AKAMAI REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS

Rhea-AI Summary

Akamai Technologies reported second quarter revenue of $903 million, marking a 6% year-over-year increase, and a 9% rise when adjusted for foreign exchange. Security and compute revenue grew 26% year-over-year, representing 54% of total revenue. GAAP EPS was $0.74, down 21% year-over-year, while non-GAAP EPS was $1.35, down 5%. The company experienced a 24% decline in GAAP net income, totaling $120 million. Despite challenging conditions, Akamai maintained a strong performance in security solutions.

Positive

• Second quarter revenue increased by 6% year-over-year.
• Security revenue grew 17% year-over-year, contributing to overall revenue growth.
• Compute revenue surged 74% year-over-year.
• Adjusted EBITDA rose by 1% compared to the previous year.

Negative

• GAAP EPS decreased by 21% year-over-year.
• GAAP net income declined by 24% year-over-year.
• GAAP income from operations decreased by 12% year-over-year.

Second quarter revenue of $903 million, up 6% year-over-year and up 9% when adjusted for foreign exchange*

Security and compute revenue represented the majority of total revenue in the second quarter and grew 26% year-over-year and grew 30% when adjusted for foreign exchange*

GAAP EPS of $0.74, down 21% year-over-year and down 15% when adjusted for foreign exchange*, and non-GAAP EPS* of $1.35, down 5% year-over-year and flat when adjusted for foreign exchange*

CAMBRIDGE, Mass., Aug. 9, 2022 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the cloud company that powers and protects life online, today reported financial results for the second quarter ended June 30, 2022.

"Despite a continued challenging macro-economic environment and foreign exchange headwinds, Akamai delivered another quarter of solid results," said Dr. Tom Leighton, Akamai's Chief Executive Officer. "Our performance continued to be led by the strong growth of our security and compute product groups, which increased 26% year-over-year and increased 30% when adjusted for foreign exchange* and represented 54% of total revenue."

Akamai delivered the following financial results for the second quarter ended June 30, 2022:

Revenue: Revenue was $903 million, a 6% increase over second quarter 2021 revenue of $853 million and a 9% increase when adjusted for foreign exchange.*

Revenue by solution:

• Security revenue was $381 million, up 17% year-over-year and up 21% when adjusted for foreign exchange*
• Delivery revenue was $417 million, down 11% year-over-year and down 8% when adjusted for foreign exchange*
• Compute revenue was $106 million, up 74% year-over-year and up 78% when adjusted for foreign exchange*

Revenue by geography:

• U.S. revenue was $477 million, up 6% year-over-year
• International revenue was $426 million, up 6% year-over-year and up 13% when adjusted for foreign exchange*

Income from operations: GAAP income from operations was $175 million, a 12% decrease from second quarter 2021. GAAP operating margin for the second quarter was 19%, down 4 percentage points from the same period last year.

Non-GAAP income from operations* was $262 million, a 3% decrease from second quarter 2021. Non-GAAP operating margin* for the second quarter was 29%, down 3 percentage points compared to the same period last year.

Net income: GAAP net income was $120 million, a 24% decrease from second quarter 2021. Non-GAAP net income* was $216 million, a 7% decrease from second quarter 2021.

EPS: GAAP EPS was $0.74 per diluted share, a 21% decrease from second quarter 2021 and a 15% decrease when adjusted for foreign exchange.* Non-GAAP EPS* was $1.35 per diluted share, a 5% decrease from second quarter 2021 and flat when adjusted for foreign exchange.*

Adjusted EBITDA*: Adjusted EBITDA* was $388 million, a 1% increase from second quarter 2021.

Supplemental cash information: Cash from operations for the second quarter of 2022 was $341 million, or 38% of revenue. Cash, cash equivalents and marketable securities was $1.3 billion as of June 30, 2022.

Share repurchases: Akamai spent $165 million in the second quarter of 2022 to repurchase 1.6 million shares of its common stock at an average price of $100.80 per share. The Company had 159 million shares of common stock outstanding as of June 30, 2022.

*      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. 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: 6965820. The archived webcast of this event may be accessed through the Akamai website.

About Akamai

Akamai powers and protects life online. Leading companies worldwide choose Akamai to build, deliver, and secure their digital experiences – helping billions of people live, work, and play every day. With the world's most distributed compute platform – from cloud to edge – we make it easy for customers to develop and run applications, while we keep experiences closer to users and threats farther away. Learn more about Akamai's security, compute, and delivery solutions at www.akamai.com, blogs.akamai.com, or follow Akamai Technologies on Twitter and LinkedIn.

 

AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$         426,710		$         536,725
Marketable securities	263,979		541,470
Accounts receivable, net	668,425		675,926
Prepaid expenses and other current assets	207,043		166,313
Total current assets	1,566,157		1,920,434
Marketable securities	640,668		1,088,048
Property and equipment, net	1,541,875		1,534,329
Operating lease right-of-use assets	797,313		815,754
Acquired intangible assets, net	476,707		313,225
Goodwill	2,763,828		2,156,254
Deferred income tax assets	292,817		168,342
Other assets	131,689		142,287
Total assets	$     8,211,054		$     8,138,673
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$         131,649		$         109,928
Accrued expenses	306,402		411,590
Deferred revenue	111,771		86,517
Revolving credit facility	75,000		—
Operating lease liabilities	186,945		175,683
Other current liabilities	5,317		6,623
Total current liabilities	817,084		790,341
Deferred revenue	25,448		25,342
Deferred income tax liabilities	39,367		40,974
Convertible senior notes	2,283,037		1,976,167
Operating lease liabilities	679,031		707,087
Other liabilities	86,609		68,748
Total liabilities	3,930,576		3,608,659
Total stockholders' equity	4,280,478		4,530,014
Total liabilities and stockholders' equity	$     8,211,054		$     8,138,673

 

AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended						Six Months Ended
(in thousands, except per share data)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Revenue	$         903,332		$         903,647		$         852,824		$     1,806,979		$     1,695,532
Costs and operating expenses:
Cost of revenue (1)  (2)	346,649		332,752		320,000		679,401		626,687
Research and development (1)	92,070		99,935		77,255		192,005		159,300
Sales and marketing (1)	126,665		122,719		111,894		249,384		228,248
General and administrative (1) (2)	141,219		153,262		134,295		294,481		271,010
Amortization of acquired intangible assets	16,972		13,644		12,060		30,616		23,487
Restructuring charge (benefit)	4,715		8,016		(2,114)		12,731		5,002
Total costs and operating expenses	728,290		730,328		653,390		1,458,618		1,313,734
Income from operations	175,042		173,319		199,434		348,361		381,798
Interest and marketable securities (loss) income, net	(2,331)		(211)		4,736		(2,542)		9,314
Interest expense	(2,932)		(2,695)		(18,037)		(5,627)		(35,871)
Other income (expense), net	816		(9,565)		(811)		(8,749)		(1,628)
Income before provision for income taxes	170,595		160,848		185,322		331,443		353,613
Provision for income taxes	(51,058)		(34,050)		(18,009)		(85,108)		(29,907)
Loss from equity method investment	—		(7,635)		(10,816)		(7,635)		(11,514)
Net income	$         119,537		$         119,163		$         156,497		$         238,700		$         312,192
Net income per share:
Basic	$               0.75		$               0.74		$               0.96		$               1.49		$               1.91
Diluted	$               0.74		$               0.73		$               0.94		$               1.47		$               1.88
Shares used in per share calculations:
Basic	160,038		160,494		163,074		160,266		163,067
Diluted	161,710		163,637		166,263		162,674		165,976

(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						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Cash flows from operating activities:
Net income	$         119,537		$         119,163		$         156,497		$         238,700		$         312,192
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	150,604		142,595		137,715		293,199		269,186
Stock-based compensation	51,882		56,227		50,481		108,109		104,786
(Benefit) provision for deferred income taxes	(29,885)		(13,579)		5,461		(43,464)		7,225
Amortization of debt discount and issuance costs	1,091		1,119		16,460		2,210		32,717
(Gain) loss on investments	(641)		16,536		10,816		15,895		11,514
Other non-cash reconciling items, net	10,045		12,598		1,612		22,643		2,140
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	35,251		(39,198)		11,176		(3,947)		(4,404)
Prepaid expenses and other current assets	26,563		(64,695)		24,539		(38,132)		(10,849)
Accounts payable and accrued expenses	6,963		(66,938)		(10,073)		(59,975)		(83,059)
Deferred revenue	(29,216)		55,394		(7,345)		26,178		18,094
Other current liabilities	(4,460)		(1,441)		(15,514)		(5,901)		(16,230)
Other non-current assets and liabilities	3,697		4,670		(3,692)		8,367		(15,386)
Net cash provided by operating activities	341,431		222,451		378,133		563,882		627,926
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	—		(872,099)		—		(872,099)		(15,638)
Purchases of property and equipment and capitalization of internal-use software development costs	(118,167)		(131,359)		(154,569)		(249,526)		(319,288)
Purchases of short- and long-term marketable securities	—		—		(291,957)		—		(382,236)
Proceeds from sales, maturities and redemptions of short- and long-term marketable securities	1,905		691,802		287,297		693,707		521,446
Other, net	1,036		(5,242)		(391)		(4,206)		(212)
Net cash used in investing activities	(115,226)		(316,898)		(159,620)		(432,124)		(195,928)

 

AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Cash flows from financing activities:
Net proceeds from borrowings and repayments under revolving credit facility	—		75,000		—		75,000		—
Proceeds from the issuance of common stock under stock plans	7,204		21,941		9,712		29,145		31,122
Employee taxes paid related to net share settlement of stock-based awards	(8,323)		(54,819)		(12,314)		(63,142)		(76,260)
Repurchases of common stock	(164,789)		(102,853)		(96,175)		(267,642)		(154,416)
Other, net	—		(104)		(67)		(104)		(67)
Net cash used in financing activities	(165,908)		(60,835)		(98,844)		(226,743)		(199,621)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	(13,798)		(1,462)		3,003		(15,260)		(4,148)
Net increase (decrease) in cash, cash equivalents and restricted cash	46,499		(156,744)		122,672		(110,245)		228,229
Cash, cash equivalents and restricted cash at beginning of period	381,007		537,751		459,023		537,751		353,466
Cash, cash equivalents and restricted cash at end of period	$         427,506		$         381,007		$         581,695		$         427,506		$         581,695

 

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE BY SOLUTION (1)
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Security	$     380,664		$     381,567		$     325,128		$     762,231		$     635,347
Delivery	416,678		444,148		466,739		860,826		940,408
Compute	105,990		77,932		60,957		183,922		119,777
Total revenue	$     903,332		$     903,647		$     852,824		$  1,806,979		$  1,695,532
Revenue growth rates year-over-year:
Security	17 %		23 %		25 %		20 %		27 %
Delivery	(11)		(6)		(4)		(8)		(2)
Compute	74		32		25		54		25
Total revenue	6 %		7 %		7 %		7 %		9 %
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates (2):
Security	21 %		26 %		22 %		23 %		24 %
Delivery	(8)		(4)		(6)		(6)		(4)
Compute	78		35		22		57		22
Total revenue	9 %		9 %		5 %		9 %		7 %

 

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA – REVENUE BY GEOGRAPHY
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
U.S.	$     477,154		$     481,007		$     449,553		$     958,161		$     912,733
International	426,178		422,640		403,271		848,818		782,799
Total revenue	$     903,332		$     903,647		$     852,824		$  1,806,979		$  1,695,532
Revenue growth rates year-over-year:
U.S.	6 %		4 %		1 %		5 %		5 %
International	6		11		15		8		14
Total revenue	6 %		7 %		7 %		7 %		9 %
Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates (2):
U.S.	6 %		4 %		1 %		5 %		5 %
International	13		16		9		15		9
Total revenue	9 %		9 %		5 %		9 %		7 %

(1)	Prior to January 1, 2022, revenue by solution was reported by product group: Security Technology Group and Edge Technology Group. Revenue from security solutions was previously presented as Security Technology Group revenue. Revenue from delivery and compute solutions was previously presented as Edge Technology Group revenue. The periods presented prior to January 1, 2022 have been revised to reflect this new presentation.
(2)	See Use of Non-GAAP Financial Measures below for a definition

 

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL OPERATING EXPENSE DATA
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
General and administrative expenses:
Payroll and related costs	$        52,974		$        53,317		$        54,974		$      106,291		$      111,424
Stock-based compensation	15,888		17,436		16,123		33,324		32,485
Depreciation and amortization	18,423		19,678		20,489		38,101		41,398
Facilities-related costs	26,820		26,579		24,845		53,399		49,192
Provision for doubtful accounts	529		1,288		971		1,817		711
Acquisition-related costs	2,798		10,616		140		13,414		204
Other expenses	23,787		24,348		16,753		48,135		35,596
Total general and administrative expenses	$      141,219		$      153,262		$      134,295		$      294,481		$      271,010
General and administrative expenses–functional (1):
Global functions	$        50,445		$        56,131		$        53,314		$      106,576		$      109,113
As a percentage of revenue	6 %		6 %		6 %		6 %		6 %
Infrastructure	87,447		85,199		79,878		172,646		160,987
As a percentage of revenue	10 %		9 %		9 %		10 %		9 %
Other	3,327		11,932		1,103		15,259		910
Total general and administrative expenses	$      141,219		$      153,262		$      134,295		$      294,481		$      271,010
As a percentage of revenue	16 %		17 %		16 %		16 %		16 %
Stock-based compensation:
Cost of revenue	$          7,134		$          6,233		$          6,874		$        13,367		$        13,970
Research and development	17,408		20,232		15,937		37,640		34,306
Sales and marketing	11,452		12,326		11,547		23,778		24,025
General and administrative	15,888		17,436		16,123		33,324		32,485
Total stock-based compensation	$        51,882		$        56,227		$        50,481		$      108,109		$      104,786

(1)

Global functions expense includes payroll, stock-based compensation and other employee-related costs for administrative functions, including finance, purchasing, order entry, human resources, legal, information technology and executive personnel, as well as third-party professional service fees. Infrastructure expense includes payroll, stock-based compensation and other employee-related costs for our network infrastructure functions, as well as facility rent expense, depreciation and amortization of facility and IT-related assets, software and software-related costs, business insurance and taxes. Our network infrastructure function is responsible for network planning, sourcing, architecture evaluation and platform security. Other expense includes acquisition-related costs and provision for doubtful accounts.

 

AKAMAI TECHNOLOGIES, INC. OTHER SUPPLEMENTAL DATA
	Three Months Ended						Six Months Ended
(in thousands, except end of period statistics)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Depreciation and amortization:
Network-related depreciation	$           66,724		$           61,386		$           55,601		$         128,110		$         107,497
Capitalized internal-use software development amortization	41,177		40,650		40,426		81,827		79,649
Other depreciation and amortization	17,914		19,152		19,833		37,066		40,198
Depreciation of property and equipment	125,815		121,188		115,860		247,003		227,344
Capitalized stock-based compensation amortization (1)	7,703		7,648		8,916		15,351		16,609
Capitalized interest expense amortization (1)	114		115		879		229		1,746
Amortization of acquired intangible assets	16,972		13,644		12,060		30,616		23,487
Total depreciation and amortization	$         150,604		$         142,595		$         137,715		$         293,199		$         269,186
Capital expenditures, excluding stock-based compensation and interest expense (2) (3):
Purchases of property and equipment	$           56,743		$           63,225		$           81,655		$         119,968		$         176,653
Capitalized internal-use software development costs	47,083		53,190		56,574		100,273		111,639
Total capital expenditures, excluding stock-based compensation and interest expense	$         103,826		$         116,415		$         138,229		$         220,241		$         288,292
End of period statistics:
Number of employees	9,270		9,180		8,275

(1)	Amortization of capitalized stock-based compensation and interest expense in this table excludes amortization of capitalized stock-based compensation and interest expense capitalized as part of the implementation of 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.
(3)	See Use of Non-GAAP Financial Measures below for a definition

 

AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS AND NET INCOME
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Income from operations	$      175,042		$      173,319		$      199,434		$      348,361		$      381,798
GAAP operating margin	19 %		19 %		23 %		19 %		23 %
Amortization of acquired intangible assets	16,972		13,644		12,060		30,616		23,487
Stock-based compensation	51,882		56,227		50,481		108,109		104,786
Amortization of capitalized stock-based compensation and capitalized interest expense	8,068		7,947		9,840		16,015		18,438
Restructuring charge (benefit)	4,715		8,016		(2,114)		12,731		5,002
Acquisition-related costs	5,771		10,943		140		16,714		204
Operating adjustments	87,408		96,777		70,407		184,185		151,917
Non-GAAP income from operations	$      262,450		$      270,096		$      269,841		$      532,546		$      533,715
Non-GAAP operating margin	29 %		30 %		32 %		29 %		31 %
Net income	$      119,537		$      119,163		$      156,497		$      238,700		$      312,192
Operating adjustments (from above)	87,408		96,777		70,407		184,185		151,917
Amortization of debt discount and issuance costs	1,091		1,119		16,460		2,210		32,717
(Gain) loss on investments	(641)		8,901		—		8,260		—
Loss from equity method investment	—		7,635		10,816		7,635		11,514
Income tax-effect of above non-GAAP adjustments and certain discrete tax items	9,049		(8,800)		(21,428)		249		(47,774)
Non-GAAP net income	$      216,444		$      224,795		$      232,752		$      441,239		$      460,566

 

AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
GAAP net income per diluted share	$             0.74		$             0.73		$             0.94		$             1.47		$             1.88
Adjustments to net income:
Amortization of acquired intangible assets	0.10		0.08		0.07		0.19		0.14
Stock-based compensation	0.32		0.34		0.30		0.66		0.63
Amortization of capitalized stock-based compensation and capitalized interest expense	0.05		0.05		0.06		0.10		0.11
Restructuring charge (benefit)	0.03		0.05		(0.01)		0.08		0.03
Acquisition-related costs	0.04		0.07		—		0.10		—
Amortization of debt discount and issuance costs	0.01		0.01		0.10		0.01		0.20
(Gain) loss on investments	—		0.05		—		0.05		—
Loss from equity method investment	—		0.05		0.07		0.05		0.07
Income tax effect of above non-GAAP adjustments and certain discrete tax items	0.06		(0.05)		(0.13)		—		(0.29)
Adjustment for shares (1)	0.01		0.02		0.02		0.03		0.03
Non-GAAP net income per diluted share	$             1.35		$             1.39		$             1.42		$             2.74		$             2.80
Shares used in GAAP per diluted share calculations	161,710		163,637		166,263		162,674		165,976
Impact of benefit from note hedge transactions (1)	(1,057)		(1,822)		(1,782)		(1,440)		(1,369)
Shares used in non-GAAP per diluted share calculations (1)	160,653		161,815		164,481		161,234		164,607

(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 the periods presented 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						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	$      119,537		$      119,163		$      156,497		$      238,700		$      312,192
Net income margin	13 %		13 %		18 %		13 %		18 %
Interest and marketable securities loss (income), net	2,331		211		(4,736)		2,542		(9,314)
Provision for income taxes	51,058		34,050		18,009		85,108		29,907
Depreciation and amortization	125,815		121,188		115,860		247,003		227,344
Amortization of capitalized stock-based compensation and capitalized interest expense	8,068		7,947		9,840		16,015		18,438
Amortization of acquired intangible assets	16,972		13,644		12,060		30,616		23,487
Stock-based compensation	51,882		56,227		50,481		108,109		104,786
Restructuring charge (benefit)	4,715		8,016		(2,114)		12,731		5,002
Acquisition-related costs	5,771		10,943		140		16,714		204
Interest expense	2,932		2,695		18,037		5,627		35,871
(Gain) loss on investments	(641)		8,901		—		8,260		—
Loss from equity method investment	—		7,635		10,816		7,635		11,514
Other (income) expense, net	(175)		664		811		489		1,628
Adjusted EBITDA	$      388,265		$      391,284		$      385,701		$      779,549		$      761,059
Adjusted EBITDA margin	43 %		43 %		45 %		43 %		45 %

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). 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, 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 results 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 – 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, 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 charges – 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 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 discount and issuance costs and amortization of capitalized interest expense – In August 2019, Akamai issued $1,150 million of convertible senior notes due 2027 with a coupon interest rate of 0.375%. In May 2018, Akamai issued $1,150 million of convertible senior notes due 2025 with a coupon interest rate of 0.125%. The imputed interest rates of these convertible senior notes were 3.10% and 4.26%, respectively. This is a result of the debt discounts recorded for the conversion features that, prior to January 1, 2022, were required to be separately accounted for as equity under GAAP, thereby reducing the carrying values of the convertible debt instruments. The debt discounts were amortized as interest expense. On January 1, 2022, Akamai adopted the new guidance for accounting for convertible senior instruments. This new guidance eliminated separate accounting for the equity portion, and thus the amortization of the debt discount that was recorded as interest expense. Prior to January 1, 2022, Akamai excluded this non-cash interest expense from its non-GAAP results because it was not representative of ongoing operating performance. After January 1, 2022, this interest expense is no longer included in or excluded from GAAP or non-GAAP results. Additionally, the issuance costs of the convertible senior notes are amortized to interest expense and are also 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.
     
• Income and losses from equity method investment – Akamai records income or losses on its share of earnings and losses from its equity method investment. Akamai excludes such income and losses because it does not 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 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.

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 discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; income and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time. 

Non-GAAP net income per diluted share –  Non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average 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 $1,150 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, the Company 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 2027 and 2025, unless Akamai's weighted average stock price is greater than $116.18 and $95.10, respectively, the initial conversion price, 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 income; 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; income and losses on 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.

Impact of foreign currency exchange rate – Revenue and earnings from international operations have historically been an important contributor 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 foreign 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 change at constant currency presented 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 macro-economic trends, including economic uncertainty, the effects of inflation, increasing 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; 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; impact of the ongoing COVID-19 pandemic; 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 periodically 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:
Gina Sorice		Tom Barth
Media Relations		Investor Relations
Akamai Technologies		Akamai Technologies
646-320-4107		617-274-7130
gsorice@akamai.com		tbarth@akamai.com

 

 

 

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SOURCE Akamai Technologies, Inc.

FAQ

What were Akamai's second quarter earnings for 2022?

Akamai reported second quarter revenue of $903 million with a GAAP EPS of $0.74.

How did Akamai's security revenue perform in Q2 2022?

Akamai's security revenue increased by 17% year-over-year, totaling $381 million.

What was the decline in Akamai's net income in the second quarter of 2022?

Akamai experienced a 24% decline in GAAP net income, amounting to $120 million.

What is the stock symbol for Akamai Technologies?

The stock symbol for Akamai Technologies is AKAM.

When will Akamai hold its quarterly conference call for Q2 2022?

Akamai's quarterly conference call is scheduled for today at 4:30 p.m. ET.