Akamai(US:AKAM)2025-05-09 20:08PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Akamai's unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, income, cash flows, and stockholders' equity with notes Condensed Consolidated Balance Sheets As of March 31, 2025, Akamai's total assets were $9.98 billion, a decrease from $10.37 billion at year-end 2024, primarily driven by a reduction in marketable securities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,374,971 | $2,578,097 | | Total Assets | $9,982,190 | $10,368,785 | | Total Current Liabilities | $2,016,529 | $2,091,323 | | Total Liabilities | $5,397,629 | $5,490,428 | | Total Stockholders' Equity | $4,584,561 | $4,878,357 | Condensed Consolidated Statements of Income For the three months ended March 31, 2025, Akamai reported revenue of $1.015 billion, a 3% increase, but higher costs and taxes led to a 30% decrease in net income to $123.2 million Q1 2025 vs. Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $1,015,139 | $986,970 | | Income from Operations | $154,583 | $166,728 | | Net Income | $123,171 | $175,418 | | Diluted EPS | $0.82 | $1.11 | Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash from operating activities decreased to $251.2 million, while investing activities provided $876.8 million, and financing activities used $552.3 million due to increased stock repurchases Cash Flow Summary for the Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $251,200 | $351,878 | | Net cash provided by (used in) investing activities | $876,846 | $(151,583) | | Net cash used in financing activities | $(552,250) | $(215,981) | | Net increase (decrease) in cash | $581,227 | $(19,699) | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures supporting the financial statements, covering revenue, convertible notes, share repurchases, and the effective income tax rate Revenue by Solution Category (in thousands) | Solution Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Security | $530,695 | $490,681 | | Delivery | $318,988 | $351,758 | | Cloud computing | $165,456 | $144,531 | | Total revenue | $1,015,139 | $986,970 | - The company has three outstanding convertible senior notes (2029, 2027, 2025) with a total par value of $3.565 billion, with the 2025 Notes, principal $1.15 billion, repaid on May 1, 202541 - The effective income tax rate was 29.0% for Q1 2025, significantly higher than 6.8% in Q1 2024, primarily due to a shortfall in stock-based compensation tax benefits and decreased foreign income taxed at lower rates71 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, focusing on revenue drivers, operating expenses, liquidity, and non-GAAP financial measures Results of Operations Total revenue increased 3% (4% at constant currency) YoY to $1.015 billion, driven by Security and Cloud Computing, while Delivery revenue declined, and cost of revenue increased due to network investments Revenue by Solution Category - Q1 2025 vs Q1 2024 (in thousands) | Solution | 2025 | 2024 | % Change | % Change at Constant Currency | | :--- | :--- | :--- | :--- | :--- | | Security | $530,695 | $490,681 | 8% | 10% | | Delivery | $318,988 | $351,758 | (9)% | (8)% | | Cloud computing | $165,456 | $144,531 | 14% | 15% | | Total revenue | $1,015,139 | $986,970 | 3% | 4% | - The decline in delivery solutions revenue was attributed to downward pricing on contract renewals and a large social media customer reducing traffic on Akamai's network due to cost optimization and 'do-it-yourself' initiatives90 - Cost of revenue increased primarily due to higher co-location fees (+15%) and depreciation of network equipment (+19%) related to investments in the company's compute platform9396 Use of Non-GAAP Financial Measures The company provides non-GAAP financial measures, including non-GAAP income from operations and Adjusted EBITDA, to offer a clearer understanding of ongoing business performance Reconciliation of GAAP Net Income to Non-GAAP Net Income (in thousands) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | GAAP Net income | $123,171 | $175,418 | | Amortization of acquired intangible assets | $27,637 | $21,023 | | Stock-based compensation | $111,978 | $93,260 | | Other adjustments (net) | $5,347 | $12,321 | | Income tax effect of adjustments | $(11,797) | $(46,727) | | Non-GAAP net income | $256,096 | $255,495 | Key Non-GAAP Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Non-GAAP operating margin | 30% | 30% | | Adjusted EBITDA margin | 43% | 42% | | Non-GAAP net income per diluted share | $1.70 | $1.64 | Liquidity and Capital Resources As of March 31, 2025, Akamai held $1.3 billion in cash, cash equivalents, and marketable securities, having repaid $1.15 billion in notes and repurchased $500.0 million in shares - The company repurchased 6.2 million shares of its common stock for $500.0 million during the three months ended March 31, 2025136137 - The company repaid $1.15 billion of convertible senior notes at maturity in May 2025 and subsequently borrowed $250.0 million under its 2022 Credit Agreement in April 2025138140 - Net cash from operations decreased to $251.2 million in Q1 2025 from $351.9 million in Q1 2024, due to timing of collections, payroll, and higher tax payments134 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company outlines its primary market risks, including interest rate, foreign currency, and credit risks, with a strengthening U.S. dollar negatively impacting reported revenue - The company's primary market risks are interest rate fluctuations on its investment portfolio and variable-rate debt, foreign currency translation and transaction exposure from international operations, and credit risk from accounts receivable148151155 - A strengthening U.S. dollar negatively impacts the company's consolidated revenue results due to the translation of foreign currency-denominated transactions151153 - As of March 31, 2025, there were no outstanding borrowings under the company's revolving credit facilities, but $250.0 million was borrowed in April 2025, exposing the company to variable interest rate risk150 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level156 - No material changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2025157 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine litigation but does not anticipate any material adverse effects on its business, financial condition, or cash flows - Akamai is party to various routine litigation and governmental proceedings but does not expect any to have a material effect on its business or financial condition158 Item 1A. Risk Factors Details significant risks to Akamai's business, including revenue growth, competition, cybersecurity, global operations, and customer DIY shifts - Slowing revenue growth is a key risk, with delivery solutions facing pricing pressure and traffic reduction from major customers, such as a large social media company implementing a DIY strategy160161 - The company faces intense competition, particularly in cloud computing where established large competitors have greater resources and market recognition172173 - Cybersecurity breaches, attacks, and system defects pose significant risks, which could lead to service disruptions, loss of customers, and reputational damage, with acquired companies like Linode presenting ongoing security challenges183197 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases during Q1 2025, totaling 6,158,235 shares for approximately $500 million under its repurchase program Issuer Purchases of Equity Securities - Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 53,123 | $90.15 | | Feb 2025 | 1,777,588 | $78.86 | | Mar 2025 | 4,327,524 | $82.03 | | Total | 6,158,235 | $81.19 | - The repurchases were made under the $2.0 billion share repurchase program authorized in May 2024, which runs through June 2027244 Item 5. Other Information During Q1 2025, three executive officers adopted Rule 10b5-1 trading arrangements for the potential sale of company securities - Three executives, Kimberly Salem Jackson (CMO), Robert Blumofe (CTO), and Paul C. Joseph (EVP, Global Sales), adopted Rule 10b5-1 trading plans for the sale of company stock during the quarter245 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and interactive data files in Inline XBRL format - The filing includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002246 - The financial statements and notes are submitted in an interactive data format using Inline XBRL, as detailed in Exhibit 101246