Akamai Reports Fourth Quarter 2017 and Full-year 2017 Financial Results

Company exceeds fourth quarter guidance on top and bottom lines
Fourth quarter revenue of $663 million, GAAP EPS of $0.11 and non-GAAP EPS of $0.69
Company records $52 million restructuring charge to drive targeted operational efficiency improvements

Cambridge, MA |

Akamai Technologies, Inc. (NASDAQ: AKAM), the world's largest and most trusted cloud delivery platform, today reported financial results for the fourth quarter and full-year ended December 31, 2017.

"We were very pleased with how well the business performed in the fourth quarter. Our Web Division customer revenue grew 17%, Security product revenue grew 32% and Media traffic on Akamai's platform grew faster than published growth rates for Internet traffic as a whole," said Dr. Tom Leighton, Akamai's Chief Executive Officer. "We believe our strong technology leadership and the momentum we've seen from the adoption of new products, coupled with continued focus on operational efficiency, position us to achieve solid top line growth as well as margin expansion in 2018."

"We were pleased to see Media traffic growth accelerate in the fourth quarter, consistent with the trend we saw in the third quarter and demonstrating continued traction from the traffic-focused initiatives we initiated in the middle of last year," said Adam Karon, Akamai's Media Division General Manager. "With this momentum exiting 2017, we are confident that we will drive Media revenue growth throughout 2018."

Akamai delivered the following results for the fourth quarter and full-year ended December 31, 2017:

Revenue: Revenue for the fourth quarter was $663 million, an 8% increase over fourth quarter 2016 revenue of $616 million and a 6% increase when adjusted for foreign exchange.* Total revenue for 2017 was $2.503 billion compared to $2.340 billion for 2016, up 7% year-over-year and when adjusted for foreign exchange.*

Customer Revenue by Division(1)

  • Web Division revenue for the fourth quarter was $355 million, up 17% year-over-year and up 15% when adjusted for foreign exchange.*  Web Division revenue for 2017 was $1.302 billion, up 15% year-over-year and when adjusted for foreign exchange.* 
  • Media Division revenue for the fourth quarter was $284 million, down 3% year-over-year and down 4% when adjusted for foreign exchange.*  Media Division revenue for 2017 was $1.119 billion, down 1% year-over-year and when adjusted for foreign exchange.* 
  • Enterprise and Carrier Division revenue for the fourth quarter was $24 million, up 24% year-over-year and up 23% when adjusted for foreign exchange.*  Enterprise and Carrier Division revenue for 2017 was $81 million, up 14% year-over-year and when adjusted for foreign exchange.* 

Revenue by Solution Category(2)

  • Performance and Security Solutions revenue for the fourth quarter was $416 million, up 13% year-over-year and up 12% when adjusted for foreign exchange.*  Performance and Security Solutions revenue for 2017 was $1.543 billion, up 14% year-over-year and when adjusted for foreign exchange.* 
  • Cloud Security Solutions revenue, which is a component of Performance and Security Solutions revenue, was $135 million for the fourth quarter, up 32% year-over-year and and up 31% when adjusted for foreign exchange.*  Cloud Security Solutions revenue for 2017 was $482 million, up 32% year-over-year and when adjusted for foreign exchange.* 
  • Media Delivery Solutions revenue for the fourth quarter was $190 million, down 3% year-over-year and down 4% when adjusted for foreign exchange.*  Media Delivery Solutions revenue for 2017 was $739 million, down 6% year-over-year and when adjusted for foreign exchange.* 
  • Service and Support Solutions revenue for the fourth quarter was $57 million, up 9% year-over-year and up 8% when adjusted for foreign exchange.*  Service and Support Solutions revenue for 2017 was $222 million, up 12% year-over-year and when adjusted for foreign exchange.* 

Revenue by Geography

  • U.S. revenue was $430 million for the fourth quarter, a 1% increase over fourth quarter 2016 revenue. U.S. revenue for 2017 was $1.648 billion, a 2% increase over 2016 revenue.
  • International revenue was $234 million for the fourth quarter, a 21% increase over fourth quarter 2016 revenue and a 17% increase when adjusted for foreign exchange.*  International revenue for 2017 was $855 million, a 19% increase over 2016 revenue and when adjusted for foreign exchange.* 

Revenue from Internet Platform Customers(3)

  • Revenue from Internet Platform Customers for the fourth quarter was $50 million, down 15% year-over-year and when adjusted for foreign exchange.*  Internet Platform Customer revenue for 2017 was $203 million, down 19% year-over-year and when adjusted for foreign exchange.* 
  • Revenue excluding Internet Platform Customers for the fourth quarter was $614 million, up 10% year-over-year and up 9% when adjusted for foreign exchange.*  Revenue excluding Internet Platform Customers for 2017 was $2.300 billion, up 10% year-over-year and when adjusted for foreign exchange.* 

Income from operations: GAAP income from operations for the fourth quarter was $28 million, a 77% decrease from fourth quarter 2016 GAAP income from operations of $124 million. The fourth quarter of 2017 was impacted by a $52 million restructuring charge and a $16 million charge due to the release of an indemnification asset related to a 2012 acquisition. GAAP operating margin for the fourth quarter was 4%, down 16 percentage points from the same period last year. GAAP income from operations for 2017 was $316 million, a 31% decrease from the prior year's GAAP income from operations of $460 million. Full-year GAAP operating margin was 13%, down 7 percentage points from the prior year.

Non-GAAP income from operations*  for the fourth quarter was $155 million, an 11% decrease from fourth quarter 2016 non-GAAP income from operations of $174 million. Non-GAAP operating margin* for the fourth quarter was 23%, down 5 percentage points from the same period last year. Non-GAAP income from operations*  for 2017 was $610 million, a 7% decrease from the prior year's non-GAAP income from operations of $658 million. Full-year non-GAAP operating margin* was 24%, down 4 percentage points from the prior year.

Net Income: GAAP net income for the fourth quarter was $19 million, a 79% decrease from fourth quarter 2016 GAAP net income of $92 million. The fourth quarter of 2017 was also impacted by a $26 million provisional charge associated with U.S. tax reform, which is comprised of a $43 million deemed repatriation tax on foreign earnings, partially offset by a $17 million benefit from the re-measurement of deferred taxes as a result of the lower corporate tax rate. Full-year GAAP net income was $218 million, a 31% decrease from 2016 GAAP net income of $316 million.

Non-GAAP net income*  for the fourth quarter was $118 million, a 7% decrease from fourth quarter 2016 non-GAAP net income of $126 million. Full-year non-GAAP net income*  was $453 million, a 5% decrease from 2016 non-GAAP net income of $476 million.

EPS: GAAP EPS was $0.11 per diluted share, a 79% decrease from fourth quarter 2016 GAAP EPS of $0.52 and when adjusted for foreign exchange.*  The $26 million provisional charge associated with U.S. tax reform impacted GAAP EPS by $0.15 during the fourth quarter of 2017. Full-year GAAP EPS was $1.26 per diluted share, a 30% decrease from 2016 GAAP EPS of $1.79 per diluted share and a 28% decrease when adjusted for foreign exchange.*

Non-GAAP EPS*  was $0.69 per diluted share, a 4% decrease from fourth quarter 2016 non-GAAP EPS*  of $0.72 and a 5% decrease when adjusted for foreign exchange.*  Full-year non-GAAP EPS*  was $2.62 per diluted share, a 3% decrease from 2016 non-GAAP EPS*  of $2.70 per diluted share and a 2% decrease when adjusted for foreign exchange.*

Adjusted EBITDA: Adjusted EBITDA*  for the fourth quarter was $241 million, a 3% decrease from fourth quarter 2016 Adjusted EBITDA*  of $247 million. Adjusted EBITDA margin*  for the fourth quarter was 36%, down 4 percentage points from the same period last year. Adjusted EBITDA*  for the full-year was $931 million, a 2% decrease from the prior year's Adjusted EBITDA*  of $951 million. Full-year adjusted EBITDA margin*  was 37%, down 4 percentage points from the same period last year.

Restructuring charge: The Company recorded a $52 million restructuring charge in the fourth quarter of 2017. These charges primarily include workforce reductions, facility closures and capitalized software impairments from decisions to deprioritize certain investment areas that have not achieved commercial success and returns on investments initially expected, most notably in the Media Division.

Supplemental cash information: Cash flows from operating activities for the fourth quarter was $197 million, or 30% of revenue, and for the full-year was $801 million, or 32% of revenue. Cash, cash equivalents and marketable securities were $1.3 billion at December 31, 2017.

Share repurchases: The Company spent $55 million in the fourth quarter to repurchase 1.0 million shares of its common stock at an average price of $52.23 per share. For the full-year, the Company spent $361 million to repurchase 6.9 million shares of its common stock at an average price of $52.59 per share. The Company had approximately 170 million shares of common stock outstanding as of December 31, 2017.

* See Use of Non-GAAP Financial Measures below for definitions
(1) Customer revenue by division - A customer-focused reporting view that reflects revenue from customers that are managed by the division
(2) Revenue by solution category - A product-focused reporting view that reflects revenue by solution purchased
(3) Internet Platform Customers - Six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix

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 5649408. 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 5649408. 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.