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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Akamai Technologies Inc | NASDAQ:AKAM | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.33 | 1.33% | 101.00 | 100.10 | 101.00 | 101.355 | 99.99 | 99.99 | 1,135,735 | 00:02:20 |
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended September 30, 2017
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to
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Delaware
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04-3432319
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
|
Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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(Do not check if a smaller reporting company)
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|
|
Page
|
|
||
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|
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Item 1.
|
||
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Consolidated Balance Sheets at September 30, 2017 and December 31, 2016
|
|
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Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016
|
|
|
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016
|
|
|
Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016
|
|
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Notes to Unaudited Consolidated Financial Statements
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Item 2.
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Item 3.
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Item 4.
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||
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Item 1.
|
||
Item 1A.
|
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Item 2.
|
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Item 6.
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||
|
|
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(in thousands, expect share data)
|
September 30,
2017 |
|
December 31,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
368,152
|
|
|
$
|
324,169
|
|
Marketable securities
|
383,849
|
|
|
512,849
|
|
||
Accounts receivable, net of reserves of $2,359 and $6,145 at September 30, 2017, and December 31, 2016, respectively
|
400,839
|
|
|
368,596
|
|
||
Prepaid expenses and other current assets
|
142,943
|
|
|
104,303
|
|
||
Total current assets
|
1,295,783
|
|
|
1,309,917
|
|
||
Property and equipment, net
|
883,754
|
|
|
801,017
|
|
||
Marketable securities
|
661,929
|
|
|
779,311
|
|
||
Goodwill
|
1,358,762
|
|
|
1,228,503
|
|
||
Acquired intangible assets, net
|
176,288
|
|
|
149,463
|
|
||
Deferred income tax assets
|
18,930
|
|
|
8,982
|
|
||
Other assets
|
113,688
|
|
|
95,953
|
|
||
Total assets
|
$
|
4,509,134
|
|
|
$
|
4,373,146
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
88,339
|
|
|
$
|
76,120
|
|
Accrued expenses
|
267,966
|
|
|
238,777
|
|
||
Deferred revenue
|
64,716
|
|
|
52,972
|
|
||
Other current liabilities
|
9,285
|
|
|
6,719
|
|
||
Total current liabilities
|
430,306
|
|
|
374,588
|
|
||
Deferred revenue
|
4,224
|
|
|
3,758
|
|
||
Deferred income tax liabilities
|
15,984
|
|
|
11,652
|
|
||
Convertible senior notes
|
657,131
|
|
|
640,087
|
|
||
Other liabilities
|
128,834
|
|
|
118,691
|
|
||
Total liabilities
|
1,236,479
|
|
|
1,148,776
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 700,000,000 shares authorized; 175,549,867 shares issued and 169,726,509 shares outstanding at September 30, 2017, and 173,254,797 shares issued and outstanding at December 31, 2016
|
1,755
|
|
|
1,733
|
|
||
Additional paid-in capital
|
4,363,876
|
|
|
4,239,588
|
|
||
Accumulated other comprehensive loss
|
(24,833
|
)
|
|
(56,222
|
)
|
||
Treasury stock, at cost, 5,823,358 shares at September 30, 2017, and no shares at December 31, 2016
|
(306,628
|
)
|
|
—
|
|
||
Accumulated deficit
|
(761,515
|
)
|
|
(960,729
|
)
|
||
Total stockholders’ equity
|
3,272,655
|
|
|
3,224,370
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,509,134
|
|
|
$
|
4,373,146
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
(in thousands, except per share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
$
|
621,399
|
|
|
$
|
584,065
|
|
|
$
|
1,839,544
|
|
|
$
|
1,723,925
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)
|
225,468
|
|
|
204,467
|
|
|
645,821
|
|
|
605,526
|
|
||||
Research and development
|
57,226
|
|
|
42,341
|
|
|
162,761
|
|
|
120,873
|
|
||||
Sales and marketing
|
120,220
|
|
|
102,626
|
|
|
353,218
|
|
|
308,060
|
|
||||
General and administrative
|
124,523
|
|
|
113,320
|
|
|
363,050
|
|
|
323,141
|
|
||||
Amortization of acquired intangible assets
|
7,753
|
|
|
6,598
|
|
|
23,075
|
|
|
20,025
|
|
||||
Restructuring charges
|
332
|
|
|
2,948
|
|
|
3,303
|
|
|
10,236
|
|
||||
Total costs and operating expenses
|
535,522
|
|
|
472,300
|
|
|
1,551,228
|
|
|
1,387,861
|
|
||||
Income from operations
|
85,877
|
|
|
111,765
|
|
|
288,316
|
|
|
336,064
|
|
||||
Interest income
|
4,463
|
|
|
3,809
|
|
|
13,368
|
|
|
10,522
|
|
||||
Interest expense
|
(4,746
|
)
|
|
(4,666
|
)
|
|
(13,989
|
)
|
|
(13,958
|
)
|
||||
Other income, net
|
535
|
|
|
778
|
|
|
414
|
|
|
1,004
|
|
||||
Income before provision for income taxes
|
86,129
|
|
|
111,686
|
|
|
288,109
|
|
|
333,632
|
|
||||
Provision for income taxes
|
25,617
|
|
|
35,686
|
|
|
88,895
|
|
|
109,139
|
|
||||
Net income
|
$
|
60,512
|
|
|
$
|
76,000
|
|
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.35
|
|
|
$
|
0.44
|
|
|
$
|
1.16
|
|
|
$
|
1.28
|
|
Diluted
|
$
|
0.35
|
|
|
$
|
0.43
|
|
|
$
|
1.15
|
|
|
$
|
1.27
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
170,976
|
|
|
174,429
|
|
|
172,269
|
|
|
175,444
|
|
||||
Diluted
|
171,505
|
|
|
175,617
|
|
|
173,371
|
|
|
176,525
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
60,512
|
|
|
$
|
76,000
|
|
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
7,379
|
|
|
(358
|
)
|
|
29,951
|
|
|
5,567
|
|
||||
Change in unrealized gain on investments, net of income tax provision (benefit) of $187, $(866), $868 and $1,445 for the three and nine months ended September 30, 2017 and 2016, respectively
|
310
|
|
|
(1,488
|
)
|
|
1,438
|
|
|
2,424
|
|
||||
Other comprehensive income (loss)
|
7,689
|
|
|
(1,846
|
)
|
|
31,389
|
|
|
7,991
|
|
||||
Comprehensive income
|
$
|
68,201
|
|
|
$
|
74,154
|
|
|
$
|
230,603
|
|
|
$
|
232,484
|
|
|
For the Nine Months
Ended September 30, |
||||||
(in thousands)
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
272,917
|
|
|
250,294
|
|
||
Stock-based compensation
|
122,103
|
|
|
105,304
|
|
||
Provision (benefit) for deferred income taxes
|
25,302
|
|
|
(13,861
|
)
|
||
Amortization of debt discount and issuance costs
|
13,989
|
|
|
13,958
|
|
||
Other non-cash reconciling items, net
|
3,655
|
|
|
8,367
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
||||
Accounts receivable
|
(19,199
|
)
|
|
22,477
|
|
||
Prepaid expenses and other current assets
|
(34,195
|
)
|
|
4,014
|
|
||
Accounts payable and accrued expenses
|
22,150
|
|
|
54,892
|
|
||
Deferred revenue
|
991
|
|
|
6,885
|
|
||
Other current liabilities
|
3,651
|
|
|
4,670
|
|
||
Other non-current assets and liabilities
|
(7,036
|
)
|
|
6,097
|
|
||
Net cash provided by operating activities
|
603,542
|
|
|
687,590
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Cash paid for acquired businesses, net of cash acquired
|
(197,201
|
)
|
|
(2,936
|
)
|
||
Purchases of property and equipment
|
(185,466
|
)
|
|
(134,874
|
)
|
||
Capitalization of internal-use software development costs
|
(122,460
|
)
|
|
(105,477
|
)
|
||
Purchases of short- and long-term marketable securities
|
(249,098
|
)
|
|
(614,808
|
)
|
||
Proceeds from sales of short- and long-term marketable securities
|
180,405
|
|
|
57,900
|
|
||
Proceeds from maturities of short- and long-term marketable securities
|
317,974
|
|
|
498,633
|
|
||
Other non-current assets and liabilities
|
(1,895
|
)
|
|
(3,145
|
)
|
||
Net cash used in investing activities
|
(257,741
|
)
|
|
(304,707
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds related to the issuance of common stock under stock plans
|
41,740
|
|
|
42,339
|
|
||
Employee taxes paid related to net share settlement of stock-based awards
|
(48,122
|
)
|
|
(38,560
|
)
|
||
Repurchases of common stock
|
(306,629
|
)
|
|
(294,867
|
)
|
||
Other non-current assets and liabilities
|
(1,096
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(314,107
|
)
|
|
(291,088
|
)
|
||
Effects of exchange rate changes on cash and cash equivalents
|
12,289
|
|
|
535
|
|
||
Net increase in cash and cash equivalents
|
43,983
|
|
|
92,330
|
|
||
Cash and cash equivalents at beginning of period
|
324,169
|
|
|
289,473
|
|
||
Cash and cash equivalents at end of period
|
$
|
368,152
|
|
|
$
|
381,803
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for income taxes, net of refunds received in the nine months ended September 30, 2017 and 2016 of $5,867 and $1,582, respectively
|
$
|
79,479
|
|
|
$
|
64,716
|
|
Non-cash investing activities:
|
|
|
|
||||
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses
|
29,546
|
|
|
35,176
|
|
||
Capitalization of stock-based compensation
|
21,602
|
|
|
17,086
|
|
|
Net Cash Provided by Operating Activities
|
|
Net Cash Used in Financing Activities
|
||||||||||||
|
As Reported
|
|
As Adjusted
|
|
As Reported
|
|
As Adjusted
|
||||||||
Year ended December 31, 2015
|
$
|
764,151
|
|
|
$
|
793,452
|
|
|
$
|
(267,728
|
)
|
|
$
|
(297,029
|
)
|
Three months ended March 31, 2016
|
190,238
|
|
|
191,373
|
|
|
(115,736
|
)
|
|
(116,871
|
)
|
||||
Six months ended June 30, 2016
|
433,110
|
|
|
435,742
|
|
|
(202,393
|
)
|
|
(205,025
|
)
|
||||
Nine months ended September 30, 2016
|
684,510
|
|
|
687,590
|
|
|
(288,008
|
)
|
|
(291,088
|
)
|
||||
Year Ended December 31, 2016
|
866,298
|
|
|
871,812
|
|
|
(354,265
|
)
|
|
(359,779
|
)
|
|
|
|
Gross Unrealized
|
|
|
|
Classification on Balance Sheet
|
||||||||||||||||
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Aggregate
Fair Value
|
|
Short-Term
Marketable
Securities
|
|
Long-Term
Marketable
Securities
|
||||||||||||
As of September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial paper
|
$
|
5,955
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
5,953
|
|
|
$
|
5,953
|
|
|
$
|
—
|
|
Corporate bonds
|
815,357
|
|
|
337
|
|
|
(1,797
|
)
|
|
813,897
|
|
|
319,136
|
|
|
494,761
|
|
||||||
U.S. government agency obligations
|
220,013
|
|
|
—
|
|
|
(1,180
|
)
|
|
218,833
|
|
|
58,706
|
|
|
160,127
|
|
||||||
|
$
|
1,041,325
|
|
|
$
|
337
|
|
|
$
|
(2,979
|
)
|
|
$
|
1,038,683
|
|
|
$
|
383,795
|
|
|
$
|
654,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial paper
|
$
|
40,965
|
|
|
$
|
—
|
|
|
$
|
(45
|
)
|
|
$
|
40,920
|
|
|
$
|
40,920
|
|
|
$
|
—
|
|
Corporate bonds
|
984,650
|
|
|
123
|
|
|
(3,697
|
)
|
|
981,076
|
|
|
418,495
|
|
|
562,581
|
|
||||||
U.S. government agency obligations
|
267,473
|
|
|
35
|
|
|
(1,366
|
)
|
|
266,142
|
|
|
53,157
|
|
|
212,985
|
|
||||||
|
$
|
1,293,088
|
|
|
$
|
158
|
|
|
$
|
(5,108
|
)
|
|
$
|
1,288,138
|
|
|
$
|
512,572
|
|
|
$
|
775,566
|
|
|
Total Fair Value
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
As of September 30, 2017
|
|
|
|
|
|
|
|
||||||||
Cash Equivalents and Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
26,201
|
|
|
$
|
26,201
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
5,953
|
|
|
—
|
|
|
5,953
|
|
|
—
|
|
||||
Corporate bonds
|
813,897
|
|
|
—
|
|
|
813,897
|
|
|
—
|
|
||||
U.S. government agency obligations
|
218,833
|
|
|
—
|
|
|
218,833
|
|
|
—
|
|
||||
Mutual funds
|
7,097
|
|
|
7,097
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
1,071,981
|
|
|
$
|
33,298
|
|
|
$
|
1,038,683
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration obligations related to completed acquisitions
|
$
|
(5,300
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(5,300
|
)
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2016
|
|
|
|
||||||||||||
Cash Equivalents and Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
8,726
|
|
|
$
|
8,726
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
40,920
|
|
|
—
|
|
|
40,920
|
|
|
—
|
|
||||
Corporate bonds
|
981,076
|
|
|
—
|
|
|
981,076
|
|
|
—
|
|
||||
U.S. government agency obligations
|
266,142
|
|
|
—
|
|
|
266,142
|
|
|
—
|
|
||||
Mutual funds
|
4,022
|
|
|
4,022
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
1,300,886
|
|
|
$
|
12,748
|
|
|
$
|
1,288,138
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration obligations related to completed acquisitions
|
$
|
(7,100
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7,100
|
)
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Due in 1 year or less
|
$
|
383,795
|
|
|
$
|
512,572
|
|
Due after 1 year through 5 years
|
654,888
|
|
|
775,566
|
|
||
|
$
|
1,038,683
|
|
|
$
|
1,288,138
|
|
|
Other Liabilities:
Contingent Consideration Obligation |
||
Balance as of January 1, 2017
|
$
|
(7,100
|
)
|
Fair value adjustment to contingent consideration included in general and administrative expense
|
550
|
|
|
Cash paid upon achievement of milestone
|
1,250
|
|
|
Balance as of September 30, 2017
|
$
|
(5,300
|
)
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Trade accounts receivable
|
$
|
285,310
|
|
|
$
|
260,976
|
|
Unbilled accounts receivable
|
117,888
|
|
|
113,765
|
|
||
Gross accounts receivable
|
403,198
|
|
|
374,741
|
|
||
Allowance for doubtful accounts
|
(2,055
|
)
|
|
(829
|
)
|
||
Reserve for cash-basis customers
|
(304
|
)
|
|
(5,316
|
)
|
||
Total accounts receivable reserves
|
(2,359
|
)
|
|
(6,145
|
)
|
||
Accounts receivable, net
|
$
|
400,839
|
|
|
$
|
368,596
|
|
Balance as of January 1, 2017
|
$
|
1,228,503
|
|
Acquisition of Soasta, Inc.
|
121,669
|
|
|
Measurement period adjustments
|
(216
|
)
|
|
Foreign currency translation
|
8,806
|
|
|
Balance as of September 30, 2017
|
$
|
1,358,762
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
||||||||||||
Completed technology
|
$
|
137,891
|
|
|
$
|
(61,499
|
)
|
|
$
|
76,392
|
|
|
$
|
119,091
|
|
|
$
|
(50,823
|
)
|
|
$
|
68,268
|
|
Customer-related intangible assets
|
221,010
|
|
|
(125,179
|
)
|
|
95,831
|
|
|
192,810
|
|
|
(114,209
|
)
|
|
78,601
|
|
||||||
Non-compete agreements
|
4,510
|
|
|
(3,751
|
)
|
|
759
|
|
|
5,030
|
|
|
(3,775
|
)
|
|
1,255
|
|
||||||
Trademarks and trade names
|
6,100
|
|
|
(2,794
|
)
|
|
3,306
|
|
|
3,700
|
|
|
(2,361
|
)
|
|
1,339
|
|
||||||
Acquired license rights
|
490
|
|
|
(490
|
)
|
|
—
|
|
|
490
|
|
|
(490
|
)
|
|
—
|
|
||||||
Total
|
$
|
370,001
|
|
|
$
|
(193,713
|
)
|
|
$
|
176,288
|
|
|
$
|
321,121
|
|
|
$
|
(171,658
|
)
|
|
$
|
149,463
|
|
Total purchase consideration
|
|
$
|
199,280
|
|
|
|
|
||
Allocation of the purchase consideration:
|
|
|
||
Cash
|
|
$
|
1,935
|
|
Accounts receivable
|
|
4,108
|
|
|
Prepaids and other current assets
|
|
1,143
|
|
|
Identifiable intangible assets
|
|
49,900
|
|
|
Goodwill
|
|
121,669
|
|
|
Deferred tax assets
|
|
35,121
|
|
|
Total assets acquired
|
|
213,876
|
|
|
Accounts payable
|
|
(1,119
|
)
|
|
Accrued liabilities
|
|
(3,915
|
)
|
|
Deferred revenue
|
|
(9,562
|
)
|
|
Total liabilities assumed
|
|
(14,596
|
)
|
|
Net assets acquired
|
|
$
|
199,280
|
|
|
Gross Carrying Amount
|
|
Weighted Average Useful Life (in years)
|
||
Completed technologies
|
$
|
18,800
|
|
|
4.1
|
Customer-related intangible assets
|
28,200
|
|
|
4.6
|
|
Trademarks
|
2,400
|
|
|
4.9
|
|
Non-compete agreements
|
500
|
|
|
1.9
|
|
Total
|
$
|
49,900
|
|
|
|
•
|
during any calendar quarter commencing after the calendar quarter ended June 30, 2014 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least
20
trading days (whether or not consecutive) during the period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130%
of the conversion price on each applicable trading day; or
|
•
|
during the
five
business day period after any
five
consecutive trading day period in which the trading price per
$1,000
principal amount of Notes for each trading day of the measurement period was less than
98%
of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or upon the occurrence of specified corporate events.
|
|
September 30,
2017 |
|
December 31, 2016
|
||||
Liability component:
|
|
|
|
||||
Principal
|
$
|
690,000
|
|
|
$
|
690,000
|
|
Less: debt discount and issuance costs, net of amortization
|
(32,869
|
)
|
|
(49,913
|
)
|
||
Net carrying amount
|
$
|
657,131
|
|
|
$
|
640,087
|
|
|
|
|
|
||||
Equity component:
|
$
|
101,276
|
|
|
$
|
101,276
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amortization of debt discount and issuance costs
|
$
|
5,731
|
|
|
$
|
5,534
|
|
|
$
|
17,044
|
|
|
$
|
16,457
|
|
Capitalization of interest expense
|
(985
|
)
|
|
(868
|
)
|
|
(3,055
|
)
|
|
(2,499
|
)
|
||||
Total interest expense
|
$
|
4,746
|
|
|
$
|
4,666
|
|
|
$
|
13,989
|
|
|
$
|
13,958
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of revenue
|
$
|
5,296
|
|
|
$
|
4,701
|
|
|
$
|
15,055
|
|
|
$
|
13,224
|
|
Research and development
|
10,100
|
|
|
7,727
|
|
|
28,743
|
|
|
20,917
|
|
||||
Sales and marketing
|
15,672
|
|
|
14,729
|
|
|
44,780
|
|
|
40,340
|
|
||||
General and administrative
|
10,780
|
|
|
11,495
|
|
|
33,525
|
|
|
30,823
|
|
||||
Total stock-based compensation
|
41,848
|
|
|
38,652
|
|
|
122,103
|
|
|
105,304
|
|
||||
Provision for income taxes
|
(11,211
|
)
|
|
(11,664
|
)
|
|
(41,417
|
)
|
|
(36,185
|
)
|
||||
Total stock-based compensation, net of income taxes
|
$
|
30,637
|
|
|
$
|
26,988
|
|
|
$
|
80,686
|
|
|
$
|
69,119
|
|
|
Foreign Currency Translation
|
|
Net Unrealized Gains on Investments
|
|
Total
|
||||||
Balance as of January 1, 2017
|
$
|
(59,017
|
)
|
|
$
|
2,795
|
|
|
$
|
(56,222
|
)
|
Other comprehensive gain
|
29,951
|
|
|
1,438
|
|
|
31,389
|
|
|||
Balance as of September 30, 2017
|
$
|
(29,066
|
)
|
|
$
|
4,233
|
|
|
$
|
(24,833
|
)
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
60,512
|
|
|
$
|
76,000
|
|
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Shares used for basic net income per share
|
170,976
|
|
|
174,429
|
|
|
172,269
|
|
|
175,444
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
150
|
|
|
341
|
|
|
279
|
|
|
380
|
|
||||
RSUs and DSUs
|
379
|
|
|
847
|
|
|
823
|
|
|
701
|
|
||||
Convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Warrants related to issuance of convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Shares used for diluted net income per share
|
171,505
|
|
|
175,617
|
|
|
173,371
|
|
|
176,525
|
|
||||
Basic net income per share
|
$
|
0.35
|
|
|
$
|
0.44
|
|
|
$
|
1.16
|
|
|
$
|
1.28
|
|
Diluted net income per share
|
$
|
0.35
|
|
|
$
|
0.43
|
|
|
$
|
1.15
|
|
|
$
|
1.27
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Stock options
|
25
|
|
|
36
|
|
|
13
|
|
|
74
|
|
Service-based RSUs
|
5,407
|
|
|
1,450
|
|
|
4,074
|
|
|
2,672
|
|
Performance-based RSUs
|
1,116
|
|
|
1,245
|
|
|
1,165
|
|
|
884
|
|
Convertible senior notes
|
7,704
|
|
|
7,704
|
|
|
7,704
|
|
|
7,704
|
|
Warrants related to issuance of convertible senior notes
|
7,704
|
|
|
7,704
|
|
|
7,704
|
|
|
7,704
|
|
Total shares excluded from computation
|
21,956
|
|
|
18,139
|
|
|
20,660
|
|
|
19,038
|
|
•
|
Increased sales of our security solutions have made a significant contribution to revenue growth, and we expect to continue our focus on security solutions in the future.
|
•
|
We have experienced increases in the amount of traffic delivered for customers that use our solutions for video, gaming, social media and software downloads, contributing to an increase in our revenue. However, from the second half of 2015 onward, our traffic growth rates have moderated, primarily due to the “do-it-yourself” efforts by some of our customers that are among the largest Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix. We refer to these companies as our Internet Platform Customers. These customers have increasingly elected to develop and rely on their own internal infrastructure to deliver more of their media content themselves rather than use our services. As a result, we are likely to continue experiencing lower revenue from these customers as compared to prior years. While we have not experienced a significant shift to internal infrastructure usage across the remainder of our media services customer base, we have experienced a moderation in traffic growth from these customers. Factors that may impact their usage of our services are competition (including using multiple providers to handle their traffic needs), contract renewal terms and changes in demand for their offerings. These factors are variable and unpredictable and could impact our revenue.
|
•
|
We have increased committed recurring revenue from our performance solutions by increasing sales of incremental services to our existing Web Division customers and by adding new customers. These increases helped to limit the impact of traffic moderation by certain customers (primarily those in our Media Division), as well as the effect of price decreases negotiated as part of contract renewals.
|
•
|
The unit prices paid by some of our customers have declined, reflecting the impact of competition. Our revenue would have been higher absent these price declines.
|
•
|
We have experienced variations in certain types of revenue from quarter to quarter. In particular, we experience higher revenue in the fourth quarter of the year for some of our solutions as a result of holiday season activity. We also earn less revenue in the summer months, particularly in Europe, from both e-commerce and media customers because overall Internet use declines during that time. In addition, we experience quarterly variations in revenue attributable to, among other things, the nature and timing of software and gaming releases by our customers using our software download solutions; whether there are large live sporting or other events that increase the amount of media traffic on our network; and the frequency and timing of purchases of custom services.
|
•
|
Network bandwidth costs represent a significant portion of our cost of revenue. Historically, we have been able to mitigate increases in these costs by reducing our network bandwidth costs per unit and investing in internal-use software development to improve the performance and efficiency of our network. Our total bandwidth costs may increase in the future as a result of expected higher traffic levels and serving more traffic from higher cost regions. We will need to continue to effectively manage our bandwidth costs to maintain current levels of profitability.
|
•
|
Co-location costs are also a significant portion of our cost of revenue. By improving our internal-use software and managing our hardware deployments to enable us to use servers more efficiently, we have been able to manage the growth of co-location costs. We expect to continue to scale our network in the future and will need to continue to effectively manage our co-location costs to maintain current levels of profitability.
|
•
|
Due to the fixed nature of some of our co-location and bandwidth costs over a minimum time period, it may not be possible to quickly reduce those costs. If our revenue growth rate declines, our profitability could decrease.
|
•
|
Payroll and related compensation costs have grown as we have increased headcount, particularly in our professional services and engineering teams to support our revenue growth and strategic initiatives. We increased our headcount by 949 employees during the
nine
-month period ended
September 30, 2017
, of which approximately 145 employees were from our acquisition of Soasta, Inc., or Soasta. During the year ended
December 31, 2016
, we increased our headcount by 406 employees. We expect to continue to hire additional employees, both domestically and internationally, in support of our strategic initiatives.
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
||||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)
|
36.3
|
|
|
35.0
|
|
|
35.1
|
|
|
35.1
|
|
Research and development
|
9.2
|
|
|
7.2
|
|
|
8.8
|
|
|
7.0
|
|
Sales and marketing
|
19.3
|
|
|
17.6
|
|
|
19.2
|
|
|
17.9
|
|
General and administrative
|
20.0
|
|
|
19.4
|
|
|
19.7
|
|
|
18.7
|
|
Amortization of acquired intangible assets
|
1.2
|
|
|
1.1
|
|
|
1.3
|
|
|
1.2
|
|
Restructuring charges
|
0.1
|
|
|
0.5
|
|
|
0.2
|
|
|
0.6
|
|
Total costs and operating expenses
|
86.1
|
|
|
80.8
|
|
|
84.3
|
|
|
80.5
|
|
Income from operations
|
13.9
|
|
|
19.2
|
|
|
15.7
|
|
|
19.5
|
|
Interest income
|
0.7
|
|
|
0.7
|
|
|
0.7
|
|
|
0.6
|
|
Interest expense
|
(0.8
|
)
|
|
(0.8
|
)
|
|
(0.8
|
)
|
|
(0.8
|
)
|
Other income, net
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Income before provision for income taxes
|
13.9
|
|
|
19.2
|
|
|
15.7
|
|
|
19.4
|
|
Provision for income taxes
|
4.1
|
|
|
6.1
|
|
|
4.8
|
|
|
6.3
|
|
Net income
|
9.8
|
%
|
|
13.1
|
%
|
|
10.9
|
%
|
|
13.1
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
||||||||||||
Revenue
|
$
|
621,399
|
|
|
$
|
584,065
|
|
|
6.4
|
%
|
|
6.3
|
%
|
|
$
|
1,839,544
|
|
|
$
|
1,723,925
|
|
|
6.7
|
%
|
|
7.2
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
||||||||||||
Web Division
|
$
|
327,926
|
|
|
$
|
288,104
|
|
|
13.8
|
%
|
|
13.7
|
%
|
|
$
|
947,600
|
|
|
$
|
828,662
|
|
|
14.4
|
%
|
|
14.9
|
%
|
Media Division
|
273,415
|
|
|
276,205
|
|
|
(1.0
|
)
|
|
(1.2
|
)
|
|
834,887
|
|
|
843,756
|
|
|
(1.1
|
)
|
|
(1.0
|
)
|
||||
Enterprise and Carrier Division
|
20,058
|
|
|
19,756
|
|
|
1.5
|
|
|
1.3
|
|
|
57,057
|
|
|
51,507
|
|
|
10.8
|
|
|
10.9
|
|
||||
Total revenue
|
$
|
621,399
|
|
|
$
|
584,065
|
|
|
6.4
|
%
|
|
6.3
|
%
|
|
$
|
1,839,544
|
|
|
$
|
1,723,925
|
|
|
6.7
|
%
|
|
7.2
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
||||||||||||
Performance and Security Solutions
|
$
|
381,461
|
|
|
$
|
345,118
|
|
|
10.5
|
%
|
|
10.4
|
%
|
|
$
|
1,126,416
|
|
|
$
|
987,623
|
|
|
14.1
|
%
|
|
14.6
|
%
|
Media Delivery Solutions
|
182,753
|
|
|
188,075
|
|
|
(2.8
|
)
|
|
(3.0
|
)
|
|
549,054
|
|
|
591,091
|
|
|
(7.1
|
)
|
|
(6.8
|
)
|
||||
Services and Support Solutions
|
57,185
|
|
|
50,872
|
|
|
12.4
|
|
|
12.4
|
|
|
164,074
|
|
|
145,211
|
|
|
13.0
|
|
|
13.5
|
|
||||
Total revenue
|
$
|
621,399
|
|
|
$
|
584,065
|
|
|
6.4
|
%
|
|
6.3
|
%
|
|
$
|
1,839,544
|
|
|
$
|
1,723,925
|
|
|
6.7
|
%
|
|
7.2
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
|
2017
|
|
2016
|
|
% Change
|
|
% Change at Constant Currency
|
||||||||||||
U.S.
|
$
|
408,544
|
|
|
$
|
404,065
|
|
|
1.1
|
%
|
|
1.1
|
%
|
|
$
|
1,218,194
|
|
|
$
|
1,196,433
|
|
|
1.8
|
%
|
|
1.7
|
%
|
International
|
212,855
|
|
|
180,000
|
|
|
18.3
|
|
|
17.8
|
|
|
621,350
|
|
|
527,492
|
|
|
17.8
|
|
|
19.5
|
|
||||
Total revenue
|
$
|
621,399
|
|
|
$
|
584,065
|
|
|
6.4
|
%
|
|
6.3
|
%
|
|
$
|
1,839,544
|
|
|
$
|
1,723,925
|
|
|
6.7
|
%
|
|
7.2
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Bandwidth fees
|
$
|
42,717
|
|
|
$
|
42,099
|
|
|
1.5
|
%
|
|
$
|
125,438
|
|
|
$
|
125,876
|
|
|
(0.3
|
)%
|
Co-location fees
|
33,474
|
|
|
32,987
|
|
|
1.5
|
|
|
96,826
|
|
|
98,804
|
|
|
(2.0
|
)
|
||||
Network build-out and supporting services
|
18,742
|
|
|
14,285
|
|
|
31.2
|
|
|
54,477
|
|
|
44,957
|
|
|
21.2
|
|
||||
Payroll and related costs
|
55,499
|
|
|
49,169
|
|
|
12.9
|
|
|
160,465
|
|
|
140,475
|
|
|
14.2
|
|
||||
Stock-based compensation, including amortization of prior capitalized amounts
|
10,033
|
|
|
8,012
|
|
|
25.2
|
|
|
26,681
|
|
|
23,002
|
|
|
16.0
|
|
||||
Depreciation of network equipment
|
35,943
|
|
|
35,402
|
|
|
1.5
|
|
|
106,602
|
|
|
105,883
|
|
|
0.7
|
|
||||
Amortization of internal-use software
|
29,060
|
|
|
22,513
|
|
|
29.1
|
|
|
75,332
|
|
|
66,526
|
|
|
13.2
|
|
||||
Total cost of revenue
|
$
|
225,468
|
|
|
$
|
204,467
|
|
|
10.3
|
%
|
|
$
|
645,821
|
|
|
$
|
605,523
|
|
|
6.7
|
%
|
As a percentage of revenue
|
36.3
|
%
|
|
35.0
|
%
|
|
|
|
35.1
|
%
|
|
35.1
|
%
|
|
|
•
|
payroll and related costs, as well as stock-based compensation, due to increased hiring in our services team to support revenue growth;
|
•
|
amounts paid for network build-out and supporting services related to investments in network expansion to support our security infrastructure growth; and
|
•
|
amortization of internal-use software as we continued to release internally-developed software onto our network, particularly during the three-month period ended September 30, 2017.
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Payroll and related costs
|
$
|
85,528
|
|
|
$
|
63,927
|
|
|
33.8
|
%
|
|
$
|
239,312
|
|
|
$
|
189,734
|
|
|
26.1
|
%
|
Stock-based compensation
|
10,100
|
|
|
7,727
|
|
|
30.7
|
|
|
28,743
|
|
|
20,917
|
|
|
37.4
|
|
||||
Capitalized salaries and related costs
|
(40,353
|
)
|
|
(30,429
|
)
|
|
32.6
|
|
|
(111,208
|
)
|
|
(93,557
|
)
|
|
18.9
|
|
||||
Other expenses
|
1,951
|
|
|
1,116
|
|
|
74.8
|
|
|
5,914
|
|
|
3,779
|
|
|
56.5
|
|
||||
Total research and development
|
$
|
57,226
|
|
|
$
|
42,341
|
|
|
35.2
|
%
|
|
$
|
162,761
|
|
|
$
|
120,873
|
|
|
34.7
|
%
|
As a percentage of revenue
|
9.2
|
%
|
|
7.2
|
%
|
|
|
|
8.8
|
%
|
|
7.0
|
%
|
|
|
•
|
payroll and related costs as a result of headcount growth to support investments in new product development and network scaling, and as a result of our recent acquisitions; and
|
•
|
stock-based compensation due to increased headcount, in addition to market adjustments of award sizes due to competition for certain engineering talent.
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Payroll and related costs
|
$
|
87,152
|
|
|
$
|
75,351
|
|
|
15.7
|
%
|
|
$
|
253,994
|
|
|
$
|
226,179
|
|
|
12.3
|
%
|
Stock-based compensation
|
15,672
|
|
|
14,729
|
|
|
6.4
|
|
|
44,780
|
|
|
40,340
|
|
|
11.0
|
|
||||
Marketing programs and related costs
|
10,299
|
|
|
7,529
|
|
|
36.8
|
|
|
31,988
|
|
|
23,137
|
|
|
38.3
|
|
||||
Other expenses
|
7,097
|
|
|
5,017
|
|
|
41.5
|
|
|
22,456
|
|
|
18,404
|
|
|
22.0
|
|
||||
Total sales and marketing
|
$
|
120,220
|
|
|
$
|
102,626
|
|
|
17.1
|
%
|
|
$
|
353,218
|
|
|
$
|
308,060
|
|
|
14.7
|
%
|
As a percentage of revenue
|
19.3
|
%
|
|
17.6
|
%
|
|
|
|
19.2
|
%
|
|
17.9
|
%
|
|
|
•
|
payroll and related costs from headcount increases to enable our Web and Enterprise and Carrier Divisions' go-to-market strategies in support of growth opportunities; and
|
•
|
marketing programs and related costs in support of our go-to-market strategy and ongoing geographic expansion.
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Payroll and related costs
|
$
|
51,605
|
|
|
$
|
42,004
|
|
|
22.9
|
%
|
|
$
|
144,012
|
|
|
$
|
122,367
|
|
|
17.7
|
%
|
Stock-based compensation
|
10,780
|
|
|
11,495
|
|
|
(6.2
|
)
|
|
33,525
|
|
|
30,823
|
|
|
8.8
|
|
||||
Depreciation and amortization
|
19,686
|
|
|
16,688
|
|
|
18.0
|
|
|
56,283
|
|
|
48,081
|
|
|
17.1
|
|
||||
Facilities-related costs
|
20,399
|
|
|
18,337
|
|
|
11.2
|
|
|
59,381
|
|
|
53,545
|
|
|
10.9
|
|
||||
Provision for doubtful accounts
|
1,499
|
|
|
278
|
|
|
439.2
|
|
|
2,404
|
|
|
1,106
|
|
|
117.4
|
|
||||
Acquisition-related costs
|
773
|
|
|
236
|
|
|
227.5
|
|
|
4,803
|
|
|
490
|
|
|
880.2
|
|
||||
License of patent
|
(4,128
|
)
|
|
(4,415
|
)
|
|
(6.5
|
)
|
|
(12,252
|
)
|
|
(4,415
|
)
|
|
177.5
|
|
||||
Professional fees and other expenses
|
23,909
|
|
|
28,697
|
|
|
(16.7
|
)
|
|
74,894
|
|
|
71,144
|
|
|
5.3
|
|
||||
Total general and administrative
|
$
|
124,523
|
|
|
$
|
113,320
|
|
|
9.9
|
%
|
|
$
|
363,050
|
|
|
$
|
323,141
|
|
|
12.4
|
%
|
As a percentage of revenue
|
20.0
|
%
|
|
19.4
|
%
|
|
|
|
19.7
|
%
|
|
18.7
|
%
|
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Amortization of acquired intangible assets
|
$
|
7,753
|
|
|
$
|
6,598
|
|
|
17.5
|
%
|
|
$
|
23,075
|
|
|
$
|
20,025
|
|
|
15.2
|
%
|
As a percentage of revenue
|
1.2
|
%
|
|
1.1
|
%
|
|
|
|
1.3
|
%
|
|
1.2
|
%
|
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Restructuring charges
|
$
|
332
|
|
|
$
|
2,948
|
|
|
(88.7
|
)
|
|
$
|
3,303
|
|
|
$
|
10,236
|
|
|
(67.7
|
)
|
As a percentage of revenue
|
0.1
|
%
|
|
0.5
|
%
|
|
|
|
0.2
|
%
|
|
0.6
|
%
|
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Interest income
|
$
|
4,463
|
|
|
$
|
3,809
|
|
|
17.2
|
%
|
|
$
|
13,368
|
|
|
$
|
10,522
|
|
|
27.0
|
%
|
As a percentage of revenue
|
0.7
|
%
|
|
0.7
|
%
|
|
|
|
0.7
|
%
|
|
0.6
|
%
|
|
|
||||||
Interest expense
|
$
|
(4,746
|
)
|
|
$
|
(4,666
|
)
|
|
1.7
|
|
|
$
|
(13,989
|
)
|
|
$
|
(13,958
|
)
|
|
0.2
|
|
As a percentage of revenue
|
(0.8
|
)%
|
|
(0.8
|
)%
|
|
|
|
(0.8
|
)%
|
|
(0.8
|
)%
|
|
|
||||||
Other income, net
|
$
|
535
|
|
|
$
|
778
|
|
|
(31.2
|
)
|
|
$
|
414
|
|
|
$
|
1,004
|
|
|
(58.8
|
)
|
As a percentage of revenue
|
0.1
|
%
|
|
0.1
|
%
|
|
|
|
—
|
%
|
|
0.1
|
%
|
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Provision for income taxes
|
$
|
25,617
|
|
|
$
|
35,686
|
|
|
(28.2
|
)%
|
|
$
|
88,895
|
|
|
$
|
109,139
|
|
|
(18.5
|
)%
|
As a percentage of revenue
|
4.1
|
%
|
|
6.1
|
%
|
|
|
|
4.8
|
%
|
|
6.3
|
%
|
|
|
||||||
Effective income tax rate
|
29.7
|
%
|
|
32.0
|
%
|
|
|
|
30.9
|
%
|
|
32.7
|
%
|
|
|
•
|
Amortization of acquired intangible assets
–
We have incurred amortization of intangible assets, included in our GAAP financial statements, related to various acquisitions we have made. The amount of an acquisition's purchase price allocated to intangible assets and term of its related amortization can vary significantly and are unique to each acquisition; therefore, we exclude amortization of acquired intangible assets from our non-GAAP financial measures to provide investors with a consistent basis for comparing pre- and post-acquisition operating results.
|
•
|
Stock-based compensation and amortization of capitalized stock-based compensation
–
Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to evaluate; therefore, we believe it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from our non-GAAP financial measures in order to highlight the performance of our core business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies.
|
•
|
Acquisition-related costs
–
Acquisition-related costs include transaction fees, advisory fees, due diligence costs and other direct costs associated with strategic activities. In addition, subsequent adjustments to our initial estimated amounts of contingent consideration and indemnification associated with specific acquisitions are included within acquisition-related costs. These amounts are impacted by the timing and size of the acquisitions. We exclude acquisition-related costs from our non-GAAP financial measures to provide a useful comparison of our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of our acquisition transactions.
|
•
|
Restructuring charges
–
We have incurred restructuring charges that are included in our GAAP financial statements, primarily related to workforce reductions and estimated costs of exiting facility lease commitments. We exclude these items from our non-GAAP financial measures when evaluating our continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or historical operations of our business.
|
•
|
Amortization of debt discount and issuance costs and amortization of capitalized interest expense
–
In February 2014, we issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rate of the convertible senior notes was approximately 3.2%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity under GAAP, thereby reducing the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. All of our interest expense is comprised of these non-cash components and is excluded from management's assessment of our operating performance because management believes the non-cash expense is not representative of ongoing operating performance
.
|
•
|
Gains and losses on investments
–
We have recorded gains and losses from the disposition and impairment of certain investments. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them occur infrequently and are not representative of our core business operations and ongoing operating performance
.
|
•
|
Legal matter costs
–
We have incurred losses from the settlement of legal matters and costs with respect to our internal U.S. Foreign Corrupt Practices Act investigation in addition to the disgorgement we were required to pay to resolve it. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations.
|
•
|
Income tax effect of non-GAAP adjustments and certain discrete tax items
–
The non-GAAP adjustments described above are reported on a pre-tax basis. The income tax effect of non-GAAP adjustments is the difference between GAAP and non-GAAP income tax expense. Non-GAAP income tax expense is computed on non-GAAP pre-tax income (GAAP pre-tax income adjusted for non-GAAP adjustments) and excludes certain discrete tax items (such as recording or releasing of valuation allowances), if any. We believe that applying the non-GAAP adjustments and their related income tax effect allows us to highlight income attributable to our core operations.
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income from operations
|
$
|
85,877
|
|
|
$
|
111,765
|
|
|
$
|
288,316
|
|
|
$
|
336,064
|
|
Amortization of acquired intangible assets
|
7,753
|
|
|
6,598
|
|
|
23,075
|
|
|
20,025
|
|
||||
Stock-based compensation
|
41,848
|
|
|
38,652
|
|
|
122,103
|
|
|
105,304
|
|
||||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
5,736
|
|
|
3,983
|
|
|
14,203
|
|
|
11,662
|
|
||||
Restructuring charges
|
332
|
|
|
2,948
|
|
|
3,303
|
|
|
10,236
|
|
||||
Acquisition-related costs
|
530
|
|
|
241
|
|
|
3,379
|
|
|
523
|
|
||||
Legal matter costs
|
—
|
|
|
—
|
|
|
—
|
|
|
890
|
|
||||
Non-GAAP income from operations
|
$
|
142,076
|
|
|
$
|
164,187
|
|
|
$
|
454,379
|
|
|
$
|
484,704
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP operating margin
|
14
|
%
|
|
19
|
%
|
|
16
|
%
|
|
19
|
%
|
||||
Non-GAAP operating margin
|
23
|
%
|
|
28
|
%
|
|
25
|
%
|
|
28
|
%
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
60,512
|
|
|
$
|
76,000
|
|
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Amortization of acquired intangible assets
|
7,753
|
|
|
6,598
|
|
|
23,075
|
|
|
20,025
|
|
||||
Stock-based compensation
|
41,848
|
|
|
38,652
|
|
|
122,103
|
|
|
105,304
|
|
||||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
5,736
|
|
|
3,983
|
|
|
14,203
|
|
|
11,662
|
|
||||
Restructuring charges
|
332
|
|
|
2,948
|
|
|
3,303
|
|
|
10,236
|
|
||||
Acquisition-related costs
|
530
|
|
|
241
|
|
|
3,379
|
|
|
523
|
|
||||
Legal matter costs
|
—
|
|
|
—
|
|
|
—
|
|
|
890
|
|
||||
Amortization of debt discount and issuance costs
|
4,746
|
|
|
4,666
|
|
|
13,989
|
|
|
13,958
|
|
||||
Income tax effect of above non-GAAP adjustments and certain discrete tax items
|
(14,802
|
)
|
|
(12,939
|
)
|
|
(44,243
|
)
|
|
(37,094
|
)
|
||||
Non-GAAP net income
|
$
|
106,655
|
|
|
$
|
120,149
|
|
|
$
|
335,023
|
|
|
$
|
349,997
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
GAAP net income per diluted share
|
$
|
0.35
|
|
|
$
|
0.43
|
|
|
$
|
1.15
|
|
|
$
|
1.27
|
|
Amortization of acquired intangible assets
|
0.05
|
|
|
0.04
|
|
|
0.13
|
|
|
0.11
|
|
||||
Stock-based compensation
|
0.24
|
|
|
0.22
|
|
|
0.70
|
|
|
0.60
|
|
||||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
0.03
|
|
|
0.02
|
|
|
0.08
|
|
|
0.07
|
|
||||
Restructuring charges
|
—
|
|
|
0.02
|
|
|
0.02
|
|
|
0.06
|
|
||||
Acquisition-related costs
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
||||
Legal matter costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Amortization of debt discount and issuance costs
|
0.03
|
|
|
0.03
|
|
|
0.08
|
|
|
0.08
|
|
||||
Income tax effect of above non-GAAP adjustments and certain discrete tax items
|
(0.09
|
)
|
|
(0.07
|
)
|
|
(0.26
|
)
|
|
(0.21
|
)
|
||||
Non-GAAP net income per diluted share
|
$
|
0.62
|
|
|
$
|
0.68
|
|
|
$
|
1.93
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
||||||||
Shares used in diluted per share calculations
|
171,505
|
|
|
175,617
|
|
|
173,371
|
|
|
176,525
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
60,512
|
|
|
$
|
76,000
|
|
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Amortization of acquired intangible assets
|
7,753
|
|
|
6,598
|
|
|
23,075
|
|
|
20,025
|
|
||||
Stock-based compensation
|
41,848
|
|
|
38,652
|
|
|
122,103
|
|
|
105,304
|
|
||||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
5,736
|
|
|
3,983
|
|
|
14,203
|
|
|
11,662
|
|
||||
Restructuring charges
|
332
|
|
|
2,948
|
|
|
3,303
|
|
|
10,236
|
|
||||
Acquisition-related costs
|
530
|
|
|
241
|
|
|
3,379
|
|
|
523
|
|
||||
Legal matter costs
|
—
|
|
|
—
|
|
|
—
|
|
|
890
|
|
||||
Interest income
|
(4,463
|
)
|
|
(3,809
|
)
|
|
(13,368
|
)
|
|
(10,522
|
)
|
||||
Amortization of debt discount and issuance costs
|
4,746
|
|
|
4,666
|
|
|
13,989
|
|
|
13,958
|
|
||||
Provision for income taxes
|
25,617
|
|
|
35,686
|
|
|
88,895
|
|
|
109,139
|
|
||||
Depreciation and amortization
|
83,689
|
|
|
73,930
|
|
|
235,639
|
|
|
218,607
|
|
||||
Other (income), net
|
(535
|
)
|
|
(778
|
)
|
|
(414
|
)
|
|
(1,004
|
)
|
||||
Adjusted EBITDA
|
$
|
225,765
|
|
|
$
|
238,117
|
|
|
$
|
690,018
|
|
|
$
|
703,311
|
|
Adjusted EBITDA margin
|
36
|
%
|
|
41
|
%
|
|
38
|
%
|
|
41
|
%
|
|
For the Nine Months
Ended September 30, |
||||||
(in thousands)
|
2017
|
|
2016
|
||||
Net income
|
$
|
199,214
|
|
|
$
|
224,493
|
|
Non-cash reconciling items included in net income
|
437,966
|
|
|
364,062
|
|
||
Changes in operating assets and liabilities
|
(33,638
|
)
|
|
99,035
|
|
||
Net cash flows provided by operating activities
|
$
|
603,542
|
|
|
$
|
687,590
|
|
|
For the Nine Months
Ended September 30, |
||||||
(in thousands)
|
2017
|
|
2016
|
||||
Cash paid for acquired businesses, net of cash acquired
|
$
|
(197,201
|
)
|
|
$
|
(2,936
|
)
|
Purchases of property and equipment and capitalization of internal-use software development costs
|
(307,926
|
)
|
|
(240,351
|
)
|
||
Net marketable securities activity
|
249,281
|
|
|
(58,275
|
)
|
||
Other investing activity
|
(1,895
|
)
|
|
(3,145
|
)
|
||
Net cash used in investing activities
|
$
|
(257,741
|
)
|
|
$
|
(304,707
|
)
|
|
For the Nine Months
Ended September 30, |
||||||
(in thousands)
|
2017
|
|
2016
|
||||
Activity related to stock-based compensation
|
$
|
(6,382
|
)
|
|
$
|
3,779
|
|
Repurchases of common stock
|
(306,629
|
)
|
|
(294,867
|
)
|
||
Other financing activities
|
(1,096
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
$
|
(314,107
|
)
|
|
$
|
(291,088
|
)
|
•
|
the pace of introduction of over-the-top (often referred to as OTT) video delivery initiatives by our customers;
|
•
|
the popularity of our customers' streaming offerings as compared to those offered by companies that do not use our services;
|
•
|
customers, particularly large Internet platform companies, utilizing their own data centers and implementing delivery approaches that limit or eliminate reliance on third party providers like us; and
|
•
|
macro-economic market and industry pressures.
|
•
|
inability to increase sales of our core services and advanced features;
|
•
|
increased headcount expenses;
|
•
|
changes in our customers' business models that we do not fully anticipate or that we fail to address adequately; and
|
•
|
increased reliance by customers on our secure socket layer, or SSL, network which is more expensive to maintain and operate.
|
•
|
our customers or partners becoming our competitors;
|
•
|
our network suppliers becoming partners with us or, conversely, no longer seeking to work with us;
|
•
|
our working more closely with hardware providers;
|
•
|
large technology companies that previously did not appear to show interest in the markets we seek to address entering into those markets as competitors; and
|
•
|
needing to expand into new lines of business or to change or abandon existing strategies.
|
•
|
develop superior products or services, gain greater market acceptance, and expand their service offerings more efficiently or more rapidly;
|
•
|
adapt to new or emerging technologies and changes in customer requirements more quickly;
|
•
|
take advantage of acquisition and other opportunities more readily;
|
•
|
adopt more aggressive pricing policies and allocate greater resources to the promotion, marketing, and sales of their services; and
|
•
|
dedicate greater resources to the research and development of their products and services.
|
•
|
attract customers by offering less sophisticated versions of services than we provide at lower prices than those we charge;
|
•
|
develop new business models that are disruptive to us; and
|
•
|
respond more quickly than we can to new or emerging technologies, changes in customer requirements and market and industry developments, resulting in them being able to provide superior offerings to ours.
|
•
|
pursue a "do-it-yourself" approach by putting in place equipment, software and other technology solutions for content and application delivery within their internal systems;
|
•
|
lead to the dissemination of proprietary information or sensitive, personal or confidential data about us, our employees or our customers;
|
•
|
threaten our ability to provide our customers with our services;
|
•
|
generate negative publicity about us;
|
•
|
result in litigation and increased legal liability or fines; or
|
•
|
lead to governmental inquiry or oversight.
|
•
|
difficulty integrating the operations and personnel of acquired companies;
|
•
|
potential disruption of our ongoing business;
|
•
|
potential distraction of management;
|
•
|
diversion of business resources from core operations;
|
•
|
expenses related to the transactions;
|
•
|
failure to realize expected revenue gains, synergies or other benefits;
|
•
|
increased accounting charges such as impairment of goodwill or intangible assets, amortization of intangible assets acquired and a reduction in the useful lives of intangible assets acquired; and
|
•
|
potential unknown liabilities associated with acquired businesses.
|
•
|
quarterly variations in operating results;
|
•
|
announcements by our customers related to their businesses that could be viewed as impacting their usage of our solutions;
|
•
|
market speculation about whether we are a takeover target;
|
•
|
activism by any single large stockholder or combination of stockholders;
|
•
|
changes in financial estimates and recommendations by securities analysts;
|
•
|
failure to meet the expectations of securities analysts;
|
•
|
purchases or sales of our stock by our officers and directors;
|
•
|
macro-economic factors;
|
•
|
repurchases of shares of our common stock;
|
•
|
successful cyber-attacks against our network or systems or those or our business partners or third-party vendors;
|
•
|
performance by other companies in our industry; and
|
•
|
geopolitical conditions such as acts of terrorism or military conflicts.
|
•
|
currency exchange rate fluctuations and limitations on the repatriation and investment of funds;
|
•
|
difficulties in transferring funds from, or converting currencies in, certain countries;
|
•
|
regulations related to security requirements, data localization or restricting content that could pose risks to our intellectual property, increase the cost of doing business in a country or create other disadvantages to our business;
|
•
|
interpretations of laws or regulations that would subject us to regulatory supervision or, in the alternative, require us to exit a country, which could have a negative impact on the quality of our services or our results of operations;
|
•
|
uncertainty regarding liability for content or services;
|
•
|
adjusting to different employee/employer relationships and different regulations governing such relationships;
|
•
|
corporate and personal liability for alleged or actual violations of laws and regulations;
|
•
|
difficulty in staffing, developing and managing foreign operations as a result of distance, language and cultural differences;
|
•
|
reliance on channel partners over which we have limited control or influence on a day-to-day basis; and
|
•
|
potentially adverse tax consequences.
|
•
|
anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and local laws prohibiting corrupt payments to governmental officials; and
|
•
|
antitrust and competition regulations.
|
•
|
cease selling, incorporating or using features, functionalities, products or services that incorporate the challenged intellectual property;
|
•
|
pay substantial damages and incur significant litigation expenses;
|
•
|
obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; or
|
•
|
redesign products or services.
|
•
|
a classified board structure so that only approximately one-third of our Board of Directors is up for re-election in any one year;
|
•
|
our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director;
|
•
|
stockholders must provide advance notice to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders' meeting; and
|
Period
(1)
|
|
(a) Total Number of Shares Purchased
(2)
|
|
(b) Average Price Paid per Share
(3)
|
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(4)
|
|
(d) Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs
(4)
|
||||||
July 1, 2017 – July 31, 2017
|
|
723,161
|
|
|
$
|
50.56
|
|
|
723,161
|
|
|
$
|
480,324
|
|
August 1, 2017 – August 31, 2017
|
|
1,039,802
|
|
|
46.44
|
|
|
1,039,802
|
|
|
432,040
|
|
||
September 1, 2017 – September 30, 2017
|
|
938,884
|
|
|
47.04
|
|
|
938,884
|
|
|
387,874
|
|
||
Total
|
|
2,701,847
|
|
|
$
|
47.75
|
|
|
2,701,847
|
|
|
$
|
387,874
|
|
(1)
|
Information is based on settlement dates of repurchase transactions.
|
(2)
|
Consists of shares of our common stock, par value $0.01 per share.
|
(3)
|
Includes commissions paid.
|
(4)
|
In February 2016, the Board of Directors authorized a $1.0 billion share repurchase program effective from February 2016 through December 2018.
|
Exhibit 31.1
|
|
|
|
|
|
Exhibit 31.2
|
|
|
|
|
|
Exhibit 32.1
|
|
|
|
|
|
Exhibit 32.2
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document*
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document*
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document*
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document*
|
|
|
|
101.PRE
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XBRL Taxonomy Presentation Linkbase Document*
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*
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Submitted electronically herewith
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Akamai Technologies, Inc.
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November 8, 2017
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By:
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/s/ James Benson
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James Benson
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Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer)
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1 Year Akamai Technologies Chart |
1 Month Akamai Technologies Chart |
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