Akamai(US:AKAM)2022-05-04 01:21Financial Data and Key Metrics Changes - Q1 revenue was $904 million, up 7% year-over-year and up 9% in constant currency [7][27] - Q1 non-GAAP operating margin was 30% and non-GAAP EPS was $1.39 per diluted share, up 1% year-over-year and up 4% in constant currency [8][32] - Cash gross margin was 76% and GAAP gross margin was 63% [31] - Adjusted EBITDA was $391 million with an adjusted EBITDA margin of 43% [32] - Full year 2022 revenue guidance is now projected at $3.62 billion to $3.67 billion, representing a 5% to 6% increase year-over-year [40] Business Line Data and Key Metrics Changes - Security revenue grew 23% year-over-year to $382 million, representing 42% of total revenue [14][28] - Compute revenue was $78 million, up 32% year-over-year [29] - Delivery revenue was $444 million, down 6% year-over-year [17][30] Market Data and Key Metrics Changes - International markets represented 47% of total revenue in Q1, with international revenue growing 11% year-over-year [30] - Revenue from the U.S. market was $481 million, growing 4% year-over-year [31] Company Strategy and Development Direction - The company is focusing on expanding its security and compute businesses, which are expected to generate about $2 billion in revenue this year with a growth rate of about 27% in constant currency [13][19] - The acquisition of Linode is seen as transformational, providing opportunities to tap into the enterprise customer base and accelerate growth [20][66] - The company aims to build a continuum of compute from the cloud to the edge, especially with the growth of 5G and IoT [22] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic trends, including inflation and geopolitical developments, could impact results more meaningfully for the rest of the year [9][36] - There is a belief that traffic growth and online activity will return to more historical norms despite current moderation [37] - The company remains optimistic about opportunities in security and compute despite the challenging macroeconomic environment [41] Other Important Information - The company has terminated business with several majority state-owned Russian companies due to the war in Ukraine, which is expected to significantly reduce revenue from that region [9] - Customer churn levels remain low, with lost annual revenue from churned accounts in Q1 amounting to less than 0.5% of total annual revenue [12] Q&A Session Summary Question: Geographic specificity of slowing network traffic and demand for security solutions - Management indicated that traffic growth moderation is global, coinciding with the lifting of COVID-related restrictions, and noted an increase in demand for security solutions due to rising cyber threats [44][45] Question: Adjustments to OpEx in light of a difficult environment - Management confirmed that while CapEx is being managed efficiently, they will continue to invest in security and compute despite macroeconomic challenges [50][51] Question: Impact of macro factors on business behavior - Management stated that inflation has not significantly impacted their business yet, but they are monitoring customer behavior as restrictions lift [63][64] Question: Contribution of Linode and growth opportunities - Linode contributed approximately $3.5 million in Q1, and management believes they can significantly accelerate its growth by introducing new features and tapping into the enterprise market [66] Question: Traffic volume trends and future expectations - Management noted that while traffic growth has moderated, it remains strong, and they expect a return to higher growth rates as online activity stabilizes [72]