Reconciliation of non-GAAP to GAAP financial measures

Akamai Technologies Inc.
June 30, 2006

View a print-friendly version here.

The company has historically provided financial metrics, some of which are based on GAAP and others that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes encourage the use of GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.

Adjusted EBITDA - defined as net income before interest, taxes, depreciation and amortization of tangible and intangible assets, capitalized equity-related compensation amortization, equity-related compensation expense, certain gains and losses on equity investments, release of the deferred tax asset valuation allowance, foreign exchange gains and losses and gains on legal settlements.

Adjusted EBITDA margin - defined as the percent of Adjusted EBITDA over revenues

Normalized net income - defined as net income before amortization of intangible assets, equity-related compensation amortization, equity-related compensation expense, certain gains and loses on equity investments, utilization of tax NOL carryforward and release of the deferred tax asset valuation allowance.

Diluted shares used in normalized per share calculation - defined as diluted common shares outstanding used in GAAP net income per share calculation, excluding the effect of FAS123R under the treasury stock method in normalized net income per share calculation.

Normalized effective tax rate - defined as the GAAP tax rate, excluding the effect of FAS123R stock-based compensation and impact of the utitlization of the NOL carryforward.

Net cash from operations, excluding impact of FAS123R - defined as net cash provided by operating activities under GAAP cash flow calculation, excluding the effect of FAS123R in normalized cash flow calculation.

Cash operating expenses - defined as the sum of Research and Development, Sales and Marketing, General and Administrative expenses and amortization of intangibles, excluding depreciation, amortization of intangibles and equity-related compensation

Cash gross margin - defined as the percent of cost of revenues over revenues, excluding equity-related compensation and depreciation and amortization.

Capex or capital expenditures - defined as purchases of property and equipment, capitalization of internal-use software development costs and capitalization of equity-related compensation.