Akamai Reports Fourth Quarter 2018 And Full-Year 2018 Financial Results
"We were very pleased with our strong finish to the year. Both revenue and earnings exceeded our expectations due to the very rapid growth of our cloud security business, robust seasonal traffic and our continued focus on operational excellence," said Dr.
Revenue: Revenue for the fourth quarter was
Revenue by Division(1):
- Web Division revenue for the fourth quarter was
$385 million , up 9% year-over-year and up 10% when adjusted for foreign exchange.* Web Division revenue for 2018 was$1.446 billion , up 11% year-over-year and up 10% when adjusted for foreign exchange.* - Media and Carrier Division revenue for the fourth quarter was
$328 million , up 8% year-over-year and up 9% when adjusted for foreign exchange.* Media and Carrier Division revenue for 2018 was$1.268 billion , up 7% year-over-year and when adjusted for foreign exchange.*
Revenue from Cloud Security Solutions(2):
- Cloud Security Solutions revenue for the fourth quarter was
$185 million , up 36% year-over-year and up 38% when adjusted for foreign exchange.* Cloud Security Solutions revenue for 2018 was$658 million , up 35% year-over-year and when adjusted for foreign exchange.*
Revenue from Internet Platform Customers(3):
- Revenue from Internet Platform Customers for the fourth quarter was
$43 million , down 14% year-over-year and when adjusted for foreign exchange.* Internet Platform Customers revenue for 2018 was$175 million , down 14% year-over-year and when adjusted for foreign exchange.* - Revenue excluding Internet Platform Customers for the fourth quarter was
$670 million , up 10% year-over-year and up 11% when adjusted for foreign exchange.* Revenue excluding Internet Platform Customers for 2018 was$2.540 billion , up 11% year-over-year and when adjusted for foreign exchange.*
Revenue by Geography:
- U.S. revenue for the fourth quarter was
$434 million , up 2% year-over-year. U.S. revenue for 2018 was$1.683 billion , up 3% year-over-year. - International revenue for the fourth quarter was
$279 million , up 20% year-over-year and up 23% when adjusted for foreign exchange.* International revenue for 2018 was$1.031 billion , up 21% year-over-year and up 20% when adjusted for foreign exchange.*
Fourth quarter 2017 items: Fourth quarter year-over-year growth rates for GAAP income from operations, GAAP net income and GAAP EPS in the paragraphs below were impacted by two items recognized in the fourth quarter of 2017: a
Income from operations: GAAP income from operations for the fourth quarter was
Non-GAAP income from operations* for the fourth quarter was
Net income: GAAP net income for the fourth quarter was
Non-GAAP net income* for the fourth quarter was
EPS: GAAP EPS for the fourth quarter was
Non-GAAP EPS* for the fourth quarter was
Adjusted EBITDA*: Adjusted EBITDA* for the fourth quarter was
Supplemental cash information: Cash from operations for the quarter was
Share repurchases: The Company spent
Adoption of new revenue recognition standard: Prior period results have been revised for the adoption of the new revenue recognition standard. Under this standard, the way the Company recognizes revenue from some customers changed, primarily impacting the timing of recognizing revenue from a small number of licensed software customers. The way
* |
See Use of Non-GAAP Financial Measures below for definitions |
(1) |
Revenue by Division – A customer-focused reporting view that reflects revenue from customers that are managed by the division. As of January 1, 2018, Akamai now reports its revenue in two divisions compared to the three divisions reported in 2017; the Media Division and Enterprise and Carrier Division were combined to form the new Media and Carrier Division. In addition, as the purchasing patterns and required account expertise of customers changes over time, Akamai may reassign a customer's division from one to another. In 2018 Akamai reassigned some of its customers from the Media and Carrier Division to the Web Division and revised historical results in order to reflect the most recent categorization and to provide a comparable view for all periods presented. |
(2) |
Revenue from Cloud Security Solutions – A product-focused reporting view that illustrates revenue from Cloud Security Solutions separately from all other solution categories. During 2018, Akamai updated its methodology for allocating revenue to specific solutions when solutions are sold as a bundle. During 2018, Akamai reassigned amounts from CDN and other solutions revenue to Cloud Security Solutions revenue and revised historical results in order to reflect the most recent allocation methodologies and to provide a comparable view for all periods presented. |
(3) |
Revenue from Internet Platform Customers – Revenue from six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix |
Leadership Transition
"I am delighted to announce Ed's promotion to Executive Vice President and Chief Financial Officer at
"And on behalf of our Board of Directors and
Quarterly Conference Call
About
AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(in thousands) |
December |
December |
|||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
1,036,455 |
$ |
313,382 |
|||
Marketable securities |
855,650 |
398,554 |
|||||
Accounts receivable, net |
479,889 |
461,457 |
|||||
Prepaid expenses and other current assets |
163,360 |
172,853 |
|||||
Total current assets |
2,535,354 |
1,346,246 |
|||||
Property and equipment, net |
910,618 |
862,535 |
|||||
Marketable securities |
209,066 |
567,592 |
|||||
Goodwill |
1,487,404 |
1,498,688 |
|||||
Acquired intangible assets, net |
168,348 |
201,259 |
|||||
Deferred income tax assets |
34,913 |
36,231 |
|||||
Other assets |
116,067 |
136,365 |
|||||
Total assets |
$ |
5,461,770 |
$ |
4,648,916 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
99,089 |
$ |
80,278 |
|||
Accrued expenses |
328,304 |
283,743 |
|||||
Deferred revenue |
69,083 |
70,495 |
|||||
Convertible senior notes |
686,552 |
— |
|||||
Other current liabilities |
27,681 |
22,178 |
|||||
Total current liabilities |
1,210,709 |
456,694 |
|||||
Deferred revenue |
4,557 |
6,062 |
|||||
Deferred income tax liabilities |
19,624 |
17,823 |
|||||
Convertible senior notes |
874,080 |
662,913 |
|||||
Other liabilities |
160,940 |
142,955 |
|||||
Total liabilities |
2,269,910 |
1,286,447 |
|||||
Total stockholders' equity |
3,191,860 |
3,362,469 |
|||||
Total liabilities and stockholders' equity |
$ |
5,461,770 |
$ |
4,648,916 |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands, except per share data) |
December |
September |
December |
December |
December |
||||||||||||||
Revenue |
$ |
713,363 |
$ |
669,628 |
$ |
658,470 |
$ |
2,714,474 |
$ |
2,489,035 |
|||||||||
Costs and operating expenses: |
|||||||||||||||||||
Cost of revenue (2) (3) |
243,927 |
239,246 |
229,940 |
953,485 |
875,837 |
||||||||||||||
Research and development (2) |
60,342 |
61,049 |
59,673 |
246,165 |
222,434 |
||||||||||||||
Sales and marketing (2) |
137,797 |
125,323 |
131,223 |
517,353 |
481,522 |
||||||||||||||
General and administrative (2) (3) |
129,565 |
119,911 |
146,115 |
574,067 |
509,165 |
||||||||||||||
Amortization of acquired intangible assets |
8,292 |
8,294 |
7,829 |
33,311 |
30,904 |
||||||||||||||
Restructuring charge (benefit) |
13,152 |
(732) |
51,581 |
27,594 |
54,884 |
||||||||||||||
Total costs and operating expenses |
593,075 |
553,091 |
626,361 |
2,351,975 |
2,174,746 |
||||||||||||||
Income from operations |
120,288 |
116,537 |
32,109 |
362,499 |
314,289 |
||||||||||||||
Interest income |
7,308 |
9,258 |
4,487 |
26,940 |
17,855 |
||||||||||||||
Interest expense |
(14,582) |
(14,566) |
(4,850) |
(43,202) |
(18,839) |
||||||||||||||
Other income (expense), net |
59 |
(459) |
473 |
(3,148) |
887 |
||||||||||||||
Income before provision for income taxes |
113,073 |
110,770 |
32,219 |
343,089 |
314,192 |
||||||||||||||
Provision for income taxes |
19,058 |
3,187 |
4,699 |
44,716 |
91,426 |
||||||||||||||
Net income |
$ |
94,015 |
$ |
107,583 |
$ |
27,520 |
$ |
298,373 |
$ |
222,766 |
|||||||||
Net income per share: |
|||||||||||||||||||
Basic |
$ |
0.58 |
$ |
0.65 |
$ |
0.16 |
$ |
1.78 |
$ |
1.30 |
|||||||||
Diluted |
$ |
0.57 |
$ |
0.64 |
$ |
0.16 |
$ |
1.76 |
$ |
1.29 |
|||||||||
Shares used in per share calculations: |
|||||||||||||||||||
Basic |
162,958 |
165,924 |
169,429 |
167,312 |
171,559 |
||||||||||||||
Diluted |
164,540 |
167,900 |
170,727 |
169,188 |
172,711 |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
(2) |
Includes stock-based compensation (see supplemental table for figures) |
(3) |
Includes depreciation and amortization (see supplemental table for figures) |
AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||||
Net income |
$ |
94,015 |
$ |
107,583 |
$ |
27,520 |
$ |
298,373 |
$ |
222,766 |
|||||||||
Adjustments to reconcile net income to net cash |
|||||||||||||||||||
Depreciation and amortization |
116,294 |
107,833 |
99,396 |
434,520 |
372,313 |
||||||||||||||
Stock-based compensation |
44,998 |
46,632 |
42,205 |
183,813 |
164,308 |
||||||||||||||
(Benefit) provision for deferred income taxes |
(10,567) |
25,022 |
(30,378) |
2,339 |
(7,244) |
||||||||||||||
Amortization of debt discount and issuance costs |
14,114 |
14,085 |
4,850 |
41,958 |
18,839 |
||||||||||||||
Restructuring-related software charges |
2,122 |
— |
31,965 |
4,940 |
31,965 |
||||||||||||||
Other non-cash reconciling items, net |
2,718 |
1,345 |
6,413 |
12,078 |
10,068 |
||||||||||||||
Changes in operating assets and liabilities, net of |
|||||||||||||||||||
Accounts receivable |
(16,834) |
3,278 |
(40,631) |
(30,445) |
(50,054) |
||||||||||||||
Prepaid expenses and other current assets |
(2,048) |
(10,662) |
7,612 |
(4,132) |
(28,968) |
||||||||||||||
Accounts payable and accrued expenses |
34,317 |
35,012 |
11,082 |
42,238 |
33,232 |
||||||||||||||
Deferred revenue |
(24,846) |
(5,625) |
1,410 |
(919) |
2,938 |
||||||||||||||
Other current liabilities |
7,392 |
(3,625) |
12,727 |
9,422 |
16,378 |
||||||||||||||
Other non-current assets and liabilities |
24,480 |
(10,397) |
23,270 |
14,142 |
14,442 |
||||||||||||||
Net cash provided by operating activities |
286,155 |
310,481 |
197,441 |
1,008,327 |
800,983 |
||||||||||||||
Cash flows from investing activities: |
|||||||||||||||||||
Cash paid for acquired businesses, net of cash |
— |
— |
(171,872) |
(79) |
(369,073) |
||||||||||||||
Purchases of property and equipment and |
(117,334) |
(86,698) |
(106,852) |
(405,741) |
(414,778) |
||||||||||||||
Purchases of short- and long-term marketable |
(91,611) |
(314,200) |
(77,399) |
(873,697) |
(326,497) |
||||||||||||||
Proceeds from sales and maturities of short- and |
380,034 |
254,450 |
154,390 |
775,050 |
652,769 |
||||||||||||||
Other non-current assets and liabilities |
612 |
(2,199) |
(420) |
(2,066) |
(1,586) |
||||||||||||||
Net cash used in investing activities |
171,701 |
(148,647) |
(202,153) |
(506,533) |
(459,165) |
AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Cash flows from financing activities: |
|||||||||||||||||||
Proceeds from the issuance of convertible senior |
— |
(437) |
— |
1,132,185 |
— |
||||||||||||||
Proceeds from the issuance of warrants |
— |
— |
— |
119,945 |
— |
||||||||||||||
Purchase of note hedge related to convertible senior |
— |
— |
— |
(261,740) |
— |
||||||||||||||
Proceeds from the issuance of common stock under |
10,111 |
18,394 |
13,940 |
62,608 |
55,680 |
||||||||||||||
Employee taxes paid related to net share settlement |
(12,160) |
(10,837) |
(10,273) |
(64,305) |
(58,395) |
||||||||||||||
Repurchases of common stock |
(124,075) |
(440,413) |
(54,565) |
(750,000) |
(361,194) |
||||||||||||||
Other non-current assets and liabilities |
— |
(241) |
— |
(5,085) |
(1,096) |
||||||||||||||
Net cash used in financing activities |
(126,124) |
(433,534) |
(50,898) |
233,608 |
(365,005) |
||||||||||||||
Effects of exchange rate changes on cash and cash |
(1,316) |
(68) |
631 |
(12,844) |
12,990 |
||||||||||||||
Net increase (decrease) in cash, cash equivalents and |
330,416 |
(271,768) |
(54,979) |
722,558 |
(10,197) |
||||||||||||||
Cash, cash equivalents, and restricted at beginning of |
706,571 |
978,339 |
369,408 |
314,429 |
324,626 |
||||||||||||||
Cash, cash equivalents and restricted at end of period |
$ |
1,036,987 |
$ |
706,571 |
$ |
314,429 |
$ |
1,036,987 |
$ |
314,429 |
|||||||||
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
On January 1, 2018, Akamai also adopted Accounting Standards Update No. 2016-18, Statement of Cash Flows. Under this standard, restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period cash on the statement of cash flows. Akamai retrospectively adopted this standard and revised cash flows from investing activities by ($0.2) million and $0.5 million for the three and twelve months ended December 31, 2017, respectively, with a corresponding revision to the net increase (decrease) in cash, cash equivalents and restricted cash. |
AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE BY DIVISION |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Web Division |
$ |
385,275 |
$ |
356,856 |
$ |
354,821 |
$ |
1,446,052 |
$ |
1,305,401 |
|||||||||
Media and Carrier Division |
328,088 |
312,772 |
303,649 |
1,268,422 |
1,183,634 |
||||||||||||||
Total revenue |
$ |
713,363 |
$ |
669,628 |
$ |
658,470 |
$ |
2,714,474 |
$ |
2,489,035 |
|||||||||
Revenue growth rates year-over-year: |
|||||||||||||||||||
Web Division |
9 |
% |
8 |
% |
16 |
% |
11 |
% |
15 |
% |
|||||||||
Media and Carrier Division |
8 |
6 |
— |
7 |
(2) |
||||||||||||||
Total revenue |
8 |
% |
7 |
% |
8 |
% |
9 |
% |
6 |
% |
|||||||||
Revenue growth rates year-over-year, |
|||||||||||||||||||
Web Division |
10 |
% |
9 |
% |
15 |
% |
10 |
% |
15 |
% |
|||||||||
Media and Carrier Division |
9 |
7 |
(1) |
7 |
(2) |
||||||||||||||
Total revenue |
10 |
% |
8 |
% |
7 |
% |
9 |
% |
6 |
% |
|||||||||
AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE FROM CLOUD SECURITY SOLUTIONS |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Cloud Security Solutions |
$ |
184,769 |
$ |
168,626 |
$ |
135,842 |
$ |
657,850 |
$ |
485,523 |
|||||||||
CDN and other solutions |
528,594 |
501,002 |
522,628 |
2,056,624 |
2,003,512 |
||||||||||||||
Total revenue |
$ |
713,363 |
$ |
669,628 |
$ |
658,470 |
$ |
2,714,474 |
$ |
2,489,035 |
|||||||||
Revenue growth rates year-over-year: |
|||||||||||||||||||
Cloud Security Solutions |
36 |
% |
37 |
% |
34 |
% |
35 |
% |
32 |
% |
|||||||||
CDN and other solutions |
1 |
— |
3 |
3 |
1 |
||||||||||||||
Total revenue |
8 |
% |
7 |
% |
8 |
% |
9 |
% |
6 |
% |
|||||||||
Revenue growth rates year-over-year, |
|||||||||||||||||||
Cloud Security Solutions |
38 |
% |
39 |
% |
33 |
% |
35 |
% |
32 |
% |
|||||||||
CDN and other solutions |
2 |
1 |
2 |
2 |
1 |
||||||||||||||
Total revenue |
10 |
% |
8 |
% |
7 |
% |
9 |
% |
6 |
% |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
(2) |
See Use of Non-GAAP Financial Measures below for a definition |
AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE FROM INTERNET PLATFORM CUSTOMERS |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Revenue from Internet Platform Customers |
$ |
43,218 |
$ |
43,086 |
$ |
49,992 |
$ |
174,757 |
$ |
203,283 |
|||||||||
Revenue excluding Internet Platform Customers |
670,145 |
626,542 |
608,478 |
2,539,717 |
2,285,752 |
||||||||||||||
Total revenue |
$ |
713,363 |
$ |
669,628 |
$ |
658,470 |
$ |
2,714,474 |
$ |
2,489,035 |
|||||||||
Revenue growth rates year-over-year: |
|||||||||||||||||||
Revenue from Internet Platform Customers |
(14) |
% |
(15) |
% |
(14) |
% |
(14) |
% |
(19) |
% |
|||||||||
Revenue excluding Internet Platform Customers |
10 |
9 |
10 |
11 |
9 |
||||||||||||||
Total revenue |
8 |
% |
7 |
% |
8 |
% |
9 |
% |
6 |
% |
|||||||||
Revenue growth rates year-over-year, |
|||||||||||||||||||
Revenue from Internet Platform Customers |
(14) |
% |
(15) |
% |
(14) |
% |
(14) |
% |
(19) |
% |
|||||||||
Revenue excluding Internet Platform Customers |
11 |
10 |
9 |
11 |
9 |
||||||||||||||
Total revenue |
10 |
% |
8 |
% |
7 |
% |
9 |
% |
6 |
% |
|||||||||
AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE BY GEOGRAPHY |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
U.S. |
$ |
434,231 |
$ |
412,573 |
$ |
425,744 |
$ |
1,683,272 |
$ |
1,637,198 |
|||||||||
International |
279,132 |
257,055 |
232,726 |
1,031,202 |
851,837 |
||||||||||||||
Total revenue |
$ |
713,363 |
$ |
669,628 |
$ |
658,470 |
$ |
2,714,474 |
$ |
2,489,035 |
|||||||||
Revenue growth rates year-over-year: |
|||||||||||||||||||
U.S. |
2 |
% |
— |
% |
2 |
% |
3 |
% |
— |
% |
|||||||||
International |
20 |
21 |
22 |
21 |
19 |
||||||||||||||
Total revenue |
8 |
% |
7 |
% |
8 |
% |
9 |
% |
6 |
% |
|||||||||
Revenue growth rates year-over-year, |
|||||||||||||||||||
U.S. |
2 |
% |
— |
% |
2 |
% |
3 |
% |
— |
% |
|||||||||
International |
23 |
24 |
18 |
20 |
19 |
||||||||||||||
Total revenue |
10 |
% |
8 |
% |
7 |
% |
9 |
% |
6 |
% |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
(2) |
See Use of Non-GAAP Financial Measures below for a definition |
AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL OPERATING EXPENSE DATA |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
General and administrative expenses: |
|||||||||||||||||||
Payroll and related costs |
$ |
43,001 |
$ |
46,866 |
$ |
50,187 |
$ |
188,635 |
$ |
194,199 |
|||||||||
Stock-based compensation |
13,269 |
13,054 |
11,359 |
53,514 |
44,884 |
||||||||||||||
Depreciation and amortization |
20,273 |
18,646 |
19,845 |
80,014 |
76,128 |
||||||||||||||
Facilities-related costs |
22,216 |
21,567 |
21,071 |
86,107 |
80,452 |
||||||||||||||
Provision for doubtful accounts |
1,079 |
652 |
805 |
2,672 |
3,209 |
||||||||||||||
Acquisition-related costs |
896 |
329 |
19,995 |
2,868 |
23,373 |
||||||||||||||
Legal and stockholder matter costs |
— |
— |
— |
23,091 |
— |
||||||||||||||
License of patent |
(4,355) |
(4,310) |
(4,169) |
(17,146) |
(16,421) |
||||||||||||||
Endowment of Akamai Foundation |
— |
— |
— |
50,000 |
— |
||||||||||||||
Professional fees and other expenses |
33,186 |
23,107 |
27,022 |
104,312 |
103,341 |
||||||||||||||
Total general and administrative expenses |
$ |
129,565 |
$ |
119,911 |
$ |
146,115 |
$ |
574,067 |
$ |
509,165 |
|||||||||
General and administrative expenses–functional(1): |
|||||||||||||||||||
Global functions |
$ |
47,547 |
$ |
46,680 |
$ |
52,818 |
$ |
197,377 |
$ |
201,539 |
|||||||||
As a percentage of revenue |
7 |
% |
7 |
% |
8 |
% |
7 |
% |
8 |
% |
|||||||||
Infrastructure |
80,659 |
74,009 |
76,666 |
308,915 |
297,465 |
||||||||||||||
As a percentage of revenue |
11 |
% |
11 |
% |
12 |
% |
11 |
% |
12 |
% |
|||||||||
Other |
1,359 |
(778) |
16,631 |
67,775 |
10,161 |
||||||||||||||
Total general and administrative expenses |
$ |
129,565 |
$ |
119,911 |
$ |
146,115 |
$ |
574,067 |
$ |
509,165 |
|||||||||
As a percentage of revenue |
18 |
% |
18 |
% |
22 |
% |
21 |
% |
20 |
% |
|||||||||
Stock-based compensation: |
|||||||||||||||||||
Cost of revenue |
$ |
5,549 |
$ |
5,494 |
$ |
5,259 |
$ |
21,892 |
$ |
20,314 |
|||||||||
Research and development |
11,350 |
11,249 |
10,121 |
44,034 |
38,864 |
||||||||||||||
Sales and marketing |
14,830 |
16,835 |
15,466 |
64,373 |
60,246 |
||||||||||||||
General and administrative |
13,269 |
13,054 |
11,359 |
53,514 |
44,884 |
||||||||||||||
Total stock-based compensation |
$ |
44,998 |
$ |
46,632 |
$ |
42,205 |
$ |
183,813 |
$ |
164,308 |
(1) |
Global functions expense includes payroll, stock-based compensation and other employee-related costs for administrative functions, including finance, purchasing, order entry, human resources, legal, information technology and executive personnel, as well as third-party professional service fees. Infrastructure expense includes payroll, stock-based compensation and other employee-related costs for our network infrastructure functions, as well as facility rent expense, depreciation and amortization of facility and IT-related assets, software and software-related costs, business insurance and taxes. Our network infrastructure function is responsible for network planning, sourcing, architecture evaluation and platform security. Other expense includes acquisition-related costs, provision for doubtful accounts, the license of a patent, legal and stockholder matter costs and the endowment of the Akamai Foundation and transformation costs. |
AKAMAI TECHNOLOGIES, INC. OTHER SUPPLEMENTAL DATA |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands, except end of period statistics) |
December |
September |
December |
December |
December |
||||||||||||||
Depreciation and amortization: |
|||||||||||||||||||
Network-related depreciation |
$ |
37,592 |
$ |
36,883 |
$ |
37,223 |
$ |
150,458 |
$ |
143,825 |
|||||||||
Capitalized internal-use software development |
42,440 |
36,822 |
29,096 |
143,752 |
102,877 |
||||||||||||||
Other depreciation and amortization |
19,802 |
18,259 |
19,498 |
78,396 |
74,754 |
||||||||||||||
Depreciation of property and equipment |
99,834 |
91,964 |
85,817 |
372,606 |
321,456 |
||||||||||||||
Capitalized stock-based compensation amortization |
7,175 |
6,647 |
5,029 |
25,237 |
17,518 |
||||||||||||||
Capitalized interest expense amortization |
993 |
928 |
721 |
3,366 |
2,435 |
||||||||||||||
Amortization of acquired intangible assets |
8,292 |
8,294 |
7,829 |
33,311 |
30,904 |
||||||||||||||
Total depreciation and amortization |
$ |
116,294 |
$ |
107,833 |
$ |
99,396 |
$ |
434,520 |
$ |
372,313 |
|||||||||
Capital expenditures, excluding stock-based |
|||||||||||||||||||
Purchases of property and equipment |
$ |
74,262 |
$ |
76,070 |
$ |
50,716 |
$ |
229,744 |
$ |
234,493 |
|||||||||
Capitalized internal-use software development costs |
50,920 |
49,122 |
43,074 |
198,327 |
166,329 |
||||||||||||||
Total capital expenditures, excluding stock- |
$ |
125,182 |
$ |
125,192 |
$ |
93,790 |
$ |
428,071 |
$ |
400,822 |
|||||||||
End of period statistics: |
|||||||||||||||||||
Number of employees |
7,519 |
7,574 |
7,650 |
(1) |
Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end. |
(2) |
See Use of Non-GAAP Financial Measures below for a definition |
AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS AND NET INCOME |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands) |
December |
September |
December |
December |
December |
||||||||||||||
Income from operations |
$ |
120,288 |
$ |
116,537 |
$ |
32,109 |
$ |
362,499 |
$ |
314,289 |
|||||||||
GAAP operating margin |
17 |
% |
17 |
% |
5 |
% |
13 |
% |
13 |
% |
|||||||||
Amortization of acquired intangible assets |
8,292 |
8,294 |
7,829 |
33,311 |
30,904 |
||||||||||||||
Stock-based compensation |
44,998 |
46,632 |
42,205 |
183,813 |
164,308 |
||||||||||||||
Amortization of capitalized stock-based |
8,168 |
7,575 |
5,750 |
28,603 |
19,953 |
||||||||||||||
Restructuring charge (benefit) |
13,152 |
(732) |
51,581 |
27,594 |
54,884 |
||||||||||||||
Acquisition-related costs |
896 |
329 |
19,995 |
2,868 |
23,374 |
||||||||||||||
Legal and stockholder matter costs |
— |
— |
— |
23,091 |
— |
||||||||||||||
Endowment of Akamai Foundation |
— |
— |
— |
50,000 |
— |
||||||||||||||
Transformation costs |
5,178 |
2,552 |
— |
7,730 |
— |
||||||||||||||
Operating adjustments |
80,684 |
64,650 |
127,360 |
357,010 |
293,423 |
||||||||||||||
Non-GAAP income from operations |
$ |
200,972 |
$ |
181,187 |
$ |
159,469 |
$ |
719,509 |
$ |
607,712 |
|||||||||
Non-GAAP operating margin |
28 |
% |
27 |
% |
24 |
% |
27 |
% |
24 |
% |
|||||||||
Net income |
$ |
94,015 |
$ |
107,583 |
$ |
27,520 |
$ |
298,373 |
$ |
222,766 |
|||||||||
Operating adjustments (from above) |
80,684 |
64,650 |
127,360 |
357,010 |
293,423 |
||||||||||||||
Amortization of debt discount and issuance costs |
14,114 |
14,085 |
4,850 |
41,958 |
18,839 |
||||||||||||||
(Gain) loss on investments |
— |
(519) |
(450) |
1,481 |
(450) |
||||||||||||||
Income tax-effect of above non-GAAP |
(12,959) |
(27,958) |
(38,574) |
(86,391) |
(82,817) |
||||||||||||||
Non-GAAP net income |
$ |
175,854 |
$ |
157,841 |
$ |
120,706 |
$ |
612,431 |
$ |
451,761 |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands, except per share data) |
December |
September |
December |
December |
December |
||||||||||||||
GAAP net income per diluted share |
$ |
0.57 |
$ |
0.64 |
$ |
0.16 |
$ |
1.76 |
$ |
1.29 |
|||||||||
Amortization of acquired intangible assets |
0.05 |
0.05 |
0.05 |
0.20 |
0.18 |
||||||||||||||
Stock-based compensation |
0.27 |
0.28 |
0.25 |
1.09 |
0.95 |
||||||||||||||
Amortization of capitalized stock-based |
0.05 |
0.05 |
0.03 |
0.17 |
0.12 |
||||||||||||||
Restructuring charge (benefit) |
0.08 |
— |
0.30 |
0.16 |
0.32 |
||||||||||||||
Acquisition-related costs |
0.01 |
— |
0.12 |
0.02 |
0.14 |
||||||||||||||
Legal and stockholder matter costs |
— |
— |
— |
0.14 |
— |
||||||||||||||
Endowment of Akamai Foundation |
— |
— |
— |
0.30 |
— |
||||||||||||||
Transformation costs |
0.03 |
0.02 |
— |
0.05 |
— |
||||||||||||||
Amortization of debt discount and issuance costs |
0.09 |
0.08 |
0.03 |
0.25 |
0.11 |
||||||||||||||
(Gain) loss on investments |
— |
— |
— |
0.01 |
— |
||||||||||||||
Income tax effect of above non-GAAP |
(0.08) |
(0.17) |
(0.23) |
(0.51) |
(0.48) |
||||||||||||||
Non-GAAP net income per diluted share |
$ |
1.07 |
$ |
0.94 |
$ |
0.71 |
$ |
3.62 |
$ |
2.62 |
|||||||||
Shares used in diluted per share calculations |
164,540 |
167,900 |
170,727 |
169,188 |
172,711 |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA |
|||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
(in thousands, except per share data) |
December |
September |
December |
December |
December |
||||||||||||||
Net income |
$ |
94,015 |
$ |
107,583 |
$ |
27,520 |
$ |
298,373 |
$ |
222,766 |
|||||||||
Interest income |
(7,308) |
(9,258) |
(4,487) |
(26,940) |
(17,855) |
||||||||||||||
Provision for income taxes |
19,058 |
3,187 |
4,699 |
44,716 |
91,426 |
||||||||||||||
Depreciation and amortization |
99,834 |
91,964 |
85,817 |
372,606 |
321,456 |
||||||||||||||
Amortization of capitalized stock-based |
8,168 |
7,575 |
5,750 |
28,603 |
19,953 |
||||||||||||||
Amortization of acquired intangible assets |
8,292 |
8,294 |
7,829 |
33,311 |
30,904 |
||||||||||||||
Stock-based compensation |
44,998 |
46,632 |
42,205 |
183,813 |
164,308 |
||||||||||||||
Restructuring charge (benefit) |
13,152 |
(732) |
51,581 |
27,594 |
54,884 |
||||||||||||||
Acquisition-related costs |
896 |
329 |
19,995 |
2,868 |
23,374 |
||||||||||||||
Legal and stockholder matter costs |
— |
— |
— |
23,091 |
— |
||||||||||||||
Endowment of Akamai Foundation |
— |
— |
— |
50,000 |
— |
||||||||||||||
Transformation costs |
5,178 |
2,552 |
— |
7,730 |
— |
||||||||||||||
Interest expense |
14,582 |
14,566 |
4,850 |
43,202 |
18,839 |
||||||||||||||
(Gain) loss on investments |
— |
(519) |
(450) |
1,481 |
(450) |
||||||||||||||
Other (income) expense, net |
(59) |
978 |
(23) |
1,667 |
(437) |
||||||||||||||
Adjusted EBITDA |
$ |
300,806 |
$ |
273,151 |
$ |
245,286 |
$ |
1,092,115 |
$ |
929,168 |
|||||||||
Adjusted EBITDA margin |
42 |
% |
41 |
% |
37 |
% |
40 |
% |
37 |
% |
(1) |
Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in
Management believes that these non-GAAP financial measures reflect
The non-GAAP financial measures do not replace the presentation of
The non-GAAP adjustments, and
- Amortization of acquired intangible assets –
Akamai has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitionsAkamai has made. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization can vary significantly and are unique to each acquisition; therefore,Akamai excludes amortization of acquired intangible assets from its non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results. - Stock-based compensation and amortization of capitalized stock-based compensation – Although stock-based compensation is an important aspect of the compensation paid to
Akamai's employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison ofAkamai's current financial results to previous and future periods difficult to interpret; therefore,Akamai believes it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from its non-GAAP financial measures in order to highlight the performance ofAkamai's core business and to be consistent with the way many investors evaluate its performance and compare its operating results to peer companies. - Acquisition-related costs – Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities. In addition, subsequent adjustments to
Akamai's initial estimated amounts of contingent consideration and indemnification associated with specific acquisitions are included within acquisition-related costs. These amounts are impacted by the timing and size of the acquisitions.Akamai excludes acquisition-related costs from its non-GAAP financial measures to provide a useful comparison ofAkamai's operating results to prior periods and to its peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions and do not reflectAkamai's core operations. - Restructuring charges –
Akamai has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments.Akamai excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of its business. - Amortization of debt discount and issuance costs and amortization of capitalized interest expense – In
May 2018 ,Akamai issued$1,150 million of convertible senior notes due 2025 with a coupon interest rate of 0.125%. InFebruary 2014 ,Akamai issued$690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rates of these convertible senior notes were 4.26% and 3.20%, respectively. This is a result of the debt discounts recorded for the conversion features that are required to be separately accounted for as equity under GAAP, thereby reducing the carrying value of the convertible debt instruments. The debt discounts are amortized as interest expense together with the issuance costs of the debt. The interest expense excluded fromAkamai's non-GAAP results is comprised of these non-cash components and is excluded from management's assessment of the company's operating performance because management believes the non-cash expense is not representative of ongoing operating performance. - Gains and losses on investments –
Akamai has recorded gains and losses from the disposition, changes to fair value and impairment of certain investments.Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative ofAkamai's core business operations and ongoing operating performance. - Legal and stockholder matter costs –
Akamai has incurred losses related to the settlement of legal matters, costs from professional service providers related to a non-routine stockholder matter and costs with respect to its internal U.S. Foreign Corrupt Practices Act ("FCPA") investigation.Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative ofAkamai's core business operations. Endowment of Akamai Foundation – During the second quarter of 2018,Akamai incurred a charge to endow theAkamai Foundation .Akamai believes excluding these amounts from non-GAAP financial measures is useful to investors as this one-time expense is not representative of its core business operations.- Transformation costs –
Akamai has incurred professional services fees associated with internal transformation programs designed to improve its operating margins and that are part of a planned program intended to significantly change the manner in which business in conducted.Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events and activities giving rise to them occur infrequently and are not representative ofAkamai's core business operations and ongoing operating performance. - Income tax effect of non-GAAP adjustments and certain discrete tax items – The non-GAAP adjustments described above are reported on a pre-tax basis. The income tax effect of non-GAAP adjustments is the difference between GAAP and non-GAAP income tax expense. Non-GAAP income tax expense is computed on non-GAAP pre-tax income (GAAP pre-tax income adjusted for non-GAAP adjustments) and excludes certain discrete tax items (such as recording or releasing of valuation allowances), if any.
Akamai believes that applying the non GAAP adjustments and their related income tax effect allowsAkamai to highlight income attributable to its core operations.
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; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; 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
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; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; 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
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
Adjusted EBITDA – GAAP net income excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; 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
Adjusted EBITDA margin – Adjusted EBITDA stated as a percentage of revenue.
Capital expenditures, or capex, excluding stock-based compensation and interest expense – Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.
Impact of Foreign Currency Exchange Rates – Revenue and earnings from international operations have historically been an important contributor to
Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage change at constant currency presented is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.
Akamai Statement Under the Private Securities Litigation Reform Act
This release and/or our quarterly earnings conference call scheduled for later today contain information about future expectations, plans and prospects of
In addition, the statements in this press release and on such call represent
Contacts: |
|||||
Gina Sorice |
Tom Barth |
||||
Media Relations |
Investor Relations |
||||
Akamai Technologies |
Akamai Technologies |
||||
646-320-4107 |
617-274-7130 |
||||
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