Akamai Reports Fourth Quarter 2011 And Full-Year 2011 Financial Results

-- Fourth quarter revenue grew to $324 million, up 15 percent from the prior quarter and 14 percent year-over-year, and annual revenue increased 13 percent year-over-year to $1,159 million -- Fourth quarter GAAP net income increased 42 percent quarter-over-quarter and 14 percent year-over-year to $60 million, or $0.33 per diluted share, and full-year GAAP net income increased 17 percent year-over-year to $201 million, or $1.07 per diluted share -- Fourth quarter normalized net income* increased 31 percent quarter-over-quarter and 9 percent year-over-year to $83 million, or $0.45 per diluted share, and full-year normalized net income* increased 5 percent year-over-year to $285 million, or $1.52 per diluted share -- Full-year cash from operations of $453 million: year-end cash, cash equivalents and marketable securities of over $1.2 billion

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Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the fourth quarter and full-year ended December 31, 2011. Revenue for the fourth quarter 2011 was $324 million, a 15 percent increase over third quarter revenue of $282 million, and a 14 percent increase over fourth quarter 2010 revenue of $285 million. Total revenue for 2011 was $1,159 million, a 13 percent increase over 2010 revenue of $1,024 million.

"Akamai posted record results in the fourth quarter, with accelerated growth across our business." said Paul Sagan, President and CEO of Akamai. "We believe our Content Delivery and Cloud Infrastructure solutions are stronger than ever, and we look forward to further enhancing our Cloud Infrastructure portfolio with the completed acquisition of Blaze and the planned acquisition of Cotendo, which may close as early as the first quarter."

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the fourth quarter of 2011 was $60 million, or $0.33 per diluted share. Full-year GAAP net income for 2011 was $201 million, or $1.07 per diluted share.

The Company generated normalized net income* of $83 million, or $0.45 per diluted share, in the fourth quarter of 2011, a 31 percent increase over the prior quarter's normalized net income of $63 million, or $0.34 per diluted share, and a 9 percent increase over fourth quarter 2010 normalized net income of $77 million, or $0.40 per diluted share. Full-year normalized net income grew 5 percent year-over-year to $285 million, or $1.52 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

Adjusted EBITDA* for the fourth quarter of 2011 was $148 million, up from $122 million in the prior quarter, and $129 million in the fourth quarter of 2010. Adjusted EBITDA margin for the fourth quarter was 46 percent, up 3 points from the prior quarter and up 1 point from the same period last year. For the full year, adjusted EBITDA was $525 million, up from $474 million in 2010. Full-year adjusted EBITDA margin in 2011 was at 45 percent, down one percent from 2010. (*See Use of Non-GAAP Financial Measures below for definitions.)

Full-year cash from operations was $453 million, or 39 percent of revenue, consistent with the prior year. At year end, the Company had over $1.2 billion of cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 19 percent and 28 percent, respectively, of revenue for the fourth quarter 2011.

Share Repurchase Program During the fourth quarter of 2011, under a share repurchase program that was approved by the Board of Directors in April 2011 and expanded in August 2011, the Company repurchased approximately 3 million shares of its common stock for $76 million, an average price of $26.38 per share. As of December 31, 2011, the Company had repurchased 12 million shares of its common stock for $325 million, at an average price of $26.45 per share, during fiscal 2011.

The Company had approximately 178 million shares of common stock outstanding as of December 31, 2011.

Quarterly Conference Call Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-866-831-6247 (or 1-617-213-8856 for international calls) and using passcode No. 92823340. 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. 69462788.

About Akamai Akamai' is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere. At the core of the Company's solutions is the Akamai Intelligent Platform(TM) 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 visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

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

Dec. 31, 2011 Dec. 31, 2010 ------------- ------------- Assets Cash and cash equivalents $559,197 $231,866 Marketable securities 290,029 374,733 Restricted marketable securities - 272 Accounts receivable, net 210,936 175,366 Deferred income tax assets, current portion 6,444 28,201 Prepaid expenses and other current assets 55,414 48,029 ------ ------ Current assets 1,122,020 858,467 Marketable securities 380,687 636,486 Restricted marketable securities 42 45 Property and equipment, net 293,043 255,929 Goodwill and other intangible assets, net 498,300 515,370 Other assets 7,924 11,153 Deferred income tax assets, net 43,485 75,226 ------ ------ Total assets $2,345,501 $2,352,676 ========== ==========

Liabilities and stockholders' equity Accounts payable and accrued expenses $123,618 $120,046 Other current liabilities 24,774 25,105 ------ ------ Current liabilities 148,392 145,151 Other liabilities 40,859 29,920 ------ ------ Total liabilities 189,251 175,071 Stockholders' equity 2,156,250 2,177,605 --------- --------- Total liabilities and stockholders' equity $2,345,501 $2,352,676 ========== ==========

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

----------Year ----------Three Months Ended---------- Ended---------- Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2011 2011 2010 2011 2010 ---- ---- ---- ---- ----

Revenues $323,740 $281,856 $284,688 $1,158,538 $1,023,586

Costs and operating expenses: Cost of revenues * + 102,544 93,284 86,277 374,543 303,403 Research and development * 15,191 13,542 13,775 52,333 54,766 Sales and marketing * 66,609 54,520 66,230 227,331 226,704 General and administrative * + 51,016 50,834 41,793 191,726 167,779 Amortization of other intangible assets 4,316 4,185 4,267 17,070 16,657 Restructuring charge 4,728 158 - 4,886 - ----- --- --- ----- --- Total costs and operating expenses 244,404 216,523 212,342 867,889 769,309 ------- ------- ------- ------- ------- Operating income 79,336 65,333 72,346 290,649 254,277

Interest income, net 1,863 3,002 2,793 10,921 10,862 Loss on early extinguishment of debt - - (5) - (299) Loss on investments (500) - - (500) - Other gain (loss), net 7,455 (188) (1,149) 6,125 (2,468) ----- ---- ------ ----- ------ Income before provision for income taxes 88,154 68,147 73,985 307,195 262,372 Provision for income taxes 28,073 25,862 21,475 106,291 91,152 ------ ------ ------ ------- ------ Net income $60,081 $42,285 $52,510 $200,904 $171,220 ======= ======= ======= ======== ========

Net income per share: Basic $0.34 $0.23 $0.29 $1.09 $0.97 Diluted $0.33 $0.23 $0.27 $1.07 $0.90

Shares used in per share calculations: Basic 178,916 183,085 183,362 183,866 177,309 Diluted 182,956 185,704 191,837 187,556 190,650

* Includes stock-based compensation (see supplemental table for figures) + Includes depreciation and amortization (see supplemental table for figures)

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

----------Year ----------Three Months Ended---------- Ended---------- Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2011 2011 2010 2011 2010 ---- ---- ---- ---- ----

Cash flows from operating activities: Net income $60,081 $42,285 $52,510 $200,904 $171,220 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of intangible assets and deferred financing costs 43,650 41,761 39,179 167,878 143,749 Stock-based compensation 18,840 15,141 18,495 61,305 76,468 Provision for deferred income taxes, net 32,722 20,906 (4,436) 53,628 62,462 Excess tax benefits from stock- based compensation (1,663) (610) (6,594) (13,123) (28,973) Loss (gain) on investments and disposal of property and equipment, net 769 (176) (205) 597 (428) Provision for doubtful accounts 830 782 (561) 2,066 1,546 Non-cash portion of loss on early extinguishment of debt - - 5 - 299 Non-cash portion of restructuring charge 412 - - 412 - Changes in operating assets and liabilities: Accounts receivable (30,016) (8,277) (17,221) (37,837) (23,563) Prepaid expenses and other current assets (6,936) (919) 29,304 (7,014) (12,089) Accounts payable, accrued expenses and other current liabilities 20,452 445 (44) 15,184 20,529 Accrued restructuring 3,752 (148) (450) 3,572 (617) Deferred revenue (2,335) 796 (2,328) (3,721) (9,454) Other noncurrent assets and liabilities (4,651) 4,303 2,705 8,704 1,306 ------ ----- ----- ----- ----- Net cash provided by operating activities 135,907 116,289 110,359 452,555 402,455 ------- ------- ------- ------- -------

Cash flows from investing activities: Cash paid for acquired business, net of cash received - - (458) (550) (12,668) Purchases of property and equipment and capitalization of internal-use software costs (46,570) (47,317) (48,700) (182,862) (192,045) Proceeds from sales and maturities of short- and long- term marketable securities 334,103 388,983 226,651 1,234,223 1,015,833 Purchases of short- and long- term marketable securities (152,657) (149,318) (246,406) (880,110) (1,146,493) Proceeds from the sale of property and equipment 15 47 124 150 176 Increase in other investments - - - - (500) Decrease in restricted investments held for security deposits 51 - 330 272 338 --- --- --- --- --- Net cash provided by (used in) investing activities 134,942 192,395 (68,459) 171,123 (335,359) ------- ------- ------- ------- --------

Cash flows from financing activities: Proceeds from the issuance of common stock under stock option and employee stock purchase plans 11,947 1,183 13,830 25,252 45,776 Excess tax benefits from stock- based compensation 1,663 610 6,594 13,123 28,973 Taxes paid related to net share settlement of equity awards (2,713) (2,173) - (8,393) - Repurchase of common stock (76,332) (155,125) (27,299) (324,070) (92,425) ------- -------- ------- -------- ------- Net cash used in financing activities (65,435) (155,505) (6,875) (294,088) (17,676) ------- -------- ------ -------- -------

Effects of exchange rate changes on cash and cash equivalents (1,816) (3,209) (726) (2,259) 1,141 ------ ------ ---- ------ -----

Net increase in cash and cash equivalents 203,598 149,970 34,299 327,331 50,561 Cash and cash equivalents, beginning of period 355,599 205,629 197,567 231,866 181,305 Cash and cash equivalents, end of period $559,197 $355,599 $231,866 $559,197 $231,866 ======== ======== ======== ======== ========

----------Three Months Ended---------- ----------Year Ended---------- Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2011 2011 2010 2011 2010 ---- ---- ---- ---- ---- Supplemental financial data (in thousands):

Stock-based compensation: Cost of revenues $581 $634 $696 $2,360 $2,806 Research and development 3,610 2,629 3,317 11,125 14,539 Sales and marketing 8,878 6,951 8,863 27,990 35,525 General and administrative 5,771 4,927 5,619 19,830 23,598 ----- ----- ----- ------ ------ Total stock-based compensation $18,840 $15,141 $18,495 $61,305 $76,468

Depreciation and amortization: Network-related depreciation $33,170 $31,662 $28,807 $126,764 $103,071 Capitalized stock- based compensation amortization 1,713 1,592 1,987 7,308 7,509 Other depreciation and amortization 4,451 4,322 4,068 16,736 16,005 Amortization of other intangible assets 4,316 4,185 4,267 17,070 16,657 ----- ----- ----- ------ ------ Total depreciation and amortization $43,650 $41,761 $39,129 $167,878 $143,242

Capital expenditures: Purchases of property and equipment $34,450 $37,244 $39,684 $140,219 $159,275 Capitalized internal- use software 12,120 10,073 9,016 42,643 32,770 Capitalized stock- based compensation 2,067 1,941 2,221 7,473 7,818 ----- ----- ----- ----- ----- Total capital expenditures $48,637 $49,258 $50,921 $190,335 $199,863

Net increase (decrease) in cash, cash equivalents, marketable securities and restricted marketable securities $38,960 $(94,478) $53,197 $(13,447) $181,918

End of period statistics: Number of employees 2,380 2,356 2,200 Number of deployed servers 105,111 100,770 84,259

*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). Legislative and regulatory pronouncements 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. We believe that the inclusion of these non-GAAP financial measures in this press release and our earnings call helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in its financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which may make comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.

Akamai defines "Adjusted EBITDA" as net income, before interest, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt and gains and losses on legal settlements. 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 and net interest income, or that do not require a cash outlay, such as stock-based compensation. 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 the historical 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 as a percentage of revenues. 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, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai's 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 other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, loss on early extinguishment of debt and gains and losses on legal settlements. 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.

Akamai defines "normalized net income per share" as normalized net income, plus interest add-back for diluted share calculation, divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations. Akamai considers normalized net income per share to be another important indicator of overall performance of the Company because it eliminates the effect of non-cash items. 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 measures 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)

----------Year Ended---------- Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2011 2011 2010 2011 2010 ---- ---- ---- ---- ----

Net income $60,081 $42,285 $52,510 $200,904 $171,220

Amortization of other intangible assets 4,316 4,185 4,267 17,070 16,657 Stock-based compensation 18,840 15,141 18,495 61,305 76,468 Amortization of capitalized stock- based compensation 1,713 1,592 1,987 7,308 7,509 Loss on investments, net 500 - - 500 - Loss on early extinguishment of debt - - 5 - 299 Acquisition related costs (benefits) 1,020 - (760) 580 (415) Legal settlements, net (8,043) - - (8,043) - Restructuring charge 4,728 158 - 4,886 - ----- --- --- ----- ---

Total normalized net income: 83,155 63,361 76,504 284,510 271,738

Interest income, net (1,863) (3,002) (2,793) (10,921) (10,862) Provision for income taxes 28,073 25,862 21,475 106,291 91,152 Depreciation and amortization 37,621 35,984 32,875 143,500 119,076 Other loss, net 588 188 1,149 1,918 2,468 --- --- ----- ----- -----

Total Adjusted EBITDA: $147,574 $122,393 $129,210 $525,298 $473,572 ======== ======== ======== ======== ========

Normalized net income per share: Basic $0.46 $0.35 $0.42 $1.55 $1.53 Diluted $0.45 $0.34 $0.40 $1.52 $1.43

Shares used in normalized per share calculations: Basic 178,916 183,085 183,362 183,866 177,309 Diluted 182,956 185,704 191,837 187,556 190,650

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 concerning the closing of our proposed acquisition of Cotendo Inc. 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 close the Cotendo acquisition within the anticipated time frame or at all, failure to maintain the prices we charge for our services, 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, changes in estimates we make about tax liabilities and other contingencies, 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 particularly our content delivery and cloud infrastructure solutions, 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.