Akamai Reports Fourth Quarter 2007 and Full-Year 2007 Financial Results
-- Fourth quarter revenue grew to $183.2 million, up 14 percent
from the prior quarter and 46 percent year-over-year, and
annual revenue increased 48 percent year-over-year to $636.4
million
-- Fourth quarter GAAP net income increased 48 percent
quarter-over-quarter to $35.9 million, or $0.20 per diluted
share, and full-year GAAP net income increased 76 percent
year-over-year to $101.0 million, or $0.56 per diluted share
-- Fourth quarter normalized net income* increased 22 percent
quarter-over-quarter to $75.9 million, or $0.41 per diluted
share, and full-year normalized net income* increased 58
percent year-over-year to $244.4 million, or $1.32 per diluted
share
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 6, 2008--Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and applications online, today reported financial results for the fourth quarter and full-year ended December 31, 2007. Revenue for the fourth quarter 2007 was $183.2 million, a 14 percent increase over third quarter revenue of $161.2 million, and a 46 percent increase over fourth quarter 2006 revenue of $125.7 million. Total revenue for 2007 was $636.4 million, a 48 percent increase over 2006 revenue of $428.7 million.
"2007 was another year of impressive growth and significant accomplishments for Akamai," said Paul Sagan, president and CEO of Akamai. "The relationships we've built with customers across our target industries drove annual revenue growth of nearly 50 percent. As we begin our tenth year as a company, we believe the value of Akamai's differentiated services is stronger than ever - a testament to the dedication of our employees and the commitment of our customers to building great businesses on the Internet."
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2007 was $35.9 million, or $0.20 per diluted share. Full-year GAAP net income for 2007 was $101.0 million, or $0.56 per diluted share.
The Company generated normalized net income* of $75.9 million, or $0.41 per diluted share, in the fourth quarter of 2007, a 22 percent increase over prior quarter normalized net income of $62.4 million, or $0.34 per diluted share. Full-year normalized net income grew 58 percent year-over-year to $244.4 million, or $1.32 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)
Adjusted EBITDA* for the fourth quarter of 2007 was $86.9 million, up from $71.9 million in the prior quarter, and $53.0 million in the fourth quarter of 2006. Adjusted EBITDA margin for the fourth quarter was 47 percent, a 5-point improvement over the fourth quarter of last year. For the full year, adjusted EBITDA was $283.2 million, up from $173.3 million in 2006. Full-year adjusted EBITDA margin improved to 44 percent, up from 40 percent in 2006. (*See Use of Non-GAAP Financial Measures below for definitions.)
Full-year cash from operations was $235.4 million, or 37 percent of revenue, up 78 percent over the prior year. At year-end, the Company had approximately $633.5 million of cash, cash equivalents and marketable securities.
The Company had approximately 166.5 million shares of common stock outstanding as of December 31, 2007.
The number of customers under long-term service contracts at the end of the fourth quarter increased by 29 to a record 2,645, a 13 percent increase year-over-year.
Sales through resellers and sales outside the United States accounted for 16 percent and 23 percent, respectively, of revenue for the fourth quarter 2007.
Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-888-689-4521 (or 1-706-645-9202 for international calls). 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 1-800-642-1687 (or 1-706-645-9291 for international calls) and using conference ID No. 30455196.
About Akamai
Akamai(R) is the leading global service provider for accelerating content and business processes online. Thousands of organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com.
Financial Statements
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
Dec. 31, Dec. 31,
2007 2006
---------- ----------
Assets
Cash and cash equivalents $ 145,078 $ 80,595
Marketable securities 400,580 188,141
Restricted marketable securities 511 1,105
Accounts receivable, net 118,944 86,232
Prepaid expenses and other current assets 47,080 18,600
---------- ----------
Current assets 712,193 374,673
Marketable securities 84,237 161,511
Restricted marketable securities 3,102 3,102
Property and equipment, net 134,546 86,623
Goodwill and other intangible assets, net 449,137 298,263
Other assets 4,520 4,256
Deferred tax assets, net 285,463 319,504
---------- ----------
Total assets $1,673,198 $1,247,932
========== ==========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 74,773 $ 80,713
Other current liabilities 13,602 8,551
---------- ----------
Current liabilities 88,375 89,264
Other liabilities 9,265 3,975
Convertible notes 199,855 200,000
---------- ----------
Total liabilities 297,495 293,239
Stockholders' equity 1,375,703 954,693
---------- ----------
Total liabilities and stockholders' equity $1,673,198 $1,247,932
========== ==========
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months
Ended-
December September December September DecemberDecember
31, 30, 31, 30, 31, 31,
2007 2007 2006 2006 2007 2006
-------- --------- -------- --------- ----------------
Revenues $183,238 $161,240 $125,703 $111,495 $636,406$428,672
Costs and
operating
expenses:
Cost of
revenues * + 49,394 43,811 28,605 24,984 167,444 94,100
Research and
development * 10,466 11,408 9,141 8,862 44,141 33,102
Sales and
marketing * 36,397 36,671 34,258 29,416 147,556 119,689
General and
admin-
istrative * + 33,100 30,744 25,249 24,529 121,101 90,191
Amortization
of other
intangible
assets 2,835 2,835 2,047 1,943 11,414 8,484
Restructuring
benefit - - - - (178) -
-------- --------- -------- --------- ----------------
Total costs
and
operating
expenses 132,192 125,469 99,300 89,734 491,478 345,566
-------- --------- -------- --------- ----------------
Operating
income 51,046 35,771 26,403 21,761 144,928 83,106
Interest
income, net (6,841) (5,913) (4,567) (3,970) (22,729)(14,532)
Loss on early
extinguishment
of debt - 2 - - 3 -
Gain on
investments,
net (23) (1) (2) - (24) (261)
Other (income)
expense, net (30) (1,273) (357) 448 (527) (570)
-------- --------- -------- --------- ----------------
Income before
provision for
income taxes 57,940 42,956 31,329 25,283 168,205 98,469
Provision for
income taxes 22,062 18,692 10,706 11,264 67,238 41,068
-------- --------- -------- --------- ----------------
Net income $35,878 $24,264 $20,623 $14,019 $100,967 $57,401
======== ========= ======== ========= ================
Net income per
share:
Basic $0.22 $0.15 $0.13 $0.09 $0.62 $0.37
Diluted $0.20 $0.13 $0.12 $0.08 $0.56 $0.34
Shares used in
per share
calculations:
Basic 164,768 165,474 157,206 155,739 162,959 155,366
Diluted 185,294 185,106 179,064 177,063 185,094 176,767
* Includes stock-related compensation (see supplemental table for
figures)
+ Includes depreciation (see supplemental table for figures)
Twelve Months
Three Months Ended Ended
Dec. Sept. Dec. Sept. Dec. 31, Dec. 31,
31, 30, 31, 30,
2007 2007 2006 2006 2007 2006
------- ------- ------- ------- -------- --------
Supplemental
financial data (in
thousands):
Stock-related
compensation:
Cost of revenues $ 867 $ 896 $ 637 $ 517 $ 3,349 $ 1,960
Research and
development 3,643 4,095 3,409 3,037 15,658 11,435
Sales and marketing 6,144 6,810 5,993 4,781 26,252 18,403
General and
administrative 4,954 5,108 4,753 6,179 21,296 17,770
------- ------- ------- ------- -------- --------
Total stock-
related
compensation $15,608 $16,909 $14,792 $14,514 $ 66,555 $ 49,568
Depreciation and
amortization:
Network-related
depreciation $14,249 $13,591 $ 8,132 $ 7,144 $ 50,295 $ 26,810
Capitalized stock-
related
compensation
amortization 703 537 136 129 1,829 298
Other depreciation
and amortization 2,439 2,279 1,487 1,306 8,356 4,992
Amortization of
other intangible
assets 2,835 2,835 2,047 1,943 11,414 8,484
------- ------- ------- ------- -------- --------
Total depreciation
and amortization $20,226 $19,242 $11,802 $10,522 $ 71,894 $ 40,584
Capital
expenditures:
Purchases of
property and
equipment $ 9,954 $18,345 $18,944 $13,519 $ 81,420 $ 56,752
Capitalized
internal-use
software 5,962 4,981 3,532 2,932 19,057 12,576
Capitalized stock-
related
compensation 1,991 1,551 1,471 1,058 6,353 4,293
------- ------- ------- ------- -------- --------
Total capital
expenditures $17,907 $24,877 $23,947 $17,509 $106,830 $ 73,621
Net increase in
cash, cash
equivalents,
marketable
securities and
restricted
marketable
securities $67,572 $62,010 $18,372 $48,600 $199,054 $120,325
End of period
statistics:
Number of customers
under recurring
contract 2,645 2,616 2,347 2,144
Number of employees 1,324 1,287 1,058 917
Number of deployed
servers 30,293 28,301 22,109 21,864
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
Twelve Months
Three Months Ended Ended
Dec. 31, Sept. 30,Dec. 31, Sept. Dec. 31, Dec. 31,
30,
2007 2007 2006 2006 2007 2006
------------------------------------------------------
Cash flows from
operating
activities:
Net income $35,878 $24,264 $20,623 $14,019 $100,967 $57,401
Adjustments to
reconcile net
income to net
cash provided
by operating
activities,
net of
acquisitons:
Depreciation
and
amortization
of intangible
assets and
deferred
financing
costs 20,436 19,452 12,013 10,732 72,735 41,426
Stock-related
compensation 15,608 16,909 14,792 14,514 66,555 49,568
Utilization of
tax
NOLs/credits
and changes in
deferred tax
assets, net 22,794 16,540 9,414 11,154 64,472 38,510
Excess tax
benefits from
stock-related
compensation (2,551) (2,338) (12,910) (8,735) (20,862) (32,511)
(Gain) loss on
investments,
property and
equipment and
foreign
currency, net (375) (678) (438) 64 (1,542) (996)
Provision for
doubtful
accounts 848 944 397 (164) 2,901 830
Non-cash
portion of
loss on early
extinguishment
of debt - 2 - - 3 -
Non-cash
portion of
restructuring
benefit - - - - (178) -
Changes in
operating
assets and
liabilities,
net of
acquisitions:
Accounts
receivable,
net (11,386) (9,054) (14,022) (3,257) (31,937) (28,020)
Prepaid
expenses and
other
current
assets (3,584) (2,192) (3,249) (495) (11,209) (8,062)
Accounts
payable,
accrued
expenses and
other
current
liabilities (8,837) 10,975 (3,137) 12,097 (12,965) 15,382
Accrued re-
structuring (177) (1,049) (464) (458) (2,722) (1,970)
Deferred
revenue 1,324 859 (759) (937) 5,297 343
Other
noncurrent
assets and
liabilities 1,179 1,479 310 (44) 3,874 66
------------------------------------------------------
Net cash
provided by
operating
activities 71,157 76,113 22,570 48,490 235,389 131,967
------------------------------------------------------
Cash flows from
investing
activities:
Business
acquisitions,
net of cash
acquired - - (5,127) - 7,875 (5,127)
Purchases of
property and
equipment and
capital-
ization of
internal-use
software
costs (15,916) (23,326) (22,476)(16,451)(100,477) (69,328)
Proceeds from
sales and
maturities of
investments 166,353 93,335 79,075 65,501 415,771 264,308
Purchase of
investments (241,788)(102,716)(116,164)(87,778)(550,614)(395,871)
Proceeds from
sale of
property and
equipment 6 9 - - 15 -
Decrease in
restricted
investments
held for
security
deposits - 723 - - 723 400
------------------------------------------------------
Net cash used
in investing
activities (91,345) (31,975) (64,692)(38,728)(266,707)(205,618)
------------------------------------------------------
Cash flows from
financing
activities:
Proceeds from
the issuance
of common
stock under
stock option
and employee
stock
purchase
plans 9,035 4,835 9,267 7,186 31,621 27,918
Excess tax
benefits from
stock-related
compensation 2,551 2,338 12,910 8,735 20,862 32,511
Payments on
capital
leases - - - - (23) -
------------------------------------------------------
Net cash
provided by
financing
activities 11,586 7,173 22,177 15,921 52,460 60,429
------------------------------------------------------
Effects of
exchange rate
translation on
cash and cash
equivalents 876 1,331 1,417 (62) 3,341 2,025
------------------------------------------------------
Net (decrease)
increase in
cash and cash
equivalents (7,726) 52,642 (18,528) 25,621 64,483 (11,197)
Cash and cash
equivalents,
beginning of
period 152,804 100,162 99,123 73,502 80,595 91,792
------------------------------------------------------
Cash and cash
equivalents,
end of period $145,078 $152,804 $80,595 $99,123 $145,078 $80,595
======================================================
*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 changes 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 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 makes 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-related compensation expense, amortization of capitalized stock-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, foreign exchange gains and losses, loss on early extinguishment of debt, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. 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 expense, or do not require a cash outlay, such as stock-related 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 historic 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 Adjusted EBITDA as a percentage of revenues. Akamai considers Adjusted EBITDA margin to be an indicator of the Company's operating trends 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-related compensation. Capital expenditures or capex are disclosed in Akamai's condensed 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 intangible assets, stock-related compensation expense, amortization of capitalized stock-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, loss on early extinguishment of debt, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. 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 "diluted shares used in normalized net income per share calculation" as diluted common shares outstanding used in GAAP net income per share calculation, excluding the effect of FAS 123R under the treasury stock method. Akamai considers normalized net income to be another important indicator of overall performance of the Company because it eliminates the effect of a non-cash item.
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 Twelve Months
Ended
Dec. Sept. Dec. Sept. Dec. 31, Dec. 31,
31, 30, 31, 30,
2007 2007 2006 2006 2007 2006
------- ------- ------- ------- -------- --------
Net income $35,878 $24,264 $20,623 $14,019 $100,967 $57,401
Amortization of
intangible assets 2,835 2,835 2,047 1,943 11,414 8,484
Stock-related
compensation 15,608 16,909 14,792 14,514 66,555 49,568
Amortization of
capitalized stock-
related compensation 703 537 136 129 1,829 298
Gain on investments,
net (23) (1) (2) - (24) (261)
Utilization of tax
NOLs/credits 20,898 17,833 9,924 11,154 63,869 39,020
Loss on early
extinguishment of
debt - 2 - - 3 -
Restructuring benefit - - - - (178) -
------- ------- ------- ------- -------- --------
Total normalized net
income: 75,899 62,379 47,520 41,759 244,435 154,510
Interest income, net (6,841) (5,913) (4,567) (3,970) (22,729) (14,532)
Provision for income
taxes 1,164 859 782 110 3,369 2,048
Depreciation and
amortization 16,688 15,870 9,619 8,450 58,651 31,802
Other (income)
expense, net (30) (1,273) (357) 448 (527) (570)
------- ------- ------- ------- -------- --------
Total Adjusted
EBITDA: $86,880 $71,922 $52,997 $46,797 $283,199 $173,258
======= ======= ======= ======= ======== ========
Normalized net income
per share:
Basic $0.46 $0.38 $0.30 $0.27 $1.50 $0.99
Diluted $0.41 $0.34 $0.27 $0.24 $1.32 $0.88
Shares used in
normalized per share
calculations:
Basic 164,768 165,474 157,206 155,739 162,959 155,366
Diluted 186,674 186,767 181,332 179,563 186,709 179,470
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 concerning the expected growth and development of our business and expectations with respect to revenue. 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 to maintain the prices we charge for our services, unexpected increases in Akamai's use of funds, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai's services or network infrastructure, inability to realize the benefits of our net operating loss carryforward, 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, unexpected expenses associated with the integration of Nine Systems, 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.
CONTACT: Akamai Technologies
Jeff Young, 617-444-3913
Media Relations
jyoung@akamai.com
or
Akamai Technologies
Sandy Smith, 617-444-2804
Investor Relations
ssmith@akamai.com
SOURCE: Akamai Technologies