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Nature of Business and Basis of Presentation (Policies)
 9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Newly-Adopted and Recent Accounting Pronouncements
Newly-Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step model for recognizing revenue from contracts with customers. 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. The new standard can be adopted using one of two methods: retrospectively to each prior period presented or a modified retrospective application by recognizing a cumulative-effect adjustment as a component of equity as of the date of adoption. The Company adopted this new standard on a retrospective basis on January 1, 2018. The changes to the Company's revenue recognition approach under this new standard primarily impact the timing of recognizing revenue from a small number of licensed software customers. There is little impact on revenue recognized for the Company's core services. As a result of the change, the Company also began capitalizing certain commission and incentive payments.

In November 2016, the FASB issued guidance that requires restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this new standard on a retrospective basis on January 1, 2018.

The following table details the changes to the consolidated balance sheet as of December 31, 2017 as a result of the retrospective adoption of the new revenue recognition standard (in thousands):

 
As Previously Reported
 
Revenue Recognition Standard Adjustments
 
As Revised
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Accounts receivable
$
459,127

 
$
2,330

 
$
461,457

Prepaid expenses and other current assets
137,809

 
35,044

 
172,853

Total current assets
1,308,872

 
37,374

 
1,346,246

Deferred income tax assets
51,069

 
(14,838
)
 
36,231

Other assets
112,829

 
23,536

 
136,365

Total assets
4,602,844

 
46,072

 
4,648,916

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Deferred revenue
$
77,705

 
$
(7,210
)
 
$
70,495

Total current liabilities
463,904

 
(7,210
)
 
456,694

Deferred revenue
6,839

 
(777
)
 
6,062

Deferred income tax liabilities
15,510

 
2,313

 
17,823

Total liabilities
1,292,121

 
(5,674
)
 
1,286,447

Stockholders' equity:
 
 


 
 
Accumulated deficit
(742,408
)
 
51,746

 
(690,662
)
Total stockholders' equity
3,310,723

 
51,746

 
3,362,469

Total liabilities and stockholders' equity
4,602,844

 
46,072

 
4,648,916


The following table details the changes to the consolidated statements of income for the three and nine months ended September 30, 2017 as a result of the retrospective adoption of the new revenue recognition standard (in thousands, except per share data):

 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2017
 
September 30, 2017
 
As Previously Reported
 
Revenue Recognition Standard Adjustments
 
As Revised
 
As Previously Reported
 
Revenue Recognition Standard Adjustments
 
As Revised
Revenue
$
621,399

 
$
3,041

 
$
624,440

 
$
1,839,544

 
$
(8,979
)
 
$
1,830,565

Costs and operating expenses:
 
 


 
 
 
 
 
 
 
 
Cost of revenue (exclusive of amortization of acquired intangible assets)
225,468

 
22

 
225,490

 
645,821

 
76

 
645,897

Sales and marketing
120,220

 
(2,357
)
 
117,863

 
353,218

 
(2,919
)
 
350,299

Total costs and operating expenses
535,522

 
(2,335
)
 
533,187

 
1,551,228

 
(2,843
)
 
1,548,385

Income from operations
85,877

 
5,376

 
91,253

 
288,316

 
(6,136
)
 
282,180

Income before provision for income taxes
86,129

 
5,376

 
91,505

 
288,109

 
(6,136
)
 
281,973

Provision for income taxes
25,617

 
1,977

 
27,594

 
88,895

 
(2,168
)
 
86,727

Net income
60,512

 
3,399

 
63,911

 
199,214

 
(3,968
)
 
195,246

Net income per share:
 
 


 
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.02

 
$
0.37

 
$
1.16

 
$
(0.03
)
 
$
1.13

Diluted
$
0.35

 
$
0.02

 
$
0.37

 
$
1.15

 
$
(0.02
)
 
$
1.13

The statements of comprehensive income for the three and nine months ended September 30, 2017 was also impacted by the adjustments to net income of $3.4 million and $(4.0) million, respectively.

The following table details the changes to the consolidated statement of cash flows for the nine months ended September 30, 2017 as a result of the retrospective adoption of the new revenue recognition and statement of cash flow standards (in thousands):

 
As Previously Reported
 
Revenue Recognition Standard Adjustments
 
Cash Flow Standard Adjustments
 
As Revised
Cash flows from operating activities:
 
 


 
 
 
 
Net income
$
199,214

 
$
(3,968
)
 
$
—

 
$
195,246

Adjustments to reconcile net income to net cash provided by operating activities:
 
 


 
 
 
 
Provision for deferred income taxes
25,302

 
(2,168
)
 
—

 
23,134

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 


 
 
 
 
Accounts receivable
(19,199
)
 
9,776

 
—

 
(9,423
)
Prepaid expenses and other current assets
(34,195
)
 
(2,385
)
 
—

 
(36,580
)
Deferred revenue
991

 
537

 
—

 
1,528

Other non-current assets and liabilities
(7,036
)
 
(1,792
)
 
—

 
(8,828
)
Net cash provided by operating activities
603,542

 
—

 
—

 
603,542

Cash flows from investing activities:
 
 
 
 
 
 
 
Other non-current assets and liabilities
(1,895
)
 
—

 
729

 
(1,166
)
Net cash used in investing activities
(257,741
)
 
—

 
729

 
(257,012
)
Effects of exchange rate changes on cash, cash equivalents and restricted cash
12,289

 
—

 
70

 
12,359

Net increase in cash, and cash equivalents and restricted cash
43,983

 
—

 
799

 
44,782

Cash, cash equivalents and restricted cash at beginning of period
324,169

 
—

 
457

 
324,626

Cash, cash equivalents and restricted cash at end of period
368,152

 
—

 
1,256

 
369,408



In October 2016, the FASB issued guidance that requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company adopted this new standard on January 1, 2018 using the modified retrospective basis, recognizing a cumulative-effect adjustment as a component of equity as of the date of adoption. Upon adoption, the Company reclassified $11.6 million from prepaid and other current assets and $27.0 million from other assets to beginning retained earnings.

In January 2017, the FASB issued guidance that changes the definition of a "business" to assist entities with evaluating whether transactions should be accounted for as transfers of assets or business combinations. The Company adopted this guidance on January 1, 2018 and will apply it prospectively to future transactions. The adoption of this new accounting guidance had no immediate impact on the Company's consolidated financial statements; however, it may result in a future transaction being recorded as a transfer of assets, whereas previously the Company may have concluded it was a business combination.

Recent Accounting Pronouncements

In February 2016, the FASB issued guidance that requires companies to present assets and liabilities arising from leases with terms greater than 12 months on the consolidated balance sheets. The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. This will impact all leases, including leases for real estate and co-location facilities, among other arrangements currently under evaluation. The Company plans to adopt this standard in the first quarter of 2019 on a modified retrospective basis. The Company expects to record significant right-of-use assets and lease liabilities on its consolidated balance sheets, but does not expect the adoption to impact its results of operations or cash flows. The Company has formed a project team to assess the current state of accounting for leases, to understand the gaps between the current state and required future state and to implement the new processes, systems and controls required. To date, the Company has completed its gap analysis, selected a software tool to assist with the accounting for leases, has begun to implement the software, and has begun its data collection and migration efforts. The Company is also in the process of finalizing its accounting policies and designing the related processes and internal controls. The Company expects the adoption of this standard to require changes to its processes, systems and controls over financial reporting.

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. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements.

In February 2018, the FASB issued guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the "TCJA") that was enacted in 2017. The amendments in this update are effective either in the period of adoption or retrospectively, to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized, during interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements.

In August 2018, the FASB issued guidance which changes the fair value measurement disclosure requirements. This guidance will be effective for the Company on January 1, 2019. The Company is evaluating the impact the update will have on its disclosures.

In August 2018, the FASB issued guidance which address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. This guidance will be effective for the Company on January 1, 2020, with early adoption permitted. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements.
Revenue Recognition, Incremental Costs to Obtain a Contract with a Customer and Contract Liabilities
Revenue Recognition
    
The Company primarily derives revenue from the sale of services to customers executing contracts having terms of one year or longer. Services included in the Company's contracts consist of its core services – the delivery of content, applications and software over the Internet – as well as security solutions and professional services. Revenue is recognized upon transfer of control of promised services in an amount that reflects the consideration the Company expects to receive in exchange for those services.
    
The Company enters into contracts that may include various combinations of these services, which are generally capable of being distinct and accounted for as separate performance obligations. These contracts generally commit the customer to a minimum of monthly, quarterly or annual levels of usage and specify the rate at which the customer must pay for actual usage above the stated minimum. Based on the typical structure of the Company's contracts, which are generally for monthly recurring services that are essentially the same over time and have the same pattern of transfer to the customer, most performance obligations represent a promise to deliver a series of distinct services over time.

The Company's contracts with customers sometimes include promises to deliver multiple services to a customer. Determining whether services are distinct performance obligations often requires the exercise of judgment by management. For example, advanced features that enhance a service and are highly interrelated are generally not considered distinct; rather, they are combined with the service they relate to into one performance obligation. Different determinations related to combining services into performance obligations could result in differences in the timing and amount of revenue recognized in a period.

Generally, the transaction price in a contract is equal to the committed price stated in the contract, less any discounts or rebates. The Company's typical contracts qualify for series accounting and the pricing terms generally do not require estimation of the transaction price beyond the reporting period. As a result, any incremental fees generated as a result of usage or “bursting” over committed contract levels are recorded in the period to which the services relate. The amount of consideration recognized for usage above contract minimums is limited to the amount the Company expects to be entitled to receive in exchange for providing the services. Once the transaction price has been determined, the Company allocates such price among all performance obligations in the contract on a relative standalone selling price (“SSP”) basis.

Determination of SSP requires the exercise of judgment by management. SSP is based on observable inputs such as the price the Company charges for the service when sold separately, or the discounted list price per management’s approved price list. In cases where services are not sold separately or price list rates are not available, a cost-plus-margin approach or adjusted market approach is used to determine SSP.

Most content delivery and security services represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company. Accordingly, revenue for those services is recognized over time, generally ratably over the term of the arrangement due to consistent monthly traffic commitments that expire each period. Any bursting over given commitments is recognized in the period in which the traffic was served. For services that involve traffic consumption, revenue is recognized in an amount that reflects the level of traffic served to a customer in a given period. For custom arrangements, other methods may be used as a measure of progress towards satisfying the performance obligations.

Some of the Company's services are satisfied at a point in time, such as one-time professional services contracts, integration services and most license sales where the primary obligation is delivery of the license at the start of the term. In these cases, revenue is recognized at the point in time of delivery or satisfaction of the performance obligation.

From time to time, the Company enters into contracts to sell its services or license its technology to unrelated enterprises at or about the same time that it enters into contracts to purchase products or services from the same enterprises. Consideration payable to a customer is reviewed as part of the transaction price. If the payment to the customer does not represent payment for a distinct service, revenue is recognized only up to the net amount of consideration after customer payment obligations are considered. The Company may also resell the licenses or services of third parties. If the Company is acting as an agent in an arrangement with a customer to provide third party services, the transaction price reflects only the net amount to which the Company will be entitled, after accounting for payments made to the third party responsible for satisfying the performance obligation.

Incremental Costs to Obtain a Contract with a Customer

The Company capitalizes incremental costs associated with obtaining customer contracts, specifically certain commission and incentive payments. The Company pays commissions and incentives up-front based on contract value upon signing a new arrangement with a customer and upon renewal and upgrades of existing contracts with customers if the renewal and upgrades result in an incremental increase in contract value.  To the extent commissions and incentives are earned, the expenses, including estimated payroll taxes, are deferred on the Company's consolidated balance sheet and amortized over the expected life of the customer arrangement on a straight-line basis.  The Company also incurs commission expense on an ongoing basis based upon revenue recognized.  In these cases, no incremental costs are deferred, as the commissions are earned and expensed in the same period for which the associated revenue is recognized.

Based on the nature of the Company's unique technology and services, and the rate at which the Company continually enhances and updates its technology, the expected life of the customer arrangement is determined to be approximately 2.5 years. Amortization is primarily included in sales and marketing expense in the consolidated statements of income.  The current portion of deferred commission and incentive payments is included in prepaid expenses and other current assets, and the long-term portion is included in other assets on the Company's consolidated balance sheets.

Contract Liabilities
    
Contract liabilities primarily represent payments received from customers for which the related performance obligations have not yet been satisfied. These balances consist of the unearned portion of monthly service fees and integration fees, and prepayments made by customers for future periods. The current and long-term portions of the Company's contract liabilities are included in deferred revenue in the respective sections of the Company's consolidated balance sheets.