conference date: April 25, 2007 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2007 (1st quarter)
Overview: At top end of revenue guidance but sequentially down on GAAP EPS.
Revenue was $139.3 million, up 11% sequentially and up 53% from Q1 2006.
Net income was $19.2 million, down 7% sequentially but up 67% from year earlier. Non-GAAP "normalized" net income was stated at $50.7 million, up 7% sequentially.
Earnings per share (EPS) were $0.11, down 8% sequentially but up 67% from Q1 2006 . Non-GAAP "normalized" EPS stated at $0.28.
Cash and equivalents ended at $480 million.
For full 2007, revenue from $610 to $620 million. $1.26 to $1.30 normalized EPS. Stock compensation will be about $0.36 per share.
For Q2 $149 to $153 million revenues. $0.29 to $0.30 normalized EPS.
Results included 18 days of activity from Netli, which contributed $0.5 million in revenue during the quarter. Also had first full quarter of Nine Systems in the numbers.
Record revenue and normalized earnings. E-commerce and music downloading attributed to growth.
Adjusted EBITDA was $58.8 million, up sequentially from $53.0 million. Cash from operations was $56.3 million.
89 net new customers were added in the quarter, plus Netli contributed an additional 45 customers. Total customers reached 2,481.
U.S. sales were 78%, international sales 22%.
Current liabilities increased by $9.9 million.
GAAP cost of revenues was $34.5 million; R&D $10.4 million; Sales and Marketing $36.7 million; General and Administrative $27.5 million. Operating expenses totaled $112.1 million. Stock related compensation was $16.8 million, depreciation $14.9 million, capital expenditures $32.9 million.
RPU (Average revenue per customer) $19,100. Only up 1%.
75% gross margin, down 2%. 1% came from increased stock based compensation and increased depreciation.
40% book tax rate, but believes cash rate will be 2%. GAAP EPS assumes book rate.
Expect gross margins to drop due to need to discount to certain customers.
Working with CBS on interactivity for customers.
Use of a distributed edge model gives them an advantage over competitors, all using centralised systems.
Application acceleration market? Early in development of market. Clients think of box first, only come to Akamai when they realize that is not working. Business to Business applications, SAP installation over Internet are typical uses.
RPU number given acquisitions? Had about 4% excluding Nine Systems customers.
Acquisition structure? All are fully integrated into Akamai; not run as separate divisions.
Competitive environment? The same. Still (1) do it yourself, (2) managed service providers, (3) direct competitors.
Should Netli have changed guidance? No, was already in prior guidance. First quarter put us on track to hit guidance.
Guidance in the past was low, why no longer? Always try to give accurate guidance. Just did better than expected in past. Pleased to hit guidance this quarter.
Improved margins for 2nd half? Partly because acquisition costs tend to come early. Payroll reset (social security) in Q1, plus more revenue without as much increase in costs.
Long term gross margin? No specific target. But as large deals grow margin decline tendency has to be compensated by economies of scale.
Stock share count? Increased mostly from acquisitions; normal growth is a million shares per quarter.
When do NOLs (tax loss carry forwards) run out? Not until well after 2010. [Which keeps their cash tax rate low]
Defered revenue jump? But it declined a bit in Q4; bounces around.
International media market? It is one to two years behind for hosting and outsourcing.
Syndication product reaction? Very early, but exciting discussion and some deals are being made.
Red Swoosh acquisition closed in April but will be inconsequential for revenue. All acquisitions were included in 2007 guidance.
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Copyright 2007 William P. Meyers