Akamai acquires Linode to provide enterprises with a massively distributed platform that is easy for developers to use

Akamai Acquires Linode to Provide Enterprises with a Large-Scale, Developer-Friendly, Distributed Platform to Build, Run and Secure Applications

Akamai discussed the acquisition during its fourth quarter and 2021 year-end financial results conference call on February 15 at 4:30 p.m. ET.

February 23, 2022 – Akamai Technologies, Inc. (Akamai) (NASDAQ: AKAM), a global provider of trusted solutions to secure and deliver digital experiences, today announced that it has entered into a definitive agreement to acquire Linode, a provider of an easy-to-use and trusted Infrastructure as a Service (IaaS) platform.

Modern digital experiences, including virtual environments such as the Metaverse, are created by integrating media, entertainment, technology, e-commerce, financial services, and online gaming. For decades, Akamai has been a key partner to global leaders in these industries, supporting and protecting applications in today's multi-cloud, multi-platform environments. Linode helps developers use cloud computing in a simple, affordable, and accessible way. This time, Akamai will work with Linode to become a globally distributed computing platform covering from the cloud to the edge environment.

“The opportunity to combine Linode’s developer-friendly cloud computing capabilities with Akamai’s market-leading edge platform and security services is transformative for Akamai,” said Tom Leighton, CEO and co-founder of Akamai. “Akamai has been a pioneer in edge computing for more than 20 years, and we are excited to begin the next chapter: helping developers build applications on a platform that delivers unmatched scale, reach, performance, reliability, and security by creating a unique cloud platform to build, run, and secure applications from cloud to edge.” 

Christopher Aker, Founder and CEO of Linode, added, "We founded Linode 19 years ago to make the power of the cloud easier to use and more accessible. In the process, we built a cloud computing platform trusted by developers and enterprises around the world. Today, as cloud services become all-encompassing, including compute, storage, security, and delivery from the core to the edge, our customers face new challenges. Meeting these challenges will require a significant amount of integration and expansion, and Akamai and Linode will work together to plan and achieve this, which marks an exciting new chapter for Linode and an important step forward for our current and future customers."

Under the terms of the agreement, Akamai has agreed to acquire all of the outstanding equity of Linode Limited Liability Company for approximately $900 million, after customary purchase price adjustments. As this transaction is an asset purchase, Akamai expects to realize net cash income tax savings of approximately $120 million over 15 years. The transaction is expected to close in the first quarter of 2022 and is subject to customary closing conditions. 

In fiscal 2022, the Linode acquisition is expected to generate approximately $100 million in revenue and Akamai's non-GAAP earnings per share are expected to be slightly accretive to approximately $0.05 to $0.06. Akamai will provide additional details on its fourth quarter and 2021 year-end financial results and full year revenue guidance conference call on February 15, 2022 at 4:30 pm ET.

Transaction advisor

PJT Partners served as financial advisor to Akamai, and WilmerHale served as legal advisor to Akamai. DH Capital served as financial advisor to Linode, and Latham & Watkins served as legal advisor to Linode.

Conference call will be held on Tuesday, February 15 at 4:30 p.m. ET 

Akamai will discuss the acquisition of Linode during its fourth quarter and year-end 2021 financial results conference call on February 15, 2022 at 4:30 p.m. ET. The conference call may include management's forward-looking financial guidance. The conference call can be accessed by dialing (844) 578-9671 (international dial-in number: (508) 637-5655) and entering conference ID number 7579719. A live webcast of the conference call and accompanying slides will be available through the Investor Relations section of www.akamai.com. In addition, a replay of the conference call will be available for two weeks following the call and can be accessed through the Akamai website or by calling (855) 859-2056 (international dial-in number: (404) 537-3406) and entering conference ID 7579719. 

Use of Non-GAAP Financial Measures 

In addition to financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Akamai also presents other financial measures that are not prepared in accordance with GAAP (“non-GAAP”). In addition to GAAP financial measures, management uses non-GAAP financial measures to understand and compare operating results from period to period to support financial and operating decisions, planning and forecasting, and to measure executive compensation and evaluate Akamai’s financial performance. The non-GAAP financial measure used in this release is non-GAAP diluted net earnings per share.

Management believes that this non-GAAP financial measure provides a good representation of Akamai's ongoing business and enables meaningful comparisons and analysis of business trends because it facilitates comparisons of financial results from period to period and from peer companies. Management also believes that this non-GAAP financial measure enables investors to evaluate Akamai's operating results and future prospects in the same manner as management. This non-GAAP diluted earnings per share measure excludes certain expenses and gains that are not typical, uncommon, or representative of Akamai's ongoing operating results.

Non-GAAP financial measures are not intended to replace Akamai's presentation of GAAP financial results and are intended to supplement, not replace, Akamai's financial results presented in accordance with GAAP. Akamai has reconciled each non-GAAP financial measure used in its financial reports and investor presentation materials to the most directly comparable GAAP financial measure for historical non-GAAP measures. These reconciliations can be found under the heading "Reconciliations of GAAP to Non-GAAP Financial Measures" in the "Investor Relations" section of Akamai's website.

Akamai provides forward-looking statements in the form of guidance and other representations of expected future performance. These forward-looking statements are provided on a non-GAAP basis and cannot be reconciled to the nearest GAAP measure without reasonable efforts due to the uncertainty of the amount and timing of events that affect the items we exclude from our non-GAAP measures. For example, with respect to Akamai's performance-based awards, stock-based compensation is unpredictable and could fluctuate significantly based on current expectations of achieving future performance-based targets. Amortization of intangible assets, acquisition-related costs and restructuring costs are all affected by the timing and magnitude of potential future actions, which are difficult to predict. In addition, Akamai excludes certain infrequently occurring items from time to time, which are themselves difficult to predict and estimate. It is also difficult for us to predict the tax impact of exclusions and to estimate certain independent tax-related items, such as the resolution of tax audits or changes in tax laws. As a result, the costs excluded from our non-GAAP forecasts are difficult to predict, reconcile, or have a range of outcomes that could result in inaccurate or potentially misleading disclosures. A significant change in any one of the exclusions could have a material impact on our guidance and future GAAP results.

The following summarizes Akamai's definitions of non-GAAP measures used in this press release:

Non-GAAP Diluted Net Income per Share – Non-GAAP net income divided by weighted average diluted common shares outstanding. The non-GAAP net income per share calculation is adjusted for the equity delivered to Akamai as a result of the debt hedging transactions resulting from the issuance of $1.15 billion of convertible senior notes due in 2027 and 2025, respectively. Under GAAP, the equity delivered in the hedging transactions is not treated as an offset to the equity in the fully diluted equity calculation until delivered. However, the Company will receive a gain from the debt hedging transactions and will not allow dilution to occur, so management believes that adjusting for this gain provides a meaningful view of operating performance. For the convertible senior notes due in 2027 and 2025, there is no difference between the GAAP and non-GAAP weighted average diluted common shares outstanding unless and until Akamai's weighted average share price exceeds $116.18 and $95.10, respectively, the initial conversion prices.

Non-GAAP Net Income – GAAP Net Income is adjusted for the tax effects of: amortization of acquired intangible assets; share-based compensation; amortization of capitalized share-based compensation; acquisition-related costs; restructuring charges; gains and losses on legal settlements; charges related to contributions to the Akamai Foundation; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; income and losses on equity method investments; and other non-recurring or unusual items that may occur from time to time.

Non-GAAP adjustments and the basis on which Akamai excludes them from its non-GAAP financial measures are summarized below:

• Amortization of acquired intangible assets – Akamai has amortized intangible assets as specifically recorded in its GAAP financial statements in connection with various acquisitions Akamai has made. The purchase price allocated to intangible assets and their related amortization periods can vary significantly and each acquisition is unique; therefore, Akamai excludes amortization of acquired intangible assets from its non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results.