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Akamai(AKAM) - 2024 Q1 - Earnings Call Transcript
AKAMAkamai(AKAM)2024-05-09 23:52
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Financial Data and Key Metrics Changes - First quarter revenue reached 987million,anincreaseof8987 million, an increase of 8% year-over-year in both reported and constant currency [7][28] - Non-GAAP operating margin was 30%, and non-GAAP earnings per share were 1.64, up 17% year-over-year [7][30] - Security and cloud computing combined revenue grew 22% year-over-year, now representing almost two-thirds of total revenue [7][28] Business Line Data and Key Metrics Changes - Security revenue grew 21% year-over-year to 491million,drivenbystrongdemandforGuardicoreSegmentationSolution[8][29]−Computerevenuewas491 million, driven by strong demand for Guardicore Segmentation Solution [8][29] - Compute revenue was 145 million, up 25% year-over-year, with over 200 enterprise customers using cloud computing solutions [28][30] - Delivery revenue declined 11% year-over-year to 352million,attributedtoslowingtrafficgrowthandalargesocialmediacustomeroptimizingcosts[21][29]MarketDataandKeyMetricsChanges−Internationalrevenuewas352 million, attributed to slowing traffic growth and a large social media customer optimizing costs [21][29] Market Data and Key Metrics Changes - International revenue was 475 million, up 7% year-over-year, representing 48% of total revenue [30] - The U.S. dollar's strength is expected to negatively impact revenue by approximately 40millionforthefullyear2024[24]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusingonleveragingitsdeliveryproductline′scashflowtoinvestinfaster−growingsecurityandcloudcomputingportfolios[7][21]−TheplannedacquisitionofNonameSecurityisexpectedtoenhancethecompany′sAPIsecurityofferingsandaccelerategrowthinthissegment[12][32]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedindustryheadwindsaffectingthedeliveryproductlineandexpressedoptimismaboutthegrowthpotentialinsecurityandcompute[7][21]−Thecompanyexpectsdeliveryrevenuetodeclineatahigherratethisyearduetolowertrafficandcustomeroptimizations[25][27]OtherImportantInformation−Thecompanyhasauthorizedanewbuybackprogramofupto40 million for the full year 2024 [24] Company Strategy and Development Direction - The company is focusing on leveraging its delivery product line's cash flow to invest in faster-growing security and cloud computing portfolios [7][21] - The planned acquisition of Noname Security is expected to enhance the company's API security offerings and accelerate growth in this segment [12][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged industry headwinds affecting the delivery product line and expressed optimism about the growth potential in security and compute [7][21] - The company expects delivery revenue to decline at a higher rate this year due to lower traffic and customer optimizations [25][27] Other Important Information - The company has authorized a new buyback program of up to 2 billion, effective through June 2027 [31][32] - The acquisition of Noname Security is expected to close in June and contribute approximately $20 million in revenue for the full year [33] Q&A Session Summary Question: Update on delivery renewals and guidance - Management confirmed that renewals are proceeding as planned, with pricing expectations met, but traffic volume is lower than usual [41] Question: Impact of lower volume on compute growth - Management indicated that while large customers are experiencing lower volumes, compute capabilities are being utilized effectively by major media companies [44] Question: Margin guidance and factors affecting it - Management explained that margin guidance was lowered due to lower delivery revenue and foreign exchange impacts, with no structural changes anticipated [46][48] Question: Confidence in traffic recovery for delivery business - Management expressed cautious optimism, noting that traffic levels are currently lower than expected but have historically recovered [60][62] Question: Details on the Noname acquisition - Management highlighted Noname's market leadership and complementary capabilities, expecting significant synergies post-acquisition [54][70] Question: Delivery business pricing and traffic growth - Management clarified that the decline in delivery revenue is primarily due to lower traffic rather than pricing issues [102] Question: Future outlook for compute business and CapEx - Management expects continued growth in the compute business, with a focus on maintaining low CapEx as a percentage of revenue [106]