SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Date of report: April 30, 2003
AKAMAI TECHNOLOGIES, INC.
Delaware | 0-27275 | 04-3432319 | ||
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
8 Cambridge Center, Cambridge, Massachusetts 02142
Registrants telephone number, including area code: (617) 444-3000
Item 9. Regulation FD Disclosure (Information furnished pursuant to Item 12, Disclosure of Results of Operations and Financial Condition). | ||||||||
SIGNATURE | ||||||||
EX-99.1 PRESS RELEASE DATED 04-30-03 |
Item 9. Regulation FD Disclosure (Information furnished pursuant to Item 12, Disclosure of Results of Operations and Financial Condition).
On April 30, 2003, Akamai Technologies, Inc. announced its financial results for the quarter ended March 31, 2003. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.
In accordance with the procedural guidance in SEC Release No. 33-8216, the information in this Form 8-K and the Exhibit attached hereto is being furnished under Item 9. Regulation FD Disclosure rather than under Item 12. Disclosure of Results of Operations and Financial Condition. The information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing. The information in this Form 8-K and the Exhibit attached hereto is also being furnished under Item 9. Regulation FD Disclosure.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: April 30, 2003 | AKAMAI TECHNOLOGIES, INC. | |||
By: | /s/ Robert Cobuzzi | |||
Robert Cobuzzi, Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release dated April 30, 2003 |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts: Jeff Young |
J.C. Raby | |||
Media Relations | Investor Relations | |||
Akamai Technologies | Akamai Technologies | |||
617-444-3913 | 617-444-2555 | |||
jyoung@akamai.com | or | jraby@akamai.com |
AKAMAI REPORTS FIRST QUARTER 2003 RESULTS
| First quarter revenue grows to $36.6 million; net loss narrows to $0.07 per share | ||
| Total EdgeSuite® customers increased by 77 to 346 | ||
| EdgeSuite sales account for over 50 percent of total revenue | ||
| Cash and cash equivalents, restricted cash and marketable securities of $109.9 million at quarter end |
CAMBRIDGE, Mass. April 30, 2003 Akamai Technologies, Inc. (NASDAQ: AKAM), a provider of services that enable the worlds leading enterprises and government agencies to extend and control their e-business infrastructure, today reported financial results for the first quarter ended March 31, 2003. Revenue for first quarter 2003 was $36.6 million, a 3.4 percent growth quarter-to-quarter the first sequential quarterly revenue growth in a year.
Net loss, in accordance with United States generally accepted accounting principles (GAAP) for first quarter 2003 was $8.6 million, or negative $0.07 per share, compared to a net loss for the fourth quarter 2002 of $55.6 million, or negative $0.48 per share.
Normalized net loss* for first quarter 2003 was $13.3 million, or negative $0.11 per share, compared to normalized net loss for the prior quarter of $20.1 million, or negative $0.17 per share, and First Calls consensus summary net loss of $0.15 per share. (* See Use of Non-GAAP Financial Measures for definitions.)
EBITDA* for the first quarter was $6.3 million, up from $1.3 million in the prior quarter. (* See Use of Non-GAAP Financial Measures for definitions.)
We believe our first quarter results clearly demonstrate the steady improvement in our underlying business fundamentals, including the benefit of our company-wide effort to grow and improve the quality of our customer base, and to operate the business on a more cost effective structure, said George Conrades, chairman and CEO of Akamai.
Included in the quarterly results is the impact of agreements and anticipated agreements to restructure all of Akamais domestic impaired lease obligations, resulting in average annual cash
savings of approximately $8 million from 2004 through 2010. In restructuring the agreements, Akamai expects to eliminate approximately $50 million in net long-term lease obligations by agreeing to make one time cash payments totaling $15 million, which includes $7 million of restricted cash and long-term deposits. As a result of the expected settlements, net loss for the first quarter includes a one-time benefit of $9.8 million.
We are taking the necessary steps to align our cost structure with todays reality and to position the company to take full advantage of the expanding market opportunity for our services, said Robert Cobuzzi, chief financial officer, Akamai. For the second consecutive quarter, we reduced the rate at which we consumed cash, ending the quarter with $109.9 million in cash and cash equivalents, restricted cash and marketable securities. As a result, including the payments we expect to make in the second quarter to restructure real estate, we believe we are well-positioned to reach our goal of generating positive free cash flow* by year end. (* See Use of Non-GAAP Financial Measures for definitions.)
At March 31, 2003, the Company had 117.8 million shares of common stock outstanding. At March 31, 2003, common stock outstanding and unexercised stock options and warrants totaled 133.5 million shares.
Customers
At the end of the first quarter of 2003, Akamai had 346 EdgeSuite customers under recurring contract, compared to 269 at the end of the previous quarter, and up from 187 EdgeSuite clients at the end of first quarter of 2002. New EdgeSuite customers in the first quarter included Accenture plc, Australian Broadcasting Corporation, BMW Japan, Canadian Broadcasting Corporation, Chicago Sun-Times, Cirque Du Soleil, Inc., E.W. Scripps Company, Home Office Communication Directorate (United Kingdom), John Wiley & Sons, LOréal, Lycos Asia, Norman Data Defense, Thomson Financial, among others. Resellers accounted for approximately 24 percent of first quarter revenue, as compared to approximately 26 percent in the fourth quarter of 2002.
The market for our services is expanding, as evidenced by the dramatic increase in EdgeSuite accounts, as well as by our growing penetration of key verticals. EdgeSuite customers grew by 77 this quarter for an increase of almost 30 percent over the prior quarter. In addition, our total recurring customer count grew four percent to 994, said Conrades.
Network
The size, scale and functionality of Akamais underlying global network remains key to the value proposition of all Akamai services. Akamais global network at the end of the first quarter consisted of 15,307 servers in 1,134 networks, within 68 countries. This deployment has increased from 13,622 servers in 1,135 networks within 65 countries at the end of 2002. The geographic reach and capacity of Akamais network is unprecedented in its ability to serve the needs of enterprise customers, government agencies and major Web-centric businesses.
Use of Non-GAAP Financial Measures
The Company has historically provided financial metrics, some of which are based on GAAP and others that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes encourage the use of GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.
Akamai defines EBITDA as net loss, before interest, taxes, depreciation, amortization, equity-related compensation, restructuring charges and benefits, and certain gains and losses on equity investments. Akamai considers EBITDA to be an important indicator of the Companys operational strength and performance of its business and provides a good measure of the Companys historical operating trend. EBITDA eliminates items which are either not part of the Companys core operations, such as investment gains and losses and net interest expense, do not require a cash outlay, such as equity-related compensation and impairment of intangible assets, or vary widely from quarter to quarter, such as restructuring activities. EBITDA also eliminates depreciation expense, which is based on the Companys estimate of a capital assets useful life. These estimates could vary from actual performance of the asset and are based on historic cost incurred to build out the Companys deployed network and may not be indicative of current or future capital expenditures.
Akamai defines normalized net loss as net loss before amortization, equity-related compensation, restructuring charges and benefits, and certain gains and losses on equity investments. Akamai considers normalized net loss 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 Companys core operations or non-cash.
Akamai defines Free Cash Flow as the net change in cash and cash equivalents, restricted cash and marketable securities quarter-over-quarter. Akamai considers Free Cash Flow to be an important indicator of the Companys ability to generate cash to maintain operations, service its debt and make strategic investments.
EBITDA, Free Cash Flow and normalized net loss should be considered in addition to, not as a substitute for, the Companys operating loss, net loss, and various cash flow measures (e.g., cash used in operations), as well as other measures of financial performance reported in accordance with generally accepted accounting principles.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G, the Company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial metrics to the comparable GAAP measures.
Reconciliation of GAAP net loss
to normalized net loss and
EBITDA: (dollar amounts in thousands)
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2003 | 2002 | 2002 | ||||||||||
Net loss |
$ | (8,647 | ) | $ | (55,604 | ) | $ | (59,058 | ) | |||
Amortization of intangible assets |
2,198 | 2,231 | 5,237 | |||||||||
Equity-related compensation |
2,971 | 5,562 | 6,371 | |||||||||
Restructuring charges |
(9,820 | ) | 26,675 | 12,409 | ||||||||
Loss (gain) on investments, net |
15 | (299 | ) | 4,328 | ||||||||
Amortization of CNN advertising |
| 1,371 | 1,246 | |||||||||
Total normalized net loss |
(13,283 | ) | (20,064 | ) | (29,467 | ) | ||||||
Interest expense, net |
4,228 | 4,053 | 3,574 | |||||||||
Provision for income taxes |
73 | 123 | 123 | |||||||||
Depreciation |
15,248 | 17,141 | 20,010 | |||||||||
Total EBITDA |
$ | 6,266 | $ | 1,253 | $ | (5,760 | ) | |||||
Weighted-average common shares
outstanding |
116,398 | 114,866 | 109,693 | |||||||||
Normalized net loss per share |
$ | (0.11 | ) | $ | (0.17 | ) | $ | (0.27 | ) |
Net increase (decrease) in cash and cash equivalents as reported on the consolidated statements of cash flow, which are prepared in accordance with GAAP is the financial measure most directly comparable to Free Cash Flow. This measure is not accessible on a forward-looking basis because it would include estimates that cannot be reasonably forecasted. These estimates include future changes in the balance of marketable securities and restricted cash, which may be significant.
Akamai Technologies, Inc.
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
March 31, 2003 | December 31, 2002 | |||||||||||
Assets |
||||||||||||
Cash and cash equivalents |
$ | 98,632 | $ | 111,262 | ||||||||
Restricted cash and marketable securities |
8,099 | 3,664 | ||||||||||
Accounts receivable, net |
21,066 | 17,574 | ||||||||||
Prepaid expenses and other current assets |
6,933 | 9,183 | ||||||||||
Current assets: |
134,730 | 141,683 | ||||||||||
Restricted cash |
3,211 | 10,244 | ||||||||||
Property and equipment, net |
49,965 | 63,159 | ||||||||||
Goodwill and other intangible assets, net |
5,212 | 7,410 | ||||||||||
Other assets |
6,406 | 7,367 | ||||||||||
Total assets |
$ | 199,524 | $ | 229,863 | ||||||||
Liabilities and stockholders deficit |
||||||||||||
Accounts payable and accrued expenses |
$ | 40,962 | $ | 53,909 | ||||||||
Other current liabilities |
25,207 | 27,190 | ||||||||||
Current liabilities: |
66,169 | 81,099 | ||||||||||
Other liabilities |
6,908 | 16,854 | ||||||||||
Convertible notes |
300,000 | 300,000 | ||||||||||
Total liabilities |
373,077 | 397,953 | ||||||||||
Stockholders deficit |
(173,553 | ) | (168,090 | ) | ||||||||
Total liabilities and stockholders deficit |
$ | 199,524 | $ | 229,863 | ||||||||
Akamai Technologies, Inc.
Condensed Consolidated Statements of Operations
(dollar amounts in thousands, except per share data)
(unaudited)
Three Months Ended | |||||||||||||||
March 31, | December 31, | March 31, | |||||||||||||
2003 | 2002 | 2002 | |||||||||||||
Revenue |
$ | 36,564 | $ | 35,352 | $ | 37,927 | |||||||||
Cost and operating expenses: |
|||||||||||||||
Cost of revenue (before network-related depreciation) |
6,866 | 6,603 | 11,242 | ||||||||||||
Research and development |
2,445 | 2,845 | 4,869 | ||||||||||||
Sales and marketing |
10,109 | 11,760 | 13,610 | ||||||||||||
General and administrative |
10,878 | 12,891 | 13,966 | ||||||||||||
Amortization of CNN advertising |
| 1,371 | 1,246 | ||||||||||||
Amortization of other intangible assets |
2,198 | 2,231 | 5,237 | ||||||||||||
Depreciation |
15,248 | 17,141 | 20,010 | ||||||||||||
Equity-related compensation |
2,971 | 5,562 | 6,371 | ||||||||||||
Restructuring charges |
(9,820 | ) | 26,675 | 12,409 | |||||||||||
Total cost and operating expenses |
40,895 | 87,079 | 88,960 | ||||||||||||
Operating loss |
(4,331 | ) | (51,727 | ) | (51,033 | ) | |||||||||
Interest expense, net |
4,228 | 4,053 | 3,574 | ||||||||||||
Loss (gain) on investments, net |
15 | (299 | ) | 4,328 | |||||||||||
Loss before provision for income taxes |
(8,574 | ) | (55,481 | ) | (58,935 | ) | |||||||||
Provision for income taxes |
73 | 123 | 123 | ||||||||||||
Net loss |
$ | (8,647 | ) | $ | (55,604 | ) | $ | (59,058 | ) | ||||||
Basic and diluted net loss per share |
$ | (0.07 | ) | $ | (0.48 | ) | $ | (0.54 | ) | ||||||
Weighted average common shares outstanding |
116,398 | 114,866 | 109,693 | ||||||||||||
Supplemental financial data (in thousands): |
|||||||||||||||
Network-related depreciation |
$ | 10,620 | $ | 10,669 | $ | 11,914 | |||||||||
Other depreciation |
$ | 4,628 | $ | 6,472 | $ | 8,096 | |||||||||
Capital expenditures |
$ | 2,202 | $ | 893 | $ | 2,787 | |||||||||
End of period statistics: |
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EdgeSuite customers |
346 | 269 | 187 | ||||||||||||
Number of customers under recurring contract |
994 | 955 | 1,055 | ||||||||||||
Number of employees |
532 | 557 | 822 | ||||||||||||
Number of deployed servers |
15,307 | 13,622 | 12,674 | ||||||||||||
Common stock outstanding |
117,843 | 117,660 | 115,723 | ||||||||||||
Common stock outstanding and unexercised options and
warrants |
133,503 | 134,382 | 130,607 | ||||||||||||
Cash flow data: |
|||||||||||||||
Net cash used in operating activities |
$ | (13,001 | ) | $ | (10,376 | ) | $ | (35,969 | ) | ||||||
Net cash provided by (used in) investing activities |
$ | 411 | $ | (2,966 | ) | $ | 20,873 | ||||||||
Net cash (used in) provided by financing activities and
effects of exchange rate translation |
$ | (40 | ) | $ | 1,110 | $ | 131 | ||||||||
Net change in cash, cash equivalents, restricted cash and
marketable securities |
$ | (15,228 | ) | $ | (16,812 | ) | $ | (38,786 | ) |
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. 9421350.
About Akamai
Akamai® provides services that enable the worlds leading enterprises and government agencies to extend and control their e-business infrastructure. Having deployed the worlds largest, globally-distributed computing platform, Akamai ensures the highest levels of availability, reliability, security, and performance of networked information and application delivery. Headquartered in Cambridge, Massachusetts, Akamais industry-leading services, matched with world-class customer care, are used by hundreds of successful enterprises, government entities, and Web businesses around the globe. For more information, visit www.akamai.com.
# # #
Akamai Statement Under the Private Securities Litigation Reform Act
The release contains information about future expectations, plans and prospects of Akamais management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. 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, the effects of any attempts to intentionally disrupt our services or network by hackers or others, failure to have available sufficient transmission capacity, a failure of Akamais network infrastructure, and other factors that are discussed in the Companys Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.