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Akamai Technologies
ISIN: US00971T1016
WKN: 928906
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Analyse der Inhalte und Zusammenfassung

Akamai Technologies · ISIN: US00971T1016 · PR Newswire (ID: 20241107NE50961)
07 November 2024 10:01PM

AKAMAI REPORTS THIRD QUARTER 2024 FINANCIAL RESULTS


Third quarter revenue of $1.005 billion, up 4% year-over-year and when adjusted for foreign exchange*

Security and compute revenue represented 68% of total revenue in the third quarter and combined grew 17% year-over-year and when adjusted for foreign exchange*

CAMBRIDGE, Mass., Nov. 7, 2024 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the cybersecurity and cloud computing company that powers and protects business online, today reported financial results for the third quarter ended September 30, 2024.

"Akamai delivered another solid quarter, highlighted by continued momentum in security and cloud computing. Together, these solutions grew 17% on a year-over-year basis and now account for nearly 70% of our total revenue," said Dr. Tom Leighton, Akamai's Chief Executive Officer. "This quarter also marks a significant milestone as we surpassed the billion-dollar quarterly revenue threshold for the first time. Looking forward, we remain confident in the traction we see from our new products and our continued commitment to strong bottom-line performance."

Akamai delivered the following results for the third quarter ended September 30, 2024:

Revenue: Revenue was $1.005 billion, a 4% increase over third quarter 2023 revenue of $965 million and a 4% increase when adjusted for foreign exchange.*

Revenue by solution:

  • Security revenue was $519 million, up 14% year-over-year and when adjusted for foreign exchange*
  • Delivery revenue was $319 million, down 16% year-over-year and when adjusted for foreign exchange*
  • Compute revenue was $167 million, up 28% year-over-year and when adjusted for foreign exchange*

Revenue by geography:

  • U.S. revenue was $525 million, up 5% year-over-year
  • International revenue was $480 million, up 3% year-over-year and when adjusted for foreign exchange*

Restructuring charge: Third quarter 2024 GAAP income from operations, GAAP net income and GAAP EPS in the paragraphs below were impacted by the $82 million restructuring charge recognized in the third quarter of 2024. This charge primarily related to severance costs in connection with a workforce reduction with the primary intent of redeploying resources to support the Company's strategic investments and impairments of certain assets as a result of recent acquisitions.

Income from operations: GAAP income from operations was $71 million, a 60% decrease from third quarter 2023. GAAP operating margin for the third quarter was 7%, down 11 percentage points from the same period last year.

Non-GAAP income from operations* was $296 million, flat from third quarter 2023. Non-GAAP operating margin* for the third quarter was 29%, down 2 percentage points from the same period last year.

Net income: GAAP net income was $58 million, a 64% decrease from third quarter 2023. Non-GAAP net income* was $244 million, a 3% decrease from third quarter 2023.

EPS: GAAP net income per diluted share was $0.38, a 63% decrease from third quarter 2023 and a 62% decrease when adjusted for foreign exchange.* Non-GAAP net income per diluted share* was $1.59, a 2% decrease from third quarter 2023 and a 1% decrease when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA* was $426 million, a 2% increase from third quarter 2023.

Supplemental cash information: Cash from operations for the third quarter of 2024 was $393 million, or 39% of revenue. Cash, cash equivalents and marketable securities was $1.979 billion as of September 30, 2024.

Share repurchases: The Company spent $166 million in the third quarter of 2024 to repurchase 1.7 million shares of its common stock at an average price of $97.29 per share. The Company had 151 million shares of common stock outstanding as of September 30, 2024.

Financial guidance:

The Company reports the following financial guidance for the fourth quarter and full year 2024:



Three Months Ending

December 31, 2024



Year Ending

December 31, 2024



Low End



High End



Low End



High End

Revenue (in millions)

$        995



$     1,020



$  3,966



$  3,991

Non-GAAP operating margin *

27 %



28 %



29 %



29 %

Non-GAAP net income per diluted share *

$       1.49



$       1.56



$     6.31



$     6.38

Non-GAAP tax rate*

19 %



19 %



19 %



19 %

Shares used in non-GAAP per diluted share calculations * (in millions)

153



153



154



154

Capex as a percentage of revenue *

18 %



19 %



17 %



17 %

This guidance is provided on a non-GAAP basis and cannot be reconciled to the closest GAAP measures without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items Akamai excludes from non-GAAP measures. For example, stock-based compensation is unpredictable for Akamai's performance-based awards, which can fluctuate significantly based on current expectations of the future achievement of performance-based targets. Amortization of intangible assets, acquisition-related costs and restructuring costs are all impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, Akamai excludes certain items that occur infrequently, which are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items Akamai excludes and to estimate certain discrete tax items, such as the resolution of tax audits or changes to tax laws. As such, the costs that are being excluded from non-GAAP guidance are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes to any one of the exclusions could have a significant effect on our guidance and future GAAP results.

*     See Use of Non-GAAP Financial Measures below for definitions

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-833-634-5020 (or 1-412-902-4238 for international calls) and using passcode Akamai Technologies Call. A live webcast of the call may be accessed at www.akamai.com in the Investor Relations section. In addition, a replay of the call will be available for two weeks following the conference by calling 1-877-344-7529 (or 1-412-317-0088 for international calls) and using passcode 1443103. The archived webcast of this event may be accessed through the Akamai website.

About Akamai

Akamai is the cybersecurity and cloud computing company that powers and protects business online. Our market-leading security solutions, superior threat intelligence and global operations team provide defense-in-depth to safeguard enterprise data and applications everywhere. Akamai's full-stack cloud computing solutions deliver performance and affordability on the world's most distributed platform. Global enterprises trust Akamai to provide the industry-leading reliability, scale and expertise they need to grow their business with confidence. Learn more about Akamai's cloud computing, security and content delivery solutions at akamai.com and akamai.com/blog, or follow Akamai Technologies on X, formerly known as Twitter, and LinkedIn.

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands)

September 30,

2024



December 31,

2023

ASSETS







Current assets:







Cash and cash equivalents

$        569,749



$        489,468

Marketable securities

1,129,456



374,971

Accounts receivable, net

696,493



724,302

Prepaid expenses and other current assets

238,732



216,114

Total current assets

2,634,430



1,804,855

Marketable securities

279,411



1,431,354

Property and equipment, net

1,948,799



1,825,944

Operating lease right-of-use assets

1,006,132



908,634

Acquired intangible assets, net

586,247



536,143

Goodwill

3,154,351



2,850,470

Deferred income tax assets

431,318



418,297

Other assets

149,769



124,340

Total assets

$   10,190,457



$     9,900,037

LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Accounts payable

$        106,629



$        146,927

Accrued expenses

288,619



352,181

Deferred revenue

138,929



107,544

Convertible senior notes

1,148,471



Operating lease liabilities

251,596



222,944

Other current liabilities

48,779



6,442

Total current liabilities

1,983,023



836,038

Deferred revenue

24,316



23,006

Deferred income tax liabilities

27,387



24,622

Convertible senior notes

2,395,439



3,538,229

Operating lease liabilities

854,740



774,806

Other liabilities

111,414



106,181

Total liabilities

5,396,319



5,302,882

Total stockholders' equity

4,794,138



4,597,155

Total liabilities and stockholders' equity

$   10,190,457



$     9,900,037

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 



Three Months Ended



Nine Months Ended

(in thousands, except per share data)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Revenue

$     1,004,679



$         979,580



$         965,484



$     2,971,229



$     2,816,903

Costs and operating expenses:



















Cost of revenue (1) (2)

408,806



402,888



383,075



1,206,437



1,117,666

Research and development (1)

120,347



113,352



105,942



350,631



296,846

Sales and marketing (1)

138,551



139,039



132,309



412,160



397,970

General and administrative (1) (2)

159,957



153,854



147,326



466,241



445,276

Amortization of acquired intangible assets

24,368



21,076



18,108



66,467



49,918

Restructuring charge

82,013



1,385



2,595



83,942



56,675

Total costs and operating expenses

934,042



831,594



789,355



2,585,878



2,364,351

Income from operations

70,637



147,986



176,129



385,351



452,552

Interest and marketable securities income, net

23,065



26,628



11,412



77,534



21,213

Interest expense

(6,735)



(6,829)



(4,987)



(20,382)



(10,825)

Other expense, net

(13,161)



(949)



(3,161)



(13,599)



(6,654)

Income before provision for income taxes

73,806



166,836



179,393



428,904



456,286

Provision for income taxes

(15,899)



(35,148)



(20,326)



(63,891)



(71,297)

Gain from equity method investment





1,475





1,475

Net income

$           57,907



$         131,688



$         160,542



$        365,013



$        386,464





















Net income per share:



















Basic

$               0.38



$               0.86



$               1.06



$               2.40



$               2.53

Diluted

$               0.38



$               0.86



$               1.04



$               2.36



$               2.50





















Shares used in per share calculations:



















Basic

151,435



152,265



151,359



151,776



153,020

Diluted

153,240



153,588



154,976



154,765



154,855



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

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

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Cash flows from operating activities:



















Net income

$           57,907



$         131,688



$         160,542



$        365,013



$        386,464

Adjustments to reconcile net income to net cash provided by operating activities:



















Depreciation and amortization

165,729



158,549



148,560



480,461



423,142

Stock-based compensation

102,607



98,466



87,017



294,333



236,344

(Benefit) provision for deferred income taxes

(2,541)



13,946



(10,172)



938



(9,763)

Amortization of debt issuance costs

1,591



1,660



1,404



4,933



3,600

Other non-cash reconciling items, net

41,733



1,962



6,438



45,757



44,891

Changes in operating assets and liabilities, net of effects of acquisitions:



















Accounts receivable

11,290



17,538



(23,484)



28,092



(46,262)

Prepaid expenses and other current assets

(717)



1,253



1,994



(25,480)



(16,103)

Accounts payable and accrued expenses

(31,765)



19,523



23,615



(79,191)



(60,170)

Deferred revenue

(8,719)



(11,619)



(12,905)



13,978



24,146

Other current liabilities

41,370



624



(13,855)



42,350



2,290

Other non-current assets and liabilities

14,057



(2,627)



(9,718)



4,199



(29,333)

Net cash provided by operating activities

392,542



430,963



359,436



1,175,383



959,246

Cash flows from investing activities:



















Cash (paid) received for business acquisitions, net of cash acquired



(434,066)



155



(434,066)



(106,171)

Cash paid for asset acquisition

(66)



(4,796)



(36,348)



(4,862)



(36,348)

Purchases of property and equipment and capitalization of internal-use software development costs

(185,117)



(163,537)



(197,619)



(522,408)



(596,153)

Purchases of short- and long-term marketable securities

(15,519)



(16,103)



(1,050,016)



(201,641)



(1,184,837)

Proceeds from sales, maturities and redemptions of short- and long-term marketable securities

84,849



337,220



106,330



604,324



398,535

Other, net

(375)



(5,400)



13,335



4,160



(7,431)

Net cash used in investing activities

(116,228)



(286,682)



(1,164,163)



(554,493)



(1,532,405)

 

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Cash flows from financing activities:



















Proceeds from borrowings under revolving credit facility









90,000

Repayment from borrowings under revolving credit facility





(20,000)





(90,000)

Proceeds from the issuance of convertible senior notes, net of issuance costs





1,247,388





1,247,388

Proceeds from the issuance of warrants related to convertible senior notes





90,195





90,195

Purchases of note hedges related to convertible senior notes





(236,555)





(236,555)

Proceeds from the issuance of common stock under stock plans

19,442



7,956



18,222



47,708



49,553

Employee taxes paid related to net share settlement of stock-based awards

(15,868)



(31,914)



(11,304)



(157,115)



(50,910)

Repurchases of common stock

(165,839)



(127,809)



(113,197)



(419,097)



(599,155)

Other, net

(104)



(8,678)



(104)



(10,291)



(360)

Net cash (used in) provided by financing activities

(162,369)



(160,445)



974,645



(538,795)



500,156

Effects of exchange rate changes on cash, cash equivalents and restricted cash

9,494



(5,293)



(7,019)



188



(7,729)

Net increase (decrease) in cash, cash equivalents and restricted cash

123,439



(21,457)



162,899



82,283



(80,732)

Cash, cash equivalents and restricted cash at beginning of period

449,314



470,771



299,391



490,470



543,022

Cash, cash equivalents and restricted cash at end of period

$         572,753



$         449,314



$         462,290



$        572,753



$        462,290

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA – REVENUE BY SOLUTION

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Security

$     518,670



$     498,708



$     455,792



$ 1,508,059



$ 1,294,290

Delivery

319,132



329,399



379,304



1,000,289



1,153,386

Compute

166,877



151,473



130,388



462,881



369,227

Total revenue

$  1,004,679



$     979,580



$     965,484



$ 2,971,229



$ 2,816,903

Revenue growth rates year-over-year:



















Security

14 %



15 %



20 %



17 %



13 %

Delivery

(16)



(13)



(4)



(13)



(8)

Compute

28



23



19



25



26

Total revenue

4 %



5 %



9 %



5 %



5 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates (1):



















Security

14 %



16 %



19 %



17 %



14 %

Delivery

(16)



(12)



(4)



(13)



(7)

Compute

28



24



19



26



27

Total revenue

4 %



6 %



9 %



6 %



6 %

 

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA – REVENUE BY GEOGRAPHY

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

U.S.

$     524,611



$     508,696



$     498,536



$ 1,545,654



$ 1,452,431

International

480,068



470,884



466,948



1,425,575



1,364,472

Total revenue

$  1,004,679



$     979,580



$     965,484



$ 2,971,229



$ 2,816,903

Revenue growth rates year-over-year:



















U.S.

5 %



6 %



8 %



6 %



2 %

International

3



3



11



4



7

Total revenue

4 %



5 %



9 %



5 %



5 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates (1):



















U.S.

5 %



6 %



8 %



6 %



2 %

International

3



5



9



6



9

Total revenue

4 %



6 %



9 %



6 %



6 %



(1)  See Use of Non-GAAP Financial Measures below for a definition

 

AKAMAI TECHNOLOGIES, INC.

OTHER SUPPLEMENTAL DATA

 



Three Months Ended



Nine Months Ended

(in thousands, except end of period statistics)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Stock-based compensation:



















Cost of revenue

$        16,566



$        15,864



$        11,236



$        45,048



$        31,904

Research and development

39,275



36,951



33,366



114,271



87,468

Sales and marketing

21,076



18,976



17,290



58,863



48,558

General and administrative

25,690



26,675



25,125



76,151



68,414

Total stock-based compensation

$      102,607



$        98,466



$        87,017



$      294,333



$      236,344





















Depreciation and amortization:



















Network-related depreciation

$        72,546



$        68,936



$        60,887



$      207,157



$      168,275

Capitalized internal-use software development amortization

41,973



42,407



45,030



128,012



132,756

Other depreciation and amortization

15,998



15,983



15,709



48,011



47,690

Depreciation of property and equipment

130,517



127,326



121,626



383,180



348,721

Capitalized stock-based compensation amortization (1)

10,740



10,048



8,710



30,500



24,169

Capitalized interest expense amortization (1)

104



99



116



314



334

Amortization of acquired intangible assets

24,368



21,076



18,108



66,467



49,918

Total depreciation and amortization

$      165,729



$      158,549



$      148,560



$      480,461



$      423,142





















Capital expenditures, excluding stock-based compensation and interest expense (2) (3):



















Purchases of property and equipment

$        91,600



$        94,463



$        86,382



$      260,698



$      378,759

Capitalized internal-use software development costs

72,391



72,653



65,895



222,535



196,271

Total capital expenditures, excluding stock-based compensation and interest expense

$      163,991



$      167,116



$      152,277



$      483,233



$      575,030

Capex as a percentage of revenue (3)

16 %



17 %



16 %



16 %



20 %





















End of period statistics:



















Number of employees

10,947



10,920



10,111













(1)

Amortization of capitalized stock-based compensation and interest expense in this table excludes amortization of capitalized stock-based compensation and interest expense capitalized related to cloud-computing arrangements and contract fulfillment costs. However, the amounts are included in our total amortization of capitalized stock-based compensation and interest expense that is excluded from our non-GAAP measures (see reconciliations of GAAP to non-GAAP measures).

(2)

Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end versus prior periods.

(3)

See Use of Non-GAAP Financial Measures below for a definition

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS, NET INCOME AND TAX RATE

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Income from operations

$       70,637



$     147,986



$     176,129



$     385,351



$     452,552

GAAP operating margin

7 %



15 %



18 %



13 %



16 %

Amortization of acquired intangible assets

24,368



21,076



18,108



66,467



49,918

Stock-based compensation

102,607



98,466



87,017



294,333



236,344

Amortization of capitalized stock-based compensation and capitalized interest expense

11,089



10,434



9,077



31,646



25,207

Restructuring charge

82,013



1,385



2,595



83,942



56,675

Acquisition-related costs

5,036



2,179



3,048



7,387



12,156

Operating adjustments

225,113



133,540



119,845



483,775



380,300

Non-GAAP income from operations

$     295,750



$     281,526



$     295,974



$     869,126



$     832,852

Non-GAAP operating margin

29 %



29 %



31 %



29 %



30 %





















Net income

$       57,907



$     131,688



$     160,542



$     365,013



$     386,464

Operating adjustments (from above)

225,113



133,540



119,845



483,775



380,300

Amortization of debt issuance costs

1,591



1,660



1,404



4,933



3,600

Loss (gain) on investments



66



(110)



66



(311)

Gain from equity method investment





(1,475)





(1,475)

Income tax effect of above non-GAAP adjustments and certain discrete tax items

(41,097)



(24,306)



(29,135)



(112,130)



(71,202)

Non-GAAP net income

$     243,514



$     242,648



$     251,071



$     741,657



$     697,376





















GAAP tax rate

22 %



21 %



11 %



15 %



16 %

Income tax effect of non-GAAP adjustments and certain discrete tax items

(3)



(1)



5



4



1

Non-GAAP tax rate

19 %



20 %



16 %



19 %



17 %

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE

 



Three Months Ended



Nine Months Ended

(in thousands, except per share data)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

GAAP net income per diluted share

$            0.38



$            0.86



$            1.04



$            2.36



$            2.50

Adjustments to net income:



















Amortization of acquired intangible assets

0.16



0.14



0.12



0.43



0.32

Stock-based compensation

0.67



0.64



0.56



1.90



1.53

Amortization of capitalized stock-based compensation and capitalized interest expense

0.07



0.07



0.06



0.20



0.16

Restructuring charge

0.54



0.01



0.02



0.54



0.37

Acquisition-related costs

0.03



0.01



0.02



0.05



0.08

Amortization of debt issuance costs

0.01



0.01



0.01



0.03



0.02

Loss (gain) on investments









Gain from equity method investment





(0.01)





(0.01)

Income tax effect of above non-GAAP adjustments and certain discrete tax items

(0.27)



(0.16)



(0.19)



(0.72)



(0.46)

Adjustment for shares (1)





0.01



0.03



0.01

Non-GAAP net income per diluted share

$            1.59



$            1.58



$            1.63



$            4.82



$            4.51





















Shares used in GAAP per diluted share calculations

153,240



153,588



154,976



154,765



154,855

Impact of benefit from note hedge transactions (1)

(294)



(199)



(544)



(869)



(181)

Shares used in non-GAAP per diluted share calculations (1)

152,946



153,389



154,432



153,896



154,674





(1)

Shares used in non-GAAP per diluted share calculations have been adjusted for the periods presented for the benefit of Akamai's note hedge transactions. During these periods, Akamai's average stock price was in excess of $95.10, which is the initial conversion price of Akamai's convertible senior notes due in 2025. See Use of Non-GAAP Financial Measures below for further definition.

 

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

 



Three Months Ended



Nine Months Ended

(in thousands)

September 30,

2024



June 30,

2024



September 30,

2023



September 30,

2024



September 30,

2023

Net income

$        57,907



$      131,688



$      160,542



$      365,013



$      386,464

Net income margin

6 %



13 %



17 %



12 %



14 %

Interest and marketable securities income, net

(23,065)



(26,628)



(11,412)



(77,534)



(21,213)

Provision for income taxes

15,899



35,148



20,326



63,891



71,297

Depreciation and amortization

130,517



127,326



121,626



383,180



348,721

Amortization of capitalized stock-based compensation and capitalized interest expense

11,089



10,434



9,077



31,646



25,207

Amortization of acquired intangible assets

24,368



21,076



18,108



66,467



49,918

Stock-based compensation

102,607



98,466



87,017



294,333



236,344

Restructuring charge

82,013



1,385



2,595



83,942



56,675

Acquisition-related costs

5,036



2,179



3,048



7,387



12,156

Interest expense

6,735



6,829



4,987



20,382



10,825

Loss (gain) on investments



66



(110)



66



(311)

Gain from equity method investment





(1,475)





(1,475)

Other expense, net

13,161



883



3,271



13,533



6,965

Adjusted EBITDA

$      426,267



$      408,852



$      417,600



$  1,252,306



$  1,181,573

Adjusted EBITDA margin

42 %



42 %



43 %



42 %



42 %

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 provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP financial measures). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate Akamai's financial performance. These non-GAAP financial measures are non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP tax rate, capital expenditures and impact of foreign currency exchange rates, as discussed below.

Management believes that these non-GAAP financial measures reflect Akamai's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparison of financial results across accounting periods and to those of our peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate Akamai's operating results and future prospects in the same manner as management. These non-GAAP financial measures may exclude expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results.

The non-GAAP financial measures do not replace the presentation of Akamai's GAAP financial measures and should only be used as a supplement to, not as a substitute for, Akamai's financial results presented in accordance with GAAP. Akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting and investor presentations to the most directly comparable GAAP financial measure. This reconciliation captioned "Reconciliation of GAAP to Non-GAAP Financial Measures" can be found on the Investor Relations section of Akamai's website.

The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:

  • 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 – Stock-based compensation is an important aspect of the compensation paid to Akamai's employees which includes long-term incentive plans to encourage retention, performance-based plans to encourage achievement of specified financial targets and also short-term incentive awards with a one year vest. The grant date fair value of the stock-based compensation awards 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, as well as certain additional compensation costs payable to employees acquired from the Linode acquisition if employed for a certain period of time. The additional compensation cost was initiated by and determined by the seller, and is in addition to normal levels of compensation, including retention programs, offered by Akamai. Acquisition-related costs are impacted by the timing and size of the acquisitions, and Akamai excludes acquisition-related costs from its non-GAAP financial measures to provide a useful comparison of operating results to prior periods and to peer companies because such amounts vary significantly based on the magnitude of the acquisition transactions and do not reflect Akamai's core operations.



  • Restructuring charge – Akamai has incurred restructuring charges from programs that have significantly changed either the scope of the business undertaken by the Company or the manner in which that business is conducted. These charges include severance and related expenses for workforce reductions, impairments of long-lived assets that will no longer be used in operations (including acquired intangible assets, right-of-use assets, other facility-related property and equipment and internal-use software) and termination fees for any contracts cancelled as part of these programs. 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 issuance costs and capitalized interest expense – Akamai has convertible senior notes outstanding that mature in 2029, 2027 and 2025. The issuance costs of the convertible senior notes are amortized to interest expense and are excluded from Akamai's non-GAAP results because management believes the non-cash amortization expense is not representative of ongoing operating performance.



  • Gains and losses on investments – Akamai has recorded gains and losses from the disposition, changes to fair value and impairment of certain investments. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to these gains and losses are not representative of Akamai's core business operations and ongoing operating performance.



  • Gains and losses from equity method investment – Akamai records income or losses on its share of earnings and losses from its equity method investment, and any gains from returns of investments or impairments. Akamai excludes such income and losses because it does not have direct control over the operations of the investment and the related income and losses are not representative of its 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 the impact of intercompany sales of intellectual property related to acquisitions), 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.

Akamai's definitions of its non-GAAP financial measures are outlined below:

Non-GAAP income from operations – GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; and other non-recurring or unusual items that may arise from time to time. 

Non-GAAP operating margin – Non-GAAP income from operations stated as a percentage of revenue.

Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; amortization of debt issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; gains and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time. 

Non-GAAP tax rate – GAAP tax rate excluding the tax effect of non-GAAP adjustments and certain discrete tax items.

Non-GAAP net income per diluted share, or EPS – Non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average common shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to Akamai pursuant to the note hedge transactions entered into in connection with the issuances of $1,265 million of convertible senior notes due 2029 and the issuances of $1,150 million of convertible senior notes due 2027 and 2025, respectively. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, Akamai would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2029, 2027 and 2025, unless Akamai's weighted average stock price is greater than $126.31, $116.18 and $95.10, respectively, the initial conversion prices, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.

Adjusted EBITDA – GAAP net income excluding the following items: interest and marketable securities income and losses; income taxes; depreciation and amortization of tangible and intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; foreign exchange gains and losses; interest expense; amortization of capitalized interest expense; certain gains and losses on investments; gains and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time.

Adjusted EBITDA margin – Adjusted EBITDA stated as a percentage of revenue.

Capital expenditures, or capex, excluding stock-based compensation and interest expense – Purchases of property and equipment and capitalization of internal-use software development costs presented on an accrual basis, which differs from the cash-basis presentation included in the statements of cash flows. The primary difference between the two is the change in purchases of property and equipment and capitalization of internal-use software development costs accrued for, but not paid, at period end versus prior periods.

Capex as a percentage of revenue – Capital expenditures, or capex, excluding stock-based compensation and interest expense, stated as a percentage of revenue.

Impact of foreign currency exchange rate – Revenue and earnings from international operations have historically been important contributors to Akamai's financial results. Consequently, Akamai's financial results have been impacted, and management expects they will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, when the local currencies of our international subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.



Because exchange rates are a meaningful factor in understanding period-to-period comparisons, management believes the presentation of the impact of foreign currency exchange rates on revenue and earnings enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. The dollar impact of changes in foreign currency exchange rates presented is calculated by translating current period results using monthly average foreign currency exchange rates from the comparative period and comparing them to the reported amount. The percentage growth rate impacted by foreign currency exchange rates, sometimes referred to as constant currency, is calculated by comparing the prior period amounts as reported and the current period amounts translated using the same monthly average foreign currency exchange rates from the comparative period.

Akamai Statement Under the Private Securities Litigation Reform Act

This release and/or our quarterly earnings conference call scheduled for later today contain statements that are not statements of historical fact and constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about expected future financial performance, expectations, plans and prospects of Akamai. 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, inability to continue to generate cash at the same level as prior years; failure of our investments in innovation to generate solutions that are accepted in the market; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; effects of competition, including pricing pressure and changing business models; impact of macroeconomic trends, including economic uncertainty, turmoil in the financial services industry, the effects of inflation, rising and fluctuating interest rates, foreign currency exchange rate fluctuations, securities market volatility and monetary supply fluctuations; conditions and uncertainties in the geopolitical environment, including sanctions and disruptions resulting from the ongoing war in Ukraine and the Israel-Hamas war; continuing supply chain and logistics costs, constraints, changes or disruptions; defects or disruptions in our products or IT systems, including cyber-attacks, data breaches or malware; failure to realize the expected benefits of any of our acquisitions or reorganizations; changes to economic, political and regulatory conditions in the United States and internationally; our ability to attract and retain key personnel; 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 or failure of such solutions to operate as expected, and other factors that are discussed in our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents filed with the SEC.

In addition, the statements in this press release and on our quarterly earnings conference call 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.

Contacts:

Christine Simeone

Media Relations

Akamai Technologies

AkamaiPR@akamai.com

Mark Stoutenberg

Investor Relations

Akamai Technologies

mstouten@akamai.com

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SOURCE Akamai Technologies, Inc.

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