Cambridge, MA |
Akamai Technologies (NASDAQ: AKAM), the intelligent edge platform for securing and delivering digital experiences, today announces that the company has entered into an agreement to acquire Exceda, its largest channel partner in Latin America.
“Akamai and Exceda both share the view that there is growing customer demand for Akamai’s Content Delivery Network and cloud security services in Latin America,” said Rick McConnell, president and general manager of Akamai’s web division. “Today, Akamai powers many of the top Latin American retail and large bank websites in the region and securely delivers major online events for regional broadcasters. By combining the Akamai and Exceda teams, we believe we can scale our Latin America business faster, better enable existing and new partners, and improve experiences for more customers.”
Exceda became an Akamai channel partner in 2002, and quickly emerged as Akamai’s largest in Latin America. Exceda sells the full portfolio of Akamai products, and its success is evidence of the increasing demand for cloud infrastructure investments, as well as web performance and security services in the region.
Exceda operates in seven Latin American countries, with offices in Argentina, Brazil, Chile and Mexico, and throughout its existence has been almost exclusively focused on selling Akamai solutions. Its business is a natural complement to Akamai's, and the combination of the two companies, including Exceda’s experienced team, is expected to form an even stronger foundation from which to accelerate growth and support Akamai’s other partners in the region.
“We look forward to leveraging our Akamai-related expertise and knowledge to deliver superior results for our customers. We also welcome the opportunity to work with the broad array of Akamai partners to grow the company’s Latin America business,” said Claudio Baumann, chief executive officer, Exceda.
The all-cash transaction is expected to close in the fourth quarter of 2019. Akamai expects the Exceda transaction to add approximately $2 million of revenue in 2019, and $15 million in 2020. Further, it is expected to be $0.01 dilutive to its non-GAAP earnings per share for 2019, and $0.01 - 0.02 accretive in 2020*. The acquisition is not expected to impact Akamai’s previously-stated goal of achieving a non-GAAP operating margin of 30% by 2020. As described below, Akamai is unable, without unreasonable effort, to provide guidance on the planned acquisition’s impact on GAAP earnings per share and operating margin, largely because it is unable to calculate the value of the acquired intangible assets and resulting amortization at this time.
Akamai secures and delivers digital experiences for the world’s largest companies. Akamai’s intelligent edge platform surrounds everything, from the enterprise to the cloud, so customers and their businesses can be fast, smart, and secure. Top brands globally rely on Akamai to help them realize competitive advantage through agile solutions that extend the power of their multi-cloud architectures. Akamai keeps decisions, apps and experiences closer to users than anyone — and attacks and threats far away. Akamai’s portfolio of edge security, web and mobile performance, enterprise access and video delivery solutions is supported by unmatched customer service, analytics and 24/7/365 monitoring. To learn why the world’s top brands trust Akamai, visit www.akamai.com, blogs.akamai.com, or @Akamai on Twitter.
*Use of Non-GAAP Financial Measures
The forward-looking financial measures provided in this release have not been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Akamai is unable to provide forward-looking guidance with respect to the earnings per share and operating margin impacts of the planned acquisition as measured in accordance GAAP or to reconcile such amounts to the closest GAAP metrics provided without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items we exclude from non-GAAP measures. For example, amortization of intangible assets is based on highly specialized valuations that are prepared after an acquisition closes, and acquisition-related costs and restructuring costs are impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, Akamai excludes certain items that occur infrequently, which are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items we exclude and to estimate certain discrete tax items, like the resolution of tax audits or changes to tax laws. As such, the costs that are being excluded from non-GAAP projections are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes to any one of the exclusions could have a significant effect on our guidance and future GAAP results.
Management uses the non-GAAP measure reflected in this release, as well as GAAP financial measures and other non-GAAP metrics, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate Akamai's financial performance. The non-GAAP financial measures used in this release are non-GAAP operating margin and non-GAAP net income per share.
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 the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results. 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 and investor presentations 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.
Akamai’s definitions of non-GAAP measures used in this press release are outlined below:
Non-GAAP income from operations – GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; gains and losses on legal settlements; costs from professional service providers related to a non-routine stockholder matter; costs incurred related to the establishment of an endowment to the Akamai Foundation; transformation costs; and other non-recurring or unusual items that may arise from time to time.
Non-GAAP operating margin – Non-GAAP income from operations stated as a percentage of revenue.
Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; gains and losses on legal settlements; costs from professional service providers related to a non-routine stockholder matter; costs incurred related to the establishment of an endowment to the Akamai Foundation; transformation costs; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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 $1,150 million of convertible senior notes due 2025. 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 operating performance. With respect to the convertible senior notes due 2025, unless and until Akamai's weighted average stock price is greater than $95.10, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.
The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:
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 about expected revenue and other benefits to Akamai from the acquisition. 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, failure to close the transaction expeditiously or at all, inability to successfully integrate the personnel of Exceda, failure to achieve expected post-closing financial results, 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.