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Akamai Technologies, Inc. (NASDAQ: AKAM), the leading provider of cloud services for delivering, optimizing and securing online content and business applications, today reported financial results for the first quarter ended March 31, 2014. Revenue for the first quarter of 2014 was $454 million, a 23% increase over first quarter 2013 revenue of $368 million.
“Our first quarter results demonstrated continued momentum across all our solution offerings and geographies, driven by traffic acceleration in Media Delivery Solutions and strong traction across our Security portfolio,” said Tom Leighton, CEO of Akamai. “We believe that our unparalleled technology for optimizing and securing the delivery of online content and business applications, along with our continued investments across the business, enable us to provide more value to our customers than ever before.”
GAAP net income for the first quarter of 2014 was $73 million, or $0.40 per diluted share, a 9% decrease from the prior quarter's GAAP net income of $80 million, or $0.44 per diluted share, and a 2% increase over first quarter 2013 GAAP net income of $71 million, or $0.39 per diluted share.
Non-GAAP net income* for the first quarter of 2014 was $105 million, or $0.58 per diluted share, a 5% increase from the prior quarter's non-GAAP net income of $100 million, or $0.55 per diluted share, and a 13% increase over first quarter 2013 non- GAAP net income of $93 million, or $0.51 per diluted share.
Adjusted EBITDA* for the first quarter of 2014 was $204 million, an increase from the prior quarter's Adjusted EBITDA of $192 million, and up from $166 million in the first quarter of 2013. Adjusted EBITDA margin* for the first quarter of 2014 was 45%, up a percentage point from the prior quarter and consistent with the same period last year.
Cash from operations for the first quarter of 2014 was $89 million, or 20% of revenue. Reflecting the closing of the Prolexic acquisition and the issuance of convertible senior notes in February 2014, the Company had $1.4 billion of cash, cash equivalents and marketable securities at the end of the first quarter.
During the first quarter of 2014, under the share repurchase program authorized by the Board of Directors in October 2013, the Company spent approximately $116 million to repurchase 2.0 million shares of its common stock, at an average price of $58.77 per share. The Company had approximately 179 million shares of common stock outstanding as of March 31, 2014.
*See Use of Non-GAAP Financial Measures below for definitions.
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-510-0712 (or 1-617-597-5380 for international calls) and using passcode No. 65944812. 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 one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 15531734.
Akamai® is the leading provider of cloud services for delivering, optimizing and securing online content and business applications. At the core of the Company’s solutions is the Akamai Intelligent Platform™ providing extensive reach, coupled with unmatched reliability, security, visibility and expertise. Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud. To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.
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 and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin and capital expenditures, 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 its business, as they exclude expenses and gains that may be infrequent, unusual in nature and not reflective of Akamai's ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating Akamai's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
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 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:
Akamai's definitions of its non-GAAP financial measures are outlined below:
Non-GAAP net income – GAAP net income adjusted for the following tax-effected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring charges; acquisition-related costs; certain gains and losses on investments; gains and other activity related to divestiture of a business; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements 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 $690.0 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 net income per share.
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; restructuring charges; acquisition-related costs; certain gains and losses on investments; gains and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements 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 – Purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation.
This 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, including statements about future business plans and opportunities. 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, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; 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; a failure of Akamai's services or network infrastructure; 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 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.