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Press Release -- February 11th, 2015
Source: Akamai
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Akamai Reports Record Fourth Quarter 2014 And Full-Year 2014 Financial Results

CAMBRIDGE, Mass., Feb. 10, 2015 /PRNewswire/ —

Fourth Quarter Highlights

  • Revenue of $536 million, up 23% year-over-year, and up 25% adjusted for foreign exchange
  • GAAP net income of $97 million, up 21% year-over-year, or $0.54 per diluted share, up 23% year-over-year
  • Non-GAAP net income* of $127 million, or $0.70 per diluted share, up 27% year-over-year (includes $9 million, or $0.05 per diluted share, tax benefit from the reinstatement of the federal R&D tax credit)

Full-Year Highlights

  • Revenue of $1,964 million, up 24% year-over-year, and up 25% adjusted for foreign exchange
  • GAAP net income of $334 million, or $1.84 per diluted share, up 14% year-over-year
  • Non-GAAP net income* of $449 million, up 22% year-over-year, or $2.48 per diluted share, up 23% year-over-year

Akamai Technologies, Inc. (AKAM), the leading provider of cloud services for delivering, optimizing and securing online content and business applications, today reported financial results for the fourth quarter and full-year ended December 31, 2014.  Revenue for the fourth quarter of 2014 was $536 million, a 23% increase over fourth quarter 2013 revenue of $436 million, and a 25% increase when adjusted for foreign exchange. Total revenue for 2014 was $1,964 million, a 24% increase over 2013 revenue of $1,578 million, and a 25% increase when adjusted for foreign exchange.

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Akamai Technologies logo

“Akamai’s strong fourth quarter performance capped off a record year on both the top and bottom line,” said Dr. Tom Leighton, CEO of Akamai.  “Our strong revenue results continued to be driven by solid performance across all our geographies and all of our major product lines, with very strong growth coming from our Security and Media products. As we look forward to 2015, we expect to continue investing in the business with the goals of building out our network, expanding sales capacity, deepening channel relationships and accelerating innovation to help our customers secure and grow their on-line businesses.”

GAAP net income for the fourth quarter of 2014 was $97 million, or $0.54 per diluted share, an increase from prior quarter’s GAAP net income of $91 million, and a 21% increase over fourth quarter 2013 GAAP net income of $80 million, or $0.44 per diluted share.  Full-year GAAP net income for 2014 was $334 million, or $1.84 per diluted share, a 14% increase from 2013 GAAP net income of $293 million, or $1.61 per diluted share.

Non-GAAP net income* for the fourth quarter of 2014 was $127 million, or $0.70 per diluted share, an increase from the prior quarter’s non-GAAP net income of $111 million, or $0.62 per diluted share, and a 27% increase over fourth quarter 2013 non-GAAP net income of $100 million, or $0.55 per diluted share.  Full-year non-GAAP net income* was $449 million, or $2.48 per diluted share, a 22% increase over 2013 non-GAAP net income of $367 million, or $2.02 per diluted share.

GAAP and non-GAAP net income results for the fourth quarter include a $9 million, or $0.05 per diluted share, benefit from the reinstatement of the federal R&D tax credit, which was retroactive to January 1, 2014.

Adjusted EBITDA* for the fourth quarter of 2014 was $232 million, an increase from the prior quarter’s Adjusted EBITDA of $213 million, and also up from $192 million in the fourth quarter of 2013.  Adjusted EBITDA margin* for the fourth quarter of 2014 was 43%, consistent with the prior quarter and down one percentage point from the same period last year.  Adjusted EBITDA* for the full-year 2014 was $853 million, an increase from the prior year’s Adjusted EBITDA* of $697 million.  Full-year adjusted EBITDA margin* in 2014 was 43%, down a point from the prior year.

GAAP income from operations for the fourth quarter of 2014 was $136 million, an increase from the prior quarter’s GAAP income from operations of $120 million, and up from $116 million in the fourth quarter of 2013.  GAAP operating margin for the fourth quarter of 2014 was 25%, up one percentage point from the prior quarter and down two percentage points from the same period last year. GAAP income from operations for the full-year 2014 was $490 million, an increase from the prior year’s GAAP income from operations of $414 million. GAAP operating margin for the full-year 2014 was 25%, down one percentage point from the prior year.

Non-GAAP income from operations* for the fourth quarter of 2014 was $175 million, an increase from the prior quarter’s non-GAAP income from operations of $158 million, and up from $149 million in the fourth quarter of 2013. Non-GAAP operating margin* for the fourth quarter of 2014 was 33%, up one percentage point from the prior quarter and down one percentage point from the same period last year. Non-GAAP income from operations* for the full-year 2014 was $648 million, an increase from the prior year’s non-GAAP income from operations of $542 million. Non-GAAP operating margin* for the full-year 2014 was 33%, down one percentage point from the prior year.

Cash from operations for the fourth quarter of 2014 was $196 million, or 36% of revenue, and for the full year was $658 million, or 34% of revenue. At the end of the fourth quarter of 2014, the Company had $1.6 billion of cash, cash equivalents and marketable securities.

Share Repurchase Program
During the fourth quarter of 2014, under the share repurchase program authorized by the Board of Directors in October 2013, the Company spent $42 million to repurchase 0.7 million shares of its common stock, at an average price of $59.76 per share. During 2014, the Company spent $269 million to repurchase 4.6 million shares of its common stock, at an average price of $58.02 per share.

The Company had approximately 178 million shares of common stock outstanding as of December 31, 2014.

*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 1-866-270-6057 (or 1-617-213-8891 for international calls) and using passcode No. 25648246.  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 one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 43260496.

About Akamai
Akamai® is the leading provider of cloud services for delivering, optimizing and securing online content and business applications.  At the core of the Company’s solutions is the Akamai Intelligent Platform™ providing extensive reach, coupled with unmatched reliability, security, visibility and expertise.  Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud.  To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visitwww.akamai.com or blogs.akamai.com,  and follow @Akamai on Twitter.

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December
31, 2014

December
31, 2013

ASSETS

Cash and cash equivalents

$

238,650

$

333,891

Marketable securities

519,642

340,005

Accounts receivable, net

329,578

271,988

Prepaid expenses and other current assets

128,981

62,096

Deferred income tax assets

45,704

21,734

Current assets

1,262,555

1,029,714

Property and equipment, net

601,591

450,287

Marketable securities

869,992

573,026

Goodwill and acquired intangible assets, net

1,183,706

834,797

Deferred income tax assets

1,955

2,325

Other assets

81,747

67,536

Total assets

$

4,001,546

$

2,957,685

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued expenses

$

282,098

$

224,095

Other current liabilities

51,913

39,071

Current liabilities

334,011

263,166

Deferred income tax liabilities

39,299

4,737

Convertible senior notes

604,851

Other liabilities

78,050

60,351

Total liabilities

1,056,211

328,254

Stockholders’ equity

2,945,335

2,629,431

Total liabilities and stockholders’ equity

$

4,001,546

$

2,957,685

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Year Ended

(in thousands, except per share data)

December
31, 2014

September
30, 2014

December
31, 2013

December
31, 2014

December
31, 2013

Revenue

$

536,295

$

498,042

$

435,980

$

1,963,874

$

1,577,922

Costs and operating expenses:

Cost of revenue (1) (2)

163,201

158,812

133,951

610,943

511,087

Research and development (1)

32,417

32,583

26,520

125,286

93,879

Sales and marketing (1)

110,293

96,215

82,054

379,035

280,380

General and administrative (1) (2)

85,899

81,905

71,853

325,845

255,218

Amortization of acquired intangible assets

8,403

8,403

4,894

32,057

21,547

Restructuring (benefits) charges

(115)

952

1,189

1,843

Total costs and operating expenses

400,213

377,803

320,224

1,474,355

1,163,954

Income from operations

136,082

120,239

115,756

489,519

413,968

Interest income

2,291

2,010

1,534

7,680

6,077

Interest expense

(4,524)

(4,482)

(15,463)

Other income (expense), net

8

(188)

(395)

(1,960)

(491)

Income before provision for income taxes

133,857

117,579

116,895

479,776

419,554

Provision for income taxes

36,750

26,424

36,546

145,828

126,067

Net income

$

97,107

$

91,155

$

80,349

$

333,948

$

293,487

Net income per share:

Basic

$

0.55

$

0.51

$

0.45

$

1.87

$

1.65

Diluted

$

0.54

$

0.50

$

0.44

$

1.84

$

1.61

Shares used in per share calculations:

Basic

178,144

178,186

178,758

178,279

178,196

Diluted

180,910

180,955

182,258

181,186

181,783

(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, 2014

September
30, 2014

December
31, 2013

December
31, 2014

December
31, 2013

Cash flows from operating activities:

Net income

$

97,107

$

91,155

$

80,349

$

333,948

$

293,487

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

Depreciation and amortization

67,763

67,415

49,976

247,406

184,431

Stock-based compensation

27,196

28,008

23,673

111,996

95,884

Provision for doubtful accounts

464

1,053

280

1,981

1,169

Excess tax benefits from stock-based compensation

(8,280)

(4,297)

(4,649)

(32,238)

(22,801)

(Benefit) provision for deferred income taxes

(36,502)

(11,218)

27,343

(25,880)

27,343

Amortization of debt discount

4,524

4,482

15,463

(Gain) loss on disposal of property and equipment

(484)

287

429

(159)

414

Gain from divestiture of a business

(1,188)

Noncash portion of restructuring charges

781

781

Loss on investments

50

443

Change in fair value of contingent consideration

300

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

Accounts receivable

(8,184)

(8,959)

(15,863)

(58,397)

(67,184)

Prepaid expenses and other current assets

(38,442)

(9,348)

5,424

(60,788)

(3,842)

Accounts payable and accrued expenses

57,822

15,417

(3,197)

94,698

40,533

Deferred revenue

37

2,938

504

7,725

11,495

Other current liabilities

1

(2,122)

20

(702)

52

Other non-current assets and liabilities

32,469

(1,529)

6,662

22,274

3,334

Net cash provided by operating activities

195,541

173,282

171,732

658,070

563,908

Cash flows from investing activities:

Cash paid for acquired businesses, net of cash acquired

(3,237)

(386,532)

(30,657)

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

(92,320)

(71,782)

(62,335)

(318,627)

(260,073)

Purchases of short- and long-term marketable securities

(157,211)

(204,607)

(91,329)

(1,225,409)

(494,885)

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

114,595

93,300

130,433

746,017

475,135

Proceeds from the sale of property and equipment

569

218

66

1,371

827

Other non-current assets and liabilities

(2,046)

4,976

(135)

4,374

(3,455)

Net cash used in investing activities

(136,413)

(177,895)

(26,537)

(1,178,806)

(313,108)

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

Three Months Ended

Year Ended

(in thousands)

December
31, 2014

September
30, 2014

December
31, 2013

December
31, 2014

December
31, 2013

Cash flows from financing activities:

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

678,735

Proceeds from the issuance of warrants

77,970

Payment for bond hedge

(101,292)

Repayment of acquired debt and capital leases

(17,862)

Payment of contingent consideration related to acquired business

(1,575)

(1,575)

Proceeds from the issuance of common stock under
stock plans

11,748

17,362

9,289

87,109

63,707

Excess tax benefits from stock-based compensation

8,280

4,297

4,649

32,238

22,801

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

(7,444)

(8,957)

(12,773)

(50,649)

(41,332)

Repurchases of common stock

(42,134)

(39,022)

(48,011)

(268,647)

(160,419)

Net cash used in financing activities

(29,550)

(27,895)

(46,846)

436,027

(115,243)

Effects of exchange rate changes on cash and cash equivalents

(5,267)

(7,318)

527

(10,532)

(3,655)

Net increase (decrease) in cash and cash equivalents

24,311

(39,826)

98,876

(95,241)

131,902

Cash and cash equivalents at beginning of period

214,339

254,165

235,015

333,891

201,989

Cash and cash equivalents at end of period

$

238,650

$

214,339

$

333,891

$

238,650

$

333,891

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND ADJUSTED EBITDA

Three Months Ended

Year Ended

(in thousands, except per share data)

December
31, 2014

September
30, 2014

December
31, 2013

December
31, 2014

December
31, 2013

Income from operations

$

136,082

$

120,239

$

115,756

$

489,519

$

413,968

Amortization of acquired intangible assets

8,403

8,403

4,894

32,057

21,547

Stock-based compensation

27,196

28,008

23,673

111,996

95,884

Amortization of capitalized stock-based compensation

2,845

3,556

1,974

10,345

8,077

Amortization of capitalized interest expense

98

45

161

Acquisition-related costs

353

270

1,266

4,807

1,853

Legal settlements

285

285

Restructuring (benefits) charges

(115)

952

1,189

1,843

Benefit from adoption of software development
activities

(2,670)

(2,670)

Gain from divestiture of a business

(1,188)

Operating adjustments

39,180

37,497

32,759

158,170

128,016

Non-GAAP income from operations

$

175,262

$

157,736

$

148,515

$

647,689

$

541,984

Non-GAAP operating margin

33

%

32

%

34

%

33

%

34

%

Net income

$

97,107

$

91,155

$

80,349

$

333,948

$

293,487

Operating adjustments (from above)

39,180

37,497

32,759

158,170

128,016

Amortization of debt discount and issuance costs

4,524

4,482

15,463

Loss on investments

50

443

Income tax-effect of above non-GAAP adjustments

(13,869)

(21,771)

(13,233)

(59,202)

(54,124)

Non-GAAP net income

126,992

111,363

99,875

448,822

367,379

Depreciation and amortization

56,417

55,411

43,108

204,843

154,807

Interest income

(2,291)

(2,010)

(1,534)

(7,680)

(6,077)

Other (income) expense, net

(58)

188

395

1,517

491

Provision for GAAP income taxes

36,750

26,424

36,546

145,828

126,067

Income tax-effect of above non-GAAP adjustments

13,869

21,771

13,233

59,202

54,124

Adjusted EBITDA

$

231,679

$

213,147

$

191,623

$

852,532

$

696,791

Adjusted EBITDA margin

43

%

43

%

44

%

43

%

44

%

Non-GAAP net income per share:

Basic

$

0.71

$

0.62

$

0.56

$

2.52

$

2.06

Diluted

$

0.70

$

0.62

$

0.55

$

2.48

$

2.02

Shares used in non-GAAP per share calculations:

Basic

178,144

178,186

178,758

178,279

178,196

Diluted

180,910

180,955

182,258

181,186

181,783

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL FINANCIAL DATA

Three Months Ended

Year Ended

(in thousands, except end of period statistics)

December
31, 2014

September
30, 2014

December
31, 2013

December
31, 2014

December
31, 2013

Revenue by solution category:

Media Delivery Solutions

$

250,132

$

230,576

$

207,475

$

911,715

$

757,147

Performance and Security Solutions

239,660

224,169

192,172

879,221

690,559

Service and Support Solutions

46,503

43,297

36,333

172,938

128,087

Advertising Decision Solutions and other

2,129

Total revenue

$

536,295

$

498,042

$

435,980

$

1,963,874

$

1,577,922

Stock-based compensation:

Cost of revenue

$

3,033

$

3,030

$

2,637

$

11,934

$

10,867

Research and development

4,824

4,979

4,653

19,341

17,472

Sales and marketing

12,132

12,110

10,012

47,570

39,290

General and administrative

7,207

7,889

6,371

33,151

28,255

Total stock-based compensation

$

27,196

$

28,008

$

23,673

$

111,996

$

95,884

Depreciation and amortization:

Network-related depreciation

$

45,433

$

44,617

$

35,066

$

165,211

$

128,194

Other depreciation and amortization

10,984

10,794

8,042

39,632

26,613

Depreciation of property and equipment

56,417

55,411

43,108

204,843

154,807

Capitalized stock-based compensation amortization

2,845

3,556

1,974

10,345

8,077

Capitalized interest amortization

98

45

161

Amortization of acquired intangible assets

8,403

8,403

4,894

32,057

21,547

Total depreciation and amortization

$

67,763

$

67,415

$

49,976

$

247,406

$

184,431

Capital expenditures:

Purchases of property and equipment

$

66,285

$

47,034

$

42,751

$

223,565

$

183,146

Capitalized internal-use software development costs

31,630

31,466

20,118

116,062

75,234

Capitalized stock-based compensation

3,649

3,850

3,073

15,226

12,325

Capitalized interest expense

680

679

2,193

Total capital expenditures*

$

102,244

$

83,029

$

65,942

$

357,046

$

270,705

Net increase in cash, cash equivalents and marketable securities

$

66,525

$

69,357

$

60,403

$

381,362

$

151,682

End of period statistics:

Number of employees

5,105

4,858

3,908

Number of deployed servers

170,295

161,273

147,468

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

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 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 share, Adjusted EBITDA, Adjusted EBITDA margin and capital expenditures, 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 its business, as they exclude expenses and gains that may be infrequent, unusual in nature and not reflective of Akamai’s ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating Akamai’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

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 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 are unique to each acquisition; therefore, Akamai excludes amortization of acquired intangible assets 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 and executives, the expense varies with changes in the stock price and market conditions 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 in order to better understand the performance of Akamai’s core business performance and to be consistent with the way investors evaluate its performance and comparison of its operating results to peer companies.
  • Acquisition-related costs – Acquisition-related costs include transaction fees, due diligence costs and other one-time direct costs associated with strategic activities. In addition, subsequent adjustments to Akamai’s initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related costs. These amounts are impacted by the timing and size of the acquisitions. Akamai excludes acquisition-related costs from non-GAAP financial measures to provide a useful comparison of Akamai’s operating results to prior periods and to its peer companies because such amounts vary significantly based on the magnitude of its acquisition transactions.
  • Restructuring (benefits) charges – Akamai has incurred restructuring (benefits) charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments.  Akamai excludes these items from non-GAAP financial measures when evaluating its continuing business performance as such items are not consistently recurring and do not reflect expected future operating expense, nor provide meaningful insight into the fundamentals of current or past operations of its business.
  • Benefit from adoption of software development activities – Akamai recognized a benefit to non-income-related tax expense associated with the adoption of software development activities.  Akamai excluded this item from its non-GAAP financial measures because transactions of this nature occur infrequently and are not considered part of Akamai’s core business operations.
  • Gains and other activity related to divestiture of a business – Akamai recognized a gain and other activity related to the divestiture of its Advertising Decision Solutions business. Akamai excludes gains and other activity related to divestiture of a business from non-GAAP financial measures because transactions of this nature occur infrequently and are not considered part of Akamai’s core business operations.
  • Amortization of debt discount and issuance costs and amortization of capitalized interest expense – Akamai issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%.  The imputed interest rate of the convertible senior notes was approximately 3.2%.  This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, thereby reducing the carrying value of the convertible debt instrument.  The debt discount is amortized as interest expense together with the issuance costs of the debt which are recorded as an asset in the consolidated balance sheet.  All of Akamai’s interest expense is comprised of these non-cash components and is excluded from management’s assessment of the company’s operating performance because management believes the non-cash expense is not indicative of ongoing operating performance.
  • Loss on investments and legal settlements – Akamai has incurred losses from the impairment of certain investments and the settlement of legal matters. Akamai believes excluding these amounts from non-GAAP financial measures is useful to investors as they occur infrequently, are not representative of Akamai’s core business operations or meaningful in evaluating Akamai’s business results.
  • 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 release of valuation allowances), if any. Akamai believes that applying the non-GAAP adjustments and their related income tax effect allows Akamai to more properly reflect the 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; restructuring (benefits) charges; acquisition-related costs; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; gains and losses on legal settlements 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-effected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; restructuring (benefits) charges; acquisition-related costs; certain gains and losses on investments; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements and other non-recurring or unusual items that may arise from time to time.

Non-GAAP net income per share – Non-GAAP net income divided by basic weighted average or diluted common shares outstanding.  Basic weighted average shares outstanding are those used in GAAP net income per share calculations.  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 transaction entered into in connection with the issuance of $690 million of convertible senior notes due 2019.  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 transaction and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of net income per share. Until Akamai’s weighted average stock price is greater than $89.56, 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; restructuring (benefits) charges; acquisition-related costs; certain gains and losses on investments; benefit from adoption of software development activities; gains and other activity related to divestiture of a business; foreign exchange gains and losses; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; gains and losses on legal settlements 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 – Purchases of property and equipment, capitalization of internal-use software development costs, capitalization of stock-based compensation and capitalization of interest expense.

Impact of Foreign Currency Exchange Rates on Revenue – Revenue from international operations has historically been an important contributor to Akamai’s total revenue.  Consequently, Akamai’s revenue 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 Akamai’s foreign subsidiaries weaken, 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 enhances the understanding of revenue results and evaluation of performance in comparison to prior periods. The information presented is calculated by translating current period results using the same average foreign currency exchange rates per month from the comparative period.

Akamai Statement Under the Private Securities Litigation Reform Act
This 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 about future business plans and opportunities. 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, effects of increased competition including potential failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; 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; a failure of Akamai’s services or network infrastructure; 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 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.

Contacts:

Jeff Young

Tom Barth

Media Relations

Investor Relations

Akamai Technologies

Akamai Technologies

617-444-3913

617-274-7130

jyoung@akamai.com

tbarth@akamai.com

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