Akamai (AKAM) Lowers Q1 adj.-EPS Outlook Under New Accounting Methodology

March 11, 2013 12:11 PM EDT
Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, is today reaffirming its previously-issued first quarter 2013 financial guidance. In conjunction with its annual Investor Summit being held today, the Company is also announcing the adoption of new reporting methodologies for classifying certain costs in the statements of operations and for calculating normalized net income, which will be referred to as non-GAAP net income going forward. These new reporting methodologies will be reflected beginning in the Company's first quarter 2013 results, and have no impact on the Company's operational performance, financial position or cash flows.

First Quarter 2013 GuidanceThe Company is announcing today that it continues to expect first quarter revenue in the range of $352 million to $362 million, adjusted EBITDA margins in the range of 42 to 43 percent and normalized net income per diluted share in the range of $0.50 to $0.52. Under the new methodology described below, the Company expects non-GAAP net income per diluted share in the range of $0.45 to $0.47.

*** The Street sees EPS of $0.50 and revs of $357.4 million.

New Reporting MethodologiesStarting in the first quarter 2013, the Company will classify both the cost of services and support and the cost of network build-out and support as costs of revenues in its statements of operations on a historic and prospective basis. The Company previously classified the cost of services and support in the sales and marketing line of the statements of operations and the cost of network build-out and support in the general and administrative line of the statements of operations. The effect of these reclassifications is to increase cost of revenues and decrease operating expenses. The changes do not impact adjusted EBITDA, GAAP and non-GAAP net income or operational free cash flow.

In addition, the Company previously calculated normalized net income by adding the following items on a non-tax-effected basis to net income calculated in accordance with GAAP:

* Amortization of other acquired intangible assets;
* Stock-based compensation expense, including amortization of capitalized internal-use software;
* Restructuring charges and benefits;
* Acquisition-related costs and benefits;
* Certain gains and losses on investments;
* Loss on early extinguishment of debt;
* Gains and losses on legal settlements; and
* Other non-recurring or unusual items that may arise from time to time.

Starting in the first quarter 2013, the Company will tax effect the items listed above to calculate non-GAAP net income. The Company believes this revised methodology will help investors more easily and consistently evaluate the Company's performance.

"Our goal is to align our reporting methodology with the evolution of our business," said Tom Leighton, CEO of Akamai. "As we look to the next phase of Akamai's growth, it is important that we help investors better understand the dynamics of our core and emerging businesses. These additional disclosures will provide increased granularity to enable measurement of Akamai's growth over the long term."

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