Incremental Costs to Obtain a Contract with a Customer

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Incremental Costs to Obtain a Contract with a Customer

Incremental Costs to Obtain a Contract with a Customer

Deferred costs associated with obtaining customer contracts, specifically commission and incentive payments, as of June 30, 2023 and December 31, 2022 were as follows (in thousands):

	June 30, 2023		December 31, 2022
Deferred costs included in prepaid expenses and other current assets	$	38,660	$	37,316
Deferred costs included in other assets	33,420		29,069
Total deferred costs	$	72,080	$	66,385

Information related to incremental costs to obtain a contract with a customer for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Amortization expense related to deferred costs	$	12,210	$	13,150	$	24,385	$	28,172
Incremental costs capitalized	17,381		11,269		29,798		20,753

Amortization expense related to deferred costs is primarily included in sales and marketing expense in the interim condensed consolidated statements of income.

Revenue from Contracts with Customers

The Company sells its services through a sales force located both domestically and abroad. Revenue derived from operations outside of the U.S. is determined based on the country in which the sale originated. Other than the U.S., no single country accounted for 10% or more of the Company’s total revenue for any reported period. Revenue by geography included in the Company’s interim condensed consolidated statements of income for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
U.S.	$	480,062	$	477,154	$	953,895	$	958,161
International	455,659		426,178		897,524		848,818
Total revenue	$	935,721	$	903,332	$	1,851,419	$	1,806,979

The Company reports its revenue in three solution categories: security, delivery and compute. Security includes solutions that are designed to protect business online by keeping infrastructure, websites, applications and users safe. Delivery includes solutions that are designed to enable business online, including media delivery and web performance. Compute includes cloud computing, edge applications, cloud optimization and storage. Revenue by solution category included in the Company’s interim condensed consolidated statements of income for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Security	$	432,946	$	380,664	$	838,498	$	762,231
Delivery	379,698		416,678		774,082		860,826
Compute	123,077		105,990		238,839		183,922
Total revenue	$	935,721	$	903,332	$	1,851,419	$	1,806,979

Most security, delivery and compute services represent obligations that are satisfied over time as the customer simultaneously receives and consumes the services provided by the Company. Accordingly, the majority of the Company's revenue is recognized over time, generally ratably over the term of the arrangement due to consistent monthly usage commitments that expire each period. Any usage over a given commitment is recognized in the period in which the units are served. A small percentage of the Company's contracts 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 a point in time of delivery or satisfaction of the performance obligation.

During the six months ended June 30, 2023 and 2022, the Company recognized $82.1 million and $79.2 million of revenue that was included in deferred revenue as of December 31, 2022 and 2021, respectively.

As of June 30, 2023, the aggregate amount of remaining performance obligations from contracts with customers was $3.3 billion. The Company expects to recognize approximately 70% of its remaining performance obligations as revenue over the next 12 months. The remainder of the balance is expected to be recognized over the next two to three years. Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. This consists of future committed revenue for monthly, quarterly or annual periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced in prior periods for which the related performance obligations have not been satisfied. It excludes estimates of variable consideration, such as usage-based contracts with no committed contract, as well as anticipated renewed contracts. Revenue recognized during the six months ended June 30, 2023 and 2022, related to performance obligations satisfied in previous periods was not material.