Akamai Reports Record Revenue and Profits for First Quarter 2005

Akamai Reports Record Revenue and Profits for First Quarter 2005

    Business Editors/Technology Editors

    CAMBRIDGE, Mass.--(BUSINESS WIRE)--April 27, 2005--Akamai Technologies, Inc. (NASDAQ: AKAM):

--	Revenue grows 24 percent year-over-year to $60.1 million, a 4 percent increase from prior quarter
--	First quarter GAAP net income grows to $14.1 million, a 5 percent increase from prior quarter, or $0.10 per diluted share

    Akamai Technologies, Inc. (NASDAQ: AKAM), the leading global service provider for accelerating content and business processes online, today reported financial results for the first quarter ended March 31, 2005. Revenue for the first quarter 2005 was $60.1 million, a 4 percent increase over fourth quarter 2004 revenue of $57.6 million, and a 24 percent increase over first quarter 2004 revenue of $48.4 million.
    Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, increased in the first quarter of 2005 to $14.1 million, or $0.10 per diluted share, consistent with earnings per diluted share in the prior quarter, and a significant improvement over 2004 first quarter earnings per diluted share of $0.02 per share.
    "We are off to a great start this year and this quarter's positive results demonstrate the expanding market opportunity for, and utilization of, our global, on-demand platform," said Paul Sagan, president and CEO of Akamai. "Our goal is to continue growing revenue and earnings through increased adoption of our core delivery services, as well as new offerings for on-demand managed services and accelerating Web applications."
    The Company generated normalized net income(a) of $14.3 million, or $0.10 per diluted share, in the first quarter of 2005. ((a)See Use of Non-GAAP Financial Measures below for definitions.)
    Adjusted EBITDA(a) for the first quarter of 2005 was $20.4 million, up 10 percent compared to $18.6 million in the prior quarter, and up 37 percent compared to $14.9 million in the first quarter of 2004. Adjusted EBITDA as a percent of revenue was 34 percent, up from 32 percent in the prior quarter. ((a)See Use of Non-GAAP Financial Measures below for definitions.)
    Cash from operations increased 20 percent to $18.7 million in the first quarter as compared to fourth quarter 2004 cash from operations of $15.6 million, and was more than double first quarter 2004 cash from operations of $8.6 million.
    At March 31, 2005, the Company had approximately 127.4 million shares of common stock outstanding, and had approximately $118.0 million of cash, cash equivalents and marketable securities.

    Customers

    The number of total customers under long-term services contracts increased to 1,360, a 4 percent increase over fourth quarter 2004, and a 16 percent increase year-over-year. This increase marks the ninth consecutive quarter of net customer growth.
    New customers in the first quarter included Connextra Limited, CTS EVENTIM AG, Fordham University, F-Secure Corporation, InterSystems, Motricity, New England Patriots, Palladium Group, Inc., 3 Suisses-Gruppe, U.S. Department of Agriculture (USDA), and West Elm, among others.
    Sales through resellers and sales outside the United States accounted for 25 percent and 20 percent, respectively, of revenue for the first quarter of 2005.

    Quarterly Conference Call

    Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-888-689-4521 (or 1-706-645-9202 for international calls). 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 1-800-642-1687 (or 1-706-645-9291 for international calls) and using conference ID No. 5075937.

    About Akamai

    Akamai(R) is the leading global service provider for accelerating content and business processes online. More than 1,300 organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com.

Financial Statements

Condensed Consolidated Balance Sheets (dollar amounts in thousands) (unaudited)

March 31, December 31, 2005 2004 ------------ ------------ Assets Cash and cash equivalents $39,881 $35,318 Marketable securities 43,602 34,380 Restricted marketable securities 932 932 Accounts receivable, net 34,285 30,333 Prepaid expenses and other current assets 6,337 7,706 ------------ ------------ Current assets 125,037 108,669 Marketable securities 29,884 34,065 Restricted marketable securities 3,722 3,722 Property and equipment, net 31,007 25,242 Goodwill and other intangible assets, net 5,116 5,128 Other assets 6,844 5,917 ------------ ------------ Total assets $201,610 $182,743 ============ ============

Liabilities and stockholders' deficit Accounts payable and accrued expenses $46,105 $42,446 Other current liabilities 4,294 4,320 ------------ ------------ Current liabilities 50,399 46,766 Other liabilities 5,100 5,294 Convertible notes 256,614 256,614 ------------ ------------ Total liabilities 312,113 308,674 Stockholders' deficit (110,503) (125,931) ------------ ------------ Total liabilities and stockholders' deficit $201,610 $182,743 ============ ============

Condensed Consolidated Statements of Operations (amounts in thousands, except per share data) (unaudited)

Three Months Ended March 31, December 31, March 31, 2005 2004 2004 ------------ ------------ ------------

Revenues $60,096 $57,576 $48,367

Costs and operating expenses: Cost of revenues (b) 11,524 11,173 12,146 Research and development 3,629 3,344 2,694 Sales and marketing 16,745 15,017 14,010 General and administrative (b) 11,839 13,463 11,197 Amortization of other intangible assets 12 12 12 ------------ ------------ ------------ Total costs and operating expenses 43,749 43,009 40,059 ------------ ------------ ------------ Operating income 16,347 14,567 8,308

Interest expense, net 1,013 1,319 3,158 Loss on early extinguishment of debt - 852 2,018 Loss (gain) on investments, net - 1 (11) Other expense (income), net 726 (1,183) 138 ------------ ------------ ------------ Income before provision for income taxes 14,608 13,578 3,005 Provision for income taxes 529 187 84 ------------ ------------ ------------ Net income $14,079 $13,391 $2,921 ============ ============ ============

Net income per share: Basic $0.11 $0.11 $0.02 Diluted $0.10 $0.10 $0.02

Shares used in per share calculations: Basic 127,051 126,261 122,104 Diluted 147,282 147,306 133,825

(b) Includes depreciation (see supplemental tables for figures)

Three Months Ended March 31, December 31, March 31, 2005 2004 2004 ------------ ------------- ------------

Supplemental financial data (in thousands): Network-related depreciation $2,915 $2,731 $4,450 Other depreciation $939 $1,007 $1,594

Capital expenditures $9,719 $7,138 $3,042

Net increase (decrease) in cash, cash equivalents, restricted cash and marketable securities $9,604 $(11,379) $(31,307)

End of period statistics: Number of customers under recurring contract 1,360 1,310 1,172 Number of employees 633 605 565 Number of deployed servers 16,017 15,075 14,434

Condensed Consolidated Statements of Cash Flows (amounts in thousands) (unaudited)

Three Months Ended March December March 31, 31, 31, 2005 2004 2004 -------- --------- ---------

Cash flows from operating activities: Net income $14,079 $13,391 $2,921 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of deferred financing costs 4,140 4,051 6,497 Equity-related compensation 227 236 533 Deferred taxes 158 408 30 Non-cash portion of loss on early extinguishment of debt - 292 977 Loss (gain) on investments, property and equipment and foreign currency, net 227 (437) 156 Provision for doubtful accounts 413 191 (206) Changes in operating assets and liabilities: Accounts receivable, net (4,761) (1,411) (3,333) Prepaid expenses and other current assets 777 (1,441) 2,474 Accounts payable, accrued expenses and other current liabilities 4,878 38 (2,204) Accrued restructuring (352) (352) (450) Deferred revenue 281 907 1,173 Other noncurrent assets and liabilities (1,365) (298) 68 -------- --------- --------- Net cash provided by operating activities: 18,702 15,575 8,636 -------- --------- ---------

Cash flows from investing activities: Purchases of property and equipment and capitalization of internal-use software (9,719) (7,138) (3,042) Purchase of investments (10,544) (14,814) (121,418) Proceeds from sale of property and equipment - - 9 Proceeds from sales and maturities of investments 5,203 15,040 171,725 Decrease in restricted cash held for note repurchases - - 5,000 -------- --------- --------- Net cash (used in) provided by investing activities (15,060) (6,912) 52,274 -------- --------- ---------

Cash flows from financing activities: Payments on capital leases (134) (141) (131) Proceeds from the issuance of 1% convertible senior notes, net of financing costs - - 24,313 Repurchase and retirement of 5 1/2% convertible subordinated notes - (24,875) (62,873) Proceeds from the issuance of common stock under stock option and employee stock purchase plans 1,643 3,863 2,178 -------- --------- --------- Net cash provided by (used in) financing activities 1,509 (21,153) (36,513) -------- --------- ---------

Effects of exchange rate translation on cash and cash equivalents (588) 1,587 (568) -------- --------- ---------

Net increase (decrease) in cash and cash equivalents 4,563 (10,903) 23,829 Cash and cash equivalents, beginning of period 35,318 46,221 105,652 -------- --------- --------- Cash and cash equivalents, end of period $39,881 $35,318 $129,481 ======== ========= =========

    (a) 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 discourage the use of and emphasis on non-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, 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 "Adjusted EBITDA margin" as a percentage of adjusted EBITDA over revenue. Akamai considers Adjusted EBITDA margin to be an indicator of the company's operating trend and performance of its business in relation to its revenue growth.
    Akamai defines "capital expenditures" or "capex" as purchases of property and equipment and 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" as net income 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 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 should be considered in addition to, not as a substitute for, the company's operating income and net income, 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.

Reconciliation of GAAP net income to normalized net income and Adjusted EBITDA (amounts in thousands, except per share data)

Three Months Ended March 31, December 31, March 31, 2005 2004 2004 ---------- ----------- ----------

Net income $14,079 $13,391 $2,921

Amortization of intangible assets 12 12 12 Equity-related compensation 227 236 533 Loss (gain) on investments, net - 1 (11) Loss on early extinguishment of debt - 852 2,018 ---------- ----------- ----------

Total normalized net income: 14,318 14,492 5,473

Interest expense, net 1,013 1,319 3,158 Provision for income taxes 529 187 84 Depreciation and amortization 3,854 3,738 6,044 Other expense (income), net 726 (1,183) 138 ---------- ----------- ----------

Total Adjusted EBITDA: $20,440 $18,553 $14,897 ========== =========== ==========

Normalized net income per share: Basic $0.11 $0.11 $0.04 Diluted $0.10 $0.10 $0.04

Shares used in per share calculations: Basic 127,051 126,261 122,104 Diluted 147,282 147,306 133,825

    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.

--30--NC/bo*

CONTACT: Media Relations Akamai Technologies Jeff Young, 617-444-3913 jyoung@akamai.com or Investor Relations Akamai Technologies Sandy Smith, 617-444-2804 ssmith@akamai.com

KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: SOFTWARE INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Akamai Technologies

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