501 $324,169
Marketable securities 330,620 512,849
Accounts receivable, net 395,865 368,596
Prepaid expenses and other
current assets 159,371 104,303
-------
Total current assets 1,238,357 1,309,917
Property and equipment, net 856,039 801,017
Marketable securities 731,781 779,311
Goodwill 1,356,623 1,228,503
Acquired intangible assets,
net 184,041 149,463
Deferred income tax assets 7,448 8,982
Other assets 114,750 95,953
------- ------
Total assets $4,489,039 $4,373,146
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $91,741 $76,120
Accrued expenses 222,023 238,777
Deferred revenue 73,772 52,972
Other current liabilities 11,528 6,719
------ -----
Total current liabilities 399,064 374,588
Deferred revenue 3,848 3,758
Deferred income tax
liabilities 21,762 11,652
Convertible senior notes 651,400 640,087
Other liabilities 125,793 118,691
------- -------
Total liabilities 1,201,867 1,148,776
--------- ---------
Total stockholders' equity 3,287,172 3,224,370
--------- ---------
Total liabilities and
stockholders' equity $4,489,039 $4,373,146
========== ==========
AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
(in thousands, except
per share data) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Revenue $608,908 $609,237 $572,135 $1,218,145 $1,139,860
Costs and operating
expenses:
Cost of revenue(1) (2) 214,650 205,703 206,323 420,353 401,059
Research and
development(1) 53,373 52,162 37,690 105,535 78,532
Sales and marketing(1) 119,432 113,566 103,223 232,998 205,434
General and
administrative(1) (2) 123,518 115,009 107,538 238,527 209,821
Amortization of acquired
intangible assets 7,753 7,569 6,711 15,322 13,427
Restructuring charges 2,971 - 470 2,971 7,288
----- --- --- ----- -----
Total costs and
operating expenses 521,697 494,009 461,955 1,015,706 915,561
------- ------- ------- --------- -------
Income from operations 87,211 115,228 110,180 202,439 224,299
Interest income 4,281 4,624 3,393 8,905 6,713
Interest expense (4,646) (4,597) (4,639) (9,243) (9,292)
Other income (expense),
net 563 (684) 415 (121) 226
--- ---- --- ---- ---
Income before provision
for income taxes 87,409 114,571 109,349 201,980 221,946
Provision for income
taxes 29,637 33,641 35,714 63,278 73,453
------ ------ ------ ------ ------
Net income $57,772 $80,930 $73,635 $138,702 $148,493
======= ======= ======= ======== ========
Net income per share:
Basic $0.33 $0.47 $0.42 $0.80 $0.84
Diluted $0.33 $0.46 $0.42 $0.80 $0.84
Shares used in per share
calculations:
Basic 172,674 173,158 175,499 172,916 175,951
Diluted 173,439 175,171 176,420 174,305 176,980
(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 Six Months Ended
(in thousands) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Cash flows from operating
activities(1):
Net income $57,772 $80,930 $73,635 $138,702 $148,493
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 89,206 86,533 85,114 175,739 165,783
Stock-based compensation 41,269 38,986 34,911 80,255 66,652
Provision for deferred income taxes 7,396 31,972 1,713 39,368 2,785
Amortization of debt discount and
issuance costs 4,646 4,597 4,639 9,243 9,292
Other non-cash reconciling items,
net 1,738 (129) 749 1,609 3,501
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Accounts receivable 12,273 (30,146) 1,880 (17,873) 17,786
Prepaid expenses and other current
assets (3,043) (47,065) (7,510) (50,108) (10,991)
Accounts payable and accrued
expenses 6,399 (23,940) 44,659 (17,541) 12,282
Deferred revenue (470) 10,876 1,473 10,406 12,126
Other current liabilities 2,385 3,516 95 5,901 6,971
Other non-current assets and
liabilities 5,062 (13,512) 3,011 (8,450) 1,062
----- ------- ----- ------ -----
Net cash provided by operating
activities 224,633 142,618 244,369 367,251 435,742
------- ------- ------- ------- -------
Cash flows from investing
activities:
Cash paid for acquired businesses,
net of cash acquired (197,191) (10) - (197,201) -
Purchases of property and equipment
and capitalization of internal-
use software development costs (97,005) (91,181) (78,141) (188,186) (160,481)
Purchases of short- and long-term
marketable securities (88,913) (92,306) (288,742) (181,219) (384,585)
Proceeds from sales and maturities
of short- and long-term
marketable securities 88,978 324,138 227,234 413,116 352,343
Other non-current assets and
liabilities (19) (1,230) 842 (1,249) (1,512)
--- ------ --- ------ ------
Net cash (used in) provided by
investing activities (294,150) 139,411 (138,807) (154,739) (194,235)
-------- ------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from the issuance of
common stock under stock plans 8,150 17,530 8,745 25,680 27,095
Employee taxes paid related to net
share settlement of stock-based
awards (7,417) (33,921) (5,914) (41,338) (32,410)
Repurchases of common stock (105,148) (72,467) (90,985) (177,615) (199,710)
Other non-current assets and
liabilities (1,096) - - (1,096) -
------ --- --- ------ ---
Net cash used in financing
activities (105,511) (88,858) (88,154) (194,369) (205,025)
-------- ------- -------
Effects of exchange rate changes on
cash and cash equivalents 5,210 4,979 (3,676) 10,189 689
----- ----- ------ ------ ---
Net (decrease) increase in cash and
cash equivalents (169,818) 198,150 13,732 28,332 37,171
Cash and cash equivalents at
beginning of period 522,319 324,169 312,912 324,169 289,473
------- ------- ------- ------- -------
Cash and cash equivalents at end of
period $352,501 $522,319 $326,644 $352,501 $326,644
======== ======== ======== ======== ========
(1) On January 1, 2017, the Company adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, excess tax benefits are no longer classified as a reduction of cash flows from operating activities. The Company retrospectively adopted this standard and revised cash flows from operating activities by $1.5 million and $2.6 million for the three and six months ended June 30, 2016, respectively. The increase caused a corresponding decrease to cash flows from financing activities.
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY
Three Months Ended Six Months Ended
(in thousands) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Revenue by
solution
category(1):
Performance and
Security
Solutions $375,807 $369,148 $326,642 $744,955 $642,505
Media Delivery
Solutions 178,905 187,396 197,077 366,301 403,016
Services and
Support
Solutions 54,196 52,693 48,416 106,889 94,339
------ ------ ------ ------- ------
Total revenue $608,908 $609,237 $572,135 $1,218,145 $1,139,860
======== ======== ======== ========== ==========
Cloud Security
Solutions
revenue $115,135 $109,758 $86,980 $224,893 $167,640
Revenue growth
rates year-
over-year:
Performance and
Security
Solutions 15% 17% 16% 16% 16%
Media Delivery
Solutions (9) (9) (9) (9) (7)
Services and
Support
Solutions 12 15 18 13 17
--- --- --- ---
Total revenue 6% 7% 6% 7% 7%
=== === === ===
Cloud Security
Solutions
revenue growth
rates 32% 36% 42% 34% 44%
Revenue growth
rates year-
over-year,
adjusted for the
impact of
foreign exchange
rates(2):
Performance and
Security
Solutions 16% 18% 16% 17% 16%
Media Delivery
Solutions (9) (9) (10) (9) (7)
Services and
Support
Solutions 13 15 17 14 17
--- --- --- ---
Total revenue 7% 8% 6% 8% 7%
=== === === === ===
Cloud Security
Solutions
revenue growth
rates 34% 37% 42% 35% 44%
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY DIVISION
Three Months Ended Six Months Ended
(in thousands) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Customer
revenue by
division(3):
Web Division $314,988 $304,686 $273,891 $619,674 $540,558
Media Division 276,071 285,401 281,937 561,472 567,551
Enterprise and
Carrier
Division 17,849 19,150 16,307 36,999 31,751
------ ------ ------ ------ ------
Total revenue $608,908 $609,237 $572,135 $1,218,145 $1,139,860
======== ======== ======== ========== ==========
Revenue growth
rates year-
over-year:
Web Division 15% 14% 14% 15% 15%
Media Division (2) - (2) (1) (1)
Enterprise and
Carrier
Division 9 24 24 17 28
--- --- --- --- ---
Total revenue 6% 7% 6% 7% 7%
=== === === === ===
Revenue growth
rates year-
over-year,
adjusted for
the impact of
foreign
exchange
rates(2):
Web Division 16% 15% 13% 16% 15%
Media Division (1) 1 (2) - (1)
Enterprise and
Carrier
Division 10 24 25 17 28
--- --- --- --- ---
Total revenue 7% 8% 6% 8% 7%
=== === === === ===
(1) See customer revenue by solution category definition in press release
(2) See Use of Non-GAAP Financial Measures below for a definition
(3) See customer revenue by division definition in press release
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY
Three Months Ended Six Months Ended
(in thousands) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Revenue by
geography:
U.S. $403,085 $406,565 $395,085 $809,650 $792,368
International 205,823 202,672 177,050 408,495 347,492
------- ------- ------- ------- -------
Total revenue $608,908 $609,237 $572,135 $1,218,145 $1,139,860
======== ======== ======== ========== ==========
Revenue growth
rates year-
over-year:
U.S. 2% 2% (1)% 2% 1%
International 16 19 25 18 24
--- --- --- --- ---
Total revenue 6% 7% 6% 7% 7%
=== === === === ===
Revenue growth
rates year-
over-year,
adjusted for the
impact of
foreign exchange
rates(1):
U.S. 2% 2% (1)% 2% 1%
International 19 21 24 20 25
--- --- --- --- ---
Total revenue 7% 8% 6% 8% 7%
=== === === === ===
AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA FOR INTERNET PLATFORM CUSTOMERS
Three Months Ended Six Months Ended
(in thousands) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Revenue from
Internet
Platform
Customers(2) $51,169 $51,367 $61,497 $102,536 $134,002
Revenue
excluding
Internet
Platform
Customers 557,739 557,870 510,638 1,115,609 1,005,858
------- ------- ------- --------- ---------
Total revenue $608,908 $609,237 $572,135 $1,218,145 $1,139,860
======== ======== ======== ========== ==========
Revenue growth
rates year-
over-year:
Revenue from
Internet
Platform
Customers (17)% (29)% (36)% (23)% (30)%
Revenue
excluding
Internet
Platform
Customers 9 13 15 11 15
Total revenue 6% 7% 6% 7% 7%
=== === === === ===
Revenue growth
rates year-
over-year,
adjusted for
the impact of
foreign
exchange
rates(1):
Revenue from
Internet
Platform
Customers (17)% (29)% (36)% (23)% (30)%
Revenue
excluding
Internet
Platform
Customers 10 13 15 12 15
Total revenue 7% 8% 6% 8% 7%
=== === === === ===
(1) See Use of Non-GAAP Financial Measures below for a definition
(2) See Internet Platform Customers definition in press release
AKAMAI TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL FINANCIAL DATA
Three Months Ended Six Months Ended
(in thousands, except end
of period statistics) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Stock-based compensation:
Cost of revenue $5,074 $4,685 $4,553 $9,759 $8,523
Research and development 9,614 9,029 6,752 18,643 13,190
Sales and marketing 13,951 15,157 13,259 29,108 25,611
General and
administrative 12,630 10,115 10,347 22,745 19,328
------ ------ ------ ------ ------
Total stock-based
compensation $41,269 $38,986 $34,911 $80,255 $66,652
======= ======= ======= ======= =======
Depreciation and
amortization:
Network-related
depreciation $59,170 $56,844 $58,615 $116,014 $113,789
Other depreciation and
amortization 17,727 18,209 15,717 35,936 30,888
------ ------ ------ ------ ------
Depreciation of property
and equipment 76,897 75,053 74,332 151,950 144,677
Capitalized stock-based
compensation
amortization 3,972 3,471 3,628 7,443 6,885
Capitalized interest
expense amortization 584 440 443 1,024 794
Amortization of acquired
intangible assets 7,753 7,569 6,711 15,322 13,427
----- ----- ----- ------ ------
Total depreciation and
amortization $89,206 $86,533 $85,114 $175,739 $165,783
======= ======= ======= ======== ========
Capital expenditures,
excluding stock-based
compensation and
interest expense(1)(2):
Purchases of property and
equipment $64,522 $56,500 $50,726 $121,022 $100,793
Capitalized internal-use
software development
costs 40,957 37,085 36,288 78,042 71,460
Total capital
expenditures, excluding
stock-based
compensation and
interest expense $105,479 $93,585 $87,014 $199,064 $172,253
======== ======= ======= ======== ========
End of period statistics:
Number of employees 7,084 6,672 6,263
(1) Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.
(2) See Use of Non-GAAP Financial Measures below for a definition
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND NET INCOME PER DILUTED SHARE
Three Months Ended Six Months Ended
(in thousands, except per
share data) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ----
Income from operations $87,211 $115,228 $110,180 $202,439 $224,299
GAAP operating margin 14% 19% 19% 17% 20%
Amortization of acquired
intangible assets 7,753 7,569 6,711 15,322 13,427
Stock-based compensation 41,269 38,986 34,911 80,255 66,652
Amortization of capitalized
stock-based compensation
and capitalized interest
expense 4,556 3,911 4,071 8,467 7,679
Restructuring charges 2,971 - 470 2,971 7,288
Acquisition-related costs
(benefits) 3,057 (208) 361 2,849 282
Legal matter costs - - 101 - 890
--- ---
Operating adjustments 59,606 50,258 46,625 109,864 96,218
Non-GAAP income from
operations $146,817 $165,486 $156,805 $312,303 $320,517
======== ======== ======== ======== ========
Non-GAAP operating margin 24% 27% 27% 26% 28%
Net income $57,772 $80,930 $73,635 $138,702 $148,493
Operating adjustments (from
above) 59,606 50,258 46,625 109,864 96,218
Amortization of debt
discount and issuance
costs 4,646 4,597 4,639 9,243 9,292
Income tax-effect of above
non-GAAP adjustments and
certain discrete tax items (13,974) (15,467) (12,832) (29,441) (24,155)
------- -------
Non-GAAP net income $108,050 $120,318 $112,067 $228,368 $229,848
======== ======== ======== ======== ========
GAAP net income per diluted
share $0.33 $0.46 $0.42 $0.80 $0.84
Amortization of acquired
intangible assets 0.04 0.05 0.04 0.09 0.08
Stock-based compensation 0.24 0.22 0.20 0.46 0.38
Amortization of capitalized
stock-based compensation
and capitalized interest
expense 0.03 0.02 0.02 0.05 0.04
Restructuring charges 0.02 - - 0.02 0.04
Acquisition-related costs
(benefits) 0.02 - - 0.02 -
Legal matter costs - - - - 0.01
Amortization of debt
discount and issuance
costs 0.03 0.03 0.03 0.05 0.05
Income tax effect of above
non-GAAP adjustments and
certain discrete tax items (0.08) (0.09) (0.07) (0.17) (0.14)
Non-GAAP net income per
diluted share $0.62 $0.69 $0.64 $1.31 $1.30
===== ===== ===== ===== =====
Shares used in diluted per
share calculations 173,439 175,171 176,420 174,305 176,980
AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
Three Months Ended Six Months Ended
(in thousands, except
per share data) June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ----
Net income $57,772 $80,930 $73,635 $138,702 $148,493
Interest income (4,281) (4,624) (3,393) (8,905) (6,713)
Provision for income
taxes 29,637 33,641 35,714 63,278 73,453
Depreciation and
amortization 76,897 75,053 74,332 151,950 144,677
Amortization of
capitalized stock-
based compensation and
capitalized interest
expense 4,556 3,911 4,071 8,467 7,679
Amortization of acquired
intangible assets 7,753 7,569 6,711 15,322 13,427
Stock-based compensation 41,269 38,986 34,911 80,255 66,652
Restructuring charges 2,971 - 470 2,971 7,288
Acquisition-related
costs (benefits) 3,057 (208) 361 2,849 282
Legal matter costs - - 101 - 890
Amortization of debt
discount and issuance
costs 4,646 4,597 4,639 9,243 9,292
Other (income) expense,
net (563) 684 (415) 121 (226)
---- --- ---- --- ----
Adjusted EBITDA $223,714 $240,539 $231,137 $464,253 $465,194
======== ======== ======== ======== ========
Adjusted EBITDA margin 37% 39% 40% 38% 41%
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.
-- Restructuring charges - Akamai has incurred restructuring charges that
are included in its GAAP financial statements, primarily related to
workforce reductions and estimated costs of exiting facility lease
commitments. Akamai excludes these items from its non-GAAP financial
measures when evaluating its continuing business performance as such
items vary significantly based on the magnitude of the restructuring
action and do not reflect expected future operating expenses. In
addition, these charges do not necessarily provide meaningful insight
into the fundamentals of current or past operations of its business.
-- Amortization of debt discount and issuance costs and amortization of
capitalized interest expense - In February 2014, Akamai issued $690
million of convertible senior notes due 2019 with a coupon interest rate
of 0%. The imputed interest rate of the convertible senior notes was
approximately 3.2%. This is a result of the debt discount recorded for
the conversion feature that is required to be separately accounted for
as equity under GAAP, thereby reducing the carrying value of the
convertible debt instrument. The debt discount is amortized as interest
expense together with the issuance costs of the debt. All of Akamai's
interest expense is comprised of these non-cash components and is
excluded from management's assessment of the company's operating
performance because management believes the non-cash expense is not
representative of ongoing operating performance.
-- Legal matter costs - Akamai has incurred losses from the settlement of
legal matters and costs with respect to its internal U.S. Foreign
Corrupt Practices Act ("FCPA") investigation in addition to the
disgorgement Akamai was required to pay to resolve it. Akamai believes
excluding these amounts from its non-GAAP financial measures is useful
to investors as the types of events giving rise to them are not
representative of Akamai's core business operations.
-- Income tax effect of non-GAAP adjustments and certain discrete tax items
- The non-GAAP adjustments described above are reported on a pre-tax
basis. The income tax effect of non-GAAP adjustments is the difference
between GAAP and non-GAAP income tax expense. Non-GAAP income tax
expense is computed on non-GAAP pre-tax income (GAAP pre-tax income
adjusted for non-GAAP adjustments) and excludes certain discrete tax
items (such as recording or releasing of valuation allowances), if any.
Akamai believes that applying the non GAAP adjustments and their related
income tax effect allows Akamai to highlight income attributable to its
core operations.
Akamai's definitions of its non-GAAP financial measures are outlined below:
Non-GAAP income from operations - GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; and other non-recurring or unusual items that may arise from time to time.
Non-GAAP operating margin - Non-GAAP income from operations stated as a percentage of revenue.
Non-GAAP net income - GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; and other non-recurring or unusual items that may arise from time to time.
Non-GAAP net income per share - Non-GAAP net income divided by basic weighted average or diluted common shares outstanding. Basic weighted average shares outstanding are those used in GAAP net income per share calculations. Diluted weighted average shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transaction entered into in connection with the issuance of $690 million of convertible senior notes due 2019. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, the company would receive a benefit from the note hedge transaction and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. Unless and until Akamai's weighted average stock price is greater than $89.56, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.
Adjusted EBITDA - GAAP net income excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; and other non-recurring or unusual items that may arise from time to time.
Adjusted EBITDA margin - Adjusted EBITDA stated as a percentage of revenue.
Capital expenditures, or capex, excluding stock-based compensation and interest expense - Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.
Impact of Foreign Currency Exchange Rates - Revenue and earnings from international operations have historically been an important contributor to Akamai's financial results. Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.
Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage change at constant currency presented is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.
EPS growth rates, adjusted for the Soasta acquisition - Earnings per share adjusted for the April 6, 2017 acquisition of Soasta, Inc.
Akamai Statement Under the Private Securities Litigation Reform Act
This release and/or our quarterly earnings conference call scheduled for later today contain information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements about expected revenue growth and future profitability levels. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, failure of our investments in innovation to generate solutions that are accepted in the market; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.
In addition, the statements in this press release and on such call represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.
Contacts:
Rob Morton Tom Barth
Media Relations Investor Relations
Akamai Technologies Akamai Technologies
617-444-3641 617-274-7130
rmorton@akamai.com tbarth@akamai.com
View original content with multimedia:http://www.prnewswire.com/news-releases/akamai-reports-second-quarter-2017-financial-results-300493854.html
SOURCE Akamai Technologies, Inc.
