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Akamai Reports Third Quarter 2018 Financial Results
Record revenue of $670 million, up 7% year-over-year and up 8% when adjusted for foreign exchange*
Cloud Security Solutions revenue grew 37%, now nearly $700 million annualized run rate
GAAP EPS of $0.64, up 73% year-over-year, and non-GAAP EPS of $0.94, up 47% year-over-year
Board of Directors authorizes a new multi-year $1.1 billion share repurchase program

CAMBRIDGE, Mass., Oct. 29, 2018 /PRNewswire/ -- Akamai (NASDAQ: AKAM), the intelligent edge platform for securing and delivering digital experiences, today reported financial results for the third quarter ended September 30, 2018.

(PRNewsfoto/Akamai Technologies, Inc.)

"We are very pleased with our excellent results in the third quarter, which includes 37% year-over-year growth in our security business and tremendous growth in our earnings," said Dr. Tom Leighton, Chief Executive Officer.  "We are also pleased to report our fourth consecutive quarter of non-GAAP operating margin improvement.  We are well on our way to achieving our 30% margin goal in 2020, while continuing to invest in innovation and new products to drive future growth."

Revenue: Revenue was $670 million, a 7% increase over third quarter 2017 revenue of $624 million and an 8% increase when adjusted for foreign exchange.*

Revenue by Division(1):

  • Web Division revenue was $357 million, up 8% year-over-year and up 9% when adjusted for foreign exchange*
  • Media and Carrier Division revenue was $313 million, up 6% year-over-year and up 7% when adjusted for foreign exchange*

Revenue from Cloud Security Solutions(2):

  • Cloud Security Solutions revenue was $169 million, up 37% year-over-year and up 39% when adjusted for foreign exchange*

Revenue from Internet Platform Customers(3):

  • Revenue from Internet Platform Customers was $43 million, down 15% year-over-year and when adjusted for foreign exchange*
  • Revenue excluding Internet Platform Customers was $627 million, up 9% year-over-year and up 10% when adjusted for foreign exchange*

Revenue by Geography:

  • U.S. revenue was $413 million, consistent year-over-year
  • International revenue was $257 million, up 21% year-over-year and up 24% when adjusted for foreign exchange*

Income from operations: GAAP income from operations was $117 million, a 28% increase from third quarter 2017. GAAP operating margin for the third quarter was 17%, up 2 percentage points from the same period last year.

Non-GAAP income from operations* was $181 million, a 23% increase from third quarter 2017. Non-GAAP operating margin* for the third quarter was 27%, up 3 percentage points from the same period last year.

Net income: GAAP net income was $108 million, a 68% increase from third quarter 2017. Non-GAAP net income* was $158 million, a 43% increase from third quarter 2017.

EPS: GAAP EPS was $0.64 per diluted share, a 73% increase from third quarter 2017 and a 75% increase when adjusted for foreign exchange.*  Non-GAAP EPS was $0.94 per diluted share, a 47% increase from third quarter 2017 and a 48% increase when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA was $273 million, an 18% increase from third quarter 2017. Adjusted EBITDA margin* was 41%, an increase of 4 percentage points as compared to the third quarter of 2017.

Other third quarter 2018 results:

  • Cash from operations was $310 million, or 46% of revenue
  • Cash, cash equivalents and marketable securities was $2.1 billion as of September 30, 2018
  • The Company spent $440 million to repurchase 5.9 million shares of its common stock at an average price of $74.71 per share
  • The Company had approximately 164 million shares of common stock outstanding as of September 30, 2018

Share Repurchase Program: The Company also announces today that its Board of Directors has authorized a new $1.1 billion share repurchase program, effective from November 1, 2018 through December 31, 2021, which is in addition to $124 million remaining on its prior authorization. The Company's goal for the new program is to continue to return to shareholders a significant percentage of Akamai's free cash flow while preserving its flexibility for other strategic opportunities.

The timing and amount of any shares repurchased will be determined by the Company's management based upon the evaluation of market conditions and other factors. Repurchases will be executed in the open market subject to Rule 10b-18, and 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. Other structured repurchase programs may be considered from time to time. The Company may choose to suspend, expand or discontinue the repurchase program at any time.

Adoption of new revenue recognition standard: Prior period results have been revised for the adoption of the new revenue recognition standard.  Under this standard, the way revenue is recognized changed for some of Akamai's customers and primarily impacts the revenue timing of a small number of licensed software customers.  The way Akamai recognizes revenue for its core Web and Media products is substantially unchanged.  Akamai will also begin capitalizing certain commission and incentive payments.  The revisions as a result of the new standard did not have a material impact on Akamai's annual revenue or results of operations, but did cause quarter-to-quarter fluctuations.  For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

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

(1)

Revenue by Division – A customer-focused reporting view that reflects revenue from customers that are managed by the division. As of January 1, 2018, Akamai now reports its revenue in two divisions compared to the three divisions reported in 2017; the Media Division and Enterprise and Carrier Division were combined to form the new Media and Carrier Division. In addition, as the purchasing patterns and required account expertise of customers changes over time, Akamai may reassign a customer's division from one to another. In 2018 Akamai reassigned some of its customers from the Media and Carrier Division to the Web Division and revised historical results in order to reflect the most recent categorization and to provide a comparable view for all periods presented.



(2)

Revenue from Cloud Security Solutions – A product-focused reporting view that illustrates revenue from Cloud Security Solutions separately from all other solution categories.  During 2018, Akamai updated its methodology for allocating revenue to specific solutions when solutions are sold as a bundle.  During 2018, Akamai reassigned amounts from CDN and other solutions revenue to Cloud Security Solutions revenue and revised historical results in order to reflect the most recent allocation methodologies and to provide a comparable view for all periods presented.



(3)

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

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 8889239. 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 8889239. The archived webcast of this event may be accessed through the Akamai website.

About Akamai
Akamai secures and delivers digital experiences for the world's largest companies. Akamai's intelligent edge platform surrounds everything, from the enterprise to the cloud, so customers and their businesses can be fast, smart, and secure. Top brands globally rely on Akamai to help them realize competitive advantage through agile solutions that extend the power of their multi-cloud architectures. Akamai keeps decisions, apps and experiences closer to users than anyone - and attacks and threats far away. Akamai's portfolio of edge security, web and mobile performance, enterprise access and video delivery solutions is supported by unmatched customer service, analytics and 24/7/365 monitoring. To learn why the world's top brands trust Akamai, visit www.akamai.com, blogs.akamai.com, or @Akamai on Twitter.


 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS



(in thousands)

September 30,
 2018


December 31,
2017 (1)

ASSETS




Current assets:




Cash and cash equivalents

$

705,407



$

313,382


Marketable securities

1,096,233



398,554


Accounts receivable, net

466,364



461,457


Prepaid expenses and other current assets

161,785



172,853


Total current assets

2,429,789



1,346,246


Property and equipment, net

884,483



862,535


Marketable securities

257,135



567,592


Goodwill

1,488,868



1,498,688


Acquired intangible assets, net

176,640



201,259


Deferred income tax assets

23,688



36,231


Other assets

103,284



136,365


Total assets

$

5,363,887



$

4,648,916


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

96,051



$

80,278


Accrued expenses

305,267



283,743


Deferred revenue

93,732



70,495


Convertible senior notes

680,564




Other current liabilities

20,324



22,178


Total current liabilities

1,195,938



456,694


Deferred revenue

5,218



6,062


Deferred income tax liabilities

18,827



17,823


Convertible senior notes

864,679



662,913


Other liabilities

123,695



142,955


Total liabilities

2,208,357



1,286,447


Total stockholders' equity

3,155,530



3,362,469


Total liabilities and stockholders' equity

$

5,363,887



$

4,648,916



(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

 

 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME




Three Months Ended


Nine Months Ended

(in thousands, except per share data)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Revenue

$

669,628



$

662,759



$

624,440



$

2,001,111



$

1,830,565


Costs and operating expenses:










Cost of revenue(2) (3)

239,246



235,487



225,490



709,558



645,897


Research and development(2)

61,049



59,709



57,226



185,823



162,761


Sales and marketing(2)

125,323



131,680



117,863



379,556



350,299


General and administrative(2) (3)

119,911



170,206



124,523



444,502



363,050


Amortization of acquired intangible assets

8,294



8,294



7,753



25,019



23,075


Restructuring (benefit) charges

(732)



266



332



14,442



3,303


Total costs and operating expenses

553,091



605,642



533,187



1,758,900



1,548,385


Income from operations

116,537



57,117



91,253



242,211



282,180


Interest income

9,258



6,409



4,463



19,632



13,368


Interest expense

(14,566)



(9,204)



(4,746)



(28,620)



(13,989)


Other (expense) income, net

(459)



(2,769)



535



(3,207)



414


Income before provision for income taxes

110,770



51,553



91,505



230,016



281,973


Provision for income taxes

3,187



8,492



27,594



25,658



86,727


Net income

$

107,583



$

43,061



$

63,911



$

204,358



$

195,246












Net income per share:










Basic

$

0.65



$

0.25



$

0.37



$

1.21



$

1.13


Diluted

$

0.64



$

0.25



$

0.37



$

1.20



$

1.13












Shares used in per share calculations:










Basic

165,924



170,250



170,976



168,763



172,269


Diluted

167,900



172,307



171,505



170,732



173,371



(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

(2)

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

(3)

Includes depreciation and amortization (see supplemental table for figures)

 

 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Cash flows from operating activities:










Net income

$

107,583



$

43,061



$

63,911



$

204,358



$

195,246


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










Depreciation and amortization

107,833



106,298



97,178



318,226



272,917


Stock-based compensation

46,632



47,497



41,848



138,815



122,103


(Benefit) provision for deferred income
taxes

25,022



(4,302)



(12,089)



12,906



23,134


Amortization of debt discount and issuance
costs

14,085



8,909



4,746



27,844



13,989


Restructuring-related software charges







2,818




Other non-cash reconciling items, net

1,345



3,636



2,046



9,360



3,655


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










Accounts receivable

3,278



1,530



(5,158)



(13,611)



(9,423)


Prepaid expenses and other current
assets

(10,662)



13,505



14,644



(2,084)



(36,580)


Accounts payable and accrued expenses

35,012



4,221



39,691



7,921



22,150


Deferred revenue

(5,625)



4,309



(8,283)



23,927



1,528


Other current liabilities

(3,625)



(8,046)



(2,250)



2,030



3,651


Other non-current assets and liabilities

(10,397)



(937)



7



(10,338)



(8,828)


Net cash provided by operating
activities

310,481



219,681



236,291



722,172



603,542


Cash flows from investing activities:










Cash paid for acquired businesses, net of cash
acquired







(79)



(197,201)


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

(86,698)



(88,634)



(119,740)



(288,407)



(307,926)


Purchases of short- and long-term marketable
securities

(314,200)



(394,534)



(67,879)



(782,086)



(249,098)


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

254,450



64,830



85,263



395,016



498,379


Other non-current assets and liabilities

(2,199)



236



(23)



(2,678)



(1,166)


Net cash used in investing activities

(148,647)



(418,102)



(102,379)



(678,234)



(257,012)


 

 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Cash flows from financing activities:










Proceeds from the issuance of convertible
senior notes

(437)



1,132,622





1,132,185




Proceeds from the issuance of warrants



119,945





119,945




Purchase of note hedge related to convertible
senior notes



(261,740)





(261,740)




Proceeds from the issuance of common stock
under stock plans

18,394



11,365



16,060



52,497



41,740


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

(10,837)



(11,594)



(6,784)



(52,145)



(48,122)


Repurchases of common stock

(440,413)



(165,727)



(129,014)



(625,925)



(306,629)


Other non-current assets and liabilities

(241)



(944)





(5,085)



(1,096)


Net cash (used in) provided by
financing activities

(433,534)



823,927



(119,738)



359,732



(314,107)


Effects of exchange rate changes on cash, cash
equivalents and restricted cash

(68)



(12,625)



2,107



(11,528)



12,359


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

(271,768)



612,881



16,281



392,142



44,782


Cash, cash equivalents and restricted cash at
beginning of period

978,339



365,458



353,127



314,429



324,626


Cash, cash equivalents and restricted cash at end 
period

$

706,571



$

978,339



$

369,408



$

706,571



$

369,408



(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.




On January 1, 2018, Akamai also adopted Accounting Standards Update No. 2016-18, Statement of Cash Flows. Under this standard, restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period cash on the statement of cash flows. Akamai retrospectively adopted this standard and revised cash flows from investing activities by $0.6 million and $0.7 million for the three and nine months ended September 30, 2017, respectively, with a corresponding revision to the net (decrease) increase in cash, cash equivalents and restricted cash.

 

 

AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA – REVENUE BY DIVISION



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Web Division

$

356,856



$

351,084



$

329,684



$

1,060,777



$

950,580


Media and Carrier Division

312,772



311,675



294,756



940,334



879,985


Total revenue

$

669,628



$

662,759



$

624,440



$

2,001,111



$

1,830,565


Revenue growth rates year-over-year:










Web Division

8

%


11

%


14

%


12

%


14

%

Media and Carrier Division

6



8



(4)



7



(3)


Total revenue

7

%


9

%


5

%


9

%


5

%

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










Web Division

9

%


9

%


14

%


10

%


15

%

Media and Carrier Division

7



7



(4)



6



(2)


Total revenue

8

%


8

%


5

%


8

%


6

%

 

AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA – REVENUE FROM CLOUD SECURITY SOLUTIONS



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Cloud Security Solutions

$

168,626



$

155,250



$

122,899



$

473,081



$

349,681


CDN and other solutions

501,002



507,509



501,541



1,528,030



1,480,884


Total revenue

$

669,628



$

662,759



$

624,440



$

2,001,111



$

1,830,565












Revenue growth rates year-over-year:










Cloud Security Solutions

37

%


33

%


26

%


35

%


31

%

CDN and other solutions



4



1



3



1


Total revenue

7

%


9

%


5

%


9

%


5

%

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










Cloud Security Solutions

39

%


31

%


26

%


34

%


31

%

CDN and other solutions

1



3



1



2



1


Total revenue

8

%


8

%


5

%


8

%


6

%


(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

(2)

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

 

 

AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA – REVENUE FROM INTERNET PLATFORM CUSTOMERS



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

Revenue from Internet Platform Customers

$

43,086



$

44,062



$

50,734



$

131,539



$

153,291


Revenue excluding Internet Platform Customers

626,542



618,697



573,706



1,869,572



1,677,274


Total revenue

$

669,628



$

662,759



$

624,440



$

2,001,111



$

1,830,565


Revenue growth rates year-over-year:










Revenue from Internet Platform Customers

(15)

%


(14)

%


(13)

%


(14)

%


(20)

%

Revenue excluding Internet Platform Customers

9



12



7



11



9


Total revenue

7

%


9

%


5

%


9

%


5

%

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










Revenue from Internet Platform Customers

(15)

%


(14)

%


(13)

 

%


(14)

%


(20)

%

Revenue excluding Internet Platform Customers

10



10



7



10



9


Total revenue

8

%


8

%


5

%


8

%


6

%

 

AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL REVENUE DATA – REVENUE BY GEOGRAPHY



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

U.S.

$

412,573



$

413,129



$

412,348



$

1,249,041



$

1,211,454


International

257,055



249,630



212,092



752,070



619,111


Total revenue

$

669,628



$

662,759



$

624,440



$

2,001,111



$

1,830,565


Revenue growth rates year-over-year:










U.S.

%


3

%


(1)

%


3

%


%

International

21



21



18



21



17


Total revenue

7

%


9

%


5

%


9

%


5

%

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










U.S.

%


3

%


(1)

%


3

%


%

International

24



18



18



18



19


Total revenue

8

%


8

%


5

%


8

%


6

%


(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

(2)

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

 

 

AKAMAI TECHNOLOGIES, INC.
SUPPLEMENTAL OPERATING EXPENSE DATA



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017


September
30, 2018


September
30, 2017

General and administrative expenses:










Payroll and related costs

$

46,866



$

46,874



$

51,605



$

145,634



$

144,012


Stock-based compensation

13,054



14,269



10,780



40,245



33,525


Depreciation and amortization

18,646



21,207



19,686



59,741



56,283


Facilities-related costs

21,567



20,529



20,399



63,891



59,381


Provision for doubtful accounts

652



420



1,499



1,593



2,404


Acquisition-related costs

329



500



773



1,972



4,803


Legal and stockholder matter costs







23,091




License of patent

(4,310)



(4,266)



(4,128)



(12,791)



(12,252)


Endowment of Akamai Foundation



50,000





50,000




Professional fees and other expenses

23,107



20,673



23,909



71,126



74,894


Total general and administrative expenses

$

119,911



$

170,206



$

124,523



$

444,502



$

363,050












General and administrative expenses–functional(1):










Global functions

$

46,680



$

47,497



$

50,355



$

149,830



$

148,721


As a percentage of revenue

7

%


7

%


8

%


7

%


8

%

Infrastructure

74,009



76,055



76,267



228,256



220,799


As a percentage of revenue

11

%


11

%


12

%


11

%


12

%

Other

(778)



46,654



(2,099)



66,416



(6,470)


Total general and administrative expenses

$

119,911



$

170,206



$

124,523



$

444,502



$

363,050


As a percentage of revenue

18

%


26

%


20

%


22

%


20

%











Stock-based compensation:










Cost of revenue

$

5,494



$

5,553



$

5,296



$

16,343



$

15,055


Research and development

11,249



10,926



10,100



32,684



28,743


Sales and marketing

16,835



16,749



15,672



49,543



44,780


General and administrative

13,054



14,269



10,780



40,245



33,525


Total stock-based compensation

$

46,632



$

47,497



$

41,848



$

138,815



$

122,103



(1)

Global functions expense includes payroll, stock-based compensation and other employee-related costs for administrative functions, including finance, purchasing, order entry, human resources, legal, information technology and executive personnel, as well as third-party professional service fees. Infrastructure expense includes payroll, stock-based compensation and other employee-related costs for our network infrastructure functions, as well as facility rent expense, depreciation and amortization of facility and IT-related assets, software and software-related costs, business insurance and taxes. Our network infrastructure function is responsible for network planning, sourcing, architecture evaluation and platform security. Other expense includes acquisition-related costs, provision for doubtful accounts, the license of a patent, legal and stockholder matter costs and the endowment of the Akamai Foundation and transformation costs.

 

 

AKAMAI TECHNOLOGIES, INC.
OTHER SUPPLEMENTAL DATA



Three Months Ended


Nine Months Ended

(in thousands, except end of period statistics)

September
30, 2018


June 30,
2018


September
30, 2017


September
30, 2018


September
30, 2017

Depreciation and amortization:










Network-related depreciation

$

36,883



$

37,748



$

35,943



$

112,866



$

106,601


Capitalized internal-use software development
amortization

36,822



32,822



28,426



101,312



73,782


Other depreciation and amortization

18,259



20,837



19,320



58,594



55,256


Depreciation of property and equipment

91,964



91,407



83,689



272,772



235,639


Capitalized stock-based compensation
amortization

6,647



5,846



5,046



18,062



12,489


Capitalized interest expense amortization

928



751



690



2,373



1,714


Amortization of acquired intangible assets

8,294



8,294



7,753



25,019



23,075


Total depreciation and amortization

$

107,833



$

106,298



$

97,178



$

318,226



$

272,917












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










Purchases of property and equipment

$

76,070



$

52,815



$

62,755



$

155,482



$

183,777


Capitalized internal-use software development
costs

49,122



49,028



45,213



147,407



123,255


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

$

125,192



$

101,843



$

107,968



$

302,889



$

307,032












End of period statistics:










Number of employees

7,574



7,443



7,438







(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 AND NET INCOME



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017


September
30, 2018


September
30, 2017

Income from operations

$

116,537



$

57,117



$

91,253



$

242,211



$

282,180


GAAP operating margin

17

%


9

%


15

%


12

%


15

%

Amortization of acquired intangible assets

8,294



8,294



7,753



25,019



23,075


Stock-based compensation

46,632



47,497



41,848



138,815



122,103


Amortization of capitalized stock-based
compensation and capitalized interest expense

7,575



6,597



5,736



20,435



14,203


Restructuring (benefit) charges

(732)



266



332



14,442



3,303


Acquisition-related costs

329



500



530



1,972



3,379


Legal and stockholder matter costs







23,091




Endowment of Akamai Foundation



50,000





50,000




Transformation costs

2,552







2,552




Operating adjustments

64,650



113,154



56,199



276,326



166,063


Non-GAAP income from operations

$

181,187



$

170,271



$

147,452



$

518,537



$

448,243


Non-GAAP operating margin

27

%


26

%


24

%


26

%


24

%











Net income

$

107,583



$

43,061



$

63,911



$

204,358



$

195,246


Operating adjustments (from above)

64,650



113,154



56,199



276,326



166,063


Amortization of debt discount and issuance costs

14,085



8,909



4,746



27,844



13,989


(Gain) loss on investments

(519)



2,000





1,481




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

(27,958)



(24,191)



(14,802)



(73,432)



(44,243)


Non-GAAP net income

$

157,841



$

142,933



$

110,054



$

436,577



$

331,055



(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

 

 

AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE



Three Months Ended


Nine Months Ended

(in thousands)

September
30, 2018


June 30,
2018


September
30, 2017 (1)


September
30, 2018


September
30, 2017 (1)

GAAP net income per diluted share

$

0.64



$

0.25



$

0.37



$

1.20



$

1.13


Amortization of acquired intangible assets

0.05



0.05



0.05



0.15



0.13


Stock-based compensation

0.28



0.28



0.24



0.81



0.70


Amortization of capitalized stock-based
compensation and capitalized interest expense

0.05



0.04



0.03



0.12



0.08


Restructuring (benefit) charges







0.08



0.02


Acquisition-related costs







0.01



0.02


Legal and stockholder matter costs







0.14




Endowment of Akamai Foundation



0.29





0.29




Transformation costs

0.02







0.01




Amortization of debt discount and issuance costs

0.08



0.05



0.03



0.16



0.08


(Gain) loss on investments



0.01





0.01




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

(0.17)



(0.14)



(0.09)



(0.43)



(0.26)


Non-GAAP net income per diluted share

$

0.94



$

0.83



$

0.64



$

2.56



$

1.91












Shares used in diluted per share calculations

167,900



172,307



171,505



170,732



173,371



(1)

Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers.  Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically certain commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com.

 

 

AKAMAI TECHNOLOGIES, INC.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA



Three Months Ended


Nine Months Ended

(in thousands, except per share data)

September
30, 2018


June 30,
2018


September
30, 2017


September
30, 2018


September
30, 2017 (1)

Net income

$

107,583



$

43,061



63,911



204,358



$

195,246


Interest income

(9,258)



(6,409)



(4,463)



(19,632)



(13,368)


Provision for income taxes

3,187



8,492



27,594



25,658



86,727


Depreciation and amortization

91,964



91,407



83,689



272,772



235,639


Amortization of capitalized stock-based
compensation and capitalized interest expense

7,575



6,597



5,736



20,435



14,203


Amortization of acquired intangible assets

8,294



8,294



7,753



25,019



23,075


Stock-based compensation

46,632



47,497



41,848



138,815



122,103


Restructuring (benefit) charges

(732)



266



332



14,442



3,303


Acquisition-related costs

329



500



530



1,972



3,379


Legal and stockholder matter costs







23,091




Endowment of Akamai Foundation



50,000





50,000




Transformation costs

2,552







2,552