PR Newswire | Aug 3, 2021 04:02PM EDT

08/03 15:01 CDT

Akamai Reports Second Quarter 2021 Financial ResultsSecond quarter revenue of $853 million, up 7% year-over-year and up 5% when adjusted for foreign exchange*Security Technology Group revenue of $325 million, up 25% year-over-year and up 22% when adjusted for foreign exchange*Edge Technology Group revenue of $528 million, down 1% year-over-year and down 4% when adjusted for foreign exchange*GAAP EPS of $0.94, down 4% year-over-year, and non-GAAP EPS* of $1.42, up 3% year-over-year CAMBRIDGE, Mass., Aug. 3, 2021

CAMBRIDGE, Mass., Aug. 3, 2021 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM), the world's most trusted solution for protecting and delivering digital experiences, today reported financial results for the second quarter ended June 30, 2021.

"Akamai's excellent second quarter financial performance was highlighted by continued strong growth across our security solutions globally," said Dr. Tom Leighton, Akamai's Chief Executive Officer. "As the internet has become increasingly critical to consumers and businesses, our customers have turned to us more than ever to power and protect exceptional online experiences."

Akamai delivered the following financial results for the second quarter ended June 30, 2021:

Revenue:Revenue was $853 million, a 7% increase over second quarter 2020 revenue of $795 million and a 5% increase when adjusted for foreign exchange.*

Revenue by Product Group:

* Security Technology Group revenue was $325 million, up 25% year-over-year and up 22% when adjusted for foreign exchange* * Edge Technology Group revenue was $528 million, down 1% year-over-year and down 4% when adjusted for foreign exchange*

Revenue by Geography:

* U.S. revenue was $450 million, up 1% year-over-year * International revenue was $403 million, up 15% year-over-year and up 9% when adjusted for foreign exchange*

Income from operations:GAAP income from operations was $199 million, a 5% increase from second quarter 2020. GAAP operating margin for the second quarter was 23%, down 1 percentage point from the same period last year.

Non-GAAP income from operations* was $270 million, a 5% increase from second quarter 2020. Non-GAAP operating margin* for the second quarter was 32%, flat compared to the same period last year.

Net income:GAAP net income was $156 million, a 3% decrease from second quarter 2020. Non-GAAP net income* was $233 million, a 3% increase from second quarter 2020.

EPS:GAAP EPS was $0.94 per diluted share, a 4% decrease from second quarter 2020 and a 9% decrease when adjusted for foreign exchange.* Non-GAAP EPS was $1.42 per diluted share, a 3% increase from second quarter 2020 and a 1% decrease when adjusted for foreign exchange.*

Adjusted EBITDA*:Adjusted EBITDA* was $386 million, a 9% increase from second quarter 2020. Adjusted EBITDA margin* for the second quarter was 45%, flat compared to the same period last year.

Supplemental cash information:Cash from operations for the second quarter of 2021 was $378 million, or 44% of revenue. Cash, cash equivalents and marketable securities was $2.6 billion as of June 30, 2021.

Share repurchases:Akamai spent $96 million in the second quarter of 2021 to repurchase 0.9 million shares of its common stock at an average price of $110.51 per share. The Company had 163 million shares of common stock outstanding as of June 30, 2021.

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

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 3968976. 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 3968976. 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) June 30, December 31, 2021 2020

ASSETS

Current assets:

Cash and cash equivalents $581,068 $352,917

Marketable securities 835,420 745,156

Accounts receivable, net 656,609 660,052

Prepaid expenses and other current assets 180,155 171,406

Total current assets 2,253,252 1,929,531

Marketable securities 1,164,620 1,398,802

Property and equipment, net 1,538,422 1,478,272

Operating lease right-of-use assets 830,022 793,945

Acquired intangible assets, net 217,519 234,724

Goodwill 1,685,859 1,674,371

Deferred income tax assets 99,634 106,918

Other assets 131,610 147,567

Total assets $7,920,938$7,764,130

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $93,465 $118,546

Accrued expenses 289,189 380,468

Deferred revenue 95,216 76,600

Operating lease liabilities 158,390 154,801

Other current liabilities 11,189 27,755

Total current liabilities 647,449 758,170

Deferred revenue 4,623 5,262

Deferred income tax liabilities 36,124 37,458

Convertible senior notes 1,941,113 1,906,707

Operating lease liabilities 733,523 715,404

Other liabilities 81,449 89,833

Total liabilities 3,444,281 3,512,834

Total stockholders' equity 4,476,657 4,251,296

Total liabilities and stockholders' equity$7,920,938$7,764,130

AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended Six Months Ended

(in thousands, except per share data) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Revenue $852,824$842,708$794,715$1,695,532$1,559,017

Costs and operating expenses:

Cost of revenue^(1) (2) 320,000 306,687 276,804 626,687 545,386

Research and development^(1) 77,255 82,045 64,090 159,300 135,314

Sales and marketing^(1) 111,894 116,354 123,469 228,248 247,255

General and administrative^(1) (2) 134,295 136,715 129,709 271,010 257,070

Amortization of acquired intangible assets12,060 11,427 10,381 23,487 20,815

Restructuring (benefit) charge (2,114) 7,116 (167) 5,002 10,418

Total costs and operating expenses 653,390 660,344 604,286 1,313,734 1,216,258

Income from operations 199,434 182,364 190,429 381,798 342,759

Interest income 4,736 4,578 9,502 9,314 16,545

Interest expense (18,037) (17,834) (17,249) (35,871) (34,454)

Other expense, net (811) (817) (1,603) (1,628) (5,711)

Income before provision for income taxes 185,322 168,291 181,079 353,613 319,139

Provision for income taxes (18,009) (11,898) (18,671) (29,907) (32,963)

Loss from equity method investment (10,816) (698) (493) (11,514) (1,115)

Net income $156,497$155,695$161,915$312,192 $285,061



Net income per share:

Basic $0.96 $0.95 $1.00 $1.91 $1.76

Diluted $0.94 $0.94 $0.98 $1.88 $1.74



Shares used in per share calculations:

Basic 163,074 163,061 162,413 163,067 162,203

Diluted 166,263 165,688 164,768 165,976 164,226

(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 Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Cash flows from operating activities:

Net income $156,497$155,695$161,915$312,192$285,061

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

Depreciation and amortization 137,715 131,471 115,580 269,186 231,788

Stock-based compensation 50,481 54,305 49,191 104,786 96,684

Provision for deferred income taxes 5,461 1,764 14,282 7,225 11,394

Amortization of debt discount and 16,460 16,257 15,677 32,717 31,310 issuance costs

Other non-cash reconciling items, net 12,428 1,226 2,752 13,654 14,804

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

Accounts receivable 11,176 (15,580) (31,633) (4,404) (105,546)

Prepaid expenses and other current 24,539 (35,388) 455 (10,849) (9,979) assets

Accounts payable and accrued expenses (10,073) (72,986) (19,944) (83,059) (47,402)

Deferred revenue (7,345) 25,439 (5,647) 18,094 21,342

Other current liabilities (15,514) (716) (2,043) (16,230) (1,115)

Other non-current assets and liabilities(3,692) (11,694) (1,894) (15,386) (6,407)

Net cash provided by operating 378,133 249,793 298,691 627,926 521,934 activities

Cash flows from investing activities:

Cash (paid) received for business - (15,638) - (15,638) 106 acquisitions, net of cash acquired

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

Purchases of property and equipment and capitalization of internal-use software (154,569)(164,719)(120,239)(319,288)(335,668)development costs

Purchases of short- and long-term (291,957)(90,279) (452,737)(382,236)(842,516)marketable securities

Proceeds from sales and maturities of short- and long-term marketable 287,297 234,149 483,184 521,446 1,014,000securities

Other non-current assets and liabilities(391) 179 155 (212) 79

Net cash used in investing activities (159,620)(36,308) (89,637) (195,928)(200,375)

AKAMAI TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued



Three Months Ended Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Cash flows from financing activities:

Proceeds from the issuance of common 9,712 21,410 10,259 31,122 29,805 stock under stock plans

Employee taxes paid related to net share settlement of stock-based (12,314) (63,946) (13,095) (76,260) (63,930) awards

Repurchases of common stock (96,175) (58,241) (27,330) (154,416)(107,880)

Other non-current assets and (67) - - (67) - liabilities

Net cash used in financing activities(98,844) (100,777)(30,166) (199,621)(142,005)

Effects of exchange rate changes on cash, cash equivalents and restricted3,003 (7,151) 8,155 (4,148) (828) cash

Net increase in cash, cash 122,672 105,557 187,043 228,229 178,726 equivalents and restricted cash

Cash, cash equivalents and restricted459,023 353,466 385,829 353,466 394,146 cash at beginning of period

Cash, cash equivalents and restricted$581,695$459,023$572,872$581,695$572,872cash at end of period



AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA - REVENUE BY PRODUCT GROUP^ (1)



Three Months Ended Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Security Technology Group $325,128 $310,219 $259,316 $635,347 $499,616

Edge Technology Group 527,696 532,489 535,399 1,060,185 1,059,401

Total revenue $852,824 $842,708 $794,715 $1,695,532 $1,559,017

Revenue growth rates year-over-year:

Security Technology Group 25 %29 %27 %27 %27 %

Edge Technology Group (1) 2 7 - 4

Total revenue 7 %10 %13 %9 %10 %

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

Security Technology Group 22 %27 %28 %24 %28 %

Edge Technology Group (4) - 8 (2) 5

Total revenue 5 %8 %14 %7 %11 %

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA - REVENUE BY GEOGRAPHY



Three Months Ended Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

U.S. $449,553 $463,180 $443,668 $912,733 $872,598

International 403,271 379,528 351,047 782,799 686,419

Total revenue $852,824 $842,708 $794,715 $1,695,532 $1,559,017

Revenue growth rates year-over-year:

U.S. 1 %8 %6 %5 %4 %

International 15 13 22 14 19

Total revenue 7 %10 %13 %9 %10 %

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

U.S. 1 %8 %6 %5 %4 %

International 9 8 24 9 22

Total revenue 5 %8 %14 %7 %11 %

Effective March 1, 2021, Akamai reorganized into two groups: the Security Technology Group and the Edge Technology Group, which both utilize the Akamai Intelligent Edge Platform and its global sales organization. These(1) groups are aligned with their product offerings. Revenue from the Security Technology Group was previously reported as revenue from Cloud Security Solutions, and revenue from the Edge Technology Group was previously reported as revenue from content delivery network (CDN) services and all other solutions.

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

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA - REVENUE FROM INTERNET PLATFORM CUSTOMERS^ (1)



Three Months Ended Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Revenue from Internet Platform Customers$63,634 $59,191 $50,752 $122,825 $95,454

Revenue excluding Internet Platform 789,190 783,517 743,963 1,572,707 1,463,563 Customers

Total revenue $852,824 $842,708 $794,715 $1,695,532 $1,559,017

Revenue growth rates year-over-year:

Revenue from Internet Platform Customers25 %32 %10 %29 %2 %

Revenue excluding Internet Platform 6 9 13 7 11 Customers

Total revenue 7 %10 %13 %9 %10 %

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

Revenue from Internet Platform Customers25 %32 %10 %29 %2 %

Revenue excluding Internet Platform 3 7 14 5 12 Customers

Total revenue 5 %8 %14 %7 %11 %

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL REVENUE DATA - REVENUE BY DIVISION^ (3)



Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30, (in thousands) 2021 2021 2021 2020 ^(4) 2020 ^(4)

Web Division $431,521 $427,046 $401,071 $858,567 $803,821

Media and Carrier Division 421,303 415,662 393,644 836,965 755,196

Total revenue $852,824 $842,708 $794,715 $1,695,532 $1,559,017

Revenue growth rates year-over-year:

Web Division 8 %6 %7 %7 %8 %

Media and Carrier Division 7 15 19 11 13

Total revenue 7 %10 %13 %9 %10 %

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

Web Division 5 %4 %8 %4 %9 %

Media and Carrier Division 5 13 20 9 14

Total revenue 5 %8 %14 %7 %11 %

(1) Revenue from large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix

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

Prior to March 1, 2021, Akamai managed its business by division, which was a customer-focused reporting view that reflected revenue from customers(3) that were managed by the division. Although Akamai no longer manages its business by division, the prior divisional view of revenue is provided for informational purposes.

As of January 1, 2021, Akamai reassigned some of its customers between the Media and Carrier Division and the Web Division and revised historical(4) 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.

AKAMAI TECHNOLOGIES, INC. SUPPLEMENTAL OPERATING EXPENSE DATA



Three Months Ended Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

General and administrative expenses:

Payroll and related costs $54,974 $56,450 $49,475 $111,424 $98,074

Stock-based compensation 16,123 16,362 15,377 32,485 29,334

Depreciation and amortization 20,489 20,909 20,654 41,398 41,119

Facilities-related costs 24,845 24,347 23,898 49,192 48,570

Provision (benefit) for doubtful accounts971 (260) 2,893 711 5,092

Acquisition-related costs 140 64 62 204 138

Legal settlements - - 275 - 275

Professional fees and other expenses 16,753 18,843 17,075 35,596 34,468

Total general and administrative expenses$134,295 $136,715 $129,709 $271,010 $257,070



General and administrative expenses-functional^(1):

Global functions $53,314 $55,799 $46,818 $109,113 $94,684

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

Infrastructure 79,878 81,109 79,677 160,987 156,897

As a percentage of revenue 9 %10 %10 %9 %10 %

Other 1,103 (193) 3,214 910 5,489

Total general and administrative expenses$134,295 $136,715 $129,709 $271,010 $257,070

As a percentage of revenue 16 %16 %16 %16 %16 %



Stock-based compensation:

Cost of revenue $6,874 $7,096 $6,254 $13,970 $11,990

Research and development 15,937 18,369 11,549 34,306 23,614

Sales and marketing 11,547 12,478 16,011 24,025 31,746

General and administrative 16,123 16,362 15,377 32,485 29,334

Total stock-based compensation $50,481 $54,305 $49,191 $104,786 $96,684

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, provision for doubtful accounts and legal settlements.

AKAMAI TECHNOLOGIES, INC. OTHER SUPPLEMENTAL DATA



Three Months Ended Six Months Ended

(in thousands, except end of period statistics) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Depreciation and amortization:

Network-related depreciation $55,601 $51,896 $38,806 $107,497$75,203

Capitalized internal-use software development 40,426 39,223 38,164 79,649 78,933 amortization

Other depreciation and amortization 19,833 20,365 20,193 40,198 40,212

Depreciation of property and equipment 115,860 111,484 97,163 227,344 194,348

Capitalized stock-based compensation amortization^(1) 8,916 7,693 7,185 16,609 14,816

Capitalized interest expense amortization^(1) 879 867 851 1,746 1,809

Amortization of acquired intangible assets 12,060 11,427 10,381 23,487 20,815

Total depreciation and amortization $137,715$131,471$115,580$269,186$231,788



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

Purchases of property and equipment $81,655 $94,998 $142,310$176,653$227,109

Capitalized internal-use software development costs 56,574 55,065 53,692 111,639 104,601

Total capital expenditures, excluding stock-based $138,229$150,063$196,002$288,292$331,710compensation and interest expense



End of period statistics:

Number of employees 8,275 8,300 7,951

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.

(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 Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Income from operations $199,434 $182,364 $190,429 $381,798 $342,759

GAAP operating margin 23 %22 %24 %23 %22 %

Amortization of acquired intangible assets 12,060 11,427 10,381 23,487 20,815

Stock-based compensation 50,481 54,305 49,191 104,786 96,684

Amortization of capitalized stock-based 9,840 8,598 8,038 18,438 16,627 compensation and capitalized interest expense

Restructuring (benefit) charge (2,114) 7,116 (167) 5,002 10,418

Acquisition-related costs 140 64 62 204 138

Legal settlements - - 275 - 275

Operating adjustments 70,407 81,510 67,780 151,917 144,957

Non-GAAP income from operations $269,841 $263,874 $258,209 $533,715 $487,716

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



Net income $156,497 $155,695 $161,915 $312,192 $285,061

Operating adjustments (from above) 70,407 81,510 67,780 151,917 144,957

Amortization of debt discount and issuance costs16,460 16,257 15,677 32,717 31,310

Loss from equity method investment 10,816 698 493 11,514 1,115

Income tax-effect of above non-GAAP adjustments (21,428) (26,346) (19,347) (47,774) (39,792) and certain discrete tax items

Non-GAAP net income $232,752 $227,814 $226,518 $460,566 $422,651

AKAMAI TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INCOME PER DILUTED SHARE



Three Months Ended Six Months Ended

(in thousands, except per share data) June 30,March 31,June 30,June 30,June 30, 2021 2021 2020 2021 2020

GAAP net income per diluted share $0.94 $0.94 $0.98 $1.88 $1.74

Adjustments to net income:

Amortization of acquired intangible assets 0.07 0.07 0.06 0.14 0.13

Stock-based compensation 0.30 0.33 0.30 0.63 0.59

Amortization of capitalized stock-based compensation and 0.06 0.05 0.05 0.11 0.10 capitalized interest expense

Restructuring (benefit) charge (0.01) 0.04 - 0.03 0.06

Acquisition-related costs - - - - -

Legal settlements - - - - -

Amortization of debt discount and issuance costs 0.10 0.10 0.10 0.20 0.19

Loss from equity method investment 0.07 - - 0.07 0.01

Income tax effect of above non-GAAP adjustments and (0.13) (0.16) (0.12) (0.29) (0.24) certain discrete tax items

Adjustment for shares^(1) 0.02 0.01 0.01 0.03 0.01

Non-GAAP net income per diluted share $1.42 $1.38 $1.38 $2.80 $2.58



Shares used in GAAP per diluted share calculations 166,263165,688 164,768165,976164,226

Impact of benefit from note hedge transactions^(1) (1,782)(954) (653) (1,369)(326)

Shares used in non-GAAP per diluted share calculations^(1)164,481164,734 164,115164,607163,900

Shares used in non-GAAP per diluted share calculations have been adjusted for the periods presented for the benefit of Akamai's note hedge(1) transactions. During the periods presented 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 Six Months Ended

(in thousands) June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020

Net income $156,497 $155,695 $161,915 $312,192 $285,061

Interest income (4,736) (4,578) (9,502) (9,314) (16,545)

Provision for income taxes 18,009 11,898 18,671 29,907 32,963

Depreciation and amortization 115,860 111,484 97,163 227,344 194,348

Amortization of capitalized stock-based compensation and capitalized interest 9,840 8,598 8,038 18,438 16,627 expense

Amortization of acquired intangible assets12,060 11,427 10,381 23,487 20,815

Stock-based compensation 50,481 54,305 49,191 104,786 96,684

Restructuring (benefit) charge (2,114) 7,116 (167) 5,002 10,418

Acquisition-related costs 140 64 62 204 138

Legal settlements - - 275 - 275

Interest expense 18,037 17,834 17,249 35,871 34,454

Loss from equity method investment 10,816 698 493 11,514 1,115

Other expense, net 811 817 1,603 1,628 5,711

Adjusted EBITDA $385,701 $375,358 $355,372 $761,059 $682,064

Adjusted EBITDA margin 45 %45 %45 %45 %44 %

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 diluted 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 comparison of financial results across accounting periods and to those of our 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 is 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 charges associated with exiting 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%. The imputed interest rates of these convertible senior notes were 3.10% and 4.26%, 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 these gains and losses 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. * 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; 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; 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 diluted 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; 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 Relations Akamai Technologies 617-274-7130 tbarth@akamai.com

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SOURCE Akamai Technologies, Inc.