Delaware | 0-27275 | 04-3432319 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 |
Dated: | April 30, 2018 | AKAMAI TECHNOLOGIES, INC. | |
/s/ James Benson | |||
James Benson | |||
Chief Financial Officer |
Contacts: | ||
Chris Nicholson | Tom Barth | |
Media Relations | Investor Relations | |
Akamai Technologies | Akamai Technologies | |
617-444-2987 | 617-274-7130 | |
cnichols@akamai.com | tbarth@akamai.com |
• | Web Division revenue was $353 million, up 16% year-over-year and up 13% when adjusted for foreign exchange* |
• | Media and Carrier Division revenue was $316 million, up 6% year-over-year and up 4% when adjusted for foreign exchange* |
• | Cloud Security Solutions revenue was $149 million, up 36% year-over-year and up 32% when adjusted for foreign exchange* |
• | Revenue from Internet Platform Customers was $44 million, down 14% year-over-year and when adjusted for foreign exchange* |
• | Revenue excluding Internet Platform Customers was $624 million, up 14% year-over-year and up 11% when adjusted for foreign exchange* |
• | U.S. revenue was $423 million, up 6% year-over-year |
• | International revenue was $245 million, up 22% year-over-year and up 14% when adjusted for foreign exchange* |
• | Cash from operations was $192 million, or 29% of revenue |
• | Cash, cash equivalents and marketable securities was $1.3 billion as of March 31, 2018 |
• | The Company spent $20 million to repurchase 0.3 million shares of its common stock at an average price of $67.38 per share |
• | The Company had approximately 171 million shares of common stock outstanding as of March 31, 2018 |
* | See Use of Non-GAAP Financial Measures below for definitions |
(2) | Revenue from Cloud Security Solutions – A product-focused reporting view that illustrates revenue from Cloud Security Solutions separately from all other solution categories. During 2018, Akamai updated its methodology for allocating revenue to specific solutions when solutions are sold as a bundle. During 2018, Akamai reassigned amounts from CDN and other solutions revenue to Cloud Security Solutions revenue and revised historical results in order to reflect the most recent allocation methodologies and to provide a comparable view for all periods presented. |
(3) | Revenue from Internet Platform Customers – Revenue from six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix |
(in thousands) | March 31, 2018 | December 31, 2017 (1) | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 363,703 | $ | 313,382 | |||
Marketable securities | 447,850 | 398,554 | |||||
Accounts receivable, net | 484,617 | 461,457 | |||||
Prepaid expenses and other current assets | 163,556 | 172,853 | |||||
Total current assets | 1,459,726 | 1,346,246 | |||||
Property and equipment, net | 845,118 | 862,535 | |||||
Marketable securities | 512,270 | 567,592 | |||||
Goodwill | 1,498,906 | 1,498,688 | |||||
Acquired intangible assets, net | 193,228 | 201,259 | |||||
Deferred income tax assets | 44,490 | 36,231 | |||||
Other assets | 133,166 | 136,365 | |||||
Total assets | $ | 4,686,904 | $ | 4,648,916 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 81,239 | $ | 80,278 | |||
Accrued expenses | 253,075 | 283,743 | |||||
Deferred revenue | 95,490 | 70,495 | |||||
Convertible senior notes | 668,745 | — | |||||
Other current liabilities | 32,046 | 22,178 | |||||
Total current liabilities | 1,130,595 | 456,694 | |||||
Deferred revenue | 7,049 | 6,062 | |||||
Deferred income tax liabilities | 17,675 | 17,823 | |||||
Convertible senior notes | — | 662,913 | |||||
Other liabilities | 145,328 | 142,955 | |||||
Total liabilities | 1,300,647 | 1,286,447 | |||||
Total stockholders' equity | 3,386,257 | 3,362,469 | |||||
Total liabilities and stockholders' equity | $ | 4,686,904 | $ | 4,648,916 |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
Three Months Ended | |||||||||||
(in thousands, except per share data) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Revenue | $ | 668,724 | $ | 658,470 | $ | 600,293 | |||||
Costs and operating expenses: | |||||||||||
Cost of revenue(2) (3) | 234,825 | 229,940 | 205,727 | ||||||||
Research and development(2) | 65,065 | 59,673 | 52,162 | ||||||||
Sales and marketing(2) | 122,553 | 131,223 | 114,492 | ||||||||
General and administrative(2) (3) | 154,385 | 146,115 | 115,009 | ||||||||
Amortization of acquired intangible assets | 8,431 | 7,829 | 7,569 | ||||||||
Restructuring charges | 14,908 | 51,581 | — | ||||||||
Total costs and operating expenses | 600,167 | 626,361 | 494,959 | ||||||||
Income from operations | 68,557 | 32,109 | 105,334 | ||||||||
Interest income | 3,965 | 4,487 | 4,624 | ||||||||
Interest expense | (4,850 | ) | (4,850 | ) | (4,597 | ) | |||||
Other income (expense), net | 21 | 473 | (684 | ) | |||||||
Income before provision for income taxes | 67,693 | 32,219 | 104,677 | ||||||||
Provision for income taxes | 13,979 | 4,699 | 30,094 | ||||||||
Net income | $ | 53,714 | $ | 27,520 | $ | 74,583 | |||||
Net income per share: | |||||||||||
Basic | $ | 0.32 | $ | 0.16 | $ | 0.43 | |||||
Diluted | $ | 0.31 | $ | 0.16 | $ | 0.43 | |||||
Shares used in per share calculations: | |||||||||||
Basic | 170,116 | 169,429 | 173,158 | ||||||||
Diluted | 172,004 | 170,727 | 175,171 |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
(2) | Includes stock-based compensation (see supplemental table for figures) |
(3) | Includes depreciation and amortization (see supplemental table for figures) |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 53,714 | $ | 27,520 | $ | 74,583 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 104,095 | 99,396 | 86,533 | ||||||||
Stock-based compensation | 44,686 | 42,205 | 38,986 | ||||||||
(Benefit) provision for deferred income taxes | (7,814 | ) | (30,378 | ) | 28,425 | ||||||
Amortization of debt discount and issuance costs | 4,850 | 4,850 | 4,597 | ||||||||
Restructuring-related software charges | 2,818 | 31,965 | — | ||||||||
Other non-cash reconciling items, net | 4,379 | 6,413 | (129 | ) | |||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||
Accounts receivable | (18,419 | ) | (40,631 | ) | (19,876 | ) | |||||
Prepaid expenses and other current assets | (4,927 | ) | 7,612 | (47,172 | ) | ||||||
Accounts payable and accrued expenses | (31,312 | ) | 11,082 | (23,940 | ) | ||||||
Deferred revenue | 25,243 | 1,410 | 10,043 | ||||||||
Other current liabilities | 13,701 | 12,727 | 3,516 | ||||||||
Other non-current assets and liabilities | 996 | 23,270 | (12,948 | ) | |||||||
Net cash provided by operating activities | 192,010 | 197,441 | 142,618 | ||||||||
Cash flows from investing activities: | |||||||||||
Cash paid for acquired businesses, net of cash acquired | (79 | ) | (171,872 | ) | (10 | ) | |||||
Purchases of property and equipment and capitalization of internal-use software development costs | (113,075 | ) | (106,852 | ) | (91,181 | ) | |||||
Purchases of short- and long-term marketable securities | (73,352 | ) | (77,399 | ) | (92,306 | ) | |||||
Proceeds from sales and maturities of short- and long-term marketable securities | 75,736 | 154,390 | 324,138 | ||||||||
Other non-current assets and liabilities | (715 | ) | (420 | ) | (335 | ) | |||||
Net cash used in (provided by) investing activities | (111,485 | ) | (202,153 | ) | 140,306 | ||||||
Cash flows from financing activities: | |||||||||||
Proceeds from the issuance of common stock under stock plans | 22,738 | 13,940 | 17,530 | ||||||||
Employee taxes paid related to net share settlement of stock-based awards | (29,714 | ) | (10,273 | ) | (33,921 | ) | |||||
Repurchases of common stock | (19,785 | ) | (54,565 | ) | (72,467 | ) | |||||
Other non-current assets and liabilities | (3,900 | ) | — | — | |||||||
Net cash used in financing activities | (30,661 | ) | (50,898 | ) | (88,858 | ) | |||||
Effects of exchange rate changes on cash, cash equivalents and restricted cash | 1,165 | 631 | 5,019 | ||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 51,029 | (54,979 | ) | 199,085 | |||||||
Cash, cash equivalents and restricted cash at beginning of period | 314,429 | 369,408 | 324,626 | ||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 365,458 | $ | 314,429 | $ | 523,711 |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Web Division | $ | 352,837 | $ | 354,821 | $ | 303,488 | |||||
Media and Carrier Division | 315,887 | 303,649 | 296,805 | ||||||||
Total revenue | $ | 668,724 | $ | 658,470 | $ | 600,293 | |||||
Revenue growth rates year-over-year: | |||||||||||
Web Division | 16 | % | 16 | % | 13 | % | |||||
Media and Carrier Division | 6 | — | (2 | ) | |||||||
Total revenue | 11 | % | 8 | % | 5 | % | |||||
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2): | |||||||||||
Web Division | 13 | % | 15 | % | 14 | % | |||||
Media and Carrier Division | 4 | (1 | ) | (1 | ) | ||||||
Total revenue | 9 | % | 7 | % | 6 | % |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Cloud Security Solutions | $ | 149,205 | $ | 135,842 | $ | 110,006 | |||||
CDN and other solutions | 519,519 | 522,628 | 490,287 | ||||||||
Total revenue | $ | 668,724 | $ | 658,470 | $ | 600,293 | |||||
Revenue growth rates year-over-year: | |||||||||||
Cloud Security Solutions | 36 | % | 34 | % | 34 | % | |||||
CDN and other solutions | 6 | 3 | — | ||||||||
Total revenue | 11 | % | 8 | % | 5 | % | |||||
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2): | |||||||||||
Cloud Security Solutions | 32 | % | 33 | % | 36 | % | |||||
CDN and other solutions | 3 | 2 | 1 | ||||||||
Total revenue | 9 | % | 7 | % | 6 | % |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017(1) | March 31, 2017(1) | ||||||||
Revenue from Internet Platform Customers | $ | 44,391 | $ | 49,992 | $ | 51,391 | |||||
Revenue excluding Internet Platform Customers | 624,333 | 608,478 | 548,902 | ||||||||
Total revenue | $ | 668,724 | $ | 658,470 | $ | 600,293 | |||||
Revenue growth rates year-over-year: | |||||||||||
Revenue from Internet Platform Customers | (14 | )% | (14 | )% | (29 | )% | |||||
Revenue excluding Internet Platform Customers | 14 | 10 | 10 | ||||||||
Total revenue | 11 | % | 8 | % | 5 | % | |||||
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2): | |||||||||||
Revenue from Internet Platform Customers | (14 | )% | (14 | )% | (29 | )% | |||||
Revenue excluding Internet Platform Customers | 11 | 9 | 11 | ||||||||
Total revenue | 9 | % | 7 | % | 6 | % |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
U.S. | $ | 423,339 | $ | 425,744 | $ | 398,870 | |||||
International | 245,385 | 232,726 | 201,423 | ||||||||
Total revenue | $ | 668,724 | $ | 658,470 | $ | 600,293 | |||||
Revenue growth rates year-over-year: | |||||||||||
U.S. | 6 | % | 2 | % | — | % | |||||
International | 22 | 22 | 19 | ||||||||
Total revenue | 11 | % | 8 | % | 5 | % | |||||
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates(2): | |||||||||||
U.S. | 6 | % | 2 | % | — | % | |||||
International | 14 | 18 | 21 | ||||||||
Total revenue | 9 | % | 7 | % | 6 | % |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
General and administrative expenses: | |||||||||||
Payroll and related costs | $ | 51,894 | $ | 50,187 | $ | 44,891 | |||||
Stock-based compensation | 12,922 | 11,359 | 10,115 | ||||||||
Depreciation and amortization | 19,888 | 19,845 | 18,528 | ||||||||
Facilities-related costs | 21,795 | 21,071 | 18,798 | ||||||||
Provision for doubtful accounts | 521 | 805 | 153 | ||||||||
Acquisition-related costs | 1,143 | 19,995 | (209 | ) | |||||||
Legal and stockholder matter costs | 23,091 | — | — | ||||||||
License of patent | (4,215 | ) | (4,169 | ) | (4,035 | ) | |||||
Professional and other expenses | 27,346 | 27,022 | 26,768 | ||||||||
Total general and administrative expenses | $ | 154,385 | $ | 146,115 | $ | 115,009 | |||||
General and administrative expenses–functional(1): | |||||||||||
Global functions | $ | 55,653 | $ | 52,818 | $ | 48,727 | |||||
As a percentage of revenue | 8 | % | 8 | % | 8 | % | |||||
Infrastructure | 78,192 | 76,666 | 70,373 | ||||||||
As a percentage of revenue | 12 | % | 12 | % | 12 | % | |||||
Other | 20,540 | 16,631 | (4,091 | ) | |||||||
Total general and administrative expenses | $ | 154,385 | $ | 146,115 | $ | 115,009 | |||||
As a percentage of revenue | 23 | % | 22 | % | 19 | % | |||||
Stock-based compensation: | |||||||||||
Cost of revenue | $ | 5,296 | $ | 5,259 | $ | 4,685 | |||||
Research and development | 10,509 | 10,121 | 9,029 | ||||||||
Sales and marketing | 15,959 | 15,466 | 15,157 | ||||||||
General and administrative | 12,922 | 11,359 | 10,115 | ||||||||
Total stock-based compensation | $ | 44,686 | $ | 42,205 | $ | 38,986 |
Three Months Ended | |||||||||||
(in thousands, except end of period statistics) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Depreciation and amortization: | |||||||||||
Network-related depreciation | $ | 38,235 | $ | 37,223 | $ | 35,255 | |||||
Capitalized internal-use software development amortization | 31,668 | 29,096 | 21,589 | ||||||||
Other depreciation and amortization | 19,498 | 19,498 | 18,209 | ||||||||
Depreciation of property and equipment | 89,401 | 85,817 | 75,053 | ||||||||
Capitalized stock-based compensation amortization | 5,569 | 5,029 | 3,471 | ||||||||
Capitalized interest expense amortization | 694 | 721 | 440 | ||||||||
Amortization of acquired intangible assets | 8,431 | 7,829 | 7,569 | ||||||||
Total depreciation and amortization | $ | 104,095 | $ | 99,396 | $ | 86,533 | |||||
Capital expenditures, excluding stock-based compensation and interest expense(1)(2): | |||||||||||
Purchases of property and equipment | $ | 26,597 | $ | 50,716 | $ | 56,500 | |||||
Capitalized internal-use software development costs | 49,257 | 43,074 | 37,085 | ||||||||
Total capital expenditures, excluding stock-based compensation and interest expense | $ | 75,854 | $ | 93,790 | $ | 93,585 | |||||
End of period statistics: | |||||||||||
Number of employees | 7,454 | 7,650 | 6,672 |
Three Months Ended | |||||||||||
(in thousands, except per share data) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Income from operations | $ | 68,557 | $ | 32,109 | $ | 105,334 | |||||
GAAP operating margin | 10 | % | 5 | % | 18 | % | |||||
Amortization of acquired intangible assets | 8,431 | 7,829 | 7,569 | ||||||||
Stock-based compensation | 44,686 | 42,205 | 38,986 | ||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 6,263 | 5,750 | 3,911 | ||||||||
Restructuring charges | 14,908 | 51,581 | — | ||||||||
Acquisition-related costs | 1,143 | 19,995 | (208 | ) | |||||||
Legal and stockholder matter costs | 23,091 | — | — | ||||||||
Operating adjustments | 98,522 | 127,360 | 50,258 | ||||||||
Non-GAAP income from operations | $ | 167,079 | $ | 159,469 | $ | 155,592 | |||||
Non-GAAP operating margin | 25 | % | 24 | % | 26 | % | |||||
Net income | $ | 53,714 | $ | 27,520 | $ | 74,583 | |||||
Operating adjustments (from above) | 98,522 | 127,360 | 50,258 | ||||||||
Amortization of debt discount and issuance costs | 4,850 | 4,850 | 4,597 | ||||||||
Gain on investments | — | (450 | ) | — | |||||||
Income tax-effect of above non-GAAP adjustments and certain discrete tax items | (21,283 | ) | (38,574 | ) | (15,467 | ) | |||||
Non-GAAP net income | $ | 135,803 | $ | 120,706 | $ | 113,971 | |||||
GAAP net income per diluted share | $ | 0.31 | $ | 0.16 | $ | 0.43 | |||||
Amortization of acquired intangible assets | 0.05 | 0.05 | 0.04 | ||||||||
Stock-based compensation | 0.25 | 0.25 | 0.22 | ||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 0.04 | 0.03 | 0.02 | ||||||||
Restructuring charges | 0.09 | 0.30 | — | ||||||||
Acquisition-related costs | 0.01 | 0.12 | — | ||||||||
Legal and stockholder matter costs | 0.13 | — | — | ||||||||
Amortization of debt discount and issuance costs | 0.03 | 0.03 | 0.03 | ||||||||
Gain on investments | — | — | — | ||||||||
Income tax effect of above non-GAAP adjustments and certain discrete tax items | (0.12 | ) | (0.23 | ) | (0.09 | ) | |||||
Non-GAAP net income per diluted share | $ | 0.79 | $ | 0.71 | $ | 0.65 | |||||
Shares used in diluted per share calculations | 172,004 | 170,727 | 175,171 |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
Three Months Ended | |||||||||||
(in thousands, except per share data) | March 31, 2018 | December 31, 2017 (1) | March 31, 2017 (1) | ||||||||
Net income | $ | 53,714 | $ | 27,520 | $ | 74,583 | |||||
Interest income | (3,965 | ) | (4,487 | ) | (4,624 | ) | |||||
Provision for income taxes | 13,979 | 4,699 | 30,094 | ||||||||
Depreciation and amortization | 89,401 | 85,817 | 75,053 | ||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 6,263 | 5,750 | 3,911 | ||||||||
Amortization of acquired intangible assets | 8,431 | 7,829 | 7,569 | ||||||||
Stock-based compensation | 44,686 | 42,205 | 38,986 | ||||||||
Restructuring charges | 14,908 | 51,581 | — | ||||||||
Acquisition-related costs | 1,143 | 19,995 | (208 | ) | |||||||
Legal and stockholder matter costs | 23,091 | — | — | ||||||||
Amortization of debt discount and issuance costs | 4,850 | 4,850 | 4,597 | ||||||||
Gain on investments | — | (450 | ) | — | |||||||
Other (income) expense, net | (21 | ) | (23 | ) | 684 | ||||||
Adjusted EBITDA | $ | 256,480 | $ | 245,286 | $ | 230,645 | |||||
Adjusted EBITDA margin | 38 | % | 37 | % | 38 | % |
(1) | Prior period information has been restated for the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which Akamai adopted retrospectively on January 1, 2018. Under this standard, the way revenue is recognized changed for some of Akamai's contracts with customers. Akamai will also begin capitalizing costs associated with obtaining customer contracts, specifically commission and incentive payments. For more information, see the posted revisions to the consolidated statements of income and other key disaggregated revenue amounts in the Investor Relations section of Akamai's website at www.akamai.com. |
• | Amortization of acquired intangible assets – Akamai has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions Akamai has made. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization can vary significantly and is unique to each acquisition; therefore, Akamai excludes amortization of acquired intangible assets from its non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results. |
• | Stock-based compensation and amortization of capitalized stock-based compensation – Although stock-based compensation is an important aspect of the compensation paid to Akamai's employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of Akamai's current financial results to previous and future periods difficult to interpret; therefore, Akamai believes it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from its non-GAAP financial measures in order to highlight the performance of Akamai's core business and to be consistent with the way many investors evaluate its performance and compare its operating results to peer companies. |
• | Acquisition-related costs – Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities. In addition, subsequent adjustments to Akamai's initial estimated amounts of contingent consideration and indemnification associated with specific acquisitions are included within acquisition-related costs. These amounts are impacted by the timing and size of the acquisitions. Akamai excludes acquisition-related costs from its non-GAAP financial measures to provide a useful comparison of Akamai's operating results to prior periods and to its peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions and do not reflect Akamai's core operations. |
• | Restructuring charges – Akamai has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments. Akamai excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of its business. |
• | Amortization of debt discount and issuance costs and amortization of capitalized interest expense – In February 2014, Akamai issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rate of the convertible senior notes was approximately 3.2%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity under GAAP, thereby reducing the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. All of Akamai's interest expense is comprised of these non-cash components and is excluded from management's assessment of the company's operating performance because management believes the non-cash expense is not representative of ongoing operating performance. |
• | Legal and stockholder matter costs –Akamai has incurred losses related to the settlement of legal matters, costs from professional service providers related to a non-routine stockholder matter and costs with respect to its internal U.S. Foreign Corrupt Practices Act ("FCPA") investigation. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of Akamai's core business operations. |
• | Income tax effect of non-GAAP adjustments and certain discrete tax items – The non-GAAP adjustments described above are reported on a pre-tax basis. The income tax effect of non-GAAP adjustments is the difference between GAAP and non-GAAP income tax expense. Non-GAAP income tax expense is computed on non-GAAP pre-tax income (GAAP pre-tax income adjusted for non-GAAP adjustments) and excludes certain discrete tax items (such as recording or releasing of valuation allowances), if any. Akamai believes that applying the non GAAP adjustments and their related income tax effect allows Akamai to highlight income attributable to its core operations. |