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Press Release Details

Akamai Reports Third Quarter 2001 Results

October 11, 2001 at 6:14 AM EDT

CAMBRIDGE, Mass--(BUSINESS WIRE)--Oct. 11, 2001--

  • Third quarter revenue of $42.8 million, up 57.4% from same period last year

  • EBITDA loss continues to narrow to $16.6 million from $26.5 million in previous quarter

  • EdgeSuite(SM) service reaches milestone of 101 customers

  • Capital expenditures continue to decline to $14.7 million from $18.2 million in previous quarter

  • Network grows to over 13,000 servers within 954 networks in 63 countries

Akamai Technologies, Inc. (Nasdaq: AKAM), the leading provider of outsourced e-business infrastructure services and software, today reported financial results for the third quarter ended September 30, 2001. Revenue for the quarter was $42.8 million compared to revenue of $27.2 million for the third quarter of 2000, an increase of 57.4%.

"We are extremely pleased to have exceeded expectations on our bottom line, and are satisfied with our top line results, as we continue to demonstrate dramatic progress toward achieving our goal of generating positive free cash flow and maintaining our fully-funded business plan," said George Conrades, chairman and CEO of Akamai. "Reaching over 100 customers for our flagship EdgeSuite service was especially significant as we continue to build momentum in the enterprise for Akamai's services."

Third quarter earnings before interest, taxes, depreciation, amortization and other one-time and non-cash charges (EBITDA) was a loss of $16.6 million, lower than the second quarter 2001 EBITDA loss of $26.5 million. Recurring free cash flow, defined as EBITDA minus capital expenditures minus net interest expense, was negative $33.5 million in the third quarter, an improvement vs. negative $46.4 million in the second quarter.

"We have significant cost controls in place and are achieving absolute operating savings," Conrades said. "We also are taking further steps toward profitability by reducing our overall workforce by up to 25% this quarter, which we believe will allow us to achieve a cost savings of at least $30 million on an annual basis. We continue to target EBITDA breakeven in the second quarter of next year."

Normalized net loss for third quarter 2001, before amortization and other one-time and non-cash charges, totaled $38.2 million, or $0.37 per share, compared to First Call's consensus summary net loss of $0.43 per share. Second quarter 2001 normalized net loss was $46.8 million, or $0.46 per share.

Net loss, in accordance with GAAP, for third quarter 2001 was $55.4 million, or $0.53 per share.

Third Quarter 2001 In Review


"Akamai strengthened its funding position again this quarter by cutting our burn rate dramatically. Our fully-funded business plan remains a strategic asset in the marketplace, as enterprise customers seek long-term partnerships with us," said Timothy Weller, CFO of Akamai. "Churn stabilized and our DSO of 48 days, down from 52 days last quarter, testifies to the quality of our customer base."

At September 30, 2001, the Company had $239.6 million of cash, cash equivalents, and short-term marketable securities as compared to $267.1 million at June 30, 2001. Capital expenditures, principally made in connection with network deployment and information systems, were $14.7 million for the quarter, down from $18.2 million in the previous quarter. At September 30, 2001, the Company had 115.3 million shares of common stock outstanding. At September 30, 2001, common stock outstanding and unexercised stock options and warrants totaled 126.1 million shares.


At the end of the third quarter of 2001, Akamai had 1,210 customers under recurring contract. Akamai ended the quarter with 101 EdgeSuite customers under recurring contract, and many more undergoing technical trials, compared to 53 EdgeSuite customers at the end of the previous quarter. In the third quarter, EdgeSuite customers, including ClubMed OnLine Inc., Columbia House, Logitech,,, Network Associates, Inc., Six Flags Inc., Sony Ericsson, USGS Earthquake Hazards Program, and Xerox Corp, among others, contributed a combined total of more than 10% of revenue.

Akamai entered into a broad strategic relationship with Compaq Computer Corp. in which Compaq Global Services will create a certified solutions sales team to resell the Akamai EdgeSuite service and other solutions built on Akamai software to enterprise customers. Compaq will offer EdgeSuite as a stand-alone solution for outsourcing enterprise Web infrastructure, as well as bundled with application servers, such as Oracle's 9iAS, to provide customers with global application delivery. Compaq also licensed Akamai's EdgeScape SM geo-targeting and bandwidth characterization software. Compaq's services organization will use EdgeScape to design intelligent site architecture for enterprise clients.

In the third quarter, Akamai restructured a technology license agreement with Sockeye Networks, Inc., which contributed $4 million in revenue in the quarter. Under the new agreement, future license payments to Akamai will be based on a percentage of Sockeye's revenues with a $250,000 quarterly minimum.


Akamai extended its globally distributed network to include 13,036 servers, up from 11,689 in the second quarter. Akamai's servers are now deployed within 954 networks in 63 countries including Internet backbone providers, ISPs, cable and DSL providers, and other telecommunications facilities.


Akamai extended its global platform with key technology milestones in the third quarter. The Edge Side Includes (ESI) specification, an open specification for dynamic assembly of Web pages at the edge of the Internet, was published as a W3C Note, available at and its Java-based tag library was accepted by the Java Community Process as JSR 128. Akamai announced that ESI would be integrated into top application server vendors, BEA and IBM, in addition to Oracle, which integrated ESI into its application server product in the second quarter. Akamai and these companies have proposed to make ESI an industry standard for distributing applications and content on the Internet.


Fourth quarter 2001 revenue is expected to be $34-36 million with an EBITDA loss of $18-20 million. "Before Sockeye, third quarter 2001 revenue was $38.8 million and the EBITDA loss was $20.6 million," Weller explained. "With that as the basis for comparison, our fourth quarter guidance reflects solid revenue growth from EdgeSuite, continued churn of low-end customers, and ongoing cost savings." Capital expenditures in the fourth quarter are expected to be $5-8 million. Recurring free cash flow is expected to be negative $26-29 million, another quarterly sequential improvement. Normalized EPS is expected to be a loss of $0.38-0.40 per share.

Weller added, "We ended the third quarter with $239.6 million of cash and equivalents. We believe that negative free cash flow for 2002 will be less than $100 million, and free cash flow will be positive for 2003, supporting our confidence in our fully-funded business plan."

Quarterly Conference Call

Akamai will host a conference call today at 8:30 a.m. EDT 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 In addition, a replay of the call will be available for 48 hours 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. 2065314.

About Akamai

Akamai is the leading provider of 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 13,000 servers within over 950 networks in 63 countries. With headquarters in Cambridge, Massachusetts, Akamai provides services to companies worldwide. For information on Delivering a Better InternetSM, visit

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, any material, unexpected increases in Akamai's use of funds, failure to collect amounts owed by customers, the dependence on Akamai's Internet content delivery service and technology products, lack of market acceptance of new services, 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, a failure of Akamai's network infrastructure, 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.

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

                                 September 30, 2001  December 31, 2000
                                 ------------------  -----------------

Current assets:
Cash, cash equivalents and
 short-term marketable securities  $   239,606        $   309,652
Accounts receivable, net                19,614             22,670
Prepaid expenses and other
 current assets                         13,979             23,022
                                   -----------        -----------
Total current assets                   273,199            355,344
Property and equipment, net            146,383            143,041
Goodwill and other intangible
 assets, net                            23,371          2,186,157
Marketable securities                        -             77,282
Other assets                            25,755             28,953
                                   -----------        -----------
Total assets                       $   468,708        $ 2,790,777
                                   ===========        ===========
Liabilities and stockholders'

Current liabilities:
Accounts payable and accrued
 expenses                          $    69,524        $    79,481
Other current liabilities               18,651              5,467
                                   -----------        -----------
Total current liabilities               88,175             84,948
Other liabilities                       10,687              1,430
Convertible notes                      300,000            300,000
                                   -----------        -----------
Total liabilities                      398,862            386,378
Stockholders' equity                    69,846          2,404,399
                                   -----------        -----------
Total liabilities and
 stockholders' equity              $   468,708        $ 2,790,777
                                   ===========        ===========

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

                   For the       For the       For the      For the
                    three         three         three        three
                   months        months        months       months
                    ended         ended         ended        ended
                  Sept. 30,      June 30,     March 31,     Dec. 31,
                    2001          2001          2001         2000

Revenue          $    42,754   $    43,141  $    40,209   $    37,244
Cost of service
 depreciation)        13,402        13,622       16,160        16,264
Gross profit          29,352        29,519       24,049        20,980
Gross margin %          68.7%         68.4%        59.8%         56.3%

Engineering and
 development          13,828        16,737       18,632        17,408
Sales, general
 administrative       32,094        39,279       41,885        48,679
Amortization of
 CNN advertising       1,818         2,013          391         2,628
Amortization of
 goodwill and
 assets                7,440         5,392      238,938       239,329
Depreciation          19,116        18,340       16,452        14,006
 compensation          8,717        11,038        4,514         4,884
 charge                   --        26,194           --            --
Impairment of
 goodwill                 --            --    1,912,840            --
Total operating
 expenses             83,013       118,993    2,233,652       326,934
Operating loss       (53,661)      (89,474)  (2,209,603)     (305,954)

Interest income
 (expense), net       (2,210)       (1,637)         581         2,932
Other income           1,002            --           --            --
Equity in losses
 of affiliate             --          (153)      (1,847)           --
Loss on
 investments            (213)       (1,000)     (11,747)           --
Loss before
 provision for
 income taxes        (55,082)      (92,264)  (2,222,616)     (303,022)
Provision for
 income taxes            277           344          164            55
Net loss         $   (55,359)  $   (92,608) $(2,222,780)  $  (303,077)

Basic and
 diluted net
 loss per share  $     (0.53)  $     (0.91) $    (22.50)  $     (3.16)
Weighted average
 common shares
 outstanding         104,166       101,629       98,780        95,970

 Financial Data
 (dollars and
 shares in

Normalized net
 loss (1)        $   (38,173)  $   (46,818) $   (52,503)  $   (56,236)
Normalized basic
 and diluted net
 loss per share  $     (0.37)  $     (0.46) $     (0.53)  $     (0.59)

EBITDA (2)       $   (16,570)  $   (26,497) $   (36,468)  $   (45,107)

Recurring Free
 Cash Flow (3)   $   (33,523)  $   (46,379) $   (60,381)  $   (77,376)

 depreciation    $    10,991   $    10,276  $     9,312   $     7,773
 depreciation    $     8,125   $     8,064  $     7,140   $     6,233

 expenditures    $    14,743   $    18,245  $    24,494   $    35,201

End of period
Number of
 customers under
 contract              1,210         1,333        1,473         1,337
Number of
 employees             1,111         1,129        1,299         1,299
Number of
 servers              13,036        11,689        9,743         8,004
Common stock
 outstanding         115,281       115,071      109,215       108,203
Common stock
 outstanding and
 options and
 warrants            126,090       125,470      127,372       125,413

(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.

(2) EBITDA (earnings before interest, taxes, depreciation,
amortization and other one-time and non-cash charges) is calculated as
gross profit less engineering and development expenses and sales,
general and administrative expenses.

(3) Recurring Free Cash Flow is calculated as EBITDA less capital
expenditures less net interest expense.


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