UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report: February 4, 2009

(Date of earliest event reported)

 

 

AKAMAI TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware		0-27275		04-3432319
(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

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

On February 4, 2009, Akamai Technologies, Inc. announced its financial results for the fiscal year ended December 31, 2008. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99.1) 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.

 

Item 9.01.

Financial Statements and Exhibits

(d) Exhibits

 

99.1		Press Release dated February 4, 2009.

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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: February 4, 2009				AKAMAI TECHNOLOGIES, INC.
				By:		/s/ JD Sherman
						J. Donald Sherman, Chief Financial Officer

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EXHIBIT INDEX

 

99.1		Press Release dated February 4, 2009.

Exhibit 99.1

FOR IMMEDIATE RELEASE

 

Contacts:
Jeff Young Media Relations Akamai Technologies 617-444-3913 jyoung@akamai.com				—or—				Natalie Temple Investor Relations Akamai Technologies 617-444-3635 ntemple@akamai.com

AKAMAI REPORTS FOURTH QUARTER 2008 AND

FULL-YEAR 2008 FINANCIAL RESULTS

 

•

Fourth quarter revenue grew to $212.6 million, up 8 percent from the prior quarter and 16 percent year-over-year, and annual revenue increased 24 percent year-over-year to $790.9 million

 

•

Fourth quarter GAAP net income increased 22 percent quarter-over-quarter to $40.5 million, or $0.22 per diluted share, and full-year GAAP net income increased 44 percent year-over-year to $145.1 million, or $0.79 per diluted share

 

•

Fourth quarter normalized net income* increased 11 percent quarter-over-quarter to $82.2 million, or $0.44 per diluted share, and full-year normalized net income* increased 26 percent year-over-year to $308.5 million, or $1.66 per diluted share

CAMBRIDGE, Mass. – February 4, 2009 – Akamai Technologies, Inc. (NASDAQ: AKAM), the leader in powering rich media, dynamic transactions and enterprise applications online, today reported financial results for the fourth quarter and full-year ended December 31, 2008. Revenue for the fourth quarter 2008 was $212.6 million, an 8 percent increase over third quarter revenue of $197.3 million, and a 16 percent increase over fourth quarter 2007 revenue of $183.2 million. Total revenue for 2008 was $790.9 million, a 24 percent increase over 2007 revenue of $636.4 million.

“2008 was another year of impressive growth and significant accomplishments for Akamai,” said Paul Sagan, president and CEO of Akamai. “As the external environment has become more challenging, we’re pleased that we were able to grow revenue and earnings throughout the year while broadening our portfolio of solutions to improve Internet performance for our customers.”

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2008 was $40.5 million, or $0.22 per diluted share. Full-year GAAP net income for 2008 was $145.1 million, or $0.79 per diluted share.

The Company generated normalized net income* of $82.2 million, or $0.44 per diluted share, in the fourth quarter of 2008, an 11 percent increase over prior quarter normalized net income

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of $74.2 million, or $0.40 per diluted share. Full-year normalized net income grew 26 percent year-over-year to $308.5 million, or $1.66 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

Adjusted EBITDA* for the fourth quarter of 2008 was $100.3 million, up from $90.5 million in the prior quarter, and $86.9 million in the fourth quarter of 2007. Adjusted EBITDA margin for the fourth quarter was 47 percent, consistent with the same period last year. For the full year, adjusted EBITDA was $370.8 million, up from $283.2 million in 2007. Full-year adjusted EBITDA margin improved to 47 percent, up from 44 percent in 2007. (*See Use of Non-GAAP Financial Measures below for definitions.)

Full-year cash from operations was $343.5 million, or 43 percent of revenue, up 45 percent over the prior year. At year-end, the Company had approximately $771.6 million of cash, cash equivalents and marketable securities.

The Company had approximately 169.4 million shares of common stock outstanding as of December 31, 2008.

The number of customers under long-term service contracts at the end of the fourth quarter increased by 50 to a record 2,858, an 8 percent increase year-over-year.

Sales through resellers and sales outside the United States accounted for 17 percent and 25 percent, respectively, of revenue for the fourth quarter 2008.

Akamai’s fourth quarter consolidated financial results include two months of activity from acerno, following the closing of Akamai’s acquisition of acerno on November 3, 2008. acerno contributed approximately $6.9 million of revenue during the fourth quarter of 2008.

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-270-6057 (or 1-617-213-8891 for international calls) and using passcode No. 25657509. 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 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 48935965.

The Akamai Difference

Akamai^® provides market-leading managed services for powering rich media, dynamic transactions, and enterprise applications online. Having pioneered the content delivery market one decade ago, Akamai’s services have been adopted by the world’s most recognized brands across diverse industries. The alternative to centralized Web infrastructure, Akamai’s global network of tens of thousands of distributed servers provides the scale, reliability, insight and performance for businesses to succeed online. Akamai has transformed the Internet into a more viable place to inform, entertain, advertise, interact, and collaborate. To experience The Akamai Difference, visit www.akamai.com.

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Financial Statements

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

 

		Dec. 31, 2008			Dec. 31, 2007
Assets
Cash and cash equivalents		$	156,074		$	145,078
Marketable securities			171,097			400,580
Restricted marketable securities			3,460			511
Accounts receivable, net			139,612			118,944
Prepaid expenses and other current assets			31,666			29,929
Current assets			501,909			695,042
Marketable securities			440,843			84,237
Restricted marketable securities			153			3,102
Property and equipment, net			174,483			134,546
Goodwill and other intangible assets, net			534,253			449,137
Other assets			5,592			4,520
Deferred income tax assets, net			223,718			285,463
Total assets		$	1,880,951		$	1,656,047
Liabilities and stockholders’ equity
Accounts payable and accrued expenses		$	87,297		$	74,773
Other current liabilities			13,159			13,602
Current liabilities			100,456			88,375
Other liabilities			11,870			9,265
Convertible notes			199,855			199,855
Total liabilities			312,181			297,495
Stockholders’ equity			1,568,770			1,358,552
Total liabilities and stockholders’ equity		$	1,880,951		$	1,656,047

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Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)

 

		Three Months Ended												Year Ended
		Dec. 31,				Sept. 30,				Dec. 31,				Dec. 31,				Dec. 31,
		2008				2008				2007				2008				2007
Revenues		$	212,554			$	197,347			$	183,238			$	790,924			$	636,406
Costs and operating expenses:
Cost of revenues * †			60,688				56,659				49,394				222,610				167,444
Research and development *			10,477				9,943				10,466				39,243				44,141
Sales and marketing *			45,206				42,027				36,397				164,365				147,556
General and administrative * †			35,183				33,776				33,100				136,028				121,101
Amortization of other intangible assets			3,651				3,173				2,835				13,905				11,414
Restructuring charge (benefit)			2,509				—				—				2,509				(178	)
Total costs and operating expenses			157,714				145,578				132,192				578,660				491,478
Operating income			54,840				51,769				51,046				212,264				144,928
Interest income, net			(4,862	)			(4,994	)			(6,841	)			(21,967	)			(22,729	)
Loss on early extinguishment of debt			—				—				—				—				3
Loss (gain) on investments, net			430				(1	)			(23	)			157				(24	)
Other income, net			(801	)			(154	)			(30	)			(461	)			(527	)
Income before provision for income taxes			60,073				56,918				57,940				234,535				168,205
Provision for income taxes			19,540				23,558				22,062				89,397				67,238
Net income		$	40,533			$	33,360			$	35,878			$	145,138			$	100,967
Net income per share:
Basic		$	0.24			$	0.20			$	0.22			$	0.87			$	0.62
Diluted		$	0.22			$	0.18			$	0.20			$	0.79			$	0.56
Shares used in per share calculations:
Basic			168,843				168,474				164,768				167,673				162,959
Diluted			186,694				187,769				185,294				186,685				185,094

 

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

†	Includes depreciation and amortization (see supplemental table for figures)

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		Three Months Ended										Year Ended
		Dec. 31,				Sept. 30,			Dec. 31,			Dec. 31,			Dec. 31,
		2008				2008			2007			2008			2007
Supplemental financial data (in thousands):
Stock-based compensation:
Cost of revenues		$	636			$	614		$	867		$	2,415		$	3,349
Research and development			3,213				2,765			3,643			11,088			15,658
Sales and marketing			7,271				6,949			6,144			26,273			26,252
General and administrative			4,409				3,794			4,954			18,123			21,296
Total stock-based compensation		$	15,529			$	14,122		$	15,608		$	57,899		$	66,555
Depreciation and amortization:
Network-related depreciation		$	18,944			$	17,365		$	14,249		$	68,427		$	50,295
Capitalized stock-based compensation amortization			1,219				1,118			703			4,212			1,829
Other depreciation and amortization			3,639				2,914			2,439			11,537			8,356
Amortization of other intangible assets			3,651				3,173			2,835			13,905			11,414
Total depreciation and amortization		$	27,453			$	24,570		$	20,226		$	98,081		$	71,894
Capital expenditures:
Purchases of property and equipment		$	14,140			$	30,286		$	9,954		$	90,369		$	81,420
Capitalized internal-use software			6,296				6,142			5,962			25,017			19,057
Capitalized stock-based compensation			1,978				1,867			1,991			7,436			6,353
Total capital expenditures		$	22,414			$	38,295		$	17,907		$	122,822		$	106,830
Net (decrease) increase in cash, cash equivalents, marketable securities and restricted marketable securities		$	(17,074	)		$	43,059		$	67,572		$	138,119		$	199,054
End of period statistics:
Number of customers under recurring contract			2,858				2,808			2,645
Number of employees			1,537				1,555			1,324
Number of deployed servers			42,669				40,635			30,293

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Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

 

		Three Months Ended												Year Ended
		Dec. 31,				Sept. 30,				Dec. 31,				Dec. 31,				Dec. 31,
		2008				2008				2007				2008				2007
Cash flows from operating activities:
Net income		$	40,533			$	33,360			$	35,878			$	145,138			$	100,967
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets and deferred financing costs			27,662				24,780				20,436				98,920				72,735
Stock-based compensation			15,529				14,122				15,608				57,899				66,555
Provision for deferred income taxes, net			14,165				22,434				23,594				80,551				65,272
Excess tax benefits from stock-based compensation			(143	)			(751	)			(2,551	)			(11,176	)			(20,862	)
Losses (gains) on investments and disposal of property and equipment, net			529				16				(13	)			242				23
Provision for doubtful accounts			1,229				610				848				2,575				2,901
Non-cash portion of loss on early extinguishment of debt			—				—				—				—				3
Non-cash portion of restructuring charge (benefit)			(842	)			—				—				(842	)			(178	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			(10,582	)			(5,184	)			(11,386	)			(21,474	)			(31,937	)
Prepaid expenses and other current assets			2,737				607				(4,384	)			(5,471	)			(12,009	)
Accounts payable, accrued expenses and other current liabilities			(3,148	)			7,074				(8,837	)			(4,181	)			(12,965	)
Accrued restructuring			1,763				(4	)			(177	)			1,216				(2,722	)
Deferred revenue			841				(3,432	)			1,324				(1,492	)			5,297
Other noncurrent assets and liabilities			2,200				(414	)			1,179				1,589				3,874
Net cash provided by operating activities			92,473				93,218				71,519				343,494				236,954
Cash flows from investing activities:
Cash of acquired businesses			—				—				—				—				7,875
Cash paid for acquired business			(83,719	)			—				—				(83,719	)			—
Purchases of property and equipment and capitalization of internal-use software costs			(20,436	)			(36,428	)			(15,916	)			(115,386	)			(100,477	)
Proceeds from sales and maturities of short- and long-term marketable securities			77,196				40,641				166,353				367,652				415,771
Purchases of short- and long-term marketable securities			(53,514	)			(121,096	)			(241,788	)			(533,069	)			(550,614	)
Proceeds from the sale of property and equipment			6				2				6				82				15
Decrease in restricted investments held for security deposits			—				—				—				—				723
Net cash used in investing activities			(80,467	)			(116,881	)			(91,345	)			(364,440	)			(226,707	)
Cash flows from financing activities:
Proceeds from the issuance of common stock under stock option and employee stock purchase plans			2,164				1,670				9,035				21,966				31,621
Excess tax benefits from stock-based compensation			143				751				2,551				11,176				20,862
Payments on capital leases			—				—				—				—				(23	)
Net cash provided by financing activities			2,307				2,421				11,586				33,142				52,460
Effects of exchange rate changes on cash and cash equivalents			(261	)			(2,153	)			514				(1,200	)			1,776
Net increase (decrease) in cash and cash equivalents			14,052				(23,395	)			(7,726	)			10,996				64,483
Cash and cash equivalents, beginning of period			142,022				165,417				152,804				145,078				80,595
Cash and cash equivalents, end of period		$	156,074			$	142,022			$	145,078			$	156,074			$	145,078

 

*	Use of Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Legislative and regulatory changes discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. We believe that the inclusion of these non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core

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operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in its financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which makes comparisons with other companies’ financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.

Akamai defines “Adjusted EBITDA” as net income, before interest, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt, gains on legal settlements, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. Akamai considers Adjusted EBITDA to be an important indicator of the Company’s operational strength and performance of its business and a good measure of the Company’s historical operating trend.

Adjusted EBITDA eliminates items that are either not part of the Company’s core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment and net interest income, or do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company’s estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historic cost incurred to build out the Company’s deployed network, and may not be indicative of current or future capital expenditures.

Akamai defines “Adjusted EBITDA margin” as Adjusted EBITDA as a percentage of revenues. Akamai considers Adjusted EBITDA margin to be an indicator of the Company’s operating trend and performance of its business in relation to its revenue growth.

Akamai defines “capital expenditures” or “capex” as purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai’s consolidated Statement of Cash Flows in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Akamai defines “normalized net income” as net income before amortization of other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, certain gains and losses on investments, loss on early extinguishment of debt, utilization of tax NOLs/credits and release of the deferred tax asset valuation allowance. Akamai considers normalized net income to be another important indicator of the overall performance of the Company because it eliminates the effects of events that are either not part of the Company’s core operations or are non-cash.

Akamai defines “diluted shares used in normalized net income per share calculation” as diluted common shares outstanding used in GAAP net income per share calculation, excluding the effect of FAS 123R under the treasury stock method. Akamai considers normalized net income to be another important indicator of overall performance of the Company because it eliminates the effect of a non-cash item.

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Adjusted EBITDA and normalized net income should be considered in addition to, not as a substitute for, the Company’s operating income and net income, as well as other measures of financial performance reported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

Reconciliation of GAAP net income to Normalized net income

and Adjusted EBITDA

(amounts in thousands, except per share data)

 

		Three Months Ended												Year Ended
		Dec. 31,				Sept. 30,				Dec. 31,				Dec. 31,				Dec. 31,
		2008				2008				2007				2008				2007
Net income		$	40,533			$	33,360			$	35,878			$	145,138			$	100,967
Amortization of other intangible assets			3,651				3,173				2,835				13,905				11,414
Stock-based compensation			15,529				14,122				15,608				57,899				66,555
Amortization of capitalized stock-based compensation			1,219				1,118				703				4,212				1,829
Loss (gain) on investments, net			430				(1	)			(23	)			157				(24	)
Utilization of tax NOLs/credits			18,336				22,434				20,898				84,722				63,869
Loss on early extinguishment of debt			—				—				—				—				3
Restructuring charge (benefit)			2,509				—				—				2,509				(178	)
Total normalized net income:			82,207				74,206				75,899				308,542				244,435
Interest income, net			(4,862	)			(4,994	)			(6,841	)			(21,967	)			(22,729	)
Provision for income taxes			1,204				1,124				1,164				4,675				3,369
Depreciation and amortization			22,583				20,279				16,688				79,964				58,651
Other income, net			(801	)			(154	)			(30	)			(461	)			(527	)
Total Adjusted EBITDA:		$	100,331			$	90,461			$	86,880			$	370,753			$	283,199
Normalized net income per share:
Basic		$	0.49			$	0.44			$	0.46			$	1.84			$	1.50
Diluted		$	0.44			$	0.40			$	0.41			$	1.66			$	1.32
Shares used in normalized per share calculations:
Basic			168,843				168,474				164,768				167,673				162,959
Diluted			186,489				188,349				186,674				187,382				186,709

# # #

Akamai Statement Under the Private Securities Litigation Reform Act

This release contains information about future expectations, plans and prospects of Akamai’s management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements concerning the expected growth and development of our business and expectations with respect to revenue. Actual results may differ materially from those indicated by

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these forward-looking statements as a result of various important factors including, but not limited to, failure to maintain the prices we charge for our services, unexpected increases in Akamai’s use of funds, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai’s services or network infrastructure, inability to realize the benefits of our net operating loss carryforwards, delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities, unexpected expenses associated with the integration of acerno, and other factors that are discussed in the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai’s expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai’s expectations or beliefs as of any date subsequent to the date of this press release.