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SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: July 30, 2003
(Date of earliest event reported)
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
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (617) 444-3000
| Item 12. Disclosure of Results of Operations and Financial Condition | ||||||||
| SIGNATURE | ||||||||
| EXHIBIT INDEX | ||||||||
| PRESS RELEASE DATED JULY 30, 2003 | ||||||||
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Item 12. Disclosure of Results of Operations and Financial Condition
On July 30, 2003, Akamai Technologies, Inc. announced its financial results for the quarter ended June 30, 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.
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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: July 30, 2003 | AKAMAI TECHNOLOGIES, INC. | |||
| By: | /s/ Robert Cobuzzi | |||
| Robert Cobuzzi, Chief Financial Officer | ||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release dated July 30, 2003 |
Exhibit 99.1
CONTACTS: Jeff Young --or-- J.C. Raby Media Relations Investor Relations Akamai Technologies Akamai Technologies 617-444-3913 617-444-2555 jyoung@akamai.com jraby@akamai.com AKAMAI REPORTS SECOND QUARTER 2003 RESULTS - REVENUE GROWS TO $37.8 MILLION - TOTAL EDGESUITE(R)CUSTOMERS INCREASES BY 88 TO 434 - NET LOSS OF $14.6 MILLION OR NEGATIVE $0.13 PER SHARE, DECLINES FROM A NET LOSS OF $42.2 MILLION, OR NEGATIVE $0.38 PER SHARE, IN THE SECOND QUARTER OF 2002 - CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES OF $96.3 MILLION AT QUARTER END CAMBRIDGE, MASS. - JULY 30, 2003 - Akamai Technologies, Inc. (NASDAQ: AKAM), a provider of services that enable the world's leading enterprises and government agencies to extend and control their e-business infrastructure, today reported financial results for the second quarter ended June 30, 2003. Revenue for second quarter 2003 was $37.8 million, a 3.3 percent increase over first quarter revenue of $36.6 million, and a 4.1 percent increase over second quarter 2002 revenue of $36.3 million. Net loss, in accordance with United States generally accepted accounting principles (GAAP) for second quarter 2003 was $14.6 million, or negative $0.13 per share, compared to a net loss for first quarter 2003 of $8.6 million, or negative $0.07 per share, and compared to a loss of $42.2 million, or negative $0.38 per share in second quarter 2002. The Company's net losses include a real estate restructuring charge of $1.3 million for the second quarter of 2003, and a real estate restructuring benefit of $9.8 million for the first quarter of 2003. Net loss for the six months ended June 30, 2003 was $23.3 million, or negative $0.20 per share, compared to a net loss of $101.3 million, or negative $0.91 per share, for the six months ended June 30, 2002. Normalized net loss* for second quarter 2003 was $10.1 million, or negative $0.09 per share, compared to normalized net loss for the prior quarter of $13.3 million, or negative $0.11 per share, and compared to First Call's consensus summary normalized net loss of $0.10 per share. (* See Use of Non-GAAP Financial Measures for definition of normalized net loss.)
Normalized net loss* for second quarter 2003 also represents a 69 percent improvement as compared to normalized net loss of $32.8 million, or negative $0.29 per share in second quarter 2002. Normalized net loss* for the six months ended June 30, 2003 was $23.3 million, or negative $0.20 per share, compared to a normalized net loss of $62.2 million, or negative $0.56 per share, for the six months ended June 30, 2002. (* See Use of Non-GAAP Financial Measures for definition of normalized net loss.) Adjusted EBITDA* for second quarter 2003 was $7.7 million, up 22 percent from $6.3 million in the prior quarter, and up 193 percent from an Adjusted EBITDA loss of $8.3 million in second quarter 2002. (* See Use of Non-GAAP Financial Measures for definition of Adjusted EBITDA.) "In the second quarter, we improved our operating results year over year and grew revenue quarter over quarter and year over year, while building valuable relationships with a large and healthy base of enterprise and government clients," said George Conrades, chairman and CEO of Akamai. Net cash consumption declined for the third consecutive quarter to $13.6 million, including cash payments of $16.1 million to settle real estate lease obligations, ending the quarter with $96.3 million in cash and cash equivalents, restricted cash and marketable securities. The settlement payments of $16.1 million to restructure real estate lease obligations will result in average annual cash savings of over $8 million per year starting in 2004, or over $50 million by the end of the original lease period in 2010. "We believe we are well-positioned to reach our goal of generating positive free cash flow* for the fourth quarter," said Robert Cobuzzi, chief financial officer of Akamai. (* See Use of Non-GAAP Financial Measures for definition of free cash flow.) At June 30, 2003, the Company had 118.8 million shares of common stock outstanding. At June 30, 2003, common stock outstanding and unexercised stock options and warrants totaled 135.2 million shares. CUSTOMERS At the end of the second quarter of 2003, Akamai had 434 EdgeSuite customers under recurring contract, compared to 346 at the end of the previous quarter, and up from 211 EdgeSuite clients at the end of second quarter of 2002. New EdgeSuite customers in the second quarter included ATI Technologies Inc., BBC Technology, BearingPoint, Inc., The Dow Chemical Company, FUJI TV, Fuji Heavy Industries, Ltd. (Subaru), The Princeton Review, Inc., Red Hat Inc., Reebok International, Ltd, and Warner Music Group, among others. Resellers accounted for approximately 27 percent of second quarter revenue, as compared to approximately 24 percent in the first quarter of 2003. NETWORK The size, scale and functionality of Akamai's underlying global network remain key to the value proposition of all Akamai services. Akamai's global network at the end of the second quarter
consisted of 14,372 servers in 1,134 networks, in 70 countries. The geographic reach and capacity of Akamai's 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 "Adjusted 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 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 which are either not part of the Company's core operations, such as investment gains and losses, net interest expense and restructuring activities, or do not require a cash outlay, such as equity-related compensation and impairment of intangible assets. Adjusted EBITDA also eliminates 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 "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 Company's core operations or are 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 Company's ability to generate cash to finance operations, service its debt and make strategic investments. Adjusted EBITDA, free cash flow and normalized net loss should be considered in addition to, not as a substitute for, the Company's 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 ADJUSTED EBITDA (dollar amounts in thousands except per share data) THREE MONTHS ENDED SIX MONTHS ENDED --------------------------------------------- --------------------------- JUNE 30, MARCH 31, JUNE 30, JUNE 30, JUNE 30, 2003 2003 2002 2003 2002 --------- --------- --------- --------- --------- Net loss $ (14,646) $ (8,647) $ (42,242) $ (23,293) $(101,300) Amortization of intangible assets 12 2,198 2,231 2,210 7,468 Equity-related compensation 3,268 2,971 4,646 6,239 11,017 Restructuring charges 1,299 (9,820) 602 (8,521) 13,011 Loss on investments, net -- 15 759 15 5,087 Amortization of CNN advertising -- -- 1,246 -- 2,492 --------- --------- --------- --------- --------- Total normalized net loss: (10,067) (13,283) (32,758) $ (23,350) $ (62,225) ========= ========= Interest expense, net 4,268 4,228 3,733 Provision for income taxes 123 73 123 Depreciation 13,385 15,248 20,602 --------- --------- --------- Total Adjusted EBITDA: $ 7,709 $ 6,266 $ (8,300) ========= ========= ========= Weighted average common shares outstanding: 117,109 116,398 112,253 116,754 110,973 Normalized net loss per share: $ (0.09) $ (0.11) $ (0.29) $ (0.20) $ (0.56)
CONDENSED CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands) (unaudited) June 30, 2003 December 31, 2002 ------------- ----------------- ASSETS Cash and cash equivalents $ 90,719 $ 111,262 Restricted cash and marketable securities 1,608 3,664 Accounts receivable, net 22,004 17,574 Prepaid expenses and other current assets 9,284 9,183 --------- --------- Current assets: 123,615 141,683 Restricted cash 4,018 10,244 Property and equipment, net 38,143 63,159 Goodwill and other intangible assets, net 5,200 7,410 Other assets 6,045 7,367 --------- --------- Total assets $ 177,021 $ 229,863 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable and accrued expenses $ 43,969 $ 53,909 Other current liabilities 8,076 27,190 --------- --------- Current liabilities: 52,045 81,099 Other liabilities 5,724 16,854 Convertible notes 300,000 300,000 --------- --------- Total liabilities 357,769 397,953 Stockholders' deficit (180,748) (168,090) --------- --------- Total liabilities and stockholders' deficit $ 177,021 $ 229,863 ========= ========= Net increase (decrease) in cash and cash equivalents as reported on the consolidated statements of cash flows, 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. FREE CASH FLOW OR NET CASH CONSUMPTION (dollar amounts in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollar amounts in thousands, except per share data) (unaudited) THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------------------- ------------------------ JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, JUNE 30, 2003 2003 2002 2002 2003 2002 -------- -------- -------- --------- -------- --------- Revenue $ 37,759 $ 36,564 $ 36,322 $ 37,927 $ 74,323 $ 74,249 Cost and operating expenses: Cost of revenue (before depreciation) 6,551 6,866 10,946 11,242 13,417 22,188 Research and development 2,048 2,445 4,624 4,869 4,493 9,493 Sales and marketing 11,382 10,109 13,837 13,610 21,491 27,447 General and administrative 10,069 10,878 15,215 13,966 20,947 29,181 Amortization of CNN advertising -- -- 1,246 1,246 -- 2,492 Amortization of other intangible assets 12 2,198 2,231 5,237 2,210 7,468 Depreciation 13,385 15,248 20,602 20,010 28,633 40,612 Equity-related compensation 3,268 2,971 4,646 6,371 6,239 11,017 Restructuring charges 1,299 (9,820) 602 12,409 (8,521) 13,011 -------- -------- -------- -------- -------- --------- Total cost and operating expenses 48,014 40,895 73,949 88,960 88,909 162,909 -------- -------- -------- -------- -------- --------- Operating loss (10,255) (4,331) (37,627) (51,033) (14,586) (88,660) Interest expense, net 4,268 4,228 3,733 3,574 8,496 7,307 Loss on investments, net -- 15 759 4,328 15 5,087 -------- -------- -------- -------- -------- --------- Loss before provision for income taxes (14,523) (8,574) (42,119) (58,935) (23,097) (101,054) Provision for income taxes 123 73 123 123 196 246 -------- -------- -------- -------- -------- --------- Net loss $(14,646) $ (8,647) $(42,242) $(59,058) $(23,293) $(101,300) ======== ======== ======== ======== ======== ========= Basic and diluted net loss per share $ (0.13) $ (0.07) $ (0.38) $ (0.54) $ (0.20) $ (0.91) Weighted average shares outstanding 117,109 116,398 112,253 109,693 116,754 110,973
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------------------- ---------------------- June 30, March 31, June 30, March 31, June 30, June 30, 2003 2003 2002 2002 2003 2002 --------- --------- --------- --------- -------- -------- Supplemental financial data (in thousands): Network-related depreciation $ 9,146 $ 10,620 $ 11,848 $ 11,914 $ 19,766 $ 23,762 Other depreciation $ 4,239 $ 4,628 $ 8,754 $ 8,096 $ 8,867 $ 16,850 Capital expenditures $ 1,857 $ 2,202 $ 3,665 $ 2,787 $ 4,069 $ 6,452 Common stock outstanding 118,820 117,843 116,397 115,723 Common stock outstanding and unexercised options and warrants 135,225 133,503 133,377 130,607 Cash flow data (in thousands): Net cash used in operating activities $(13,941) $(13,001) $ (8,011) $(35,969) $(26,942) $(43,980) Net cash provided by investing activities $ 4,373 $ 411 $ 31,481 $ 20,873 $ 4,784 $ 52,354 Net cash provided by (used in) financing activities and effects of exchange rate translation on cash $ 1,655 $ (40) $ 862 $ 131 $ 1,615 $ 993 -------- -------- -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents $ (7,913) $(12,630) $ 24,332 $(14,965) $(20,543) $ 9,367 Net change in cash, cash equivalents, restricted cash and marketable securities $(13,597) $(15,228) $(11,483) $(38,786) $(28,825) $(50,269) End of period statistics: EdgeSuite customers 434 346 211 187 Number of customers under recurring contract 1,001 994 1,034 1,055 Number of employees 519 532 807 822 Number of deployed servers 14,372 15,307 12,976 12,674 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. 1565261. ABOUT AKAMAI Akamai(R) provides services that enable the world's leading enterprises and government agencies to extend and control their e-business infrastructure. Having deployed the world's 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, Akamai's 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 Akamai's 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, unexpected increases in Akamai's use of funds, lack of market acceptance of our services, failure to achieve incremental revenue growth, 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 Akamai's network infrastructure, 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.