Akamai Reports Second Quarter 2013 Financial Results

             Akamai Reports Second Quarter 2013 Financial Results

PR Newswire

CAMBRIDGE, Mass., July 24, 2013

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

  oSecond quarter revenue of $378 million, up 14 percent year-over-year, or
    up 18 percent year-over-year adjusted for ADS divestiture
  oSecond 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)
  oSecond 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 Program
During 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         20,422           20,422
portion
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,    797,949          815,879
net
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        --------------Six
                Months                                   Months
                Ended----------------------------------  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        124,705         120,392       131,260    245,097    256,185
 revenues * +
 Research and   20,597          21,905        17,542     42,502     35,022
 development *
 Sales and      67,825          62,690        56,480     130,515    105,475
 marketing *
 General and
 administrative 61,351          55,380        53,596     116,731    105,238
 * +
 Amortization
 of acquired    5,734           6,060         5,463      11,794     10,230
 intangible
 assets
 Restructuring
 charges        391             431           (46)       822        14
 (benefits)
 Total costs
 and operating  280,603         266,858       264,295    547,461    512,164
 expenses
 Operating      97,503          101,188       67,011     198,691    138,590
 income
 Interest       1,477           1,608         1,626      3,085      3,272
 income, net
 Other income   341             (132)         1,131      209        690
 (expense), net
 Income before
 provision for  99,321          102,664       69,768     201,985    142,552
 income taxes
 Provision for  37,426          31,177        25,529     68,603     55,086
 income taxes
                $         $        $      $      $   
 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   --------------Six
                    Months Ended----------------------   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  44,126       42,375      50,112      86,501     95,746
  amortization
  Stock-based       24,801       22,931      25,621      47,732     46,545
  compensation
  Excess tax
  benefits from     (5,503)      (4,119)     (1,635)     (9,622)    (15,049)
  stock-based
  compensation
  Loss (gain) on
  investments and
  disposal of       380          (71)        (107)       309        (204)
  property and
  equipment, net
  Gain on
  divestiture of a  -            (1,188)     -           (1,188)    -
  business, net
  Unrealized gain
  on convertible    (1,093)      -           -           (1,093)    -
  note receivable
  Provision for
  doubtful          879          320         (86)        1,199      284
  accounts
  Changes in
  operating assets
  and liabilities,
  net of effects of
  acquisitions

  and
  divestitures:
     Accounts       (6,848)      (28,355)    7,803       (35,203)   6,387
     receivable
     Prepaid
     expenses and   (5,071)      (14,035)    4,663       (19,106)   8,972
     other current
     assets
     Accounts
     payable,
     accrued        17,473       7,838       15,939      25,311     10,141
     expenses and
     other current
     liabilities
     Accrued        (112)        (111)       (725)       (223)      (2,869)
     restructuring
     Deferred       (1,613)      8,225       2,667       6,612      4,141
     revenue
     Other
     noncurrent     408          (2,257)     1,061       (1,849)    495
     assets and
     liabilities
  Net cash provided
  by operating      129,722      103,040     149,552     232,762    242,055
  activities
Cash flows from
investing
activities:
  Cash paid for
  acquired          80           -           -           80         (291,638)
  businesses, net
  of cash received
  Purchases of
  property and
  equipment and     (72,498)     (63,476)    (55,539)    (135,974)  (98,883)
  capitalization of
  internal-use
  software costs
  Proceeds from
  sales and
  maturities of
  short- and        165,513      121,680     134,171     287,193    251,585
  long-term
  marketable
  securities
  Purchases of
  short- and
  long-term         (164,525)    (145,350)   (135,845)   (309,875)  (416,494)
  marketable
  securities
  Proceeds from the
  sale of property  166          260         2           426        12
  and equipment
  Net cash used in
  investing         (71,264)     (86,886)    (57,211)    (158,150)  (555,418)
  activities
Cash flows from
financing
activities:
  Proceeds from the
  issuance of
  common stock
  under stock       24,855       3,195       15,491      28,050     22,569
  option and
  employee stock
  purchase plans
  Excess tax
  benefits from     5,503        4,119       1,635       9,622      15,049
  stock-based
  compensation
  Taxes paid
  related to net    (3,810)      (17,315)    (2,541)     (21,125)   (24,196)
  share settlement
  of equity awards
  Repurchase of     (42,504)     (40,278)    (67,213)    (82,782)   (75,126)
  common stock
  Net cash used in
  financing         (15,956)     (50,279)    (52,628)    (66,235)   (61,704)
  activities
 Effects of
 exchange rate
 changes on cash    (2,912)      (2,589)     (1,441)     (5,501)    (1,134)
 and cash
 equivalents
 Net increase
 (decrease) in cash 39,590       (36,714)    38,272      2,876      (376,201)
 and cash
 equivalents
 Cash and cash
 equivalents,       165,275      201,989     144,724     201,989    559,197
 beginning of
 period
 Cash and cash     $       $       $       $      $    
 equivalents, end   204,865      165,275                       
 of period                                  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   ----------------Six
                Months                                Months
                Ended---------------------------      Ended---------------
                Jun. 30,     Mar. 31,     Jun. 30,    Jun. 30,     Jun. 30,
                2013         2013         2012        2013         2012
                $       $       $       $       $    
Net income       61,895     71,487              133,382      
                                          44,239                  87,466
Amortization of
acquired        5,734        6,060        5,463       11,794       10,230
intangible
assets
Stock-based     24,801       22,931       25,621      47,732       46,545
compensation
Amortization of
capitalized     1,978        1,901        1,939       3,879        3,694
stock-based
compensation
Acquisition     31           337          376         368          4,828
related costs
Restructuring
charges         391          431          (46)        822          14
(benefits)
Gain and other
activity
related to
divestiture
 of a       (1,093)      (1,188)      -           (2,281)      -
business, net
Income
tax-effect of   (9,726)      (8,726)      (10,444)    (18,452)     (20,333)
above non-GAAP
adjustments
Total non-GAAP  84,011       93,233       67,148      177,244      132,444
net income:
Interest        (1,477)      (1,608)      (1,626)     (3,085)      (3,272)
income, net
Provision for
GAAP income     37,426       31,177       25,529      68,603       55,086
taxes
Income
tax-effect of   9,726        8,726        10,444      18,452       20,333
above non-GAAP
adjustments
Depreciation
and             36,414       34,414       42,710      70,828       81,822
amortization
Other (income)  (341)        132          (1,131)     (209)        (690)
expense, net
Total Adjusted  $       $       $       $       $    
EBITDA:         165,759     166,074      143,074  331,833     
                                                                   285,723
Adjusted EBITDA 44%          45%          43%         44%          44%
Margin
Non-GAAP net
income per
share:
                $       $       $       $       $    
 Basic          0.47     0.52             1.00     
                                          0.38                    0.74
                $       $       $       $       $    
 Diluted        0.46     0.51             0.98     
                                          0.37                    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  ---------------Six
                      Ended-----------------------        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           5,345    5,770
                                                3,064
Research and          3,867          4,369      4,901     8,236      8,831
development
Sales and marketing  9,799          9,431      8,814     19,230     16,925
General and           8,417          6,504      8,842     14,921     15,019
administrative
 Total            $         $      $      $      $    
stock-based           24,801          22,931            47,732    46,545
compensation                                   25,621
Depreciation and
amortization:
Network-related       $         $      $      $      $    
depreciation          30,299          28,920            59,219    72,594
                                                37,989
Capitalized
stock-based           1,978          1,901      1,939     3,879      3,694
compensation
amortization
Other depreciation    6,115          5,494      4,721     11,609     9,228
and amortization
Amortization of
acquired intangible   5,734          6,060      5,463     11,794     10,230
assets
Total depreciation    $         $      $      $      $    
and amortization      44,126          42,375            86,501    95,746
                                                50,112
Capital expenditures:
Purchases of property $         $      $      $      $    
and equipment         54,369          46,478           100,847     72,621
                                                42,188
Capitalized           18,129         16,998     13,351    35,127     26,262
internal-use software
Capital expenditures,
excluding stock-based 72,498         63,476     55,539    135,974    98,883
compensation
Capitalized
stock-based           3,245          2,938      1,835     6,183      4,133
compensation
Total capital         $         $      $      $      $    
expenditures*         75,743          66,414           142,157    103,016
                                                57,374
Net increase                                    $   
(decrease) in cash,   $         $              $      $   
cash equivalents,     35,978         (12,806)   39,725     23,172   (211,510)
marketable
securities and
restricted marketable
securities
End of period
statistics:
Number of employees   3,453          3,207      2,654
Number of deployed    137,788        132,442    115,008
servers
* 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:

  oAmortization 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.
  oStock-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.
  oRestructuring 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.
  oAcquisition 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.
  oGain 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.
  oIncome 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 Young                 Natalie Temple
Media Relations            Investor Relations
Akamai Technologies --or-- Akamai Technologies
617-444-3913               617-444-3635
jyoung@akamai.com
                           ntemple@akamai.com

SOURCE Akamai Technologies, Inc.

Website: http://www.akamai.com
 
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