This is a summary of the second quarter fiscal 2008 earnings call conducted by Akamai Technologies, Inc. (AKAM: chart) on July 30, 2008.
Management:
President and CEO: Paul Sagan
CFO: J.D. Sherman
IR: Noelle Faris
Key Investor Issues:
- Quarterly earnings rose to $34.3 million, or 19 cents per share, from $21.6 million, or 12 cents per share in the same period last year.
- Excluding amortization charges and other items, profit totaled 41 cents per share.
- Revenue jumped 27% to $194 million from $152.7 million a year earlier.
- During the second quarter, international sales represented 26% of total revenue, up 1 point from first quarter levels.
Second Quarter Highlights:
Financial highlights for the second quarter include record revenue of $194 million, a 27% increase over the second quarter of last year, and a 4% increase over the first quarter this year.
Normalized net income was $76.5 million, or $0.41 per diluted share. That''s a 38% increase over normalized net income from last year and consistent with the first quarter results. The company continues to experience solid growth in many of its newer service areas such as application acceleration for business to business services and dynamic site solutions for ecommerce.
For the second quarter, revenue grew 27% year over year and 4% sequentially to $194 million at the low end of the expectation range.
Media & Entertainment vertical grew roughly inline with the overall business and remained an important contributor to second quarter financial results. But media growth has moderated from the pace for several years during the period of rapid broadband adoption.
Growth in the commerce vertical continued to be very strong.
It was the fastest growing vertical with more than 50% increase year over year. The company also continues to make progress with its newer value-added solutions such as Application Performance Services, Dynamic Site Solutions, and Stream OS.
During the second quarter, international sales represented 26% of total revenue, up 1 point from first quarter levels.
- International business performed very well growing 8% sequentially and 45% year over year.
- Revenue in North America, where the company saw the largest impact both from the economic factors and media trends grew 2% sequentially and 22% year over year.
- Resellers represented 16% of total revenue consistent with the prior quarter. No customer accounted for 10% or more of revenue in the second quarter.
Consolidated ARPU, or average revenue per customer, was up 19% year over year to $23,700 in the second quarter.
The company added 53 net new customers bringing the total customer count to 2725. Gross adds brand new customer to Akamai increased to about 170 this quarter. Churn was just over 4% primarily due to churn from smaller customers. The ARPU of new customer adds continued to be well above the average revenue of churned customer.
Cash gross margins for the quarter were 82%, up from 81% in the first quarter and down about 1 point from the same period last year.
As expected, gross margin stabilized with the growth in sales of Dynamic Site Solutions and Application Performance Services, which have a higher gross margin than the media delivery deals.
GAAP gross margin, which includes both depreciation and stock-based compensation was 72% from the quarter, consistent with the first quarter and down about 2 points from last year.
GAAP operating expenses were $88 million in the second quarter.
These GAAP numbers include depreciation, amortization of intangible assets and stock-based compensation charges. Excluding these non-cash charges, operating expenses for the quarter were $65.9 million, up $900,00 from the prior quarter, which is down slightly from the prior quarter.
