Akamai Technologies, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2020 Alkermine Technologies, Inc. earnings conference call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Tom Barth. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining Optimize Third Quarter 2020 Earnings Conference Call. Speaking today will be Tom Layden, Optimize Chief Executive Officer, and Ed McGowan, Optimize 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 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 the COVID-19 pandemic and any impact from unexpected geopolitical development. Additional information concerning these factors is contained in Optimized Violence 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 October 27, 2020. Optimized claims any obligation to applicate 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. And 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 third quarter. Revenue was $793 million, up 12% year-over-year and up 11% in constant currency. Nongap operating margin was 32%, up three points from Q3 of last year. Nongap EPS was $1.31 per diluted share, up 19% year-over-year and up 18% in constant currency. These very strong results were driven primarily by the continued strong performance of our security products and high traffic levels on our edge platform. We're very proud of how Akamai has continued to deliver fast, intelligent and secure online experiences for billions of users around the world as we support our customers during these challenging times. We're also very pleased that our hard work to improve operating efficiency and profitability has put us in an excellent position to exceed our goal of 30% operating margins for the year. Our media and carrier business continued to perform very well in Q3, benefiting from high traffic levels for video streaming and gaming software downloads. In fact, one giant video on demand service increased their traffic on our platform by a factor of four last quarter. As more entertainment moves online, Akamai has continued to prove that our unique edge platform scales to meet the unprecedented demand for streaming video, popular gaming releases, and complex API transactions. We can do this in part because we positioned more than 325,000 servers in more than 4,000 locations in over 1,000 cities. At Akamai, we position content very close to end-users, and we make sure it's available when and where it's needed. In addition, our highly advanced internet mapping algorithms route traffic around congestion to maintain excellent application performance for our customers. Our unique edge platform also allows our customers to perform a wide variety of computational tasks close to end users, resulting in faster performance, instant scalability and lower cost. For example, A leading social networking company uses Akamai's Edge platform to manage API requests for their recommendation engine. A leading apparel company uses our platform to supply health information to users based on their fitness tracker. Several major companies use Akamai to provide critical weather updates based on local conditions, as well as geographic information such as nearby points of interest or locations of desired services. Many of the world's largest OTT companies use Akamai to help manage the critical components of their architecture on the edge, including functionality for user authentication, content recommendations, and payment processing. Some of the world's largest credit card companies use our platform to assist with authentication and authorization of payments via digital gateways. Several of the world's largest gaming companies use Akamai's Edge to assist in managing user profiles and registration, as well as event leaderboards. And the ad tech ecosystem uses applications running on the Akamai Edge to assist with ad calls, bidding, and placing consent cookies to remain compliant with data privacy regulations. It's important to note that while some CDMs are talking about edge computing or serverless computing as if they're somehow new technologies, Akamai has been providing these services to thousands of customers for well over a decade. And already this year, we've handled well over 100 trillion API requests on our Edge platform. The vast capacity of our platform, combined with our unparalleled security intelligence and machine learning algorithms, has also enabled Akamai to defend many of the world's most important enterprises against the largest and most sophisticated cyber attacks. This capability has proved to be especially important during the recent wave of ransom DDoS attacks. Since August, we've been approached by dozens of major businesses around the world that had received extortion letters, threatening them with massive DDoS attacks if they didn't pay a ransom. In response, our security experts performed emergency integrations of our Perlexix service, which enabled these enterprises to continue or resume business operations without experiencing any service disruptions from the attacks. As a result, we've added many new enterprises to our Perlexic customer base, including several global banks and insurance companies, a leading travel website, and two national stock exchanges. In addition to Perlexic, we also continue to see strong growth from our market-leading Kona site defender and bot manager services. Bot Manager has been especially valuable in stopping account takeover attacks, which have greatly increased in scale and sophistication. In fact, the number of malicious login attempts by bots that we blocked in Q3 was more than double the number we handled in Q2. I'm also pleased to report that our recently launched Page Integrity Manager solution, which is designed to identify and thwart Magecart attacks and malware and third-party scripts, is off to an excellent start with strong customer interest and bookings. In another sign of our leadership in cybersecurity, Forrester recently named Akamai as a leader in zero trust with the highest possible scores for network security, workload security, APIs, zero trust advocacy, and market approach. And just last week, Gartner recognized Akamai as a leader in its 2020 magic quadrant for web application firewalls for the fourth year in a row. Overall, Q3 revenue from our cloud security solutions was $266 million, up 23% year-over-year in constant currency, and accounting for 34% of Akamai's total revenue. To further build on our growth in security, we were pleased to announce today that Akamai has acquired Azavi, a leader in securing mobile access for enterprises. Azavi partners with some of the world's largest mobile network operators to enable enterprises to connect, manage, and secure communication among cell phones and other IoT devices without the need for client software on the device. These capabilities are critical for organizations with mobile workforces or large numbers of connected devices. By integrating Azavi's solution with Akamai's unique edge platform and arming it with Akamai's vast array of real-time security data, we plan to enable enterprises to greatly improve the security of their operations while also improving the performance of their internal applications. Azavi will complement our security product lines with a cellular-specific security offering, which is an important step in our strategy to capture the emerging opportunity in 5G. It is also synergistic with our Enterprise Application Access product and complements our IoT Edge Cloud solution, allowing enterprises to improve the reliability and consistency of real-time communications with IoT devices, and to easily secure those endpoints to avoid compromise. As we look to the future, we believe that the deployment of 5G and IoT applications can provide significant opportunities for Akamai. 5G technology improves the performance of the last mile, providing higher throughput and lower latency, and the potential to connect a lot more people and things. And that could spawn the creation of new applications, such as ultra-low latency video, augmented reality, IoT applications and analytics at a massive scale, deep threat intelligence for attack mitigation, and much more that we can't even imagine yet. The impact of 5G on innovation could be similar to the way broadband enabled new social networking apps that few could have imagined before. As 5G networks come online, we believe that end users and connected devices will demand faster performance and greater scale than cloud data centers can provide, and thus that our edge architecture will become more important than ever. In fact, Gartner estimates that by 2022, more than half of enterprise-generated data will be created and processed outside of traditional cloud data centers. The breadth of our edge platform means that we're incredibly close to billions of end users. And being so close means that Akamai is in a unique position to provide the near-instant response times, very high-quality video experiences, serverless computing capabilities, and the market-leading security services that our customers are demanding. In summary, we're very pleased with our performance so far this year. We believe that our strong growth, profitability, and cash generation provides us with the financial firepower to continue investing in the innovation, network capacity, novel products, and world-class talent needed to fuel our future growth. Now I'll turn the call over to Ed for more on Q3. and our outlook for the fourth quarter. Ed?