Analyst Conference Summary


conference date: October 24, 2007 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2007 (3rd quarter)

Forward-looking statements

Overview: Continued strong growth.

Basic data:

Revenue was $161.2 million, up 6% sequentially from $152.7 million and up 45% from $111.5 million year-earlier.

Net income was $24.3 million, up 12% sequentially and up 73% from year-earlier.

EPS was $0.13 per share, up 12% sequentially and up 73% from year-earlier.


Full year increased to $625-$629 million in revenue. Normalized EPS $1.28 to $1.29. GAAP Gross margin around 74%.

Expects Q4 revenues of $172 to $176 million. $0.37 to $0.38 normalized EPS.

For preliminary 2008, 25 to 30% normalized EPS and revenue growth.

Conference Highlights:

They were pleased with strong growth in all core markets.

Normalized net income was $62.4 million or $0.34 per share. EBITDA was $71.9 million. Cash from operations was $77.4 million.

Cash and equivalents ended at $566 million.

Number of customers with long-term contracts increased 61 to 2616, up 22% from year-earlier.

Cost of revenues was $43.8 million, R&D $11.4 million, S&M $36.7 million, G&A $30.7, amortization $2.8. Operating income was $35.8 million. Interest income $5.9 million. Tax provision $18.7 million.

23% of revenue was international and 18% was from resellers.

There was a seasonal slowdown in summer, but an acceleration towards the end of the quarter.

20,600 average revenue per customer (RPU).

GAAP gross margin 73%.

New video opportunities starting to show some traction. Serving the leading online entertainment sites. Transition is now to high-quality video, which again needs better delivery of data.

Application accelerator now available. B to B services being improved too. Competitors will have trouble matching us.

Believes will be a billion dollar company by 2010.


Cash gross margin outlook? Price declines are continuous in an IT business. We see no fundamental change. Competition is eased by rate of market growth. As you gain volume your cost per unit drops. We are focused on increasing profitability as we scale. We also have unique services that our competitors cannot match.

2008 margin trends? Just making directional remarks at this point, too early for specifics.

Bandwidth costs? No significant changes. We are unique in the way we buy.

Revenue per customer increase? Driven half by increased traffic, half by add-on services.

High definition (HD) adoption? Very early, just about to get going. For video to really compete with TV, it has to have similar quality. Will see DVD and HD quality offers later this year and into next year.

Churn was 3 to 4%, tends to be smaller customers and seems to be steady.

Application acceleration revenue? Will provide some scale insights at next analyst meeting next week.

Deceleration of growth from 2007 to 2008? Rate of growth has slowed. But another inflection point will be around high-quality video. It is not a question of if it happens, but when. So our guidance.

2007 expenses were increased by 3 acquisitions. Need to continue that in 2008.

Media and Entertainment monetization for customers? It is one of the crucial variables. Monetization is just beginning. There are a lot of entrants with unproven models, but as the audience goes to the Internet the advertising dollars will have to follow them.

E-commerce trends? Very focused, our customers have early lockdowns, they have big plans. No fundamental new trends. Big concern about security. PCI is being looked at. Ramp up is really in November.

Cap ex for next quarter? Don't see a tremendous uptick.

Multi-sourcing a threat to exclusive partnerships? We don't push for exclusive contracts. We like to demonstrate our value.

Peer to Peer? Client technology offering is in works. Peer to peer has been around for a long time without getting commercial tracking. Just does not solve content delivery problem because clients cannot upload as fast as they can download. But we are working on a system where peer to peer would be a component.

Resellers? We do all govenment sales through resellers. Other than that we try to do direct sales.

Akamai was not originally set up to be a content delivery network company. It was supposed to be a distributed business computing company. Our new application acceleration product is in that direction.

RPU (revenue per customer)? Not chasing small customers. Not a metric we target, we just give it out to help you understand the business.

Wireless? We are excited about wireless market. It is all Internet, we already do a lot of video for wireless. Our customers are finding cool ways to monetize this space.

Capital expense due to HD? We don't know the effects of HD, we do plan for the year going forward.

OpenIcon Analyst Conference Summaries Main Page

Akamai Investor Relations page


More Analyst Conference Pages:


Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers