Akamai Technologies, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Akamai Technologies Q2 2020 Earnings Conference Call. Please be advised today's conference call is being recorded. I will now turn to conference OD host, Mr. Tom Barr, head of investor relations. Sir, you may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining Akamai's second quarter 2020 earnings conference call. Speaking today will be Tom Layton, 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 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. The factors include uncertainty stemming from COVID-19 pandemic and any impact on unexpected geopolitical developments. 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, 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 of Akamai.com. With that, let me turn the call over to Tom.

Thanks, Tom, and thank you all for joining us today. I'm pleased to report that Akamai achieved excellent results in the second quarter. Revenue was $795 million, up 13% year over year, and up 14% in constant currency. Non-GAAP operating margin was 32%, up three points over Q2 of last year. And non-GAAP EPS was $1.38 per diluted share, up 29% year over year, and up 30% in constant currency. These very strong results were driven by a continuation of the high traffic levels we've seen since the onset of the pandemic, very strong demand for our cloud security solutions, and by our ongoing focus on operational efficiency. Akamai was founded with the vision of enabling the internet to scale so that it could support millions of enterprises and billions of people everywhere. Our mission has been to make all digital experiences be fast, reliable, and secure, a mission that is especially important now amidst a devastating pandemic. In our 22-year history as a company, there's never been a time when Akamai's importance and value to daily life has been more evident. Due to the incredible work of our highly talented employees, we believe that Akamai has become an indispensable part of the Internet, supporting remote work, home entertainment, e-learning, online banking, home deliveries, logistics, security systems, and commercial transactions of all kinds. for billions of people around the world as they cope with a pandemic. The Akamai Intelligent Edge platform has grown to include over 300,000 servers in over 4,000 locations and nearly 1,500 network partners at the edge of the internet. The edge is where the end users are and where the content and applications need to be. The edge is where connected devices and the internet of things are located. where 5G networks will become pervasive and increasingly where security needs to be to stop the many distributed attacks whose size and sophistication continue to increase. 4,000 locations spanning 135 countries is a powerful offering for global customers and goes far beyond the deployments of other CDNs, even if you were to somehow put them all together. Our unique edge platform has provided enormous capacity to meet the unprecedented demand due to the impact of the pandemic, the launch of several OTT services, and the release of numerous electronic games. Peak traffic on the Akamai platform exceeded 100 terabits per second every day in the second quarter. That's a lot of traffic. Of course, many CDNs claim to have lots of capacity. but none get close to Akamai when it comes to the actual delivery of content. As a result of our unparalleled scale and industry-leading performance and reliability, Akamai gained traffic share in Q2 on both an overall basis and at several of the world's largest media companies. Akamai now works with more than 220 of the world's largest OTT and broadcasting companies as well as with 24 of the world's 25 most popular video game publishers. The enormous capacity of our unique edge platform has also enabled Akamai to defend the world's most important enterprises against the world's largest and most sophisticated attacks. The size and sophistication of attacks has risen dramatically since the pandemic began. as threat actors take advantage of the distraction and vulnerabilities created by employees working remotely. Data from our Enterprise Threat Protector Service shows that employee visits to sites with malware rose nearly five-fold in Q2. And just last month, we defended a major bank and a major Internet service provider against two of the largest attacks ever seen. In Q2, we released our new and highly innovative Akamai Page Integrity Manager, which is designed to protect websites and end users from malware infected content that resides on third party sites. Nearly half of the content on a typical website originates from third parties, and attackers are embedding malware in this content to steal users' credit cards and other personal data. Page Integrity Manager provides visibility and intelligence to help organizations stay ahead of this rapidly growing attack, and it has received strong positive feedback from early adopters. The well over 2,000 customers who use our web application firewall products are perfect candidates for this new solution. Theft of login credentials is another growing problem that customers increasingly seek our help in stopping. We blocked more than 53 billion credential abuse attempts last quarter, more than four times the number we saw in Q2 of last year. This increase is one reason why our bot manager service is now used by more than 600 of the world's major enterprises. Overall Q2 revenue from our cloud security solutions grew by 28% year over year in constant currency and achieved a billion dollar run rate on an annualized basis. This is an important milestone that's been reached by only a handful of cybersecurity businesses. Our cloud security solutions are now relied upon by thousands of enterprises, including 30 of the world's top 35 banks, 17 of the world's top 20 e-commerce sites, eight of the world's top 10 asset managers, and the majority of the world's largest airlines, hotels, insurance firms, and consumer goods companies. The strong demand we saw in Q2 for our security and media services more than offset the reduced revenue growth we saw from sectors of the economy that have been hit hardest by the pandemic, namely travel, hospitality, and transportation. That's one of many reasons why Akamai customer loyalty has remained very high and that our churn rate in the quarter stayed below 1% of annualized revenue. As we've grown our business over the last several years, we've worked hard to improve our operating efficiency and profitability. As a result, we were especially pleased to see our operating margins exceed our target of 30% in Q2. And also to see our non gap earnings per share reach $1.38 more than double what we achieved three years ago. Our profitability and cash generation is important because it gives us the financial firepower to continue to invest in innovation network capacity go to market capabilities and world class talent to fuel our future growth. Before turning the call over to Ed, I want to thank our nearly 8,000 employees for their very hard work on behalf of our many customers and the billions of internet users around the world. Despite the pandemic, Akamai employees have continued their can-do attitude and customer-first mindset, enabling our platform to manage more traffic, more web transactions, and more cyber attacks than ever before. Their creativity, teamwork, and tenacity are key to what makes Akamai such a unique and strong company. Now I'll turn the call over to Ed for more on Q2 and our outlook for the second half. Ed?