CAMBRIDGE, Mass. – October 29, 2004 – Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader of distributed computing solutions and services, today reported financial results for the third quarter ended September 30, 2004. Revenue for the third quarter 2004 was $53.3 million, a 5 percent increase over second quarter 2004 revenue of $50.8 million, and a 28 percent increase over third quarter 2003 revenue of $41.8 million.
“We continue to benefit from increased utilization of Akamai services by businesses and government agencies to deliver more of their business processes, Web applications and content over the Internet,” said George Conrades, chairman and CEO of Akamai. “By helping customers to overcome Internet bottlenecks and achieve their demanding online objectives, our business continues to expand with existing accounts while we add new customers to our platform.”
Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the third quarter of 2004 was $11.2 million, or $0.08 per diluted share, a 65 percent increase over previous quarter net income of $6.8 million, or $0.05 per diluted share, and a $15.1 million improvement over third quarter 2003 net loss of $3.9 million, or negative $0.03 per share. The Company generated normalized net income* of $12.2 million, or $0.09 per diluted share in the third quarter 2004, matching the First Call consensus estimate of $0.09 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)
Adjusted EBITDA* for the third quarter of 2004 was $17.9 million, up from $17.7 million in the prior quarter, and an increase of 53 percent over the Adjusted EBITDA of $11.7 million in the third quarter of 2003. Adjusted EBITDA as a percent of revenue was 34 percent. (*See Use of Non-GAAP Financial Measures below for definitions.)
Cash from operations increased 17 percent to $14.5 million in the third quarter as compared to the second quarter of 2004, and is up significantly from $1.1 million generated in the third quarter of 2003. Also during the quarter, the Company further reduced long-term debt by retiring $13.1 million in principal amount of its 5 ½ percent convertible subordinated notes due in 2007. The Company’s diligent efforts to reduce long-term debt have resulted in a decrease of annual interest payments by nearly $10 million since 2003.
At September 30, 2004, the Company had approximately 125.9 million shares of common stock outstanding, and had approximately $120 million of cash, cash equivalents and marketable securities.
The number of total customers under long-term services contracts increased by 4 percent from second quarter 2004 to 1,258, the highest level in three years, and the seventh consecutive quarter of net customer growth.
New customers in the third quarter included Apple Vacations, California Lottery Commission, CanWest Interactive (Canada.com), Cox Newspapers, Inc., Ford, Lincoln and Mercury Divisions of Ford Motor Company, MSN Music, National Archives and Records Administration (NARA), National Oceanic and Atmospheric Administration (NOAA), Visa USA, and Vonage, among others.
Sales through resellers and sales outside the United States accounted for 26 percent and 18 percent of revenue for the third quarter of 2004.
Akamai® is the global leader in distributed computing solutions and services, making the Internet predictable, scalable, and secure for conducting profitable e-business. The Akamai on demand platform enables customers to easily extend their Web operations – with full control – anywhere, anytime, without the cost of building out infrastructure. Headquartered in Cambridge, Massachusetts, Akamai serves hundreds of today’s most successful enterprises and government agencies around the globe. Akamai is The Business Internet. For more information, visit www.akamai.com.
* Includes depreciation (see supplemental tables for figures)
*Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.
Akamai defines “Adjusted EBITDA” as net income (loss), before interest, taxes, depreciation, amortization, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, foreign exchange gains and losses, and loss on early extinguishment of debt. Akamai considers Adjusted EBITDA to be an important indicator of the company's operational strength and performance of its business and a good measure of the company’s historical operating trend.
Adjusted EBITDA eliminates items that are either not part of the company’s core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment, net interest expense and restructuring activities, or do not require a cash outlay, such as equity-related compensation and impairment of intangible assets. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the company’s estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historic cost incurred to build out the company’s deployed network, and may not be indicative of current or future capital expenditures.
Akamai defines “capital expenditures” or “capex” as purchases of property and equipment and the capitalization of internal-use software development costs. Capital expenditures or capex are disclosed in Akamai’s condensed consolidated statement of cash flows in the company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission.
Akamai defines “normalized net income (loss)” as net income (loss) before amortization of intangible assets, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers normalized net income (loss) to be another important indicator of the overall performance of the company because it eliminates the effects of events that are either not part of the company’s core operations or are non-cash.
Adjusted EBITDA and normalized net income (loss) should be considered in addition to, not as a substitute for, the company's operating income (loss) and net income (loss), as well as other measures of financial performance reported in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial metrics to the comparable GAAP measures.
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Akamai Statement Under the Private Securities Litigation Reform Act
The release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements concerning the expected growth and development of our business. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, unexpected increases in Akamai’s use of funds, loss of significant customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai's services or network infrastructure, failure to maintain the prices we charge for our services , inability to service and repay our outstanding debt and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.
In addition, the statements in this press release represent Akamai’s expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai’s expectations or beliefs as of any date subsequent to the date of this press release.
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