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Akamai Reports Fourth Quarter 2019 and Full-Year 2019 Financial Results

Fourth quarter revenue of $772 million , up 8% year-over-year and up 9% when adjusted for foreign exchange*

Cloud Security Solutions revenue grew 29% year-over-year

GAAP EPS of $0.73 , up 28% year-over-year, and non-GAAP EPS* of $1.23 , up 15% year-over-year

CAMBRIDGE, Mass. , Feb. 11, 2020 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the intelligent edge platform for securing and delivering digital experiences, today reported financial results for the fourth quarter and full-year ended December 31, 2019.

Akamai Technologies, Inc. logo (PRNewsfoto/Akamai Technologies, Inc.)

"We were very pleased with our 2019 performance. Both revenue and earnings exceeded our expectations due to the rapid growth of our cloud security business, robust seasonal traffic on our network and our continued focus on operational excellence," said Dr. Tom Leighton , Chief Executive Officer of Akamai. "As a result, we achieved another year of strong revenue growth and operating margin expansion, and we believe that we are well-positioned to achieve our 30% non-GAAP operating margin goal in 2020, as we continue to invest in innovation and new products to drive future growth."

Akamai delivered the following results for the fourth quarter and full-year ended December 31, 2019:

Revenue: Revenue for the fourth quarter was $772 million , an 8% increase over fourth quarter 2018 revenue of $713 million and a 9% increase when adjusted for foreign exchange.* Total revenue for 2019 was $2.894 billion compared to $2.714 billion for 2018, up 7% year-over-year and up 8% when adjusted for foreign exchange.*

Revenue by Division (1) :

  • Web Division revenue for the fourth quarter was $420 million , up 9% year-over-year and when adjusted for foreign exchange.* Web Division revenue for 2019 was $1.566 billion , up 8% year-over-year and up 9% when adjusted for foreign exchange.*
  • Media and Carrier Division revenue for the fourth quarter was $353 million , up 8% year-over-year and when adjusted for foreign exchange.* Media and Carrier Division revenue for 2019 was $1.327 billion , up 5% year-over-year and up 6% when adjusted for foreign exchange.*

Revenue from Cloud Security Solutions (2) :

  • Cloud Security Solutions revenue for the fourth quarter was $238 million , up 29% year-over-year and when adjusted for foreign exchange.* Cloud Security Solutions revenue for 2019 was $849 million , up 29% year-over-year and up 30% when adjusted for foreign exchange.*

Revenue from Internet Platform Customers (3) :

  • Revenue from Internet Platform Customers for the fourth quarter was $52 million , up 20% year-over-year and when adjusted for foreign exchange.* Internet Platform Customers revenue for 2019 was $189 million , up 8% year-over-year and when adjusted for foreign exchange.*
  • Revenue excluding Internet Platform Customers for the fourth quarter was $720 million , up 7% year-over-year and up 8% when adjusted for foreign exchange.* Revenue excluding Internet Platform Customers for 2019 was $2.704 billion , up 6% year-over-year and up 8% when adjusted for foreign exchange.*

Revenue by Geography:

  • U.S. revenue for the fourth quarter was $446 million , up 3% year-over-year. U.S. revenue for 2019 was $1.694 billion , up 1% year-over-year.
  • International revenue for the fourth quarter was $326 million , up 17% year-over-year and up 18% when adjusted for foreign exchange.* International revenue for 2019 was $1.199 billion , up 16% year-over-year and up 20% when adjusted for foreign exchange.*

2019 items: Effective January 1, 2019 , the expected average useful life of our network assets, primarily servers, increased from four years to five years, due to software and hardware initiatives undertaken to manage our global network more efficiently. As a result, fourth quarter year-over-year growth rates for GAAP and non-GAAP income from operations, net income and EPS in the paragraphs below were benefited by $7 million , or $6 million net of tax and $0.04 per share. Full-year growth rates for GAAP and non-GAAP income from operations, net income and EPS in the paragraphs below were benefited by $32 million , or $26 million net of tax and $0.16 per share.

Full-year GAAP growth rates were also impacted by a one-time $50 million endowment to the Akamai Foundation recognized in the second quarter of 2018, which did not recur in 2019.

Income from operations: GAAP income from operations for the fourth quarter was $135 million , a 12% increase from fourth quarter 2018 income from operations of $120 million . GAAP operating margin for the fourth quarter was 18%, up 1 percentage point from the same period last year. GAAP income from operations for 2019 was $549 million , a 51% increase from the prior year's GAAP income from operations of $362 million . Full-year GAAP operating margin was 19%, up 6 percentage points from the same period last year.

Non-GAAP income from operations* for the fourth quarter was $222 million , a 10% increase from fourth quarter 2018 non-GAAP income from operations of $201 million . Non-GAAP operating margin* for the fourth quarter was 29%, up 1 percentage point from the same period last year. Non-GAAP income from operations* for 2019 was $844 million , a 17% increase from the prior year's non-GAAP income from operations of $720 million . Full year non-GAAP operating margin* was 29%, up 2 percentage points from the same period last year.

Net income: GAAP net income for the fourth quarter was $119 million , a 27% increase from fourth quarter 2018 GAAP net income of $94 million . GAAP net income for 2019 was $478 million , a 60% increase from the prior year's GAAP net income of $298 million .

Non-GAAP net income* for the fourth quarter was $202 million , a 15% increase from fourth quarter 2018 non-GAAP net income of $176 million . Non-GAAP net income* for 2019 was $739 million , a 21% increase from the prior year's non-GAAP net income of $612 million .

EPS: GAAP EPS for the fourth quarter was $0.73 per diluted share, a 28% increase from fourth quarter 2018 GAAP EPS of $0.57 and a 29% increase when adjusted for foreign exchange.* GAAP EPS for 2019 was $2.90 per diluted share, a 65% increase from prior year's GAAP EPS of $1.76 per diluted share and a 69% increase when adjusted for foreign exchange.*

Non-GAAP EPS* for the fourth quarter was $1.23 per diluted share, a 15% increase from fourth quarter 2018 non-GAAP EPS of $1.07 and a 16% increase when adjusted for foreign exchange.* Non-GAAP EPS* for 2019 was $4.49 per diluted share, a 24% increase from prior year's non-GAAP EPS of $3.62 per diluted share and a 26% increase when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA* for the fourth quarter was $319 million , a 6% increase from fourth quarter 2018 Adjusted EBITDA of $301 million . Adjusted EBITDA margin* for the fourth quarter was 41%, down 1 percentage point from the same period last year. Adjusted EBITDA* for 2019 was $1.211 billion , an 11% increase from the prior year's Adjusted EBITDA of $1.092 billion . Adjusted EBITDA margin* was 42%, up 2 percentage points from the same period last year.

Supplemental cash information: Cash from operations for the quarter was $282 million , or 37% of revenue. Cash from operations for 2019 was $1.058 billion , or 37% of revenue. Cash, cash equivalents and marketable securities was $2.4 billion as of December 31, 2019.

Share repurchases: The Company spent $43 million in the fourth quarter to repurchase 0.5 million shares of its common stock at an average price of $88.48 per share. For the full-year, the Company spent $335 million to repurchase 4.0 million shares of its common stock at an average price of $82.90 per share. The Company had 162 million shares of common stock outstanding as of December 31, 2019.

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

(1)  Revenue by Division A customer-focused reporting view that reflects revenue from customers that are managed by the division

(2)  Revenue from Cloud Security Solutions A product-focused reporting view that reflects revenue from Cloud Security Solutions separately from all other solution categories

(3)  Revenue from Internet Platform Customers Revenue from six customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix

Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-844-578-9671 (or 1-508-637-5655 for international calls) and using passcode 7619277. 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 two weeks following the conference by calling 1-855-859-2056 (or 1-404-537-3406 for international calls) and using passcode 7619277. The archived webcast of this event may be accessed through the Akamai website.

About Akamai
Akamai secures and delivers digital experiences for the world's largest companies. Akamai's intelligent edge platform surrounds everything, from the enterprise to the cloud, so customers and their businesses can be fast, smart and secure. Top brands globally rely on Akamai to help them realize competitive advantage through agile solutions that extend the power of their multi-cloud architectures. Akamai keeps decisions, apps and experiences closer to users than anyone and attacks and threats far away. Akamai's portfolio of edge security, web and mobile performance, enterprise access and video delivery solutions is supported by unmatched customer service, analytics and 24/7/365 monitoring. To learn why the world's top brands trust Akamai, visit www.akamai.com , blogs.akamai.com, or @Akamai on Twitter.

 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)

December 31,

2019 (1)


December 31,
 2018

ASSETS




Current assets:




Cash and cash equivalents

$

543,745



$

1,036,455


Marketable securities

993,249



855,650


Accounts receivable, net

551,943



479,889


Prepaid expenses and other current assets

142,676



163,360


Total current assets

2,231,613



2,535,354


Marketable securities

835,384



209,066


Property and equipment, net

1,152,153



910,618


Operating lease right-of-use assets

758,450




Acquired intangible assets, net

179,431



168,348


Goodwill

1,600,265



1,487,404


Deferred income tax assets

76,528



34,913


Other assets

173,062



116,067


Total assets

$

7,006,886



$

5,461,770


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

138,946



$

99,089


Accrued expenses

334,861



328,304


Deferred revenue

71,223



69,083


Convertible senior notes



686,552


Operating lease liabilities

139,463




Other current liabilities

8,843



27,681


Total current liabilities

693,336



1,210,709


Deferred revenue

4,368



4,557


Deferred income tax liabilities

29,187



19,624


Convertible senior notes

1,839,791



874,080


Operating lease liabilities

692,181




Other liabilities

90,065



160,940


Total liabilities

3,348,928



2,269,910


Total stockholders' equity

3,657,958



3,191,860


Total liabilities and stockholders' equity

$

7,006,886



$

5,461,770




(1)

On January 1, 2019, Akamai adopted the new lease accounting standard on a modified retrospective basis by applying the new standard to its lease portfolio as of January 1, 2019, while continuing to apply legacy guidance in the comparative periods. Adoption of the standard required Akamai to record right-of-use assets and lease liabilities for its operating leases related to real estate and co-location arrangements. The adoption of the standard also resulted in elimination of related accrued expenses and deferred rent liabilities, as of January 1, 2019, that are now included in the new lease balances.


 

 

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended


Year Ended

(in thousands, except per share data)

December 31,
 2019


September 30,
 2019


December 31,
 2018


December 31,
 2019


December 31,
 2018

Revenue

$

772,123



$

709,912



$

713,363



$

2,893,617



$

2,714,474


Costs and operating expenses:










Cost of revenue (1) (2)

257,750



246,938



243,927



987,624



953,485


Research and development (1)

68,898



64,887



60,342



261,365



246,165


Sales and marketing (1)

140,243



122,258



137,797



523,883



517,353


General and administrative (1) (2)

149,926



123,216



129,565



516,093



574,067


Amortization of acquired intangible assets

9,710



9,624



8,292



38,581



33,311


Restructuring charge (benefit)

10,274



(300)



13,152



17,153



27,594


Total costs and operating expenses

636,801



566,623



593,075



2,344,699



2,351,975


Income from operations

135,322



143,289



120,288



548,918



362,499


Interest income

11,402



7,908



7,308



34,355



26,940


Interest expense

(16,675)



(12,127)



(14,582)



(49,364)



(43,202)


Other (expense) income, net

(609)



(752)



59



(1,428)



(3,148)


Income before (provision) benefit for income taxes

129,440



138,318



113,073



532,481



343,089


(Provision) benefit for income taxes

(10,632)



960



(19,058)



(53,350)



(44,716)


Income (loss) from equity method investment

292



(1,388)





(1,096)




Net income

$

119,100



$

137,890



$

94,015



$

478,035



$

298,373












Net income per share:










Basic

$

0.74



$

0.85



$

0.58



$

2.94



$

1.78


Diluted

$

0.73



$

0.84



$

0.57



$

2.90



$

1.76












Shares used in per share calculations:










Basic

161,737



162,445



162,958



162,706



167,312


Diluted

163,930



164,558



164,540



164,573



169,188




(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


Year Ended

(in thousands)

December 31,
 2019


September 30,
 2019


December 31,
 2018


December 31,
 2019


December 31,
 2018

Cash flows from operating activities:










Net income

$

119,100



$

137,890



$

94,015



$

478,035



$

298,373


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










Depreciation and amortization

115,800



110,604



116,294



440,674



434,520


Stock-based compensation

46,878



46,815



44,998



187,140



183,813


(Benefit) provision for deferred income taxes

(23,648)



(27)



(10,567)



933



2,339


Amortization of debt discount and issuance costs

15,096



11,133



14,114



45,857



41,958


Restructuring-related software charges

3,784





2,122



3,784



4,940


Other non-cash reconciling items, net

966



2,598



2,718



4,744



12,078


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










Accounts receivable

(26,327)



(17)



(16,834)



(64,471)



(30,445)


Prepaid expenses and other current assets

23,352



11,624



(2,048)



11,689



(4,132)


Accounts payable and accrued expenses

38,210



23,348



34,317



8,769



42,238


Deferred revenue

(30,261)



(11,259)



(24,846)



(13,547)



(919)


Other current liabilities

4,620



(3,111)



7,392



(17,230)



9,422


Other non-current assets and liabilities

(5,430)



(32,213)



24,480



(28,073)



14,142


Net cash provided by operating activities

282,140



297,385



286,155



1,058,304



1,008,327


Cash flows from investing activities:










Cash paid for acquired businesses, net of cash acquired

(43,920)







(165,329)



(79)


Cash paid for equity method investment