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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.59 | 0.58% | 101.67 | 100.40 | 101.63 | 101.82 | 101.00 | 101.73 | 954,308 | 22:55:00 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, 2019
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to
|
Delaware
|
|
04-3432319
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
x
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
Emerging growth company
o
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock - par value $0.01 per share
|
AKAM
|
Nasdaq Global Select Market
|
|
|
Page
|
|
||
|
|
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
||
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 6.
|
||
|
|
|
(in thousands, except share data)
|
March 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
688,698
|
|
|
$
|
1,036,455
|
|
Marketable securities
|
429,932
|
|
|
855,650
|
|
||
Accounts receivable, net of reserves of $1,078 and $1,534 at March 31, 2019, and December 31, 2018, respectively
|
529,346
|
|
|
479,889
|
|
||
Prepaid expenses and other current assets
|
170,442
|
|
|
163,360
|
|
||
Total current assets
|
1,818,418
|
|
|
2,535,354
|
|
||
Marketable securities
|
101,434
|
|
|
209,066
|
|
||
Property and equipment, net
|
951,259
|
|
|
910,618
|
|
||
Operating lease right-of-use assets
|
358,554
|
|
|
—
|
|
||
Acquired intangible assets, net
|
184,879
|
|
|
168,348
|
|
||
Goodwill
|
1,586,990
|
|
|
1,487,404
|
|
||
Deferred income tax assets
|
30,363
|
|
|
34,913
|
|
||
Other assets
|
150,865
|
|
|
116,067
|
|
||
Total assets
|
$
|
5,182,762
|
|
|
$
|
5,461,770
|
|
(in thousands, except share data)
|
March 31,
2019 |
|
December 31,
2018 |
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
102,371
|
|
|
$
|
99,089
|
|
Accrued expenses
|
238,524
|
|
|
328,304
|
|
||
Deferred revenue
|
110,667
|
|
|
69,083
|
|
||
Convertible senior notes
|
—
|
|
|
686,552
|
|
||
Operating lease liabilities
|
101,545
|
|
|
—
|
|
||
Other current liabilities
|
16,599
|
|
|
27,681
|
|
||
Total current liabilities
|
569,706
|
|
|
1,210,709
|
|
||
Deferred revenue
|
6,482
|
|
|
4,557
|
|
||
Deferred income tax liabilities
|
19,396
|
|
|
19,624
|
|
||
Convertible senior notes
|
883,584
|
|
|
874,080
|
|
||
Operating lease liabilities
|
293,381
|
|
|
—
|
|
||
Other liabilities
|
126,996
|
|
|
160,940
|
|
||
Total liabilities
|
1,899,545
|
|
|
2,269,910
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
||||
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; 163,995,208 shares issued and 163,503,258 shares outstanding at March 31, 2019, and 162,904,550 shares issued and outstanding at December 31, 2018
|
1,640
|
|
|
1,629
|
|
||
Additional paid-in capital
|
3,686,337
|
|
|
3,670,033
|
|
||
Accumulated other comprehensive loss
|
(46,979
|
)
|
|
(48,912
|
)
|
||
Treasury stock, at cost, 491,950 shares at March 31, 2019, and no shares at December 31, 2018
|
(34,872
|
)
|
|
—
|
|
||
Accumulated deficit
|
(322,909
|
)
|
|
(430,890
|
)
|
||
Total stockholders’ equity
|
3,283,217
|
|
|
3,191,860
|
|
||
Total liabilities and stockholders’ equity
|
$
|
5,182,762
|
|
|
$
|
5,461,770
|
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands, except per share data)
|
2019
|
|
2018
|
||||
Revenue
|
$
|
706,508
|
|
|
$
|
668,724
|
|
Costs and operating expenses:
|
|
|
|
||||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)
|
240,743
|
|
|
234,825
|
|
||
Research and development
|
66,141
|
|
|
65,065
|
|
||
Sales and marketing
|
126,276
|
|
|
122,553
|
|
||
General and administrative
|
122,835
|
|
|
154,385
|
|
||
Amortization of acquired intangible assets
|
9,599
|
|
|
8,431
|
|
||
Restructuring charges
|
6,389
|
|
|
14,908
|
|
||
Total costs and operating expenses
|
571,983
|
|
|
600,167
|
|
||
Income from operations
|
134,525
|
|
|
68,557
|
|
||
Interest income
|
8,635
|
|
|
3,965
|
|
||
Interest expense
|
(12,116
|
)
|
|
(4,850
|
)
|
||
Other income, net
|
511
|
|
|
21
|
|
||
Income before provision for income taxes
|
131,555
|
|
|
67,693
|
|
||
Provision for income taxes
|
24,425
|
|
|
13,979
|
|
||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.66
|
|
|
$
|
0.32
|
|
Diluted
|
$
|
0.65
|
|
|
$
|
0.31
|
|
Shares used in per share calculations:
|
|
|
|
||||
Basic
|
163,236
|
|
|
170,116
|
|
||
Diluted
|
164,787
|
|
|
172,004
|
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
502
|
|
|
6,282
|
|
||
Change in unrealized gain (loss) on investments, net of income tax (provision) benefit of $(554) and $871 for the three months ended March 31, 2019 and 2018, respectively
|
1,431
|
|
|
(2,686
|
)
|
||
Other comprehensive income
|
1,933
|
|
|
3,596
|
|
||
Comprehensive income
|
$
|
109,063
|
|
|
$
|
57,310
|
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
108,205
|
|
|
104,095
|
|
||
Stock-based compensation
|
45,305
|
|
|
44,686
|
|
||
Provision (benefit) for deferred income taxes
|
8,982
|
|
|
(7,814
|
)
|
||
Amortization of debt discount and issuance costs
|
11,618
|
|
|
4,850
|
|
||
Restructuring-related software charges
|
—
|
|
|
2,818
|
|
||
Other non-cash reconciling items, net
|
(121
|
)
|
|
4,379
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
||||
Accounts receivable
|
(43,766
|
)
|
|
(18,419
|
)
|
||
Prepaid expenses and other current assets
|
(13,029
|
)
|
|
(4,927
|
)
|
||
Accounts payable and accrued expenses
|
(85,366
|
)
|
|
(31,312
|
)
|
||
Deferred revenue
|
29,286
|
|
|
25,243
|
|
||
Other current liabilities
|
(9,473
|
)
|
|
13,701
|
|
||
Other non-current assets and liabilities
|
2,079
|
|
|
996
|
|
||
Net cash provided by operating activities
|
160,850
|
|
|
192,010
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Cash paid for acquired businesses, net of cash acquired
|
(121,464
|
)
|
|
(79
|
)
|
||
Cash paid for equity method investment
|
(40,213
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(69,752
|
)
|
|
(51,584
|
)
|
||
Capitalization of internal-use software development costs
|
(72,677
|
)
|
|
(61,491
|
)
|
||
Purchases of short- and long-term marketable securities
|
(10,625
|
)
|
|
(73,352
|
)
|
||
Proceeds from sales of short- and long-term marketable securities
|
244
|
|
|
16,196
|
|
||
Proceeds from maturities of short- and long-term marketable securities
|
547,793
|
|
|
59,540
|
|
||
Other non-current assets and liabilities
|
2,935
|
|
|
(715
|
)
|
||
Net cash provided by (used in) investing activities
|
236,241
|
|
|
(111,485
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayment of convertible senior notes
|
(690,000
|
)
|
|
—
|
|
||
Proceeds related to the issuance of common stock under stock plans
|
19,774
|
|
|
22,738
|
|
||
Employee taxes paid related to net share settlement of stock-based awards
|
(38,639
|
)
|
|
(29,714
|
)
|
||
Repurchases of common stock
|
(34,872
|
)
|
|
(19,785
|
)
|
||
Other non-current assets and liabilities
|
(1,558
|
)
|
|
(3,900
|
)
|
||
Net cash used in financing activities
|
(745,295
|
)
|
|
(30,661
|
)
|
||
Effects of exchange rate changes on cash, cash equivalents and restricted cash
|
1,601
|
|
|
1,165
|
|
||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(346,603
|
)
|
|
51,029
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
1,036,987
|
|
|
314,429
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
690,384
|
|
|
$
|
365,458
|
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for income taxes, net of refunds received of $1,176 and $4,476 for the three months ended March 31, 2019 and 2018, respectively
|
$
|
44,165
|
|
|
$
|
18,313
|
|
Cash paid for operating lease liabilities
|
30,504
|
|
|
|
|||
Non-cash activities:
|
|
|
|
||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
|
29,257
|
|
|
|
|||
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses
|
49,627
|
|
|
18,555
|
|
||
Capitalization of stock-based compensation
|
8,831
|
|
|
7,811
|
|
||
|
|
|
|
||||
Reconciliation of cash, cash equivalents and restricted cash:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
688,698
|
|
|
$
|
363,703
|
|
Restricted cash
|
1,686
|
|
|
1,755
|
|
||
Cash, cash equivalents and restricted cash
|
$
|
690,384
|
|
|
$
|
365,458
|
|
|
Three Months Ended March 31, 2019
|
|||||||||||||||||||||||||
(in thousands, except share data)
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated
Deficit
|
|
Total Stockholders' Equity
|
|||||||||||||||
Shares
|
|
Amount
|
|
|||||||||||||||||||||||
Balance at January 1, 2019
|
162,904,550
|
|
|
$
|
1,629
|
|
|
$
|
3,670,033
|
|
|
$
|
—
|
|
|
$
|
(48,912
|
)
|
|
$
|
(430,890
|
)
|
|
$
|
3,191,860
|
|
Cumulative-effect adjustment to accumulated deficit related to adoption of new accounting pronouncement
|
|
|
|
|
|
|
|
|
|
|
851
|
|
|
851
|
|
|||||||||||
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes
|
1,090,658
|
|
|
11
|
|
|
(37,775
|
)
|
|
|
|
|
|
|
|
(37,764
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
54,079
|
|
|
|
|
|
|
|
|
54,079
|
|
|||||||||||
Repurchases of common stock
|
(491,950
|
)
|
|
|
|
|
|
(34,872
|
)
|
|
|
|
|
|
(34,872
|
)
|
||||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
107,130
|
|
|
107,130
|
|
|||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
502
|
|
|
|
|
502
|
|
|||||||||||
Change in unrealized gain on investments, net of tax
|
|
|
|
|
|
|
|
|
1,431
|
|
|
|
|
1,431
|
|
|||||||||||
Balance at March 31, 2019
|
163,503,258
|
|
|
$
|
1,640
|
|
|
$
|
3,686,337
|
|
|
$
|
(34,872
|
)
|
|
$
|
(46,979
|
)
|
|
$
|
(322,909
|
)
|
|
$
|
3,283,217
|
|
|
Three Months Ended March 31, 2018
|
|||||||||||||||||||||||||
(in thousands, except share data)
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated
Deficit
|
|
Total Stockholders' Equity
|
|||||||||||||||
Shares
|
|
Amount
|
|
|||||||||||||||||||||||
Balance at January 1, 2018
|
169,893,324
|
|
|
$
|
1,699
|
|
|
$
|
4,073,362
|
|
|
$
|
—
|
|
|
$
|
(21,930
|
)
|
|
$
|
(690,662
|
)
|
|
$
|
3,362,469
|
|
Cumulative-effect adjustment to accumulated deficit related to adoption of new accounting pronouncement
|
|
|
|
|
|
|
|
|
|
|
(38,601
|
)
|
|
(38,601
|
)
|
|||||||||||
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes
|
948,434
|
|
|
9
|
|
|
(27,534
|
)
|
|
|
|
|
|
|
|
(27,525
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
52,390
|
|
|
|
|
|
|
|
|
52,390
|
|
|||||||||||
Repurchases of common stock
|
(293,619
|
)
|
|
|
|
|
|
(19,785
|
)
|
|
|
|
|
|
(19,785
|
)
|
||||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
53,714
|
|
|
53,714
|
|
|||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
6,282
|
|
|
|
|
6,282
|
|
|||||||||||
Change in unrealized gain on investments, net of tax
|
|
|
|
|
|
|
|
|
(2,686
|
)
|
|
|
|
(2,686
|
)
|
|||||||||||
Balance at March 31, 2018
|
170,548,139
|
|
|
$
|
1,708
|
|
|
$
|
4,098,218
|
|
|
$
|
(19,785
|
)
|
|
$
|
(18,334
|
)
|
|
$
|
(675,549
|
)
|
|
$
|
3,386,258
|
|
|
|
|
Gross Unrealized
|
|
|
|
Classification on Balance Sheet
|
||||||||||||||||
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Aggregate
Fair Value
|
|
Short-Term
Marketable
Securities
|
|
Long-Term
Marketable
Securities
|
||||||||||||
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial paper
|
$
|
1,249
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,249
|
|
|
$
|
1,249
|
|
|
$
|
—
|
|
Corporate bonds
|
468,247
|
|
|
21
|
|
|
(1,799
|
)
|
|
466,469
|
|
|
378,012
|
|
|
88,457
|
|
||||||
U.S. government agency obligations
|
50,878
|
|
|
3
|
|
|
(210
|
)
|
|
50,671
|
|
|
50,671
|
|
|
—
|
|
||||||
|
$
|
520,374
|
|
|
$
|
24
|
|
|
$
|
(2,009
|
)
|
|
$
|
518,389
|
|
|
$
|
429,932
|
|
|
$
|
88,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
$
|
40,000
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
39,993
|
|
|
$
|
39,993
|
|
|
$
|
—
|
|
Commercial paper
|
282,996
|
|
|
—
|
|
|
(50
|
)
|
|
282,946
|
|
|
282,946
|
|
|
—
|
|
||||||
Corporate bonds
|
685,653
|
|
|
1
|
|
|
(4,309
|
)
|
|
681,345
|
|
|
482,088
|
|
|
199,257
|
|
||||||
U.S. government agency obligations
|
50,876
|
|
|
—
|
|
|
(404
|
)
|
|
50,472
|
|
|
50,472
|
|
|
—
|
|
||||||
|
$
|
1,059,525
|
|
|
$
|
1
|
|
|
$
|
(4,770
|
)
|
|
$
|
1,054,756
|
|
|
$
|
855,499
|
|
|
$
|
199,257
|
|
|
Total Fair Value
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
As of March 31, 2019
|
|
|
|
|
|
|
|
||||||||
Cash Equivalents and Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
189,805
|
|
|
$
|
189,805
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
1,249
|
|
|
—
|
|
|
1,249
|
|
|
—
|
|
||||
Corporate bonds
|
466,469
|
|
|
—
|
|
|
466,469
|
|
|
—
|
|
||||
U.S. government agency obligations
|
50,671
|
|
|
—
|
|
|
50,671
|
|
|
—
|
|
||||
Mutual funds
|
12,977
|
|
|
12,977
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
721,171
|
|
|
$
|
202,782
|
|
|
$
|
518,389
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2018
|
|
|
|
||||||||||||
Cash Equivalents and Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
380,260
|
|
|
$
|
380,260
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
39,993
|
|
|
39,993
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
282,946
|
|
|
—
|
|
|
282,946
|
|
|
—
|
|
||||
Corporate bonds
|
681,345
|
|
|
—
|
|
|
681,345
|
|
|
—
|
|
||||
U.S. government agency obligations
|
50,472
|
|
|
—
|
|
|
50,472
|
|
|
—
|
|
||||
Mutual funds
|
10,016
|
|
|
10,016
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
1,445,032
|
|
|
$
|
430,269
|
|
|
$
|
1,014,763
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration related to a completed acquisition
|
$
|
(6,300
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(6,300
|
)
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Due in 1 year or less
|
$
|
429,932
|
|
|
$
|
855,499
|
|
Due after 1 year through 3 years
|
88,457
|
|
|
199,257
|
|
||
|
$
|
518,389
|
|
|
$
|
1,054,756
|
|
|
Other Liabilities:
Contingent Consideration Obligation |
||
Balance as of January 1, 2019
|
$
|
(6,300
|
)
|
Cash paid upon achievement of milestone
|
6,300
|
|
|
Balance as of March 31, 2019
|
$
|
—
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Trade accounts receivable
|
$
|
380,241
|
|
|
$
|
337,445
|
|
Unbilled accounts receivable
|
150,183
|
|
|
143,978
|
|
||
Gross accounts receivable
|
530,424
|
|
|
481,423
|
|
||
Allowance for doubtful accounts and other reserves
|
(1,078
|
)
|
|
(1,534
|
)
|
||
Accounts receivable, net
|
$
|
529,346
|
|
|
$
|
479,889
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Deferred costs included in prepaid and other current assets
|
$
|
41,109
|
|
|
$
|
41,955
|
|
Deferred costs included in other assets
|
22,892
|
|
|
26,338
|
|
||
Total deferred costs
|
$
|
64,001
|
|
|
$
|
68,293
|
|
Balance as of January 1, 2019
|
$
|
1,487,404
|
|
Acquisition of Janrain, Inc.
|
100,634
|
|
|
Foreign currency translation
|
(1,048
|
)
|
|
Balance as of March 31, 2019
|
$
|
1,586,990
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
||||||||||||
Completed technology
|
$
|
153,691
|
|
|
$
|
(86,321
|
)
|
|
$
|
67,370
|
|
|
$
|
145,091
|
|
|
$
|
(81,587
|
)
|
|
$
|
63,504
|
|
Customer-related intangible assets
|
263,010
|
|
|
(149,378
|
)
|
|
113,632
|
|
|
245,710
|
|
|
(144,786
|
)
|
|
100,924
|
|
||||||
Non-compete agreements
|
730
|
|
|
(359
|
)
|
|
371
|
|
|
700
|
|
|
(306
|
)
|
|
394
|
|
||||||
Trademarks and trade names
|
7,400
|
|
|
(3,894
|
)
|
|
3,506
|
|
|
7,200
|
|
|
(3,674
|
)
|
|
3,526
|
|
||||||
Acquired license rights
|
490
|
|
|
(490
|
)
|
|
—
|
|
|
490
|
|
|
(490
|
)
|
|
—
|
|
||||||
Total
|
$
|
425,321
|
|
|
$
|
(240,442
|
)
|
|
$
|
184,879
|
|
|
$
|
399,191
|
|
|
$
|
(230,843
|
)
|
|
$
|
168,348
|
|
Total purchase consideration
|
|
$
|
123,632
|
|
|
|
|
||
Allocation of the purchase consideration:
|
|
|
||
Cash
|
|
$
|
2,168
|
|
Accounts receivable
|
|
7,318
|
|
|
Prepaid expenses and other current assets
|
|
838
|
|
|
Identifiable intangible assets
|
|
26,130
|
|
|
Goodwill
|
|
100,634
|
|
|
Deferred tax assets
|
|
5,124
|
|
|
Other assets
|
|
87
|
|
|
Total assets acquired
|
|
142,299
|
|
|
Accounts payable
|
|
(1,641
|
)
|
|
Accrued expenses
|
|
(2,690
|
)
|
|
Deferred revenue
|
|
(14,336
|
)
|
|
Total liabilities assumed
|
|
(18,667
|
)
|
|
Net assets acquired
|
|
$
|
123,632
|
|
|
Gross Carrying Amount
|
|
Weighted Average Useful Life (in years)
|
||
Completed technologies
|
$
|
8,600
|
|
|
3.0
|
Customer-related intangible assets
|
17,300
|
|
|
6.3
|
|
Trademarks
|
200
|
|
|
0.8
|
|
Non-compete agreements
|
30
|
|
|
1.0
|
|
Total
|
$
|
26,130
|
|
|
|
•
|
during any calendar quarter commencing after the calendar quarter ended June 30, 2018 (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, and including, 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;
|
•
|
during the
five
business day period after any
five
consecutive trading day period in which the trading price per
$1,000
principal amount of 2025 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.
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Liability component:
|
|
|
|
||||
Principal
|
$
|
1,150,000
|
|
|
$
|
1,150,000
|
|
Less: debt discount and issuance costs, net of amortization
|
(266,416
|
)
|
|
(275,920
|
)
|
||
Net carrying amount
|
$
|
883,584
|
|
|
$
|
874,080
|
|
|
|
|
|
||||
Equity component:
|
$
|
285,225
|
|
|
$
|
285,225
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Amortization of debt discount and issuance costs
|
$
|
13,009
|
|
|
$
|
5,832
|
|
Coupon interest payable on 2025 Notes
|
359
|
|
|
—
|
|
||
Revolving credit facility contractual interest expense
|
139
|
|
|
—
|
|
||
Capitalization of interest expense
|
(1,391
|
)
|
|
(982
|
)
|
||
Total interest expense
|
$
|
12,116
|
|
|
$
|
4,850
|
|
|
Real Estate Arrangements
|
|
Co-location Arrangements
|
|
Total
|
||||||
Operating lease cost
|
$
|
14,823
|
|
|
$
|
22,996
|
|
|
$
|
37,819
|
|
Short-term lease cost
|
102
|
|
|
3,416
|
|
|
3,518
|
|
|||
Variable lease cost
|
3,368
|
|
|
4,362
|
|
|
7,730
|
|
|||
Sublease income
|
(1,033
|
)
|
|
—
|
|
|
(1,033
|
)
|
|||
Total operating lease costs
|
$
|
17,260
|
|
|
$
|
30,774
|
|
|
$
|
48,034
|
|
Weighted average remaining lease term (in years)
|
10.1
|
|
|
2.0
|
|
|
|
||||
Weighted average discount rate
|
4.4
|
%
|
|
2.6
|
%
|
|
|
|
Real Estate Arrangements
|
|
Co-location Arrangements
|
||||
Remainder of 2019
|
$
|
42,867
|
|
|
$
|
54,265
|
|
2020
|
47,640
|
|
|
16,662
|
|
||
2021
|
43,948
|
|
|
4,083
|
|
||
2022
|
38,861
|
|
|
1,030
|
|
||
2023
|
37,483
|
|
|
795
|
|
||
Thereafter
|
196,390
|
|
|
3,869
|
|
||
Total lease payments
|
407,189
|
|
|
80,704
|
|
||
Less: imputed interest
|
90,096
|
|
|
2,871
|
|
||
Total lease liabilities
|
$
|
317,093
|
|
|
$
|
77,833
|
|
|
Real Estate Arrangements
|
|
Bandwidth and Co-location Arrangements
|
||||
2019
|
$
|
54,561
|
|
|
$
|
138,777
|
|
2020
|
78,683
|
|
|
24,420
|
|
||
2021
|
75,991
|
|
|
8,463
|
|
||
2022
|
72,579
|
|
|
5,233
|
|
||
2023
|
70,101
|
|
|
2,156
|
|
||
Thereafter
|
599,339
|
|
|
3,709
|
|
||
Total
|
$
|
951,254
|
|
|
$
|
182,758
|
|
|
Employee Severance and Related Benefits
|
|
Software Charges
|
|
Excess Facilities, Contract Terminations and Other
|
|
Total
|
||||||||
Balance as of January 1, 2019
|
$
|
10,508
|
|
|
$
|
198
|
|
|
$
|
275
|
|
|
$
|
10,981
|
|
Costs incurred
|
6,351
|
|
|
—
|
|
|
38
|
|
|
6,389
|
|
||||
Cash disbursements
|
(7,983
|
)
|
|
(99
|
)
|
|
(77
|
)
|
|
(8,159
|
)
|
||||
Balance as of March 31, 2019
|
$
|
8,876
|
|
|
$
|
99
|
|
|
$
|
236
|
|
|
$
|
9,211
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Cost of revenue
|
$
|
5,569
|
|
|
$
|
5,296
|
|
Research and development
|
12,057
|
|
|
10,509
|
|
||
Sales and marketing
|
15,051
|
|
|
15,959
|
|
||
General and administrative
|
12,628
|
|
|
12,922
|
|
||
Total stock-based compensation
|
45,305
|
|
|
44,686
|
|
||
Provision for income taxes
|
(12,993
|
)
|
|
(11,088
|
)
|
||
Total stock-based compensation, net of income taxes
|
$
|
32,312
|
|
|
$
|
33,598
|
|
|
Foreign Currency Translation
|
|
Net Unrealized Losses on Investments
|
|
Total
|
||||||
Balance as of January 1, 2019
|
$
|
(51,904
|
)
|
|
$
|
2,992
|
|
|
$
|
(48,912
|
)
|
Other comprehensive loss
|
502
|
|
|
1,431
|
|
|
1,933
|
|
|||
Balance as of March 31, 2019
|
$
|
(51,402
|
)
|
|
$
|
4,423
|
|
|
$
|
(46,979
|
)
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
U.S.
|
$
|
418,200
|
|
|
$
|
423,339
|
|
International
|
288,308
|
|
|
245,385
|
|
||
Total revenue
|
$
|
706,508
|
|
|
$
|
668,724
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Web Division
|
$
|
376,275
|
|
|
$
|
353,250
|
|
Media and Carrier Division
|
330,233
|
|
|
315,474
|
|
||
Total revenue
|
$
|
706,508
|
|
|
$
|
668,724
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Denominator:
|
|
|
|
||||
Shares used for basic net income per share
|
163,236
|
|
|
170,116
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Stock options
|
49
|
|
|
142
|
|
||
RSUs and DSUs
|
1,502
|
|
|
1,746
|
|
||
Convertible senior notes
|
—
|
|
|
—
|
|
||
Warrants related to issuance of convertible senior notes
|
—
|
|
|
—
|
|
||
Shares used for diluted net income per share
|
164,787
|
|
|
172,004
|
|
||
Basic net income per share
|
$
|
0.66
|
|
|
$
|
0.32
|
|
Diluted net income per share
|
$
|
0.65
|
|
|
$
|
0.31
|
|
|
For the Three Months
Ended March 31, |
||||
|
2019
|
|
2018
|
||
Service-based RSUs
|
2,565
|
|
|
2,815
|
|
Performance-based RSUs
|
1,484
|
|
|
1,529
|
|
Convertible senior notes
|
12,093
|
|
|
7,704
|
|
Warrants related to issuance of convertible senior notes
|
12,093
|
|
|
7,704
|
|
Total shares excluded from computation
|
28,235
|
|
|
19,752
|
|
•
|
Increased sales of our security solutions have made a significant contribution to revenue growth. We plan to continue to invest in this area with a focus on further enhancing our product portfolio and extending our go-to-market capabilities.
|
•
|
We have increased committed recurring revenue from our solutions by increasing sales of incremental solutions to our existing customers and adding new customers; however, we have also experienced slower revenue growth in recent quarters particularly in our Web Performance solutions. We expect the trend of slower revenue growth to continue in 2019 as our commerce customers experience financial pressure, we face contract renewals with large media and other customers, and we experience the absence of as many large media-driven events in 2019 as compared to 2018.
|
•
|
The prices paid by some of our customers have declined, particularly in the context of contract renewals, reflecting the impact of competition and volume discounts. Our revenue would have been higher absent these price declines.
|
•
|
We have experienced increases in the amount of traffic delivered for customers that use our solutions for video, gaming and software downloads, contributing to an increase in our revenue.
|
•
|
In recent years, revenue from our international operations has been growing at a faster pace than from our U.S. operations, due to a sharper increase in sales of our solutions originating outside the U.S. to new customers as well as sales of incremental solutions to existing non-U.S. customers.
|
•
|
We have experienced variations in certain types of revenue from quarter to quarter. In particular, we experience higher revenue in the fourth quarter of each year for some of our solutions as a result of holiday season activity. 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; 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 solutions.
|
•
|
Our profitability improved in the first quarter of 2019 as compared to the same period in 2018 due to higher revenues as well as the effects of cost savings and efficiency initiatives we have undertaken. We expect to continue to undertake efforts intended to improve the efficiency of operations, but do anticipate variability in our profitability during 2019 due to some increased expenses in certain areas of the business that did not impact us in the first quarter. However, we anticipate overall profitability improvement in 2019 as compared to 2018, which is also expected to be at a lower rate as compared to 2018. We believe we can achieve additional improvement in 2020.
|
•
|
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.
|
•
|
Depreciation and amortization expense related to our network equipment decreased during the first quarter of 2019 as compared to the first quarter of 2018. We implemented software and hardware initiatives to manage our global network more efficiently, and as a result, the expected average useful life of our network assets, primarily servers, increased from four years to five years, effective January 1, 2019. This change is expected to decrease depreciation expense related to our network equipment during 2019 as compared to 2018.
|
|
For the Three Months
Ended March 31, |
||||
|
2019
|
|
2018
|
||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
Costs and operating expenses:
|
|
|
|
||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)
|
34.1
|
|
|
35.1
|
|
Research and development
|
9.4
|
|
|
9.7
|
|
Sales and marketing
|
17.9
|
|
|
18.3
|
|
General and administrative
|
17.4
|
|
|
23.1
|
|
Amortization of acquired intangible assets
|
1.4
|
|
|
1.3
|
|
Restructuring charges
|
0.9
|
|
|
2.2
|
|
Total costs and operating expenses
|
81.1
|
|
|
89.7
|
|
Income from operations
|
18.9
|
|
|
10.3
|
|
Interest income
|
1.2
|
|
|
0.6
|
|
Interest expense
|
(1.7
|
)
|
|
(0.7
|
)
|
Other income, net
|
0.1
|
|
|
—
|
|
Income before provision for income taxes
|
18.5
|
|
|
10.2
|
|
Provision for income taxes
|
3.5
|
|
|
2.1
|
|
Net income
|
15.0
|
%
|
|
8.1
|
%
|
|
For the Three Months
Ended March 31, |
||||||||||||
|
2019
|
|
2018
|
|
% Change
|
|
% Change at Constant Currency
|
||||||
Web Division
|
$
|
376,275
|
|
|
$
|
353,250
|
|
|
6.5
|
%
|
|
8.8
|
%
|
Media and Carrier Division
|
330,233
|
|
|
315,474
|
|
|
4.7
|
|
|
6.8
|
|
||
Total revenue
|
$
|
706,508
|
|
|
$
|
668,724
|
|
|
5.7
|
%
|
|
7.9
|
%
|
|
For the Three Months
Ended March 31, |
||||||||||||
|
2019
|
|
2018
|
|
% Change
|
|
% Change at Constant Currency
|
||||||
U.S.
|
$
|
418,200
|
|
|
$
|
423,339
|
|
|
(1.2
|
)%
|
|
(1.2
|
)%
|
International
|
288,308
|
|
|
245,385
|
|
|
17.5
|
|
|
23.5
|
|
||
Total revenue
|
$
|
706,508
|
|
|
$
|
668,724
|
|
|
5.7
|
%
|
|
7.9
|
%
|
|
For the Three Months
Ended March 31, |
|||||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
Bandwidth fees
|
$
|
42,473
|
|
|
$
|
42,117
|
|
|
0.8
|
%
|
Co-location fees
|
29,492
|
|
|
33,103
|
|
|
(10.9
|
)
|
||
Network build-out and supporting services
|
22,711
|
|
|
18,525
|
|
|
22.6
|
|
||
Payroll and related costs
|
60,263
|
|
|
60,008
|
|
|
0.4
|
|
||
Stock-based compensation, including amortization of prior capitalized amounts
|
13,309
|
|
|
10,531
|
|
|
26.4
|
|
||
Depreciation of network equipment
|
30,168
|
|
|
38,235
|
|
|
(21.1
|
)
|
||
Amortization of internal-use software
|
42,327
|
|
|
32,306
|
|
|
31.0
|
|
||
Total cost of revenue
|
$
|
240,743
|
|
|
$
|
234,825
|
|
|
2.5
|
%
|
As a percentage of revenue
|
34.1
|
%
|
|
35.1
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
Payroll and related costs
|
$
|
94,944
|
|
|
$
|
95,685
|
|
|
(0.8
|
)%
|
Stock-based compensation
|
12,057
|
|
|
10,509
|
|
|
14.7
|
|
||
Capitalized salaries and related costs
|
(43,359
|
)
|
|
(43,091
|
)
|
|
0.6
|
|
||
Other expenses
|
2,499
|
|
|
1,962
|
|
|
27.4
|
|
||
Total research and development
|
$
|
66,141
|
|
|
$
|
65,065
|
|
|
1.7
|
%
|
As a percentage of revenue
|
9.4
|
%
|
|
9.7
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
Payroll and related costs
|
$
|
92,651
|
|
|
$
|
94,193
|
|
|
(1.6
|
)%
|
Stock-based compensation
|
15,050
|
|
|
15,959
|
|
|
(5.7
|
)
|
||
Marketing programs and related costs
|
14,533
|
|
|
11,280
|
|
|
28.8
|
|
||
Other expenses
|
4,042
|
|
|
1,121
|
|
|
260.6
|
|
||
Total sales and marketing
|
$
|
126,276
|
|
|
$
|
122,553
|
|
|
3.0
|
%
|
As a percentage of revenue
|
17.9
|
%
|
|
18.3
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
Payroll and related costs
|
$
|
49,651
|
|
|
$
|
51,894
|
|
|
(4.3
|
)%
|
Stock-based compensation
|
12,628
|
|
|
12,922
|
|
|
(2.3
|
)
|
||
Depreciation and amortization
|
18,373
|
|
|
19,888
|
|
|
(7.6
|
)
|
||
Facilities-related costs
|
21,023
|
|
|
21,795
|
|
|
(3.5
|
)
|
||
Provision for doubtful accounts
|
800
|
|
|
521
|
|
|
53.6
|
|
||
Acquisition-related costs
|
451
|
|
|
1,143
|
|
|
(60.5
|
)
|
||
License of patent
|
(4,403
|
)
|
|
(4,215
|
)
|
|
4.5
|
|
||
Legal and stockholder matter costs
|
—
|
|
|
23,091
|
|
|
(100.0
|
)
|
||
Professional fees and other expenses
|
24,312
|
|
|
27,346
|
|
|
(11.1
|
)
|
||
Total general and administrative
|
$
|
122,835
|
|
|
$
|
154,385
|
|
|
(20.4
|
)%
|
As a percentage of revenue
|
17.4
|
%
|
|
23.1
|
%
|
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
|
|
2019
|
|
2018
|
|
% Change
|
|||||
Global functions
|
|
$
|
49,468
|
|
|
$
|
55,653
|
|
|
(11.1
|
)%
|
As a percentage of revenue
|
|
7.0
|
%
|
|
8.3
|
%
|
|
|
|||
Infrastructure
|
|
72,327
|
|
|
78,192
|
|
|
(7.5
|
)
|
||
As a percentage of revenue
|
|
10.2
|
%
|
|
11.7
|
%
|
|
|
|||
Other
|
|
1,040
|
|
|
20,540
|
|
|
(94.9
|
)
|
||
Total general and administrative expenses
|
|
$
|
122,835
|
|
|
$
|
154,385
|
|
|
(20.4
|
)%
|
As a percentage of revenue
|
|
17.4
|
%
|
|
23.1
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
(in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Amortization of acquired intangible assets
|
$
|
9,599
|
|
|
$
|
8,431
|
|
|
13.9
|
%
|
As a percentage of revenue
|
1.4
|
%
|
|
1.3
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
(in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Restructuring charges
|
$
|
6,389
|
|
|
$
|
14,908
|
|
|
(57.1
|
)%
|
As a percentage of revenue
|
0.9
|
%
|
|
2.2
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
(in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Interest income
|
$
|
8,635
|
|
|
$
|
3,965
|
|
|
117.8
|
%
|
As a percentage of revenue
|
1.2
|
%
|
|
0.6
|
%
|
|
|
|||
Interest expense
|
$
|
(12,116
|
)
|
|
$
|
(4,850
|
)
|
|
149.8
|
%
|
As a percentage of revenue
|
(1.7
|
)%
|
|
(0.7
|
)%
|
|
|
|||
Other income, net
|
$
|
511
|
|
|
$
|
21
|
|
|
2,333.3
|
%
|
As a percentage of revenue
|
0.1
|
%
|
|
—
|
%
|
|
|
|
For the Three Months
Ended March 31, |
|||||||||
(in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Provision for income taxes
|
$
|
24,425
|
|
|
$
|
13,979
|
|
|
74.7
|
%
|
As a percentage of revenue
|
3.5
|
%
|
|
2.1
|
%
|
|
|
|||
Effective income tax rate
|
18.6
|
%
|
|
20.7
|
%
|
|
|
•
|
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 and do not reflect our core operations.
|
•
|
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 May 2018, we issued $1,150 million of convertible senior notes due 2025 with a coupon interest rate of 0.125%. In February 2014, we issued $690 million of convertible senior notes due 2019 with a coupon interest rate of 0%. The imputed interest rates of these convertible senior notes were 4.26% and 3.20%, respectively. This is a result of the debt discounts recorded for the conversion features that are required to be separately accounted for as equity under GAAP, thereby reducing the carrying values of the convertible debt instruments. The debt discounts are amortized as interest expense together with the issuance costs of the debt. The interest expense excluded from our non-GAAP results 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, changes to fair value 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 are not representative of our core business operations and ongoing operating performance.
|
•
|
Legal and stockholder matter costs
–
We have incurred losses related to the settlement of legal matters and costs from professional service providers related to a non-routine stockholder matter. 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.
|
•
|
Endowment of Akamai Foundation
–
During the second quarter of 2018, we incurred a charge to endow the Akamai Foundation. We believe excluding these amounts from non-GAAP financial measures is useful to investors as this one-time event is not representative of our core business operations.
|
•
|
Transformation costs
–
We have incurred professional services fees associated with internal transformation programs designed to improve operating margins and that are part of a planned program intended to significantly change the manner in which business is conducted. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events and activities giving rise to them occur infrequently and are not representative of our core business operations and ongoing operating performance.
|
•
|
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 March 31, |
||||||
|
2019
|
|
2018
|
||||
Income from operations
|
$
|
134,525
|
|
|
$
|
68,557
|
|
Amortization of acquired intangible assets
|
9,599
|
|
|
8,431
|
|
||
Stock-based compensation
|
45,305
|
|
|
44,686
|
|
||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
9,233
|
|
|
6,263
|
|
||
Restructuring charges
|
6,389
|
|
|
14,908
|
|
||
Acquisition-related costs
|
451
|
|
|
1,143
|
|
||
Legal and stockholder matter costs
|
—
|
|
|
23,091
|
|
||
Transformation costs
|
4,191
|
|
|
—
|
|
||
Non-GAAP income from operations
|
$
|
209,693
|
|
|
$
|
167,079
|
|
|
|
|
|
||||
GAAP operating margin
|
19
|
%
|
|
10
|
%
|
||
Non-GAAP operating margin
|
30
|
%
|
|
25
|
%
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Amortization of acquired intangible assets
|
9,599
|
|
|
8,431
|
|
||
Stock-based compensation
|
45,305
|
|
|
44,686
|
|
||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
9,233
|
|
|
6,263
|
|
||
Restructuring charges
|
6,389
|
|
|
14,908
|
|
||
Acquisition-related costs
|
451
|
|
|
1,143
|
|
||
Legal and stockholder matter costs
|
—
|
|
|
23,091
|
|
||
Transformation costs
|
4,191
|
|
|
—
|
|
||
Amortization of debt discount and issuance costs
|
11,618
|
|
|
4,850
|
|
||
Gain on investments
|
(690
|
)
|
|
—
|
|
||
Income tax effect of above non-GAAP adjustments and certain discrete tax items
|
(12,304
|
)
|
|
(21,283
|
)
|
||
Non-GAAP net income
|
$
|
180,922
|
|
|
$
|
135,803
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
GAAP net income per diluted share
|
$
|
0.65
|
|
|
$
|
0.31
|
|
Amortization of acquired intangible assets
|
0.06
|
|
|
0.05
|
|
||
Stock-based compensation
|
0.27
|
|
|
0.25
|
|
||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
0.06
|
|
|
0.04
|
|
||
Restructuring charges
|
0.04
|
|
|
0.09
|
|
||
Acquisition-related costs
|
—
|
|
|
0.01
|
|
||
Legal and stockholder matter costs
|
—
|
|
|
0.13
|
|
||
Transformation costs
|
0.03
|
|
|
—
|
|
||
Amortization of debt discount and issuance costs
|
0.07
|
|
|
0.03
|
|
||
Gain on investments
|
—
|
|
|
—
|
|
||
Income tax effect of above non-GAAP adjustments and certain discrete tax items
|
(0.07
|
)
|
|
(0.12
|
)
|
||
Non-GAAP net income per diluted share
(1)
|
$
|
1.10
|
|
|
$
|
0.79
|
|
|
|
|
|
||||
Shares used in diluted per share calculations
|
164,787
|
|
|
172,004
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Interest income
|
(8,635
|
)
|
|
(3,965
|
)
|
||
Provision for income taxes
|
24,425
|
|
|
13,979
|
|
||
Depreciation and amortization
|
89,373
|
|
|
89,401
|
|
||
Amortization of capitalized stock-based compensation and capitalized interest expense
|
9,233
|
|
|
6,263
|
|
||
Amortization of acquired intangible assets
|
9,599
|
|
|
8,431
|
|
||
Stock-based compensation
|
45,305
|
|
|
44,686
|
|
||
Restructuring charges
|
6,389
|
|
|
14,908
|
|
||
Acquisition-related costs
|
451
|
|
|
1,143
|
|
||
Legal and stockholder matter costs
|
—
|
|
|
23,091
|
|
||
Transformation costs
|
4,191
|
|
|
—
|
|
||
Interest expense
|
12,116
|
|
|
4,850
|
|
||
Gain on investments
|
(690
|
)
|
|
—
|
|
||
Other expense (income), net
|
179
|
|
|
(21
|
)
|
||
Adjusted EBITDA
|
$
|
299,066
|
|
|
$
|
256,480
|
|
Adjusted EBITDA margin
|
42
|
%
|
|
38
|
%
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Net income
|
$
|
107,130
|
|
|
$
|
53,714
|
|
Non-cash reconciling items included in net income
|
173,989
|
|
|
153,014
|
|
||
Changes in operating assets and liabilities
|
(120,269
|
)
|
|
(14,718
|
)
|
||
Net cash flows provided by operating activities
|
$
|
160,850
|
|
|
$
|
192,010
|
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Cash paid for acquired businesses, net of cash acquired
|
$
|
(121,464
|
)
|
|
$
|
(79
|
)
|
Purchases of property and equipment and capitalization of internal-use software development costs
|
(142,429
|
)
|
|
(113,075
|
)
|
||
Net marketable securities activity
|
537,412
|
|
|
2,384
|
|
||
Other investing activity
|
(37,278
|
)
|
|
(715
|
)
|
||
Net cash provided by (used in) investing activities
|
$
|
236,241
|
|
|
$
|
(111,485
|
)
|
|
For the Three Months
Ended March 31, |
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Repayment of convertible senior notes
|
$
|
(690,000
|
)
|
|
$
|
—
|
|
Activity related to stock-based compensation
|
(18,865
|
)
|
|
(6,976
|
)
|
||
Repurchases of common stock
|
(34,872
|
)
|
|
(19,785
|
)
|
||
Other financing activities
|
(1,558
|
)
|
|
(3,900
|
)
|
||
Net cash (used in) financing activities
|
$
|
(745,295
|
)
|
|
$
|
(30,661
|
)
|
•
|
our ability to retain and increase sales of additional solutions to existing customers, attract new customers, and satisfy our customers’ demands;
|
•
|
commoditization of our delivery-based solutions, which would lead to lower prices and loss of customers to competitors;
|
•
|
our ability to develop and sell new solutions that are not easily replicable by competitors;
|
•
|
the impact of multi-vendor policies designed to reduce reliance on any particular provider, such as us;
|
•
|
changes in our customer contracting models from a committed revenue structure to a "pay-as-you-go" approach, which would make it easier for customers to stop doing business with us;
|
•
|
changes in usage or adoption rates of the Internet, e-commerce and electronic devices;
|
•
|
the impact of competition across our business;
|
•
|
inability of our customers, particularly commerce, travel and media companies, to continue their operations and spending levels; and
|
•
|
general economic conditions.
|
•
|
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 solutions;
|
•
|
the pace at which our customers' enterprise applications move from behind the firewall to the cloud;
|
•
|
media and other customers 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.
|
•
|
develop superior products or services, gain greater market acceptance for their products and services, enter new markets more easily, and expand their service offerings more efficiently or more rapidly;
|
•
|
combine their products that are competitive with ours with other solutions they offer in a way that makes our offerings less appealing to current and potential customers;
|
•
|
adapt to new or emerging technologies and changes in customer requirements more quickly;
|
•
|
take advantage of acquisition, investment and other opportunities more readily;
|
•
|
offer lower prices than ours;
|
•
|
allocate greater resources to the promotion, marketing, and sales of their products and services; and
|
•
|
dedicate greater resources to the research and development of their products and services.
|
•
|
attract customers by offering less sophisticated versions of products and 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 superior offerings.
|
•
|
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;
|
•
|
enter into relationships directly with network providers instead of relying on an overlay network like ours; or
|
•
|
implement multi-vendor policies to reduce reliance on any particular external providers such as us.
|
•
|
difficulty integrating the technologies, operations and personnel of acquired businesses;
|
•
|
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 synergies or other expected 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.
|
•
|
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 our competitors; and
|
•
|
needing to expand into new lines of business or to change or abandon existing strategies.
|
•
|
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 or considering a strategic transaction;
|
•
|
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 affecting our network or systems;
|
•
|
performance by other companies in our industry; and
|
•
|
geopolitical conditions such as acts of terrorism or military conflicts.
|
•
|
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 lead to loss of significant revenues and have a negative impact on the quality of our solutions;
|
•
|
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;
|
•
|
currency exchange rate fluctuations and limitations on the repatriation and investment of funds;
|
•
|
difficulties in transferring funds from, or converting currencies in, certain countries;
|
•
|
reliance on channel partners over which we have limited control or influence on a day-to-day basis; and
|
•
|
potentially adverse tax consequences.
|
•
|
internal control and disclosure rules;
|
•
|
data protection, privacy and filtering regulations and requirements;
|
•
|
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 that is being phased out over time so that only approximately one-third of our Board of Directors is up for re-election this year and only approximately two-thirds of our Board of Directors will be up for re-election in 2020;
|
•
|
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
|
•
|
our Board of Directors may issue, without stockholder approval, shares of undesignated preferred stock.
|
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)
|
||||||
January 1, 2019 – January 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,100,000
|
|
February 1, 2019 – February 28, 2019
|
|
125,424
|
|
|
69.89
|
|
|
125,424
|
|
|
1,091,234
|
|
||
March 1, 2019 – March 31, 2019
|
|
366,526
|
|
|
71.23
|
|
|
366,526
|
|
|
1,065,128
|
|
||
Total
|
|
491,950
|
|
|
$
|
70.89
|
|
|
491,950
|
|
|
$
|
1,065,128
|
|
(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)
|
Effective November 2018, the Board authorized a $1.1 billion repurchase program through December 2021.
|
Exhibit 10.38(A)
|
|
|
|
|
|
Exhibit 10.39
|
|
|
|
|
|
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
|
|
XBRL Taxonomy Presentation Linkbase Document*
|
*
|
Submitted electronically herewith
|
|
Akamai Technologies, Inc.
|
|
|
|
|
May 9, 2019
|
By:
|
/s/ Ed McGowan
|
|
|
Ed McGowan
|
|
|
Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer)
|
1 Year Akamai Technologies Chart |
1 Month Akamai Technologies Chart |
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