Akamai Reports First Quarter 2007 Financial Results
-- Revenue grew to $139.3 million, up 53 percent year-over-year
and 11 percent from the prior quarter
-- GAAP net income was $19.2 million, or $0.11 per diluted share,
up 67 percent over the first quarter 2006
-- Normalized net income(1) increased 73 percent year-over-year
to $50.7 million, or $0.28 per diluted share, and increased 7
percent over the prior quarter
CAMBRIDGE, Mass.--(BUSINESS WIRE)--April 25, 2007--Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and business processes online, today reported financial results for the first quarter ended March 31, 2007. Revenue for the first quarter 2007 was $139.3 million, an 11 percent increase over fourth quarter 2006 revenue of $125.7 million, and a 53 percent increase over first quarter 2006 revenue of $90.8 million.
Akamai's first quarter consolidated financial results include 18 days of activity from Netli, Inc. following the closing of Akamai's acquisition of Netli on March 13, 2007. Netli contributed approximately $500,000 of revenue during the first quarter of 2007.
"Demand for our core content delivery and application acceleration services grew in all sectors of our business and helped us to achieve record performance in the first quarter," said Paul Sagan, president and CEO of Akamai. "With our ongoing investment in internal research and development, along with key strategic acquisitions of Nine Systems, Netli, and most recently Red Swoosh, we continue to innovate to meet our customers' high expectations for quality delivery and enhanced functionality that will help them achieve their online business objectives."
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the first quarter of 2007 was $19.2 million, or $0.11 per diluted share.
The Company generated normalized net income(1) of $50.7 million, or $0.28 per diluted share, in the first quarter of 2007, a seven percent increase over fourth quarter 2006 normalized net income of $47.5 million, or $0.27 per diluted share. ((1)See Use of Non-GAAP Financial Measures below for definitions.)
Adjusted EBITDA(1) for the first quarter of 2007 was $58.8 million, up from $53.0 million in the fourth quarter 2006, and $33.4 million in the first quarter of 2006. Adjusted EBITDA margin for the first quarter was 42 percent, a 5 point improvement over the first quarter of last year. ((1)See Use of Non-GAAP Financial Measures below for definitions.)
Cash from operations was $56.3 million, or 40 percent of revenue. At the end of the first quarter, the Company had approximately $480 million in cash, cash equivalents and marketable securities.
The Company had approximately 164 million shares of common stock outstanding as of March 31, 2007.
Customers
Akamai added 89 net new customers under long-term services contracts during the first quarter of 2007 and Netli contributed an additional 45 net new customers, bringing Akamai's total quarter-end number of customers under long-term services contracts to 2,481.
Sales through resellers and sales outside the United States accounted for 20 percent and 22 percent, respectively, of revenue for the first quarter 2007.
Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-888-689-4521 (or 1-706-645-9202 for international calls). A live Webcast of the call may be accessed at www.akamai.com in the Investor section. In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-800-642-1687 (or 1-706-645-9291 for international calls) and using conference ID No. 3310990.
About Akamai
Akamai(R) is the leading global service provider for accelerating content and business processes online. Thousands of organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com.
Financial Statements
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
March 31, 2007 December 31, 2006
----------------- -----------------
Assets
Cash and cash equivalents $ 124,245 $ 80,595
Marketable securities 216,712 188,141
Restricted marketable securities 1,235 1,105
Accounts receivable, net 86,873 86,232
Prepaid expenses and other current
assets 23,780 18,600
----------------- -----------------
Current assets 452,845 374,673
Marketable securities 134,737 161,511
Restricted marketable securities 3,102 3,102
Property and equipment, net 109,547 86,623
Goodwill and other intangible
assets, net 453,794 298,263
Other assets 4,900 4,256
Deferred tax assets, net 307,712 319,504
----------------- -----------------
Total assets $ 1,466,637 $ 1,247,932
================= =================
Liabilities and stockholders'
equity
Accounts payable and accrued
expenses $ 85,450 $ 80,713
Other current liabilities 13,730 8,551
----------------- -----------------
Current liabilities 99,180 89,264
Other liabilities 6,179 3,975
Convertible notes 199,960 200,000
----------------- -----------------
Total liabilities 305,319 293,239
Stockholders' equity 1,161,318 954,693
----------------- -----------------
Total liabilities and
stockholders' equity $ 1,466,637 $ 1,247,932
================= =================
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2007 2006 2006
--------- ------------ ---------
Revenues $139,274 $ 125,703 $ 90,825
Costs and operating expenses:
Cost of revenues (a)(b) 34,480 28,605 19,316
Research and development (a) 10,604 9,141 6,726
Sales and marketing (a) 36,749 34,258 26,295
General and administrative (a)(b) 27,478 25,249 18,543
Amortization of other intangible
assets 2,812 2,047 2,296
--------- ------------ ---------
Total costs and operating
expenses 112,123 99,300 73,176
--------- ------------ ---------
Operating income 27,151 26,403 17,649
Interest income, net (4,732) (4,567) (2,659)
Loss on early extinguishment of debt 1 - -
Gain on investments, net - (2) (257)
Other expense (income), net 204 (357) (186)
--------- ------------ ---------
Income before provision for income
taxes 31,678 31,329 20,751
Provision for income taxes 12,499 10,706 9,256
--------- ------------ ---------
Net income $ 19,179 $ 20,623 $ 11,495
========= ============ =========
Net income per share:
Basic $ 0.12 $ 0.13 $ 0.07
Diluted 0.11 0.12 $ 0.07
Shares used in per share
calculations:
Basic 161,569 157,206 153,819
Diluted 183,157 179,064 173,811
(a) Includes stock-related compensation (see supplemental table for
figures)
(b) Includes depreciation (see supplemental table for figures)
Three Months Ended
March 31, December 31, March 31,
2007 2006 2006
--------- ------------- ---------
Supplemental financial data (in
thousands):
Stock-related compensation:
Cost of revenues $ 739 $ 637 $ 273
Research and development 3,976 3,409 1,657
Sales and marketing 6,827 5,993 2,589
General and administrative 5,288 4,753 2,568
--------- ------------- ---------
Total stock-related compensation $ 16,830 $ 14,792 $ 7,087
Depreciation and amortization:
Network-related depreciation $ 10,178 $ 8,132 $ 5,356
Capitalized stock-related
compensation amortization 188 136 6
Other depreciation 1,671 1,487 1,035
Amortization of other intangible
assets 2,812 2,047 2,296
--------- ------------- ---------
Total depreciation and
amortization $ 14,849 $ 11,802 $ 8,693
Capital expenditures:
Purchases of property and equipment $ 27,542 $ 18,944 $ 13,556
Capitalized internal-use software 4,001 3,532 2,618
Capitalized stock-related
compensation 1,384 1,471 522
--------- ------------- ---------
Total capital expenditures $ 32,927 $ 23,947 $ 16,696
Net increase in cash, cash
equivalents, marketable securities
and restricted marketable
securities $ 45,577 $ 18,372 $ 27,294
End of period statistics:
Number of customers under
recurring contract 2,481 2,347 1,981
Number of employees 1,213 1,058 833
Number of deployed servers 25,093 22,109 19,919
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2007 2006 2006
---------- ------------- ----------
Cash flows from operating
activities:
Net income $ 19,179 $ 20,623 $ 11,495
Adjustments to reconcile net
income to net cash provided by
operating activities, net of
acquisitions:
Depreciation and amortization of
intangible assets and deferred
financing costs 15,059 12,013 8,903
Stock-related compensation 16,830 14,792 7,087
Non-cash portion of loss on
early extinguishment of debt 1 - -
Utilization of tax NOLs/credits
and changes in deferred tax
assets, net 11,833 9,414 8,764
Excess tax benefits from stock-
based compensation (7,476) (12,910) (5,399)
Gain on investments, property
and equipment and foreign
currency, net (448) (438) (327)
Provision for doubtful accounts 515 397 318
Changes in operating assets and
liabilities:
Accounts receivable, net 659 (14,022) (3,403)
Prepaid expenses and other
current assets (5,126) (3,249) (3,113)
Accounts payable, accrued
expenses and other current
liabilities 694 (3,137) 6,840
Accrued restructuring (678) (464) (554)
Deferred revenue 4,117 (759) 2,641
Other noncurrent assets and
liabilities 1,119 310 (91)
---------- ------------- ----------
Net cash provided by operating
activities: 56,278 22,570 33,161
---------- ------------- ----------
Cash flows from investing
activities:
Business acquisitions, net of
cash acquired (used in) 5,306 (5,127) -
Purchases of property and
equipment and capitalization of
internal-use software costs (31,543) (22,476) (16,174)
Purchase of investments (53,150) (116,164) (105,005)
Proceeds from sales and
maturities of investments 51,669 79,075 50,766
Decrease in restricted
investments held for security
deposits - - 400
---------- ------------- ----------
Net cash used in investing
activities (27,718) (64,692) (70,013)
---------- ------------- ----------
Cash flows from financing
activities:
Proceeds from the issuance of
common stock under stock option
and employee stock purchase
plans 6,692 9,267 4,643
Excess tax benefits from stock-
based compensation 7,476 12,910 5,399
---------- ------------- ----------
Net cash provided by financing
activities 14,168 22,177 10,042
---------- ------------- ----------
Effects of exchange rate
translation on cash and cash
equivalents 922 1,417 40
---------- ------------- ----------
Net increase (decrease) in cash
and cash equivalents 43,650 (18,528) (26,770)
Cash and cash equivalents,
beginning of period 80,595 99,123 91,792
---------- ------------- ----------
Cash and cash equivalents, end of
period $ 124,245 $ 80,595 $ 65,022
========== ============= ==========
(1)Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. We believe that the inclusion of these non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. This measure is also used by management in their financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which makes comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.
Akamai defines "Adjusted EBITDA" as net income, before interest, taxes, depreciation and amortization of tangible and intangible assets, stock-related compensation, depreciation of capitalized stock-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, foreign exchange gains and losses, loss on early extinguishment of debt, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. Akamai considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance of its business and a good measure of the Company's historical operating trend.
Adjusted EBITDA eliminates items that are either not part of the Company's core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment and net interest expense, or do not require a cash outlay, such as stock-related compensation and impairment of intangible assets. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historic cost incurred to build out the Company's deployed network, and may not be indicative of current or future capital expenditures.
Akamai defines "Adjusted EBITDA margin" as a percentage of Adjusted EBITDA over revenue. Akamai considers Adjusted EBITDA margin to be an indicator of the Company's operating trend and performance of its business in relation to its revenue growth.
Akamai defines "capital expenditures" or "capex" as purchases of property and equipment and capitalization of internal-use software development costs. Capital expenditures or capex are disclosed in Akamai's condensed consolidated Statement of Cash Flows in the company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Akamai defines "normalized net income" as net income before amortization of intangible assets, stock-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, loss on early extinguishment of debt, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. Akamai considers normalized net income to be another important indicator of the overall performance of the Company because it eliminates the effects of events that are either not part of the Company's core operations or are non-cash.
Akamai defines "normalized diluted shares" as diluted common shares outstanding used in GAAP net income per share calculation, excluding the effect of FAS 123R under the treasury stock method. Akamai considers normalized diluted shares to be another important indicator of overall performance of the Company because it eliminates the effect of a non-cash item.
Adjusted EBITDA and normalized net income should be considered in addition to, not as a substitute for, the Company's operating income and net income, as well as other measures of financial performance reported in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.
Reconciliation of GAAP net income to normalized net income
and Adjusted EBITDA
(amounts in thousands, except per share data)
Three Months Ended
March 31, December 31, March 31,
2007 2006 2006
--------- ------------ ---------
Net income $ 19,179 $ 20,623 $ 11,495
Amortization of intangible assets 2,812 2,047 2,296
Stock-related compensation 16,830 14,792 7,087
Amortization of capitalized stock-
related compensation 188 136 6
Gain on investments, net - (2) (257)
Utilization of tax NOLs/credits 11,701 9,924 8,764
Loss on early extinguishment of debt 1 - -
--------- ------------ ---------
Total normalized net income: 50,711 47,520 29,391
Interest income, net (4,732) (4,567) (2,659)
Provision for income taxes 798 782 492
Depreciation and amortization 11,849 9,619 6,391
Other expense (income), net 204 (357) (186)
--------- ------------ ---------
Total Adjusted EBITDA: $ 58,830 $ 52,997 $ 33,429
========= ============ =========
Normalized net income per share:
Basic $ 0.31 $ 0.30 $ 0.19
Diluted $ 0.28 $ 0.27 $ 0.17
Shares used in normalized per share
calculations:
Basic 161,569 157,206 153,819
Diluted 185,179 181,332 176,644
Akamai Statement Under the Private Securities Litigation Reform Act
This release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements concerning the expected growth and development of our business and expectations with respect to revenue. 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, unexpected increases in Akamai's use of funds, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai's services or network infrastructure, failure to maintain the prices we charge for our services, inability to realize the benefits of our net operating loss carryforward, delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities, unexpected expenses associated with the acquisitions and integrations of Nine Systems, Netli and Red Swoosh, 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, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.
CONTACT: Akamai Technologies
Jeff Young, 617-444-3913
Media Relations
jyoung@akamai.com
or
Sandy Smith, 617-444-2804
Investor Relations
ssmith@akamai.com
SOURCE: Akamai Technologies, Inc.