Akamai Reports Second Quarter 2006 Results

-- Revenue grew to a record $100.6 million, up 56 percent year-over-year and 11 percent over prior quarter

-- GAAP net income was $11.3 million, or $0.07 per diluted share, including impact of compensation charges attributable to adoption of FAS 123R

-- Normalized net income(a) more than doubled year-over-year to $35.8 million, or $0.20 per normalized diluted share(a), and increased 22 percent over prior quarter

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading globalservice provider for accelerating content and business processesonline, today reported financial results for the second quarter endedJune 30, 2006. Revenue for second quarter 2006 was $100.6 million, an11 percent increase over first quarter 2006 revenue of $90.8 million,and a 56 percent increase over second quarter 2005 revenue of $64.6million.

Net income in accordance with United States Generally AcceptedAccounting Principles, or GAAP, for the second quarter of 2006 was$11.3 million, or $0.07 per diluted share. GAAP net income in thesecond quarter includes equity-related compensation charges ofapproximately $13.2 million, or $0.07 per diluted share, on a pre-taxbasis, reflecting the Company's adoption of Financial AccountingStandard 123R on January 1, 2006. GAAP net income also reflects a booktax rate of approximately 45 percent.

The Company generated normalized net income(a) of $35.8 million,or $0.20 per normalized diluted share(a), in the second quarter of2006, a 22 percent increase over first quarter 2006 normalized netincome of $29.4 million, or $0.17 per diluted share, and a 110 percentimprovement over 2005 second quarter normalized earnings of $17.1million, or $0.12 per diluted share. ((a) See Use of Non-GAAPFinancial Measures below for definitions.)

"We had an exceptionally strong quarter, exceeding our growthexpectations," said Paul Sagan, president and CEO of Akamai. "Weexperienced robust demand for our services across many verticals, withheavier than expected customer usage resulting in part from theexplosion in digital media consumption and the continued proliferationof broadband around the world. Akamai is helping our customersleverage the low-cost, global reach of the Internet to optimize theperformance of their content and business applications, and createmore profitable online business models."

Adjusted EBITDA(a) for the second quarter of 2006 was $40.0million, up 20 percent from $33.4 million in the prior quarter, and upfrom $22.7 million in the second quarter of 2005. Adjusted EBITDA as apercentage of revenue was 40 percent, up from 37 percent in the priorquarter and up from 35 percent a year ago. ((a)See Use of Non-GAAPFinancial Measures below for definitions.)

Cash from operations was $27.7 million in the second quarter, ascompared to $33.2 million in the first quarter 2006 and $16.9 millionin the same period last year. Cash, cash equivalents and marketablesecurities totaled $367 million at the end of the period.

At June 30, 2006, the Company had approximately 155 million sharesof common stock outstanding.

Customers

The number of customers under long-term services contracts at theend of the second quarter increased by 79 to a record 2,060, a fourpercent increase over first quarter 2006, and a 19 percent increaseyear-over-year.

Sales through resellers and sales outside the United States eachaccounted for 22 percent of revenue for the second quarter of 2006.

Quarterly Conference Call

Akamai will host a conference call today at 4:30 p.m. ET that canbe accessed through 1-888-689-4521 (or 1-706-645-9202 forinternational calls). A live Webcast of the call may be accessed atwww.akamai.com in the Investor section. In addition, a replay of thecall will be available for one week following the conference throughthe Akamai Website or by calling 1-800-642-1687 (or 1-706-645-9291 forinternational calls) and using conference ID No. 2001832.

About Akamai

Akamai(R) is the leading global service provider for acceleratingcontent and business processes online. Thousands of organizations haveformed trusted relationships with Akamai, improving their revenue andreducing costs by maximizing the performance of their onlinebusinesses. Leveraging the Akamai EdgePlatform, these organizationsgain business advantage today, and have the foundation for theemerging Web solutions of tomorrow. Akamai is "The Trusted Choice forOnline Business." For more information, visit www.akamai.com.
Financial Statements


Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)

June 30, December 31,
2006 2005
---------- ----------
Assets
Cash and cash equivalents $ 73,502 $ 91,792
Marketable securities 185,429 199,886
Restricted marketable securities 330 730
Accounts receivable, net 63,963 52,162
Prepaid expenses and other current assets 13,864 10,428
---------- ----------
Current assets 337,088 354,998
Marketable securities 104,396 17,896
Restricted marketable securities 3,825 3,825
Property and equipment, net 63,243 44,885
Goodwill and other intangible assets, net 132,074 136,786
Other assets 4,786 4,801
Deferred tax assets, net 324,065 328,308
---------- ----------
Total assets $ 969,477 $ 891,499
========== ==========

Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 62,247 $ 54,471
Other current liabilities 9,435 7,405
---------- ----------
Current liabilities 71,682 61,876
Other liabilities 3,689 5,409
Convertible notes 200,000 200,000
---------- ----------
Total liabilities 275,371 267,285
Stockholders' equity 694,106 624,214
---------- ----------
Total liabilities and stockholders'
equity $ 969,477 $ 891,499
========== ==========



Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)


--------Three Months Ended-------- -Six Months Ended-
June March June March June June
30, 31, 30, 31, 30, 30,
2006 2006 2005 2005 2006 2005
-------- -------- -------- ------- -------- --------

Revenues $100,649 $ 90,825 $ 64,649 $60,096 $191,474 $124,745

Costs and
operating
expenses:
Cost of
revenues(a)(b) 21,195 19,316 12,752 11,524 40,511 24,276
Research and
development(a) 8,373 6,726 4,507 3,629 15,099 8,136
Sales and
marketing(a) 29,720 26,295 18,363 16,745 56,015 35,108
General and
administrative
(a)(b) 21,870 18,543 11,341 11,839 40,413 23,180
Amortization of
other
intangible
assets 2,198 2,296 520 12 4,494 532
-------- -------- -------- ------- -------- --------
Total costs and
operating
expenses 83,356 73,176 47,483 43,749 156,532 91,232
-------- -------- -------- ------- -------- --------
Operating income 17,293 17,649 17,166 16,347 34,942 33,513

Interest (income)
expense, net (3,336) (2,659) 770 1,013 (5,995) 1,783
Gain on
investments, net (2) (257) - - (259) -
Other (income)
expense, net (475) (186) (77) 726 (661) 649
-------- -------- -------- ------- -------- --------
Income before
provision for
income taxes 21,106 20,751 16,473 14,608 41,857 31,081
Provision for
income taxes 9,842 9,256 573 529 19,098 1,102
-------- -------- -------- ------- -------- --------
Net income $ 11,264 $ 11,495 $ 15,900 $14,079 $ 22,759 $ 29,979
======== ======== ======== ======= ======== ========

Net income per
share:
Basic $ 0.07 $ 0.07 $ 0.12 $ 0.11 $ 0.15 $ 0.23
Diluted $ 0.07 $ 0.07 $ 0.11 $ 0.10 $ 0.14 $ 0.21

Shares used in
per share
calculations:
Basic 154,702 153,819 130,119 127,051 154,260 128,565
Diluted 175,612 173,811 149,986 147,282 175,001 148,607

(a) Includes equity-related compensation (see supplemental table for
figures)
(b) Includes depreciation (see supplemental table for figures)






------Three Months Ended------ Six Months Ended
June March June March June June
30, 31, 30, 31, 30, 30,
2006 2006 2005 2005 2006 2005
------- ------- ------- ------- ------- -------
Supplemental financial data
(in thousands):

Equity-related
compensation:
Cost of revenues $ 533 $ 273 $ - $ - $ 806 $ -
Research and
development 3,332 1,657 129 6 4,989 135
Sales and marketing 5,040 2,589 129 47 7,629 176
General and
administrative 4,270 2,568 399 174 6,838 573
------- ------- ------- ------- ------- -------
Total equity-
related
compensation $13,175 $ 7,087 $ 657 $ 227 $20,262 $ 884

Depreciation and
amortization:
Network-related
depreciation $ 6,205 $ 5,356 $ 3,472 $ 2,915 $11,561 $ 6,387
Capitalized equity-
related compensation
amortization 27 6 - - 33 -
Other depreciation 1,137 1,035 860 939 2,172 1,799
------- ------- ------- ------- ------- -------
Total depreciation
and amortization $ 7,369 $ 6,397 $ 4,332 $ 3,854 $13,766 $ 8,186

Capital expenditures:
Purchases of property
and equipment $10,733 $13,556 $ 7,584 $ 7,598 $24,289 $15,182
Capitalized internal-
use software 3,494 2,618 2,221 2,121 6,112 4,342
Capitalized equity-
related compensation 1,242 522 - - 1,764 -
------- ------- ------- ------- ------- -------
Total capital
expenditures $15,469 $16,696 $ 9,805 $ 9,719 $32,165 $19,524

Net increase in cash,
cash equivalents,
marketable securities
and restricted
marketable
securities $26,059 $27,294 $12,695 $ 9,604 $53,353 $22,299

End of period statistics:
Number of customers
under recurring
contract 2,060 1,981 1,736 1,360
Number of employees 871 833 774 633
Number of deployed
servers 20,836 19,919 17,500 16,017



Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)


---------Three Months Ended-----------
June 30, March 31, June 30, March 31,
2006 2006 2005 2005
--------- --------- -------- --------

Cash flows from operating activities:
Net income $ 11,264 $ 11,495 $ 15,900 $ 14,079
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
of deferred financing costs 9,778 8,903 5,074 4,140
Equity-related compensation 13,163 7,087 657 227
Change in deferred tax assets,
net, including release of
deferred tax asset valuation
allowance - - - 158
Utilization of tax NOL
carryforward 9,178 8,764 - -
Excess tax benefits from
stock-based compensation (5,467) (5,399) - -
(Gain) loss on investments,
property and equipment and
foreign currency, net (283) (327) 319 227
Provision for doubtful
accounts 279 318 41 413
Changes in operating assets
and liabilities:
Accounts receivable, net (7,338) (3,403) (1,837) (4,761)
Prepaid expenses and other
current assets (1,205) (3,113) (1,926) 777
Accounts payable, accrued
expenses and other current
liabilities (418) 6,840 (1,846) 4,878
Accrued restructuring (494) (554) (339) (352)
Deferred revenue (602) 2,641 45 281
Other noncurrent assets and
liabilities (109) (91) 836 (1,365)
--------- --------- -------- --------
Net cash provided by
operating activities: 27,746 33,161 16,924 18,702
--------- --------- -------- --------

Cash flows from investing
activities:
Cash acquired through
business combination - - 1,717 -
Purchases of property and
equipment and capitalization
of internal-use software and
equity-related compensation (14,227) (16,174) (9,805) (9,719)
Purchase of investments (86,924) (105,005) (15,541) (10,544)
Proceeds from sales and
maturities of investments 68,966 50,766 14,231 5,203
Decrease in restricted
investments held for
security deposits - 400 - -
--------- --------- -------- --------
Net cash used in investing
activities (32,185) (70,013) (9,398) (15,060)
--------- --------- -------- --------

Cash flows from financing
activities:
Payments on capital leases - - (93) (134)
Proceeds from equity
offering, net of financing
costs - - - -
Proceeds from the issuance of
common stock under stock
option and employee stock
purchase plans 6,822 4,643 4,145 1,643
Excess tax benefits from
stock-based compensation 5,467 5,399 - -
--------- --------- -------- --------
Net cash provided by
financing activities 12,289 10,042 4,052 1,509
--------- --------- -------- --------

Effects of exchange rate
translation on cash and cash
equivalents 630 40 (431) (588)
--------- --------- -------- --------

Net (decrease) increase in
cash and cash equivalents 8,480 (26,770) 11,147 4,563
Cash and cash equivalents,
beginning of period 65,022 91,792 39,881 35,318
--------- --------- -------- --------
Cash and cash equivalents,
end of period $ 73,502 $ 65,022 $ 51,028 $ 39,881
========= ========= ======== ========




Six Months Ended
June 30, June 30,
2006 2005
---------- ----------

Cash flows from operating activities:
Net income $ 22,759 $ 29,979
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
deferred financing costs 18,681 9,214
Equity-related compensation 20,250 884
Change in deferred tax assets, net,
including release of deferred tax asset
valuation allowance - 158
Utilization of tax NOL carryforward 17,942 -
Excess tax benefits from stock-based
compensation (10,866) -
(Gain) loss on investments, property
and equipment and foreign currency,
net (610) 546
Provision for doubtful accounts 597 454
Changes in operating assets and liabilities:
Accounts receivable, net (10,741) (6,598)
Prepaid expenses and other current
assets (4,318) (1,149)
Accounts payable, accrued expenses
and other current liabilities 6,422 3,032
Accrued restructuring (1,048) (691)
Deferred revenue 2,039 326
Other noncurrent assets and
liabilities (200) (529)
---------- ----------
Net cash provided by operating
activities: 60,907 35,626
---------- ----------

Cash flows from investing activities:
Cash acquired through business
combination - 1,717
Purchases of property and equipment and
capitalization of internal-use software
and equity-related compensation (30,401) (19,524)
Purchase of investments (191,929) (26,085)
Proceeds from sales and maturities of
investments 119,732 19,434
Decrease in restricted investments
held for security deposits 400 -
---------- ----------
Net cash used in investing activities (102,198) (24,458)
---------- ----------

Cash flows from financing activities:
Payments on capital leases - (227)
Proceeds from equity offering, net of
financing costs - -
Proceeds from the issuance of common
stock under stock option and -
employee stock purchase plans 11,465 5,788
Excess tax benefits from stock-based
compensation 10,866 -
---------- ----------
Net cash provided by financing
activities 22,331 5,561
---------- ----------

Effects of exchange rate translation
on cash and cash equivalents 670 (1,019)
---------- ----------

Net (decrease) increase in cash and
cash equivalents (18,290) 15,710
Cash and cash equivalents, beginning
of period 91,792 35,318
---------- ----------
Cash and cash equivalents, end of
period $ 73,502 $ 51,028
========== ==========

(a) Use of Non-GAAP Financial Measures

In addition to providing financial measurements based on generallyaccepted accounting principles in the United States of America (GAAP),Akamai has historically provided additional financial metrics that arenot prepared in accordance with GAAP (non-GAAP). Recent legislativeand regulatory changes discourage the use of and emphasis on non-GAAPfinancial metrics and require companies to explain why non-GAAPfinancial metrics are relevant to management and investors. We believethat the non-GAAP financial metrics we have included are useful tomanagement and investors because they provide additional insight intoour operations as well as help us assess and monitor developments inour business. Set forth below are definitions of the non-GAAP terms weuse and explanations of some of the benefits provided by thosemetrics.

Akamai defines "Adjusted EBITDA" as net income, before interest,taxes, depreciation and amortization of tangible and intangibleassets, equity-related compensation, depreciation of capitalizedequity-related compensation, certain gains and losses on equityinvestments, foreign exchange gains and losses, utilization of tax NOLcarryforward and release of the deferred tax asset valuationallowance.

Adjusted EBITDA eliminates items that are either not part of theCompany's core operations, such as investment gains and losses,foreign exchange gains and losses and net interest expense, or do notrequire a cash outlay, such as equity-related compensation andimpairment of intangible assets. Adjusted EBITDA also excludesdepreciation and amortization expense, which is based on the Company'sestimate of the useful life of tangible and intangible assets. Theseestimates could vary from actual performance of the asset, are basedon historic cost incurred to build out the Company's deployed network,and may not be indicative of current or future capital expenditures.Because Adjusted EBITDA eliminates these items, Akamai considers thisfinancial measure to be an important indicator of the Company'soperational strength and performance of its business and a goodmeasure of the Company's historical operating trend.

Akamai defines "Adjusted EBITDA margin" as a percentage ofadjusted EBITDA over revenue. Akamai considers Adjusted EBITDA marginto be an indicator of the Company's operating trend and performance ofits business in relation to its revenue growth.

Akamai defines "capital expenditures" or "capex" as purchases ofproperty and equipment and capitalization of internal-use softwaredevelopment costs. Capital expenditures or capex are disclosed inAkamai's condensed consolidated statement of cash flows in theCompany's most recent annual report on Form 10-K filed with theSecurities and Exchange Commission.

Akamai defines "normalized net income" as net income beforeamortization of intangible assets, equity-related compensation,depreciation of capitalized equity-related compensation, certain gainsand losses on equity investments, utilization of tax NOL carryforwardand release of the deferred tax asset valuation allowance. Akamaiconsiders normalized net income to be another important indicator ofthe overall performance of the Company because it eliminates theeffects of events that are either not part of the Company's coreoperations or are non-cash.

Akamai defines "normalized diluted share" as diluted common sharesoutstanding used in GAAP net income per share calculation, excludingthe effect of FAS 123R under the treasury stock method. Akamaiconsiders normalized diluted shares to be another important indicatorof overall performance of the Company because it eliminates the effectof a non-cash item.

Adjusted EBITDA and normalized net income should be considered inaddition to, not as a substitute for, the Company's operating incomeand net income, as well as other measures of financial performancereported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by theSecurities and Exchange Commission, the Company is presenting the mostdirectly comparable GAAP financial measure and reconciling thenon-GAAP financial metrics to the comparable GAAP measures.
Reconciliation of GAAP net income to normalized net income
and Adjusted EBITDA
(amounts in thousands, except per share data)


--------Three Months Ended-------- Six Months Ended
June March June March June June
30, 31, 30, 31, 30, 30,
2006 2006 2005 2005 2006 2005
-------- -------- -------- -------- -------- --------

Net income $11,264 $11,495 $15,900 $14,079 $22,759 $29,979

Amortization of
intangible
assets 2,198 2,296 520 12 4,494 532
Equity-related
compensation 13,175 7,087 657 227 20,262 884
Amortization of
capitalized
equity-related
compensation 27 6 - - 33 -
Gain on
investments,
net (2) (257) - - (259) -
Utilization of
tax NOL
carryforward 9,178 8,764 - - 17,942 -
Release of the
deferred tax
asset
valuation
allowance - - - - - -
-------- -------- -------- -------- -------- --------

Total
normalized net
income: 35,840 29,391 17,077 14,318 65,231 31,395

Interest
(income)
expense, net (3,336) (2,659) 770 1,013 (5,995) 1,783
Provision for
income taxes 664 492 573 529 1,156 1,102
Depreciation
and
amortization 7,342 6,391 4,332 3,854 13,733 8,186
Other (income)
expense, net (475) (186) (77) 726 (661) 649
-------- -------- -------- -------- -------- --------

Total Adjusted
EBITDA: $40,035 $33,429 $22,675 $20,440 $73,464 $43,115
======== ======== ======== ======== ======== ========

Normalized net
income per
share:
Basic $0.23 $0.19 $0.13 $0.11 $0.42 $0.24
Diluted $0.20 $0.17 $0.12 $0.10 $0.37 $0.22

Shares used in
normalized per
share
calculations:
Basic 154,702 153,819 130,119 127,051 154,260 128,585
Diluted 178,358 176,644 149,986 147,282 177,817 148,607

Akamai Statement Under the Private Securities Litigation ReformAct

The release contains information about future expectations, plansand prospects of Akamai's management that constitute forward-lookingstatements for purposes of the safe harbor provisions under ThePrivate Securities Litigation Reform Act of 1995, including statementsconcerning the expected growth and development of our business and ourability to help our customers create profitable online businessmodels. Actual results may differ materially from those indicated bythese forward-looking statements as a result of various importantfactors including, but not limited to, unexpected increases inAkamai's use of funds, loss of significant customers, failure toincrease our revenue and keep our expenses consistent with revenues,the effects of any attempts to intentionally disrupt our services ornetwork by unauthorized users or others, failure to have availablesufficient transmission or server capacity, a failure of Akamai'sservices or network infrastructure, failure to maintain the prices wecharge for our services and other factors that are discussed in theCompany's Annual Report on Form 10-K for the year ended December 31,2005, and subsequent quarterly reports on Form 10-Q, and otherdocuments periodically filed with the SEC.

In addition, the statements in this press release representAkamai's expectations and beliefs as of the date of this pressrelease. Akamai anticipates that subsequent events and developmentsmay cause these expectations and beliefs to change. However, whileAkamai may elect to update these forward-looking statements at somepoint in the future, it specifically disclaims any obligation to doso. These forward-looking statements should not be relied upon asrepresenting Akamai's expectations or beliefs as of any datesubsequent to the date of this press release.