Akamai: Q1 Fine, But Sagan Leaving

April 25th, 2012 by · 21 Comments

Akamai (NASDAQ:AKAM, news, filings) turned in a strong first quarter, but rattled the markets a bit with some succession news.  CEO Paul Sagan is planning to leave the company by the end of 2013, staying on for the transition period until a successor can be brought in.  Here is a quick table of Q1 results in some context:

$ in millions Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12
Revenue 276.0 277.0 281.9 323.4 319.4 322-330
COS 89.0  89.6  93.3 102.5 102.6
SG&A+R&D 109.9  109.8  118.8 132.8 140.4
Gross Margin 67.8% 67.7% 66.9% 68.3% 67.8%
Adj.  EPS 0.38 0.35 0.34 0.45 0.41 0.36-0.38

Revenues of $319.4M were within guidance but above analyst expectations, which had been on the low end of the range.  Second quarter forecasts were ahead of estimates by a similar margin.

Gross margins fell back below 68%, and the company said it expected them to decline a percent or two this year due to support for investment and integration efforts for the Cotendo deal.  This is a highly anticipated number for Akamai in recent quarters, watched carefully to see if competitive pressures are cutting into their profits.  Capex will also be at the high end of its guidance.

Earnings per share of $0.41 were a few pennies above expectations and guidance, while projections for Q2 were in-line with expectations.

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Categories: Cloud Computing · Content Distribution · Financials

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21 Comments So Far

  • CarlK says:

    This company’s EBITDA margins were down at least four hundred basis points to 41 percent from projections of 45-47 percent.

    Their tax rate was just under 41 percent and expected to be maintained at 38 percent.

    Why do you choose to ignore this crucial metric?

  • CarlK says:

    Rob, did you create an Akamai CHARITY, one which you will supply the payments for their TAXES and DEPRECIATION expenses?

    If you keep this up, you’re going to make Warren E. Buffett’s list of wealthy people pledging to give back to the masses, including Akamai, it seems!

  • Anonymous says:

    Akamai gave their calculated margins on the financial metrics spreadsheet in the investor relations portion of their website. Their adjusted EBITDA was $142.65M or 45% margin for Q1’12, compared to the $147.57M or 46%margin for Q4’11.

    Now if we look at free cash flow:

    Q1’12 142.65M – 43.44 Capex = 99.31M
    Q4’11 147.57M – 46.57 Capex = 101.00M

    A difference approx $1.7M.

    Akamai stock was initially up 6% upon earnings release because this was ahead of analyst expectations.

    The news of Paul Sagan leaving decreased the price, which is typical when a successful CEO announces they will be leaving their company.

  • ddm08 says:

    I wonder if things are going so well for these guys, why did the CFO leave last year and now the CEO is leaving? If they have so much skin in the game, why not stick around?

  • CarlK says:

    Michael Turits – Raymond James & Associates

    I think that you kind of [ph] said 41% to 42% EBITDA margins. You’ve got the gross margins down for next quarter. Can you see — obviously, it’s important to make these investments. Anything you can tell us about how those should trend over the following several quarters, the back half of the year because it would be great to see some leverage off that, and any help you can give us there, it would be great.

    James Benson

    we do expect that we can get back into the long term model range we provided of 45% to 47% EBITDA. But I would say, it’s going to be probably several quarters before we get back to that range.


  • CarlK says:

    That’s quite a T for TAXES “margin sucking” phenomenon they’re carrying too, compared to let’s say, Level 3 Communications, a $40B network infrastructure owner holding zero tax liabilities on the next $6B in profits they are going to earn!

  • CarlK says:

    Investments? These chumps at Akamai don’t know how or where to invest in “networks,” because they’re too busy wasting shareholder capital on stock buybacks while sending their CEO around the world in eighty days to enjoy a global vacation on the shareholder NICKEL before he retires into the sunset.

    Read more here: http://www.sacbee.com/2012/04/25/4442343/akamai-reports-first-quarter-2012.html#storylink=cpy

  • CarlK says:

    Donna Jaegers, Janco Partners paraphrase: Great quarter guys! Which revenue bucket are you DUMPING your PALTRY “CONTENDO” sales acquisition into?

  • Anonymous says:

    You are right, EBITDA is 41-42%. I mentioned adjusted EBITDA is 45%.

    Based on a FCF calc from adjusted EBITDA margins, the FCF did not decrease substantially.

    EBITDA margins can be misleading, especially if a company capitalizes everything only to generate negative FCF. Ultimately margins will not matter if the company can not generate substantial FCF.

    As for Donna’s question she is trying to see how each vertical is going to be affected. Cotendo’s revenue might be small, but it can have a big impact on a smaller vertical. I.e, $5M into a $15M vertical to make $20M. That vertical increases by 33%. Keep in mind the type of customer that Cotendo or Blaze bring is important. Any insight into these customers can give an idea for what kind of products/growth can be expected.

    The analysts opinion who wrote ‘Contendo’ when referring to Akamai acquisitions is questionable at best. They simply have not done their homework.

  • CarlK says:

    But the math for this PALTRY revenue stream is only 5K per month over the current billable 30K per month or 1/6th or 16.67 percent with an outright refusal by the CEO to answer how their largest customer previously, AT&T, is responding to their offerings today!

    That’s called RISK of losing your largest customer, or relying on the kindness of strangers without any pre negotiated commitments!

    The answer that Contendo is dropping revenues into each vertical window, didn’t help The Mouse Lady when she seemed to be hoping that their MOUSE DROPPINGS were focused on ENTERPRISE CUSTOMERS exclusively.

  • CarlK says:

    Then there’s the RISK of how much old or prior software sales they LOSE, when trying to STUFF NEW SOFTWARE sales into the PIPELINE! Oh, that’s right, AKAMAI doesn’t OWN the PIPES nor the bandwidth nor the Colo facilities they hide in.

  • CarlK says:

    How many quarters is “SEVERAL”? Acquisitions by way of integration, somehow never happen to work out the way the Wall Street PITCH MEN propose it, nor the executives present it to their sheep!

    There are companies who are still suffering five to seven years after relying on bold, optimistic forecasts by their own executives mixed in with the Wall Street MISScreants.

  • Anonymous says:

    Well the math is 5k per customer per month right? So divide $2million by $5k and you’re left with 400 customers.

    These customers are probably heavy data users, and if 20% of these customers can be bumped up to 30k per month that will turn that same $2million into a $4million revenue stream.

    Any insight into those verticals would help determine whether the a customer is likely to be 30K or not.

    It’s Cotendo btw.

  • Anonymous says:

    By the way when Michael Turits mentioned the 41-42%, he is referring to Q2.

  • CarlK says:

    Listen Anonymous, if anyone is deserving of Kudos by Wall Street tied to this Akamai news irrespective of what that Goldman Operative, the PUMP&DUMP, Carnival Barker, Criminal Cramer, who was yakking lies again on Trash T.V.; it’s Jim Crowe.

    He basically told Akamai to pack up their gear and go find a new sandbox to play in!

    Inexplicably and first, their hot shot cfo, JR, or JD or JW left, and now their ceo after touring the globe on the share owner dime has probably found the beach front he is ready to retire to. Good for him!

    Now, we all know that, Akamai has been a dirty little secret embedded in TELECOM and CABLE homes; therefore, it is likely that they will be the ones to pay up for this nose bleeding P/S based upon a declining cdn business, but a Level 3 win is a win is a BIG WIN!

    It won’t end here; however, because Big (3) is intent on liberating consumers along with businesses to the free and open internet while becoming the 21st Century’s leading communications provider across the globe, and will be doing so by fighting this BATTLE ROYALE one ENTERPRISE BUILDING at a time!

    It’s going to be someone who takes a large piece of the VIDEO INTERNET PIE, so, “it might as well be us!”

  • Anonymous says:

    Lol, alright this made me grin. I do need to sign up and not be anonymous — its annoying to argue with an anonymous people.

  • CarlK says:

    “Bring it on!,” Anonymous! 🙂

  • CarlK says:

    Anonymous, is this the kind of fear mongering you utilize for companies you are not “ALL IN” with?

    By the way, I understand there is some math to dispel much of the rumor mongering this group of opaque miscreants are continually attempting to stir up!


  • Anonymous says:

    I prefer Brainwashing over fear mongering.

  • CarlK says:

    Is there an encrypted message in this?

    The best way to end Brainwashing at least in America, is to OPEN the FLOODGATES to the INTERNET with the free flow of information X the globe by breaking down the WALLS and BOTTLENECKS created by THE MONOPOLISTS in telecom and cable land, who are holding end users for ransom, while using dirty little software secrets in the form of user behavior for advertising purposes, crafted by the likes of Akamai, no longer serving their original purpose well, at least as a CDN since the movement of “large files” according to the shift in VIDEO PATTERNS is fully BANDWIDTH BASED and controlled by Big (3). Is that brainwashed enough for you? 🙂

  • Anonymous says:

    That is brainwashing at its finest!

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