Akamai Reports First Quarter 2002 Results
Akamai Reports First Quarter 2002 Results
April 18, 2002 at 3:56 PM EDT
| Contacts: | ||
| Jeff Young Media Relations Akamai Technologies, Inc. (617) 444 - 3913 jyoung@akamai.com | --or-- | J.C. Raby Investor Relations Akamai Technologies, Inc. (617) 444 - 2555 jraby@akamai.com |
- First quarter revenue of $37.9 million
- Total EdgeSuiteSM customers increased to 185
- First quarter EBITDA loss narrows to $5.8 million
- First quarter normalized net loss is $0.27 per share, compared to First Call's consensus summary net loss of $0.32 per share
"Our first quarter of 2002 was marked by positive but modest growth," said George Conrades, chairman and CEO of Akamai. "We continued to significantly improve our customer quality and sales of our higher margin EdgeSuite service, while improving the bottom line. This reflects our focus on profitability while maintaining a healthy balance sheet as we drive toward our goal of becoming free cash flow positive in 2003."
Net loss for the first quarter 2002 before interest, taxes, depreciation, amortization and other one-time and non-cash charges (EBITDA) was $5.8 million, lower than the fourth quarter 2001 EBITDA loss of $14.3 million, and down about 84% from the first quarter 2001 EBITDA loss of $36.5 million. EBITDA (earnings before interest, taxes, depreciation, amortization and other one-time and non-cash charges) is calculated as gross profit less research and development expenses, sales and marketing expenses and general and administrative expenses.
Normalized net loss for first quarter 2002 totaled $29.5 million, or $0.27 per share, compared to First Call's consensus summary net loss of $0.32 per share. Normalized net loss is calculated as EBITDA less net interest expense, provision for income taxes and depreciation. Fourth quarter 2001 normalized net loss was $37.8 million, or $0.35 per share, and first quarter 2001 normalized net loss was $52.5 million, or $0.53 per share.
Net loss, in accordance with GAAP, for first quarter 2002 was $59.1 million, or $0.54 per share, compared to a net loss in accordance with GAAP for the fourth quarter 2001 of $64.8 million, or $0.60 per share, and for the first quarter 2001 a loss of $2,222.8 million, or $22.50 per share.
First Quarter 2002 Highlights:
Customers
At the end of the first quarter of 2002, Akamai had 185 EdgeSuite customers under recurring contract, compared to 152 at the end of the previous quarter. New EdgeSuite customers in the first quarter included DaimlerChrysler, Edmunds.com, Foot Locker, Toyota Motor Sales, and TrendMicro, among others. Resellers and channel partners accounted for approximately 25% of first quarter revenue, consistent with levels from the fourth quarter of last year.
"We saw continued market acceptance of our EdgeSuite offering in spite of a difficult IT spending environment," said Conrades. "Revenue from EdgeSuite, our primary growth driver, was 27% of total revenue for the quarter, up from 20% in the fourth quarter. This is a 35% sequential increase quarter over quarter."
The combination of Akamai's wholly owned European operations plus the Akamai Technologies Japan K.K. joint venture contributed approximately 13% of revenue in the first quarter of 2002, compared to 12% in the prior quarter.
Network
In the first quarter, Akamai continued to extend its deployment in 66 countries into a total of 1,047 networks, up from 1,036 networks at the end of the prior quarter. Akamai now has 12,674 servers deployed versus 13,522 servers at the end of the prior quarter. Quarterly server deployment contracted slightly principally as Akamai removed servers from several bankrupt ISPs, completed consolidation of some network assets, and replaced selected servers with more powerful models.
Technology
During the first quarter of 2002, Akamai furthered its evolution from Edge Delivery to Edge Computing with the addition of new functionality to EdgeSuite, including:
EdgeSuite Edge Processing - extends and accelerates an enterprise's e-business applications by performing processing including authorization, assembly, and transformations at optimal locations within the global Akamai platform;
Akamai SureRouteSM - advanced technology that determines the optimal route between the customer's origin servers and the edge of the Internet to optimize delivery for all types of content, including dynamic, uncacheable content;
EdgeSuite Site ShieldSM - an industry-leading solution for protecting a Web site from the wide range of threats on the public Internet; and,
Last Mile Compression - enables accelerated delivery of HTML/text content to end-users resulting in faster downloads with no hardware or software installation or maintenance required.
Financials
"Our 2002 first quarter operating results, strong customer collections with 45 days sales outstanding, and the real estate settlement with our Cambridge landlord, all strengthened our cash outlook," said Timothy Weller, chief financial officer at Akamai. "Not only did we end the first quarter with over $170 million of cash and marketable securities, we took major steps to cut our future burn rate, ensuring that our fully-funded business plan remains stronger than ever."
In the first quarter 2002, Akamai reached an agreement to terminate the Company's leases with MIT at 500 and 600 Technology Square in Cambridge for an upfront payment of $15 million, thus reducing Akamai's long-term capital lease agreements by over $100 million. The Company expects to achieve $8-10 million of annual cash savings from this transaction.
At March 31, 2002, the Company had approximately $171.7 million of cash, cash equivalents, and short-term and long-term marketable securities as compared to $210.5 million at December 31, 2001. Capital expenditures, principally made in connection with network deployment, facilities and information systems, for the quarter were $2.8 million.
At March 31, 2002, the Company had 115.7 million shares of common stock outstanding. At March 31, 2002, common stock outstanding and unexercised stock options and warrants totaled 130.6 million shares.
Akamai Technologies, Inc.
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
March 31, 2002 December 31, 2001
-------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 63,809 $ 78,774
Marketable securities 100,313 113,906
Accounts receivable, net 17,294 20,067
Prepaid expenses and other
current assets 16,542 15,253
------- --------
Total current assets 197,958 228,000
Property and equipment, net 114,717 132,237
Goodwill and other intangible
assets, net 14,104 19,351
Marketable securities 7,603 17,831
Other assets 16,423 24,059
-------- --------
Total assets $350,805 $421,478
========= =========
Liabilities and stockholders' (deficit) equity
Current liabilities:
Accounts payable and
accrued expenses $ 57,096 $ 68,311
Other current liabilities 21,390 22,987
--------- ---------
Total current liabilities 78,486 91,298
Other liabilities 7,200 12,947
Convertible notes 300,000 300,000
--------- ---------
Total liabilities 385,686 404,245
Stockholders' (deficit)
equity (34,881) 17,233
--------- ---------
Total liabilities and
stockholders' (deficit) equity $ 350,805 $ 421,478
========== =========
Akamai Technologies, Inc.
Condensed Consolidated Statements of Operations
(dollar amounts in thousands, except per share data)
(unaudited)
------------------Three Months Ended----------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2002 2001 2001 2001 2001
-------- -------- -------- -------- -----------
Revenue $ 37,927 $ 37,110 $ 42,754 $ 43,141 $ 40,209
Cost of service
(before
network-related
depreciation)(4) 11,242 13,977 15,869 16,439 18,834
-------- -------- -------- -------- -----------
Gross profit 26,685 23,133 26,885 26,702 21,375
-------- -------- -------- -------- -----------
Gross margin % 70.4% 62.3% 62.9% 61.9% 53.2%
Operating
expenses: (4)
Research and
development 4,869 6,575 7,627 9,595 11,284
Sales and
marketing 13,610 13,355 17,432 19,072 23,937
General and
administrative 13,966 17,517 18,396 24,532 22,622
Amortization of
CNN advertising 1,246 1,410 1,818 2,013 391
Amortization
of goodwill
and other
intangible
assets 5,237 4,034 7,440 5,392 238,938
Depreciation 20,010 19,912 19,116 18,340 16,452
Equity-related
compensation 6,371 7,188 8,717 11,038 4,514
Restructuring
charge 12,409 14,302 -- 26,194 --
Impairment of
goodwill -- -- -- -- 1,912,840
-------- -------- -------- -------- -----------
Total operating
expenses 77,718 84,293 80,546 116,176 2,230,978
-------- -------- -------- -------- -----------
Operating loss (51,033) (61,160) (53,661) (89,474) (2,209,603)
Interest income
(expense), net (3,574) (3,336) (2,210) (1,637) 581
Other income -- -- 1,002 -- --
Equity in losses
of affiliate -- -- -- (153) (1,847)
Loss on
investments (4,328) 8 (213) (1,000) (11,747)
-------- -------- -------- -------- -----------
Loss before
provision for
income taxes (58,935) (64,488) (55,082) (92,264) (2,222,616)
Provision for
income taxes 123 277 277 344 164
-------- -------- -------- -------- -----------
Net loss $(59,058) $(64,765) $(55,359) $(92,608) $(2,222,780)
======== ======== ======== ======== ===========
Basic and
diluted net
loss per share $ (0.54) $ (0.60) $ (0.53) $ (0.91) $ (22.50)
Weighted average
common shares
outstanding 109,693 108,357 104,166 101,629 98,780
Supplemental
financial data
(dollars and
shares in
thousands):
Normalized
net loss (1) $(29,467) $(37,839) $(38,173) $(46,818) $ (52,503)
Normalized basic
and diluted net
loss per share $ (0.27) $ (0.35) $ (0.37) $ (0.46) $ (0.53)
EBITDA (2) $ (5,760) $(14,314) $(16,570) $(26,497) $ (36,468)
Recurring free
cash flow (3) $(12,121) $(24,818) $(33,523) $(46,379) $ (60,381)
Network-related
depreciation $ 11,807 $ 12,098 $ 10,991 $ 10,276 $ 9,312
Other
depreciation $ 8,203 $ 7,814 $ 8,125 $ 8,064 $ 7,140
Capital
expenditures $ 2,787 $ 7,168 $ 14,743 $ 18,245 $ 24,494
End of period
statistics:
EdgeSuite
customers 185 152 100 51 16
Number of
customers
under
recurring
contract 1,055 1,078 1,096 1,208 1,377
Number of
employees 822 841 1,111 1,129 1,299
Number of
servers 12,674 13,522 13,036 11,689 9,743
Common stock
outstanding 115,723 115,099 115,281 115,071 109,215
Common stock
outstanding
and
unexercised
options
and warrants 130,594 128,926 126,090 125,470 127,372
End of period
ratios:
Annualized
average revenue
per employee $ 182.5 $ 152.1 $ 152.7 $ 142.1 $ 123.8
Cost of service
as a % of
revenue 29.6% 37.7% 37.1% 38.1% 46.8%
Research and
development as
a % of revenue 12.8% 17.7% 17.8% 22.2% 28.1%
Sales and
marketing as
a % of revenue 35.9% 36.0% 40.8% 44.2% 59.5%
General and
administrative
as a % of
revenue 36.8% 47.2% 43.0% 56.9% 56.3%
Capital
expenditures as
a % of revenue 7.3% 19.3% 34.5% 42.3% 60.9%
Days sales
outstanding
of accounts
receivable 45 49 48 52 53
(1) Normalized net loss (net loss before amortization and other
one-time and non-cash charges) is calculated as EBITDA less net
interest expense, provision for income taxes and depreciation. See
Supplemental Financial Information for reconciliation to GAAP net
loss.
(2) EBITDA (earnings before interest, taxes, depreciation,
amortization and other one-time and non-cash charges) is calculated as
gross profit less research and development, sales and marketing and
general and administrative expenses. See Supplemental Financial
Information for reconciliation to GAAP net loss.
(3) Recurring free cash flow is calculated as EBITDA less capital
expenditures less net interest expense. See Supplemental Financial
Information for reconciliation to GAAP net loss.
(4) Akamai's Condensed, Consolidated Statements of Operations are
shown in a new format. In the old format, the engineering and
development line included research and development; network
operations, which has been moved to cost of service in the new format;
and information technology, which has been moved to general and
administrative in the new format. The sales, general and
administrative line in the old format has been separated into two
lines called sales and marketing, and general and administrative in
the new format. All other expense lines are the same in both format.
Each expense line which is different in the old and new format is
presented in both formats in the Supplemental Financial Information.
Akamai Technologies, Inc.
Supplemental Financial Information
Reconciliation from GAAP to
Normalized net loss, EBITDA
and Recurring free cash flow
-------------------Three Months Ended------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2002 2001 2001 2001 2001
--------- -------- --------- -------- ----------
Net loss in
accordance
with GAAP $(59,058) $(64,765) $(55,359) $(92,608) $(2,222,780)
Adjustments to
reconcile net
loss to Normalized
net loss, EBITDA
and Recurring free
cash flow:
Amortization of
goodwill,
intangibles
and CNN
advertising 6,483 5,444 9,258 7,405 239,329
Equity-related
compensation 6,371 7,188 8,717 11,038 4,514
Impairment of
goodwill -- -- -- -- 1,912,840
Restructuring
charge 12,409 14,302 -- 26,194 --
Equity in losses
of affiliate -- -- -- 153 1,847
Loss on
investments 4,328 (8) 213 1,000 11,747
Other income -- -- (1,002) -- --
-------- -------- --------- -------- --------
(1) Normalized
net loss (29,467) (37,839) (38,173) (46,818) (52,503)
Interest expense
(income), net 3,574 3,336 2,210 1,637 (581)
Provision for
income taxes 123 277 277 344 164
Depreciation 20,010 19,912 19,116 18,340 16,452
------ ------ ------ ------ ------
(2) EBITDA (5,760) (14,314) (16,570) (26,497) (36,468)
Interest (expense)
income, net (3,574) (3,336) (2,210) (1,637) 581
Capital
expenditures (2,787) (7,168) (14,743) (18,245) (24,494)
-------- -------- --------- -------- --------
(3) Recurring
free cash
flow $(12,121) $(24,818) $(33,523) $(46,379) $(60,381)
========= ========= ========= ========= =========
Condensed Consolidated Statements
of Operations format changes
----------------Three Months Ended-----------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
2002 2001 2001 2001 2001
-------- -------- --------- -------- ---------
(4) Comparison of
old format and new
format expense lines
Old format:
Cost of service 9,697 11,948 13,402 13,622 16,160
Engineering
and development 9,098 12,254 13,828 16,737 18,632
Sales, general
and
administrative 24,892 27,222 32,094 39,279 41,885
------ ------ ------ ------ ------
43,687 51,424 59,324 69,638 76,677
====== ====== ====== ====== ======
New format:
Cost of service 11,242 13,977 15,869 16,439 18,834
Research and
development 4,869 6,575 7,627 9,595 11,284
Sales and
marketing 13,610 13,355 17,432 19,072 23,937
General and
administrative 13,966 17,517 18,396 24,532 22,622
------ ------ ------ ------ ------
43,687 51,424 59,324 69,638 76,677
====== ====== ====== ====== ======
Quarterly Conference Call Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 800-274-4379 (or 1+ 706-645-9202 for international calls). A live Webcast of the call can be accessed at www.akamai.com. In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 800-642-1687 (or 1+ 706-645-9291 for international calls) and using conference ID No. 3728348.
About Akamai
Akamai is a leading provider of secure, outsourced e-business infrastructure services and software. These services and software enable companies to reduce the complexity and cost of deploying and operating a uniform Web infrastructure while ensuring unmatched performance, reliability, scalability and manageability. Akamai's services give businesses a distinct competitive advantage and provide an unparalleled Internet experience for their customers. Akamai's intelligent edge platform for content, streaming media, and application delivery comprises more than 12,600 servers within over 1,000 networks in 66 countries. With headquarters in Cambridge, Massachusetts, Akamai provides services and industry-renowned customer care to hundreds of enterprises worldwide, including dozens of Fortune 500 businesses. For information on Delivering a Better InternetSM, visit www.akamai.com.
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. 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, general economic conditions, unexpected increases in Akamai's use of funds, the dependence on Akamai's Internet content delivery service, outsourced e-business infrastructure services and other technology products, lack of market acceptance of our services, including EdgeSuite, a failure by us to successfully enter into any license, technology development or other technology partnership agreement within the time periods expected by us or at all, the sometimes lengthy and unpredictable amount of time required to engage a customer, failure to achieve incremental revenue growth through increased sales resources in a timely fashion or at all, the complexity of our services and the networks on which our services are deployed, and human error in operating the same, a failure of Akamai's network infrastructure, failure to lease new space under desirable economic terms, changes in regulations or laws relating to privacy or other aspects of the Internet 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, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.