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Akamai
reported its third quarter earnings on Wednesday. Shares of the company are up a 5%.
Below are some key highlights from its conference call:
Financial Progress:
• Q3 was another excellent quarter for Akamai, with revenues and earnings both exceeding the high end of our guidance range.
• Revenue in the third quarter was a record $498 million.
• That's up 26% over Q3 of 2013.
• Our strong financial results continue to be driven by solid performance across all of our geographies and all of our major product lines.
• Significant growth coming from our security and media products.
• Our overachievement on the top line was led by better than expected traffic and revenue growth from our Media Delivery Solutions.
• Non-GAAP EPS was $0.62 per diluted share, a 24% increase year over year.
• Our overachievement on the bottom line was driven by higher than expected revenue, continued strong operational execution, and a favorable change in our tax rate change.
• The tax rate change had a $0.02 benefit on non-GAAP EPS that was not included in the guidance.
• Q3 revenue came in above the high end of our guidance range at $498 million, up 26% year over year and up 5% or $22 million sequentially.
• This result marks our first quarter of year-over-year growth of over $100 million and represents our highest Q2 to Q3 sequential growth ever.
• Traffic and revenue growth accelerated across most of the customer base
• Particularly strong growth coming from our largest and most strategic social media, gaming, and video delivery customers.
• We are very pleased with the performance of the Media business and remain bullish on the secular trends for this business looking forward.
• Turning now to our Performance and Security Solutions, revenue was $224 million in the quarter, up 29% year over year and up 3% sequentially
• We are especially pleased with this 29% increase compared to last year's very strong Q3 that was aided by a couple of non-recurring engagements.
• Finally, revenue from our Services and Support Solutions was $43 million in the quarter, up 32% year over year and up 2% sequentially
• We continued to see solid traction in our Asia-Pacific geography and improved performance in our in the EMEA markets, primarily driven by strength in our
• Media Delivery business.
• Revenue from our U.S. market was $363 million, up 25% year over year and up 6% sequentially.
• Particularly strong growth in our large social media, gaming, and video delivery customer base.
• GAAP operating expenses were $219 million in the third quarter.
• Adjusted EBITDA for the third quarter was $213 million, up $40 million from the same period last year and up $9 million from Q2 levels.
• During the quarter we spent approximately $39 million on share repurchases, buying back approximately 600,000 shares at an average price of $60. As of Q3 end, we had $476 million remaining on our current share repurchase authorization.
• Our balance sheet also remains very strong, with roughly $1.6 billion in cash, cash equivalents, and marketable securities.
Guidance:
• Q3 was a very strong revenue quarter that exceeded our expectations, in our Media business specifically.
• Q3 revenue benefited from unseasonably strong media traffic and revenue growth, which may translate into a slightly more moderate Q3 to Q4 growth rate than what we've historically seen.
• We are expecting another strong quarter, with Q4 revenue in the range of $515 million to $535 million.
• This range represents 20% to 25% growth, adjusted for foreign exchange movements, over a very strong fourth quarter last year.
• If the holiday season is weak, then we would expect to be towards the lower end of the range.
• At these revenue levels, we expect gross margins to increase slightly from Q3 levels, consistent with seasonal patterns, with cash gross margins of 79% and GAAP gross margins of 69%.
• Moving on to depreciation, we expect non-GAAP depreciation expense to be $56 million to $57 million.
• Expect Q4 non-GAAP EPS in the range of $0.61 to $0.66.
• This EPS guidance assumes taxes of $52 million to $57 million based on an estimated quarterly non-GAAP tax rate of 32%.
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