Akamai 8K Reports Fourth Quarter 2003 and Full-year 2003 Financial Results | AKAM 4 Feb 04

Exhibit 99.1

FOR IMMEDIATE RELEASE


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

AKAMAI REPORTS FOURTH QUARTER 2003 AND
FULL-YEAR 2003 FINANCIAL RESULTS

•

Record fourth quarter revenue of $45.2 million, up 8% quarter-over-quarter, and up 28% year-over-year

•

Annual revenue grew to $161.3 million, up 11% year-over-year

•

GAAP net loss narrowed to $0.02 per share

•

First ever normalized net income* of $1.5 million, or $0.01 per share

CAMBRIDGE, Mass.–February 4, 2004– Akamai Technologies, Inc. (NASDAQ: AKAM), the global leader in distributed computing solutions and services, today reported financial results for the fourth quarter and full-year ended December 31, 2003. Revenue for the fourth quarter 2003 was $45.2 million, an 8.1 percent increase over third quarter revenue of $41.8 million, and a 27.7 percent increase over fourth quarter 2002 revenue of $35.4 million. Total revenue for 2003 was $161.3 million.

Net loss, in accordance with United States Generally Accepted Accounting Principles (GAAP), for the fourth quarter 2003 was $2.1 million, or $0.02 per share, compared to a net loss for the third quarter 2003 of $3.9 million, or $0.03 per share, and compared to a net loss of $55.6 million, or $0.48 per share, in the fourth quarter of 2002. Included in the fourth quarter 2003 net loss is $2.1 million of expenses associated with the retirement of debt.

For the first time in its history, the Company also achieved positive earnings per share of $0.01 on a normalized basis*, generating $1.5 million positive net income for the fourth quarter, compared to a normalized net loss* for the prior quarter of $0.03 per share, or $3.5 million, and compared to First Call’s consensus estimate for the fourth quarter of a normalized net loss of $0.01 per share.

Akamai ended the year with $208.4 million in cash, cash equivalents, restricted cash, marketable securities and restricted marketable securities, including $95.8 million in net debt proceeds and redemptions, an increase from $99.0 million at the end of the third quarter.

“The fourth quarter of 2003 was our best quarter to date,” said George Conrades, chairman and CEO of Akamai. “We achieved the most revenue of any quarter; the most cash flow from operations in any quarter; and, marking the most important improvement in our five-year history, we generated positive earnings per share on a normalized basis. All of this capped a year of consistent revenue growth and rapidly declining losses.”

Adjusted EBITDA* for the fourth quarter of 2003 was $14.2 million, a 21 percent increase from $11.7 million in the prior quarter, and over a ten fold increase over Adjusted EBITDA of $1.3 million in the fourth quarter of 2002. (* See Use of Non-GAAP Financial Measures for definition of Adjusted EBITDA.)

“With revenue growth in 2003 of 11 percent year-over-year, improvement in gross margins, and a decrease in cash operating expenses of 25 percent year-over-year, we’re clearly seeing the leverage in our model,” continued Conrades.

Customers
The number of recurring customers grew in the fourth quarter by 70 net new accounts for a total of 1,126 customers under long-term services contracts, the highest level in more than two years. For the full year, the Company’s customer count increased almost 18 percent.

New Akamai EdgeSuite^® customers in the fourth quarter included Americanas (Brazil’s leading e-retailer), AUDI AG, Bayer AG, Brylane, Christian Dior, Knight Ridder Digital, Learning.com, Muze Inc., OfficeMax Inc., Overstock.com, ScanAlert and Tourism New Zealand, among others.

Resellers accounted for approximately 25 percent of 2003 fourth quarter revenue, as compared to approximately 22 percent in the prior quarter and 26 percent in the fourth quarter of 2002.

Network

Akamai’s global network at the end of the fourth quarter consisted of 14,733 servers in 1,072 networks, in 71 countries. The geographic reach and capacity of Akamai’s network is unprecedented in its ability to serve the needs of enterprise customers, government agencies and major Web-centric businesses.

Financial Statements

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


		December 31,			December 31,
		2003			2002

Assets
Cash and cash equivalents		$	160,074		$	111,262
Restricted cash			5,000			—
Marketable securities			4,184			503
Restricted marketable securities			726			3,161
Accounts receivable, net			20,727			17,574
Prepaid expenses and other current assets			11,705			9,183

	Current assets		202,416			141,683
Marketable securities			34,449			—
Restricted marketable securities			3,922			10,244
Property and equipment, net			23,878			63,159
Goodwill and other intangible assets, net			5,176			7,410
Other assets			9,100			7,367

	Total assets	$	278,941		$	229,863

Liabilities and stockholders’ deficit
Accounts payable and accrued expenses		$	42,231		$	53,909
Other current liabilities			20,429			27,190

	Current liabilities		62,660			81,099
Other liabilities			5,635			16,854
Convertible notes			386,000			300,000

	Total liabilities		454,295			397,953
Stockholders’ deficit			(175,354	)		(168,090	)

	Total liabilities and stockholders’ deficit	$	278,941		$	229,863

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


			Three Months Ended						Year Ended

			December 31,			December 31,			December 31,			December 31,
			2003			2002			2003			2002

Revenue			$	45,169		$	35,352		$	161,259		$	144,976
Cost and operating expenses:
	Cost of revenue (before depreciation)			7,277			6,603			27,431			38,371
	Research and development			2,473			2,845			10,152			17,158
	Sales and marketing			12,215			11,760			44,731			53,068
	General and administrative			8,997			12,891			39,059			55,844
	Amortization of CNN advertising			—			1,371			—			5,634
	Amortization of other intangible assets			12			2,231			2,234			11,930
	Depreciation			8,125			17,141			47,515			78,488
	Equity-related compensation			1,518			5,562			9,813			21,195
	Restructuring charges			—			26,675			(8,521	)		45,824

		Total cost and operating expenses		40,617			87,079			172,414			327,512

Operating income (loss)				4,552			(51,727	)		(11,155	)		(182,536	)
Interest expense, net				4,183			4,053			17,022			15,310
Loss on early extinguishment of debt				2,097			—			2,097			—
(Gain) loss on investments, net				—			(299	)		(1,622	)		6,099

Loss before provision for income taxes				(1,728	)		(55,481	)		(28,652	)		(203,945	)
Provision for income taxes				351			123			629			492

Net loss			$	(2,079	)	$	(55,604	)	$	(29,281	)	$	(204,437	)

Basic and diluted net loss per share			$	(0.02	)	$	(0.48	)	$	(0.25	)	$	(1.81	)
Weighted average common shares outstanding				120,198			114,866			118,075			112,766

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


				Three Months Ended			Year Ended

				December 31,			December 31,			December 31,
				2003			2003			2002

Cash flows from operating activities:
	Net loss			$	(2,079	)	$	(29,281	)	$	(204,437	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization			8,137			49,749			96,052
		Equity related compensation			1,518			9,813			21,195
		Interest income on notes receivable for stock			(7	)		(80	)		(131	)
		Amortization of deferred financing costs			377			1,417			1,389
		(Gain) loss on investments, property and equipment and foreign currency			(1,385	)		(4,048	)		6,803
		Provision for doubtful accounts			576			760			(746	)
		Noncash portion of restructuring charge			—			144			3,161
		Noncash portion of loss on early extinguishment of debt			1,207			1,207			—
		Changes in operating assets and liabilities:
			Accounts receivable		4,497			(2,800	)		4,501
			Prepaid expenses and other current assets		(6,204	)		(2,740	)		1,195
			Accounts payable, accrued expenses and other current liabilities		2,924			3,932			(17,913	)
			Accrued restructuring		(1,789	)		(23,111	)		9,973
			Deferred revenue		140			604			(2,197	)
			Other noncurrent assets and liabilities		(950	)		(24,936	)		15,398

	Net cash provided by (used in) operating activities:				6,962			(19,370	)		(65,757	)

Cash flows from investing activities:
		Purchases of property and equipment and capitalization of internal-use software			(2,712	)		(8,881	)		(14,187	)
		Proceeds from sale of property and equipment			—			114			327
		Purchase of investments			(28,249	)		(38,320	)		(24,550	)
		Proceeds from sales and maturities of investments			—			10,639			141,001
		Cash paid as contingent purchase price for the acquisition of a business			—			—			(6,500	)

	Net cash (used in) provided by investing activities				(30,961	)		(36,448	)		96,091

Cash flows from financing activities:
		Proceeds from the issuance of 1% convertible subordinated notes, net of financing costs			169,800			169,800			—
		Proceeds from the issuance of common stock under stock option and employee stock purchase plans			6,689			8,585			2,807
		Repayment of notes receivable from officers			531			2,301			—
		Payments on capital leases and equipment loan			(137	)		(1,438	)		(1,645	)
		Payments on 5 1/2% convertible subordinated notes			(74,000	)		(74,000	)		—
		Increase in restricted cash held for bond redemption activities			(5,000	)		(5,000	)		—

	Net cash provided by financing activities				97,883			100,248			1,162

	Effects of exchange rate translation on cash and cash equivalents				2,294			4,382			992

	Net increase in cash and cash equivalents				76,178			48,812			32,488
	Cash and cash equivalents, beginning of period				83,896			111,262			78,774

	Cash and cash equivalents, end of period			$	160,074		$	160,074		$	111,262


	Three Months Ended					Year Ended

	December 31,		December 31,			December 31,		December 31,
	2003		2002			2003		2002

Supplemental financial data (in thousands):
Network-related depreciation	$	5,803	$	10,669		$	33,056	$	46,297
Other depreciation	$	2,322	$	6,472		$	14,459	$	32,191
Capital expenditures	$	2,712	$	884		$	8,881	$	14,187
Net change in cash, cash equivalents, restricted cash, marketable securities and restricted marketable securities	$	109,390	$	(16,812	)	$	83,185	$	(85,341	)
Common stock issued		122,155		117,660
Common stock issued and unexercised options, warrants and deferred stock units		137,741		134,383
End of period statistics:
Number of customers under recurring contract		1,126		955
Number of employees		535		557
Number of deployed servers		14,733		13,622

*Use of Non-GAAP Financial Measures

In addition to providing GAAP-based financial measurements, Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Recent legislative and regulatory changes encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.

Akamai defines “Adjusted EBITDA” as net loss, before interest, taxes, depreciation, amortization, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers Adjusted EBITDA to be an important indicator of the company’s operational strength and performance of its business and a good measure of the company’s historical operating trend.

Adjusted EBITDA eliminates items which are either not part of the company’s core operations, such as investment gains and losses, early debt extinguishment, net interest expense and restructuring activities, or do not require a cash outlay, such as equity-related compensation and impairment of intangible assets. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the company’s estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historic cost incurred to build out the company’s deployed network, and may not be indicative of current or future capital expenditures.

Akamai defines “capital expenditures” or “capex” as purchases of property and equipment and the capitalization of internal-use software development costs. Capital expenditures or capex are disclosed in Akamai’s consolidated statement of cash flows in the company’s most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission.

Akamai defines “normalized net income (loss)” as net income (loss) before amortization, equity-related compensation, restructuring charges and benefits, certain gains and losses on equity investments, and loss on early extinguishment of debt. Akamai considers normalized net income (loss) to be another important indicator of the overall performance of the company because it eliminates the effects of events that are either not part of the company’s core operations or are non-cash.

Adjusted EBITDA and normalized net loss should be considered in addition to, not as a substitute for, the company’s operating loss and net loss, as well as other measures of financial performance reported in accordance with generally accepted accounting principles.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G, the company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

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


	Three Months Ended						Year Ended

	December 31,			December 31,			December 31,			December 31,
	2003			2002			2003			2002

Net loss	$	(2,079	)	$	(55,604	)	$	(29,281	)	$	(204,437	)
Amortization of intangible assets		12			2,231			2,234			11,930
Equity-related compensation		1,518			5,562			9,813			21,195
Restructuring charges		—			26,675			(8,521	)		45,824
(Gain) loss on investments, net		—			(299	)		(1,622	)		6,099
Loss on early extinguishment of debt		2,097			—			2,097			—
Amortization of CNN advertising		—			1,371			—			5,634

Total normalized net income (loss):		1,548			(20,064	)		(25,280	)		(113,755	)
Interest expense, net		4,183			4,053			17,022			15,310
Provision for income taxes		351			123			629			492
Depreciation		8,125			17,141			47,515			78,488

Total Adjusted EBITDA:	$	14,207		$	1,253		$	39,886		$	(19,465	)

Weighted average common shares outstanding:		120,198			114,866			118,075			112,766
Normalized net income (loss) per share:	$	0.01		$	(0.17	)	$	(0.21	)	$	(1.01	)

Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-888-689-4521 (or 1-706-645-9202 for international calls). A live Webcast of the call may be accessed at www.akamai.com in the Investor section. In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-800-642-1687 (or 1-706-645-9291 for international calls) and using conference ID No. 4766875.

About Akamai

Akamai^® is the global leader in distributed computing solutions and services, making the Internet predictable, scalable, and secure for conducting profitable e-business. The Akamai on demand platform enables customers to easily extend their Web operations – with full control – anywhere, anytime, without the cost of building out infrastructure. Headquartered in Cambridge, Massachusetts, Akamai serves hundreds of today’s most successful enterprises and government agencies around the globe. Akamai isThe Business Internet. For more information, visit www.akamai.com.

# # #

Akamai Statement Under the Private Securities Litigation Reform Act

The release contains information about future expectations, plans and prospects of Akamai’s management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, unexpected increases in Akamai’s use of funds, unexpected loss of key large customers, failure to increase our revenue and keep our expenses consistent with revenues, the effects of any attempts to intentionally disrupt our services or network by unauthorized users or others, failure to have available sufficient transmission capacity, a failure of Akamai’s network infrastructure, inability to service and repay our outstanding debt and other factors that are discussed in the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai’s expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai’s expectations or beliefs as of any date subsequent to the date of this press release.

Akamai (AKAM) 8-KAkamai Reports Fourth Quarter 2003 and Full-year 2003 Financial Results