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Press release from PR Newswire

Akamai Reports Second Quarter 2013 Financial Results

Wednesday, July 24, 2013

Akamai Reports Second Quarter 2013 Financial Results

16:01 EDT Wednesday, July 24, 2013

CAMBRIDGE, Mass., July 24, 2013 /PRNewswire/ --

  • Second quarter revenue of $378 million, up 14 percent year-over-year, or up 18 percent year-over-year adjusted for ADS divestiture
  • Second quarter GAAP net income of $62 million, up 40 percent year-over-year, or $0.34 per diluted share, up 42 percent year-over-year (includes $9 million, or $0.05 per diluted share, depreciation benefit)
  • Second quarter non-GAAP net income* of $84 million, up 25 percent year-over-year, or $0.46 per diluted share, up 24 percent year-over-year (includes $9 million, or $0.05 per diluted share, depreciation benefit)

(Logo: http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the second quarter ended June 30, 2013.  Revenue for the second quarter of 2013 was $378 million, a 14 percent increase over second quarter 2012 revenue of $331 million, or up 18 percent adjusted for the Advertising Decision Solutions (ADS) divestiture.

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the second quarter of 2013 was $62 million, or $0.34 per diluted share, a 13 percent decrease from the prior quarter's GAAP net income of $71 million, or $0.39 per diluted share, and a 40 percent increase over second quarter 2012 GAAP net income of $44 million, or $0.24 per diluted share.

The Company generated non-GAAP net income* of $84 million, or $0.46 per diluted share, in the second quarter of 2013, a 10 percent decrease from the prior quarter's non-GAAP net income of $93 million, or $0.51 per diluted share, and a 25 percent increase over second quarter 2012 non-GAAP net income of $67 million, or $0.37 per diluted share.  

Both GAAP and non-GAAP net income results for the second quarter of 2013 include a $9 million, or $0.05 per diluted share, benefit from the change in our depreciation methodology effective on January 1, 2013.

"Akamai delivered a strong second quarter, achieving the high end of our guidance range for both the top and bottom line," said Tom Leighton, CEO of Akamai.  "We were especially pleased with the strong growth in our performance and security solutions, and we continue to invest in both sales capacity and innovation in an effort to drive further growth in this important area."

Adjusted EBITDA* for the second quarter of 2013 was $166 million, in line with the prior quarter, and up from $143 million in the second quarter of 2012.  Adjusted EBITDA margin* for the second quarter of 2013 was 44 percent, down a point from the prior quarter and up a point from the same period last year. 

Cash from operations for the second quarter of 2013 was $130 million, or 34 percent of revenue.  At the end of the second quarter of 2013, the Company had over $1.1 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 20 percent and 29 percent, respectively, of revenue for the second quarter of 2013.

Share Repurchase ProgramDuring the second quarter of 2013, under a share repurchase program that was extended by the Board of Directors in February 2013, the Company spent approximately $42.5 million repurchasing 1.1 million shares of its common stock, at an average price of just over $39 per share.  The Company has $77 million remaining on its current authorization, which runs through January 31, 2014.

The Company had approximately 178 million shares of common stock outstanding as of June 30, 2013. 

(*See Use of Non-GAAP Financial Measures below for definitions.)  

Quarterly Conference Call Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-788-0542 (or 1-857-350-1680 for international calls) and using passcode No. 59331581.  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 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 71794732.

About Akamai   Akamai® is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere.  At the core of the Company's solutions is the Akamai Intelligent Platform? providing extensive reach, coupled with unmatched reliability, security, visibility and expertise.  Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud.  To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

Jun. 30, 2013

Dec. 31, 2012

Assets

Cash and cash equivalents

$                204,865

$                201,989

Marketable securities

326,077

235,592

Accounts receivable, net 

237,286

218,777

Deferred income tax assets, current portion

20,422

20,422

Prepaid expenses and other current assets

70,734

51,604

Current assets

859,384

728,384

Marketable securities

587,470

657,659

Property and equipment, net 

405,653

345,091

Goodwill and acquired intangible assets, net

797,949

815,879

Other assets

60,287

39,811

Deferred income tax assets, net

14,527

13,803

Total assets

$             2,725,270

$             2,600,627

Liabilities and stockholders' equity

Accounts payable and accrued expenses

$                193,596

$                176,378

Other current liabilities

32,978

26,566

Current liabilities

226,574

202,944

Other liabilities

50,823

51,929

Total liabilities

277,397

254,873

Stockholders' equity

2,447,873

2,345,754

Total liabilities and stockholders' equity

$             2,725,270

$             2,600,627

 

 

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)

----------------------------Three Months Ended----------------------------------

--------------Six Months Ended--------------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2013

2013

2012

2013

2012

Revenues

$             378,106

$             368,046

$             331,306

$             746,152

$             650,754

Costs and operating expenses:  

Cost of revenues * +

124,705

120,392

131,260

245,097

256,185

Research and development *

20,597

21,905

17,542

42,502

35,022

Sales and marketing *

67,825

62,690

56,480

130,515

105,475

General and administrative * +

61,351

55,380

53,596

116,731

105,238

Amortization of acquired intangible assets

5,734

6,060

5,463

11,794

10,230

Restructuring charges (benefits)

391

431

(46)

822

14

Total costs and operating expenses

280,603

266,858

264,295

547,461

512,164

Operating income

97,503

101,188

67,011

198,691

138,590

Interest income, net

1,477

1,608

1,626

3,085

3,272

Other income (expense), net

341

(132)

1,131

209

690

Income before provision for income taxes

99,321

102,664

69,768

201,985

142,552

Provision for income taxes

37,426

31,177

25,529

68,603

55,086

Net income

$               61,895

$               71,487

$               44,239

$             133,382

$               87,466

Net income per share:

    Basic

$                   0.35

$                   0.40

$                   0.25

$                   0.75

$                   0.49

    Diluted

$                   0.34

$                   0.39

$                   0.24

$                   0.73

$                   0.48

Shares used in per share calculations:

    Basic

177,891

177,899

178,547

177,895

178,333

    Diluted

181,388

181,562

181,817

181,475

182,080

* Includes stock-based compensation (see supplemental table for figures)

+ Includes depreciation and amortization (see supplemental table for figures)

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

-----------------------------Three Months Ended----------------------

--------------Six Months Ended------------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30, 

2013

2013

2012

2013

2012

 Cash flows from operating activities: 

 Net income 

$              61,895

$              71,487

$              44,239

$            133,382

$              87,466

 Adjustments to reconcile net income to net cash provided by operating activities: 

Depreciation and amortization  

44,126

42,375

50,112

86,501

95,746

Stock-based compensation 

24,801

22,931

25,621

47,732

46,545

Excess tax benefits from stock-based compensation

(5,503)

(4,119)

(1,635)

(9,622)

(15,049)

Loss (gain) on investments and disposal of property and equipment, net 

380

(71)

(107)

309

(204)

Gain on divestiture of a business, net 

-

(1,188)

-

(1,188)

-

Unrealized gain on convertible note receivable 

(1,093)

-

-

(1,093)

-

Provision for doubtful accounts 

879

320

(86)

1,199

284

Changes in operating assets and liabilities, net of effects of acquisitions

and divestitures: 

Accounts receivable 

(6,848)

(28,355)

7,803

(35,203)

6,387

Prepaid expenses and other current assets 

(5,071)

(14,035)

4,663

(19,106)

8,972

Accounts payable, accrued expenses and other current liabilities 

17,473

7,838

15,939

25,311

10,141

Accrued restructuring 

(112)

(111)

(725)

(223)

(2,869)

Deferred revenue 

(1,613)

8,225

2,667

6,612

4,141

Other noncurrent assets and liabilities  

408

(2,257)

1,061

(1,849)

495

Net cash provided by operating activities 

129,722

103,040

149,552

232,762

242,055

 Cash flows from investing activities: 

Cash paid for acquired businesses, net of cash received 

80

-

-

80

(291,638)

Purchases of property and equipment and capitalization of internal-use software costs 

(72,498)

(63,476)

(55,539)

(135,974)

(98,883)

Proceeds from sales and maturities of short- and long-term marketable securities 

165,513

121,680

134,171

287,193

251,585

Purchases of short- and long-term marketable securities 

(164,525)

(145,350)

(135,845)

(309,875)

(416,494)

Proceeds from the sale of property and equipment 

166

260

2

426

12

Net cash used in investing activities 

(71,264)

(86,886)

(57,211)

(158,150)

(555,418)

 Cash flows from financing activities: 

Proceeds from the issuance of common stock under stock option and employee stock purchase plans 

24,855

3,195

15,491

28,050

22,569

Excess tax benefits from stock-based compensation 

5,503

4,119

1,635

9,622

15,049

Taxes paid related to net share settlement of equity awards 

(3,810)

(17,315)

(2,541)

(21,125)

(24,196)

Repurchase of common stock 

(42,504)

(40,278)

(67,213)

(82,782)

(75,126)

Net cash used in financing activities 

(15,956)

(50,279)

(52,628)

(66,235)

(61,704)

 Effects of exchange rate changes on cash and cash equivalents 

(2,912)

(2,589)

(1,441)

(5,501)

(1,134)

 Net increase (decrease) in cash and cash equivalents 

39,590

(36,714)

38,272

2,876

(376,201)

 Cash and cash equivalents, beginning of period 

165,275

201,989

144,724

201,989

559,197

 Cash and cash equivalents, end of period 

$            204,865

$            165,275

$            182,996

$            204,865

$            182,996

 

Reconciliation of GAAP net income to non-GAAP net income

and Adjusted EBITDA

(amounts in thousands, except per share data)

------------------------------Three Months Ended---------------------------

----------------Six Months Ended---------------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2013

2013

2012

2013

2012

Net income

$              61,895

$              71,487

$              44,239

$            133,382

$              87,466

Amortization of acquired intangible assets

5,734

6,060

5,463

11,794

10,230

Stock-based compensation

24,801

22,931

25,621

47,732

46,545

Amortization of capitalized stock-based compensation

1,978

1,901

1,939

3,879

3,694

Acquisition related costs

31

337

376

368

4,828

Restructuring charges (benefits)

391

431

(46)

822

14

Gain and other activity related to divestiture 

     of a business, net

(1,093)

(1,188)

-

(2,281)

-

Income tax-effect of above non-GAAP adjustments

(9,726)

(8,726)

(10,444)

(18,452)

(20,333)

Total non-GAAP net income:

84,011

93,233

67,148

177,244

132,444

Interest income, net

(1,477)

(1,608)

(1,626)

(3,085)

(3,272)

Provision for GAAP income taxes

37,426

31,177

25,529

68,603

55,086

Income tax-effect of above non-GAAP adjustments

9,726

8,726

10,444

18,452

20,333

Depreciation and amortization

36,414

34,414

42,710

70,828

81,822

Other (income) expense, net

(341)

132

(1,131)

(209)

(690)

Total Adjusted EBITDA:

$            165,759

$            166,074

$            143,074

$            331,833

$            285,723

Adjusted EBITDA Margin

44%

45%

43%

44%

44%

Non-GAAP net income per share:

    Basic

$                  0.47

$                  0.52

$                  0.38

$                  1.00

$                  0.74

    Diluted

$                  0.46

$                  0.51

$                  0.37

$                  0.98

$                  0.73

Shares used in non-GAAP per share calculations:

    Basic

177,891

177,899

178,547

177,895

178,333

    Diluted

181,388

181,562

181,817

181,475

182,080

 

 

Supplemental Financial Data

(amounts in thousands, except end of period statistics)

----------------------Three Months Ended-----------------------

---------------Six Months Ended--------------

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2013

2013

2012

2013

2012

Stock-based compensation:

Cost of revenues 

$             2,718

$             2,627

$             3,064

$             5,345

$             5,770

Research and development 

3,867

4,369

4,901

8,236

8,831

Sales and marketing 

9,799

9,431

8,814

19,230

16,925

General and administrative 

8,417

6,504

8,842

14,921

15,019

     Total stock-based compensation 

$           24,801

$           22,931

$           25,621

$           47,732

$           46,545

Depreciation and amortization:

Network-related depreciation

$           30,299

$           28,920

$           37,989

$           59,219

$           72,594

Capitalized stock-based compensation amortization

1,978

1,901

1,939

3,879

3,694

Other depreciation and amortization

6,115

5,494

4,721

11,609

9,228

Amortization of acquired intangible assets

5,734

6,060

5,463

11,794

10,230

Total depreciation and amortization

$           44,126

$           42,375

$           50,112

$           86,501

$           95,746

Capital expenditures:

Purchases of property and equipment

$           54,369

$           46,478

$           42,188

$         100,847

$           72,621

Capitalized internal-use software

18,129

16,998

13,351

35,127

26,262

Capital expenditures, excluding stock-based compensation

72,498

63,476

55,539

135,974

98,883

Capitalized stock-based compensation

3,245

2,938

1,835

6,183

4,133

Total capital expenditures*

$           75,743

$           66,414

$           57,374

$         142,157

$         103,016

Net increase (decrease) in cash, cash equivalents, marketable

$           35,978

$         (12,806)

$           39,725

$           23,172

$       (211,510)

securities and restricted marketable securities

End of period statistics:

Number of employees

3,453

3,207

2,654

Number of deployed servers

137,788

132,442

115,008

* See Use of Non-GAAP Financial Measures below for definition

*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 provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate Akamai's financial performance.  These non-GAAP financial measures are non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin, and capital expenditures, as discussed below.

Management believes that these non-GAAP financial measures reflect Akamai's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in its business, as they exclude expenses and gains that may be infrequent, unusual in nature and not reflective of the Company's ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

The non-GAAP financial measures do not replace the presentation of the Company's GAAP financial results and should only be used as a supplement to, not as a substitute for, the Company's financial results presented in accordance with GAAP.  Akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting to the most directly comparable GAAP financial measure.  This reconciliation captioned "Reconciliation of GAAP to Non-GAAP Financial Measures" can be found on the Investor Relations section of Akamai's website.

The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:

  • Amortization of acquired intangible assets ? Akamai has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions the Company 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 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 to Akamai's employees and executives, the expense varies with changes in the stock price and market conditions at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types.  This makes the comparison of the Company'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 in order to better understand the performance of the Company's core business performance and to be consistent with the way the investors evaluate its performance and comparison of its operating results to peer companies.
  • Restructuring charges (benefits) ? Akamai has incurred restructuring charges and benefits, included in its GAAP financial statements, primarily due to workforce reductions and estimated costs of exiting facility lease commitments.  Akamai excludes these items when evaluating its continuing business performance as such items are not consistently recurring and not do reflect expected future operating expense, nor provide meaningful evaluation of current and past operations of its business.
  • Acquisition related costs (benefits) ? Acquisition related costs and benefits include transaction fees, due diligence costs and other one-time direct costs associated with strategic activities. In addition, subsequent adjustments to the Company's initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition related costs and benefits. These amounts are impacted by the timing and size of the acquisitions. Akamai excludes acquisition related costs and benefits to provide a useful comparison of the Company's operating results to prior periods and to its peer companies because such amounts vary significantly based on magnitude of its acquisition transactions.
  • Gain and other activity related to divestiture of a business ? Akamai recognized gains associated with the divestiture of its Advertising Decision Solutions business. In addition, subsequent adjustments to the fair value of the convertible note receivable received in the transaction are included as other activity related to the divestiture of its Advertising Decision Solutions business.  Akamai excludes gains and other activity related to divestiture of a business because sales of this nature occur infrequently and are not considered part of the Company's core business operations.
  • Income tax-effect of non-GAAP adjustments ? 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 release of valuation allowances), if any. Akamai believes that applying the non-GAAP adjustments and their related income tax effect allows the Company to more properly reflect the income attributable to its core operations.  

Akamai's definitions of its non-GAAP financial measures are outlined below:

Non-GAAP net income ? GAAP net income adjusted for the following tax-effected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring charges and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; loss on early extinguishment of debt; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.

Non-GAAP net income per share ? Non-GAAP net income divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations.

Adjusted EBITDA ? GAAP net income excluding the following items: interest; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation ; amortization of capitalized stock-based compensation; restructuring charges and benefits; acquisition related costs and benefits; certain gains and losses on investments; gains, losses and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.

Adjusted EBITDA margin ? Adjusted EBITDA as a percentage of revenues.

Capital expenditures (Capex) ? Purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation.

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 about future business opportunities. 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, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; 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 or failure of such solutions to operate as expected, 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.

Contacts:

Jeff YoungMedia RelationsAkamai Technologies617-444-3913jyoung@akamai.com

--or--

Natalie TempleInvestor RelationsAkamai Technologies617-444-3635

ntemple@akamai.com

SOURCE Akamai Technologies, Inc.

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