x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016 |
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 |
(Do not check if a smaller reporting company) |
Page | ||
Item 1. | ||
Consolidated Balance Sheets at September 30, 2016 and December 31, 2015 | ||
Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015 | ||
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015 | ||
Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 | ||
Notes to Unaudited Consolidated Financial Statements | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
(in thousands, expect share data) | September 30, 2016 | December 31, 2015 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 381,803 | $ | 289,473 | |||
Marketable securities | 529,416 | 460,088 | |||||
Accounts receivable, net of reserves of $8,789 and $7,364 at September 30, 2016, and December 31, 2015, respectively | 357,997 | 380,399 | |||||
Prepaid expenses and other current assets | 117,748 | 123,228 | |||||
Total current assets | 1,386,964 | 1,253,188 | |||||
Property and equipment, net | 797,923 | 753,180 | |||||
Marketable securities | 767,691 | 774,674 | |||||
Goodwill | 1,151,216 | 1,150,244 | |||||
Acquired intangible assets, net | 138,870 | 156,095 | |||||
Deferred income tax assets | 21,156 | 4,700 | |||||
Other assets | 89,815 | 89,603 | |||||
Total assets | $ | 4,353,635 | $ | 4,181,684 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 74,328 | $ | 61,982 | |||
Accrued expenses | 291,101 | 216,166 | |||||
Deferred revenue | 61,292 | 54,154 | |||||
Other current liabilities | 4,815 | 138 | |||||
Total current liabilities | 431,536 | 332,440 | |||||
Deferred revenue | 4,134 | 4,163 | |||||
Deferred income tax liabilities | 8,963 | 12,888 | |||||
Convertible senior notes | 634,504 | 618,047 | |||||
Other liabilities | 105,567 | 93,268 | |||||
Total liabilities | 1,184,704 | 1,060,806 | |||||
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; 179,406,558 shares issued and 173,670,583 shares outstanding at September 30, 2016, and 177,212,181 shares issued and outstanding at December 31, 2015 | 1,794 | 1,772 | |||||
Additional paid-in capital | 4,547,834 | 4,437,420 | |||||
Accumulated other comprehensive loss | (33,462 | ) | (41,453 | ) | |||
Treasury stock, at cost, 5,735,975 shares at September 30, 2016, and no shares at December 31, 2015 | (294,867 | ) | — | ||||
Accumulated deficit | (1,052,368 | ) | (1,276,861 | ) | |||
Total stockholders’ equity | 3,168,931 | 3,120,878 | |||||
Total liabilities and stockholders’ equity | $ | 4,353,635 | $ | 4,181,684 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
(in thousands, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenue | $ | 584,065 | $ | 551,030 | $ | 1,723,925 | $ | 1,618,289 | |||||||
Costs and operating expenses: | |||||||||||||||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) | 204,467 | 183,204 | 605,526 | 532,408 | |||||||||||
Research and development | 42,341 | 38,396 | 120,873 | 110,917 | |||||||||||
Sales and marketing | 102,626 | 107,426 | 308,060 | 322,406 | |||||||||||
General and administrative | 113,320 | 99,543 | 323,141 | 288,287 | |||||||||||
Amortization of acquired intangible assets | 6,598 | 6,752 | 20,025 | 20,284 | |||||||||||
Restructuring charges | 2,948 | 20 | 10,236 | 517 | |||||||||||
Total costs and operating expenses | 472,300 | 435,341 | 1,387,861 | 1,274,819 | |||||||||||
Income from operations | 111,765 | 115,689 | 336,064 | 343,470 | |||||||||||
Interest income | 3,809 | 2,723 | 10,522 | 8,265 | |||||||||||
Interest expense | (4,666 | ) | (4,630 | ) | (13,958 | ) | (13,884 | ) | |||||||
Other income (expense), net | 778 | 204 | 1,004 | (1,702 | ) | ||||||||||
Income before provision for income taxes | 111,686 | 113,986 | 333,632 | 336,149 | |||||||||||
Provision for income taxes | 35,686 | 25,946 | 109,139 | 103,163 | |||||||||||
Net income | $ | 76,000 | $ | 88,040 | $ | 224,493 | $ | 232,986 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.44 | $ | 0.49 | $ | 1.28 | $ | 1.30 | |||||||
Diluted | $ | 0.43 | $ | 0.49 | $ | 1.27 | $ | 1.29 | |||||||
Shares used in per share calculations: | |||||||||||||||
Basic | 174,429 | 178,547 | 175,444 | 178,591 | |||||||||||
Diluted | 175,617 | 180,364 | 176,525 | 180,642 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net income | $ | 76,000 | $ | 88,040 | $ | 224,493 | $ | 232,986 | |||||||
Other comprehensive (loss) income: | |||||||||||||||
Foreign currency translation adjustments | (358 | ) | (9,261 | ) | 5,567 | (17,069 | ) | ||||||||
Change in unrealized (loss) gain on investments, net of income tax benefit (provision) of $866, $(73), $(1,445)and $(647) for the three and nine months ended September 30, 2016 and 2015, respectively | (1,488 | ) | 121 | 2,424 | 1,161 | ||||||||||
Other comprehensive (loss) income | (1,846 | ) | (9,140 | ) | 7,991 | (15,908 | ) | ||||||||
Comprehensive income | $ | 74,154 | $ | 78,900 | $ | 232,484 | $ | 217,078 |
For the Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 224,493 | $ | 232,986 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 250,294 | 219,234 | |||||
Stock-based compensation | 105,304 | 92,966 | |||||
Excess tax benefits from stock-based compensation | (3,080 | ) | (24,851 | ) | |||
Benefit for deferred income taxes | (13,861 | ) | (17,941 | ) | |||
Amortization of debt discount and issuance costs | 13,958 | 13,884 | |||||
Other non-cash reconciling items, net | 8,367 | 3,271 | |||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | 22,477 | (40,707 | ) | ||||
Prepaid expenses and other current assets | 4,014 | 16,119 | |||||
Accounts payable and accrued expenses | 54,892 | 26,098 | |||||
Deferred revenue | 6,885 | 6,908 | |||||
Other current liabilities | 4,670 | 146 | |||||
Other non-current assets and liabilities | 6,097 | 18,247 | |||||
Net cash provided by operating activities | 684,510 | 546,360 | |||||
Cash flows from investing activities: | |||||||
Cash paid for acquired businesses, net of cash acquired | (2,936 | ) | (122,445 | ) | |||
Purchases of property and equipment | (134,874 | ) | (262,404 | ) | |||
Capitalization of internal-use software development costs | (105,477 | ) | (103,742 | ) | |||
Purchases of short- and long-term marketable securities | (614,808 | ) | (584,189 | ) | |||
Proceeds from sales of short- and long-term marketable securities | 57,900 | 2,008 | |||||
Proceeds from maturities of short- and long-term marketable securities | 498,633 | 725,117 | |||||
Other non-current assets and liabilities | (3,145 | ) | (3,037 | ) | |||
Net cash used in investing activities | (304,707 | ) | (348,692 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds related to the issuance of common stock under stock plans | 42,339 | 54,288 | |||||
Excess tax benefits from stock-based compensation | 3,080 | 24,851 | |||||
Employee taxes paid related to net share settlement of stock-based awards | (38,560 | ) | (47,171 | ) | |||
Repurchases of common stock | (294,867 | ) | (202,426 | ) | |||
Other non-current assets and liabilities | — | (2,050 | ) | ||||
Net cash used in financing activities | (288,008 | ) | (172,508 | ) | |||
Effects of exchange rate changes on cash and cash equivalents | 535 | (7,339 | ) | ||||
Net increase in cash and cash equivalents | 92,330 | 17,821 | |||||
Cash and cash equivalents at beginning of period | 289,473 | 238,650 | |||||
Cash and cash equivalents at end of period | $ | 381,803 | $ | 256,471 |
For the Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for income taxes, net of refunds received in the nine months ended September 30, 2016 and 2015 of $1,582 and $19,285, respectively | $ | 64,716 | $ | 47,045 | |||
Non-cash investing activities: | |||||||
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses | 35,176 | 27,026 | |||||
Capitalization of stock-based compensation | 17,086 | 13,133 |
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, 2016 | |||||||||||||||||||||||
Commercial paper | $ | 37,307 | $ | 26 | $ | (59 | ) | $ | 37,274 | $ | 37,274 | $ | — | ||||||||||
Corporate bonds | 970,750 | 791 | (805 | ) | 970,736 | 426,218 | 544,518 | ||||||||||||||||
U.S. government agency obligations | 285,422 | 162 | (76 | ) | 285,508 | 65,552 | 219,956 | ||||||||||||||||
$ | 1,293,479 | $ | 979 | $ | (940 | ) | $ | 1,293,518 | $ | 529,044 | $ | 764,474 | |||||||||||
As of December 31, 2015 | |||||||||||||||||||||||
Commercial paper | $ | 2,491 | $ | — | $ | (4 | ) | $ | 2,487 | $ | 2,487 | $ | — | ||||||||||
Corporate bonds | 995,100 | 73 | (3,365 | ) | 991,808 | 432,585 | 559,223 | ||||||||||||||||
U.S. government agency obligations | 239,587 | 41 | (575 | ) | 239,053 | 25,016 | 214,037 | ||||||||||||||||
$ | 1,237,178 | $ | 114 | $ | (3,944 | ) | $ | 1,233,348 | $ | 460,088 | $ | 773,260 |
Total Fair Value | Fair Value Measurements at Reporting Date Using | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
As of September 30, 2016 | |||||||||||||||
Cash Equivalents and Marketable Securities: | |||||||||||||||
Money market funds | $ | 5,205 | $ | 5,205 | $ | — | $ | — | |||||||
Commercial paper | 37,274 | — | 37,274 | — | |||||||||||
Corporate bonds | 970,736 | — | 970,736 | — | |||||||||||
U.S. government agency obligations | 285,508 | — | 285,508 | — | |||||||||||
Mutual funds | 3,589 | 3,589 | — | — | |||||||||||
$ | 1,302,312 | $ | 8,794 | $ | 1,293,518 | $ | — | ||||||||
As of December 31, 2015 | |||||||||||||||
Cash Equivalents and Marketable Securities: | |||||||||||||||
Money market funds | $ | 1,250 | $ | 1,250 | $ | — | $ | — | |||||||
Commercial paper | 2,487 | — | 2,487 | — | |||||||||||
Corporate bonds | 991,808 | — | 991,808 | — | |||||||||||
U.S. government agency obligations | 239,053 | — | 239,053 | — | |||||||||||
Mutual funds | 1,414 | 1,414 | — | — | |||||||||||
$ | 1,236,012 | $ | 2,664 | $ | 1,233,348 | $ | — |
September 30, 2016 | December 31, 2015 | ||||||
Due in 1 year or less | $ | 529,044 | $ | 460,088 | |||
Due after 1 year through 5 years | 764,474 | 773,260 | |||||
$ | 1,293,518 | $ | 1,233,348 |
September 30, 2016 | December 31, 2015 | ||||||
Trade accounts receivable | $ | 255,236 | $ | 262,885 | |||
Unbilled accounts receivable | 111,550 | 124,878 | |||||
Gross accounts receivable | 366,786 | 387,763 | |||||
Allowance for doubtful accounts | (1,127 | ) | (906 | ) | |||
Reserve for cash-basis customers | (7,662 | ) | (6,458 | ) | |||
Total accounts receivable reserves | (8,789 | ) | (7,364 | ) | |||
Accounts receivable, net | $ | 357,997 | $ | 380,399 |
Balance as of January 1, 2016 | $ | 1,150,244 | |
Acquisition of Concord Systems, Inc. | 1,079 | ||
Foreign currency translation | (107 | ) | |
Balance as of September 30, 2016 | $ | 1,151,216 |
September 30, 2016 | December 31, 2015 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Completed technology | $ | 102,992 | $ | (47,543 | ) | $ | 55,449 | $ | 120,791 | $ | (58,633 | ) | $ | 62,158 | |||||||||
Customer-related intangible assets | 191,710 | (111,375 | ) | 80,335 | 191,710 | (102,872 | ) | 88,838 | |||||||||||||||
Non-compete agreements | 5,140 | (3,542 | ) | 1,598 | 6,540 | (3,374 | ) | 3,166 | |||||||||||||||
Trademarks and trade names | 3,700 | (2,212 | ) | 1,488 | 3,700 | (1,767 | ) | 1,933 | |||||||||||||||
Acquired license rights | 490 | (490 | ) | — | 490 | (490 | ) | — | |||||||||||||||
Total | $ | 304,032 | $ | (165,162 | ) | $ | 138,870 | $ | 323,231 | $ | (167,136 | ) | $ | 156,095 |
• | 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, 2016 | December 31, 2015 | ||||||
Liability component: | |||||||
Principal | $ | 690,000 | $ | 690,000 | |||
Less: debt discount and issuance costs, net of amortization | (55,496 | ) | (71,953 | ) | |||
Net carrying amount | $ | 634,504 | $ | 618,047 | |||
Equity component: | $ | 101,276 | $ | 101,276 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Amortization of debt discount and issuance costs | $ | 5,534 | $ | 5,344 | 16,457 | 15,892 | |||||||||
Capitalization of interest expense | (868 | ) | (714 | ) | (2,499 | ) | (2,008 | ) | |||||||
Total interest expense | $ | 4,666 | $ | 4,630 | $ | 13,958 | $ | 13,884 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cost of revenue | $ | 4,701 | $ | 3,579 | $ | 13,224 | $ | 10,244 | |||||||
Research and development | 7,727 | 5,982 | 20,917 | 17,357 | |||||||||||
Sales and marketing | 14,729 | 13,465 | 40,340 | 39,295 | |||||||||||
General and administrative | 11,495 | 8,020 | 30,823 | 26,070 | |||||||||||
Total stock-based compensation | 38,652 | 31,046 | 105,304 | 92,966 | |||||||||||
Provision for income taxes | (11,664 | ) | (11,218 | ) | (36,185 | ) | (33,325 | ) | |||||||
Total stock-based compensation, net of income taxes | $ | 26,988 | $ | 19,828 | $ | 69,119 | $ | 59,641 |
Foreign Currency Translation | Net Unrealized Gains on Investments | Total | |||||||||
Balance as of January 1, 2016 | $ | (44,936 | ) | $ | 3,483 | $ | (41,453 | ) | |||
Other comprehensive gain | 5,567 | 2,424 | 7,991 | ||||||||
Balance as of September 30, 2016 | $ | (39,369 | ) | $ | 5,907 | $ | (33,462 | ) |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 76,000 | $ | 88,040 | $ | 224,493 | $ | 232,986 | |||||||
Denominator: | |||||||||||||||
Shares used for basic net income per share | 174,429 | 178,547 | 175,444 | 178,591 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options | 341 | 667 | 380 | 858 | |||||||||||
RSUs and DSUs | 847 | 1,150 | 701 | 1,193 | |||||||||||
Convertible senior notes | — | — | — | — | |||||||||||
Warrants related to issuance of convertible senior notes | — | — | — | — | |||||||||||
Shares used for diluted net income per share | 175,617 | 180,364 | 176,525 | 180,642 | |||||||||||
Basic net income per share | $ | 0.44 | $ | 0.49 | $ | 1.28 | $ | 1.30 | |||||||
Diluted net income per share | $ | 0.43 | $ | 0.49 | $ | 1.27 | $ | 1.29 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Stock options | 36 | 3 | 74 | 10 | |||||||
Service-based RSUs | 1,450 | 157 | 2,672 | 269 | |||||||
Performance-based RSUs | 1,245 | 1,148 | 884 | 1,148 | |||||||
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 |
• | Increased sales of our Cloud 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 increased committed recurring revenue by adding new customers and increasing sales of incremental services to our existing customers. These increases helped to limit the impact of reductions in usage of our services and contract terminations by certain customers, as well as the effect of price decreases negotiated as part of contract renewals. |
• | In recent years, we have experienced increases in the amount of traffic delivered for our customers that use our solutions for video, gaming, social media and software downloads, which contributed to an increase of our revenue. Beginning in the second half of 2015, our traffic growth rates have moderated, which has impacted our overall revenue growth rates. These developments in traffic growth are primarily attributable to the “do-it-yourself” efforts by six of our customers that are large Internet platform companies: Amazon, Apple, Facebook, Google, Microsoft and Netflix, or our Internet Platform Customers. We are likely to continue experiencing modest decreases in traffic from these customers during the remainder of the year. |
• | 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 experience lower 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 manage effectively 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 to support our revenue growth and strategic initiatives. We increased our headcount by 250 employees during the first nine months of 2016. During the year ended December 31, 2015, we increased our headcount by 979 employees. We expect to continue to hire additional employees during the fourth quarter of 2016, both domestically and internationally, in support of our strategic initiatives, although we expect the rate of hiring to slow relative to the past several years. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
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) | 35.0 | 33.2 | 35.1 | 32.9 | |||||||
Research and development | 7.2 | 7.0 | 7.0 | 6.9 | |||||||
Sales and marketing | 17.6 | 19.5 | 17.9 | 19.9 | |||||||
General and administrative | 19.4 | 18.1 | 18.7 | 17.8 | |||||||
Amortization of acquired intangible assets | 1.1 | 1.2 | 1.2 | 1.3 | |||||||
Restructuring charges | 0.5 | — | 0.6 | — | |||||||
Total costs and operating expenses | 80.8 | 79.0 | 80.5 | 78.8 | |||||||
Income from operations | 19.2 | 21.0 | 19.5 | 21.2 | |||||||
Interest income | 0.7 | 0.5 | 0.6 | 0.5 | |||||||
Interest expense | (0.8 | ) | (0.8 | ) | (0.8 | ) | (0.9 | ) | |||
Other income (expense), net | 0.1 | — | 0.1 | (0.1 | ) | ||||||
Income before provision for income taxes | 19.2 | 20.7 | 19.4 | 20.7 | |||||||
Provision for income taxes | 6.1 | 4.7 | 6.3 | 6.4 | |||||||
Net income | 13.1 | % | 16.0 | % | 13.1 | % | 14.3 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | % Change | % Change at Constant Currency | 2016 | 2015 | % Change | % Change at Constant Currency | ||||||||||||||||||||
Revenue | $ | 584,065 | $ | 551,030 | 6.0 | % | 5.4 | % | $ | 1,723,925 | $ | 1,618,289 | 6.5 | % | 6.5 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | % Change | % Change at Constant Currency | 2016 | 2015 | % Change | % Change at Constant Currency | ||||||||||||||||||||
Performance and Security Solutions | $ | 345,118 | $ | 289,046 | 19.4 | % | 19.1 | % | $ | 987,623 | $ | 843,396 | 17.1 | % | 17.2 | % | |||||||||||
Media Delivery Solutions | 188,075 | 218,537 | (13.9 | ) | (14.9 | ) | 591,091 | 650,553 | (9.1 | )% | (9.3 | ) | |||||||||||||||
Services and Support Solutions | 50,872 | 43,447 | 17.1 | 16.2 | 145,211 | 124,340 | 16.8 | % | 16.5 | ||||||||||||||||||
Total revenue | $ | 584,065 | $ | 551,030 | 6.0 | % | 5.4 | % | $ | 1,723,925 | $ | 1,618,289 | 6.5 | % | 6.5 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | % Change | % Change at Constant Currency | 2016 | 2015 | % Change | % Change at Constant Currency | ||||||||||||||||||||
Media Division | $ | 284,107 | $ | 296,848 | (4.3 | )% | (4.9 | )% | $ | 864,472 | $ | 885,365 | (2.4 | )% | (2.3 | )% | |||||||||||
Web Division | 284,629 | 243,430 | 16.9 | 16.3 | 819,699 | 703,687 | 16.5 | 16.4 | |||||||||||||||||||
Enterprise and Carrier Division | 15,329 | 10,752 | 42.6 | 42.6 | 39,754 | 29,237 | 36.0 | 35.9 | |||||||||||||||||||
Total revenue | $ | 584,065 | $ | 551,030 | 6.0 | % | 5.4 | % | $ | 1,723,925 | $ | 1,618,289 | 6.5 | % | 6.5 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | % Change | % Change at Constant Currency | 2016 | 2015 | % Change | % Change at Constant Currency | ||||||||||||||||||||
U.S. | $ | 404,065 | $ | 400,581 | 0.9 | % | 0.9 | % | $ | 1,196,433 | $ | 1,188,657 | 0.7 | % | 0.7 | % | |||||||||||
International | 180,000 | 150,449 | 19.6 | 17.5 | 527,492 | 429,632 | 22.8 | 22.7 | |||||||||||||||||||
Total revenue | $ | 584,065 | $ | 551,030 | 6.0 | % | 5.4 | % | $ | 1,723,925 | $ | 1,618,289 | 6.5 | % | 6.5 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Bandwidth fees | $ | 42,099 | $ | 37,711 | 11.6 | % | $ | 125,876 | $ | 109,312 | 15.2 | % | |||||||||
Co-location fees | 32,987 | 31,709 | 4.0 | 98,804 | 92,969 | 6.3 | |||||||||||||||
Network build-out and supporting services | 14,285 | 15,756 | (9.3 | ) | 44,957 | 42,716 | 5.2 | ||||||||||||||
Payroll and related costs | 49,169 | 40,529 | 21.3 | 140,475 | 117,682 | 19.4 | |||||||||||||||
Stock-based compensation, including amortization of prior capitalized amounts | 8,012 | 6,350 | 26.2 | 23,002 | 19,124 | 20.3 | |||||||||||||||
Depreciation of network equipment | 35,402 | 32,749 | 8.1 | 105,883 | 96,181 | 10.1 | |||||||||||||||
Amortization of internal-use software | 22,513 | 18,400 | 22.4 | 66,529 | 54,424 | 22.2 | |||||||||||||||
Total cost of revenue | $ | 204,467 | $ | 183,204 | 11.6 | % | $ | 605,526 | $ | 532,408 | 13.7 | % | |||||||||
As a percentage of revenue | 35.0 | % | 33.2 | % | 35.1 | % | 32.9 | % |
• | amounts paid to network providers for bandwidth fees to support the increase in traffic served on our network and for traffic served from higher cost regions; |
• | payroll and related costs, as well as stock-based compensation, of service personnel due to headcount growth in our services organization, to support our increase in Services and Support Solutions revenue, and our network operations personnel, to support our other solution revenue; and |
• | depreciation of network equipment and amortization of internal-use software as we continued to invest in our infrastructure and release internally-developed software onto our network. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Payroll and related costs | $ | 63,927 | $ | 58,005 | 10.2 | % | $ | 189,734 | $ | 167,559 | 13.2 | % | |||||||||
Stock-based compensation | 7,727 | 5,982 | 29.2 | 20,917 | 17,357 | 20.5 | |||||||||||||||
Capitalized salaries and related costs | (30,429 | ) | (26,951 | ) | 12.9 | (93,557 | ) | (79,037 | ) | 18.4 | |||||||||||
Other expenses | 1,116 | 1,360 | (17.9 | ) | 3,779 | 5,038 | (25.0 | ) | |||||||||||||
Total research and development | $ | 42,341 | $ | 38,396 | 10.3 | % | $ | 120,873 | $ | 110,917 | 9.0 | % | |||||||||
As a percentage of revenue | 7.2 | % | 7.0 | % | 7.0 | % | 6.9 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Payroll and related costs | $ | 75,351 | $ | 82,282 | (8.4 | )% | $ | 226,179 | $ | 233,811 | (3.3 | )% | |||||||||
Stock-based compensation | 14,729 | 13,465 | 9.4 | 40,340 | 39,295 | 2.7 | |||||||||||||||
Marketing programs and related costs | 7,529 | 8,022 | (6.1 | ) | 23,137 | 28,899 | (19.9 | ) | |||||||||||||
Other expenses | 5,017 | 3,657 | 37.2 | 18,404 | 20,401 | (9.8 | ) | ||||||||||||||
Total sales and marketing | $ | 102,626 | $ | 107,426 | (4.5 | )% | $ | 308,060 | $ | 322,406 | (4.4 | )% | |||||||||
As a percentage of revenue | 17.6 | % | 19.5 | % | 17.9 | % | 19.9 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Payroll and related costs | $ | 42,004 | $ | 42,667 | (1.6 | )% | $ | 122,367 | $ | 124,689 | (1.9 | )% | |||||||||
Stock-based compensation | 11,495 | 8,020 | 43.3 | 30,823 | 26,070 | 18.2 | |||||||||||||||
Depreciation and amortization | 16,688 | 14,114 | 18.2 | 48,081 | 39,468 | 21.8 | |||||||||||||||
Facilities-related costs | 18,337 | 16,599 | 10.5 | 53,545 | 46,785 | 14.4 | |||||||||||||||
Provision for doubtful accounts | 278 | 775 | (64.1 | ) | 1,106 | 1,112 | (0.5 | ) | |||||||||||||
Acquisition-related costs | 236 | 252 | (6.3 | ) | 490 | 1,058 | (53.7 | ) | |||||||||||||
License of patent | (4,415 | ) | — | nm | (4,415 | ) | — | nm | |||||||||||||
Professional fees and other expenses | 28,697 | 17,116 | 67.7 | 71,144 | 49,105 | 44.9 | |||||||||||||||
Total general and administrative | $ | 113,320 | $ | 99,543 | 13.8 | % | $ | 323,141 | $ | 288,287 | 12.1 | % | |||||||||
As a percentage of revenue | 19.4 | % | 18.1 | % | 18.7 | % | 17.8 | % |
• | legal and other professional fees due to ongoing litigation and other costs to support our operations; |
• | stock-based compensation as a result of increased headcount and the impact that changing estimates have on our performance-based stock-based compensation from period to period; and |
• | expansion of company infrastructure throughout 2015 and 2016 to support investments in engineering, go-to-market capacity and enterprise expansion initiatives, particularly expansion of our facility footprint, which increased facilities-related costs and depreciation and amortization. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
(in thousands) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||
Amortization of acquired intangible assets | $ | 6,598 | $ | 6,752 | (2.3 | )% | $ | 20,025 | $ | 20,284 | (1.3 | )% | |||||||||
As a percentage of revenue | 1.1 | % | 1.2 | % | 1.2 | % | 1.3 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||
(in thousands) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||
Restructuring charges | $ | 2,948 | $ | 20 | nm | $ | 10,236 | $ | 517 | nm | |||||||||
As a percentage of revenue | 0.5 | % | — | % | 0.6 | % | — | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
(in thousands) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||
Interest income | $ | 3,809 | $ | 2,723 | 39.9 | % | $ | 10,522 | $ | 8,265 | 27.3 | % | |||||||||
As a percentage of revenue | 0.7 | % | 0.5 | % | 0.6 | % | 0.5 | % | |||||||||||||
Interest expense | $ | (4,666 | ) | $ | (4,630 | ) | 0.8 | $ | (13,958 | ) | $ | (13,884 | ) | 0.5 | |||||||
As a percentage of revenue | (0.8 | )% | (0.8 | )% | (0.8 | )% | (0.9 | )% | |||||||||||||
Other income (expense), net | $ | 778 | $ | 204 | nm | $ | 1,004 | $ | (1,702 | ) | nm | ||||||||||
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) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||
Provision for income taxes | $ | 35,686 | $ | 25,946 | 37.5 | % | $ | 109,139 | $ | 103,163 | 5.8 | % | |||||||||
As a percentage of revenue | 6.1 | % | 4.7 | % | 6.3 | % | 6.4 | % | |||||||||||||
Effective income tax rate | 32.0 | % | 22.8 | % | 32.7 | % | 30.7 | % |
• | 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 interpret; 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 past 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. |
• | Loss on investments and legal matter costs – We have incurred losses from the impairment of certain investments and the settlement of legal matters. We have also incurred costs with respect to our internal U.S. Foreign Corrupt Practices Act, or FCPA, 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 occur infrequently and 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, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Income from operations | $ | 111,765 | $ | 115,689 | $ | 336,064 | $ | 343,470 | |||||||
Amortization of acquired intangible assets | 6,598 | 6,752 | 20,025 | 20,284 | |||||||||||
Stock-based compensation | 38,652 | 31,046 | 105,304 | 92,966 | |||||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 3,983 | 3,152 | 11,662 | 9,896 | |||||||||||
Restructuring charges | 2,948 | 20 | 10,236 | 517 | |||||||||||
Acquisition-related costs | 241 | 258 | 523 | 124 | |||||||||||
Legal matter costs | — | 430 | 890 | 3,215 | |||||||||||
Non-GAAP income from operations | $ | 164,187 | $ | 157,347 | $ | 484,704 | $ | 470,472 | |||||||
GAAP operating margin | 19 | % | 21 | % | 19 | % | 21 | % | |||||||
Non-GAAP operating margin | 28 | % | 29 | % | 28 | % | 29 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 76,000 | $ | 88,040 | $ | 224,493 | $ | 232,986 | |||||||
Amortization of acquired intangible assets | 6,598 | 6,752 | 20,025 | 20,284 | |||||||||||
Stock-based compensation | 38,652 | 31,046 | 105,304 | 92,966 | |||||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 3,983 | 3,152 | 11,662 | 9,896 | |||||||||||
Restructuring charges | 2,948 | 20 | 10,236 | 517 | |||||||||||
Acquisition-related costs | 241 | 258 | 523 | 124 | |||||||||||
Legal matter costs | — | 430 | 890 | 3,215 | |||||||||||
Amortization of debt discount and issuance costs | 4,666 | 4,630 | 13,958 | 13,884 | |||||||||||
Loss on investments | — | — | — | 25 | |||||||||||
Income tax effect of above non-GAAP adjustments and certain discrete tax items | (12,939 | ) | (22,453 | ) | (37,094 | ) | (48,678 | ) | |||||||
Non-GAAP net income | $ | 120,149 | $ | 111,875 | $ | 349,997 | $ | 325,219 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
GAAP net income per diluted share | $ | 0.43 | $ | 0.49 | $ | 1.27 | $ | 1.29 | |||||||
Amortization of acquired intangible assets | 0.03 | 0.03 | 0.10 | 0.10 | |||||||||||
Stock-based compensation | 0.22 | 0.17 | 0.60 | 0.52 | |||||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 0.02 | 0.02 | 0.07 | 0.06 | |||||||||||
Restructuring charges | 0.02 | — | 0.06 | — | |||||||||||
Acquisition-related costs | — | — | — | — | |||||||||||
Legal matter costs | — | — | 0.01 | 0.02 | |||||||||||
Amortization of debt discount and issuance costs | 0.03 | 0.03 | 0.08 | 0.08 | |||||||||||
Loss on investments | — | — | — | — | |||||||||||
Income tax effect of above non-GAAP adjustments and certain discrete tax items | (0.07 | ) | (0.12 | ) | (0.21 | ) | (0.27 | ) | |||||||
Non-GAAP net income per diluted share | $ | 0.68 | $ | 0.62 | $ | 1.98 | $ | 1.80 | |||||||
Shares used in diluted per share calculations | 175,617 | 180,364 | 176,525 | 180,642 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 76,000 | $ | 88,040 | $ | 224,493 | $ | 232,986 | |||||||
Amortization of acquired intangible assets | 6,598 | 6,752 | 20,025 | 20,284 | |||||||||||
Stock-based compensation | 38,652 | 31,046 | 105,304 | 92,966 | |||||||||||
Amortization of capitalized stock-based compensation and capitalized interest expense | 3,983 | 3,152 | 11,662 | 9,896 | |||||||||||
Restructuring charges | 2,948 | 20 | 10,236 | 517 | |||||||||||
Acquisition-related costs | 241 | 258 | 523 | 124 | |||||||||||
Legal matter costs | — | 430 | 890 | 3,215 | |||||||||||
Interest income | (3,809 | ) | (2,723 | ) | (10,522 | ) | (8,265 | ) | |||||||
Amortization of debt discount and issuance costs | 4,666 | 4,630 | 13,958 | 13,884 | |||||||||||
Provision for income taxes | 35,686 | 25,946 | 109,139 | 103,163 | |||||||||||
Depreciation and amortization | 73,930 | 64,881 | 218,607 | 189,054 | |||||||||||
Other (income) expense, net | (778 | ) | (204 | ) | (1,004 | ) | 1,702 | ||||||||
Adjusted EBITDA | $ | 238,117 | $ | 222,228 | $ | 703,311 | $ | 659,526 | |||||||
Adjusted EBITDA margin | 41 | % | 40 | % | 41 | % | 41 | % |
For the Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Net income | $ | 224,493 | $ | 232,986 | |||
Non-cash reconciling items included in net income | 360,982 | 286,563 | |||||
Changes in operating assets and liabilities | 99,035 | 26,811 | |||||
Net cash flows provided by operating activities | $ | 684,510 | $ | 546,360 |
For the Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Cash paid for acquired businesses, net of cash acquired | $ | (2,936 | ) | $ | (122,445 | ) | |
Purchases of property and equipment and capitalization of internal-use software development costs | (240,351 | ) | (366,146 | ) | |||
Net marketable securities activity | (58,275 | ) | 142,936 | ||||
Other investing activity | (3,145 | ) | (3,037 | ) | |||
Net cash used in investing activities | $ | (304,707 | ) | $ | (348,692 | ) |
For the Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Activity related to stock-based compensation | $ | 6,859 | $ | 31,968 | |||
Repurchases of common stock | (294,867 | ) | (202,426 | ) | |||
Other financing activities | — | (2,050 | ) | ||||
Net cash used in financing activities | $ | (288,008 | ) | $ | (172,508 | ) |
• | decisions by our media customers to delay introduction of OTT video delivery initiatives; |
• | 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 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 external providers like us. |
• | 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 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. |
• | quarterly variations in operating results; |
• | slower than expected growth in traffic over our network; |
• | announcements by our customers related to their businesses that could be viewed as impacting their usage of our solutions; |
• | introduction of new products, services and strategic developments by us or our competitors; |
• | 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; |
• | 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; |
• | changes in regulatory requirements 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. |
• | 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 |
• | 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) | ||||||||||
July 1, 2016 – July 31, 2016 | 478,462 | $ | 56.26 | 478,462 | $ | 841,669 | ||||||||
August 1, 2016 – August 31, 2016 | 697,849 | 51.60 | 697,849 | 805,658 | ||||||||||
September 1, 2016 – September 30, 2016 | 607,901 | 53.02 | 607,901 | 773,428 | ||||||||||
Total | 1,784,212 | $ | 53.33 | 1,784,212 | $ | 773,428 |
(1) | Information is based on settlement dates of repurchase transactions. |
(2) | Consists of shares of our common stock, par value $0.01 per share. All repurchases were made pursuant to a previously-announced program. |
(3) | Includes commissions paid. |
(4) | In October 2013, the Board of Directors authorized a $750.0 million share repurchase program, effective from October 16, 2013 through December 31, 2016. In February 2016, the Board of Directors authorized a $1.0 billion share repurchase program that superseded the October 2013 repurchase program and is effective from February 11, 2016 through December 31, 2018. |
Akamai Technologies, Inc. | ||
November 8, 2016 | By: | /s/ James Benson |
James Benson | ||
Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer) |
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
Exhibit 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Akamai Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2016 | /s/ F. Thomson Leighton | |
F. Thomson Leighton, Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Akamai Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2016 | /s/ James Benson | |
James Benson, Chief Financial Officer |
Date: | November 8, 2016 | /S/ F. Thomson Leighton | |
F. Thomson Leighton, Chief Executive Officer |
Date: | November 8, 2016 | /s/ James Benson | |
James Benson, Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 03, 2016 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | AKAMAI TECHNOLOGIES INC | |
Entity Central Index Key | 0001086222 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 173,299,911 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable reserve | $ 8,789 | $ 7,364 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares designated as Series A Junior Participating Preferred Stock | 700,000 | 700,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 179,406,558 | 177,212,181 |
Common stock, shares outstanding | 173,670,583 | 177,212,181 |
Treasury stock, shares | 5,735,975 | 0 |
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Revenue | $ 584,065 | $ 551,030 | $ 1,723,925 | $ 1,618,289 |
Costs and operating expenses: | ||||
Cost of revenue (exclusive of amortization of acquired intangible assets shown below) | 204,467 | 183,204 | 605,526 | 532,408 |
Research and development | 42,341 | 38,396 | 120,873 | 110,917 |
Sales and marketing | 102,626 | 107,426 | 308,060 | 322,406 |
General and administrative | 113,320 | 99,543 | 323,141 | 288,287 |
Amortization of acquired intangible assets | 6,598 | 6,752 | 20,025 | 20,284 |
Restructuring charges | 2,948 | 20 | 10,236 | 517 |
Total costs and operating expenses | 472,300 | 435,341 | 1,387,861 | 1,274,819 |
Income from operations | 111,765 | 115,689 | 336,064 | 343,470 |
Interest income | 3,809 | 2,723 | 10,522 | 8,265 |
Interest expense | (4,666) | (4,630) | (13,958) | (13,884) |
Other income (expense), net | 778 | 204 | 1,004 | (1,702) |
Income before provision for income taxes | 111,686 | 113,986 | 333,632 | 336,149 |
Provision for income taxes | 35,686 | 25,946 | 109,139 | 103,163 |
Net income | $ 76,000 | $ 88,040 | $ 224,493 | $ 232,986 |
Net income per share: | ||||
Basic (in dollars per share) | $ 0.44 | $ 0.49 | $ 1.28 | $ 1.30 |
Diluted (in dollars per share) | $ 0.43 | $ 0.49 | $ 1.27 | $ 1.29 |
Shares used in per share calculations: | ||||
Basic (in shares) | 174,429 | 178,547 | 175,444 | 178,591 |
Diluted (in shares) | 175,617 | 180,364 | 176,525 | 180,642 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 76,000 | $ 88,040 | $ 224,493 | $ 232,986 |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustments | (358) | (9,261) | 5,567 | (17,069) |
Change in unrealized (loss) gain on investments, net of income tax benefit (provision) of $867, $(73), $(1,445)and $(647) for the three and nine months ended September 30, 2016 and 2015, respectively | (1,488) | 121 | 2,424 | 1,161 |
Other comprehensive (loss) income | (1,846) | (9,140) | 7,991 | (15,908) |
Comprehensive income | $ 74,154 | $ 78,900 | $ 232,484 | $ 217,078 |
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Benefit (provision) on change in unrealized gain (loss) on investments, net | $ 866 | $ (73) | $ (1,445) | $ (647) |
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Cash Flows [Abstract] | ||
Income tax refund received | $ 1,582 | $ 19,285 |
Nature of Business and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation Akamai Technologies, Inc. (the “Company”) provides cloud services for delivering, optimizing and securing content and business applications over the Internet. The Company's globally-distributed platform comprises over 222,000 servers in more than 1,600 networks in approximately 125 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. The Company currently operates in one industry segment: providing cloud services for delivering, optimizing and securing content and business applications over the Internet. The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying financial statements. Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed in, or omitted from, these interim financial statements. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (the "Commission") on February 29, 2016. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein. Newly-Adopted Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (“FASB”) issued updated guidance to simplify the presentation of debt issuance costs on the balance sheets. This guidance moved debt issuance costs from the assets section of the balance sheet to the liabilities section as a direct deduction from the carrying amount of the debt issued. The Company retrospectively adopted the guidance on January 1, 2016. The prior period consolidated balance sheet presented, as of December 31, 2015, was revised to reclassify $6.2 million of debt issuance costs included in other assets to convertible senior notes. This had the impact of reducing the Company's total assets and total liabilities by $6.2 million, as of December 31, 2015. This reclassification did not have a material impact on the Company's consolidated financial statements. In September 2015, the FASB issued updated guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments. In an effort to reduce complexity in financial reporting, the new guidance requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in the reporting period in which the adjustment is identified. The standard was effective for and adopted by the Company on January 1, 2016. This guidance did not have an impact on the Company's consolidated financial statements as the measurement periods for the Company's 2015 acquisitions were closed as of December 31, 2015. Recent Accounting Pronouncements In May 2014, the FASB issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard will be effective for the Company on January 1, 2018, and may be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In February 2016, the FASB issued guidance that requires companies to present assets and liabilities arising from leases on the consolidated balance sheets. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This standard will be effective for the Company on January 1, 2019, and is to be applied using a modified retrospective approach. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In March 2016, the FASB issued guidance that is intended to simplify aspects of how share-based payments are accounted for and presented in financial statements. This guidance requires that entities record all tax effects of share-based payments at settlement or expiration through the income statement. The standard also amends how windfall tax benefits are recognized, the minimum statutory tax withholding requirements and how entities elect to recognize share-based payment forfeitures. This guidance will be effective for the Company on January 1, 2017, and portions will be required to be applied on a retrospective or modified retrospective basis. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In June 2016, the FASB issued guidance that introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities. The guidance establishes a new "expected loss model" that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. This guidance will be effective for the Company on January 1, 2020. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In October 2016, the FASB issued guidance which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance will be effective for the Company on January 1, 2018 and is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The following is a summary of available-for-sale marketable securities held as of September 30, 2016 and December 31, 2015 (in thousands):
The Company offers certain eligible employees the ability to participate in a non-qualified deferred compensation plan. The mutual funds held by the Company that are associated with this plan are classified as restricted trading securities. These securities are not included in the available-for-sale securities table above but are included in marketable securities in the consolidated balance sheets. Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive loss in the consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest income in the consolidated statements of income. As of September 30, 2016, the Company held for investment corporate bonds and U.S. government agency obligations with a fair value of $44.3 million and classified as available-for-sale marketable securities that had been in a continuous unrealized loss position for more than 12 months. The unrealized losses are not significant and are attributable to changes in interest rates. The Company does not believe any unrealized losses represent other than temporary impairments based on the evaluation of available evidence. The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets at September 30, 2016 and December 31, 2015 (in thousands):
As of September 30, 2016 and December 31, 2015, the Company grouped money market funds and mutual funds using a Level 1 valuation because market prices for such investments are readily available in active markets. As of September 30, 2016 and December 31, 2015, the Company grouped commercial paper, corporate bonds and U.S. government agency obligations using a Level 2 valuation because quoted prices for identical or similar assets are available in markets that are inactive. The Company did not have any transfers of assets between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the nine months ended September 30, 2016. When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Contractual maturities of the Company’s available-for-sale marketable securities held as of September 30, 2016 and December 31, 2015 were as follows (in thousands):
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Accounts Receivable |
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Net accounts receivable consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands):
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Goodwill and Acquired Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Acquired Intangible Assets | Goodwill and Acquired Intangible Assets The change in the carrying amount of goodwill for the nine months ended September 30, 2016 was as follows (in thousands):
The Company tests goodwill for impairment at least annually. Through the date the consolidated financial statements were issued, no triggering events had occurred that would indicate a potential impairment exists. Acquired intangible assets that are subject to amortization consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands):
Aggregate expense related to amortization of acquired intangible assets for the three and nine months ended September 30, 2016 was $6.6 million and $20.0 million, respectively. Aggregate expense related to amortization of acquired intangible assets for the three and nine months ended September 30, 2015 was $6.8 million and $20.3 million, respectively. Based on the Company’s acquired intangible assets as of September 30, 2016, aggregate expense related to amortization of acquired intangible assets is expected to be $6.6 million for the remainder of 2016, and $28.2 million, $24.1 million, $22.1 million and $18.1 million for 2017, 2018, 2019 and 2020, respectively. |
Business Combinations |
9 Months Ended |
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Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations Acquisition-related costs during the nine months ended September 30, 2016 were $1.0 million and are included in general and administrative expense in the consolidated statements of income. Pro forma results of operations for the acquisition completed during the nine months ended September 30, 2016 have not been presented because the effects of the acquisition were not material to the Company's consolidated financial results. Revenue and earnings of the acquired company since the date of the acquisition that are included in the Company's consolidated statements of income are also not presented separately because they are not material. Concord Systems In September 2016, the Company acquired Concord Systems, Inc., a provider of technology for processing data at scale, for $3.0 million in cash. The acquisition is expected to provide the Company with technology to complement existing platform data processing capabilities. The Company allocated $1.1 million of the cost of the acquisition to goodwill, $2.8 million to acquired intangible assets, which have a weighted average useful life of 7.0 years, and $0.9 million related to deferred tax liabilities. The allocation of the purchase price has not been finalized. The total amount of goodwill expected to be deducted for tax purposes is $0.3 million. Soha Systems In October 2016, the Company acquired Soha Systems, Inc. ("Soha"), a provider of technology designed to facilitate secure access to enterprise applications, for $55.0 million in cash and up to an additional $5.0 million for the achievement of post-closing milestones. The allocation of the purchase price has not been finalized as of the date of the filing of these financial statements. The Company plans to continue offering existing Soha solutions as well as incorporate the technology into new solutions. |
Convertible Senior Notes |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes | Convertible Senior Notes In February 2014, the Company issued $690.0 million in par value of convertible senior notes due 2019 (the "Notes"). The Notes are senior unsecured obligations of the Company, do not bear regular interest and mature on February 15, 2019, unless repurchased or converted prior to maturity. At their option, holders may convert their Notes prior to the close of business on the business day immediately preceding August 15, 2018 only under the following circumstances:
On or after August 15, 2018, holders may convert all or any portion of their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. Upon conversion, the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The initial conversion rate is 11.1651 shares of the Company's common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $89.56 per share, subject to adjustments in certain events, and represents a potential conversion into 7.7 million shares. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying cost of the liability component was calculated by measuring the fair value of a similar debt obligation that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes. The difference between the principal amount of the Notes and the proceeds allocated to the liability component (“debt discount”) is amortized to interest expense using the effective interest method over the term of the Notes. The equity component is recorded in additional paid-in capital in the consolidated balance sheet and will not be remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total transaction costs incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to interest expense over the term of the Notes, and transaction costs attributable to the equity component are netted against the equity component of the Notes in stockholders’ equity. The Notes consist of the following components (in thousands):
The estimated fair value of the Notes at September 30, 2016 was $676.6 million. The fair value was determined based on the quoted price of the Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 within the fair value hierarchy. Based on the closing price of the Company's common stock of $52.99 on September 30, 2016, the value of the Notes if immediately converted to common stock was less than the principal amount of $690.0 million. The Company used $62.0 million of the proceeds from the offering to repurchase shares of its common stock, concurrently with the issuance of the Notes. The repurchases were made in accordance with the share repurchase program previously approved by the Board of Directors (Note 8). Additionally, $23.3 million of the proceeds was used for the net cost of convertible note hedge and warrant transactions. The remaining net proceeds are for working capital, share repurchases and other general corporate purposes, as well as for potential acquisitions and strategic transactions. Note Hedge To minimize the impact of potential dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock in February 2014. The Company paid $101.3 million for the note hedge transactions. The note hedge transactions cover approximately 7.7 million shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The note hedge transactions are intended to reduce dilution in the event of conversion of the Notes. Warrants Separately, in February 2014, the Company entered into warrant transactions, whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, up to 7.7 million shares of the Company’s common stock at a strike price of approximately $104.49 per share. The Company received aggregate proceeds of $78.0 million from the sale of the warrants. The convertible note hedge and warrant transactions will generally have the effect of increasing the conversion price of the Notes to approximately $104.49 per share. Interest Expense The Notes do not bear regular interest, but have an effective interest rate of 3.2% attributable to the conversion feature. The following table sets forth total interest expense included in the consolidated statements of income related to the Notes (in thousands):
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Commitments and Contingencies |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments In November 2016, the Company executed a lease for new headquarters space in Cambridge, Massachusetts. The lease is for approximately 480,000 square feet and is expected to commence at the termination of the Company's current leases in Cambridge, the majority of which expire on December 31, 2019. The initial lease term is 15 years. In addition to the new lease, the Company also executed an arrangement obligating it to lease at least 150,000 square feet of additional space in Cambridge. The total minimum obligation under these arrangements is $698.4 million. For the year ended December 31, 2020, the Company's minimum obligation is $42.2 million. Contingencies During the three months ended June 30, 2016, the Company completed an internal investigation, with the assistance of outside counsel, relating to improper sales practices by a former employee. The internal investigation included a review of compliance with the requirements of the U.S. Foreign Corrupt Practices Act ("FCPA") and other applicable laws and regulations. In February 2015, the Company voluntarily contacted the Commission and Department of Justice to advise both agencies of this internal investigation. In June 2016, the Company signed a non-prosecution agreement with the Commission and agreed to disgorge $0.7 million to resolve this matter, including interest. In July 2016, as part of the resolution of a patent infringement lawsuit filed by the Company against Limelight Networks, Inc. (“Limelight”) in 2006, the Company agreed to license to Limelight technology covered by certain of the Company’s patents. The terms of the agreement require Limelight to pay the Company $54.0 million in 12 equal installments over three years, beginning in August 2016. During the third quarter of 2016, the Company received the first installment of $4.5 million, which was recorded as a reduction to general and administrative expenses in the consolidated statement of income, with an insignificant amount recorded as interest income. In November 2015, Limelight filed a complaint in the U.S. District Court for the Eastern District of Virginia against the Company and XO Communications LLC (“XO”), alleging patent infringement by the two companies. The complaint alleges that the Company and XO infringed six of Limelight’s content delivery patents. The complaint seeks to recover from the Company and XO monetary damages based upon lost revenue due to infringing technology used by the companies. The Company has made counterclaims in the action against Limelight alleging that Limelight has infringed five of the Company’s content delivery patents, and the Company is seeking monetary damages based upon lost revenue due to the infringing technology used by Limelight. The case is scheduled for trial in January 2017. No provision with respect to this matter has been made in the Company’s consolidated financial statements. An estimate of the possible loss or range of loss cannot be made. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Share Repurchase Program In October 2013, the Board of Directors authorized a $750.0 million share repurchase program, effective from October 16, 2013 through December 31, 2016. In February 2016, the Board of Directors authorized a $1.0 billion share repurchase program that superseded the October 2013 program and is effective from February 9, 2016 through December 31, 2018. The Company's goal for the share repurchase program is to offset the dilution created by its employee equity compensation programs and provide the flexibility to return capital to shareholders as business and market conditions warrant. During the nine months ended September 30, 2016, the Company repurchased 5.7 million shares of its common stock for $294.9 million. Stock-Based Compensation The following table summarizes stock-based compensation included in the Company’s consolidated statements of income for the three and nine months ended September 30, 2016 and 2015 (in thousands):
In addition to the amounts of stock-based compensation reported in the table above, the Company’s consolidated statements of income for the three and nine months ended September 30, 2016 include stock-based compensation reflected as a component of amortization of capitalized internal-use software of $3.5 million and $10.4 million, respectively, before taxes. For the three and nine months ended September 30, 2015, the Company's consolidated statements of income include stock-based compensation reflected as a component of amortization of capitalized internal-use software of $2.9 million and $9.3 million, respectively, before taxes. |
Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders' equity, for the nine months ended September 30, 2016 (in thousands):
The tax effect on accumulated unrealized gains on investments was insignificant as of September 30, 2016 and December 31, 2015. Amounts reclassified from accumulated other comprehensive loss to net income were insignificant for the nine months ended September 30, 2016. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s effective income tax rate was 32.7% and 30.7% for the nine months ended September 30, 2016 and 2015, respectively. The effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods, including retroactive changes in tax legislation, settlements of tax audits or assessments, the resolution or identification of tax position uncertainties and acquisitions of other companies. For the nine months ended September 30, 2016, the effective income tax rate was lower than the federal statutory tax rate due to the composition of income from foreign jurisdictions that is taxed at lower rates compared to the statutory tax rates in the U.S. and the U.S. federal, state and foreign research and development credits, partially offset by the effects of accounting for stock-based compensation in accordance with the authoritative guidance for share-based payments and state income taxes. For the nine months ended September 30, 2015, the effective income tax rate was lower than the federal statutory tax rate due to the retroactive application of a third-party U.S. tax court ruling with respect to the treatment of stock-based compensation in intercompany arrangements, the domestic production activities deduction and the composition of income from foreign jurisdictions that is taxed at lower rates compared to the statutory tax rates in the U.S., partially offset by the effects of accounting for stock-based compensation in accordance with the authoritative guidance for share-based payments and state income taxes. |
Net Income per Share |
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Earnings Per Share Reconciliation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income per Share | Net Income per Share Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock options, restricted stock units (“RSUs”), deferred stock units ("DSUs"), convertible senior notes and warrants issued by the Company. The dilutive effect of outstanding awards and convertible securities is reflected in diluted earnings per share by application of the treasury stock method. The following table sets forth the components used in the computation of basic and diluted net income per share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share data):
For the three and nine months ended September 30, 2016 and 2015, certain potential outstanding shares from stock options, service-based RSUs, convertible senior notes and warrants were excluded from the computation of diluted net income per share because the effect of including these items was anti-dilutive. Additionally, certain performance-based RSUs were excluded from the computation of diluted net income per share because the underlying performance conditions for such RSUs had not been met as of these dates. The number of potentially outstanding shares excluded from the computation of diluted net income per share for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):
The calculation of assumed proceeds used to determine the diluted weighted average shares outstanding under the treasury stock method in the periods presented was adjusted by tax windfalls and shortfalls associated with all of the Company’s outstanding stock awards. Such windfalls and shortfalls are computed by comparing the tax deductible amount of outstanding stock awards to their grant-date fair values and multiplying the results by the applicable statutory tax rate. A positive result creates a windfall, which increases the assumed proceeds, and a negative result creates a shortfall, which reduces the assumed proceeds. |
Nature of Business and Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Newly-Adopted and Recent Accounting Pronouncements | Newly-Adopted Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (“FASB”) issued updated guidance to simplify the presentation of debt issuance costs on the balance sheets. This guidance moved debt issuance costs from the assets section of the balance sheet to the liabilities section as a direct deduction from the carrying amount of the debt issued. The Company retrospectively adopted the guidance on January 1, 2016. The prior period consolidated balance sheet presented, as of December 31, 2015, was revised to reclassify $6.2 million of debt issuance costs included in other assets to convertible senior notes. This had the impact of reducing the Company's total assets and total liabilities by $6.2 million, as of December 31, 2015. This reclassification did not have a material impact on the Company's consolidated financial statements. In September 2015, the FASB issued updated guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments. In an effort to reduce complexity in financial reporting, the new guidance requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in the reporting period in which the adjustment is identified. The standard was effective for and adopted by the Company on January 1, 2016. This guidance did not have an impact on the Company's consolidated financial statements as the measurement periods for the Company's 2015 acquisitions were closed as of December 31, 2015. Recent Accounting Pronouncements In May 2014, the FASB issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard will be effective for the Company on January 1, 2018, and may be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In February 2016, the FASB issued guidance that requires companies to present assets and liabilities arising from leases on the consolidated balance sheets. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This standard will be effective for the Company on January 1, 2019, and is to be applied using a modified retrospective approach. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In March 2016, the FASB issued guidance that is intended to simplify aspects of how share-based payments are accounted for and presented in financial statements. This guidance requires that entities record all tax effects of share-based payments at settlement or expiration through the income statement. The standard also amends how windfall tax benefits are recognized, the minimum statutory tax withholding requirements and how entities elect to recognize share-based payment forfeitures. This guidance will be effective for the Company on January 1, 2017, and portions will be required to be applied on a retrospective or modified retrospective basis. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In June 2016, the FASB issued guidance that introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities. The guidance establishes a new "expected loss model" that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. This guidance will be effective for the Company on January 1, 2020. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. In October 2016, the FASB issued guidance which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance will be effective for the Company on January 1, 2018 and is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements. |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Marketable Securities | The following is a summary of available-for-sale marketable securities held as of September 30, 2016 and December 31, 2015 (in thousands):
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Schedule of Fair Value Measurement | The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets at September 30, 2016 and December 31, 2015 (in thousands):
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Schedule of Contractual Maturities of Marketable Securities and Other Investment Related Assets | Contractual maturities of the Company’s available-for-sale marketable securities held as of September 30, 2016 and December 31, 2015 were as follows (in thousands):
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Accounts Receivable (Tables) |
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable | Net accounts receivable consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands):
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Goodwill and Acquired Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The change in the carrying amount of goodwill for the nine months ended September 30, 2016 was as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Acquired Intangible Assets | Acquired intangible assets that are subject to amortization consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands):
|
Convertible Senior Notes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Convertible Senior Notes | The Notes consist of the following components (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Expense | The following table sets forth total interest expense included in the consolidated statements of income related to the Notes (in thousands):
|
Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-Based Compensation Expense | The following table summarizes stock-based compensation included in the Company’s consolidated statements of income for the three and nine months ended September 30, 2016 and 2015 (in thousands):
|
Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders' equity, for the nine months ended September 30, 2016 (in thousands):
|
Net Income per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Reconciliation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components Used in Diluted and Basic Income Per Common Share | The following table sets forth the components used in the computation of basic and diluted net income per share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share data):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Shares Excluded from Computation of Diluted Earnings Per Share | The number of potentially outstanding shares excluded from the computation of diluted net income per share for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):
|
Nature of Business and Basis of Presentation - Narrative (Details) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2016
network
segment
country
server
|
Dec. 31, 2015
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of servers (over 222,000) | server | 222,000 | |
Number of networks (more than 1,600) | network | 1,600 | |
Approximate number of countries in which servers are located (approximately 125) | country | 125 | |
Number of industry segments | segment | 1 | |
Accounting Standards Update 2015-03 [Member] | Other Assets [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Debt issuance costs | $ (6.2) | |
Accounting Standards Update 2015-03 [Member] | Convertible senior notes | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Debt issuance costs | $ 6.2 |
Fair Value Measurements - Contractual Maturities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Due in 1 year or less | $ 529,044 | $ 460,088 |
Due after 1 year through 5 years | 764,474 | 773,260 |
Aggregate Fair Value | $ 1,293,518 | $ 1,233,348 |
Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Gross accounts receivable | $ 366,786 | $ 387,763 |
Allowance for doubtful accounts | (1,127) | (906) |
Reserve for cash-basis customers | (7,662) | (6,458) |
Total accounts receivable reserves | (8,789) | (7,364) |
Accounts receivable, net | 357,997 | 380,399 |
Unbilled accounts receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Gross accounts receivable | 111,550 | 124,878 |
Trade accounts receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Gross accounts receivable | $ 255,236 | $ 262,885 |
Goodwill and Acquired Intangible Assets - Schedule of Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Schedule of Goodwill [Roll Forward] | |
Balance as of January 1, 2016 | $ 1,150,244 |
Foreign currency translation | (107) |
Balance as of September 30, 2016 | 1,151,216 |
Concord Systems, Inc. [Member] | |
Schedule of Goodwill [Roll Forward] | |
Acquisition of Concord Systems, Inc. | 1,079 |
Balance as of September 30, 2016 | $ 1,100 |
Goodwill and Acquired Intangible Assets - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of acquired intangible assets | $ 6,598 | $ 6,752 | $ 20,025 | $ 20,284 |
Future amortization expense to be recognized in remainder of 2016 | 6,600 | 6,600 | ||
Future amortization expense 2017 | 28,200 | 28,200 | ||
Future amortization expense 2018 | 24,100 | 24,100 | ||
Future amortization expense 2019 | 22,100 | 22,100 | ||
Future amortization expense 2020 | $ 18,100 | $ 18,100 |
Business Combinations - Narrative (Details) - USD ($) $ in Thousands |
1 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 31, 2016 |
Sep. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Business Acquisition [Line Items] | ||||
Goodwill | $ 1,151,216 | $ 1,151,216 | $ 1,150,244 | |
Concord Systems, Inc. [Member] | ||||
Business Acquisition [Line Items] | ||||
Cash consideration | 3,000 | |||
Goodwill | 1,100 | 1,100 | ||
Intangible assets acquired | $ 2,800 | |||
Weighted average useful life | 7 years | |||
Deferred tax liability | $ 900 | 900 | ||
Goodwill expected to be tax deductible | $ 300 | 300 | ||
Soha Systems, Inc. [Member] | Subsequent Event [Member] | ||||
Business Acquisition [Line Items] | ||||
Total purchase consideration | $ 55,000 | |||
Consideration for achievement of post-closing milestones | $ 5,000 | |||
General and Administrative Expense [Member] | ||||
Business Acquisition [Line Items] | ||||
Acquisition-related costs | $ 1,000 |
Convertible Senior Notes - Schedule of Convertible Senior Notes (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
Feb. 28, 2014 |
---|---|---|---|
Liability component: | |||
Principal | $ 690,000,000 | $ 690,000,000 | $ 690,000,000 |
Less: debt discount and issuance costs, net of amortization | (55,496,000) | (71,953,000) | |
Net carrying amount | 634,504,000 | 618,047,000 | |
Convertible senior notes | |||
Liability component: | |||
Equity component: | $ 101,276,000 | $ 101,276,000 |
Convertible Senior Notes - Schedule of Interest Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Debt Disclosure [Abstract] | ||||
Amortization of debt discount and issuance costs | $ 5,534 | $ 5,344 | $ 16,457 | $ 15,892 |
Capitalization of interest expense | (868) | (714) | (2,499) | (2,008) |
Total interest expense | $ 4,666 | $ 4,630 | $ 13,958 | $ 13,884 |
Commitments and Contingencies - Commitments (Details) - Subsequent Event [Member] $ in Millions |
Nov. 08, 2016
USD ($)
ft²
|
---|---|
Headquarters Space [Member] | |
Operating Leased Assets [Line Items] | |
Area of lease | ft² | 480,000 |
Initial term of contract | 15 years |
Lease obligation due in 2020 | $ | $ 42.2 |
Future minimum obligation | $ | $ 698.4 |
Additional Space Arrangement [Member] | |
Operating Leased Assets [Line Items] | |
Area of lease | ft² | 150,000 |
Commitments and Contingencies - Contingencies (Details) |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2016
USD ($)
installment
|
Jun. 30, 2016
USD ($)
|
Nov. 30, 2015
patent
company
|
Sep. 30, 2016
USD ($)
|
|
Loss Contingencies [Line Items] | ||||
Amount accrued and paid associated with non-prosecution agreement | $ 700,000 | |||
Patent Infringement Case Against Limelight [Member] | ||||
Loss Contingencies [Line Items] | ||||
License agreement payment | $ 54,000,000 | |||
License agreement, number of installments | installment | 12 | |||
License agreement term | 3 years | |||
Proceeds from legal settlements | $ 4,500,000 | |||
Patent Infringement Case Against Company and XO [Member] | Pending Litigation [Member] | ||||
Loss Contingencies [Line Items] | ||||
Number of companies in case | company | 2 | |||
Provision for contingency | $ 0 | |||
Patents allegedly infringed | patent | 6 |
Stockholders' Equity - Narrative (Details) - USD ($) shares in Millions |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Feb. 28, 2014 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Feb. 29, 2016 |
Oct. 31, 2013 |
|
Class of Stock [Line Items] | |||||||
Stock repurchase program, authorized amount | $ 1,000,000,000.0 | $ 750,000,000.0 | |||||
Repurchases of common stock | $ (62,000,000) | $ (294,867,000) | $ (202,426,000) | ||||
Amortization expense from capitalized stock-based compensation | $ 3,500,000 | $ 2,900,000 | $ 10,400,000 | $ 9,300,000 | |||
Common Stock [Member] | |||||||
Class of Stock [Line Items] | |||||||
Shares repurchased during period (in shares) | 5.7 |
Accumulated Other Comprehensive Loss - Schedule of Accumulated Other Comprehensive Income Loss (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Balance as of January 1, 2016 | $ (41,453) | |||
Other comprehensive gain | $ (1,846) | $ (9,140) | 7,991 | $ (15,908) |
Balance as of September 30, 2016 | (33,462) | (33,462) | ||
Foreign Currency Translation | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Balance as of January 1, 2016 | (44,936) | |||
Other comprehensive gain | 5,567 | |||
Balance as of September 30, 2016 | (39,369) | (39,369) | ||
Net Unrealized Gains on Investments | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Balance as of January 1, 2016 | 3,483 | |||
Other comprehensive gain | 2,424 | |||
Balance as of September 30, 2016 | $ 5,907 | $ 5,907 |
Income Taxes - Narrative (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 32.70% | 30.70% |
Net Income per Share - Schedule of Shares Excluded from Computation of Diluted EPS (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 36 | 3 | 74 | 10 |
Service-based RSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 1,450 | 157 | 2,672 | 269 |
Performance-based RSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 1,245 | 1,148 | 884 | 1,148 |
Convertible senior notes | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 7,704 | 7,704 | 7,704 | 7,704 |
Warrants related to issuance of convertible senior notes | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 7,704 | 7,704 | 7,704 | 7,704 |
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