Akamai Technologies, Inc. Net Income jumped on 33.9% and Revenue increased on 9.1%
02/12/2019 • About Akamai Technologies, Inc. (
$AKAM) • By InTwits
Akamai Technologies, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Akamai Technologies, Inc. is a growth stock: 2018 revenue growth was 9.1%, 5 year revenue CAGR was 11.5% at 2018 ROIC 8.2%
- Akamai Technologies, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 16.3%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $89m in 2018, $46m in 2017, $38m in 2016, $18m in 2015, $19m in 2014
- The company has business model with low profitability: ROIC is 8.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Akamai Technologies, Inc.'s Revenue increased on 9.1%. Revenue growth showed small slowdown in 18Q4 - it was 8.3% YoY. During the last 5 years Revenue growth bottomed in 2017 at 6.4%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. EBITDA Margin declined at -2.4 pp per annum in 2014-2018.
Gross Margin showed almost no change in 2018. Gross Margin declined at -1.0 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 0.55 pp from 36.6% to 37.2% in 2018. SG&A as a % of Revenue grew at 0.82 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue stuck to a growing trend at 0.63 pp per annum in 2014-2018.
Net Income margin increased on 2.0 pp from 8.9% to 11.0% in 2018. Net Income margin stuck to a declining trend at -1.8 pp per annum in 2014-2018. The efficient tax rate was 13.0% in 2018 while the average for the last five years was 27.3%.
Investments (CAPEX, working capital and M&A)
Akamai Technologies, Inc.'s CAPEX/Revenue was 14.9% in 2018. CAPEX/Revenue decreased on 5.3 pp from 20.2% in 2015 to 14.9% in 2018. For the last three years the average CAPEX/Revenue was 15.0%. The company invested a large share of EBITDA (50.9%) to CAPEX.
Accounts receivable as a % of Revenue decreased slightly on 0.86 pp from 18.5% to 17.7% in 2018. Accounts payable as a % of Revenue increased slightly on 1.2 pp from 9.2% to 10.4% in 2018.
Akamai Technologies, Inc. has spent
$0m on M&A in 2018 which accounts for 0.0029% of revenue.
Return on investment
The company operates at low ROIC (8.2%) and ROE (9.1%). ROIC showed almost no change in 2018. ROE increased on 2.3 pp from 6.8% to 9.1% in 2018. ROIC followed a declining trend at -1.9 pp per annum in the last 5 years. During 2014-2018 ROE bottomed in 2017 at 6.8%.
Leverage (Debt)
Debt level is 0.7x Net Debt / EBITDA and 2.0x Debt / EBITDA. Net Debt / EBITDA surged on 0.1x from 0.5x to 0.7x in 2018. Debt jumped on 135% while cash surged on 231%. During the last 5 years Net Debt/EBITDA bottomed in 2016 at 0.4x and was growing since that time.
Akamai Technologies, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 8.4x. Akamai Technologies, Inc. has no short term refinancing risk: cash is higher than short term debt (151.0%).
Average interest expence paid by the company was 2.8% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 15.0x and P/E 38.3x.
Management team
Akamai Technologies, Inc.'s CEO is F Thomson Leighton "Tom". F Thomson Leighton "Tom" is a founder and has 6 years tenure with the company. CEO total compensation was
$11,347,676 in 2018 which included
$1 salary.
At the end of financial year the company had 2.3% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 7,519 employees. The number of employees decreased slightly on 1.7%. Average revenue per employee in 2018 was
$361,015 and it jumped on 11.0%.
Financial and operational results
FY ended 12/31/2018
Akamai Technologies, Inc. ($AKAM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,964 | 2,197 | 2,340 | 2,489 | 2,714 | 9.1% |
| Gross Profit | 1,353 | 1,472 | 1,531 | 1,613 | 1,761 | 9.2% |
| SG&A | 664 | 773 | 800 | 911 | 1,009 | 10.7% |
| EBITDA | 737 | 766 | 794 | 687 | 797 | 16.1% |
| EBIT | 490 | 466 | 460 | 314 | 362 | 15.3% |
| Interest expence | 15 | 19 | 19 | 19 | 43 | 129.3% |
| Tax | 146 | 135 | 143 | 91 | 45 | -51.1% |
| Net Income | 334 | 321 | 316 | 223 | 298 | 33.9% |
| Stock Based Compensation | 80 | 127 | 145 | 164 | 184 | 11.9% |
Balance Sheet
|
|---|
| Cash | 239 | 289 | 324 | 313 | 1,036 | 230.7% |
| Accounts Receivable | 330 | 380 | 369 | 461 | 480 | 4.0% |
| Accounts Payable | 77 | 62 | 76 | 80 | 99 | 23.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | 687 | |
| Long Term Debt | 605 | 618 | 640 | 663 | 874 | 31.9% |
Cash flow
|
|---|
| Capex | 319 | 445 | 316 | 415 | 406 | -2.2% |
| Acquisitions | 387 | 141 | 95 | 369 | 0 | -100.0% |
Ratios
|
|---|
| Revenue growth | 24.5% | 11.9% | 6.5% | 6.4% | 9.1% | |
| EBITDA growth | 23.1% | 3.9% | 3.7% | -13.5% | 16.1% | |
|
|---|
| Gross Margin | 68.9% | 67.0% | 65.4% | 64.8% | 64.9% | 0.1% |
| EBITDA Margin | 37.5% | 34.8% | 33.9% | 27.6% | 29.4% | 1.8% |
| EBIT Margin | 24.9% | 21.2% | 19.6% | 12.6% | 13.4% | 0.7% |
| SG&A, % of revenue | 33.8% | 35.2% | 34.2% | 36.6% | 37.2% | 0.5% |
| SBC, % of revenue | 4.1% | 5.8% | 6.2% | 6.6% | 6.8% | 0.2% |
| Net Income Margin | 17.0% | 14.6% | 13.5% | 8.9% | 11.0% | 2.0% |
| CAPEX, % of revenue | 16.2% | 20.2% | 13.5% | 16.7% | 14.9% | -1.7% |
|
|---|
| ROIC | 15.5% | 12.5% | 11.9% | 7.9% | 8.2% | 0.3% |
| ROE | 12.0% | 10.6% | 10.0% | 6.8% | 9.1% | 2.3% |
| Net Debt/EBITDA | 0.5x | 0.4x | 0.4x | 0.5x | 0.7x | 0.1x |
| Interest expence / Average debt | 2.6% | 3.0% | 3.0% | 2.9% | 2.8% | -0.1% |
People
|
|---|
| Insider ownership | 2.3% | 2.3% | 2.3% | 2.3% | 2.3% | 0.0% |
| Employees | 5,105 | 6,084 | 6,490 | 7,650 | 7,519 | -1.7% |
| Revenue/Employee, th. $ | 385 | 361 | 361 | 325 | 361 | 11.0% |
Akamai Technologies, Inc. ($AKAM) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 669 | 663 | 670 | 713 | | 11.4% | 9.4% | 7.2% | 8.3% |
| EBITDA | 173 | 163 | 224 | 237 | | -10.0% | -6.5% | 19.1% | 79.9% |
| Net Income | 54 | 43 | 108 | 94 | | -28.0% | -24.1% | 68.3% | 241.6% |
Balance Sheet
|
|---|
| Cash | 364 | 977 | 705 | 1,036 | | -30.4% | 177.3% | 91.6% | 230.7% |
| Short Term Debt | 669 | 675 | 681 | 687 | | | | | |
| Long Term Debt | 0 | 855 | 865 | 874 | | -100.0% | 31.3% | 31.6% | 31.9% |
Ratios
|
|---|
| Gross Margin | 64.9% | 64.5% | 64.3% | 65.8% | | -0.8% | -0.1% | 0.4% | 0.7% |
| EBITDA Margin | 25.8% | 24.7% | 33.5% | 33.2% | | -6.1% | -4.2% | 3.3% | 13.2% |
| Net Income Margin | 8.0% | 6.5% | 16.1% | 13.2% | | -4.4% | -2.9% | 5.8% | 9.0% |
Peers in Internet Services & Infrastruc
Below you can find Akamai Technologies, Inc. benchmarking vs. other companies in Internet Services & Infrastruc industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | | 20.4% | 108.0% |
| GTT Communications, Inc. ($GTT) | | 78.1% | 41.3% | 58.7% | 80.1% |
| MongoDB, Inc. ($MDB) | | | | 55.3% | 63.8% |
| Twilio Inc. ($TWLO) | | 87.9% | 66.1% | 43.9% | 62.9% |
| Okta, Inc. ($OKTA) | | | 109.5% | 86.6% | 60.0% |
| |
|---|
| Median (15 companies) | 25.5% | 13.6% | 15.8% | 13.7% | 19.2% |
|---|
| Akamai Technologies, Inc. ($AKAM) | | 11.9% | 6.5% | 6.4% | 9.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | 68.1% | 77.5% | 84.9% |
| VeriSign, Inc. ($VRSN) | 81.3% | 81.8% | 82.6% | 83.4% | 84.2% |
| Wix.com Ltd. ($WIX) | 81.6% | 82.8% | 84.4% | 83.7% | 79.0% |
| MongoDB, Inc. ($MDB) | | | 68.0% | 70.5% | 74.2% |
| Carbonite, Inc. ($CARB) | 68.5% | 71.6% | 70.6% | 70.7% | 71.2% |
| |
|---|
| Median (15 companies) | 48.4% | 54.3% | 59.2% | 61.8% | 66.4% |
|---|
| Akamai Technologies, Inc. ($AKAM) | 68.9% | 67.0% | 65.4% | 64.8% | 64.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 62.2% | 63.0% | 65.2% | 65.0% | 67.1% |
| Liberated Syndication Inc ($LSYN) | | | 32.0% | -29.9% | 32.2% |
| Internap Corporation ($INAP) | 20.0% | 21.0% | -5.4% | 28.4% | 30.5% |
| Endurance International Group Holdings, Inc. ($EIGI) | 23.2% | 24.0% | 14.8% | 20.0% | 26.0% |
| 21Vianet Group, Inc. ($VNET) | 10.9% | 8.3% | -4.8% | -20.7% | 25.6% |
| |
|---|
| Median (15 companies) | 4.5% | 1.3% | -5.1% | -7.1% | 14.4% |
|---|
| Akamai Technologies, Inc. ($AKAM) | 37.5% | 34.8% | 33.9% | 27.6% | 29.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| 21Vianet Group, Inc. ($VNET) | 32.6% | 29.0% | 15.8% | 11.7% | 12.8% |
| Internap Corporation ($INAP) | 24.0% | 17.5% | 14.9% | 12.7% | 12.1% |
| Limelight Networks, Inc. ($LLNW) | 11.5% | 14.5% | 5.7% | 11.2% | 8.2% |
| GTT Communications, Inc. ($GTT) | 2.8% | 3.8% | 4.6% | 5.1% | 5.2% |
| Carbonite, Inc. ($CARB) | 11.8% | 7.1% | 3.2% | 7.2% | 4.4% |
| |
|---|
| Median (15 companies) | 3.9% | 3.8% | 3.3% | 3.8% | 3.0% |
|---|
| Akamai Technologies, Inc. ($AKAM) | 16.2% | 20.2% | 13.5% | 16.7% | 14.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 60.6% | 68.7% | 65.2% | 54.3% | 81.9% |
| Liberated Syndication Inc ($LSYN) | | | | -13.2% | 12.1% |
| Endurance International Group Holdings, Inc. ($EIGI) | 1.0% | 4.2% | -2.3% | 2.0% | 7.5% |
| GoDaddy Inc. ($GDDY) | -3.3% | -1.7% | 2.9% | 2.7% | 4.6% |
| 21Vianet Group, Inc. ($VNET) | -1.5% | -3.6% | -8.9% | -14.6% | 2.8% |
| |
|---|
| Median (16 companies) | -3.0% | -6.9% | -18.5% | -14.6% | 1.0% |
|---|
| Akamai Technologies, Inc. ($AKAM) | 15.5% | 12.5% | 11.9% | 7.9% | 8.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GTT Communications, Inc. ($GTT) | 3.1x | 7.4x | 6.8x | 7.2x | 12.7x |
| Internap Corporation ($INAP) | 5.1x | 5.3x | | 6.5x | 6.9x |
| Endurance International Group Holdings, Inc. ($EIGI) | 7.3x | 6.0x | 11.8x | 7.8x | 5.8x |
| GoDaddy Inc. ($GDDY) | 14.0x | 5.4x | 2.3x | 6.8x | 3.9x |
| VeriSign, Inc. ($VRSN) | 1.9x | 2.5x | 2.2x | 2.6x | 1.8x |
| |
|---|
| Median (9 companies) | 4.1x | 5.3x | 2.2x | 6.5x | 1.8x |
|---|
| Akamai Technologies, Inc. ($AKAM) | 0.5x | 0.4x | 0.4x | 0.5x | 0.7x |
