EX-99.1 2 b55961atexv99w1.htm EX-99.1 PRESS RELEASE DATED JULY 26, 2005 exv99w1
 

EXHIBIT 99.1
FOR IMMEDIATE RELEASE
         
Contacts:
Jeff Young
Media Relations
Akamai Technologies
617-444-3913
jyoung@akamai.com
  —or—
 
  		  Sandy Smith
Investor Relations
Akamai Technologies
617-444-2804
ssmith@akamai.com
AKAMAI REPORTS RECORD REVENUE AND PROFITS
FOR SECOND QUARTER 2005
w   Revenue grows 27 percent year-over-year to $64.6 million, an 8 percent increase from prior quarter
w   Second quarter GAAP net income expands 134 percent year-over-year to $15.9 million, or $0.11 per diluted share, a 13 percent increase over prior quarter’s GAAP net income
w   Normalized net income* increases 65 percent year-over-year to $17.1 million, or $0.12 per diluted share, a 19 percent increase over prior quarter’s normalized net income
CAMBRIDGE, Mass. - July 26, 2005 - Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and business processes online, today reported financial results for the second quarter ended June 30, 2005.
Revenue for the second quarter 2005 was $64.6 million, an 8 percent increase over first quarter 2005 revenue of $60.1 million, and a 27 percent increase over second quarter 2004 revenue of $50.8 million.
Akamai’s second quarter consolidated financial results include 20 days of activity from Speedera Networks, Inc. following the closing of Akamai’s acquisition of Speedera on June 10th. Speedera contributed $2.5 million of revenue during the quarter.
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, increased in the second quarter of 2005 to $15.9 million, or $0.11 per diluted share, a 13 percent increase over first quarter 2005 GAAP net income of $14.1 million, or $0.10 per diluted share, and a significant improvement over 2004 second quarter earnings per diluted share of $0.05 per share.
“Excellent performance across our business in the second quarter helped to drive our record top-line results and profitability,” said Paul Sagan, president and CEO of Akamai. “In addition, we already are seeing benefits from the Speedera acquisition, and expect further improvements as we work to expand our client base and service offerings.”

 

 

- more -
The Company generated normalized net income* of $17.1 million, or $0.12 per diluted share, in the second quarter of 2005. (*See Use of Non-GAAP Financial Measures below for definitions.)
Adjusted EBITDA* for the second quarter of 2005 was $22.7 million, up 11 percent compared to $20.4 million in the prior quarter, and up 28 percent compared to $17.7 million in the second quarter of 2004. Adjusted EBITDA as a percentage of revenue was 35 percent, up from 34 percent in the prior quarter, and consistent with second quarter 2004. (*See Use of Non-GAAP Financial Measures below for definitions.)
Cash from operations was $14.7 million in the second quarter, including costs associated with the acquisition, as compared to first quarter 2005 cash from operations of $18.7 million. On a year-to-date basis, cash from operations was $33.4 million, as compared to $21.1 million in the first six months of 2004.
At June 30, 2005, the Company had approximately 138.8 million shares of common stock outstanding, and had approximately $130.7 million of cash, cash equivalents and marketable securities, including $4.5 million in cash, cash equivalents and marketable securities resulting from the Speedera acquisition.
Customers
Excluding any customers that were acquired from Speedera, Akamai added 71 net new customers under long-term services contracts during the second quarter 2005. The Speedera acquisition resulted in an additional 305 recurring revenue customers, bringing Akamai’s total number of customers under long-term services contracts at the end of the second quarter to 1,736.
“We are benefiting from the increased adoption of our platform by leading enterprises and government agencies that need to make mission-critical applications predictable, scalable and secure,” continued Sagan. “We believe that, in the near term, growth will continue in such markets as online commerce, electronic software and media delivery, manufacturing, travel and hospitality, news and information portals, and the public sector.”
Sales through resellers and sales outside the United States accounted for 25 percent and 21 percent, respectively, of revenue for the second quarter of 2005.
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. 7069997.
About Akamai
Akamai® is the leading global service provider for accelerating content and business processes online. More than 1,700 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)
                 
    June 30,     December 31,  
    2005     2004  
Assets
                
Cash and cash equivalents
   $ 51,028     $ 35,318  
Marketable securities
     51,933       34,380  
Restricted marketable securities
     932       932  
Accounts receivable, net
     40,366       30,333  
Prepaid expenses and other current assets
     8,697       7,706  
 
            
Current assets
     152,956       108,669  
Marketable securities
     23,101       34,065  
Restricted marketable securities
     3,722       3,722  
Property and equipment, net
     39,308       25,242  
Goodwill and other intangible assets, net
     140,023       5,128  
Other assets
     5,621       5,917  
 
            
Total assets
   $ 364,731     $ 182,743  
 
            
 
                
Liabilities and stockholders’ equity
                
Accounts payable and accrued expenses
   $ 56,674     $ 42,446  
Other current liabilities
     5,354       4,320  
 
            
Current liabilities
     62,028       46,766  
Other liabilities
     5,172       5,294  
Convertible notes
     256,614       256,614  
 
            
Total liabilities
     323,814       308,674  
Stockholders’ equity (deficit)
     40,917       (125,931 )
 
            
Total liabilities and stockholders’ equity
   $ 364,731     $ 182,743  
 
            

 

 

Condensed Consolidated Statements of Operations
(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,  
    2005     2005     2004     2004     2005     2004  
Revenues
   $ 64,649     $ 60,096     $ 50,786     $ 48,367     $ 124,745     $ 99,153  
 
                                                
Costs and operating expenses:
                                                
Cost of revenues*
     12,752       11,524       11,083       12,146       24,276       23,229  
Research and development
     4,507       3,629       2,872       2,694       8,136       5,566  
Sales and marketing
     18,363       16,745       13,671       14,010       35,108       27,681  
General and administrative*
     11,341       11,839       10,521       11,197       23,180       21,718  
Amortization of other intangible assets
     520       12       12       12       532       24  
 
                                    
Total costs and operating expenses
     47,483       43,749       38,159       40,059       91,232       78,218  
 
                                    
Operating income
     17,166       16,347       12,627       8,308       33,513       20,935  
 
                                                
Interest expense, net
     770       1,013       2,045       3,158       1,783       5,203  
Loss on early extinguishment of debt
     —       —       3,264       2,018       —       5,282  
Gain on investments, net
     —       —       —       (11 )     —       (11 )
Other (income) expense, net
     (77 )     726       85       138       649       223  
 
                                    
Income before provision for income taxes
     16,473       14,608       7,233       3,005       31,081       10,238  
Provision for income taxes
     573       529       430       84       1,102       514  
 
                                    
Net income
   $ 15,900     $ 14,079     $ 6,803     $ 2,921     $ 29,979     $ 9,724  
 
                                    
 
                                                
Net income per share:
                                                
Basic
   $ 0.12     $ 0.11     $ 0.06     $ 0.02     $ 0.23     $ 0.08  
Diluted
   $ 0.11     $ 0.10     $ 0.05     $ 0.02     $ 0.21     $ 0.07  
 
                                                
Shares used in per share calculations:
                                                
Basic
     130,119       127,051       123,645       122,104       128,585       122,875  
Diluted
     149,986       147,282       146,408       133,825       148,607       146,058  
* Includes depreciation (see supplemental tables for figures)
                                                 
    Three Months Ended     Six Months Ended  
    June 30,     March 31,     June 30,     March 31,     June 30,     June 30,  
    2005     2005     2004     2004     2005     2004  
Supplemental financial data (in thousands):
                                                
Network-related depreciation
   $ 3,472     $ 2,915     $ 3,725     $ 4,450     $ 6,387     $ 8,175  
Other depreciation
   $ 860     $ 939     $ 1,106     $ 1,594     $ 1,799     $ 2,700  
 
                                                
Capital expenditures
   $ 9,805     $ 9,719     $ 4,575     $ 3,042     $ 19,524     $ 7,617  
 
                                                
Net increase (decrease) in cash, cash equivalents, restricted cash and marketable securities
   $ 12,695     $ 9,604     $ (54,922 )   $ (31,307 )   $ 22,299     $ (86,229 )
 
                                                
End of period statistics:
                                                
Number of customers under recurring contract
     1,736       1,360       1,214       1,172                  
Number of employees
     774       633       598       565                  
Number of deployed servers
     17,500       16,017       14,916       14,434                  

 

 

Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
                                                 
    Three Months Ended     Six Months Ended  
    June 30,     March 31,     June 30,     March 31,     June 30,     June 30,  
    2005     2005     2004     2004     2005     2004  
Cash flows from operating activities:
                                                
Net income
   $ 15,900     $ 14,079     $ 6,803     $ 2,921     $ 29,979     $ 9,724  
Adjustments to reconcile net income to net cash provided by operating activities:
                                                
Depreciation and amortization of deferred financing costs
     5,074       4,140       5,189       6,497       9,214       11,686  
Equity-related compensation
     657       227       274       533       884       807  
Deferred taxes
     —       158               30       158       30  
Non-cash portion of loss on early extinguishment of debt
     —       —       1,006       977       —       1,983  
Loss on investments, property and equipment and foreign currency, net
     319       227       34       156       546       190  
Provision for doubtful accounts
     41       413       (30 )     (206 )     454       (236 )
Changes in operating assets and liabilities excluding effects of acquired business:
                                                
Accounts receivable, net
     (1,837 )     (4,761 )     (1,696 )     (3,333 )     (6,598 )     (5,029 )
Prepaid expenses and other current assets
     (1,926 )     777       (37 )     2,474       (1,149 )     2,437  
Accounts payable, accrued expenses and other current liabilities
     (1,399 )     4,878       1,755       (2,204 )     3,479       (449 )
Accrued restructuring
     (339 )     (352 )     (474 )     (450 )     (691 )     (924 )
Deferred revenue
     45       281       (393 )     1,173       326       780  
Other noncurrent assets and liabilities
     (1,808 )     (1,365 )     47       68       (3,173 )     115  
 
                                    
Net cash provided by operating activities:
     14,727       18,702       12,478       8,636       33,429       21,114  
 
                                    
 
                                                
Cash flows from investing activities:
                                                
Cash acquired through business combination
     3,914       —       —       —       3,914       —  
Purchases of property and equipment and capitalization of internal-use software
     (9,805 )     (9,719 )     (4,575 )     (3,042 )     (19,524 )     (7,617 )
Purchase of investments
     (15,541 )     (10,544 )     (39,117 )     (121,418 )     (26,085 )     (160,535 )
Proceeds from sale of property and equipment
     —       —       —       9       —       9  
Proceeds from sales and maturities of investments
     14,231       5,203       9,400       171,725       19,434       181,125  
Decrease in restricted cash held for note repurchases
     —       —       —       5,000       —       5,000  
 
                                    
Net cash (used in) provided by investing activities
     (7,201 )     (15,060 )     (34,292 )     52,274       (22,261 )     17,982  
 
                                    
 
                                                
Cash flows from financing activities:
                                                
Payments on capital leases
     (93 )     (134 )     (134 )     (131 )     (227 )     (265 )
Proceeds from the issuance of 1% convertible senior notes, net of financing cots
     —       —       —       24,313       —       24,313  
Repurchase and retirement of 5 1/2% convertible subordinated notes
     —       —       (68,523 )     (62,873 )     —       (131,396 )
Proceeds from the issuance of common stock under stock option and employee stock purchase plans
     4,145       1,643       6,617       2,178       5,788       8,795  
 
                                    
Net cash provided by (used in) financing activities
     4,052       1,509       (62,040 )     (36,513 )     5,561       (98,553 )
 
                                    
 
                                                
Effects of exchange rate translation on cash and cash equivalents
     (431 )     (588 )     (167 )     (568 )     (1,019 )     (735 )
 
                                    
 
                                                
Net increase (decrease) in cash and cash equivalents
     11,147       4,563       (84,021 )     23,829       15,710       (60,192 )
Cash and cash equivalents, beginning of period
     39,881       35,318       129,481       105,652       35,318       105,652  
 
                                    
Cash and cash equivalents, end of period
   $ 51,028     $ 39,881     $ 45,460     $ 129,481     $ 51,028     $ 45,460  
 
                                    
* 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). Recent 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.
Akamai defines “Adjusted EBITDA” as net income, before interest, taxes, depreciation and amortization of tangible and intangible assets, equity-related compensation, certain gains and losses on equity investments, foreign exchange gains and losses, and loss on early extinguishment of debt.

 

 

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 equity-related compensation and impairment of intangible assets. 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. Because Adjusted EBITDA eliminates these items, Akamai considers this financial measure 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.
Akamai defines “Adjusted EBITDA margin” as a percentage of adjusted EBITDA over revenue. 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 and capitalization of internal-use software development costs. 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, equity-related compensation, certain gains and losses on equity investments, and loss on early extinguishment of debt. 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.
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 measure 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     Six Months Ended  
    June 30,     March 31,     June 30,     March 31,     June 30,     June 30,  
    2005     2005     2004     2004     2005     2004  
Net income
   $ 15,900     $ 14,079     $ 6,803     $ 2,921     $ 29,979     $ 9,724  
 
                                                
Amortization of intangible assets
     520       12       12       12       532       24  
Equity-related compensation
     657       227       274       533       884       807  
Gain on investments, net
     —       —       —       (11 )     —       (11 )
Loss on early extinguishment of debt
     —       —       3,264       2,018       —       5,282  
 
                                    
 
                                                
Total normalized net income:
     17,077       14,318       10,353       5,473       31,395       15,826  
 
                                                
Interest expense, net
     770       1,013       2,045       3,158       1,783       5,203  
Provision for income taxes
     573       529       430       84       1,102       514  
Depreciation and amortization
     4,332       3,854       4,831       6,044       8,186       10,875  
Other (income) expense, net
     (77 )     726       85       138       649       223  
 
                                    
 
                                                
Total Adjusted EBITDA:
   $ 22,675     $ 20,440     $ 17,744     $ 14,897     $ 43,115     $ 32,641  
 
                                    
 
                                                
Normalized net income per share:
                                                
Basic
   $ 0.13     $ 0.11     $ 0.08     $ 0.04     $ 0.24     $ 0.13  
Diluted
   $ 0.12     $ 0.10     $ 0.07     $ 0.04     $ 0.22     $ 0.12  
 
                                                
Shares used in per share calculations:
                                                
Basic
     130,119       127,051       123,645       122,104       128,585       122,875  
Diluted
     149,986       147,282       146,408       133,825       148,607       146,058  
# # #
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, including statements concerning the expected growth and development of our business and our expectations concerning the acquisition of Speedera. 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, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, failure to realize our expectations with respect to the acquisition of Speedera, 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, failure to maintain the prices we charge for our services, inability to service and repay our outstanding debt 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.