Akamai Technologies (AKAM)
Q2 2010 Earnings Call
July 28, 2010 4:30 pm ET
Paul Sagan - Chief Executive Officer, President and Executive Director
J. Sherman - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Noelle Faris - Senior Manager IR
David Hilal - FBR Capital Markets & Co.
Derek Bingham - Goldman Sachs Group Inc.
Donna Jaegers - D.A. Davidson & Co.
Srinivas Anantha - Oppenheimer & Co. Inc.
Chad Bartley - Pacific Crest Securities, Inc.
Katherine Egbert - Jefferies & Company, Inc.
Mark Kelleher - Brigantine Advisors
Richard Fetyko - Merriman Curhan Ford & Co.
Jeffrey Van Rhee - Craig-Hallum Capital Group LLC
Kerry Rice - Wedbush Securities Inc.
Randy Katz - JMP Securities
Tim Klasell - Stifel, Nicolaus & Co., Inc.
Michael Olson - Piper Jaffray Companies
Scott Kessler - S&P Equity Research
Rob Sanderson - American Technology Research
Mark Mahaney - Citigroup Inc
Michael Turits - Raymond James & Associates
Previous Statements by AKAM
» Akamai Technologies, Inc. Q1 2010 Earnings Call Transcript
» Akamai Technologies, Inc. Q4 2009 Earnings Call Transcript
» Akamai Technologies Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Akamai Technologies Inc. Earnings Conference Call. My name is Regina, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Noelle Faris, Director of Investor Relations. You may proceed.
Good afternoon, and thank you for joining Akamai's Investor Conference Call to discuss our Second Quarter 2010 Financial Results. Speaking today will be Paul Sagan, Akamai's President and Chief Executive Officer; and J.D. Sherman, Akamai's Chief Financial Officer.
Before we get started, please note that today's comments include forward-looking statements, including statements regarding revenue and earnings guidance. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.
Additional information concerning these factors is contained in Akamai's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements included in this call represent the company's view on July 28, 2010. Akamai disclaims any obligation to update these statements to reflect future events or circumstances.
As a reminder, we will be referring to some non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP and non-GAAP metrics can be found under the News & Events portion of the Investor Relations section of our website.
Now let me turn the call over to Paul.
Thanks, Noelle, and thank you all for joining us today. Akamai performed very well in Q2 with record revenue of $245 million. We continue to see strong demand for our services across all verticals and top line growth accelerated for the third consecutive quarter, up 20% in the same period last year. We generated fully normalized net income of $65 million or $0.34 per diluted share, that was up 18% from Q2 of last year. We have seen continued signs of traction in all of our key markets especially increasing need for cloud computing optimization services for enterprise clients. Rolling traction in a digital video being delivered in high-quality and at massive scale over the Akamai HD network and expanded interest for mobile content delivery solutions in the rapid growing market for smartphones, an area where we made an important acquisition in Q2.
We're also very excited to announce today, that David Kenny will be joining our management team as President. I'll be back in a few minutes to talk more about David's appointment, as well as other important trends in the business. First, let me turn the call over to J.D. for the details on Q2. J.D.?
Thanks, Paul. As Paul just highlighted, our business performed very well in the second quarter. We grew revenue $5 million sequentially and 20% year-over-year to $245.3 million. Coming in at the upper end of our expected range for the quarter with solid growth in every vertical. In Media and Entertainment, we continued to see strong traffic growth building on the trend that began in the middle of last year. As a result, Media and Entertainment revenue grew by 22% from Q2 of last year and 3% from the prior quarter. In the quarter, the World Cup was a marquee event for us, demonstrating the potential of HD video over the Internet at truly impressive scale. As we have noted in the past, no single event has a significant impact on our revenue growth in a given period. And this is even truer today, as we approach $1 billion a revenue and deliver literally thousands of event, large and small, throughout the year.
E-Commerce continue to demonstrate strong results as well, increasing 21% over Q2 of last year and increasing 4% compared to last quarter. This was a very solid performance in what is generally a seasonally slower quarter, driven by increasing adoption of our value-added solutions in this vertical.
The high-tech vertical declined 3% from Q1 due to timing of some big software releases, but grew 8% year-to-year. We have continued to see growth with our Application Performance solutions among SaaS vendors in this vertical. And public sector was up 51% from Q2 of last year and 9% from last quarter, continuing the solid performance we've seen for the past several quarters from government contracts.
We're pleased with our continued traction across our portfolio of value-added solutions. In Q2, 54% of our revenue came from value-added solutions, up from 48% in Q2 of last year. Signings in the quarter both from new customers and from existing customers that are upgrading and adding additional applications were very strong. In fact, the dollar of new customers signing for our value-added solutions was up nearly 36% from last quarter. During the second quarter, sales outside North America represented 28% of total revenue consistent with the prior quarter. International revenue grew 2% sequentially and 20% year-over-year despite the currency headwind. The sharp strengthening of the dollar had a negative sequential impact of about $3.5 million, and on a year-over-year basis, the currency impact was negative by just under $1 million.