Akamai(AKAM) - 2023 Q4 - Annual Report

Revenue Performance - Total revenue for 2023 was $3,811.9 million, representing a 5.4% increase compared to 2022, driven primarily by growth in security solutions and the acquisition of Linode[169]. - Security solutions revenue increased to$ 1,765.3 million in 2023, a 14.5% increase from 2022, while compute solutions revenue grew by 24.4% to $504.2 million[169]. - Delivery solutions revenue decreased by 7.6% to$ 1,542.4 million in 2023, impacted by pricing effects from contract renewals and moderated traffic growth[169]. - U.S. revenue was $1,968,779, representing a 3.5% increase from$ 1,902,051 in 2022, while international revenue grew by 7.5% to $1,843,141[172]. - Total revenue for the year ended December 31, 2023, was$ 3,811,920, an increase of 5.4% from $3,616,654 in 2022[288]. Cost and Expenses - The cost of revenue as a percentage of total revenue increased to 39.6% in 2023 from 38.3% in 2022, indicating rising operational costs[167]. - Total cost of revenue rose to$ 1,511,063, a 9.2% increase from $1,383,819 in 2022, with co-location fees contributing significantly to this rise[174]. - Research and development expenses accounted for 10.7% of total revenue in 2023, slightly down from 10.8% in 2022[167]. - Research and development expenses totaled$ 406,048, reflecting a 3.7% increase from $391,434 in 2022, driven by higher payroll and stock-based compensation[180]. - Sales and marketing expenses increased to$ 533,226, a 6.1% rise from $502,409 in 2022, primarily due to higher payroll and travel expenses[185]. - General and administrative expenses for 2023 increased by 2.8% to$ 600,851,000 compared to $584,206,000 in 2022[190]. - Payroll and related costs rose to$ 218,272,000 in 2023, a 2.1% increase from $213,772,000 in 2022[190]. - Stock-based compensation surged by 49.9% to$ 94,316,000 in 2023 from $62,926,000 in 2022[190]. - The company expects an increase in cost of revenue in 2024, particularly in co-location costs, to support growth in compute solutions[178]. Profitability and Income - Net income for 2023 was$ 547.6 million, an increase of 4.2% from $523.7 million in 2022[216]. - Non-GAAP net income for 2023 reached$ 960.0 million, up 11.9% from $857.7 million in 2022[216]. - Basic net income per share increased to$ 3.59 in 2023 from $3.29 in 2022, representing an increase of 9.1%[288]. - The company reported a net income margin of 14.4% for 2023, slightly down from 14.5% in 2022[224]. - Non-GAAP income from operations for 2023 was$ 1,135,525, an increase from $1,032,788 in 2022, reflecting a growth of 9.9%[215]. Cash Flow and Financing - Cash provided by operating activities for 2023 was$ 1.35 billion, an increase from $1.27 billion in 2022, driven by higher profitability[230]. - Net cash provided by financing activities was$ 443,379 thousand in 2023, a significant increase from $(634,177) thousand in 2022, driven by the issuance of convertible senior notes[235]. - The company issued$ 1,265.0 million in convertible senior notes in August 2023, with net proceeds used to repay $1,150.0 million of existing notes and for stock repurchases[237]. - Cash used in investing activities increased to$ (1,848,238) thousand in 2023 from $(622,310) thousand in 2022, primarily due to increased purchases of marketable securities and property and equipment[232]. - Cash paid for business acquisitions was$ (106,171) thousand in 2023, a decrease from $(872,091) thousand in 2022, reflecting the acquisition of Linode in March 2022[232]. Strategic Initiatives and Future Outlook - The company plans to continue investing in security and compute solutions to enhance its product portfolio and drive future revenue growth[153]. - The company expects general and administrative expenses to rise in 2024, particularly payroll and related costs due to mid-year merit increases[191]. - The company plans to continue managing operating margins while investing in growth initiatives, including migrating third-party cloud services to its own solutions[178]. - Global economic conditions, including inflation and geopolitical tensions, are expected to continue impacting the company's business and revenue growth rates[164]. Tax and Regulatory Matters - For the year ended December 31, 2023, the provision for income taxes decreased to$ 106,373, a 16.0% decline from $126,696 in 2022[200]. - The effective income tax rate for 2023 was 16.3%, down from 19.3% in 2022, primarily due to foreign income taxed at lower rates and U.S. research and development credits[201]. - The company anticipates that the effective income tax rate will increase due to the enactment of a 15% global minimum corporate tax rate starting in 2024[203]. Investments and Assets - Total assets increased to$ 9,900,037 in 2023, up from $8,303,400 in 2022, marking a growth of 19.2%[286]. - The company held$ 2.3 billion in cash, cash equivalents, and marketable securities as of December 31, 2023[227]. - The company capitalized $77.0 million in internal-use software development costs in 2023, up from$ 30.0 million in 2022[182]. - The company has net deferred tax assets, including net operating loss carryforwards and tax credit carryforwards, which are subject to management's estimates and judgments[258]. Stock and Shareholder Information - The company repurchased 7.8 million shares of common stock in 2023 at an average price of $83.83 per share, compared to 6.4 million shares at$ 94.96 in 2022[236]. - The total number of common stock shares outstanding decreased from 160,512,111 in 2021 to 151,232,908 in 2023, reflecting stock repurchases[303]. - Stock-based compensation increased significantly to $328.5 million in 2023, compared to$ 217.2 million in 2022, reflecting a 51.3% rise[224].