CAMBRIDGE, Mass., Nov. 26,
2024 /PRNewswire/ -- Akamai Technologies, Inc.
(NASDAQ: AKAM), the cybersecurity and cloud computing company that
powers and protects business online, announced that the U.S.
Bankruptcy Court for the District of Delaware has approved its bid to acquire
select assets from Edgio, including certain customer contracts from
Edgio's businesses in content delivery and security, and
non-exclusive license rights to patents in Edgio's portfolio. The
transaction does not include the acquisition of Edgio personnel,
technology, or assets related to the Edgio network.
The court approval follows Akamai submitting the winning bid for
the select assets during Edgio's 363 bankruptcy auction on
November 13, 2024, as part of its
filing for Chapter 11 bankruptcy relief. The court decision
provides the necessary approval for the closing of the sale to
proceed.
When the transaction closes, several hundred net new Akamai
customers will have a clear path and the necessary support to
smoothly migrate to a best-in-class and reliable provider of the
services they need prior to Edgio ceasing operations of its content
delivery network. The customers will also have immediate access to
the full portfolio of Akamai's cybersecurity and cloud computing
services.
"Akamai is offering Edgio customers a smooth, secure transition
without impacting their business or that of their end users," said
Adam Karon, Akamai's Chief Operating
Officer and General Manager, Cloud Technology Group. "We have the
capacity, capabilities, and experience to help Edgio customers
easily migrate to Akamai, and we believe our track record with
similar transactions gives us the expertise to help move them to
Akamai as seamlessly as possible. We look forward to welcoming
these new customers and giving them the opportunity to take
advantage of Akamai's full range of security and cloud solutions,
which run on the world's most distributed platform."
For the fourth quarter of 2024, Akamai expects this transaction
to add approximately $9-$11 million in revenue. As part of its bid,
Akamai agreed to pay certain costs for Edgio to operate its network
during the transition and wind-down period until such time as Edgio
ceases operation of its content delivery network in mid-January 2025. Akamai expects those transition
services costs to be approximately $15-$17 million in
the fourth quarter. Akamai anticipates the transaction to be
dilutive to non-GAAP net income per diluted share by approximately
$0.03-$0.05 in the fourth quarter, inclusive of the
transition service costs.
For the full year 2025, Akamai anticipates this transaction will
add approximately $80-$100 million in revenue, approximately
$25-$30
million of transition service costs, and be accretive to
non-GAAP net income per diluted share by approximately $0.15-$0.20.
"We believe this transaction will create significant value for
Akamai and our shareholders," said Ed
McGowan, Akamai's Chief Financial Officer. "By integrating
these customers onto our platform with its advantageous cost
structure, we expect to improve profitability and unlock new growth
opportunities. We're excited about the potential to cross-sell and
up-sell our advanced security and cloud computing solutions to this
expanded customer base."
The transaction is expected to close in early December 2024, subject to customary closing
conditions for a transaction of this type.
About Akamai
Akamai is the cybersecurity and cloud
computing company that powers and protects business online. Our
market-leading security solutions, superior threat intelligence,
and global operations team provide defense-in-depth to safeguard
enterprise data and applications everywhere. Akamai's full-stack
cloud computing solutions deliver performance and affordability on
the world's most distributed platform. Global enterprises trust
Akamai to provide the industry-leading reliability, scale, and
expertise they need to grow their business with confidence. Learn
more at akamai.com and akamai.com/blog, or follow Akamai
Technologies on X and LinkedIn.
Contacts
Akamai Public Relations
AkamaiPR@akamai.com
Akamai Investor Relations
IR-InvestorRelations@akamai.com
Akamai Statement Under the Private Securities Litigation
Reform Act
This press release contains statements that are not statements
of historical fact and constitute forward-looking statements for
purposes of the safe harbor provisions under The Private Securities
Litigation Reform Act of 1995, including, but not limited to,
statements about: management's guidance regarding the expected
impact of the transaction on Akamai, including its expected impact
on revenue, non-GAAP net income per diluted share, capital
expenditures, and new customer additions; the potential benefits of
the transaction to Akamai, its customers and its shareholders;
expectations regarding customer migration in connection with the
transaction; expected transition services costs; the expected
duration of Edgio's transition and wind-down period; and the
expected closing date of the transaction. Each of the
forward-looking statements is subject to change as a result of
various important factors, many of which are beyond the company's
control, including, but not limited to: the risk that the
transaction may not be completed in a timely manner or at all; the
parties' ability to satisfy closing conditions; the occurrence of
any event, change or other circumstance that could give rise to the
termination of the transaction agreements; Akamai being unable to
achieve the anticipated benefits of the transaction; the risk that
customer migration may be more difficult, time-consuming or costly
than expected; the retention of key personnel during the transition
period; potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
proposed transaction; effects of competition, including pricing
pressure and changing business models; impact of macroeconomic
trends, including economic uncertainty, turmoil in the financial
services industry, the effects of inflation, rising and fluctuating
interest rates, foreign currency exchange rate fluctuations,
securities market volatility and monetary supply fluctuations;
continuing supply chain and logistics costs, constraints, changes
or disruptions; defects or disruptions in Akamai's products or IT
systems, including cyber-attacks, data breaches or malware; changes
to economic, political and regulatory conditions in the United States or internationally; and
other factors that are discussed in the company's most recent
Annual Report on Form 10-K, subsequent quarterly reports on Form
10-Q and other documents filed with the Securities and Exchange
Commission. All information provided in this press release is as of
the date of this press release, and Akamai does not undertake any
obligation to update any forward-looking statement, except as
required under applicable law.
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 financial measures). 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. The
non-GAAP financial measure used in this release is non-GAAP net
income per diluted share.
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.
In addition, the financial guidance contained in this press
release that is provided on a non-GAAP basis cannot be reconciled
to the closest GAAP measures without unreasonable effort because of
the unpredictability of the amounts and timing of events affecting
the items we exclude from non-GAAP measures. For example,
stock-based compensation is unpredictable for Akamai's
performance-based awards, which can fluctuate significantly based
on current expectations of the future achievement of
performance-based targets. Amortization of intangible assets,
acquisition-related costs and restructuring costs are all impacted
by the timing and size of potential future actions, which are
difficult to predict. In addition, from time to time, Akamai
excludes certain items that occur infrequently, which are also
inherently difficult to predict and estimate. It is also difficult
to predict the tax effect of the items we exclude and to estimate
certain discrete tax items, such as the resolution of tax audits or
changes to tax laws. As such, the costs that are being excluded
from non-GAAP guidance are difficult to predict and a
reconciliation or a range of results could lead to disclosure that
would be imprecise or potentially misleading. Material changes to
any one of the exclusions could have a significant effect on our
guidance and future GAAP results.
Akamai's definition of the non-GAAP measures used in this press
release are outlined below:
Non-GAAP net income per diluted share – Non-GAAP net income
divided by weighted average diluted common shares outstanding.
Diluted weighted average common 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 $1,265 million of convertible senior notes due
2029 and 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, Akamai 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 2029, 2027
and 2025, unless Akamai's weighted average stock price is greater
than $126.31, $116.18 and $95.10,
respectively, the initial conversion prices, there will be no
difference between GAAP and non-GAAP diluted weighted average
common shares outstanding.
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;
amortization of debt issuance costs; amortization of capitalized
interest expense; certain gains and losses on investments; gains
and losses from equity method investment; and other non-recurring
or unusual items that may arise from time to time.
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 – Stock-based compensation is an important
aspect of the compensation paid to Akamai's employees which
includes long-term incentive plans to encourage retention,
performance-based plans to encourage achievement of specified
financial targets and also short-term incentive awards with a one
year vest. The grant date fair value of the stock-based
compensation awards 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, as well as
certain additional compensation costs payable to employees acquired
from the Linode acquisition if employed for a certain period of
time. The additional compensation cost was initiated by and
determined by the seller, and is in addition to normal levels of
compensation, including retention programs, offered by Akamai.
Acquisition-related costs are impacted by the timing and size of
the acquisitions, and Akamai excludes acquisition-related costs
from its non-GAAP financial measures to provide a useful comparison
of operating results to prior periods and to peer companies because
such amounts vary significantly based on the magnitude of the
acquisition transactions and do not reflect Akamai's core
operations.
- Restructuring charge – Akamai has incurred restructuring
charges from programs that have significantly changed either the
scope of the business undertaken by the Company or the manner in
which that business is conducted. These charges include severance
and related expenses for workforce reductions, impairments of
long-lived assets that will no longer be used in operations
(including acquired intangible assets, right-of-use assets, other
facility-related property and equipment and internal-use software)
and termination fees for any contracts canceled as part of these
programs. 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 issuance costs and capitalized interest
expense – Akamai has convertible senior notes outstanding that
mature in 2029, 2027 and 2025. The issuance costs of the
convertible senior notes are amortized to interest expense and are
excluded from Akamai's non-GAAP results because management believes
the non-cash amortization 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.
- Gains and losses from equity method investment – Akamai records
income or losses on its share of earnings and losses from its
equity method investment, and any gains from returns of investments
or impairments. Akamai excludes such income and losses because it
does not have 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 the impact of
intercompany sales of intellectual property related to
acquisitions), 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.
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SOURCE Akamai Technologies, Inc.
