Akamai Reports Fourth Quarter 2005 and Full-Year 2005 Financial Results

-- Revenue grew 9 percent quarter-over-quarter to $82.7 million, and annual revenue increased 35 percent year-over-year to $283.1 million

-- GAAP net income was $25.8 million in the fourth quarter, or $0.16 per diluted share

-- Full-year GAAP net income grew to $328.0 million, or $2.11 per diluted share, including a benefit from the release of a tax valuation allowance of $258.8 million

-- Normalized net income(a) increased 19 percent quarter-over-quarter to $26.2 million, or $0.16 per diluted share, in the fourth quarter, and full-year normalized net income(a) increased 87 percent year-over-year to $79.5 million, or $0.52 per diluted share

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading globalservice provider for accelerating content and business processesonline, today reported financial results for the fourth quarter andfull-year ended December 31, 2005. Revenue for the fourth quarter 2005was $82.7 million, a 9 percent increase over the previous quarter'srevenue of $75.7 million, and a 44 percent increase over fourthquarter 2004 revenue of $57.6 million. Total revenue for 2005 was$283.1 million, a 35 percent increase over 2004 revenue of $210.0million.

Net income in accordance with United States Generally AcceptedAccounting Principles, or GAAP, for the fourth quarter of 2005 was$25.8 million, or $0.16 per diluted share. Full-year net income for2005 was $328.0 million, or $2.11 per diluted share, including a$258.8 million benefit from the release of a tax valuation allowance.

"2005 was the best year in the history of Akamai as wedemonstrated the power of the Akamai business model by deliveringstrong revenue growth, high profit margins, sustained cash flow, andincreasing profitability," said Paul Sagan, president and CEO ofAkamai. "We benefited from broad customer adoption of our globalplatform and services, and we believe our demonstrated ability toinnovate will continue to drive our success in the future."

The Company generated normalized net income(a) of $26.2 million,or $0.16 per diluted share, in the fourth quarter of 2005, a 19percent increase over the prior quarter normalized net income of $22.0million, or $0.14 per diluted share. Full-year normalized net incomefor 2005 was $79.5 million, or $0.52 per diluted share, an improvementof $37.0 million over 2004. ((a)See Use of Non-GAAP Financial Measuresbelow for definitions.)

Adjusted EBITDA(a) for the fourth quarter of 2005 was $30.6million, up from $27.7 million in the prior quarter, and $18.6 millionin the fourth quarter of 2004. Adjusted EBITDA was $101.4 million forthe full year, up from $69.1 million in 2004. Adjusted EBITDA marginsimproved to 36 percent in 2005, up from 33 percent in 2004. ((a)SeeUse of Non-GAAP Financial Measures below for definitions.)

Cash from operations for the fourth quarter of 2005 was $27.7million, a 42 percent increase over the prior quarter's cash fromoperations of $19.5 million, and a 78 percent increase over the fourthquarter of 2004. Full-year 2005 cash from operations was $82.8million, up 62 percent over the prior year.

At December 31, 2005, the Company had approximately 152.9 millionshares of common stock outstanding, including shares from theCompany's most recent equity offering. At year-end, the Company hadapproximately $314 million of cash, cash equivalents and marketablesecurities.

Customers

The number of customers under long-term services contracts at theend of the fourth quarter increased by 80 to a record 1,910, a 4percent increase over third quarter 2005.

"We have grown our recurring customer base by 46 percentyear-over-year," Sagan said. "This is the result of momentum inimportant industries that increasingly rely on the Internet, includingmedia and entertainment, online commerce, and software distribution,as well as adoption by major enterprises of our new applicationacceleration technology."

Sales through resellers and sales outside the United Statesaccounted for 24 percent and 21 percent, respectively, of revenue forthe fourth quarter and full-year 2005.

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. 4080712.

About Akamai

Akamai(R) is the leading global service provider for acceleratingcontent and business processes online. More than 1,900 organizationshave formed trusted relationships with Akamai, improving their revenueand reducing 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)

December 31, December 31,
2005 2004
------------- -------------
Assets
Cash and cash equivalents $91,792 $35,318
Marketable securities 199,886 34,380
Restricted marketable securities 730 932
Accounts receivable, net 52,162 30,333
Prepaid expenses and other current assets 10,428 7,706
------------- -------------
Current assets 354,998 108,669
Marketable securities 17,896 34,065
Restricted marketable securities 3,825 3,722
Property and equipment, net 44,885 25,242
Goodwill and other intangible assets, net 136,786 5,128
Other assets 4,801 5,917
Deferred tax assets, net 328,308 -
------------- -------------
Total assets $891,499 $182,743
============= =============

Liabilities and stockholders' equity
Accounts payable and accrued expenses $54,471 $42,446
Other current liabilities 7,405 4,320
------------- -------------
Current liabilities 61,876 46,766
Other liabilities 5,409 5,294
Convertible notes 200,000 256,614
------------- -------------
Total liabilities 267,285 308,674
Stockholders' equity (deficit) 624,214 (125,931)
------------- -------------
Total liabilities and stockholders'
equity $891,499 $182,743
============= =============


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

Three Months Ended Twelve Months Ended
------------------------------------- -------------------
Dec. Sept. Dec. Sept. Dec. Dec.
31, 30, 31, 30, 31, 31,
2005 2005 2004 2004 2005 2004
-------- --------- -------- --------- --------- ---------

Revenues $82,657 $75,713 $57,576 $53,286 $283,115 $210,015

Costs and
operating
expenses:
Cost of
revenues
(b) 16,084 15,295 11,173 11,748 55,655 46,150
Research
and
develop-
ment 4,982 4,953 3,344 3,222 18,071 12,132
Sales and
marketing 22,965 19,803 15,017 12,965 77,876 55,663
General
and
admin-
istrative
(b) 15,266 14,568 13,463 11,874 53,014 47,055
Amortization
of other
intangible
assets 2,296 2,296 12 12 5,124 48
-------- --------- -------- --------- --------- ---------
Total
costs
and
oper-
ating
ex-
penses 61,593 56,915 43,009 39,821 209,740 161,048
-------- --------- -------- --------- --------- ---------
Operating
income 21,064 18,798 14,567 13,465 73,375 48,967

Interest
(income)
expense,
net (1,283) 567 1,319 1,533 1,067 8,055
Loss on early
exting-
uishment of
debt - 1,370 852 634 1,370 6,768
Loss on
investments,
net - 27 1 79 27 69
Other
(income)
expense, net (205) 63 (1,183) (101) 507 (1,061)
-------- --------- -------- --------- --------- ---------
Income before
(benefit)
provision
for income
taxes 22,552 16,771 13,578 11,320 70,404 35,136
(Benefit)
provision
for income
taxes (3,207) (255,489) 187 71 (257,594) 772
-------- --------- -------- --------- --------- ---------
Net income $25,759 $272,260 $13,391 $11,249 $327,998 $34,364
======== ========= ======== ========= ========= =========

Net income
per share:
Basic $0.17 $1.96 $0.11 $0.09 $2.41 $0.28
Diluted $0.16 $1.71 $0.10 $0.08 $2.11 $0.25

Shares used
in per share
calc-
ulations:
Basic 148,293 139,204 126,261 125,618 136,167 124,407
Diluted 170,305 160,362 147,306 147,294 156,944 146,595

(b) Includes depreciation (see supplemental tables for figures)


Three Months Ended Twelve Months Ended
--------------------------------------- ------------------
Dec. Sept. Dec. Sept. Dec. Dec.
31, 30, 31, 30, 31, 31,
2005 2005 2004 2004 2005 2004
--------- --------- --------- --------- --------- --------

Supp-
lemental
financial
data (in
thousands):
Network-
related
depre-
ciation $4,766 $4,361 $2,731 $3,124 $15,514 $14,030
Other depre-
ciation $892 $881 $1,007 $1,024 $3,572 $4,731

Capital
expen-
ditures $8,105 $8,531 $7,138 $5,346 $36,160 $20,101

Net
increase
(decrease)
in cash,
cash equiv-
alents,
and
marketable
securities $227,626 $(44,213) $(11,379) $(2,329) $205,712 $(99,937)

End of
period
statistics:
Number of
customers
under
recurring
contract 1,910 1,830 1,310 1,258
Number of
employees 784 766 605 598
Number of
deployed
servers 18,599 18,092 15,075 15,064



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


Three Months Ended Twelve Months Ended
------------------------------------- ------------------
Dec. Sept. Dec. Sept. Dec. Dec.
31, 30, 31, 30, 31, 31,
2005 2005 2004 2004 2005 2004
--------- --------- -------- -------- --------- --------

Cash flows
from
operating
activities:
Net income $25,759 $272,260 $13,391 $11,249 $327,998 $34,364
Adjustments
to
reconcile
net income
to net cash
provided by
operating
activities:
Depre-
ciation
and
amort-
ization
of
deferred
financing
costs 8,164 7,792 4,051 4,469 25,170 20,206
Equity-
related
compen-
sation 1,582 1,383 236 249 3,849 1,292
Change in
deferred
tax
assets,
net,
including
release of
deferred
tax asset
valuation
allowance (3,482) (255,345) 408 - (258,669) 408
Non-cash
portion of
loss on
early
exting-
uishment
of
debt - 481 292 178 481 2,453
Loss on
invest-
ments,
property
and
equipment
and
foreign
currency,
net 143 161 (437) (72) 850 (319)
Provision
for
doubtful
accounts 127 566 191 (186) 1,147 (231)
Changes in
operating
assets and
liab-
ilities:
Accounts
re-
ceivable,
net (8,663) (4,194) (1,411) (2,076) (19,455) (8,516)
Prepaid
expenses
and other
current
assets 65 2,567 (1,441) 2,057 1,483 3,053
Accounts
payable,
accrued
expenses
and other
current
liab-
ilities 2,754 (6,818) 38 281 (1,032) (130)
Accrued
restr-
ucturing (415) (710) (352) (354) (1,816) (1,630)
Deferred
revenue 1,567 1,374 907 (2,016) 3,267 (329)
Other non-
current
assets and
liab-
ilities 72 (18) (298) 769 (475) 616
--------- --------- -------- -------- --------- --------
Net cash
provided by
operating
activities: 27,673 19,499 15,575 14,548 82,798 51,237
--------- --------- -------- -------- --------- --------

Cash flows
from
investing
activities:
Cash
acquired
through
business
com-
bination - - - - 1,717 -
Purchases
of
property
and
equipment
and
capital-
ization of
internal-
use
software (8,105) (8,531) (7,138) (5,346) (36,160) (20,101)
Purchase of
invest-
ments (183,014) (6,534) (14,814) (12,325) (215,633)(187,674)
Proceeds
from sale
of
property
and
equipment - - - - - 9
Proceeds
from sales
and matur-
ities of
invest-
ments 13,134 33,531 15,040 15,588 66,099 211,753
Decrease in
restricted
cash held
for note
re-
purchases - - - - - 5,000
Decrease in
restricted
investments
held for
security
deposits - 202 - 96 202 96
--------- --------- -------- -------- --------- --------
Net cash
(used in)
provided by
investing
activities (177,985) 18,668 (6,912) (1,987) (183,775) 9,083
--------- --------- -------- -------- --------- --------

Cash flows
from
financing
activities:
Payments on
capital
leases (420) (171) (141) (137) (818) (543)
Proceeds
from the
issuance
of 1% con-
vertible
senior
notes, net
of
financing
costs - - - - - 24,313
Repurchase
and
retirement
of 5 1/2%
covertible
sub-
ordinated
notes - (56,614) (24,875) (13,115) (56,614)(169,386)
Proceeds
from
equity
offering,
net of
financing
costs 202,068 - - - 202,068 -
Proceeds
from the
issuance
of common
stock
under
stock
option and
employee
stock
purchase
plans 6,741 1,933 3,863 1,095 14,462 13,754
--------- --------- -------- -------- --------- --------
Net cash
provided by
(used in)
financing
activities 208,389 (54,852) (21,153) (12,157) 159,098 (131,862)
--------- --------- -------- -------- --------- --------

Effects of
exchange
rate
translation
on cash and
cash
equivalents (369) (259) 1,587 357 (1,647) 1,208
--------- --------- -------- -------- --------- --------

Net increase
(decrease)
in cash and
cash
equivalents 57,708 (16,944) (10,903) 761 56,474 (70,334)
Cash and
cash
equivalents,
beginning of
period 34,084 51,028 46,221 45,460 35,318 105,652
--------- --------- -------- -------- --------- --------
Cash and
cash
equivalents,
end
of period $91,792 $34,084 $35,318 $46,221 $91,792 $35,318
========= ========= ======== ======== ========= ======== (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 inclusion of these non-GAAP financial measures in this pressrelease helps investors to gain a meaningful understanding of ourfuture prospects, consistent with how management measures andforecasts our performance, especially when comparing such results toprevious periods or forecasts. Our management uses these non-GAAPmeasures, in addition to GAAP financial measures, as the basis formeasuring our core operating performance and comparing suchperformance to that of prior periods and to the performance of ourcompetitors. This measure is also used by management in theirfinancial and operating decision-making.

Akamai defines "Adjusted EBITDA" as net income, before interest,taxes, depreciation, amortization, equity-related compensation,restructuring charges and benefits, certain gains and losses on equityinvestments, foreign exchange gains and losses, release of thedeferred tax asset valuation allowance and loss on earlyextinguishment of debt. Akamai considers Adjusted EBITDA to be animportant indicator of the company's operational strength andperformance of its business and a good measure of the company'shistorical operating trend.

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, early debt extinguishment and netinterest expense, or do not require a cash outlay, such asequity-related compensation and impairment of intangible assets.Adjusted EBITDA also excludes depreciation and amortization expense,which is based on the Company's estimate of the useful life oftangible and intangible assets. These estimates could vary from actualperformance of the asset, are based on historic cost incurred to buildout the company's deployed network, and may not be indicative ofcurrent or future capital expenditures.

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,certain gains and losses on equity investments, release of thedeferred tax asset valuation allowance and loss on earlyextinguishment of debt. Akamai considers normalized net income to beanother important indicator of the overall performance of the companybecause it eliminates the effects of events that are either not partof the company's core operations or are non-cash.

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 Twelve Months Ended
------------------------------------ -------------------
Dec. Sept. Dec. Sept. Dec. Dec.
31, 30, 31, 30, 31, 31,
2005 2005 2004 2004 2005 2004
-------- --------- -------- --------- --------- --------

Net income $25,759 $272,260 $13,391 $11,249 $327,998 $34,364

Amortization
of intangible
assets 2,296 2,296 12 12 5,124 48
Equity-related
compensation 1,582 1,383 236 249 3,849 1,292
Loss on
investments,
net - 27 1 79 27 69
Release of the
deferred tax
asset
valuation
allowance (3,482) (255,345) - - (258,827) -
Loss on early
exting-
uishment of
debt - 1,370 852 634 1,370 6,768
-------- --------- -------- --------- --------- --------

Total
normalized
net income: 26,155 21,991 14,492 12,223 79,541 42,541

Interest
(income)
expense, net (1,283) 567 1,319 1,533 1,067 8,055
Provision
(benefit) for
income taxes 275 (144) 187 71 1,233 772
Depreciation
and
amortization 5,658 5,242 3,738 4,148 19,086 18,761
Other (income)
expense, net (205) 63 (1,183) (101) 507 (1,061)
-------- --------- -------- --------- --------- --------

Total Adjusted
EBITDA: $30,600 $27,719 $18,553 $17,874 $101,434 $69,068
======== ========= ======== ========= ========= ========

Normalized net
income per
share:
Basic $0.18 $0.16 $0.11 $0.10 $0.58 $0.34
Diluted $0.16 $0.14 $0.10 $0.09 $0.52 $0.31

Shares used in
normalized
per share
calculations:
Basic 148,293 139,204 126,261 125,618 136,167 124,407
Diluted 170,305 159,994 147,306 147,294 156,944 146,595

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. Actualresults may differ materially from those indicated by theseforward-looking statements as a result of various important factorsincluding, but not limited to, unexpected increases in Akamai's use offunds, loss of significant customers, failure to increase our revenueand keep our expenses consistent with revenues, the effects of anyattempts to intentionally disrupt our services or network byunauthorized users or others, failure to have available sufficienttransmission capacity, a failure of Akamai's services or networkinfrastructure, failure to maintain the prices we charge for ourservices, inability to realize the benefits of our net operating losscarryforward, delay in developing or failure to develop new serviceofferings or functionalities, and if developed, lack of marketacceptance of such service offerings and functionalities, and otherfactors that are discussed in the Company's Annual Report on Form10-K, quarterly reports on Form 10-Q, and other documents periodicallyfiled 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.