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: |
February 4, 2004
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(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
Registrants telephone number, including area code: |
(617) 444-3000
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Item 12. Disclosure of Results of Operations and Financial Condition | ||||||||
SIGNATURE | ||||||||
Ex-99.1 Press release dated February 4, 2004 |
Item 12. Disclosure of Results of Operations and Financial Condition
On February 4, 2004, Akamai Technologies, Inc. announced its financial results for the year ended December 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.
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: February 4, 2004 | AKAMAI TECHNOLOGIES, INC. | |||
By: | /s/ Robert Cobuzzi Robert Cobuzzi, Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release dated February 4, 2004 |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts: | ||||
Jeff Young | Sandy Smith | |||
Media Relations | Investor Relations | |||
Akamai Technologies | or | Akamai Technologies | ||
617-444-3913 | 617-444-2804 | |||
jyoung@akamai.com | ssmith@akamai.com |
AKAMAI REPORTS FOURTH QUARTER 2003 AND
FULL-YEAR 2003 FINANCIAL RESULTS
| Record fourth quarter revenue of $45.2 million, up 8% quarter-over-quarter, and up 28% year-over-year |
| Annual revenue grew to $161.3 million, up 11% year-over-year |
| GAAP net loss narrowed to $0.02 per share |
| First ever normalized net income* of $1.5 million, or $0.01 per share |
CAMBRIDGE, Mass. February 4, 2004 Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader in distributed computing solutions and services, today reported financial results for the fourth quarter and full-year ended December 31, 2003. Revenue for the fourth quarter 2003 was $45.2 million, an 8.1 percent increase over third quarter revenue of $41.8 million, and a 27.7 percent increase over fourth quarter 2002 revenue of $35.4 million. Total revenue for 2003 was $161.3 million.
Net loss, in accordance with United States Generally Accepted Accounting Principles (GAAP), for the fourth quarter 2003 was $2.1 million, or $0.02 per share, compared to a net loss for the third quarter 2003 of $3.9 million, or $0.03 per share, and compared to a net loss of $55.6 million, or $0.48 per share, in the fourth quarter of 2002. Included in the fourth quarter 2003 net loss is $2.1 million of expenses associated with the retirement of debt.
For the first time in its history, the Company also achieved positive earnings per share of $0.01 on a normalized basis*, generating $1.5 million positive net income for the fourth quarter, compared to a normalized net loss* for the prior quarter of $0.03 per share, or $3.5 million, and compared to First Calls consensus estimate for the fourth quarter of a normalized net loss of $0.01 per share.
Akamai ended the year with $208.4 million in cash, cash equivalents, restricted cash, marketable securities and restricted marketable securities, including $95.8 million in net debt proceeds and redemptions, an increase from $99.0 million at the end of the third quarter.
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The fourth quarter of 2003 was our best quarter to date, said George Conrades, chairman and CEO of Akamai. We achieved the most revenue of any quarter; the most cash flow from operations in any quarter; and, marking the most important improvement in our five-year history, we generated positive earnings per share on a normalized basis. All of this capped a year of consistent revenue growth and rapidly declining losses.
Adjusted EBITDA* for the fourth quarter of 2003 was $14.2 million, a 21 percent increase from $11.7 million in the prior quarter, and over a ten fold increase over Adjusted EBITDA of $1.3 million in the fourth quarter of 2002. (* See Use of Non-GAAP Financial Measures for definition of Adjusted EBITDA.)
With revenue growth in 2003 of 11 percent year-over-year, improvement in gross margins, and a decrease in cash operating expenses of 25 percent year-over-year, were clearly seeing the leverage in our model, continued Conrades.
Customers
The number of recurring customers grew in the fourth quarter by 70 net new
accounts for a total of 1,126 customers under long-term services contracts, the
highest level in more than two years. For the full year, the Companys
customer count increased almost 18 percent.
New Akamai EdgeSuite® customers in the fourth quarter included Americanas (Brazils leading e-retailer), AUDI AG, Bayer AG, Brylane, Christian Dior, Knight Ridder Digital, Learning.com, Muze Inc., OfficeMax Inc., Overstock.com, ScanAlert and Tourism New Zealand, among others.
Resellers accounted for approximately 25 percent of 2003 fourth quarter revenue, as compared to approximately 22 percent in the prior quarter and 26 percent in the fourth quarter of 2002.
Network
Akamais global network at the end of the fourth quarter consisted of 14,733 servers in 1,072 networks, in 71 countries. 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.
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Financial Statements
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
December 31, | December 31, | ||||||||
2003 | 2002 | ||||||||
Assets |
|||||||||
Cash and cash equivalents |
$ | 160,074 | $ | 111,262 | |||||
Restricted cash |
5,000 | | |||||||
Marketable securities |
4,184 | 503 | |||||||
Restricted marketable securities |
726 | 3,161 | |||||||
Accounts receivable, net |
20,727 | 17,574 | |||||||
Prepaid expenses and other current assets |
11,705 | 9,183 | |||||||
Current assets |
202,416 | 141,683 | |||||||
Marketable securities |
34,449 | | |||||||
Restricted marketable securities |
3,922 | 10,244 | |||||||
Property and equipment, net |
23,878 | 63,159 | |||||||
Goodwill and other intangible assets, net |
5,176 | 7,410 | |||||||
Other assets |
9,100 | 7,367 | |||||||
Total assets |
$ | 278,941 | $ | 229,863 | |||||
Liabilities and stockholders deficit |
|||||||||
Accounts payable and accrued expenses |
$ | 42,231 | $ | 53,909 | |||||
Other current liabilities |
20,429 | 27,190 | |||||||
Current liabilities |
62,660 | 81,099 | |||||||
Other liabilities |
5,635 | 16,854 | |||||||
Convertible notes |
386,000 | 300,000 | |||||||
Total liabilities |
454,295 | 397,953 | |||||||
Stockholders deficit |
(175,354 | ) | (168,090 | ) | |||||
Total liabilities and stockholders deficit |
$ | 278,941 | $ | 229,863 | |||||
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Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||||
Revenue |
$ | 45,169 | $ | 35,352 | $ | 161,259 | $ | 144,976 | ||||||||||
Cost and operating expenses: |
||||||||||||||||||
Cost of revenue (before depreciation) |
7,277 | 6,603 | 27,431 | 38,371 | ||||||||||||||
Research and development |
2,473 | 2,845 | 10,152 | 17,158 | ||||||||||||||
Sales and marketing |
12,215 | 11,760 | 44,731 | 53,068 | ||||||||||||||
General and administrative |
8,997 | 12,891 | 39,059 | 55,844 | ||||||||||||||
Amortization of CNN advertising |
| 1,371 | | 5,634 | ||||||||||||||
Amortization of other intangible assets |
12 | 2,231 | 2,234 | 11,930 | ||||||||||||||
Depreciation |
8,125 | 17,141 | 47,515 | 78,488 | ||||||||||||||
Equity-related compensation |
1,518 | 5,562 | 9,813 | 21,195 | ||||||||||||||
Restructuring charges |
| 26,675 | (8,521 | ) | 45,824 | |||||||||||||
Total cost and operating expenses |
40,617 | 87,079 | 172,414 | 327,512 | ||||||||||||||
Operating income (loss) |
4,552 | (51,727 | ) | (11,155 | ) | (182,536 | ) | |||||||||||
Interest expense, net |
4,183 | 4,053 | 17,022 | 15,310 | ||||||||||||||
Loss on early extinguishment of debt |
2,097 | | 2,097 | | ||||||||||||||
(Gain) loss on investments, net |
| (299 | ) | (1,622 | ) | 6,099 | ||||||||||||
Loss before provision for income taxes |
(1,728 | ) | (55,481 | ) | (28,652 | ) | (203,945 | ) | ||||||||||
Provision for income taxes |
351 | 123 | 629 | 492 | ||||||||||||||
Net loss |
$ | (2,079 | ) | $ | (55,604 | ) | $ | (29,281 | ) | $ | (204,437 | ) | ||||||
Basic and diluted net loss per share |
$ | (0.02 | ) | $ | (0.48 | ) | $ | (0.25 | ) | $ | (1.81 | ) | ||||||
Weighted average common shares outstanding |
120,198 | 114,866 | 118,075 | 112,766 |
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Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | December 31, | |||||||||||||
2003 | 2003 | 2002 | |||||||||||||
Cash flows from operating activities: |
|||||||||||||||
Net loss |
$ | (2,079 | ) | $ | (29,281 | ) | $ | (204,437 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|||||||||||||||
Depreciation and amortization |
8,137 | 49,749 | 96,052 | ||||||||||||
Equity related compensation |
1,518 | 9,813 | 21,195 | ||||||||||||
Interest income on notes receivable for stock |
(7 | ) | (80 | ) | (131 | ) | |||||||||
Amortization of deferred financing costs |
377 | 1,417 | 1,389 | ||||||||||||
(Gain) loss on investments, property and equipment and foreign currency |
(1,385 | ) | (4,048 | ) | 6,803 | ||||||||||
Provision for doubtful accounts |
576 | 760 | (746 | ) | |||||||||||
Noncash portion of restructuring charge |
| 144 | 3,161 | ||||||||||||
Noncash portion of loss on early extinguishment of debt |
1,207 | 1,207 | | ||||||||||||
Changes in operating assets and liabilities: |
|||||||||||||||
Accounts receivable |
4,497 | (2,800 | ) | 4,501 | |||||||||||
Prepaid expenses and other current assets |
(6,204 | ) | (2,740 | ) | 1,195 | ||||||||||
Accounts payable, accrued expenses and other current liabilities |
2,924 | 3,932 | (17,913 | ) | |||||||||||
Accrued restructuring |
(1,789 | ) | (23,111 | ) | 9,973 | ||||||||||
Deferred revenue |
140 | 604 | (2,197 | ) | |||||||||||
Other noncurrent assets and liabilities |
(950 | ) | (24,936 | ) | 15,398 | ||||||||||
Net cash provided by (used in) operating activities: |
6,962 | (19,370 | ) | (65,757 | ) | ||||||||||
Cash flows from investing activities: |
|||||||||||||||
Purchases of property and equipment and capitalization of internal-use software |
(2,712 | ) | (8,881 | ) | (14,187 | ) | |||||||||
Proceeds from sale of property and equipment |
| 114 | 327 | ||||||||||||
Purchase of investments |
(28,249 | ) | (38,320 | ) | (24,550 | ) | |||||||||
Proceeds from sales and maturities of investments |
| 10,639 | 141,001 | ||||||||||||
Cash
paid as contingent purchase price for the acquisition of a business |
| | (6,500 | ) | |||||||||||
Net cash (used in) provided by investing activities |
(30,961 | ) | (36,448 | ) | 96,091 | ||||||||||
Cash flows from financing activities: |
|||||||||||||||
Proceeds from the issuance of 1% convertible subordinated notes,
net of financing costs |
169,800 | 169,800 | | ||||||||||||
Proceeds from the issuance of common stock under stock option and
employee stock purchase plans |
6,689 | 8,585 | 2,807 | ||||||||||||
Repayment of notes receivable from officers |
531 | 2,301 | | ||||||||||||
Payments on capital leases and equipment loan |
(137 | ) | (1,438 | ) | (1,645 | ) | |||||||||
Payments on 5 1/2% convertible subordinated notes |
(74,000 | ) | (74,000 | ) | | ||||||||||
Increase in restricted cash held for bond redemption activities |
(5,000 | ) | (5,000 | ) | | ||||||||||
Net cash provided by financing activities |
97,883 | 100,248 | 1,162 | ||||||||||||
Effects of exchange rate translation on cash and cash equivalents |
2,294 | 4,382 | 992 | ||||||||||||
Net increase in cash and cash equivalents |
76,178 | 48,812 | 32,488 | ||||||||||||
Cash and cash equivalents, beginning of period |
83,896 | 111,262 | 78,774 | ||||||||||||
Cash and cash equivalents, end of period |
$ | 160,074 | $ | 160,074 | $ | 111,262 | |||||||||
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Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Supplemental financial data (in thousands): |
||||||||||||||||
Network-related depreciation |
$ | 5,803 | $ | 10,669 | $ | 33,056 | $ | 46,297 | ||||||||
Other depreciation |
$ | 2,322 | $ | 6,472 | $ | 14,459 | $ | 32,191 | ||||||||
Capital expenditures |
$ | 2,712 | $ | 884 | $ | 8,881 | $ | 14,187 | ||||||||
Net change in cash, cash equivalents, restricted cash,
marketable securities and restricted marketable securities |
$ | 109,390 | $ | (16,812 | ) | $ | 83,185 | $ | (85,341 | ) | ||||||
Common stock issued |
122,155 | 117,660 | ||||||||||||||
Common stock issued and unexercised options,
warrants and deferred stock units |
137,741 | 134,383 | ||||||||||||||
End of period statistics: |
||||||||||||||||
Number of customers under recurring contract |
1,126 | 955 | ||||||||||||||
Number of employees |
535 | 557 | ||||||||||||||
Number of deployed servers |
14,733 | 13,622 |
*Use of Non-GAAP Financial Measures
In addition to providing GAAP-based financial measurements, Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes encourage use of and emphasis on 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, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers Adjusted EBITDA to be an important indicator of the companys operational strength and performance of its business and a good measure of the companys historical operating trend.
Adjusted EBITDA eliminates items which are either not part of the companys core operations, such as investment gains and losses, early debt extinguishment, 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 excludes depreciation and amortization expense, which is based on the companys 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 companys deployed network, and may not be indicative of current or future capital expenditures.
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Akamai defines capital expenditures or capex as purchases of property and equipment and the capitalization of internal-use software development costs. Capital expenditures or capex are disclosed in Akamais consolidated statement of cash flows in the companys most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission.
Akamai defines normalized net income (loss) as net income (loss) before amortization, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers normalized net income (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 are non-cash.
Adjusted EBITDA and normalized net loss should be considered in addition to, not as a substitute for, the companys operating loss and net loss, 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.
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Reconciliation of GAAP net loss to normalized net income (loss)
and Adjusted EBITDA
(amounts in thousands, except per share data)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Net loss |
$ | (2,079 | ) | $ | (55,604 | ) | $ | (29,281 | ) | $ | (204,437 | ) | ||||
Amortization of intangible assets |
12 | 2,231 | 2,234 | 11,930 | ||||||||||||
Equity-related compensation |
1,518 | 5,562 | 9,813 | 21,195 | ||||||||||||
Restructuring charges |
| 26,675 | (8,521 | ) | 45,824 | |||||||||||
(Gain) loss on investments, net |
| (299 | ) | (1,622 | ) | 6,099 | ||||||||||
Loss on early extinguishment of debt |
2,097 | | 2,097 | | ||||||||||||
Amortization of CNN advertising |
| 1,371 | | 5,634 | ||||||||||||
Total normalized net income (loss): |
1,548 | (20,064 | ) | (25,280 | ) | (113,755 | ) | |||||||||
Interest expense, net |
4,183 | 4,053 | 17,022 | 15,310 | ||||||||||||
Provision for income taxes |
351 | 123 | 629 | 492 | ||||||||||||
Depreciation |
8,125 | 17,141 | 47,515 | 78,488 | ||||||||||||
Total Adjusted EBITDA: |
$ | 14,207 | $ | 1,253 | $ | 39,886 | $ | (19,465 | ) | |||||||
Weighted average common
shares outstanding: |
120,198 | 114,866 | 118,075 | 112,766 | ||||||||||||
Normalized net income (loss) per share: |
$ | 0.01 | $ | (0.17 | ) | $ | (0.21 | ) | $ | (1.01 | ) |
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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. 4766875.
About Akamai
Akamai® is the global leader in distributed computing solutions and services, making the Internet predictable, scalable, and secure for conducting profitable e-business. The Akamai on demand platform enables customers to easily extend their Web operations with full control anywhere, anytime, without the cost of building out infrastructure. Headquartered in Cambridge, Massachusetts, Akamai serves hundreds of todays most successful enterprises and government agencies around the globe. Akamai is The Business Internet. For more information, visit www.akamai.com.
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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, unexpected increases in Akamais use of funds, unexpected loss of key large 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 Akamais network infrastructure, inability to service and repay our outstanding debt 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.
In addition, the statements in this press release represent Akamais 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 Akamais expectations or beliefs as of any date subsequent to the date of this press release.
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