Analyst Conference Summary


conference date: April 30, 2008 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2008 (1st quarter)

Forward-looking statements

Overview: Growth not as fast as during 2007.

Basic data (GAAP) :

Revenue was $187.0 million, up sequentially 2% from $183.2 million and up 34% from $139.3 million year-earlier.

Net income was $36.9 million, up 3% from $35.9 million and up 92% from $19.2 million year-earlier.

EPS $0.20, flat sequentially from $0.20, but up 82% from $0.11 year-earlier.


26 to 30% revenue growth for the year 2008. Believe tracking in mid to high end of that range. Raising guidance to $1.68 to $1.71 normalized EPS for 2008.

For Q2 expect $194 to $199 million in revenue. $0.41 to $0.42 normalized earnings per share.

Conference Highlights:

Q4 is seasonally strongest. 2% sequential revenue increase results in record. Value added solutions continued revenue growth and differentiate Akamai in the marketplace. All key verticals showed strong year over year growth.

Company reports a (non-GAAP) normalized net income of $75.6 million, or $0.41 per share, up 49% from year-earlier and sequentially flat.

Claims strong demand for services continued and flat results shows value of diversity of customers and products.

Adjusted EBITDA was $87.2 million, up 48% from year-earlier and just above flat sequentially.

Cash from operations was $88.0 million, up 66% from year earlier. Ended with $687 million in cash and equivalents. The net increase in cash and equivalents was $53.6 million. Some auction-priced student loan securities, took temporary unrealized loss of $16 million. Will hold the securities until the market sorts itself out.

Number of long-term customers increased 27 to 2672, up 8% y/y. Sales through resellers were 16% of revenue. Sales outside the U.S. were 25% of revenue.

Cost of revenues was $51.6 million. R&D expense $9.3 million. Sales and marketing expense $35.9 million. General and admin expense $33.3 million. Amortization $3.6 million. Leaving operating income of $53.3 million. Interest income was $7.3 million. Gain on investments was $0.2 million. Other income $0.5 million. Income tax provision was $24.4 million.

72% GAAP gross profit margin. 81% cash gross margin. Very pleased with margin performance, which is declining slower than in the past.

Non-cash stock compensation expense was $11.3 million. Depreciation and amortization was $22 million. Capital expense $29.9 million.

$23,200 average revenue per customer.

Commerce was fastest growing vertical. Media grew fast but not at the torrid pace of last year.

Adobe adopted Stream OS for media management for Adobe TV. Fujitsu signed on for application acceleration.


Gross margin slowed decline? It is mainly a question of scale and differentiating our offering from competitors.

The report of an outrage of our applications business was just false.

Churn number, you thought would improve? Mostly through acquisition-related churn. Likely to remain in 3.5 to 4% range.

Transcoding partnership? Our goal is to bring repeatable solutions, not do single client customization, although we do customize for regions and groups or vericals. So sometimes it makes more sense to have a partner for a specific project.

Expenses? We added 65 or 70 people, slower than we thought. Some spend will go into Q2.

E-commerce? We are successfully upselling many of our customers. Media growth is still fast, just not as fast as after the inflection point in the past. We expect another inflection point when HD kicks in, but don't know when that will be. Customers don't want to cut back on their internet investments; they see that as their future.

Slowing economy? Nothing perceptible, we are cautiously optimistic.

Revenue surprises in verticals? No real surprises, just came off an exceptional Q4.

NOLs (tax loss carry forwards)? In the $250 million range, will last us into the next decade. Hopefully we will become a taxpayer sooner rather than later.

Bursting revenue? Around 30%, same range as we have seen for a long time.

Did competitive environment change after patent ruling? The competitive environment has not changed in ten years. Our clients are very sophisticated about the internet. There is still a lot of room for us to get some wallet share.

Gaming vertical? We are seeing a lot of growth, but it is a new market. We can provide a comprehensive solution to monetization needs of players.

Still adding about 140 customers per quarter, with average spend by them higher than the average for our current customers.

Hardware impacts? The biggest data lag is not in the datacenter or the end local network, but in the internet midway connections. That is what we speed up.

International revenue strength? Europe and Asia internet use is growing rapidly. The idea of application acceleration is beginning to be accepted globally now. So we expect a lot of our growth will be in the international market. Our U.S. business is growing so fast the international segment has to grow rapidly just to stay at the same percentage.

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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 2008 William P. Meyers