EDS and Akamai Sign Broad Strategic Agreements to Provide Premier E-Business Services
"Akamai is focused on building upon our first-mover advantage as the world's leading Content Delivery Service Provider," said George Conrades, chairman and CEO of Akamai. "Our results this quarter are representative of our ability to capture the huge market opportunity we see in managed edge services as Web traffic continues to grow exponentially and a multibillion-dollar market opportunity has developed for Internet infrastructure services at the edge."
Normalized net loss for the third quarter 2000, before equity related non-cash compensation charges and amortization of intangible assets, totaled $55.7 million, or $0.60 per share, compared to First Call's consensus summary net loss of $0.68 per share, and second quarter 2000 normalized net loss of $43.4 million, or $0.50 per share. Net loss attributable to common stockholders for the third quarter of 2000 and the second quarter of 2000 was $304.1 million and $243.2 million, or $3.27 per share and $2.78 per share, respectively.
Customers
During the quarter, Akamai served more than 2,800 customers, including 1,115 under recurring contracts, compared to 895 at the end of the second quarter. Akamai delivered content for hundreds of the Web's most popular sites, and streaming media for many high-profile events, demonstrating the company's ability to fulfill the increasing demand for high-quality, robust and reliable Internet content and streaming media services. Some of those events included:
Extending leadership in broadband content delivery, Akamai announced an agreement with Intertainer in which Intertainer's entertainment-on-demand service will use Akamai's globally distributed FreeFlowSM Streaming network to deliver long-form video programming to customer homes. The deal was a first-of-its-kind relationship in which a commercially available on-demand streaming media service will be delivered through a distributed presence within last-mile broadband providers' local networks.
Akamai continued to expand its indirect sales channels and added several new reseller partners, including EDS and PSINet. These companies joined Akamai's existing resellers, including partners such as CacheFlow, Digex, Genuity, GlobalCenter, IBM, KPNQwest, Loudcloud and NaviSite. Indirect channels contributed approximately 15% of third quarter revenue, up from 11% in the second quarter, continuing to represent an important growth catalyst for customer acquisition.
Network
Akamai continues to operate the largest globally distributed network for the delivery of Internet content, streaming media and applications, and during the quarter increased the number of deployed servers from 4,250 to 6,060. Akamai has extended its worldwide presence with servers now deployed within 335 networks in 54 countries. These networks include Internet backbone providers, ISPs, cable providers, DSL providers and satellite facilities. In July, Akamai also unveiled its Edge Network Exchange program, which will give participating networks the ability to sell Akamai's global content delivery services to their hosting customers. This new program offers revenue generation capabilities for participating networks.
Technology
Akamai continued to leverage its EdgeAdvantage platform to introduce two new commercial services in the third quarter, StorageFlow and Digital Parcel Service. Akamai's StorageFlow service is a scalable, globally replicated, high-performance and fault-tolerant storage management service that will persistently store content delivered to end-users via Akamai's content delivery services, including its FreeFlowSM, FreeFlow Streaming, and Digital Parcel Service. StorageFlow ensures that customer content is stored on today's leading storage hardware, software and infrastructure technologies that include EMC systems and software managed by EDS, as announced during the quarter.
Akamai's Digital Parcel Service is an unparalleled, comprehensive digital distribution and rights management solution offered in partnership with Reciprocal, Inc., the global leader in digital rights management (DRM) transaction services. Akamai also announced major technology partnerships in the third quarter with Fireclick, IBM, Radware, and Resonate.
Akamai announced the issuance of a fifth patent. The newest patent covers innovative aspects of the company's flagship FreeFlow service. The U.S. Patent and Trademark Office issued U.S. Patent No. 6,108,703, entitled "Global Hosting System," on August 22. The '703 patent, granted to MIT in the names of Tom Leighton, Akamai's Chief Scientist, and Danny Lewin, Akamai's Chief Technology Officer, has been licensed to Akamai on an exclusive basis.
Financials
"We continue to track our path to profitability as demonstrated by rising gross margins, which are up even with our rapid, up-front network deployment, and declining SG&A and engineering and development costs as a percentage of revenue," said Timothy Weller, CFO at Akamai. "The average number of services per recurring customer is rising due to effective bundling, and that is leading to higher revenue per account, higher margins, low churn, and more competitive differentiation. Looking at the group of customers who were Akamaized as of January 1, 2000, we saw more than a 30% increase in the group's monthly revenues from January through September, driven by bundling and traffic growth."
At September 30, 2000, the company had approximately $438.7 million of cash, cash equivalents, and short-term investments as compared to $515.7 million at June 30, 2000. Capital expenditures for the quarter were $40.5 million, which were principally used for network deployment, facilities and information systems.
At September 30, 2000, the Company had 107.3 million shares of common stock outstanding. At September 30, 2000, common stock outstanding and unexercised stock options and warrants totaled 125.3 million shares.
Finally, in the third quarter, in support of its academic roots, Akamai announced the formation of The Akamai Foundation. The foundation, funded by Akamai management and employees, is designed to strengthen mathematics education and performance in United States public schools (K-12) through a series of initiatives aimed at fostering excellence in math learning and proficiency for an Internet-centric world.
About Akamai
Akamai is the leading Content Delivery Service Provider serving over 2,800 customers worldwide. Akamai has the broadest deployment of servers for content, streaming media, and applications delivery with over 6,000 servers in 54 countries directly connected inside 335 different telecommunications networks.
The release contains 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. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors affecting Akamai including, but not limited to, the dependence of Akamai on its Internet content delivery service, a failure of Akamai's network infrastructure, decrease in growth of Internet traffic, lack of market acceptance of its services, including its StorageFlow and Digital Parcel services, or its Edge Network Exchange program, the complexity of its service and the networks on which the service is deployed, the failure to obtain access to transmission capacity and other factors that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and other documents periodically filed with the SEC.
| Contacts: |
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Jeff Young Media Relations Akamai Technologies 617-250-3913 jyoung@akamai.com |
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Steven J. Wolfe Investor Relations Akamai Technologies 617-250-4724 swolfe@akamai.com |
- Third quarter revenue of $27.2 million, up 50% from second quarter
- Customer base under recurring contracts grows to 1,115
- Two new services commercially introduced, extending EdgeAdvantageSM platform
- Delivery of more than 4,000 live video and audio streaming events during the third quarter
- Network grows to over 6,000 servers inside 335 networks in 54 countries
"Akamai is focused on building upon our first-mover advantage as the world's leading Content Delivery Service Provider," said George Conrades, chairman and CEO of Akamai. "Our results this quarter are representative of our ability to capture the huge market opportunity we see in managed edge services as Web traffic continues to grow exponentially and a multibillion-dollar market opportunity has developed for Internet infrastructure services at the edge."
Normalized net loss for the third quarter 2000, before equity related non-cash compensation charges and amortization of intangible assets, totaled $55.7 million, or $0.60 per share, compared to First Call's consensus summary net loss of $0.68 per share, and second quarter 2000 normalized net loss of $43.4 million, or $0.50 per share. Net loss attributable to common stockholders for the third quarter of 2000 and the second quarter of 2000 was $304.1 million and $243.2 million, or $3.27 per share and $2.78 per share, respectively.
Customers
During the quarter, Akamai served more than 2,800 customers, including 1,115 under recurring contracts, compared to 895 at the end of the second quarter. Akamai delivered content for hundreds of the Web's most popular sites, and streaming media for many high-profile events, demonstrating the company's ability to fulfill the increasing demand for high-quality, robust and reliable Internet content and streaming media services. Some of those events included:
- The 52nd Annual Prime Time EMMY Awards on behalf of ABC.com
- 2000 MTV Video Music Awards
- Steve Jobs Keynote at Apple MacWorld Expo featuring 1-Megabit video streams
- British Open Championship Golf Tournament
- C-SPAN coverage of Republican and Democratic national conventions
Extending leadership in broadband content delivery, Akamai announced an agreement with Intertainer in which Intertainer's entertainment-on-demand service will use Akamai's globally distributed FreeFlowSM Streaming network to deliver long-form video programming to customer homes. The deal was a first-of-its-kind relationship in which a commercially available on-demand streaming media service will be delivered through a distributed presence within last-mile broadband providers' local networks.
Akamai continued to expand its indirect sales channels and added several new reseller partners, including EDS and PSINet. These companies joined Akamai's existing resellers, including partners such as CacheFlow, Digex, Genuity, GlobalCenter, IBM, KPNQwest, Loudcloud and NaviSite. Indirect channels contributed approximately 15% of third quarter revenue, up from 11% in the second quarter, continuing to represent an important growth catalyst for customer acquisition.
Network
Akamai continues to operate the largest globally distributed network for the delivery of Internet content, streaming media and applications, and during the quarter increased the number of deployed servers from 4,250 to 6,060. Akamai has extended its worldwide presence with servers now deployed within 335 networks in 54 countries. These networks include Internet backbone providers, ISPs, cable providers, DSL providers and satellite facilities. In July, Akamai also unveiled its Edge Network Exchange program, which will give participating networks the ability to sell Akamai's global content delivery services to their hosting customers. This new program offers revenue generation capabilities for participating networks.
Technology
Akamai continued to leverage its EdgeAdvantage platform to introduce two new commercial services in the third quarter, StorageFlow and Digital Parcel Service. Akamai's StorageFlow service is a scalable, globally replicated, high-performance and fault-tolerant storage management service that will persistently store content delivered to end-users via Akamai's content delivery services, including its FreeFlowSM, FreeFlow Streaming, and Digital Parcel Service. StorageFlow ensures that customer content is stored on today's leading storage hardware, software and infrastructure technologies that include EMC systems and software managed by EDS, as announced during the quarter.
Akamai's Digital Parcel Service is an unparalleled, comprehensive digital distribution and rights management solution offered in partnership with Reciprocal, Inc., the global leader in digital rights management (DRM) transaction services. Akamai also announced major technology partnerships in the third quarter with Fireclick, IBM, Radware, and Resonate.
Akamai announced the issuance of a fifth patent. The newest patent covers innovative aspects of the company's flagship FreeFlow service. The U.S. Patent and Trademark Office issued U.S. Patent No. 6,108,703, entitled "Global Hosting System," on August 22. The '703 patent, granted to MIT in the names of Tom Leighton, Akamai's Chief Scientist, and Danny Lewin, Akamai's Chief Technology Officer, has been licensed to Akamai on an exclusive basis.
Financials
"We continue to track our path to profitability as demonstrated by rising gross margins, which are up even with our rapid, up-front network deployment, and declining SG&A and engineering and development costs as a percentage of revenue," said Timothy Weller, CFO at Akamai. "The average number of services per recurring customer is rising due to effective bundling, and that is leading to higher revenue per account, higher margins, low churn, and more competitive differentiation. Looking at the group of customers who were Akamaized as of January 1, 2000, we saw more than a 30% increase in the group's monthly revenues from January through September, driven by bundling and traffic growth."
At September 30, 2000, the company had approximately $438.7 million of cash, cash equivalents, and short-term investments as compared to $515.7 million at June 30, 2000. Capital expenditures for the quarter were $40.5 million, which were principally used for network deployment, facilities and information systems.
At September 30, 2000, the Company had 107.3 million shares of common stock outstanding. At September 30, 2000, common stock outstanding and unexercised stock options and warrants totaled 125.3 million shares.
Finally, in the third quarter, in support of its academic roots, Akamai announced the formation of The Akamai Foundation. The foundation, funded by Akamai management and employees, is designed to strengthen mathematics education and performance in United States public schools (K-12) through a series of initiatives aimed at fostering excellence in math learning and proficiency for an Internet-centric world.
Akamai Technologies, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| For the three months ended September 30, 2000 | For the three months ended June 30, 2000 | For the nine months ended September 30, 2000 | ||||
| Revenue | $ | 27,156 | 18,144 | 52,522 | ||
| Operating Expenses: | ||||||
| Cost of service | 18,182 | 12,647 | 37,465 | |||
| Engineering and development | 18,352 | 12,931 | 38,198 | |||
| Sales, general and administrative | 49,948 | 39,662 | 111,072 | |||
| Amortization of intangible assets | 238,700 | 190,452 | 438,152 | |||
| Equity related compensation | 9,653 | 9,421 | 21,263 | |||
| Total operating expenses | 334,835 | 265,113 | 646,150 | |||
| Operating loss | (307,679) | (246,969) | (593,628) | |||
| Interest income, net | 3,624 | 3,803 | 11,052 | |||
| Loss before income taxes | (304,055) | (243,166) | (582,576) | |||
| Provision for income taxes | 20 | 70 | 132 | |||
| Net loss | $ | (304,075) | (243,236) | (582,708) | ||
| Basic and diluted net loss per share | $ | (3.27) | (2.78) | (6.84) | ||
| Weighted average common shares outstanding | $ | 93,099 | 87,374 | 85,244 | ||
| Supplemental Financial Data (dollars and shares in thousands): | ||||||
| Normalized net loss (1) | $ | (55,722) | (43,363) | (123,292) | ||
| Normalized basic and diluted net loss per share | $ | (0.60) | (0.50) | (1.45) | ||
| Depreciation | $ | 11,211 | 7,305 | 21,579 | ||
| EBITDA (2) | $ | (48,115) | (39,791) | (112,634) | ||
| Capital expenditures | $ | 40,457 | 33,537 | 96,659 | ||
| End of period statistics: | ||||||
| Number of signed customers | 2,872 | 2,100 | 2,872 | |||
| Number of customers under recurring contract | 1,115 | 895 | 1,115 | |||
| Number of employees | 1,229 | 1,063 | 1,229 | |||
| Number of servers | 6,060 | 4,250 | 6,060 | |||
| Common stock outstanding | 107,298 | 105,873 | 107,298 | |||
| Common stock outstanding and unexercised options and warrants | 125,292 | 123,187 | 125,292 | |||
(1) Normalized net loss is loss before equity related compensation, amortization and other non-cash charges
(2) EBITDA is earnings before interest, taxes, depreciation, amortization and other non-cash charges
Akamai Technologies, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| September 30, 2000 | December 31, 1999 | |||
|---|---|---|---|---|
| Assets | ||||
| Current Assets | ||||
| Cash, cash equivalents and short-term marketable securities | $ | 438,743 | $ | 269,554 |
| Accounts receivable, net | 15,592 | 1,588 | ||
| Prepaid expenses and other current assets | 19,565 | 2,521 | ||
| Total current assets | 473,900 | 273,663 | ||
| Property and equipment, net | 121,812 | 23,875 | ||
| Goodwill and other intangible assets, net | 2,425,207 | 434 | ||
| Long-term investments | 12,637 | - | ||
| Other assets | 24,770 | 2,843 | ||
| Total assets | $ | 3,058,326 | $ | 300,815 |
| Liabilities and stockholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable and accrued expenses | $ | 48,370 | $ | 14,684 |
| Other current liabilities | 6,192 | 3,953 | ||
| Total current liabilities | 54,562 | 18,637 | ||
| Long-term liabilities | 301,470 | 733 | ||
| Total liabilities | 356,032 | 19,370 | ||
| Stockholders' equity | 2,702,294 | 281,445 | ||
| Total liabilities and stockholders' equity | $ | 3,058,326 | $ | 300,815 |
About Akamai
Akamai is the leading Content Delivery Service Provider serving over 2,800 customers worldwide. Akamai has the broadest deployment of servers for content, streaming media, and applications delivery with over 6,000 servers in 54 countries directly connected inside 335 different telecommunications networks.
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The release contains 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. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors affecting Akamai including, but not limited to, the dependence of Akamai on its Internet content delivery service, a failure of Akamai's network infrastructure, decrease in growth of Internet traffic, lack of market acceptance of its services, including its StorageFlow and Digital Parcel services, or its Edge Network Exchange program, the complexity of its service and the networks on which the service is deployed, the failure to obtain access to transmission capacity and other factors that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and other documents periodically filed with the SEC.
