Akamai Technologies Inc (AKAM) — Q4 2020 Earnings Call Transcript

Thank you, operator. Good afternoon, everyone, and thank you for joining Akamai’s fourth quarter and fiscal year 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 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 from 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 February 09, 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. And with that, let me turn the call over to Tom.

Thanks, Tom. And thank you all for joining us today. I am pleased to report that Akamai delivered excellent results for both the fourth quarter and the full year in spite of the extraordinary challenges that we all faced in 2020. Q4 revenue was $846 million, up 10% over Q4 2019 and up 8% in constant currency. This strong result was driven by the continued rapid growth of our security business and continued high traffic on our intelligent Edge platform. Non-GAAP operating margin in Q4 was 30%, up one point over Q4 2019, and Q4 non-GAAP EPS was $1.33 per diluted share, up 8% year-over-year and up 6% in constant currency. For the full year, we surpassed our expectations for the top line, setting new records for our business and positioning us well for our future. Full-year 2020 revenue was $3.2 billion, up 11% over the prior year in constant currency and topping the $3 billion mark for the first time in our history. We're especially pleased to report that we expanded non-GAAP operating margin to 31% in 2020, overachieving our targeted 30%, up dramatically from 24% in 2017. I think it's worth noting that we achieved this expansion over the past three years while also investing for future growth. Non-GAAP EPS for 2020 was $5.22 per share, up 16% over 2019 and exceeding $5 per share for the first time. We also generated $1.2 billion in cash from operations last year, up 15% over 2019, representing 38% of revenue. Our security portfolio continued to be the fastest growing part of our business in Q4, generating revenue of $296 million, up 23% year-over-year in constant currency. For the full year, security revenue exceeded $1 billion and grew 25% over 2019. This puts Akamai in a rare category as few firms generated more than $1 billion in annual revenue from Cyber Security solutions, with fewer scaling to grow at 25% last year. Security represented one third of our revenue last year, which was up from 29% in 2019 and 24% in 2018. We had especially strong Prolexic services in Q4, as we helped dozens of major enterprises fend off a wave of ransom DDoS attacks that began in Q3. DDoS protection has been a mainstay of our portfolio for years and has never been more relevant for customers. We also saw strong bookings for our Bot Manager solution. Bot Manager helps defend against a variety of these attacks, which were about four times greater in 2020 than the year before. 2020 was also a strong year for innovation with the release of Page Integrity Manager and Secure Web Gateway. Bookings for both are off to an excellent start as enterprises increasingly need to address malware and third-party software applications, and the addition of Secure Web Gateway to our Enterprise Threat Protector service better positions us to compete in the fast-growing enterprise security market. We were also pleased to close our acquisition of Asavie in Q4, which helps advance our security capabilities for cellular devices and networks. New customers signed Asavie integration include the National Health Agency, which adopted Asavie to secure its COVID vaccination application, and Digital Comps, a nonprofit organization that works to close the digital learning gap for students. Our media and carrier division also delivered a strong fourth quarter due to continued high levels of traffic for OTT video services and downloads of e-gaming software. On November 10, traffic on the Akamai platform reached an all-time high of 181 terabits per second, which was 50% greater than in 2019. Nobody in the marketplace comes anywhere close to our capacity to serve customers at the edge on a global scale. In fact, we already exceeded last year's traffic feat just last week. On the application performance side of the business, Q4 was crucial for e-commerce with major buying events such as Black Friday and Singles Day. The unmatched reliability, scale, global reach, and security of our Intelligent Edge platform is a major reason why 40 of the world's top 50 retailers and 23 of the top 25 in the U.S. use Akamai to accelerate their commerce applications. Overall, we're very pleased with our performance last year on both the top and bottom lines, and I want to thank our employees for enabling Akamai to achieve such strong results as they cope with the challenges of the pandemic. Looking to the future, we see substantial opportunities for enterprises to increase their use of the Akamai Intelligent Edge platform. We believe the Edge is where new applications and new business models will come to life, where intelligence will be built, collected, and analyzed, where the promise of 5G and IoT will be realized, and where security will provide the online world's first and most critical line of defense. To better take advantage of these opportunities and to better serve our customers, we announced today that we'll be realigning our organization around two major groups of products: products that enable business online and products that protect business online. Both product groups will be supported by a single unified sales organization. Products that enable business online will be the focus of our new Edge technology group, which will be led by Adam Karon as COO and General Manager. This group will be responsible for our media delivery, web performance, and edge computing solutions, as well as the Edge platform that underpins everything we do. These products generate about two-thirds of our total revenue today, with strong margins fueling our innovation power. The group's mission is twofold: first, to ensure that our Edge platform remains the unparalleled market leader in scale, performance, reliability, ease of use, agility, and cost; and second, to generate additional growth through the innovation of new products and services for emerging customer needs in areas such as IoT, 5G, and serverless computing. The products that protect businesses online will come together as a new security technology group, led by Rick McConnell as President and General Manager. This group will be responsible for all our security solutions, including our market-leading web security products such as Kona Site Defender, Bot Manager, and Prolexic. Our enterprise security products, such as Enterprise and Application Access and Enterprise Threat Protector, along with our carrier security products, will also be part of this group. In 2021 we aim to market with a unified mobile sales organization that better serves our customers, deepens our channel relationships, and provides our customers and partners easy access to the full breadth of our portfolio. PJ Joseph will lead global sales reporting to me. As part of the new alignment, Bobby Blumofe will become our Chief Technology Officer, guiding innovation and being an evangelist for our technology vision and leadership in the marketplace. Kim Salem-Jackson, who successfully led Akamai field marketing and global indications for the last three years, will become our new Chief Marketing Officer as part of our planned transition. Kim will succeed Monique Bonner, who has done a fabulous job transforming our marketing organization over the last four years. Mo will stay on with Akamai in a senior advisory role, allowing her to devote time to her family while still ensuring the success of key market initiatives currently underway. You can read more about our organizational announcement in the press release issued today, and you'll hear directly from our leadership team at our Investor Summit on February 25, where we'll outline our strategy and plans to drive Akamai's next phase of growth. Akamai made amazing contributions to the world in 2020, but we believe the best is yet to come. Looking ahead, we have the potential to significantly expand our business in enterprise and carrier security as we strive to further grow our leadership position in web security. We plan to grow the capacity of our unparalleled Intelligent Edge platform by another order of magnitude as we continue to improve our market-leading performance and reliability. We seek to introduce innovative new services to support emerging IoT and serverless computing applications. We want to help enable the world to leverage the incredible potential of 5G, and we'll continue to build value for our shareholders with our world-class technology leadership, strong profitability, and cash generation fueling our future growth. Now I'll turn the call over to Ed to provide further details on our 2020 results and the outlook for 2021.

Thank you, Tom. As Tom outlined, Akamai delivered another excellent quarter in Q4. We were very pleased to exceed the high end of our guidance range on revenue and earnings. Q4 revenue was $846 million, up 10% year-over-year or 8% in constant currency, driven by another quarter of very strong security growth, higher-than-expected gaming traffic, and the weaker US dollar. Revenue from our Web Division was $438 million, up 5% year-over-year or 4% in constant currency. Revenue growth for this group of customers was again led by our Security business. While we saw stronger than expected seasonal traffic growth from some of our retail and commerce customers, other customers in this vertical and in our travel and hospitality segment continue to be negatively impacted by the pandemic. Revenue from our Media and Carrier Division was $408 million, up 15% year-over-year or 14% in constant currency. As noted, we benefited from higher-than-expected gaming and video traffic along with continued momentum in security. Revenue from our Internet platform customers was $58 million, up 11% from the prior year and above our expectations due to higher-than-expected traffic. Security revenue for the fourth quarter was $296 million, up 24% year-over-year and 23% in constant currency, driven by continued global demand across our web security product portfolio and higher-than-expected revenue from our recently closed Asavie acquisition. Asavie contributed approximately $8 million in Q4, driven by a combination of much better-than-expected strength in the educational vertical and a faster-than-expected revenue ramp for a recently added carrier in the U.S. Foreign exchange fluctuations positively impacted revenue, with $6 million on a sequential basis and $9 million year-over-year. International revenue was $379 million, up 16% year-over-year or 13% in constant currency. Sales in our international markets represented 45% of total revenue in Q4, up 3 percentage points from Q4 2019 and consistent with Q3 levels. Finally, revenue from our U.S. market was $467 million, up 5% year-over-year. Moving now to costs; cash gross margin was 76%, in line with our expectations. GAAP gross margin, which includes both depreciation and stock-based compensation, was 64%. Non-GAAP cash operating expenses were $280 million, slightly above our guidance, in part due to higher sales commissions given the revenue outperformance we saw in Q4. Moving to profitability. Adjusted EBITDA was $364 million, a $45 million or 14% increase from the same period in 2019. Our adjusted EBITDA margin was 43%, up 2 percentage points from Q4 2019. Non-GAAP operating income was $256 million, up $34 million or 15% compared to the same period last year. Non-GAAP operating margin came in at 30%, up 1 percentage point from last year and in line with our guidance. Capital expenditures in Q4, excluding equity compensation and capitalized interest expense, were $195 million. GAAP net income for the fourth quarter was $113 million or $0.68 of earnings per diluted share. It is worth noting that our Q4 GAAP results included two one-time items, a $27 million restructuring charge primarily related to the company realignment as Tom mentioned and a $20 million additional endowment to the Akamai Foundation. Non-GAAP net income was $220 million or $1.33 of earnings per diluted share, up 8% year-over-year, up 6% in constant currency, and $0.01 above the high-end of our guidance range due to higher-than-expected revenues. Taxes included in our non-GAAP earnings were $39 million based on a Q4 effective tax rate of approximately 15%. Now, I will discuss some balance sheet items. As of December 31st, our cash, cash equivalents, and marketable securities total approximately $2.5 billion. After accounting for the $2.3 billion of combined principal amounts of our two convertible notes, net cash was approximately $197 million as of December 31st. Now, I'll review our use of capital. During the fourth quarter, we spent $73 million to repurchase shares, buying back approximately 700,000 shares. We ended Q4 with approximately $572 million remaining on our previously announced share repurchase authorization. Our long-term plan remains to leverage our share buyback program to offset dilution resulting from equity compensation over time. I'm very proud of all of our employees who delivered these outstanding Q4 and 2020 results, especially during a very challenging year for us all. Now, before I provide guidance, I thought it would be helpful to talk about how we see the year unfolding and highlight some key items you may want to consider as you build your models. Our revenue outlook assumes that the pandemic-related impacts to areas like work-from-home and travel will last at least for the first half of 2021. As a result, we expect to see continued challenges in our retail and travel verticals. From a traffic perspective, as life returns to a more normalized pre-pandemic state, we do not expect to see our traffic on our platform decrease. We believe the pandemic has accelerated consumer usage of the Internet in areas like OTT video, gaming, and e-commerce, and we believe this usage pattern will likely persist going forward. However, we expect to see traffic continue to grow in 2021, but at a rate more in line with pre-2020 historical levels. In addition to revenue, there are some other items we expect in 2021 that are worth calling out. First, in 2020, our travel and related expenses were much lower than normal. Our guidance assumes that these expenses begin to return to a more normalized level beginning in the second half of 2021. Second, in light of the recent decline in interest rates, we expect our interest income to decline on a year-over-year basis. Specifically, we expect interest income to be about $8 million lower year-over-year, which will negatively impact our non-GAAP earnings per share by about $0.05 compared with 2020. Third, I wanted to remind you of the typical seasonality that we experience on the top and bottom lines. In the first quarter, we usually see a revenue step-down sequentially from Q4, our strong seasonal quarter. Also in Q1, remember that our employee payroll taxes and 401(k) matching programs reset. These costs will decline throughout the year as employees begin to max out. Finally, as Tom mentioned earlier, we are reorganizing the company around a product-driven group structure and moving away from the vertically aligned division structure. In Q1, we will report revenue results under the new Edge technology and security technology groups, as Tom outlined. The revenue splits will look familiar to you as they align with our current CDN and cloud security revenue reporting that we have historically provided. To assist with the transition, we will continue to report web and Media and Carrier Division results on our website for the balance of 2021. And finally, as a result of the reorganization, we expect to record an additional restructuring charge of approximately $7 million in Q1. Looking ahead to full-year, we expect revenue of $3.37 billion to $3.42 billion, which is up 4% to 6% year-over-year in constant currency. This outlook assumes that foreign exchange contributes about $45 million on a year-over-year basis. We expect security revenue growth in the range of 18% to 20% over 2020 levels. We also expect a non-GAAP operating margin of approximately 30% and non-GAAP earnings per diluted share of $5.33 to $5.46. This non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 15% and a fully diluted share count of approximately 165 million shares. And finally, full-year CapEx is expected to be approximately 16% of revenue. This is down 7 points year-over-year as we expect to leverage the significant network capacity investment we made in 2019 and 2020. Moving on to Q1 guidance. We are projecting Q1 revenue in the range of $822 million to $836 million, or up 5% to 7% in constant currency over Q1 2020. The current spot rates and foreign exchange fluctuations are expected to have a positive $4 million impact on Q1 revenue compared to Q4 levels and a positive $16 million impact year-over-year. At these revenue levels, we expect cash gross margins of approximately 76%. Q1 non-GAAP operating expenses are projected to be $265 million to $270 million. We anticipate Q1 EBITDA margins of approximately 44%. Moving on to depreciation, we expect non-GAAP depreciation expense to be between $111 million to $112 million. Factoring in this guidance, we expect a non-GAAP operating margin of approximately 30% for Q1. Moving on to CapEx; we expect to spend approximately $150 million to $155 million excluding equity compensation in the first quarter. With the overall revenue and spend configuration I just outlined, we expect Q1 non-GAAP EPS in the range of $1.28 to $1.31. This EPS guidance assumes taxes of approximately $37 million to $38 million based on an estimated quarterly non-GAAP tax rate of approximately 15%. It also reflects a fully diluted share count of approximately 165 million shares. In summary, as you heard Tom highlight, we achieved several significant milestones in 2020 including delivering 11% top-line revenue growth, with total revenue exceeding $3 billion for the first time in company history. Growing security revenue 25% and surpassing $1 billion, exceeding our 30% operating margin target, and generating non-GAAP EPS of more than $5 a share. We are very pleased with our performance in 2020 and believe we're well-positioned for 2021. We look forward to providing a deeper look into our business and our plans for the future at our upcoming Investor Summit on February 25th. Thank you. Tom and I would be happy to take your questions.

Yes, thanks. Hi, guys. So I guess the big item that crosses my mind is the comment that you're expecting traffic to continue to grow, not really fall off, but at pre-pandemic levels. And given that security is now a bigger part of the mix, I'm kind of curious why the level of deceleration that's factored into the guidance for 2021.

Hey, Sterling, this is Ed. So I think there's a couple of things you need to think about there. Obviously, 2020 was an unusually high traffic year for us. The point I was trying to make is that we're not seeing a decline, but what we're expecting going into this year is what I'd call a more normalized traffic year. You start getting into tougher comparisons as you get into Q2 and throughout the rest of the year. You still have normal dynamics in the media business; most of the traffic is coming from media obviously, so there'll be a series of renewals and that sort of thing which is pretty normal. The second thing that we called out is that we are starting to see more pressure in travel, hospitality, and retail. The first wave was customers coming to us asking us for extended payment terms, some credits, or some help within a quarter. Now, we're getting into a renewal cycle so we're expecting to see some pressure from that area. And keep in mind that's about 20% of our total business, about 40% of our prior Web Division business, so that's going to have a bit of an impact on us as well.

That makes a lot of sense. And then, Tom, hey, one for you. The structural changes that you're making to the business, what's the motivation for doing that now?

I believe it's time to consolidate all of our security teams. Five years ago, when we established our current structure, our security business was quite small, generating just a few million dollars. Now, it's exceeded $1 billion, and the products were divided among three groups: web security, enterprise security, and carrier security, the latter two being closely related. Enterprise and carrier segments have grown significantly, allowing us to bring them out of incubation. Unifying our security teams into a single division dedicated to security is a logical step that should drive stronger growth. Additionally, merging the sales teams is now sensible. Previously, we had separate sales forces for media and web products, which was effective at the time. However, currently, all our customers are investing in security, including major media clients who are now our top purchasers of security solutions. This consolidation will create efficiencies. I envision improved operational efficiency, enhanced innovation, and continued strong growth in our security product line. On the CDN front, as Ed mentioned, we face some tailwinds alongside challenges in commerce and travel sectors. Nevertheless, I anticipate promising growth in sectors like IoT, 5G, and serverless computing. Uniting these teams will enhance our efficiency as we progress.

Excellent. Thank you, guys, for taking the question. I wanted to dig into the restructuring a little bit as well. So the restructuring charge, does that imply that there were some headcount reductions associated with this, and given that the operating margins stay relatively stable for the full year, maybe down a little bit, it seems like you're hiring to offset that. So if you could walk us through where you are taking investment away and where you are adding investment. Additionally, from a go-to-market or customer-facing perspective, what are the customers going to see differently? Are the salespeople going to go in with a bigger toolset or what changes from that dynamic?

Yes, sure, Keith. This is Ed, I'll take the first part. So yes, we had about a 2% reduction in heads, and most of that was due to overlap primarily in the go-to-market area. Obviously, we had two leaders in different regions and things like that. Regarding investments, we added over 500 heads this year, so we've been investing in security R&D as a percentage is increasing. We've done a really good job scaling back some costs while investing back into the business. This wasn't about cost-saving initiatives; it was more about improved efficiency and tactical alignment. I want to reiterate, we're keeping margins in that 30% range while also investing in the business going forward. And as we’ve said in the past, we believe 30% is a good place to be running the business.

Yes. In terms of the areas we're investing more in, our net headcount went up quite a bit last year and will grow again this year despite the current reduction. We're investing in innovation and new products, particularly in security, also in our platform to make it more programmable for our customers, with projects such as EdgeWorkers that simplify deployment for our clients on Akamai. What the customer sees will be the same representative they encountered before by and large. When we had the split sales force before, it was by vertical, and by bringing it together, it does not mean account breakage or that you will have a different rep. That said, it will be a more efficient management structure. We will deepen our focus on the channel, which is especially important for our growing security products, particularly in the enterprise and carrier security segments. It will be easier for a rep to sell everything than it was before. Our reps were generally well-versed in the whole product set, but I believe it becomes even easier now.

Hey, guys, thanks for the question. I want to touch on a couple of questions that were already asked and delve into them in greater detail. First, over the last couple of weeks, we have been hearing about tougher pricing on the media delivery side. What can you say about some of the larger renewals that occurred in the back half of 2020 as well as those expected in the first half of 2021, particularly regarding the streaming services?

Yes, sure. In terms of pricing, I'm not seeing anything unusual on the media side. There are one or two accounts where competitors have gotten a bit more aggressive than normal, but as far as 2021 goes from a media perspective, I don't see a ton of renewals that would warrant concern. In the past, I've highlighted items I thought were worth calling out, but I don't see any surprises here. Our average contract lengths are between one and two years, so there's always a mix. The renewals that occurred in Q4 and for the back half of the year came in as expected.

Got it. Additionally, a few weeks ago, you announced updated channel partnerships, specifically on the security side, and today you're discussing this unified sales organization. Can you provide more insight into how much of the business, especially on the security side, is currently coming from the channel? Furthermore, how does increased investment around the channel impact the P&L compared to the consolidation of the sales structure?

Yes. Roughly a third of the business in total goes through the channel. If you break it down further, about 100% of Asavie goes through the channel, and we believe the enterprise business will increasingly do the same. In terms of the split between security and content delivery, there’s typically more on the content delivery side since we've been in that business longer, and it's a larger percentage of our revenue. As we move forward, especially in enterprise, channels will be a much bigger component of our go-to-market strategy.

Thanks for taking the question. Just for clarity, I think you stated that the EBITDA margin in the first quarter guidance was 44%, but you also mentioned potential payroll expenses that might be higher in Q1. If that's the case, where are you seeing better margins to offset some of these increased expenses? Secondly, Tom, you noted that some of your media customers have been taking on more security products. Can you provide insights into your total customer base and what trends you see regarding customers purchasing multiple products?

Yes, the EBITDA margin was indeed 44%. In general, we’ve done a good job scaling our back office and achieving leverage across most of our G&A functions. We’re also streamlining server-side efficiency. Typically, we experience heightened operating expenses in Q1 due to the stock vesting and bonus payouts. The high quarter we had in Q4 often normalizes out in Q1. Keep in mind, Q1 tends to be a bit high on the OpEx side, but this normalizes as the year progresses. In terms of our media customers, they are among the biggest brands and require robust security to protect their content and prevent hijacking. Our bot management and account protection capabilities are vital for these customers. When we gather on the 25th, we’ll provide a more detailed breakdown of our various security products, their growth rates, and our projections for the coming years, including counts of how many customers purchase multiple security products.

Thanks, guys. Can you provide a sense of last year's volume trends across the different business segments? What are your estimates, considering the many variables involved?

Yes, sure. From the traffic side, last year was probably about double what we normally see from a traffic growth standpoint. As for other volumes, our bookings were pretty much in line with expectations. Except for traffic, there was really nothing remarkable worth mentioning.

One factor is the attack traffic; the malicious attempts were significantly up across the board. This includes large increases in malicious login attempts, malware embedded attempts, and DDoS attacks. This had a big impact on Akamai's value, as we can help customers stop the largest denial of service attacks and malicious account hijacking.

And regarding term and volume, did volume price discounts come into play due to higher volumes?

That depends on the contract. A lot of large media companies have tiered pricing, which would apply, but nothing unusual other than the fact that traffic was much higher than we had anticipated.

Great, thank you. I have two questions. First, what can you share regarding your intentions for the upcoming Analyst Day? I’m not asking for specific numbers, but what financial insights do you plan to share? Secondly, regarding your 2021 guidance for security growth of 18% to 20%, which appears to be below previous guidance of more than 20%, could you explain whether this is due to typical conservatism, the law of large numbers as we exceed the $1 billion mark, or if there is potential to accelerate that growth?

Regarding the second part, it’s somewhat a consequence of the law of large numbers; we are simply becoming larger. We do have a lot of new products that are ramping quickly, but they take time in a recurring revenue model. If you reflect on the past, we've talked about our target of getting to $1 billion, we surpassed that last year, and the year before that, we were in high 20s growth. While we may periodically exceed expectations, I think my guidance is a reasonable benchmark. As for the Analyst Day, I won't disclose any updates beyond what I've mentioned today, but we will provide more detailed insights that include discussions led by team leaders outlining growth dynamics and deciphering security performance, which will feature specific growth rates across various products.

Regarding your previous Analyst Day in 2018, there was discussion about the operating margin target. Are you introducing a new target at this event?

No, we will not introduce a new operating margin target. What I will provide is an overview of different business dynamics and the potential for margin expansion over time, especially as more of our business shifts to security.

Great, thanks so much for taking the questions. With pent-up demand in the gaming segment contributing strongly this quarter, how do you anticipate the gaming vertical will perform in 2021 compared to prior console launches?

Yes, you are correct; Q4 was a very strong quarter for gaming. Just as a reminder, we work with publishers, as well as major platforms, resulting in upside from numerous different customers. While we're witnessing growing interest in gaming, the console releases drove significant upside in the quarter. It's inherently challenging to predict which games will become popular, and some seasonality exists depending on which quarter features numerous releases. That being said, it's a rapidly growing vertical for us, and we expect new demand throughout the year as these new consoles are released.

That's very helpful. For my follow-up, regarding the zero-overage plans introduced in your Web Division and the strong e-commerce holiday season, what impact might these initiatives have, and is this a model you will look to implement more broadly?

Good question. As you know, we introduced this about 20 months ago. We received a lot of traction, particularly in retail, which is where we see most requests for that type of structure. Currently, we have over half of our customers in the commerce vertical adopting this model. It’s proving to be an effective strategy for engaging clients while managing macroeconomic challenges, helping them maintain predictable spending. Customers have responded very positively, and we anticipate this adoption will continue to increase. It's not suited for every organization, but in retail, we see continued demand.

Great, thanks for taking the question. I want to circle back to security and see if you can provide deeper insights into Page Integrity. Have you seen continued strong trends there, and is it on track to reach $100 million in revenue? Additionally, can you share what you're observing regarding revenue, bookings, and other metrics for your enterprise products?

Page Integrity Manager is off to a great start. We had strong bookings there. Of course, since we launched it in the middle of last year, it will take time to reach a $100 million business, but that potential is very promising for us. Order growth for the enterprise business has also been very strong. As you're aware, we aimed to get our enterprise and carrier security products to the $100 million revenue mark, and we think we can achieve that this year. This could really happen with the strong demand we’re seeing, particularly after bringing Asavie on board. For example, we’re securing students who need access for remote learning to ensure they have a secure environment. Additionally, carriers are managing these products behind the scenes, and there’s a notable upward trend in securing enterprise cellular networks. IoT also presents tremendous future growth opportunities, especially as all those devices will need security and connected networks will likely rely on 5G.

Great, thanks, two from me. Tom, regarding restructuring, I’m curious about the thought process or history that went into this. How long has this been in consideration, and could you identify one or two key triggers that made this the right time? Secondly, high level, given the 11% annual growth, there are a lot of factors regarding COVID. Could you provide an estimate of what growth might have looked like without the impacts of COVID?

Yes, we’ve been considering this reorganization for quite an extended period. It is something the senior management team has discussed annually. In terms of triggers, our security business successfully crossed the $1 billion mark, which is a key milestone. We've also seen strong growth in our enterprise and carrier security products, which were confined to incubation. At this point, it became essential to bring them together to create a cohesive division focused solely on security. Whereas before, we had distinct segments for enterprise and carrier products, now their growth enables them to emerge from incubation. This reorg makes good sense strategically. Regarding the last point, our performance in 2020, we have some tailwinds aiding our growth in overall traffic. The Media and Carrier Division performed well largely due to capacity investments we made that contributed to this growth. However, the challenges in web performance revenue stemmed largely from a decrease in existing commerce and travel-based contracts. We had to provide some relief to clients in those verticals as they dealt with the pandemic impact. The growth we experienced in 2020 benefited the overall online commerce trend, but we also had to navigate our contracts carefully during this turbulence.

Great, thank you. Two questions for Ed. Ed, could you provide the contribution from acquired businesses included in the revenue outlook for 2021, specifically around Asavie and Inverse? How should we evaluate IPC revenue contribution in 2021 versus 2020?

Sure. As far as Inverse goes, there’s no significant revenue to report; it was a minor technology tuck-in we've done in the past. Thus, no immediate contribution expected from that acquisition. As for Asavie, we're looking at about $30 million incrementally for the year; we saw around $8 million this quarter, placing it somewhere below one percentage point. With regard to Internet platform customers, I will refrain from providing explicit guidance, but I can say our team has excelled at maintaining and even growing that business. Expect results to remain consistent with previous years, with perhaps some upside, particularly considering Q4 was quite strong.

Hey, guys, thanks so much for taking my questions. It's great to see continued strong execution. I'd like to revisit earlier comments regarding the SolarWinds breach. What shifts in demand or inbound interest have you observed since that breach, especially given your strength in the zero-trust area? I have one follow-up.

Yes, obviously that breach highlighted the importance of zero-trust security measures. It was a devastating attack and clearly illustrated the need for products like our Enterprise Threat Protector. Stopping malware is one thing; however, once it's inside, you need tools to detect whether it’s trying to communicate with command and control resources outside the enterprise. Essentially, you want to catch that and alert the security team to issues growing unnoticed. In the long run, this incident only strengthens the demand for the products we offer, as well as the necessity for a zero-trust approach to security. As third-party malware is becoming more prevalent, it reinforces the importance of implementing effective Page Integrity Manager solutions to prevent disruptions to client systems.

That’s helpful. Regarding the reorganization, can you discuss your strategy to prevent disruption since this reflects a time of strength in your operations? What measures are in place to minimize any potential surges during this transition?

Yes, that's a great question, and it’s something we’ve devoted considerable planning to. This reorg has been in the works for over six months. We initiated it from a position of strength, which is the ideal time for a change. Transitioning under adverse conditions generally leads to more complications. Since we are currently strong and capable, the timing aligns well. Employee morale is high, allowing us to manage this effectively, and we’ve ensured minimal disruption to existing account relationships; customers will generally interact with the same representatives they’ve dealt with in the past. We foresee this improvement leading to enhanced efficiency and motivation for innovation across our organization.

Great, thanks. I believe investors appreciate the sales synergies between your web performance services and cloud security offerings, and the sales force consolidation is logical. However, could you clarify whether it still makes sense to sustain a dedicated sales force to boost your enterprise security adoption?

Yes, we do have dedicated sales specialists already, and they will continue to be part of the new organization. So, there will be no changes to that structure, ensuring a focus on both enterprise and carrier security products, along with Prolexic sales specialists.

Great, thanks. I have one additional question; in relation to Brad's inquiries, the year-over-year CDN growth rate decelerated 4 points from last quarter. What should we be considering regarding this dynamic? We know that overall traffic, particularly in gaming, was strong but perhaps offsetting this were the zero-overage pricing plans. Any insights?

Yes, you pretty much covered it. The last Q4 was an exceptionally high quarter for traffic growth, making for tougher comparisons this year. As Ed pointed out earlier, the Media side faces increased challenges due to developing clients in retail and travel, which is somewhat par for the course. However, we are still confident in the market’s position, with multiple growth trends such as OTT expanding significantly.

Okay, this is Tom Barth. We want to thank everyone in closing. As Tom and Ed mentioned, we would look forward to having you join us virtually for our Investor Relations Summit on February 25th. Additionally, we will be presenting at various investor conferences and events throughout the rest of the quarter. Details of these can be found in the Investor Relations section of akamai.com. Thank you for joining us, and all of us here at Akamai wish continued good health to you and yours. Have a wonderful evening.