Market Overview

Akamai Reports First Quarter 2017 Financial Results

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CAMBRIDGE, Mass., May 2, 2017 /PRNewswire/ -- 

  • Revenue of $609 million, up 7% year-over-year and up 8% when adjusted for foreign exchange*
  • Revenue excluding Internet Platform Customers(1) up 13% year-over-year and when adjusted for foreign exchange*
  • GAAP EPS of $0.46 per diluted share, up 10% year-over-year and up 11% when adjusted for foreign exchange*
  • Non-GAAP EPS of $0.69 per diluted share, up 5% year-over-year and when adjusted for foreign exchange*

Akamai Technologies, Inc. (NASDAQ: AKAM), the world's largest and most trusted cloud delivery platform, today reported financial results for the first quarter ended March 31, 2017.

"Q1 was a very solid quarter for Akamai on both the top and bottom lines," said Dr. Tom Leighton, Chief Executive Officer. "We are especially pleased with the strong results of our performance and security solutions, which grew 17% year-over-year, or 18% in constant currency*, and now account for over 60% of our overall revenue. As we look forward, I remain excited about the opportunities that lie ahead, as Akamai is uniquely positioned to help our customers provide the highest quality and most secure digital experiences on the Internet."

Akamai delivered the following financial results for the first quarter ended March 31, 2017:

Revenue: Revenue was $609 million, a 7% increase over first quarter 2016 revenue of $568 million and an 8% increase when adjusted for foreign exchange.*

     Revenue by Solution Category(2):

  • Performance and Security Solutions revenue was $369 million, up 17% year-over-year and up 18% when adjusted for foreign exchange*
  • Cloud Security Solutions revenue, a component of Performance and Security, was $110 million, up 36% year-over-year and up 37% when adjusted for foreign exchange*
  • Media Delivery Solutions revenue was $187 million, down 9% year-over-year and when adjusted for foreign exchange*
  • Services and Support Solutions revenue was $53 million, up 15% year-over-year and when adjusted for foreign exchange*

     Revenue by Geography:

  • U.S. revenue was $407 million, up 2% year-over-year
  • International revenue was $203 million, up 19% year-over-year and up 21% when adjusted for foreign exchange*

     Customer Revenue by Division(3):

  • Web Division revenue was $305 million, up 14% year-over-year and up 15% when adjusted for foreign exchange*
  • Media Division revenue was $285 million, consistent year-over-year and up 1% when adjusted for foreign exchange*
  • Enterprise and Carrier Division revenue was $19 million, up 24% year-over-year and when adjusted for foreign exchange*

     Revenue from Internet Platform Customers(1):

  • Revenue from Internet Platform Customers was $51 million, down 29% year-over-year and when adjusted for foreign exchange*
  • Revenue excluding Internet Platform Customers was $558 million, up 13% year-over-year and when adjusted for foreign exchange*

Income from operations: GAAP income from operations was $115 million, a 1% increase from first quarter 2016. GAAP operating margin for the first quarter was 19%, down 1 percentage point from the same period last year.

Non-GAAP income from operations* was $165 million, a 1% increase from first quarter 2016. Non-GAAP operating margin* for the first quarter was 27%, down 2 percentage points from the same period last year.

Net income: GAAP net income was $81 million, an 8% increase from first quarter 2016. Non-GAAP net income* was $120 million, a 2% increase from first quarter 2016.

EPS: GAAP EPS was $0.46 per diluted share, a 10% increase from first quarter 2016 and an 11% increase when adjusted for foreign exchange.* Non-GAAP EPS was $0.69 per diluted share, a 5% increase from first quarter 2016 and when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA was $241 million, a 3% increase from first quarter 2016. Adjusted EBITDA margin* was 39%, down 2 percentage points from first quarter of 2016.

Other first quarter 2017 results:

  • Cash from operations was $143 million, or 23% of revenue
  • Cash, cash equivalents and marketable securities as of March 31, 2017 was $1.6 billion
  • The Company spent $72 million to repurchase 1.1 million shares of its common stock at an average price of $65.78 per share
  • The Company had approximately 173 million shares of common stock outstanding as of March 31, 2017

 

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



(1)

Internet Platform Customers – Six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix



(2)

Revenue by solution category – A product-focused reporting view that reflects revenue by solution purchased



(3)

Customer revenue by division – A customer-focused reporting view that reflects revenue from customers that are managed by the division. During the first quarter of 2017, the divisional categorization of certain customers was adjusted based on how those customer categorizations are currently being managed. The historical presentation of divisional revenue was revised in order to reflect the most recent categorization and to provide a comparable view for all periods presented.

 

Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-844-578-9671 (or 1-508-637-5655 for international calls) and using passcode 7543905. 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 two weeks following the conference by calling 1-855-859-2056 (or 1-404-537-3406 for international calls) and using passcode 7543905. The archived webcast of this event may be accessed through the Akamai website.

About Akamai
As the world's largest and most trusted cloud delivery platform, Akamai makes it easier for its customers to provide the best and most secure digital experiences on any device, anytime, anywhere.  Akamai's massively distributed platform is unparalleled in scale with over 200,000 servers across 130 countries, giving customers superior performance and threat protection. Akamai's portfolio of web and mobile performance, cloud security, enterprise access, and video delivery solutions are supported by exceptional customer service and 24/7 monitoring.  To learn why the top financial institutions, e-commerce leaders, media & entertainment providers, and government organizations trust Akamai please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

 

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)

March 31,
 2017


December 31,
2016

ASSETS




Current assets:




Cash and cash equivalents

$

522,319



$

324,169


Marketable securities

322,750



512,849


Accounts receivable, net

400,792



368,596


Prepaid expenses and other current assets

152,600



104,303


Total current assets

1,398,461



1,309,917


Property and equipment, net

824,724



801,017


Marketable securities

739,065



779,311


Goodwill

1,229,504



1,228,503


Acquired intangible assets, net

141,894



149,463


Deferred income tax assets

7,332



8,982


Other assets

109,015



95,953


Total assets

$

4,449,995



$

4,373,146


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

90,179



$

76,120


Accrued expenses

218,028



238,777


Deferred revenue

63,434



52,972


Other current liabilities

10,235



6,719


Total current liabilities

381,876



374,588


Deferred revenue

4,505



3,758


Deferred income tax liabilities

39,902



11,652


Convertible senior notes

645,719



640,087


Other liabilities

119,447



118,691


Total liabilities

1,191,449



1,148,776


Total stockholders' equity

3,258,546



3,224,370


Total liabilities and stockholders' equity

$

4,449,995



$

4,373,146


 

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended

(in thousands, except per share data)

March 31,
2017


December
31, 2016


March 31,
2016

Revenue

$

609,237



$

616,124



$

567,725


Costs and operating expenses:






Cost of revenue(1) (2)

205,703



203,475



194,736


Research and development(1)

52,162



46,755



40,842


Sales and marketing(1)

113,566



118,907



102,211


General and administrative(1) (2)

115,009



116,775



102,283


Amortization of acquired intangible assets

7,569



6,617



6,716


Restructuring charges



65



6,818


Total costs and operating expenses

494,009



492,594



453,606


Income from operations

115,228



123,530



114,119


Interest income

4,624



4,180



3,320


Interest expense

(4,597)



(4,680)



(4,653)


Other (expense) income, net

(684)



2,784



(189)


Income before provision for income taxes

114,571



125,814



112,597


Provision for income taxes

33,641



34,175



37,739


Net income

$

80,930



$

91,639



$

74,858








Net income per share:






Basic

$

0.47



$

0.53



$

0.42


Diluted

$

0.46



$

0.52



$

0.42








Shares used in per share calculations:






Basic

173,158



173,337



176,403


Diluted

175,171



175,284



177,539



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

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

 

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Three Months Ended

(in thousands)

March 31,
2017


December
31, 2016


March 31,
2016

Cash flows from operating activities(1):






Net income

$

80,930



$

91,639



$

74,858


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






Depreciation and amortization

86,533



84,008



80,669


Stock-based compensation

38,986



39,202



31,741


Provision for deferred income taxes

31,972



21,169



1,072


Amortization of debt discount and issuance costs

4,597



4,680



4,653


Other non-cash reconciling items, net

(129)



2,461



2,752


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






Accounts receivable

(30,146)



(19,375)



15,906


Prepaid expenses and other current assets

(47,065)



19,867



(3,481)


Accounts payable and accrued expenses

(23,940)



(36,401)



(32,377)


Deferred revenue

10,876



(8,098)



10,653


Other current liabilities

3,516



814



6,876


Other non-current assets and liabilities

(13,512)



(15,744)



(1,949)


Net cash provided by operating activities

142,618



184,222



191,373


Cash flows from investing activities:






Cash paid for acquired businesses, net of cash acquired

(10)



(92,503)




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

(91,181)



(75,938)



(82,340)


Purchases of short- and long-term marketable securities

(92,306)



(166,253)



(95,843)


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

324,138



166,044



125,109


Other non-current assets and liabilities

(1,230)



3,927



(2,354)


Net cash used in investing activities

139,411



(164,723)



(55,428)


Cash flows from financing activities:






Proceeds from the issuance of common stock under stock plans

17,530



17,221



18,350


Employee taxes paid related to net share settlement of stock-based awards

(33,921)



(6,985)



(26,496)


Repurchases of common stock

(72,467)



(78,927)



(108,725)


Net cash used in financing activities

(88,858)



(68,691)



(116,871)


Effects of exchange rate changes on cash and cash equivalents

4,979



(8,442)



4,365


Net increase (decrease) in cash and cash equivalents

198,150



(57,634)



23,439


Cash and cash equivalents at beginning of period

324,169



381,803



289,473


Cash and cash equivalents at end of period

$

522,319



$

324,169



$

312,912



(1)  On January 1, 2017, the Company adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, excess tax benefits are no longer classified as a reduction of cash flows from operating activities. The Company retrospectively adopted this standard and revised cash flows from operating activities by $2.4 million and $1.1 million for the three months ended December 31, 2016 and March 31, 2016, respectively. The increase caused a corresponding decrease to cash flows from financing activities.

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA BY SOLUTION CATEGORY



Three Months Ended

(in thousands)

March 31,
2017


December
31, 2016


March 31,
2016

Revenue by solution category(1):






Performance and Security Solutions

$

369,148



$

367,407



$

315,863


Media Delivery Solutions

187,396



196,088



205,939


Services and Support Solutions

52,693



52,629



45,923


Total revenue

$

609,237



$

616,124



$

567,725


Cloud Security Solutions revenue

$

109,758



$

102,072



$

80,660








Revenue growth rates year-over-year:






Performance and Security Solutions

17

%


17

%


16

%

Media Delivery Solutions

(9)



(10)



(4)


Services and Support Solutions

15



14



16


Total revenue

7

%


6

%


8

%

Cloud Security Solutions revenue growth rates

36

%


41

%


46

%







Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):






Performance and Security Solutions

18

%


17

%


17

%

Media Delivery Solutions

(9)



(10)



(4)


Services and Support Solutions

15



14



16


Total revenue

8

%


7

%


9

%

Cloud Security Solutions revenue growth rates

37

%


41

%


47

%

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA BY GEOGRAPHY



Three Months Ended

(in thousands)

March 31,
2017


December
31, 2016


March 31,
2016

Revenue by geography:






U.S.

$

406,565



$

423,588



$

397,283


International

202,672



192,536



170,442


Total revenue

$

609,237



$

616,124



$

567,725








Revenue growth rates year-over-year:






U.S.

2

%


2

%


2

%

International

19



18



24


Total revenue

7

%


6

%


8

%







Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):






U.S.

2

%


2

%


2

%

International

21



19



27


Total revenue

8

%


7

%


9

%


(1)  See customer revenue by solution category definition in press release

(2)  See Use of Non-GAAP Financial Measures below for a definition

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA BY DIVISION



Three Months Ended

(in thousands)

March 31,
2017


December
31, 2016


March 31,
2016

Customer revenue by division(1):






Web Division

$

304,686



$

304,196



$

266,667


Media Division

285,401



292,394



285,614


Enterprise and Carrier Division

19,150



19,534



15,444


Total revenue

$

609,237



$

616,124



$

567,725








Revenue growth rates year-over-year:






Web Division

14

%


13

%


16

%

Media Division



(1)




Enterprise and Carrier Division

24



26



31


Total revenue

7

%


6

%


8

%







Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):






Web Division

15

%


13

%


17

%

Media Division

1





1


Enterprise and Carrier Division

24



27



32


Total revenue

8

%


7

%


9

%

 

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA FOR INTERNET PLATFORM CUSTOMERS



Three Months Ended

(in thousands)

March 31,
2017


December
31, 2016


March 31,
2016

Revenue from Internet Platform Customers(3)

$

51,367



$

58,378



$

72,505


Revenue excluding Internet Platform Customers

557,870



557,746



495,220


Total revenue

$

609,237



$

616,124



$

567,725








Revenue growth rates year-over-year:






Revenue from Internet Platform Customers

(29)

%


(36)

%


(24)

%

Revenue excluding Internet Platform Customers

13



14



15


Total revenue

7

%


6

%


8

%







Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2):






Revenue from Internet Platform Customers

(29)

%


(36)

%


(24)

%

Revenue excluding Internet Platform Customers

13



15



16


Total revenue

8

%


7

%


9

%


(1)  See customer revenue by division definition in press release

(2)  See Use of Non-GAAP Financial Measures below for a definition

(3)  See Internet Platform Customers definition in press release

 

 

AKAMAI TECHNOLOGIES, INC.

OTHER SUPPLEMENTAL FINANCIAL DATA



Three Months Ended

(in thousands, except end of period statistics)

March 31,
2017


December
31, 2016


March 31,
2016

Stock-based compensation:






Cost of revenue

$

4,685



$

5,063



$

3,970


Research and development

9,029



8,822



6,438


Sales and marketing

15,157



15,067



12,352


General and administrative

10,115



10,250



8,981


Total stock-based compensation

$

38,986



$

39,202



$

31,741








Depreciation and amortization:






Network-related depreciation

$

56,844



$

56,205



$

55,174


Other depreciation and amortization

18,209



17,409



15,171


Depreciation of property and equipment

75,053



73,614



70,345


Capitalized stock-based compensation amortization

3,471



3,323



3,257


Capitalized interest expense amortization

440



454



351


Amortization of acquired intangible assets

7,569



6,617



6,716


Total depreciation and amortization

$

86,533



$

84,008



$

80,669








Capital expenditures, excluding stock-based compensation and interest expense(1)(2):






Purchases of property and equipment

$

56,500



$

44,646



$

50,067


Capitalized internal-use software development costs

37,085



33,114



35,172


Total capital expenditures, excluding stock-based compensation and interest expense

$

93,585



$

77,760



$

85,239








End of period statistics:






Number of employees

6,672



6,490



6,119



(1)  Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of cash flows.  The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.

(2)  See Use of Non-GAAP Financial Measures below for a definition

 

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND NET INCOME PER DILUTED SHARE



Three Months Ended

(in thousands, except per share data)

March 31,
2017


December
31, 2016


March 31,
2016

Income from operations

$

115,228



$

123,530



$

114,119


GAAP operating margin

19

%


20

%


20

%

Amortization of acquired intangible assets

7,569



6,617



6,716


Stock-based compensation

38,986



39,202



31,741


Amortization of capitalized stock-based compensation and capitalized interest expense

3,911



3,777



3,608


Restructuring charges



65



6,818


Acquisition-related (benefits) costs

(208)



541



(79)


Legal matter costs





789


Operating adjustments

50,258



50,202



49,593


Non-GAAP income from operations

$

165,486



$

173,732



$

163,712


Non-GAAP operating margin

27

%


28

%


29

%







Net income

$

80,930



$

91,639



$

74,858


Operating adjustments (from above)

50,258



50,202



49,593


Amortization of debt discount and issuance costs

4,597



4,680



4,653


Gain on investments



(4,807)




Income tax-effect of above non-GAAP adjustments and certain discrete tax items

(15,467)



(15,567)



(11,323)


Non-GAAP net income

$

120,318



$

126,147



$

117,781








GAAP net income per diluted share

$

0.46



$

0.52



$

0.42


Amortization of acquired intangible assets

0.05



0.05



0.03


Stock-based compensation

0.22



0.22



0.18


Amortization of capitalized stock-based compensation and capitalized interest expense

0.02



0.02



0.02


Restructuring charges





0.04


Acquisition-related (benefits) costs






Legal matter costs






Amortization of debt discount and issuance costs

0.03



0.03



0.03


Gain on investments



(0.03)




Income tax effect of above non-GAAP adjustments and certain discrete tax items

(0.09)



(0.09)



(0.06)


Non-GAAP net income per diluted share

$

0.69



$

0.72



$

0.66








Shares used in diluted per share calculations

175,171



175,284



177,539


 

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA



Three Months Ended

(in thousands, except per share data)

March 31,
2017


December
31, 2016


March 31,
2016

Net income

$

80,930



$

91,639



$

74,858


Interest income

(4,624)



(4,180)



(3,320)


Provision for income taxes

33,641



34,175



37,739


Depreciation and amortization

75,053



73,614



70,345


Amortization of capitalized stock-based compensation and capitalized interest
expense

3,911



3,777



3,608


Amortization of acquired intangible assets

7,569



6,617



6,716


Stock-based compensation

38,986



39,202



31,741


Restructuring charges



65



6,818


Acquisition-related (benefits) costs

(208)



541



(79)


Legal matter costs





789


Amortization of debt discount and issuance costs

4,597



4,680



4,653


Gain on investments



(4,807)




Other expense, net

684



2,023



189


Adjusted EBITDA

$

240,539



$

247,346



$

234,057


Adjusted EBITDA margin

39

%


40

%


41

%

 

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, to measure executive compensation and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, Adjusted EBITDA, Adjusted EBITDA margin, capital expenditures and impact of foreign currency exchange rates, 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 the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results.

The non-GAAP financial measures do not replace the presentation of Akamai's GAAP financial results and should only be used as a supplement to, not as a substitute for, Akamai's financial results presented in accordance with GAAP. Akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting and investor presentations 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 Akamai 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 from its non-GAAP financial measures 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 paid to Akamai's employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of Akamai'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 from its non-GAAP financial measures in order to highlight the performance of Akamai's core business and to be consistent with the way many investors evaluate its performance and compare its operating results to
    peer companies.

  • Acquisition-related costs – Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities. In addition, subsequent adjustments to Akamai's initial estimated amounts of contingent consideration and indemnification associated with specific acquisitions are included within acquisition-related costs. These amounts are impacted by the timing and size of the acquisitions. Akamai excludes acquisition-related costs from its non-GAAP financial measures to provide a useful comparison of Akamai's operating results to prior periods and to its peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions.

  • Restructuring charges – Akamai has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments. Akamai excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of
    its business.

  • Amortization of debt discount and issuance costs and amortization of capitalized interest expense – In February 2014, Akamai issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rate of the convertible senior notes was approximately 3.2%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity under GAAP, thereby reducing the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. All of Akamai's interest expense is comprised of these non-cash components and is excluded from management's assessment of the company's operating performance because management believes the non-cash expense is not representative of ongoing operating performance.

  • Gains and losses on investments – Akamai has recorded gains and losses from the disposition and impairment of certain investments. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them occur infrequently and are not representative of Akamai's core business operations and ongoing operating performance.

  • Legal matter costs – Akamai has incurred losses from the settlement of legal matters and costs with respect to its internal U.S. Foreign Corrupt Practices Act ("FCPA") investigation in addition to the disgorgement Akamai was required to pay to resolve it. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of Akamai's core business operations.

  • Income tax effect of non-GAAP adjustments and certain discrete tax items – 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 releasing of valuation allowances), if any. Akamai believes that applying the non GAAP adjustments and their related income tax effect allows Akamai to highlight income attributable to its core operations.

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

Non-GAAP income from operations – GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; and other non-recurring or unusual items that may arise from time to time.

Non-GAAP operating margin – Non-GAAP income from operations stated as a percentage of revenue.

Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; 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 basic weighted average or diluted common shares outstanding. Basic weighted average shares outstanding are those used in GAAP net income per share calculations. Diluted weighted average shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transaction entered into in connection with the issuance of $690 million of convertible senior notes due 2019. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, the company would receive a benefit from the note hedge transaction and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. Unless and until Akamai's weighted average stock price is greater than $89.56, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Adjusted EBITDA – GAAP net income excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements; costs incurred with respect to Akamai's internal FCPA investigation; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; and other non-recurring or unusual items that may arise from time to time.

Adjusted EBITDA margin – Adjusted EBITDA stated as a percentage of revenue.

Capital expenditures, or capex, excluding stock-based compensation and interest expense – Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end.

Impact of Foreign Currency Exchange Rates – Revenue and earnings from international operations have historically been an important contributor to Akamai's financial results. Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.

Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount.  The percentage change at constant currency presented is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.

Akamai Statement Under the Private Securities Litigation Reform Act
This release and/or our quarterly earnings conference call scheduled for later today contain 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 plans for investment and portfolio expansion. 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, failure of our investments in innovation to generate solutions that are accepted in the market; 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; 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 and on such call 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


Tom Barth

Media Relations


Investor Relations

Akamai Technologies


Akamai Technologies

617-444-3913


617-274-7130

jyoung@akamai.com


tbarth@akamai.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/akamai-reports-first-quarter-2017-financial-results-300449929.html

SOURCE Akamai Technologies, Inc.

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