PR Newswire | Feb 9, 2021 04:02PM EST

02/09 15:01 CST

Akamai Reports Fourth Quarter 2020 And Full-Year 2020 Financial Results CAMBRIDGE, Mass., Feb. 9, 2021

CAMBRIDGE, Mass., Feb. 9, 2021 /PRNewswire/ --

Fourth quarter highlights

* Revenue of $846 million, up 10% year-over-year and up 8% when adjusted for foreign exchange* * GAAP EPS of $0.68 and non-GAAP EPS* of $1.33

Full-year highlights

* Revenue of $3.2 billion, up 11% year-over-year * GAAP EPS of $3.37 and non-GAAP EPS* of $5.22 * GAAP operating margin of 21% and non-GAAP operating margin* of 31%, exceeding 30% goal * Cloud Security Solutions revenue exceeded $1 billion and grew 25% year-over-year

Akamai Technologies, Inc. (NASDAQ: AKAM), the world's most trusted solution for securing and delivering digital experiences, today reported financial results for the fourth quarter and full-year ended December 31, 2020.

"Akamai's strong fourth quarter performance capped off an excellent year in which we surpassed $3 billion in revenue and achieved record earnings per share," said Dr. Tom Leighton, CEO of Akamai. "In addition, our security portfolio exceeded $1 billion in revenue, we delivered record traffic levels on our network and we accomplished our 30% non-GAAP operating margin goal. I am very proud of how the Akamai team supported our global customers and billions of internet users who relied on the internet more than ever before during the COVID-19 pandemic. As we look forward to 2021, we expect to continue investing in innovation and new products with the goal of accelerating our market leadership in security, edge computing and video streaming."

Akamai delivered the following results for the fourth quarter and full-year ended December 31, 2020:

Revenue: Revenue for the fourth quarter was $846 million, a 10% increase over fourth quarter 2019 revenue of $772 million and an 8% increase when adjusted for foreign exchange.* Total revenue for 2020 was $3.198 billion compared to $2.894 billion for 2019, up 11% year-over-year and when adjusted for foreign exchange.*

Revenue by Division(1):

* Web Division revenue for the fourth quarter was $438 million, up 5% year-over-year and up 4% when adjusted for foreign exchange.* Web Division revenue for 2020 was $1.666 billion, up 7% year-over-year and when adjusted for foreign exchange.* * Media and Carrier Division revenue for the fourth quarter was $408 million, up 15% year-over-year and up 14% when adjusted for foreign exchange.* Media and Carrier Division revenue for 2020 was $1.532 billion, up 15% year-over-year and when adjusted for foreign exchange.*

Revenue from Cloud Security Solutions(2):

* Cloud Security Solutions revenue for the fourth quarter was $296 million, up 24% year-over-year and up 23% when adjusted for foreign exchange.* Cloud Security Solutions revenue for 2020 was $1.062 billion, up 25% year-over-year and when adjusted for foreign exchange.*

Revenue from Internet Platform Customers(3):

* Revenue from Internet Platform Customers for the fourth quarter was $58 million, up 11% year-over-year and when adjusted for foreign exchange.* Internet Platform Customers revenue for 2020 was $204 million, up 8% year-over-year and when adjusted for foreign exchange.* * Revenue excluding Internet Platform Customers for the fourth quarter was $789 million, up 9% year-over-year and up 8% when adjusted for foreign exchange.* Revenue excluding Internet Platform Customers for 2020 was $2.994 billion, up 11% year-over-year and when adjusted for foreign exchange.*

Revenue by Geography:

* U.S. revenue for the fourth quarter was $467 million, up 5% year-over-year. U.S. revenue for 2020 was $1.777 billion, up 5% year-over-year. * International revenue for the fourth quarter was $379 million, up 16% year-over-year and up 13% when adjusted for foreign exchange.* International revenue for 2020 was $1.421 billion, up 18% year-over-year and up 19% when adjusted for foreign exchange.*

Income from operations:GAAP income from operations for the fourth quarter was $135 million, relatively flat from fourth quarter 2019 income from operations of $135 million. GAAP operating margin for the fourth quarter was 16%, down 2 percentage points from the same period last year. GAAP income from operations for 2020 was $659 million, a 20% increase from the prior year's GAAP income from operations of $549 million. Full-year GAAP operating margin was 21%, up 2 percentage points from the same period last year.

Non-GAAP income from operations* for the fourth quarter was $256 million, a 15% increase from fourth quarter 2019 non-GAAP income from operations of $222 million. Non-GAAP operating margin* for the fourth quarter was 30%, up 1 percentage point from the same period last year. Non-GAAP income from operations* for 2020 was $994 million, an 18% increase from the prior year's non-GAAP income from operations of $844 million. Full year non-GAAP operating margin* was 31%, up 2 percentage points from the same period last year.

Net income:GAAP net income for the fourth quarter was $113 million, a 5% decrease from fourth quarter 2019 GAAP net income of $119 million. GAAP net income for 2020 was $557 million, a 17% increase from the prior year's GAAP net income of $478 million.

Non-GAAP net income* for the fourth quarter was $220 million, a 9% increase from fourth quarter 2019 non-GAAP net income of $202 million. Non-GAAP net income* for 2020 was $858 million, a 16% increase from the prior year's non-GAAP net income of $739 million.

EPS:GAAP EPS for the fourth quarter was $0.68 per diluted share, a 7% decrease from fourth quarter 2019 GAAP EPS of $0.73 and an 11% decrease when adjusted for foreign exchange.* GAAP EPS for 2020 was $3.37 per diluted share, a 16% increase from prior year's GAAP EPS of $2.90 per diluted share and a 16% increase when adjusted for foreign exchange.*

Non-GAAP EPS* for the fourth quarter was $1.33 per diluted share, an 8% increase from fourth quarter 2019 non-GAAP EPS of $1.23 and a 6% increase when adjusted for foreign exchange.* Non-GAAP EPS* for 2020 was $5.22 per diluted share, a 16% increase from prior year's non-GAAP EPS of $4.49 per diluted share and a 16% increase when adjusted for foreign exchange.*

Adjusted EBITDA*:Adjusted EBITDA* for the fourth quarter was $364 million, a 14% increase from fourth quarter 2019 Adjusted EBITDA of $319 million. Adjusted EBITDA margin* for the fourth quarter was 43%, up 2 percentage points from the same period last year. Adjusted EBITDA* for 2020 was $1.397 billion, a 15% increase from the prior year's Adjusted EBITDA of $1.211 billion. Adjusted EBITDA margin* was 44%, up 2 percentage points from the same period last year.

Supplemental cash information:Cash from operations for the quarter was $291 million, or 34% of revenue. Cash from operations for 2020 was $1.215 billion, or 38% of revenue. Cash, cash equivalents and marketable securities was $2.5 billion as of December 31, 2020.

Share repurchases:The Company spent $72.5 million in the fourth quarter to repurchase 0.7 million shares of its common stock at an average price of $103.32 per share. For the full-year, the Company spent $193.6 million to repurchase 2.0 million shares of its common stock at an average price of $98.53 per share. The Company had 163 million shares of common stock outstanding as of December 31, 2020.

* See Use of Non-GAAP Financial Measures below for definitions

(1) Revenue by Division - A customer-focused reporting view that reflects revenue from customers that are managed by the division

Revenue from Cloud Security Solutions - A product-focused reporting view(2) that reflects revenue from Cloud Security Solutions separately from all other solution categories

(3) Revenue from Internet Platform Customers - Revenue from large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix

Quarterly Conference CallAkamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-844-578-9671 (or 1-508-637-5655 for international calls) and using passcode 1944449. 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 two weeks following the conference by calling 1-855-859-2056 (or 1-404-537-3406 for international calls) and using passcode 1944449. The archived webcast of this event may be accessed through the Akamai website.

About AkamaiAkamai secures and delivers digital experiences for the world's largest companies. Akamai's intelligent edge platform surrounds everything, from the enterprise to the cloud, so customers and their businesses can be fast, smart, and secure. Top brands globally rely on Akamai to help them realize competitive advantage through agile solutions that extend the power of their multi-cloud architectures. Akamai keeps decisions, apps and experiences closer to users than anyone - and attacks and threats far away. Akamai's portfolio of edge security, web and mobile performance, enterprise access and video delivery solutions is supported by unmatched customer service, analytics and 24/7/365 monitoring. To learn why the world's top brands trust Akamai, visit www.akamai.com, blogs.akamai.com, or @Akamai on Twitter.

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



(in thousands) December 31,December 31, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $352,917 $393,745

Marketable securities 745,156 1,143,249

Accounts receivable, net 660,052 551,943

Prepaid expenses and other current assets 171,406 142,676

Total current assets 1,929,531 2,231,613

Marketable securities 1,398,802 835,384

Property and equipment, net 1,478,272 1,152,153

Operating lease right-of-use assets 793,945 758,450

Acquired intangible assets, net 234,724 179,431

Goodwill 1,674,371 1,600,265

Deferred income tax assets 106,918 76,528

Other assets 147,567 173,062

Total assets $7,764,130$7,006,886

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $118,546 $138,946

Accrued expenses 380,468 334,861

Deferred revenue 76,600 71,223

Operating lease liabilities 154,801 139,463

Other current liabilities 27,755 8,843

Total current liabilities 758,170 693,336

Deferred revenue 5,262 4,368

Deferred income tax liabilities 37,458 29,187

Convertible senior notes 1,906,707 1,839,791

Operating lease liabilities 715,404 692,181

Other liabilities 89,833 90,065

Total liabilities 3,512,834 3,348,928

Total stockholders' equity 4,251,296 3,657,958

Total liabilities and stockholders' equity$7,764,130$7,006,886

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended Year Ended

(in thousands,December 31,September 30,December 31,December 31,December 31,except per 2020 2020 2019 2020 2019 share data)

Revenue $846,287 $792,845 $772,123 $3,198,149$2,893,617

Costs and operating expenses:

Cost of revenue ^(1) 303,847 283,439 257,750 1,132,672 987,624 (2)

Research and development ^ 67,228 66,773 68,898 269,315 261,365 (1)

Sales and 140,401 122,749 140,243 510,405 523,883 marketing ^(1)

General and administrative162,453 128,365 149,926 547,888 516,093 ^(1) (2)

Amortization of acquired 10,894 10,340 9,710 42,049 38,581 intangible assets

Restructuring 26,847 21 10,274 37,286 17,153 charge

Total costs and operating 711,670 611,687 636,801 2,539,615 2,344,699 expenses

Income from 134,617 181,158 135,322 658,534 548,918 operations

Interest 6,270 6,307 11,402 29,122 34,355 income

Interest (17,342) (17,324) (16,675) (69,120) (49,364) expense

Other income 5,415 (2,158) (609) (2,454) (1,428) (expense), net

Income before provision for 128,960 167,983 129,440 616,082 532,481 income taxes

Provision for (4,158) (8,801) (10,632) (45,922) (53,350) income taxes

(Loss) income from equity (11,432) (559) 292 (13,106) (1,096) method investment

Net income $113,370 $158,623 $119,100 $557,054 $478,035



Net income per share:

Basic $0.70 $0.97 $0.74 $3.43 $2.94

Diluted $0.68 $0.95 $0.73 $3.37 $2.90



Shares used in per share calculations:

Basic 162,798 162,757 161,737 162,490 162,706

Diluted 165,879 166,519 163,930 165,213 164,573

(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,September 30,December 31,December 31,December 31, 2020 2020 2019 2020 2019

Cash flows from operating activities:

Net income $113,370 $158,623 $119,100 $557,054 $478,035

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

Depreciation and 127,708 118,893 115,800 478,389 440,674 amortization

Stock-based 50,510 50,217 46,878 197,411 187,140 compensation

(Benefit) provision for (11,273) (33,942) (23,648) (33,821) 933 deferred income taxes

Amortization of debt 15,766 15,747 15,096 62,823 45,857 discount and issuance costs

Other non-cash reconciling 6,743 1,480 4,750 23,027 8,528 items, net

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

Accounts (4,942) 20,107 (26,327) (90,381) (64,471) receivable

Prepaid expenses and (4,015) (11,401) 23,352 (25,395) 11,689 other current assets

Accounts payable and (10,607) 97,220 38,210 39,211 8,769 accrued expenses

Deferred (16,121) (6,539) (30,261) (1,318) (13,547) revenue

Other current 19,739 (523) 4,620 18,101 (17,230) liabilities

Other non-current 4,215 (7,909) (5,430) (10,101) (28,073) assets and liabilities

Net cash provided by 291,093 401,973 282,140 1,215,000 1,058,304 operating activities

Cash flows from investing activities:

Cash paid for acquired businesses, (128,105) - (43,920) (127,999) (165,329) net of cash acquired

Cash paid for asset - - - (36,376) - acquisition

Cash paid for equity method - - - - (36,008) investment

Purchases of property and equipment and capitalization of (167,445) (228,759) (133,666) (731,872) (562,077) internal-use software development costs

Purchases of short- and long-term (629,323) (311,010) (616,585) (1,782,849)(1,990,148)marketable securities

Proceeds from sales and maturities of short- and 296,838 317,163 205,903 1,628,001 1,085,229 long-term marketable securities

Other non-current 10,101 (2,059) (1,496) 8,121 399 assets and liabilities

Net cash used in investing (617,934) (224,665) (589,764) (1,042,974)(1,667,934)activities

AKAMAI TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued



Three Months Ended Year Ended

(in December 31,September 30,December 31,December 31,December 31,thousands) 2020 2020 2019 2020 2019

Cash flows from financing activities:

Proceeds from the issuance of- - - - 1,135,629 convertible senior notes

Proceeds from the - - - - 185,150 issuance of warrants

Purchase of note hedge related to - - - - (312,225) convertible senior notes

Repayment of convertible- - - - (690,000) senior notes

Proceeds from the issuance of13,963 16,007 13,908 59,775 57,112 common stock under stock plans

Employee taxes paid related to net share (12,529) (13,369) (14,150) (89,828) (75,266) settlement of stock-based awards

Repurchases of common (72,510) (13,198) (42,731) (193,588) (334,519) stock

Other non-current- - - - (1,558) assets and liabilities

Net cash used in (71,076) (10,560) (42,973) (223,641) (35,677) financing activities

Effects of exchange rate changes on 7,400 4,363 5,116 10,935 2,466 cash and cash equivalents

Net (decrease) increase in cash, cash (390,517) 171,111 (345,481) (40,680) (642,841) equivalents and restricted cash

Cash, cash equivalents and restricted 743,983 572,872 739,627 394,146 1,036,987 cash at beginning of period

Cash, cash equivalents and $353,466 $743,983 $394,146 $353,466 $394,146 restricted cash at end of period

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA - REVENUE BY DIVISION



Three Months Ended Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 ^(1) 2020 2019 ^(1)

Web Division $ 437,904 $418,064 $ 416,830 $1,666,305 $1,556,252

Media and Carrier 408,383 374,781 355,293 1,531,844 1,337,365 Division

Total revenue $ 846,287 $792,845 $ 772,123 $3,198,149 $2,893,617

Revenue growth rates year-over-year:

Web Division 5 % 8 %9 % 7 %8 %

Media and Carrier 15 16 8 15 5 Division

Total revenue 10 % 12 %8 % 11 %7 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates^ (2):

Web Division 4 % 7 %9 % 7 %9 %

Media and Carrier 14 16 8 15 6 Division

Total revenue 8 % 11 %9 % 11 %8 %

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA - REVENUE FROM CLOUD SECURITY SOLUTIONS



Three Months Ended Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 2020 2019

Cloud Security $ 296,137 $265,869 $ 237,913 $1,061,622 $848,733 Solutions^ (3)

CDN and other 550,150 526,976 534,210 2,136,527 2,044,884 solutions^ (4)

Total revenue $ 846,287 $792,845 $ 772,123 $3,198,149 $2,893,617

Revenue growth rates year-over-year:

Cloud Security 24 % 23 %29 % 25 %29 %Solutions^ (3)

CDN and other 3 7 1 4 (1) solutions^ (4)

Total revenue 10 % 12 %8 % 11 %7 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates^ (2):

Cloud Security 23 % 23 %29 % 25 %30 %Solutions^ (3)

CDN and other 2 6 1 4 1 solutions^ (4)

Total revenue 8 % 11 %9 % 11 %8 %

As of January 1, 2020, Akamai reassigned some of its customers from the Media and Carrier Division to the Web Division and revised historical(1) results in order to reflect the most recent categorization and to provide a comparable view for all periods presented. As the purchasing patterns and required account expertise of customers change over time, Akamai may reassign a customer's division from one to another.

(2) See Use of Non-GAAP Financial Measures below for a definition

(3) Cloud Security Solutions revenue represents revenue from the Security Technology Group, which will be formed on March 1, 2021

(4) CDN and other solutions revenue represents revenue from the Edge Technology Group, which will be formed on March 1, 2021

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA - REVENUE FROM INTERNET PLATFORM CUSTOMERS



Three Months Ended Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 2020 2019

Revenue from Internet $ 57,677 $50,618 $ 51,927 $203,749 $189,428 Platform Customers

Revenue excluding Internet 788,610 742,227 720,196 2,994,400 2,704,189 Platform Customers

Total revenue $ 846,287 $792,845 $ 772,123 $3,198,149 $2,893,617

Revenue growth rates year-over-year:

Revenue from Internet 11 % 15 %20 % 8 %8 %Platform Customers

Revenue excluding Internet 9 11 7 11 6 Platform Customers

Total revenue 10 % 12 %8 % 11 %7 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates^ (1):

Revenue from Internet 11 % 15 %20 % 8 %8 %Platform Customers

Revenue excluding Internet 8 11 8 11 8 Platform Customers

Total revenue 8 % 11 %9 % 11 %8 %

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL REVENUE DATA - REVENUE BY GEOGRAPHY



Three Months Ended Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 2020 2019

U.S. $ 467,456 $437,381 $ 446,036 $1,777,435 $1,694,211

International 378,831 355,464 326,087 1,420,714 1,199,406

Total revenue $ 846,287 $792,845 $ 772,123 $3,198,149 $2,893,617

Revenue growth rates year-over-year:

U.S. 5 % 6 %3 % 5 %1 %

International 16 20 17 18 16

Total revenue 10 % 12 %8 % 11 %7 %

Revenue growth rates year-over-year, adjusted for the impact of foreign exchange rates^ (1):

U.S. 5 % 6 %3 % 5 %1 %

International 13 18 18 19 20

Total revenue 8 % 11 %9 % 11 %8 %

(1) See Use of Non-GAAP Financial Measures below for a definition

AKAMAI TECHNOLOGIES, INC.

SUPPLEMENTAL OPERATING EXPENSE DATA



Three Months Ended Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 2020 2019

General and administrative expenses:

Payroll and related$ 51,759 $50,159 $ 48,984 $ 199,992 $ 194,232 costs

Stock-based 14,834 14,302 12,808 58,470 52,826 compensation

Depreciation and 21,189 20,554 22,167 82,862 78,587 amortization

Facilities-related 25,136 25,099 27,196 98,805 90,674 costs

(Benefit) provision for doubtful (584) (1,627) (414) 2,881 1,924 accounts

Acquisition-related4,390 1,051 726 5,579 1,920 costs

Legal settlements - - 10,000 275 10,000

License of patent - - - - (8,855)

Endowment of Akamai20,000 - - 20,000 - Foundation

Professional fees 25,729 18,827 28,459 79,024 94,785 and other expenses

Total general and administrative $ 162,453 $128,365 $ 149,926 $ 547,888 $ 516,093 expenses



General and administrative expenses-functional ^(1):

Global functions $ 51,476 $47,559 $ 51,416 $ 193,719 $ 198,077

As a percentage of 6 % 6 %7 % 6 % 7 % revenue

Infrastructure 87,172 81,365 88,198 325,434 307,500

As a percentage of 10 % 10 %11 % 10 % 11 % revenue

Other 23,805 (559) 10,312 28,735 10,516

Total general and administrative $ 162,453 $128,365 $ 149,926 $ 547,888 $ 516,093 expenses

As a percentage of 19 % 16 %19 % 17 % 18 % revenue



Stock-based compensation:

Cost of revenue $ 6,455 $6,384 $ 5,562 $ 24,829 $ 22,479

Research and 12,519 12,722 12,742 48,855 49,685 development

Sales and marketing16,702 16,809 15,766 65,257 62,150

General and 14,834 14,302 12,808 58,470 52,826 administrative

Total stock-based $ 50,510 $50,217 $ 46,878 $ 197,411 $ 187,140 compensation

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(1) 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, allowance for doubtful accounts, the license of a patent, legal settlements, transformation costs and the endowments of the Akamai Foundation.

AKAMAI TECHNOLOGIES, INC.

OTHER SUPPLEMENTAL DATA



Three Months Ended Year Ended

(in thousands, except end of December 31,September 30,December 31,December 31,December 31,period 2020 2020 2019 2020 2019 statistics)

Depreciation and amortization:

Network-related$48,824 $42,991 $34,186 $167,018 $125,588 depreciation

Capitalized internal-use software 38,682 37,572 41,501 155,187 165,240 development amortization

Other depreciation 20,662 20,081 21,703 80,955 76,827 and amortization

Depreciation of property and 108,168 100,644 97,390 403,160 367,655 equipment

Capitalized stock-based compensation 7,737 7,078 7,747 29,631 30,613 amortization^ (1)

Capitalized interest expense 909 831 953 3,549 3,825 amortization^ (1)

Amortization of acquired 10,894 10,340 9,710 42,049 38,581 intangible assets

Total depreciation $127,708 $118,893 $115,800 $478,389 $440,674 and amortization



Capital expenditures, excluding stock-based compensation and interest expense^(2)(3):

Purchases of property and $138,140 $144,155 $122,560 $509,404 $406,854 equipment

Capitalized internal-use software 56,634 55,885 50,497 217,120 202,691 development costs

Total capital expenditures, excluding stock-based $194,774 $200,040 $173,057 $726,524 $609,545 compensation and interest expense



End of period statistics:

Number of 8,368 8,155 7,724 employees

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(1) cloud-computing arrangements. 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).

Capital expenditures presented in this table are reported on an accrual basis, which differs from the cash-basis presentation in the statements of(2) 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.

(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 Year Ended

December 31, September 30,December 31, December 31,December 31, (in thousands) 2020 2020 2019 2020 2019

Income from $ 134,617 $181,158 $ 135,322 $658,534 $ 548,918 operations

GAAP operating 16 % 23 %18 % 21 % 19 % margin

Amortization of acquired intangible10,894 10,340 9,710 42,049 38,581 assets

Stock-based 50,510 50,217 46,878 197,411 187,140 compensation

Amortization of capitalized stock-based 8,662 7,913 8,700 33,202 34,438 compensation and capitalized interest expense

Restructuring 26,847 21 10,274 37,286 17,153 charge

Acquisition-related4,390 1,051 726 5,579 1,920 costs

Legal settlements - - 10,000 275 10,000

Endowment of Akamai20,000 - - 20,000 - Foundation

Transformation - - - - 5,527 costs

Operating 121,303 69,542 86,288 335,802 294,759 adjustments

Non-GAAP income $ 255,920 $250,700 $ 221,610 $994,336 $ 843,677 from operations

Non-GAAP operating 30 % 32 %29 % 31 % 29 % margin



Net income $ 113,370 $158,623 $ 119,100 $557,054 $ 478,035

Operating adjustments (from 121,303 69,542 86,288 335,802 294,759 above)

Amortization of debt discount and 15,766 15,747 15,096 62,823 45,857 issuance costs

(Gain) loss on (7,228) - 500 (7,228) 60 investments

Loss (income) from equity method 11,432 559 (292) 13,106 1,096 investment

Income tax-effect of above non-GAAP adjustments and (34,799) (28,689) (19,099) (103,280) (80,488) certain discrete tax items

Non-GAAP net income$ 219,844 $215,782 $ 201,593 $858,277 $ 739,319

AKAMAI TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE



Three Months Ended Year Ended

(in thousands, December 31,September 30,December 31,December 31,December 31,except per share 2020 2020 2019 2020 2019 data)

GAAP net income per$0.68 $ 0.95 $0.73 $3.37 $2.90 diluted share

Adjustments to net income:

Amortization of acquired intangible0.07 0.06 0.06 0.25 0.23 assets

Stock-based 0.30 0.30 0.29 1.19 1.14 compensation

Amortization of capitalized stock-based 0.05 0.05 0.05 0.20 0.21 compensation and capitalized interest expense

Restructuring 0.16 - 0.06 0.23 0.10 charge

Acquisition-related0.03 0.01 - 0.03 0.01 costs

Legal settlements - - 0.06 - 0.06

Endowment of Akamai0.12 - - 0.12 - Foundation

Transformation - - - - 0.03 costs

Amortization of debt discount and 0.10 0.09 0.09 0.38 0.28 issuance costs

(Gain) loss on (0.04) - - (0.04) - investments

Loss (income) from equity method 0.07 - - 0.08 0.01 investment

Income tax effect of above non-GAAP adjustments and (0.21) (0.17) (0.12) (0.63) (0.49) certain discrete tax items

Adjustment for - 0.02 - 0.04 - shares ^(1)

Non-GAAP net income$1.33 $ 1.31 $1.23 $5.22 $4.49 per diluted share



Shares used in diluted per share 165,879 166,519 163,930 165,213 164,573 calculations

Impact of benefit from note hedge (1,105) (1,732) - (873) - transactions ^(1)

Shares used in non-GAAP diluted 164,774 164,787 163,930 164,340 164,573 per share calculations ^(1)

Shares used in non-GAAP diluted per share calculations have been adjusted for the three-months and year ended December 31, 2020, for the benefit of(1) Akamai's note hedge transactions. During the last three quarters of 2020, 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 Year Ended

(in thousands) December 31, September 30,December 31, December 31, December 31, 2020 2020 2019 2020 2019

Net income $ 113,370 $158,623 $ 119,100 $557,054 $478,035

Interest income (6,270) (6,307) (11,402) (29,122) (34,355)

Provision for 4,158 8,801 10,632 45,922 53,350 income taxes

Depreciation and 108,168 100,644 97,390 403,160 367,655 amortization

Amortization of capitalized stock-based 8,662 7,913 8,700 33,202 34,438 compensation and capitalized interest expense

Amortization of acquired intangible10,894 10,340 9,710 42,049 38,581 assets

Stock-based 50,510 50,217 46,878 197,411 187,140 compensation

Restructuring 26,847 21 10,274 37,286 17,153 charge

Acquisition-related4,390 1,051 726 5,579 1,920 costs

Legal settlements - - 10,000 275 10,000

Endowment of Akamai20,000 - - 20,000 - Foundation

Transformation - - - - 5,527 costs

Interest expense 17,342 17,324 16,675 69,120 49,364

(Gain) loss on (7,228) - 500 (7,228) 60 investments

Loss (income) from equity method 11,432 559 (292) 13,106 1,096 investment

Other expense, net 1,813 2,158 109 9,682 1,368

Adjusted EBITDA $ 364,088 $351,344 $ 319,000 $1,397,496 $1,211,332

Adjusted EBITDA 43 % 44 %41 % 44 %42 %margin

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 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 comparing financial results across accounting periods and to those of 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 are 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. In addition, subsequent adjustments to Akamai's initial estimated amounts of contingent consideration and indemnification 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 its 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 the acquisition transactions and do not reflect Akamai's core operations. * Restructuring charges - Akamai has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and estimated costs of existing facility lease commitments. 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%. In February 2014, Akamai issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rates of these convertible senior notes were 3.10%, 4.26% and 3.20%, respectively. This is a result of the debt discounts recorded for the conversion features that are required to be separately accounted for as equity under GAAP, thereby reducing the carrying value of the convertible debt instruments. The debt discounts are amortized as interest expense together with the issuance costs of the debt. The interest expense excluded from Akamai's non-GAAP results 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 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 them are not representative of Akamai's core business operations and ongoing operating performance. * Legal settlements - Akamai has incurred losses related to the settlement of legal matters. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of Akamai's core business operations. * Endowment of Akamai Foundation - Akamai has incurred expenses to endow the Akamai Foundation, a private corporate foundation dedicated to encouraging the next generation of technology innovators by supporting math and science education. Akamai's first endowment was in 2018 to enable a permanent endowment for the Akamai Foundation to allow it to expand its reach. In the fourth quarter of 2020 Akamai supplemented the endowment to enable specific initiatives to increase diversity in the technology industry. Akamai believes excluding these amounts from non-GAAP financial measures is useful to investors as these infrequent and nearly one-time expenses are not representative of its core business operations. * Transformation costs - Akamai has incurred professional services fees associated with internal changes that are designed to improve its operating margins and that are part of a discrete planned transformation program intended to significantly change the manner in which business in conducted. Akamai believes excluding these amounts from its non-GAAP financial measures is useful to investors as the types of events and activities giving rise to them occur infrequently and 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; gains and losses on legal settlements; costs incurred related to endowments to the Akamai Foundation; transformation costs; 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; gains and losses on legal settlements; costs incurred related to endowments to the Akamai Foundation; transformation costs; 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 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; gains and losses on legal settlements; costs incurred related to endowments to the Akamai Foundation; transformation costs; 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 ActThis release and/or our quarterly earnings conference call scheduled for later today contain 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 expected future financial performance. 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 to realize the expected benefits from our announced reorganization; 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; impact of the 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 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 and on such 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 SoriceMedia Relations Akamai Technologies 646-320-4107 gsorice@akamai.com

Tom BarthInvestor RelationsAkamai Technologies617-274-7130tbarth@akamai.com

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SOURCE Akamai Technologies, Inc.