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Press Release Details

Akamai Reports Third Quarter 2000 Results

October 18, 2000 at 12:00 AM EDT

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Oct. 18, 2000--

  • Third quarter revenue of $27.2 million, up 50% from second quarter
  • Customer base under recurring contracts grows to 1,115
  • Two new services commercially introduced, extending EdgeAdvantage(SM) platform
  • Delivery of more than 4,000 live video and audio streaming events during the third quarter
  • Network grows to over 6,000 servers inside 335 networks in 54 countries

Akamai Technologies, Inc. (NASDAQ:AKAM - news), the leading Content Delivery Service Provider (CDSP), today reported financial results for the third quarter ended September 30, 2000. Revenue for the quarter increased 50% to $27.2 million, compared to revenue of $18.1 million for the previous quarter, and increased significantly compared to revenue of $0.9 million for the third quarter last year. Revenue for the first nine months of 2000 was $52.5 million.

''Akamai is focused on building upon our first-mover advantage as the world's leading Content Delivery Service Provider,'' said George Conrades, chairman and CEO of Akamai. ''Our results this quarter are representative of our ability to capture the huge market opportunity we see in managed edge services as Web traffic continues to grow exponentially and a multibillion-dollar market opportunity has developed for Internet infrastructure services at the edge.''

Normalized net loss for the third quarter 2000, before equity related non-cash compensation charges and amortization of intangible assets, totaled $55.7 million, or $0.60 per share, compared to First Call's consensus summary net loss of $0.68 per share, and second quarter 2000 normalized net loss of $43.4 million, or $0.50 per share. Net loss attributable to common stockholders for the third quarter of 2000 and the second quarter of 2000 was $304.1 million and $243.2 million, or $3.27 per share and $2.78 per share, respectively.


During the quarter, Akamai served more than 2,800 customers, including 1,115 under recurring contracts, compared to 895 at the end of the second quarter. Akamai delivered content for hundreds of the Web's most popular sites, and streaming media for many high-profile events, demonstrating the company's ability to fulfill the increasing demand for high-quality, robust and reliable Internet content and streaming media services. Some of those events included:

  • The 52nd Annual Prime Time EMMY Awards on behalf of
  • 2000 MTV Video Music Awards
  • Steve Jobs Keynote at Apple MacWorld Expo featuring 1-Megabit video streams
  • British Open Championship Golf Tournament
  • C-SPAN coverage of Republican and Democratic national conventions

Extending leadership in broadband content delivery, Akamai announced an agreement with Intertainer in which Intertainer's entertainment-on-demand service will use Akamai's globally distributed FreeFlow(SM) Streaming network to deliver long-form video programming to customer homes. The deal was a first-of-its-kind relationship in which a commercially available on-demand streaming media service will be delivered through a distributed presence within last-mile broadband providers' local networks.

Akamai continued to expand its indirect sales channels and added several new reseller partners, including EDS and PSINet. These companies joined Akamai's existing resellers, including partners such as CacheFlow, Digex, Genuity, GlobalCenter, IBM, KPNQwest, Loudcloud and NaviSite. Indirect channels contributed approximately 15% of third quarter revenue, up from 11% in the second quarter, continuing to represent an important growth catalyst for customer acquisition.


Akamai continues to operate the largest globally distributed network for the delivery of Internet content, streaming media and applications, and during the quarter increased the number of deployed servers from 4,250 to 6,060. Akamai has extended its worldwide presence with servers now deployed within 335 networks in 54 countries. These networks include Internet backbone providers, ISPs, cable providers, DSL providers and satellite facilities. In July, Akamai also unveiled its Edge Network Exchange program, which will give participating networks the ability to sell Akamai's global content delivery services to their hosting customers. This new program offers revenue generation capabilities for participating networks.


Akamai continued to leverage its EdgeAdvantage platform to introduce two new commercial services in the third quarter, StorageFlow and Digital Parcel Service. Akamai's StorageFlow service is a scalable, globally replicated, high-performance and fault-tolerant storage management service that will persistently store content delivered to end-users via Akamai's content delivery services, including its FreeFlow(SM), FreeFlow Streaming, and Digital Parcel Service. StorageFlow ensures that customer content is stored on today's leading storage hardware, software and infrastructure technologies that include EMC systems and software managed by EDS, as announced during the quarter.

Akamai's Digital Parcel Service is an unparalleled, comprehensive digital distribution and rights management solution offered in partnership with Reciprocal, Inc., the global leader in digital rights management (DRM) transaction services. Akamai also announced major technology partnerships in the third quarter with Fireclick, IBM, Radware, and Resonate.

Akamai announced the issuance of a fifth patent. The newest patent covers innovative aspects of the company's flagship FreeFlow service. The U.S. Patent and Trademark Office issued U.S. Patent No. 6,108,703, entitled ''Global Hosting System,'' on August 22. The '703 patent, granted to MIT in the names of Tom Leighton, Akamai's Chief Scientist, and Danny Lewin, Akamai's Chief Technology Officer, has been licensed to Akamai on an exclusive basis.


''We continue to track our path to profitability as demonstrated by rising gross margins, which are up even with our rapid, up-front network deployment, and declining SG&A and engineering and development costs as a percentage of revenue,'' said Timothy Weller, CFO at Akamai. ''The average number of services per recurring customer is rising due to effective bundling, and that is leading to higher revenue per account, higher margins, low churn, and more competitive differentiation. Looking at the group of customers who were Akamaized as of January 1, 2000, we saw more than a 30% increase in the group's monthly revenues from January through September, driven by bundling and traffic growth.''

At September 30, 2000, the company had approximately $438.7 million of cash, cash equivalents, and short-term investments as compared to $515.7 million at June 30, 2000. Capital expenditures for the quarter were $40.5 million, which were principally used for network deployment, facilities and information systems.

At September 30, 2000, the Company had 107.3 million shares of common stock outstanding. At September 30, 2000, common stock outstanding and unexercised stock options and warrants totaled 125.3 million shares.

Finally, in the third quarter, in support of its academic roots, Akamai announced the formation of The Akamai Foundation. The foundation, funded by Akamai management and employees, is designed to strengthen mathematics education and performance in United States public schools (K-12) through a series of initiatives aimed at fostering excellence in math learning and proficiency for an Internet-centric world.

About Akamai

Akamai is the leading Content Delivery Service Provider serving over 2,800 customers worldwide. Akamai has the broadest deployment of servers for content, streaming media, and applications delivery with over 6,000 servers in 54 countries directly connected inside 335 different telecommunications networks.

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 affecting Akamai including, but not limited to, the dependence of Akamai on its Internet content delivery service, a failure of Akamai's network infrastructure, decrease in growth of Internet traffic, lack of market acceptance of its services, including its StorageFlow and Digital Parcel services, or its Edge Network Exchange program, the complexity of its service and the networks on which the service is deployed, the failure to obtain access to transmission capacity and other factors that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and other documents periodically filed with the SEC.

                       Akamai Technologies, Inc.
                 Condensed Consolidated Balance Sheets
                            (in thousands)

                                                Sept. 30,     Dec. 31,
                                                   2000         1999
                                             ------------  -----------
Current assets:
Cash, cash equivalents and
 short-term investments                         $ 438,743    $ 269,554
Accounts receivable, net                           15,592        1,588
Prepaid expenses and other current assets          19,565        2,521
                                             ------------  -----------
     Total current assets                         473,900      273,663
Property and equipment, net                       121,812       23,875
Goodwill and other intangible assets, net       2,425,207          434
Long-term investments                              12,637            -
Other assets                                       24,770        2,843
                                             ------------  -----------
     Total assets                             $ 3,058,326    $ 300,815
                                             ============  ===========

            Liabilities and stockholders' equity
Current liabilities:
  Accounts payable and accrued expenses          $ 48,370     $ 14,684
  Other current liabilities                         6,192        3,953
                                             ------------  -----------
     Total current liabilities                     54,562       18,637
Long-term liabilities                             301,470          733
                                             ------------  -----------
     Total liabilities                            356,032       19,370
Total stockholders' equity                      2,702,294      281,445
                                             ------------  -----------
     Total liabilities and
      stockholders' equity                    $ 3,058,326    $ 300,815
                                             ============  ===========

                       Akamai Technologies, Inc.
            Condensed Consolidated Statements of Operations
                 (in thousands, except per share data)

                                 For the       For the       For the
                               three months  three months  nine months
                                  ended         ended         ended
                                Sept. 30,     June 30,      Sept. 30,
                                   2000         2000          2000
                               ------------  ------------  -----------

Revenue                         $  27,156    $  18,144    $  52,522
                               ------------  ------------  -----------
Operating expenses:
  Cost of services                 18,182       12,647       37,465
  Engineering and development      18,352       12,931       38,198
  Sales, general and
   administrative                  49,948       39,662      111,072
  Amortization of
   intangible assets              238,700      190,452      438,152
  Equity related compensation       9,653        9,421       21,263
                               ------------  ------------  -----------
     Total operating expenses     334,835      265,113      646,150
                               ------------  ------------  -----------
Operating loss                   (307,679)    (246,969)    (593,628)
Interest income, net                3,624        3,803       11,052
                               ------------  ------------  -----------
Loss before income taxes         (304,055)    (243,166)    (582,576)
Provision for income taxes             20           70          132
                               ------------  ------------  -----------
Net loss                        $(304,075)   $(243,236)   $(582,708)
                               ============  ============  ===========
Basic and diluted
 net loss per share             $   (3.27)   $   (2.78)   $   (6.84)
Weighted average
 common shares outstanding         93,099       87,374       85,244

Normalized loss (1)             $ (55,722)   $ (43,363)   $(123,293)
Normalized basic and
 diluted net loss per share     $   (0.60)   $   (0.50)   $   (1.45)

Supplemental Financial Data
 (dollars and shares in thousands):
Depreciation                       11,211        7,305       21,579
EBITDA (2)                        (48,115)     (39,791)    (112,634)
Capital expenditures               40,457       33,537       96,659
End of period statistics:
   Number of signed customers       2,872        2,100        2,872
   Number of customers
    under recurring contract        1,115          895        1,115
   Number of employees              1,229        1,063        1,229
   Number of servers                6,060        4,250        6,060
   Common stock outstanding       107,298      105,873      107,298
   Common stock outstanding
    and unexercised options
    and warrants                  125,292      123,187      125,292

(1) Normalized loss is loss before equity related compensation and
    amortization of intangible assets

(2) EBITDA is earnings (loss) before interest, taxes, depreciation,
    amortization of intangible assets and equity related compensation

     Akamai Technologies, Inc.
     Jeff Young
     Media Relations
     Steven J. Wolfe
     Investor Relations