Q4 2023 Akamai Technologies Inc Earnings Call
Good afternoon, and welcome to the Akamai Technologies, Inc. Fourth quarter money twenty-three earnings conference call.
All participants will be in listen only mode.
Did you need assistance.
My conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Tom Barth head of Investor Relations.
Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining Akamai fourth quarter 2023 earnings call speaking today will be Tom Lee Akamai, as Chief Executive Officer, and Ed Mcgowan Akamai Chief Financial Officer. Please note that today's comments include forward looking statements.
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 any impact from macroeconomic trends the integration of any acquisition and any impact from geopolitical.
<unk>.
Additional information concerning these factors is contained in Akamai 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 13th 2020 for Akamai disclaims any obligation to update these statements to reflect new information future events or circumstances, except as required by law as a reminder, we'll be referring to.
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 Dot com.
Before I turn the call over to Tom I'd like to let everyone know that I have transitioned ahead of the Akamai investor relations roles of Mark Stoutenburg. Many of you have met mark over the past year and I am confident you will find them extremely helpful about all things Akamai.
I'll be moving into another role internally and want to thank Tom personally for bringing me into the Akamai culture 10 years ago, it's been a privilege to work with so many wonderful people both here at Akamai and of course, all of you externally I wish you all happiness and good fortune.
And now I'd like to turn the call over to John.
Thanks, Tom and thank you very much for the terrific job that you've done over the last 10 years at Akamai, it's truly been a pleasure working with you and I'd like to join you in welcoming Mark is your successor.
Turning now to our Q4 results I'm pleased to report that Akamai delivered a strong finish to a very successful 2023.
Fourth quarter revenue grew to $995 million and non-GAAP operating margin was 30% non.
non-GAAP earnings per share in Q4 was a dollar and 69 cents up 23% year over year and up 22% in constant currency.
For the full year revenue was $3.81 billion and non-GAAP operating margin was 30%.
So year non-GAAP earnings per share was $6.20 up 15% year over year and up 16% in constant currency.
Security revenue in Q4 grew 17% year over year and was up 18% in constant currency contributing nearly half of our total revenue in the quarter.
Security growth was driven in part by continued strong demand for our market leading guard of course segmentation solution as more enterprises rely on akamai to defend against malware and ransomware.
Customers, who purchase segmentation in Q4 included one of the largest global tech firms in India, and a leading payment systems company based in Hong Kong that handles 15 million transactions a day.
We've also seen strong interest in our new API security solution that we announced in August.
Early adopters of this new solution include three major financial institutions, several major retail brands in Europe, and North America, and a leading industrial automation company in Europe.
Our customers are seeing the value of this new capability with several already paying over half a million dollars per year for the service.
Akamai has API security solution also earned recognition from industry analysts in Q4.
Copper is your coal named Akamai and overall industry leader in their API security and management leadership Compass report.
And Gartner validated our strong and expanded API capabilities in its market guide for cloud web application and API protection.
Turning now to cloud computing I'm pleased to say that we accomplished what we set out to achieve last year in terms of infrastructure deployment product development Jumpstarting, our partner ecosystem on boarding the first mission critical apps from some major enterprise customers and achieving substantial cost.
<unk> as we moved our own applications from Hyperscale or as to the Akamai connected cloud.
After launching Akamai connected cloud last year, we rolled out 14, new core computing regions around the world, giving us a total of 25 overall.
We also enhanced our cloud compute offering by doubling the capacity of our object storage solution and adding premium instances for large commercial workloads that are designed to deliver consistent performance with predictable resource and cost allocation.
Also our Akamai global load Balancer is now live.
This integrated services designed to route traffic request to the optimal datacenter to minimize latency and ensure no single point of failure.
Last year, we also amplified our go to market approach with our cloud computing partner program there.
The collaborative nature of the program provides a unique model for akamai to engage with customers at a consultative level to deeply understand their requirements and pain points and to provide a complete solution leveraging the combined strength of the partners technology and Akamai is distributed compute platform.
We've already partnered with several leading SaaS and paas providers and cloud data and processing platforms.
We're very pleased with the progress that we've made thus far and are looking forward to adding more new partnerships in 2024.
We've also begun to gain traction with some of our largest customers as they migrate mission critical apps onto our cloud platform.
For example, one of the world's best known social media platforms spent approximately $5 million on computing services with us last year and they're already on a run rate to do more than double that this year.
And two of the world's best known software companies recently signed on and are already spending about a quarter of a million dollars per month on cloud computing with Akamai.
In Q4, we also signed up a major global media measurement and analytics company and we displaced a hyperscale or when we sign Blue T V. The largest vod streaming company in Turkey. The.
The streaming customer told us that they found our platform to be simple to use automated and intuitive cloud agnostic for a smooth multi cloud migration and affordable with very low egress cost all backed by a trusted and reliable partner.
In addition to exceeding our full year of cloud computing revenue goal of $500 million last year. We also derive significant cost savings by migrating several of our own applications from Hyperscale to Akamai connected cloud.
Our bot manager and enterprise application access solutions were among the first to migrate together. These products are used by over 1000 customers and they generate over $300 million in annual revenue for Akamai.
But all of that is just the beginning.
Today, we're excited to announce the next phase of our multiyear strategy to transform the cloud marketplace, taking cloud computing to the edge by embedding cloud computing capabilities into Akamai is massively distributed edge network.
<unk>, New initiative code named gecko, which stands for generalized edge compute.
Binds the computing power of our cloud platform with the proximity and efficiency of the edge to put workloads closer to users than any other cloud provider.
Traditional cloud provider support virtual machines and containers in a relatively small number of core data centers.
<unk> is designed to extend this capability to our edge pops, bringing full stack computing power to hundreds of previously hard to reach locations.
Deploying our cloud computing capabilities into Akamai is worldwide edge platform will also enable us to take advantage of existing operational tools processes and observe ability.
Enabling developers to innovate across the entire continuum of compute and providing a consistent experience from centralized cloud distributed edge nobody else in the marketplace does this today.
And the latest implementation phase that we're announcing today akamai aims to embed compute with support for virtual machines into about 100 cities by the end of the year.
We've deployed new gecko architected regions and for countries already as well as in cities that lack of concentrated hyperscale or presence.
These initial locations are listed in today's press release.
Following that we plan to add support for containers.
And then we plan to develop automated workload orchestration to make it easier for developers to build applications across hundreds of distributed locations.
We've been conducting early trials of gekko with several of our enterprise customers that are eager to deliver better experiences for their customers by running workloads closer to users devices and sources of data.
They're early feedback has been very encouraging as they evaluate gecko for tasks such as AI inferencing deep learning for recommendation engines data analytics multiplayer gaming accelerating banking transactions personalization for E Commerce and a variety of media work.
Slow applications such as transcoding.
In short I'm incredibly excited for the prospects of Gekko as we move full stack compute to the edge.
Turning now to content delivery I'm pleased to report that Akamai remains the market leader by a wide margin.
Dividing the scale and performance required by the worlds top brands as we help them deliver reliable secure and near flawless online experiences.
Our delivery business continues to be an important generator of profit that we used to develop new products to fuel akamai as future growth.
And it's an important driver of our security and cloud computing businesses, as we harvest a competitive and cost advantages.
Ive offering delivery security and compute on the same platform as a bundle.
As we've noted in past calls we're selective when it comes to less profitable delivery opportunities and this is a discipline that we intend to maintain and in some cases increase in 'twenty 'twenty four.
To be clear, we still aim to be the best and delivery for our customers.
And we believe that our disciplined approach will benefit our business by allowing us to focus more of our investment in security and cloud computing, which are now approaching two thirds of akamai as revenue and growing at a rapid rate.
In summary, we're pleased to have accomplished what we said we would do in 2023.
Our cloud computing plans are taking shape as we envisioned.
Our expanded security portfolio is enabling us to deepen our relationships with customers and.
And we continue to invest in Akamai is future growth, while also enhancing our profitability.
Now I'll turn the call over to Ed for more on our results and our outlook for Q1 and 2024.
Ed.
Thank you Tom.
I would also like to thank Tom Barth, Bruce Incredible service for 10 years as our head of Investor Relations.
Now moving onto our results, let me start by saying that I'm very pleased with our fiscal 2023 year results delivering $6.20 of non-GAAP earnings per share capping off a year of double digit earnings growth for our shareholders.
Today I'll cover our Q4 results provide some color regarding 2024, including some items to help investors better understand a few factors that will impact our upcoming results and then close with our Q1 and full year 2020 for guidance.
Starting with revenue Q.
Q4 revenue was $995 million up 7% year over year as reported and in constant currency.
We saw continued strong growth in our compute and security businesses during the fourth quarter, our compute business grew to $135 million up 20% year over year as reported and in constant currency.
We continue to be very pleased with the feedback regarding our cloud compute offerings and we're very optimistic about the early traction we are seeing from enterprise customers.
Moving to security.
Revenue was $471 million growing 18% year over year and up 17% in constant currency.
Our security revenue continues to be driven by strong growth in our garden of course segmentation solution and our industry, leading web app firewall denial of service and Bot management solutions.
In addition, and as Tom mentioned.
We are encouraged by the early traction of our new API security solution. During the fourth quarter, we signed 17, API security customers, including four with annual contract values in excess of $500000 per year.
Our delivery revenue was $389 million, including approximately $20 million from the contracts, we recently acquired from stack path and lumen.
International revenue was $479 million up 8% year over year or up 6% in constant currency, representing 48% of total revenue in Q4.
Finally, foreign exchange fluctuations had a negative impact on revenue of $4 million on a sequential basis and a positive 6 million dollar benefit on a year over year basis moving to profitability.
In Q4, we generated strong non-GAAP net income of $263 million or $1.69 of earnings per diluted share up 23% year over year or 22% in constant currency and seven cents above the high end of our guidance range.
The stronger than expected EPS results were driven primarily by continued progress on our cost saving initiatives, we have previously outlined and approximately $6 million and lower than expected transition services, where TSA costs associated with the stack path and lumen contracts as our services organization.
Migrated the customers onto our platform much faster than we expected Q4, Capex was $143 million were just below 15% of revenue.
We were very pleased with our continued focus on lowering the capital intensity of our delivery business. This effort along with a very strong profitability enabled us to deliver very strong free cash flow results in Q4.
Moving to our capital allocation strategy during the fourth quarter, we spent approximately $55 million to buy back approximately 500000 shares.
For the full year, we spent approximately $654 million to buy back approximately 8 million shares. We ended 2023 with approximately $500 million remaining on our current repurchase authorization going forward. Our intention is to continue buying back shares to offset dilution from employee equity programs over time to be at.
Tunis stick in both M&A and share repurchases.
Before I move onto guidance there are several items that I want to highlight in order to give investors some greater insight into the business.
The first relates to our delivery revenue.
In the first half of 'twenty 'twenty four seven of our top 10, CDN customers contracts come up for renewal as we've discussed in the past.
This type of renewal generally leads to an initial drop in revenue.
And then we typically see revenue grow again as traffic increases over time.
We have factored the expected outcome of these renewals into our Q1 and full year 2024 guidance.
In addition, as Tom mentioned, we plan to continue to optimize our delivery business by focusing on how we charge certain high volume traffic customers for their usage on our network.
All with an eye on profitability for example, we plan to start charging a premium for higher cost delivery destinations. We expect to continue to optimize the ratio of peak to day to day traffic and we plan to negotiate different pricing for API traffic burst download traffic.
Choosing to shed some less profitable traffic will result in a more balanced and profitable approach to pricing, which we believe is the right strategy for the company.
Second.
O E C. D member countries continue to work towards the enactment of a 15% global minimum corporate tax rate and in particular in December 2023, the Swiss Federal Council declared the rules in effect for Switzerland, beginning in 2020 for.
As a result, we anticipate that our non-GAAP effective tax rate will increase by roughly one and a half to two percentage points to approximately 18, 5% to 19%.
We estimate this increase in our tax rate will have a negative impact on Q1, non-GAAP EPS of approximately two to three cents per diluted share and a negative impact on full year non-GAAP EPS of approximately 12 to 15 cents per diluted share.
The impact of this tax rate change has been factored into our Q1 and full year 2020 for guidance.
Third we expect to generate significantly more free cash flow in 2024 compared to 2023 levels.
This is primarily due to much lower or capital expenditures in 2024, along with our continued focus on profitability.
Please note that the full cost to build out our gecko compute sites, we announced earlier today is included in our Q1 and full year 2024 capital expenditure guidance.
Fourth I want to remind you of the typical seasonality, we experienced on the top and bottom lines throughout the year.
Regarding revenue for fourth quarter is usually our strongest quarter regarding profitability in Q1, we incur much higher payroll taxes related to the reset of social security taxes for employees, who maxed out during 2023 and from stock vesting from employee equity programs, which tend to be more heavily concentrated in the first quarter.
Also worth noting that in Q3, our annual company wide Merit based salary increases go into effect. So we tend to see higher operating costs in Q3 compared to Q2 levels.
Finally for 2024, we anticipate heightened volatility in foreign currency markets, driven by the unpredictable timing and magnitude of federal reserve policy changes and their impact on interest rates with this in mind forecasting the trajectory of FX in the latter part.
The year poses a formidable challenge.
Thus for the full year, we plan to provide annual revenue growth security and compute revenue growth non-GAAP EPS growth non-GAAP operating margin and Capex only in constant currency based on 12, 31 2023 exchange rates.
However for the coming quarter, we will provide both as reported and constant currency guidance.
As a reminder, we have approximately $1 $2 billion of annual revenue that is generated from foreign currency with the euro yen, great British pound being the largest non U S dollar sources of revenue.
In addition, our cost and non U S dollars tend to be significantly lower than our revenue and our primarily in Indian rupee, Israeli shekel and Polish zloty.
Moving now to guidance.
Our guidance for 2024 assumes no material changes good or bad in the current macroeconomic landscape for the first quarter of 2024, we are projecting revenue in the range of $980 million to $1 billion or up 7% to 9% as reported or 8% to 10% in constant currency over Q1 2023.
At current spot rates foreign exchange fluctuations are expected to have a positive $2 million impact on Q1 revenue compared to Q4 levels and a negative $4 million impact year over year.
At these revenue levels, we expect cash gross margin of approximately 73% as reported and in constant currency.
Q1, non-GAAP operating expenses are projected to be three.
$305 million to $310 million, we anticipate Q1, EBITDA margins of approximately 42% to 43% as reported and in constant currency.
We expect non-GAAP depreciation expense of $127 million to $129 million, we expect non-GAAP operating margin of approximately 29% to 30% as reported and in constant currency for Q1.
And with the overall revenue and spend configuration I just outlined we expect Q1 non-GAAP EPS in the range of $1 59 to $1.64 were up 14% to 18% as reported and 16% to 19% in constant currency.
This EPS guidance assumes taxes of $56 million to $58 million based on an estimated quarterly non-GAAP tax rate of approximately 18, 5% to 19%.
It also reflects a fully diluted share count of approximately 155 million shares.
Moving on to Capex, we expect to spend approximately $146 million to $154 million, excluding equity compensation and capitalized interest in the first quarter. This represents approximately 15% of total revenue.
Looking ahead to the full year for 2024, we expect revenue growth of 6% to 8% in constant currency.
We expect security revenue growth of approximately 14% to 16% in constant currency, we expect compute revenue growth to be approximately 20% in constant currency.
And we are estimating non-GAAP operating margin of approximately 30% in constant currency.
In full year Capex is expected to be approximately 15% of total constant currency revenue, which again includes the gecko compute build outs.
We expect our capex to be roughly broken down as follows approximately 3% of revenue for our delivery and security business approximately 4% of revenue for compute approximately 7% of revenue for capitalized software and the remainder for I T and facility related spend.
We expect non-GAAP earnings per diluted share growth of 7% to 11% in constant currency and as we mentioned earlier. This non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 18, 5% to 19% and a fully diluted share count of approximately 155 million shares and claw.
<unk>, we are very pleased with the strong finish to 2023, we continue to be excited about our growth prospects and driving profitability across the business now Tom and I would like to take your questions operator.
We will now begin the question answer session.
You ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the key.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the wrong.
Okay.
Yeah.
And our first question will come from Fatima <unk> of Citi. Please go ahead.
Thank you for taking my question and I wanted to drill into the delivery.
Segment performance and the guidance and kind of the modeling points that you've shared with US I was hoping you could parse out for us.
Some of the organic traffic trends you saw in the platform.
Parse away from the traffic from the acquired contracts, which means back half in women.
And then to the extent you can talk about timeframe you had yeah with regards to absorbing some of the additional acquired traffic can be a contraction and the last piece of it and the question. Here is also that the guidance that we calculated to be X percent down 6% for delivery in 2024.
Implied by your guidance full year guidance.
Can you talk about what proportion of that traffic.
You would have deemed lower quality being killed off maybe the reason why we're not seeing a much sharper improvement in the California franchise, and then I have a quick follow up thank you.
Alright, sure let me see if I can tackle all of those for you I'll start with the performance in Q4.
I'll break it down into a couple of buckets. So in Q4, we tend to see a stronger season.
Seasonal quarter for us and we did see some of that so.
From the retail customer perspective.
We saw bursting roughly to the tune of about half of what we saw last year.
I think that has to do mostly with the zero overage as that's become more popular we we are seeing less bursting.
If I look back a few years, that's down about 50%.
22, compared to 21, and again 'twenty two three compared to 22.
Folks consumption, but more they're surfing.
I look at gaming gaming was a better year, if I look last year gaming was pretty weak this year it was pretty good.
Gaming tends to be fairly lower priced delivery.
Don't get as much upside in revenue.
Water, but not as much as we saw the prior year. So I would say kind of an okay fourth quarter from delivery. The one area that was probably the weakest was more in sort of high tech. So think about that is <unk>.
New connected devices, maybe it's connected T V.
Do.
I'm, sorry, an iPad or something like that.
Printer drivers that sort of stuff that was much weaker than what we saw last year last year was a pretty good bump up in that category, so that really sort of sums up.
What's the dynamics are in terms of the delivery business in Q4.
I looked at that not including the <unk>.
Acquisition traffic. The second question you asked if I wrote it down correctly was the absorption of the traffic from the acquisitions, we've largely done that.
The services team did a phenomenal job migrating over the customers. We did it in probably about a third of the time that we had expected to be able to do that there's still a few stragglers but.
The transition services costs are immaterial. So that's why we didn't call that out, but that's largely been done.
Terms of this year why are we seeing a down 6% that's the math youre using for deliver.
Delivery a lot of it has to do with the renewals. Unfortunately.
These larger customers as we talked in the past, we only have about eight customers that are <unk>.
Greater than 1% of revenue and unfortunately seven of them are renewing in the first half of the year that does have a bit of an impact on the delivery business. The majority of the revenue from those customers comes from delivery. We've seen this in the past it seems like every two years, we we kind of bump into this even though we try to sign staggered com.
Tracks, what happens often is someone who might sign a two or three year deal with a revenue commit they'll spend that in a shorter period of time and we're just going to.
The shedding of Traffics. So let me just get a little bit more specific with what we're doing so last year. If you remember we talked about being a bit more stringent with the peak to average ratios will continue to do that.
We did a pretty good job is still a few customers we need to to adjust and that generally happens where customers will split and they have lots of them.
Day to day traffic and they might split that among three or four CDN and then they'll have peak events, whether that's a big video a badge or a big downloaded them and we get the disproportionate size of that peak do you want to make sure you're compensated for that so the way to do that as you get a higher percentage of the day to day or you just limit the peak.
So we'll continue doing that and sometimes that may may mean, we lose a little bit of traffic, but that's okay. Because you can see the results in capex.
The new thing that we're doing now is we've worked with product in it to enable us to be able to bill for very granular level.
On destinations in the past, we generally would build based on large G. O say for example, the U S or Europe or Asia, now, we're able to get one level deeper and so we can go after some of the areas, where our costs are a bit higher to deliver.
It's unclear where assuming that customers have choice. They may decide to take the traffic somewhere else some of our.
Our competitors don't really focus as much on profit as we do if that's the case then that's okay with us.
So I think as you, whereas we tried to factor all that in that those are the two driving factors as to why we're not seeing a better deal.
Livery performance of 24.
Speaker Change: I think I hit all your questions.
Ted Super comprehensive. Thank you and then one just on that gross margin you gave us guidance for cash gross margins in the first quarter our best.
Speaker Change: Qualitatively.
Speaker Change: Can talk to us about some of the puts and takes a full year level I can think about the mix of business changing your focus on pricing discipline them.
Just even U S International mix, you know any sort of puts and takes in terms of the dynamics, we should be thinking about cogs and cash gross margins for the full year and that's apparel. Thank you.
Sure no problem in terms of the cost of goods soldiers. The I'll start with the good stuff that's going on in cost of goods sold obviously you touched on the mix. So as we get a higher degree of.
Security business that obviously helps our gross margin line and the second thing is the mood.
Movement of our third party cloud costs onto our own platform. We did a great job. So far this year, Tom talked a bit about that in our.
In our prepared remarks, and we have more to go and we are.
Roadmap to get that so that'll drive some significant savings the downside or what sort of track.
Tracking them or not expanding the margins as much I should say, we could be going a bit higher is that with the build out of the gecko sites will incur some additional co location costs. So as we start to build out those facilities. You don't have revenue to go against that but also as I talked about last year. When we built out some of the bigger sites with the accounting rule.
<unk> when you do long term colo commitments or any kind of a commitment for long term leases you have to straight line any commitments. So we ended up with a bit of a disconnect between what we're paying in cash and what we're actually expensing. So we're able to offset that with the savings we get from the third party cloud in the mix, but those are the underlying dynamics.
Thank you so much.
The next question comes from Frank Louthan of Raymond James. Please go ahead.
Frank Louthan: Great. Thank you.
How different is that go from what Youre doing now with computers.
Our new packaging and some of your products or is it.
Something something little different and then secondly of the CDN business that you acquired last year, how much are you expecting that to fall off.
Frank Louthan: I think the goal was to try and get them.
Services, what are you factoring in there.
Yeah I'll take the first question Jack I was not packaging.
Frank Louthan: <unk> is a new capability, where we're going to be offering full stack compute.
In 100 cities by the end of the year and ultimately in hundreds of cities, we're actually taking full stack compute the kinds of services you get inland node or are hyper scaler and making that available in our edge Pops now today, the edge, possibly of 4000.
And they run function as a service will spin up Java script apps.
You know 4000 locations in over 700 cities in milliseconds based on user demand.
But that's not full stack compute.
Now, we're going to be taking virtual machines and containers and supporting those in our edge platform.
And that enables our customers to get much better performance and scalability also lower cost.
Because of the you know the financial benefits, we get from our edge platform. So it really becomes I think a very compelling cloud computing offering that just doesn't exist in the market place today.
Not a package you can take it all this is a new capability.
Frank Louthan: Ed do you want to take the CDN question the acquisition yet.
Sure happy to do that Hey, Frank.
Frank Louthan: Yeah, I would say just as a reminder, when we acquired the businesses, we actually acquired selected customers. What we mean by that is we actually went through and we left some customers that we weren't going to take for example of someone who violated our acceptable use policy.
Really small customers and then believe it or not some that had pricing that we just didn't want to take so we had already gone through sort of a selection process. If you recall I had given guidance last quarter of about 18 to 20 million for this quarter and we hit the high end of that range, which I'm happy that we did so we've largely.
Been able to migrate over everything that we had hoped to the few customers that churn, but by and large.
Frank Louthan: We've gotten everything out of that that acquisition are those acquisitions I should say there are two of them that we would hope to.
Okay, great. Thank you very much.
The next question comes from James Fish of Piper Sandler. Please go ahead.
Hey, guys first of all Tom Barth look you've been a class Act and appreciate all the help over the years and just wanted to Echo Tom Leighton and.
They're really appreciate the help over the years.
James E. Fish: Wanted to circle over to security actually lock security with a little bit lower than I think we were all anticipating for Q4 I get that.
So the drivers underneath that are helping the business, but did you see any push out of deals and maybe that's contributing to your confidence around mid teens growth for 2024 help us kind of on the confidence for sustained mid teens growth and really how is that selling outside the installed base.
Penetration of those new security packages.
Hey, Jim This is Ed Yeah, I was actually pretty pleased with our performance and didn't see many deals pushed out we didn't have any large license deals like we did in Q3.
Ed: So that might be that always sort of skews some of the results. So we didn't have any of that.
Ed: But no deals that really pushed out from a security perspective.
Very pleased with what we're seeing with garlic were continued great growth. There that's been phenomenal and that's a lot of customers are being driven new verticals and things like that the channel has been doing phenomenally well there we talked a lot about in our prepared remarks, API security I don't get surprised often but I've been surprised with the ARPA has there been very pleased with that and that's been very.
Very good to see and the strength and we've talked about the bundles that we had done a lot on the last call. That's continued to go very well and we're seeing very strong growth.
And our WAF and our fraud products to Bot management and fraud protect there so really strength across the board nothing so far from macroeconomic challenges that always always can change you never know what can happen, but nothing that we saw in Q4.
As far as the projections for this year, we feel pretty confident we've generally been.
Relatively conservative with our approach to security growth, we don't factor in.
Any major type of attacks, where sometimes we will see a spike in demand or anything like that so we feel pretty good with how security is going.
Maybe just a.
Click down one level into a few months earlier question on the CDN side.
Something that Tom said as well in his prepared remarks is there any way to understand how much on the CDN side of the base you planned, but essentially I don't know if I'd give away for free but do you have a wafer free to get back in queue revenue or help us understand how that dynamic between what we should expect between CDN and compete.
You kind of dollar shifting thanks, guys.
Yeah.
I think you can't factor in any percentage there at this point, we have been in some discussions with some very large media companies, where you know we would offer discounted or free delivery and returns for a significant portion of the compute business on balance that would be a great trade for us a much more profitable.
And much more revenue because at the end of the day, you know big media companies. So span 10, axon compute what they'll spend on delivery and uneven security.
So this is something that we see the hyper scaler do they will sometimes give away the deliberate in return for getting the compute business, because that's where the vast majority of the revenue is.
Very profitable so well keep you advised as we go if that starts to make a material difference.
Ed: The next question comes from Keith Weiss of Morgan Stanley. Please go ahead.
Excellent. Thank you guys for taking the question.
Just.
For Ed.
Throughout 2020.
You talked a lot about oh see gains initiatives, we've talked a lot about migrate workloads to <unk>.
Now in that yield savings.
And I got to say I could put it bluntly kind of disappointing about disappointed by the lack of margin expansion in the <unk>.
Sky.
Is there something holding that back or is there some incremental investments, perhaps behind gecko that we're making and instead of that or meet in a magic question like why not more margin.
Given.
All the efficiency sort of improvements that you guys have been putting in place over the past.
Yeah I'll take this one time that you broke up a little bit there Keith I think I got the Genesis of the question.
So yeah, we felt we've done a great job of making some acquisitions over the last few years investing in our compute business.
Spending an awful lot to build out our compute.
Compute facilities, adding a lot of functionality growing our security business doing acquisitions, there as well and got back to 30% margin last year and continuing this year. We've always said that's been a pretty healthy spot to run the business, we're investing because we see opportunity for growth and there's always a balance.
You know you can't cut your way to greatness, perhaps we could.
Quite a few more points, but then what are we leaving on the table I think we've been pretty disciplined and balanced with our approach in terms of investing for growth.
Ed: Returning to margin.
We've got some some pretty exciting areas, we're seeing great growth in API security, it's still early days, there, but the product will continue to get better.
We're seeing good art was there so I'm very excited about what we're doing there we've made investments in go to market and Gartner Court and that certainly has paid off and the investments in computer starting to show. Some some early returns. So again, it's a balanced approach. We know we're in this for the long term and I think we don't want to shoot ourselves in the foot and not go after some of these big opportunities that we have in front of us.
Speaker Change: Got it that's fair thank you.
Speaker Change: The next question comes from Mark Murphy of Jpmorgan. Please go ahead.
Thank you very much so Tom you've done a very solid job with the compute business.
And in the prepared comments you mentioned the Onboarding of some mission critical apps I'm wondering if you could shed a little light on the pipeline of.
Mark Murphy: That kind of a critical app that you see coming to you in 2024, and and thus far how well is your infrastructure handling the intensity of those larger workloads in in terms of.
[noise] stability reliability uptime et cetera, and then I have a quick follow up.
Yeah, so signing on compute customers is a big focus for US. This year you know we have the basic infrastructure in place of course now we're building out get out, but just with the basic infrastructure already in 25 cities will be looking to add on many more mission critical apps from a major.
Some examples are you.
Look at social media live Transcoding, we now have two giant companies using that on the platform one for live sports broadcasting another for live user generated content.
Another customer we're hosting e-commerce sites for them in a way that performance better because the closer to the end user and less expensive.
AI Inferencing, you know for AD targeting a personalizing.
Personalizing content and again, you want to do that really fast and you just don't have time.
Backhaul that up you know.
Until a centralized location you want to be in a lot of locations around the world to get better performance and again.
We can do it at a lower cost we've even got a large you know one of the world's largest banks now.
Using us our edge compute to.
Cause Apple pay requires you to do the registration and 60 milliseconds and the only way they can get that done fast is to do it on akamai connected cloud. So really you know a lot of different applications already on the platform.
Proofs of concept now so the focus this year and I think it's a good pipeline appears to be taking on many more mission critical apps for major enterprises and of course worth whereas the first big one we've got you know enormous applications already running on the platform and very successfully.
And we do it in a multi cloud way.
As I talked about earlier, you know now we have the the global load balancing built in you know in the fail over capability.
So that it does make for a reliable service that's high performing.
So really excited about what's coming this year.
Yeah, it's great to hear the tie in with the and for thing and.
Mark Murphy: Apple pay as well.
So I appreciate the color of that and I wanted to ask you your you're providing the fiscal year guidance in constant currency and of course, we all understand it's going to be very difficult to predict the actual fluctuations in the in the spot market, but if if we look at it at current FX levels do you think it would skew that.
At 68% revenue growth level higher or lower I mean, if if if we were to try to translate it into reported U S dollars in our models right now today.
Mark Murphy: Yeah. So good question and I think the CPI report today gave you a good view of how things can change so quickly.
Mark Murphy: You know the market originally had thought there'd be a lot of rate cuts and now all of a sudden that doesn't look like it's going to happen and obviously currencies and interest rates are very closely aligned so.
If you look where I gave you. The 12 31 number. So obviously the dollar has gotten a bit stronger gave.
Gave you the numbers in terms of the.
Total non U S. Dollar. So you can kind of do some math it would still be in that range. Obviously, it would be a little bit of a headwind just given the.
But the dollar has gotten stronger since 12 31.
But I think you can take our Q1 guidance and sort of fold that in and think about the normal seasonality that you have and come up with an answer but it would be in that still be in that range, though.
And just to clarify just to clarify so it's still in that 6% to 8% range. If we put it in the U S. D or are you, saying, it's still kind of mid single digits, but maybe maybe something like a point lower.
Well no I'd say, if you if I mean, if you're using to spot rates as of today to simple math would suggest that it is yes. If you looked at you just take the midpoint of the guide and I, just say if I just use that and what the impact of the dollar has been it's still in that range.
You would ask could it be tight obviously you know the dollar was at 101 back at 12 31.
Mark Murphy: 106 in November.
Bouncing all over the place obviously, if it were to move.
You can do the math five or six points lower you could potentially get on the other side of that so again, it's just it'd be end up giving you guys a massive range that would be helpful.
What I'd rather do is just give you guys. The tools that you can do it yourself look and really get an understanding of the core business underneath that how is that.
Mark Murphy: I think it's much more important to understand.
Understood. Thank you very much and I want also thank Tom Barth for a lot of great interactions over the years.
The next question comes from Madeline Brooks of Bank of America. Please go ahead.
Okay. Thanks, so much for taking my questions Tonight I'm, just one on security.
<unk> is going to touch on this year and the rest of this year a trust portfolio trends that you've seen and maybe you know what's.
Are you feeling any additional competitive pressure now that the market has really expanded there and then I have one follow up.
Oh, Yeah, and web App firewall, we'd been in the market leader there.
10 years since we started that that marketplace with web App firewall as a service and after 10 years you do get you know competition.
Mark Murphy: But we're still the market leader by a good margin and that is a good growth business for us we've added a lot of capabilities on top.
Bot management and more recently account protector client side protection, so that customers of commerce sites can stay safe by going to the site you need going to need that now for compliance.
You know, there's a brand protector, so that's identifying the fishing sites and keeping them from stealing you know user information of course, we have been doing denial of service protection for a long long time now our market leadership position there.
And then you have on the enterprise side of course guard of course, we've talked about doing very well and I'm really excited about API security.
Mark Murphy: Over the longer term that becomes a bigger marketplace and just as important as web app firewall has become and our goal there is to become the market leader and already in the go to market motion. There is a strong synergy between web App firewall and API security, we built a very easy way to do a proof of concept for our web app.
Firewall customers and that's why we're getting a lot of early traction.
Also we've integrated with a lot of our load balancers and other firewalls out there so.
Mark Murphy: So that we can sign on new customers, who are not using akamai CDN or web app firewall.
So I think you know there's a variety of areas in security that are working very well for us.
Alright, thanks, so much that Tom and then just one quick one on compute you and I think if we think about earnings that have happened, so far, especially with hyperscale areas like AWS Microsoft meta.
I have heard this theme of the optimization.
In terms of cloud computing, meaning maybe you're ever going to see a little bit more investment in new workloads and just wondering if you've heard of any trends among your customers thinking about compute for the first time or maybe if you're seeing increased appetite for compute and for this coming year versus that 2023. Thanks. So much.
Yeah that computes to an enormous marketplace and growing rapidly and there's always new applications that are being created.
Not just migrating from a data center into the cloud, but just brand new applications.
And.
So that's why we're seeing you know a lot of traction also in some cases lift and shift out of a data center or out of our hyper scaler.
But it's just an enormous marketplace and a great place for us to operate and even those that are optimizing that sort of I guess not such a great thing for the hyper scaler, but we're part of that trend it's great for us because we can help customers reduce cloud spend.
Mark Murphy: And we've gotten very good feedback from our early adopters of Akamai connected cloud that they are saving a lot of money. So that the trend to optimization is up is a positive thing for akamai.
Yeah.
The next question comes from Rishi Deloria of RBC. Please go ahead.
Oh wonderful. Thanks, so much for taking my questions and let me Echo my colleagues in thanking Tom Barth quite a great decade, working with you and really excited for your next chapter.
I wanted to drill on <unk>, maybe going back to <unk>.
I guess number one can you talk a little bit about.
Are you, saying and what those use cases look like and it's one of those things that we hear a lot of talk about in theory, but maybe impracticality as youre talking with your customers and having those conversations what can that look like and what position gecko uniquely for that and then maybe financially to the extent I know it's still early are you assume.
Real gecko contribution on the compute line in your guidance for the year or is that something that as it gets traction could lead to more upside beyond what your model. Thank you.
Speaker Change: Great. So let me start.
Edge inferencing.
And so there's some of the examples I gave but that's exactly what's happening.
For commerce sites in figuring out you know in real time, what content, you're actually going to give to the user.
That's coming to the site AD targeting what add to that.
Speaker Change: Anything that involves personalization on the security side.
Inferencing is used to analyze real time data for example, even our own Bot management solution is that entity, that's coming to the site is it a bot or is it a human.
And even if it's a human and they have the right credentials is it the right human and you just AI and inferencing for that and you Gotta do it really fast you can't you know.
Afford to send it back to the centralized data centers, because you've got a.
Massive number of people that you've got a process in real time, especially if youre doing some kind of you know live events.
And so being at the edge of matters, because you can be scalable you can handle it locally you get great performance you can make it real time and Akamai has unique value proposition with gecko is that we're going to be able to now support is not in a few cities.
In 100 cities by the end of this year. So anything you can put it in the B M virtual machine, which is both things.
Youre going to be able to do that in 100 cities.
And then ultimately in hundreds of cities because we can put this in general Akamai edge Pops, and then next will be containers, which is pretty much. The rest of what you do in cloud computing, and then to be able to spend it all up automatically.
Yes, it's up it's a whole new concept for compute that I think is very powerful and theres a high overlap of wanting to do that with inferencing engines, where youre trying to do something intelligent based on that end user or that an entity that's interacting with the application.
Now in terms of Jaco.
Just now in the early stages of getting at the point, where in nine cities will get the chance you know new city up in another month or so by the end of the year will be in a total of 100 cities supporting compute so not a lot of revenue is factored into the guidance based on <unk> for this year that would come more next.
Year.
Speaker Change: So this year's revenue guidance is based on the original 25, you know core compute regions that we've set up by the end of last year.
Now we will deploy this and of course, just as fast as we can and as customers want to adopt it and hopefully we have the situation, where we want to build out more and more compute capacity because there's so much demand.
Speaker Change: For compute on Akamai and do you have any color you want to add around the guidance there.
No I think you captured it right Tom we don't we're not really anticipating anything I mean, one thing. We are doing this year is we are making changes to our comp plan with our reps. So that they're all I'll have to sell compute this year.
So you could see things reps get very creative I learned in sales comp drives behavior. So by leaning in here and making it something that all reps have to do we should see a lot more use cases, a lot more opportunities et cetera. So there's always a chance that we could be surprised here with the creativity of our field, bringing us opportunities, but we did not factor in anything.
Speaker Change: As it relates to gecko.
Speaker Change: Wonderful. Thank you so much guys.
Okay.
The next question comes from Michael Elia of P. D. Cowen. Please go ahead.
Great. Thanks for taking the questions two if I may just first on gekko, presumably the Pops that you have there already supporting security and delivery workloads just from an architecture perspective can you help us think about what expanding the compute platform into these pops means it's just additional colocation deployment.
Speaker Change: And on the Capex side networking gear and servers any color that you can give there in terms of the mechanics of what the expansion would look like and then second Ed you know last year, you were talking about elongation of enterprise sales cycles, just curious what youre seeing in terms of the buying behavior of the of your customer base any notable call out.
Speaker Change: Thank you.
Speaker Change: Alright, so I'll take the first one.
Gecko that is generally speaking an existing akamai edge pumps and in particular, they tend to be the larger ones, where we already have a lot of equipment, that's already connected into our backbone.
And what we'd be doing is adding additional servers and for compute it would be a beefier server.
And additional colo for those servers, but all the other infrastructure is generally already there and it's already connected in and we already have delivery and security operating there. So it does become a very efficient way for us to for to deploy Jackup and Ed do you want to take the second one there.
Sure Yeah, So I think the.
And obviously acquiring new customers is always challenging in an environment like this the one probably exception to that is in the security space.
That tends to be something that you know obviously now with the.
Requirements with the FCC reporting and added disclosure with <unk> being now potentially criminally charged for for breaches and things like that audit committee is spending more and more time on cyber security as a as a topic.
Speaker Change: That tends to be a budget that one you don't typically cut into your generally adding too, but new customers are challenging I do think this kind of environment helps us what we were just talking about the last few questions around optimizing cloud spend.
Certainly if you've seen what we've done we've seen as you know.
Speaker Change: Tremendous amount of money.
So I think that can also help us in this particular environment, but.
Definitely new customer acquisitions, a bit more challenging but.
Where we're still doing pretty well, obviously the environment can change but.
Speaker Change: It hasn't been a major factor for us yet.
Speaker Change: Great. Thank you.
The next question comes from Ryan Macdonald of Guggenheim Securities. Please go ahead.
Ryan Macdonald: Great. Thanks for sneaking me in maybe Tom just a follow up to a prior question as we think about Gekko and you mentioned that you're at your sites right now don't have full stack compute but how much work is done to be convert to converge. What you already have at your edge sites and what you've done in terms of building out with nodes capabilities should we expect there to be a common software.
Stack across both edge and centralized sites and if so what's the plan to have that in place by year end.
Yeah, Great question. So what we're doing now is as I've mentioned in the last question deploying more hardware and existing edge region and generally the larger edge regions. We already have network. There we already have delivery security located there.
There is some additional carlo in servers and yes. The goal is to put it all on one common software stack now initially we had the law node stack is moving into these edge pops for gecko, but as we want.
Once we get the support for virtual machines and containers than next we want to add the software stack that we have for delivery and for security and for function as a service that automatically for example, spins up Java script apps in milliseconds based on end user demand, we want all of that to be.
Operating on containers N V apps.
So that you don't have to think ahead of time about how many Vms do you want in each of these hundreds of cities suggests happens based on end user demand you automatically get new one spun up load balancing fail over really a very compelling concept.
And that doesn't exist in the cloud marketplace today.
That is the vision I think you really nailed it when you talked about the common software stack because only akamai.
Has that full edge platform today that software stack.
Around delivery and security that will be now including compute.
Great appreciate that color and maybe as a quick follow up Ed as we think about the expansion of the footprint last year can you help us understand as much as you can how much of the space. Currently built out was for internal use purposes to help with that third party cloud savings versus space. That's online now that's revenue generating and I know we've talked.
About this in the past, but any color around what we should expect from a customer utilization perspective that might be embedded in your guidance as we move through year end.
That would be helpful.
Yeah sure. So the majority of the growth in the compute guidance is going to come from enterprise compute so the stuff that we built out from last year.
So if you kind of go back and look at the math in terms of we've kind of said roughly speaking a dollar of capex as a dollar of revenue.
You can kind of look at what we're doing for compute build out now what we did last year. We said, we got about $100 million roughly for our all in our for our internal use.
So that leaves a pretty significant amount left for customer demand, though obviously.
Ryan Macdonald: The way people buy today, they pick a location et cetera, so it's not going to be exactly a dollar for dollar right now, but as a general rule of thumb. So I would say that the majority of what we built out as for customer usage.
Great. Thanks for sneaking me in I appreciate it.
Yeah.
The next question comes from Tim Horan of Oppenheimer. Please go ahead.
Thanks, guys all following up on raise questions. So I'm, assuming the goal here was to get to one single platform.
Where customers can access the full range of services relatively easily on I guess, one on ramp up.
When do you think you'll get there and secondly, the.
The gecko product it sounds like it's.
Absolutely surplus and is that a developer platform also thanks.
Yes, So I think one platform really in terms of being able to do everything together.
And all the same software so that we have our edge software running.
We are a seller note software that can spin up the EMS and containers, that's not till 2025.
You know we are first combining the infrastructure.
And of course customers can buy the services as a package we have common reporting now in many cases, but in terms of doing all of the automatic spinning up and truly server less used for Vms and containers I think 2025.
That.
And let's see so and what was the other question you had.
So the new product get go it is primarily a surplus product it sounds like and do you know.
Do you have all the support there for developers to completely.
Run their applications on this new platform.
Yes.
Depends how you define server list initially with gecko you would operate it the same way you would lienau do you decide how many you know vms and containers.
Or as you want in the various cities.
Ryan Macdonald: And it is very developer friendly works just like Leno. So if you're familiar there are that would now work in well at the end of the year 100 cities for your virtual machines now if you define server list to be which doesn't exist today, you're out in the marketplace for Vms and containers. So they just spin up automatically like we do.
Today for function as a service and for Java script, that's what comes 2025.
Speaker Change: If you don't mind me asking I mean, it sounds a lot like what cloud players doing but you're you're saying it doesn't exist today.
Speaker Change: Could you maybe talk about a little bit what's different what you do.
Yeah, that's a great question, they don't support Vms or containers at all.
Speaker Change: Never mind, several list or anything else.
They don't have support for that they don't do this.
This full stack cloud computing.
Got it thanks a lot.
Yeah.
The next question comes from Alex Henderson of Needham. Please go ahead.
Great.
So it seems pretty clear that <unk> bin.
A critical piece of your security growth and obviously.
Is perturbing the overall growth rate I was hoping you could give us some sense of what the security product lines. Excluding guard it looked like in terms of their growth rates.
Yes.
Any sizing of that growth would be.
Even a ballpark would be quite helpful.
Speaker Change: And then second I was hoping you could talk a little bit about your.
You mentioned inferencing, but.
Came in kind of as an afterthought as opposed to the primary focus.
Can you talk about your involvement in AI inferencing at the edge and to what extent.
Requires.
Hi, there.
The 2025.
Structure or what what needs you have there whether youre putting gpus.
The edge in order to facilitate that.
Ed do you want to go with the first one and I'll take the second one sure why don't I go with the first one on the spirit of it being a year end call I'll break out these numbers at a high level for you, but we won't be doing it every quarter.
If I look at the what we used to when we called the App and API security bucket. That's our largest bucket that includes bot management, our fraud products, our web app firewall, our new API security product that.
That's actually in Q4 growing over 20%.
So that's been incredible garner core itself.
If I normalize for the one time software that we did last Q4 is growing at about 63%.
Infrastructure and services are growing sub 10%.
Just to be clear is this the full year growth rate or is this the fourth quarter growth rate.
Fourth quarter gross growth rate the full year.
Yeah, I don't have that.
It's not.
About nutrition I, just didn't know what it.
Yes.
Okay. Yeah in terms of the question around inferencing, and AI and so forth.
Yeah.
We're building full stack compute.
To have great performance at a lower price point.
And have that available in hundreds of cities.
And one of the many things that you would do with that is AI inferencing.
And that's not an afterthought in fact, we've been using AI in our products for well 10 years.
You know and Bot management for example runs on Akamai connected cloud, it's one of many things that run on it.
So not an afterthought there is an enormous amount of buzz now about AI and I think a lot of that is justified and I think theres a lot more compute.
Be consumed because of a yacht.
And it is you know.
Strong use case.
Our customers that are using akamai connected cloud that said, it's not all a yacht.
You know our biggest customers are doing media workflow doing live transcoding.
And that's not using AI.
So I think AI is an important use case one of several use cases now in particular, you asked 24 versus 25.
It's being done already on our platform. So there's no need to wait till the end of the year unless you want to do it in 100 cities. Then that comes at the end of the year no need to wait to twenty-five win are the instances are spun up automatically instead of you know by design ahead of time the way compute works today.
So you talked about Gpus Akamai has gpus deployed we're deploying more we've used them in the past for graphics and going forward probably use them for Gen. AI you said, we're not really deploying them right now in the etch parts.
And that's not just because you don't need to it's not cost effective and the edge hops youre going to be doing the inferencing and for the inferencing.
Can use Gpus were also using Cpus and right now we get a better ROI on the Cpus.
So I guess theres a lot of confusion there as well now Gpus are critical for doing training.
You know for especially large language models and that's going to be done in the core and we're not supporting that as a key use case today, we could in theory right. We have all the technology to do it but that's not where we're focused in terms of getting the best ROI for our platform and for that matter most of the work with these models most.
The compute is done when you're using them for the insurance thing you know you do the training menu spend that's there. So it learns you can get it ready to go and then you operate it and it's the operation where most the vast majority of the cycles are and that can be done on Cpus and in many cases, the cases I mentioned.
You know for our personalization for security for data analytics.
Speaker Change: That's done on the edge more as good reason to be done there using CPU.
Based hardware.
Great. Thanks for the complete answer.
The next question comes from Jonathan Ho of William Blair. Please go ahead.
Hi, Good afternoon, just one question from me how important is the global load balancing capability and what does that maybe mean for your ability to either attract more customers or to drive revenue from that product. Thank you.
Yeah, that's a very helpful. Because it makes it much more scalable have fail over so much more reliable and I think it's a basic capability of course, we've had for forever at.
It seems in delivery and security and now that's available for compute so I think that's important and that greatly increases the market. We can go after for compute.
Yeah.
Thank you.
And operator, we have time for one last question.
Speaker Change: Our last question will come from Rudy Kessinger of D. A Davidson. Please go ahead.
Rudy Grayson Kessinger: Hey, Thanks for squeezing me in guys.
And if my math is correct, even if I exclude the 100 million in Capex on compute last year.
Intended for moving over internal workloads.
Between last year this year.
It looks to be about $400 million and compute capex and going back to that kind of one dollar of capex equals $1 of revenue capacity.
$40 million Capex, roughly $200 million of compute growth too.
<unk> 24 versus 22.
Do you feel like you guys are maybe over building at all or what gives you the confidence I guess in the pipeline and the ramping usage to spend so much on another round of build out this year when we're not yet seeing.
Growth accelerate right, you're guiding to 20% growth next year, that's flat with Q4.
Yeah. So I'll just let me address that part first so I would say if you look at the underlying components of what's what's growing.
That enterprise compute opportunity that is growing very very very fast like those numbers. The percentages would be kind of foolish to break out because theyre going off of small numbers and adding some pretty big numbers, but now also a part of our strategy is to be competitive and have big core centers in many cities and that does require a larger bill.
<unk>.
So there is some there's a lot of capacity that we have to sell.
And then also we're seeing demand in certain cities they have to build out more capacity, where you're getting demand and then the gecko sites that we're building out it's not a significant I mean, it's a.
Rudy Grayson Kessinger: Decent amount of capital, but I think that is another big key differentiator differentiated sorry differentiator for us and as Tom mentioned, we think there's a big opportunity there so.
So I know a lot of people have been questioning you know us being able to take on large workloads et cetera, we clearly have a lot of capacity out there as I talked about earlier, we made the change with our compensation plans, where our reps now have to sell compute so going to see a lot. There's a lot more at bats, we've done a tremendous amount with the platform in terms of adding functionality, we've built out to <unk>.
At four am connected it to our backbone and we have a lot of new compute partners. The platform is ready to be sold so we're pretty optimistic about it and I think were building at a pretty responsible manner as I talked about our capex is relatively modest.
For this business right now.
So I think we're in pretty good shape.
And with that that we'll end today's call I want to thank everyone for joining and have a great evening.
Rudy Grayson Kessinger: Yeah.
Thank you. Your conference has now concluded the conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
Yeah.
[music].