Akamai Technologies, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the first quarter 2020 Akamai Technologies, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. It is now my pleasure to introduce Head of Investor Relations, Tom Barth.

Thank you, Operator. Good afternoon, everyone, and thank you for joining Akamai's first quarter 2020 earnings conference call. Speaking today will be Tom Leighton, Akamai's Chief Executive Officer, and Ed McGowan, 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 risk and uncertainty 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 optimized 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 April 28, 2020. 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 financial portion of the investor relations section at Akamai.com. And with that, let me turn the call over to Tom.

Thanks, Tom, and thank you all for joining us today. Before I get into the numbers, I want to acknowledge how much the world has been disrupted by the COVID-19 pandemic. All of our lives have been impacted in ways that would have been hard to imagine only a short while ago. At Akamai, our primary concern is for the health and safety of our employees, their loved ones, our customers and partners, and the communities where we work and live. Fortunately, we're in a position where almost all of our employees can work remotely, and we've been doing that successfully for the last two months. We've also implemented special measures to protect employees who need to travel, for example, to a data or operation center. And we're doing what we can to help employees who face especially challenging situations as a result of the pandemic. As businesses and consumers around the globe adjust their routines in the interest of public health, the Internet is being used at a scale that the world has never experienced. In addition to the hundreds of millions of people who've been working from home, governments are leveraging the Internet to keep citizens informed and to provide economic assistance. Houses of worship are streaming services, and communities are engaging online to relieve the social isolation felt by many. And of course, education, commerce, and entertainment are now almost entirely online. As much of the world hunkers down in place, Akamai is continuing to work behind the scenes to keep the internet functioning as a lifeline for organizations and people everywhere. I'll talk more in a minute about Akamai's unique role during the pandemic, and the impact of the pandemic on our business. But first, I'll review our Q1 financial performance. I'm pleased to report that Akamai had a very strong first quarter on both the top and bottom lines. Revenue was $764 million, up 8% year over year, and up 9% in constant currency. Non-GAAP operating margin in Q1 was 30%, up one point over Q4, and consistent with Q1 of last year. Non-GAAP EPS in Q1 was $1.20 per diluted share, up 9% year-over-year, and up 11% in constant currency. These excellent results were driven by the continued strong performance of our security solutions, greater than expected traffic levels, and by our continued focus on operational efficiency. As more business is conducted over the Internet, the ability to scale becomes critical. And when it comes to scale, Akamai is the clear leader. Traffic on our platform increased dramatically in March as enterprises turned to Akamai to move more of their operations online. Despite the cancellation or postponement of major sporting events like March Madness and Champions League Soccer, our traffic increased by about 30% over a four-week period at the end of Q1. Traffic reached a peak of 167 terabits per second which was more than double the peak in the first quarter of 2019. We're very pleased that the capacity we added to the platform last year has enabled us to help our customers when they need us most. We're also making a big difference when it comes to helping the major carriers handle the explosion in demand. That's because we've deployed our infrastructure deep into carrier networks and close to end users. thereby offloading an enormous amount of traffic that would otherwise congest core backbones and routers. Of course, performance is also critical as businesses move the majority of their operations online. Although some other companies have experienced cases of performance degradation and even extended outages in recent months, I'm very happy to report that Akamai's performance has remained consistent and strong over the past quarter. In fact, our measurements indicate that the page download times provided by our industry-leading ION service have significantly improved over the past year. This is in spite of the large increase in traffic and is the direct result of our relentless efforts to improve the performance of our services. Akamai is also helping to protect many of the world's major enterprises as more employees work from home and as IT departments increase their focus on business continuity. We believe that optimized market leading security services are needed now more than ever as attackers take advantage of the pandemic to ramp up their exploits on enterprises across all verticals. In Q1, our cloud-based security portfolio generated $240 million in revenue, up 28% year-over-year in constant currency. Sales continue to be led by our flagship services for DDoS prevention, application layer firewall, and bot management. We also saw a strong surge in bookings for our next-gen Zero Trust enterprise security solutions. The strong demand we saw in Q1 for our security and media services more than offset the reduced revenue we received from companies that have been hit hardest by the pandemic, especially in the travel and hospitality vertical. Where appropriate, we are modifying the terms of these customers' contracts to provide them some relief and flexibility, often in return for extended contract length. We value our customers and want them to think of Akamai as a supportive and reliable partner for the long run. We're fortunate that our financial strength enables us to provide assistance to customers in need, which we believe will benefit our shareholders and the global economy over the long term. We've also played an important role in helping to support websites and applications associated with the response to the pandemic. And the Akamai Foundation is providing substantial financial assistance for numerous relief efforts around the world. Most of all today, I want to recognize and thank our nearly 7,800 employees for working so hard to serve the thousands of organizations and billions of Internet users who rely on us during these very challenging times. I couldn't be prouder of the way that our people have stepped up and of what they're managing to accomplish despite their own personal challenges in dealing with a pandemic. Their spirit and leadership during a time of crisis is a key part of what makes Akamai such a unique and strong company. Lastly, I want to offer a warm welcome to our board's newest member, Mary Ann Brown. Mary Ann joined Akamai's board last month and brings with her extensive financial and operational expertise, as well as valuable leadership experience with global technology-driven companies. I'll now turn the call over to Ed for more details on our Q1 performance and our outlook for Q2. Ed?