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8-K - FORM 8-K - AKAMAI TECHNOLOGIES INCd480590d8k.htm

Exhibit 99.1

 

Contacts:

Jeff Young

Media Relations

Akamai Technologies

617-444-3913

jyoung@akamai.com

  

—or—

  

Natalie Temple

Investor Relations

Akamai Technologies

617-444-3635

ntemple@akamai.com

AKAMAI REPORTS FOURTH QUARTER 2012 AND

FULL-YEAR 2012 FINANCIAL RESULTS

 

   

Fourth quarter revenue of $378 million, up 17 percent year-over-year; and annual revenue of $1,374 million, up 19 percent year-over-year

 

   

Fourth quarter GAAP net income of $68 million, up 14 percent year-over-year, or $0.38 per diluted share, up 15 percent year-over-year; and full-year GAAP net income of $204 million, up 2 percent year-over-year, or $1.12 per diluted share, up 5 percent year-over-year

 

   

Fourth quarter normalized net income* of $98 million, up 18 percent year-over-year, or $0.54 per diluted share, up 20 percent year-over-year; and full-year normalized net income* of $329 million, up 16 percent year-over-year, or $1.81 per diluted share, up 19 percent year-over-year

 

   

Board of Directors authorizes $150 million extension of share repurchase program

CAMBRIDGE, Mass. February 6, 2013 – 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 fourth quarter and full-year ended December 31, 2012. Revenue for the fourth quarter 2012 was $378 million, a 9 percent increase over third quarter revenue of $345 million, and a 17 percent increase over fourth quarter 2011 revenue of $324 million. Total revenue for 2012 was $1,374 million, a 19 percent increase over 2011 revenue of $1,159 million.

“With strong revenue and profit performance in the fourth quarter, Akamai closed out 2012 with record results on both the top and bottom line,” said Tom Leighton, CEO of Akamai. “Throughout the year, we announced new products across every solution line, closed a record number of strategic acquisitions, and achieved margin expansion through continued improvement in our network efficiency even as we expanded its capacity worldwide to meet rising demand for Akamai services. We believe these efforts have positioned us well to help our customers capitalize on the opportunities, and mitigate the challenges, of conducting business online.”

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2012 was $68 million, or $0.38 per diluted share. Full-year GAAP net income for 2012 was $204 million, or $1.12 per diluted share.

The Company generated normalized net income* of $98 million, or $0.54 per diluted share, in the fourth quarter of 2012, a 25 percent increase over the prior quarter’s normalized net income of $79 million, or $0.43 per diluted share, and an 18 percent increase over fourth quarter 2011 normalized net income of $83 million, or $0.45 per diluted share. Full-year normalized net income grew 16 percent year-over-year to $329 million, or $1.81 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)


Adjusted EBITDA* for the fourth quarter of 2012 was $173 million, up from $157 million in the prior quarter, and $148 million in the fourth quarter of 2011. Adjusted EBITDA margin* for the fourth quarter was 46 percent, up a point from the prior quarter and consistent with the same period last year. For the full year, adjusted EBITDA was $615 million, up from $525 million in 2011. Full-year adjusted EBITDA margin in 2012 was at 45 percent, consistent with the prior year. (*See Use of Non-GAAP Financial Measures below for definitions.)

Full-year cash from operations was $530 million, or 39 percent of revenue, consistent with the prior year. At year end, the Company had over $1 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 23 percent and 29 percent, respectively, of revenue for the fourth quarter 2012.

Share Repurchase Program

The Company also announced today that its Board of Directors has authorized a $150 million extension of its share repurchase program, effective for a 12-month period beginning on February 1, 2013. As of this date, all prior repurchase authorizations have expired. The Company’s goal for this program, which is expected to be funded through its free cash flow, is primarily to offset dilution created by its equity compensation programs.

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit the Company to repurchase shares when the Company might otherwise be precluded from doing so under insider trading laws. The Company may choose to suspend or discontinue the repurchase program at any time but cannot carry over unused authorization amounts to future periods.

During the fourth quarter of 2012, under its current share repurchase program, the Company spent approximately $30 million repurchasing 0.8 million shares of its common stock, at an average price of $37.53 per share. During 2012, the Company spent approximately $141 million repurchasing 4.4 million shares of its common stock, at an average price of $32.45 per share.

The Company had approximately 178 million shares of common stock outstanding as of December 31, 2012.

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-314-4483 (or 1-617-213-8049 for international calls) and using passcode No. 17717131. 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. 29167666.

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)

 

     Dec. 31, 2012      Dec. 31, 2011  
Assets      

Cash and cash equivalents

   $ 201,989       $ 559,197   

Marketable securities

     235,592         290,029   

Accounts receivable, net

     218,777         210,936   

Deferred income tax assets, current portion

     20,422         6,444   

Prepaid expenses and other current assets

     51,604         55,414   
  

 

 

    

 

 

 

Current assets

     728,384         1,122,020   

Marketable securities

     657,659         380,729   

Property and equipment, net

     345,091         293,043   

Goodwill and other intangible assets, net

     815,879         498,300   

Other assets

     39,811         7,924   

Deferred income tax assets, net

     13,803         43,485   
  

 

 

    

 

 

 

Total assets

   $ 2,600,627       $ 2,345,501   
  

 

 

    

 

 

 
Liabilities and stockholders’ equity      

Accounts payable and accrued expenses

   $ 176,378       $ 123,618   

Other current liabilities

     26,566         24,774   
  

 

 

    

 

 

 

Current liabilities

     202,944         148,392   

Other liabilities

     51,929         40,859   
  

 

 

    

 

 

 

Total liabilities

     254,873         189,251   

Stockholders’ equity

     2,345,754         2,156,250   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,600,627       $ 2,345,501   
  

 

 

    

 

 

 


Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Year Ended  
     Dec. 31,      Sep. 30,     Dec. 31,     Dec. 31,      Dec. 31,  
     2012      2012     2011     2012      2011  

Revenues

   $ 377,872       $ 345,321      $ 323,740      $ 1,373,947       $ 1,158,538   

Costs and operating expenses:

            

Cost of revenues * †

     111,893         109,995        102,544        431,911         374,543   

Research and development *

     20,371         19,351        15,191        74,744         52,333   

Sales and marketing *

     85,308         75,924        66,609        304,404         227,331   

General and administrative * †

     58,819         54,511        51,016        227,033         191,726   

Amortization of other intangible assets

     5,351         5,381        4,316        20,962         17,070   

Restructuring charge

     392         —          4,728        406         4,886   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total costs and operating expenses

     282,134         265,162        244,404        1,059,460         867,889   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     95,738         80,159        79,336        314,487         290,649   

Interest income, net

     1,590         1,593        1,863        6,455         10,921   

Loss on investments, net

     —           —          (500     —           (500

Other income (expense), net

     200         (241     7,455        649         6,125   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Income before provision for income taxes

     97,528         81,511        88,154        321,591         307,195   

Provision for income taxes

     29,236         33,280        28,073        117,602         106,291   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 68,292       $ 48,231      $ 60,081      $ 203,989       $ 200,904   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

            

Basic

   $ 0.38       $ 0.27      $ 0.34      $ 1.15       $ 1.09   

Diluted

   $ 0.38       $ 0.27      $ 0.33      $ 1.12       $ 1.07   

Shares used in per share calculations:

            

Basic

     177,479         177,455        178,916        177,900         183,866   

Diluted

     181,768         181,053        182,956        181,749         187,556   

 

* 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     Year Ended  
     Dec. 31,     Sep. 30,     Dec. 31,     Dec. 31,     Dec. 31,  
     2012     2012     2011     2012     2011  

Cash flows from operating activities:

          

Net income

   $ 68,292      $ 48,231      $ 60,081      $ 203,989      $ 200,904   

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

          

Depreciation and amortization

     54,960        53,457        43,650        204,163        167,878   

Stock-based compensation

     21,405        22,635        18,840        90,585        61,305   

(Benefit) provision for deferred income taxes, net

     (6,645     826        32,722        (5,819     53,628   

Excess tax benefits from stock-based compensation

     (5,426     (2,540     (1,663     (23,015     (13,123

Loss on investments and disposal of property and equipment, net

     65        142        769        3        597   

Provision for doubtful accounts

     (255     (345     830        (316     2,066   

Non-cash portion of restructuring charge

     —          —          412        —          412   

Changes in operating assets and liabilities:

          

Accounts receivable

     19,479        (27,974     (30,016     (2,108     (37,837

Prepaid expenses and other current assets

     (5,037     2,131        (6,936     6,066        (7,014

Accounts payable, accrued expenses and other current liabilities

     4,921        44,591        20,452        59,653        15,184   

Accrued restructuring

     (381     (28     3,752        (3,278     3,572   

Deferred revenue

     (990     1,401        (2,335     4,552        (3,721

Other noncurrent assets and liabilities

     (3,534     (1,031     (4,651     (4,070     8,704   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     146,854        141,496        135,907        530,405        452,555   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Cash paid for acquired businesses, net of cash received

     (30,650     (14,392     —          (336,680     (550

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

     (60,669     (60,294     (46,570     (219,846     (182,862

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

     179,913        98,567        334,103        530,065        1,234,223   

Purchases of short- and long-term marketable securities

     (198,039     (137,809     (152,657     (752,342     (880,110

Proceeds from the sale of property and equipment

     —          —          15        12        150   

Increase in other investments

     (250     —          —          (250     —     

Decrease in restricted investments held for security deposits

     —          —          51        —          272   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (109,695     (113,928     134,942        (779,041     171,123   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

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

     16,025        6,066        11,947        44,660        25,252   

Excess tax benefits from stock-based compensation

     5,426        2,540        1,663        23,015        13,123   

Taxes paid related to net share settlement of equity awards

     (8,124     (2,370     (2,713     (34,690     (8,393

Repurchase of common stock

     (29,819     (36,523     (76,332     (141,468     (324,070
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (16,492     (30,287     (65,435     (108,483     (294,088
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     (1,328     2,373        (1,816     (89     (2,259

Net increase (decrease) in cash and cash equivalents

     19,339        (346     203,598        (357,208     327,331   

Cash and cash equivalents, beginning of period

     182,650        182,996        355,599        559,197        231,866   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 201,989      $ 182,650      $ 559,197      $ 201,989      $ 559,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


     Three Months Ended      Year Ended  
     Dec. 31,      Sep. 30,      Dec. 31,      Dec. 31,     Dec. 31,  
     2012      2012      2011      2012     2011  

Supplemental financial data (in thousands):

             

Stock-based compensation:

             

Cost of revenues

   $ 620       $ 684       $ 581       $ 2,871      $ 2,360   

Research and development

     4,017         4,427         3,610         17,275        11,125   

Sales and marketing

     10,736         10,896         8,878         42,760        27,990   

General and administrative

     6,032         6,628         5,771         27,679        19,830   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total stock-based compensation

   $ 21,405       $ 22,635       $ 18,840       $ 90,585      $ 61,305   

Depreciation and amortization:

             

Network-related depreciation

   $ 42,143       $ 41,022       $ 33,170       $ 155,759      $ 126,764   

Capitalized stock-based compensation amortization

     1,961         2,025         1,713         7,680        7,308   

Other depreciation and amortization

     5,505         5,029         4,451         19,762        16,736   

Amortization of other intangible assets

     5,351         5,381         4,316         20,962        17,070   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total depreciation and amortization

   $ 54,960       $ 53,457       $ 43,650       $ 204,163      $ 167,878   

Capital expenditures:

             

Purchases of property and equipment

   $ 46,386       $ 46,635       $ 34,450       $ 165,642      $ 140,219   

Capitalized internal-use software

     14,283         13,659         12,120         54,204        42,643   

Capitalized stock-based compensation

     2,582         2,561         2,067         9,276        7,473   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total capital expenditures

   $ 63,251       $ 62,855       $ 48,637       $ 229,122      $ 190,335   

Net increase (decrease) in cash, cash equivalents, marketable securities and restricted cash and marketable securities

   $ 36,906       $ 39,889       $ 38,960       $ (134,715   $ (13,447

End of period statistics:

             

Number of employees

     3,074         2,884         2,380        

Number of deployed servers

     127,638         119,370         105,111        

*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). Legislative and regulatory pronouncements 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 and our earnings call helps investors to gain a meaningful understanding of our past performance and 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. These measures are also used by management in its 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 may make 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, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of


capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt and gains and losses on legal settlements. 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 income, or that do not require a cash outlay, such as stock-based compensation. 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 the historical 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 as a percentage of revenues. 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, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai’s 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 other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, loss on early extinguishment of debt and gains and losses on legal settlements. 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 net income per share” as normalized net income, plus interest add-back for diluted share calculation, divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations. Akamai considers normalized net income per share to be another important indicator of overall performance of the Company because it eliminates the effect of non-cash items. 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     Year Ended  
     Dec. 31,     Sep. 30,     Dec. 31,     Dec. 31,     Dec. 31,  
     2012     2012     2011     2012     2011  

Net income

   $ 68,292      $ 48,231      $ 60,081      $ 203,989      $ 200,904   

Amortization of other intangible assets

     5,351        5,381        4,316        20,962        17,070   

Stock-based compensation

     21,405        22,635        18,840        90,585        61,305   

Amortization of capitalized stock-based compensation

     1,961        2,025        1,713        7,680        7,308   

Loss on investments, net

     —          —          500        —          500   

Acquisition related costs

     680        279        1,020        5,787        580   

Legal settlements, net

     —          —          (8,043     —          (8,043

Restructuring charge

     392        —          4,728        406        4,886   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total normalized net income:

     98,081        78,551        83,155        329,409        284,510   

Interest income, net

     (1,590     (1,593     (1,863     (6,455     (10,921

Provision for income taxes

     29,236        33,280        28,073        117,602        106,291   

Depreciation and amortization

     47,648        46,051        37,621        175,521        143,500   

Other (income) expense, net

     (200     241        588        (649     1,918   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Adjusted EBITDA:

   $ 173,175      $ 156,530      $ 147,574      $ 615,428      $ 525,298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Normalized net income per share:

          

Basic

   $ 0.55      $ 0.44      $ 0.46      $ 1.85      $ 1.55   

Diluted

   $ 0.54      $ 0.43      $ 0.45      $ 1.81      $ 1.52   

Shares used in normalized per share calculations:

          

Basic

     177,479        177,455        178,916        177,900        183,866   

Diluted

     181,768        181,053        182,956        181,749        187,556   

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.