Akamai Reports Fourth Quarter 2004 and Full-Year 2004 Financial Results
Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and business processes online, today reported financial results for the fourth quarter and full-year ended December 31, 2004. Revenue for the fourth quarter 2004 was $57.6 million, an 8 percent increase over the previous quarter's revenue of $53.3 million, and a 27 percent increase over fourth quarter 2003 revenue of $45.2 million. Total revenue for 2004 was $210.0 million, a 30 percent increase over 2003 revenue of $161.3 million.
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2004 was $13.4 million, or $0.10 per diluted share, a 19 percent increase over previous quarter net income of $11.2 million, or $0.08 per diluted share, and a $15.5 million improvement over the 2003 fourth quarter net loss of $2.1 million, or a loss of $0.02 per share. Full-year net income for 2004 was $34.4 million, or $0.25 per diluted share, a significant improvement over the 2003 net loss of $29.3 million, or a loss of $0.25 per share.
"These quarterly and full-year financial results were the most successful in the company's six-year history," said George Conrades, chairman and CEO of Akamai. "In 2004, we demonstrated the power of the Akamai business model by delivering strong revenue growth, high profit margins, sustainable cash flow, and increasing profitability. The market opportunity for our on-demand platform, our growing customer base, and our demonstrated ability to innovate will continue to drive our success."
The Company generated normalized net income* of $14.5 million, or $0.10 per diluted share, in the fourth quarter of 2004, a 19 percent increase over the prior quarter normalized net income of $12.2 million, or $0.09 per diluted share. Full year normalized net income for 2004 was $42.5 million, or $0.31 per diluted share, an improvement of $67.8 million over 2003. (*See Use of Non-GAAP Financial Measures below for definitions.)
As a result of a December 2004 accounting pronouncement (EITF 04-08) regarding the inclusion of contingent convertible debt for calculation of diluted earnings per share, the Company's GAAP and normalized diluted earnings per share results for the fourth quarter and 2004 include 12.9 million shares that underlie the Company's outstanding 1% Senior Convertible Notes.
Adjusted EBITDA* for the fourth quarter of 2004 was $18.6 million, up from $17.9 million in the prior quarter, and $14.1 million in the fourth quarter of 2003. Adjusted EBITDA was $69.1 million for the full year up from $39.9 million in 2003. Adjusted EBITDA margins improved to 33 percent in 2004 from 25 percent in 2003. (*See Use of Non-GAAP Financial Measures below for definitions.)
Cash from operations increased 7 percent to $15.6 million in the fourth quarter as compared to third quarter cash from operations of $14.5 million, and was more than double fourth quarter 2003 cash from operations of $7.7 million. Also during the quarter, the Company further reduced long-term debt by retiring $24.9 million in principal amount of its 5 1/2% Convertible Subordinated Notes due in 2007 (the "5 1/2% Notes"). As a result of the repurchase of a portion of its outstanding 5 1/2% Notes throughout 2004, the Company has decreased annual net interest expense by almost $9 million year-over-year.
At December 31, 2004, the Company had approximately 126.8 million shares of common stock outstanding, and had approximately $108.4 million of cash, cash equivalents and marketable securities.
Total customers under long-term services contracts increased by 16 percent year-over-year to 1,310. New customers in the fourth quarter included CondeNet, Inc., European Space Agency, Golden Village, Marks & Spencer, Maven Networks, Northern Tool & Equipment Co., SKF International, and Spirent Communications, among others.
Sales through resellers and sales outside the United States accounted for 28 percent and 20 percent, respectively, of revenue for the fourth quarter of 2004.
Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-888-689-4521 (or 1-706-645-9202 for international calls). 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 1-800-642-1687 (or 1-706-645-9291 for international calls) and using conference ID No. 3348508.
Akamai® is the leading global service provider for accelerating content and business processes online. More than 1,300 organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com.
* Includes depreciation (see supplemental tables for figures)
*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 has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.
Akamai defines "Adjusted EBITDA" as net income (loss), before interest, taxes, depreciation, amortization, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, foreign exchange gains and losses, and loss on early extinguishment of debt. Akamai considers Adjusted EBITDA to be an important indicator of the company's operational strength and performance of its business and a good measure of the company's historical operating trend.
Adjusted EBITDA eliminates items that are either not part of the company's core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment, net interest expense and restructuring activities, or do not require a cash outlay, such as equity-related compensation and impairment of intangible assets. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historic cost incurred to build out the company's deployed network, and may not be indicative of current or future capital expenditures.
Akamai defines "Adjusted EBITDA margin" as a percentage of adjusted EBITDA over revenue. Akamai considers Adjusted EBITDA margin to be an indicator of the company's operating trend and performance of its business in relation to its revenue growth.
Akamai defines "capital expenditures" or "capex" as purchases of property and equipment and capitalization of internal-use software development costs. Capital expenditures or capex are disclosed in Akamai's condensed consolidated statement of cash flows in the company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission.
Akamai defines "normalized net income (loss)" as net income (loss) before amortization of intangible assets, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers normalized net income (loss) to be another important indicator of the overall performance of the company because it eliminates the effects of events that are either not part of the company's core operations or are non-cash.
Adjusted EBITDA and normalized net income (loss) should be considered in addition to, not as a substitute for, the company's operating income (loss) and net income (loss), as well as other measures of financial performance reported in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial metrics to the comparable GAAP measures.
Akamai Statement Under the Private Securities Litigation Reform Act
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, including statements concerning the expected growth and development of our business. 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, unexpected increases in Akamai's use of funds, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai's services or network infrastructure, failure to maintain the prices we charge for our services , inability to service and repay our outstanding debt 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.