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Press Release Details

Akamai Reports Fourth Quarter 2007 and Full-Year 2007 Financial Results

February 6, 2008 at 4:03 PM EST
    --  Fourth quarter revenue grew to $183.2 million, up 14 percent
        from the prior quarter and 46 percent year-over-year, and
        annual revenue increased 48 percent year-over-year to $636.4
        million

    --  Fourth quarter GAAP net income increased 48 percent
        quarter-over-quarter to $35.9 million, or $0.20 per diluted
        share, and full-year GAAP net income increased 76 percent
        year-over-year to $101.0 million, or $0.56 per diluted share

    --  Fourth quarter normalized net income* increased 22 percent
        quarter-over-quarter to $75.9 million, or $0.41 per diluted
        share, and full-year normalized net income* increased 58
        percent year-over-year to $244.4 million, or $1.32 per diluted
        share

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 6, 2008--Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and applications online, today reported financial results for the fourth quarter and full-year ended December 31, 2007. Revenue for the fourth quarter 2007 was $183.2 million, a 14 percent increase over third quarter revenue of $161.2 million, and a 46 percent increase over fourth quarter 2006 revenue of $125.7 million. Total revenue for 2007 was $636.4 million, a 48 percent increase over 2006 revenue of $428.7 million.

"2007 was another year of impressive growth and significant accomplishments for Akamai," said Paul Sagan, president and CEO of Akamai. "The relationships we've built with customers across our target industries drove annual revenue growth of nearly 50 percent. As we begin our tenth year as a company, we believe the value of Akamai's differentiated services is stronger than ever - a testament to the dedication of our employees and the commitment of our customers to building great businesses on the Internet."

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2007 was $35.9 million, or $0.20 per diluted share. Full-year GAAP net income for 2007 was $101.0 million, or $0.56 per diluted share.

The Company generated normalized net income* of $75.9 million, or $0.41 per diluted share, in the fourth quarter of 2007, a 22 percent increase over prior quarter normalized net income of $62.4 million, or $0.34 per diluted share. Full-year normalized net income grew 58 percent year-over-year to $244.4 million, or $1.32 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

Adjusted EBITDA* for the fourth quarter of 2007 was $86.9 million, up from $71.9 million in the prior quarter, and $53.0 million in the fourth quarter of 2006. Adjusted EBITDA margin for the fourth quarter was 47 percent, a 5-point improvement over the fourth quarter of last year. For the full year, adjusted EBITDA was $283.2 million, up from $173.3 million in 2006. Full-year adjusted EBITDA margin improved to 44 percent, up from 40 percent in 2006. (*See Use of Non-GAAP Financial Measures below for definitions.)

Full-year cash from operations was $235.4 million, or 37 percent of revenue, up 78 percent over the prior year. At year-end, the Company had approximately $633.5 million of cash, cash equivalents and marketable securities.

The Company had approximately 166.5 million shares of common stock outstanding as of December 31, 2007.

The number of customers under long-term service contracts at the end of the fourth quarter increased by 29 to a record 2,645, a 13 percent increase year-over-year.

Sales through resellers and sales outside the United States accounted for 16 percent and 23 percent, respectively, of revenue for the fourth quarter 2007.

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. 30455196.

About Akamai

Akamai(R) is the leading global service provider for accelerating content and business processes online. Thousands of organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com.

Financial Statements

                Condensed Consolidated Balance Sheets
                    (dollar amounts in thousands)
                             (unaudited)

                                                 Dec. 31,   Dec. 31,
                                                    2007       2006
                                                 ---------- ----------
                     Assets
Cash and cash equivalents                        $  145,078 $   80,595
Marketable securities                               400,580    188,141
Restricted marketable securities                        511      1,105
Accounts receivable, net                            118,944     86,232
Prepaid expenses and other current assets            47,080     18,600
                                                 ---------- ----------
  Current assets                                    712,193    374,673
Marketable securities                                84,237    161,511
Restricted marketable securities                      3,102      3,102
Property and equipment, net                         134,546     86,623
Goodwill and other intangible assets, net           449,137    298,263
Other assets                                          4,520      4,256
Deferred tax assets, net                            285,463    319,504
                                                 ---------- ----------
  Total assets                                   $1,673,198 $1,247,932
                                                 ========== ==========

      Liabilities and stockholders' equity
Accounts payable and accrued expenses            $   74,773 $   80,713
Other current liabilities                            13,602      8,551
                                                 ---------- ----------
  Current liabilities                                88,375     89,264
Other liabilities                                     9,265      3,975
Convertible notes                                   199,855    200,000
                                                 ---------- ----------
  Total liabilities                                 297,495    293,239
Stockholders' equity                              1,375,703    954,693
                                                 ---------- ----------
  Total liabilities and stockholders' equity     $1,673,198 $1,247,932
                                                 ========== ==========
           Condensed Consolidated Statements of Operations
            (amounts in thousands, except per share data)
                             (unaudited)

                         Three Months Ended            Twelve Months
                                                           Ended-
                December September December September DecemberDecember
                   31,      30,       31,      30,       31,     31,
                  2007     2007      2006     2006      2007    2006
                -------- --------- -------- --------- ----------------

Revenues        $183,238  $161,240 $125,703  $111,495 $636,406$428,672

Costs and
 operating
 expenses:
 Cost of
  revenues * +    49,394    43,811   28,605    24,984  167,444  94,100
 Research and
  development *   10,466    11,408    9,141     8,862   44,141  33,102
 Sales and
  marketing *     36,397    36,671   34,258    29,416  147,556 119,689
 General and
  admin-
  istrative * +   33,100    30,744   25,249    24,529  121,101  90,191
 Amortization
  of other
  intangible
  assets           2,835     2,835    2,047     1,943   11,414   8,484
 Restructuring
  benefit              -         -        -         -    (178)       -
                -------- --------- -------- --------- ----------------
  Total costs
   and
   operating
   expenses      132,192   125,469   99,300    89,734  491,478 345,566
                -------- --------- -------- --------- ----------------
Operating
 income           51,046    35,771   26,403    21,761  144,928  83,106

Interest
 income, net     (6,841)   (5,913)  (4,567)   (3,970) (22,729)(14,532)
Loss on early
 extinguishment
 of debt               -         2        -         -        3       -
Gain on
 investments,
 net                (23)       (1)      (2)         -     (24)   (261)
Other (income)
 expense, net       (30)   (1,273)    (357)       448    (527)   (570)
                -------- --------- -------- --------- ----------------
Income before
 provision for
 income taxes     57,940    42,956   31,329    25,283  168,205  98,469
Provision for
 income taxes     22,062    18,692   10,706    11,264   67,238  41,068
                -------- --------- -------- --------- ----------------
Net income       $35,878   $24,264  $20,623   $14,019 $100,967 $57,401
                ======== ========= ======== ========= ================

Net income per
 share:
    Basic          $0.22     $0.15    $0.13     $0.09    $0.62   $0.37
    Diluted        $0.20     $0.13    $0.12     $0.08    $0.56   $0.34

Shares used in
 per share
 calculations:
    Basic        164,768   165,474  157,206   155,739  162,959 155,366
    Diluted      185,294   185,106  179,064   177,063  185,094 176,767

* Includes stock-related compensation (see supplemental table for
 figures)
+ Includes depreciation (see supplemental table for figures)

                                                      Twelve Months
                           Three Months Ended              Ended
                     Dec.   Sept.    Dec.   Sept.    Dec. 31, Dec. 31,
                      31,     30,     31,     30,
                      2007    2007    2006    2006     2007     2006
                    ------- ------- ------- -------  -------- --------
Supplemental
 financial data (in
 thousands):

Stock-related
 compensation:
Cost of revenues    $   867 $   896 $   637 $   517  $  3,349 $  1,960
Research and
 development          3,643   4,095   3,409   3,037    15,658   11,435
Sales and marketing   6,144   6,810   5,993   4,781    26,252   18,403
General and
 administrative       4,954   5,108   4,753   6,179    21,296   17,770
                    ------- ------- ------- -------  -------- --------
     Total stock-
      related
      compensation  $15,608 $16,909 $14,792 $14,514  $ 66,555 $ 49,568

Depreciation and
 amortization:
Network-related
 depreciation       $14,249 $13,591 $ 8,132 $ 7,144  $ 50,295 $ 26,810
Capitalized stock-
 related
 compensation
 amortization           703     537     136     129     1,829      298
Other depreciation
 and amortization     2,439   2,279   1,487   1,306     8,356    4,992
Amortization of
 other intangible
 assets               2,835   2,835   2,047   1,943    11,414    8,484
                    ------- ------- ------- -------  -------- --------
Total depreciation
 and amortization   $20,226 $19,242 $11,802 $10,522  $ 71,894 $ 40,584

Capital
 expenditures:
Purchases of
 property and
 equipment          $ 9,954 $18,345 $18,944 $13,519  $ 81,420 $ 56,752
Capitalized
 internal-use
 software             5,962   4,981   3,532   2,932    19,057   12,576
Capitalized stock-
 related
 compensation         1,991   1,551   1,471   1,058     6,353    4,293
                    ------- ------- ------- -------  -------- --------
Total capital
 expenditures       $17,907 $24,877 $23,947 $17,509  $106,830 $ 73,621

Net increase in
 cash, cash
 equivalents,
 marketable
securities and
 restricted
 marketable
 securities         $67,572 $62,010 $18,372 $48,600  $199,054 $120,325

End of period
 statistics:
Number of customers
 under recurring
 contract             2,645   2,616   2,347   2,144
Number of employees   1,324   1,287   1,058     917
Number of deployed
 servers             30,293  28,301  22,109  21,864
           Condensed Consolidated Statements of Cash Flows
                        (amounts in thousands)
                             (unaudited)


                                                      Twelve Months
                         Three Months Ended                Ended
                 Dec. 31, Sept. 30,Dec. 31,  Sept.  Dec. 31, Dec. 31,
                                               30,
                   2007     2007     2006     2006    2007     2006
                ------------------------------------------------------

Cash flows from
 operating
 activities:
 Net income        $35,878  $24,264  $20,623 $14,019 $100,967  $57,401
 Adjustments to
  reconcile net
  income to net
  cash provided
  by operating
  activities,
  net of
  acquisitons:
  Depreciation
   and
   amortization
   of intangible
   assets and
   deferred
   financing
   costs            20,436   19,452   12,013  10,732   72,735   41,426
  Stock-related
   compensation     15,608   16,909   14,792  14,514   66,555   49,568
 Utilization of
  tax
  NOLs/credits
  and changes in
  deferred tax
  assets, net       22,794   16,540    9,414  11,154   64,472   38,510
 Excess tax
  benefits from
  stock-related
  compensation     (2,551)  (2,338) (12,910) (8,735) (20,862) (32,511)
 (Gain) loss on
  investments,
  property and
  equipment and
  foreign
  currency, net      (375)    (678)    (438)      64  (1,542)    (996)
 Provision for
  doubtful
  accounts             848      944      397   (164)    2,901      830
 Non-cash
  portion of
  loss on early
  extinguishment
  of debt                -        2        -       -        3        -
 Non-cash
  portion of
  restructuring
  benefit                -        -        -       -    (178)        -
 Changes in
  operating
  assets and
  liabilities,
  net of
  acquisitions:
   Accounts
    receivable,
    net           (11,386)  (9,054) (14,022) (3,257) (31,937) (28,020)
   Prepaid
    expenses and
    other
    current
    assets         (3,584)  (2,192)  (3,249)   (495) (11,209)  (8,062)
   Accounts
    payable,
    accrued
    expenses and
    other
    current
    liabilities    (8,837)   10,975  (3,137)  12,097 (12,965)   15,382
   Accrued re-
    structuring      (177)  (1,049)    (464)   (458)  (2,722)  (1,970)
   Deferred
    revenue          1,324      859    (759)   (937)    5,297      343
   Other
    noncurrent
    assets and
    liabilities      1,179    1,479      310    (44)    3,874       66
                ------------------------------------------------------
 Net cash
  provided by
  operating
  activities        71,157   76,113   22,570  48,490  235,389  131,967
                ------------------------------------------------------

Cash flows from
 investing
 activities:
  Business
   acquisitions,
   net of cash
   acquired              -        -  (5,127)       -    7,875  (5,127)
  Purchases of
   property and
   equipment and
   capital-
   ization of
   internal-use
   software
   costs          (15,916) (23,326) (22,476)(16,451)(100,477) (69,328)
  Proceeds from
   sales and
   maturities of
   investments     166,353   93,335   79,075  65,501  415,771  264,308
  Purchase of
   investments   (241,788)(102,716)(116,164)(87,778)(550,614)(395,871)
  Proceeds from
   sale of
   property and
   equipment             6        9        -       -       15        -
  Decrease in
   restricted
   investments
   held for
   security
   deposits              -      723        -       -      723      400
                ------------------------------------------------------
 Net cash used
  in investing
  activities      (91,345) (31,975) (64,692)(38,728)(266,707)(205,618)
                ------------------------------------------------------

Cash flows from
 financing
 activities:
  Proceeds from
   the issuance
   of common
   stock under
   stock option
  and employee
   stock
   purchase
   plans             9,035    4,835    9,267   7,186   31,621   27,918
  Excess tax
   benefits from
   stock-related
   compensation      2,551    2,338   12,910   8,735   20,862   32,511
  Payments on
   capital
   leases                -        -        -       -     (23)        -
                ------------------------------------------------------
 Net cash
  provided by
  financing
  activities        11,586    7,173   22,177  15,921   52,460   60,429
                ------------------------------------------------------

 Effects of
  exchange rate
  translation on
  cash and cash
  equivalents          876    1,331    1,417    (62)    3,341    2,025
                ------------------------------------------------------

 Net (decrease)
  increase in
  cash and cash
  equivalents      (7,726)   52,642 (18,528)  25,621   64,483 (11,197)
 Cash and cash
  equivalents,
  beginning of
  period           152,804  100,162   99,123  73,502   80,595   91,792
                ------------------------------------------------------
 Cash and cash
  equivalents,
  end of period   $145,078 $152,804  $80,595 $99,123 $145,078  $80,595
                ======================================================

*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 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-related compensation expense, amortization of capitalized stock-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, foreign exchange gains and losses, loss on early extinguishment of debt, 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 expense, or do not require a cash outlay, such as stock-related 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 trends 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-related compensation. Capital expenditures or capex are disclosed in Akamai's condensed 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 intangible assets, stock-related compensation expense, amortization of capitalized stock-related compensation, restructuring charges and benefits, certain gains and losses on equity 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.

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         Twelve Months
                                                           Ended
                      Dec.   Sept.    Dec.   Sept.   Dec. 31, Dec. 31,
                       31,     30,     31,     30,
                      2007    2007    2006    2006     2007     2006
                     ------- ------- ------- ------- -------- --------


Net income           $35,878 $24,264 $20,623 $14,019 $100,967  $57,401

Amortization of
 intangible assets     2,835   2,835   2,047   1,943   11,414    8,484
Stock-related
 compensation         15,608  16,909  14,792  14,514   66,555   49,568
Amortization of
 capitalized stock-
 related compensation    703     537     136     129    1,829      298
Gain on investments,
 net                    (23)     (1)     (2)       -     (24)    (261)
Utilization of tax
 NOLs/credits         20,898  17,833   9,924  11,154   63,869   39,020
Loss on early
 extinguishment of
 debt                      -       2       -       -        3        -
Restructuring benefit      -       -       -       -    (178)        -
                     ------- ------- ------- ------- -------- --------

Total normalized net
 income:              75,899  62,379  47,520  41,759  244,435  154,510

Interest income, net (6,841) (5,913) (4,567) (3,970) (22,729) (14,532)
Provision for income
 taxes                 1,164     859     782     110    3,369    2,048
Depreciation and
 amortization         16,688  15,870   9,619   8,450   58,651   31,802
Other (income)
 expense, net           (30) (1,273)   (357)     448    (527)    (570)
                     ------- ------- ------- ------- -------- --------

Total Adjusted
 EBITDA:             $86,880 $71,922 $52,997 $46,797 $283,199 $173,258
                     ======= ======= ======= ======= ======== ========

Normalized net income
 per share:
    Basic              $0.46   $0.38   $0.30   $0.27    $1.50    $0.99
    Diluted            $0.41   $0.34   $0.27   $0.24    $1.32    $0.88

Shares used in
 normalized per share
 calculations:
    Basic            164,768 165,474 157,206 155,739  162,959  155,366
    Diluted          186,674 186,767 181,332 179,563  186,709  179,470

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 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 carryforward, 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 Nine Systems, 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.

CONTACT: Akamai Technologies
Jeff Young, 617-444-3913
Media Relations
jyoung@akamai.com
or
Akamai Technologies
Sandy Smith, 617-444-2804
Investor Relations
ssmith@akamai.com

SOURCE: Akamai Technologies