10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                          to                         

Commission file number 001-33508

Limelight Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-1677033
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

222 South Mill Avenue, 8^th Floor

Tempe, AZ 85281

(Address of principal executive offices, including Zip Code)

(602) 850-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” , “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer   þ
Non-accelerated filer   o	Smaller Reporting Company   o
	Emerging Growth Company   o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o  No  þ

The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of October 12, 2018: 113,202,864 shares.

LIMELIGHT NETWORKS, INC.

FORM 10-Q

Quarterly Period Ended September 30, 2018

TABLE OF CONTENTS

		Page
Note Regarding Forward-Looking Statements		3
PART I. FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017	4
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	5
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2018 and 2017	6
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
Item 4.	CONTROLS AND PROCEDURES	31
PART II. OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	32
Item 1A.	RISK FACTORS	32
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	46
Item 3.	DEFAULTS UPON SENIOR SECURITIES	46
Item 4.	MINE SAFETY DISCLOSURES	46
Item 5.	OTHER INFORMATION	46
Item 6.	EXHIBITS	47
	SIGNATURES	48

Special Note Regarding Forward-Looking Statement

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events, as well as trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These statements include, among other things:

• our beliefs regarding delivery traffic growth trends and demand for digital content;

• our expectations regarding revenue, costs, expenses, gross margin, non-GAAP earnings per share, Adjusted EBITDA and capital expenditures;

• our plans regarding investing in our content delivery network, as well as other products and technologies;

• our beliefs regarding the growth of, and competition within, the content delivery industry;

• our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;

• our expectations regarding headcount;

• the impact of certain new accounting standards and guidance as well as the time and cost of continued compliance with existing rules and standards;

• our plans with respect to investments in marketable securities;

• our expectations and strategies regarding acquisitions;

• our estimations regarding taxes and belief regarding our tax reserves;

• our beliefs regarding the use of Non-GAAP financial measures;

• our approach to identifying, attracting and keeping new and existing customers, as well as our expectations regarding customer turnover;

• the sufficiency of our sources of funding;

• our beliefs regarding inflation risks;

• our beliefs regarding expense and productivity of and competition for our sales force; and

• our beliefs regarding the significance of our large customers.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the caption “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q and those discussed in other documents we file with the Securities and Exchange Commission (SEC).

In addition, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements contained herein are based on our current expectations and assumptions and on information available as of the date of the filing of this Quarterly Report on Form 10-Q. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms "Limelight," "we," "us," and "our" in this document refer to Limelight Networks, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries. All information is presented in thousands, except per share amounts, customer count and where specifically noted.

PART I. FINANCIAL INFORMATION

Item 1.        Financial Statements

Limelight Networks, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

	September 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	28,678		$	20,912
Marketable securities	23,957			28,404
Accounts receivable, net	26,147			32,381
Income taxes receivable	154			98
Prepaid expenses and other current assets	17,859			5,397
Total current assets	96,795			87,192
Property and equipment, net	27,392			28,991
Marketable securities, less current portion	40			40
Deferred income taxes	1,590			1,506
Goodwill	76,683			77,054
Other assets	2,434			1,665
Total assets	$	204,934		$	196,448
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,976		$	4,439
Deferred revenue	853			1,187
Income taxes payable	111			452
Provision for litigation	13,500			18,000
Other current liabilities	13,804			18,507
Total current liabilities	37,244			42,585
Deferred income taxes	174			144
Deferred revenue, less current portion	68			16
Provision for litigation, less current portion	—			9,000
Other long-term liabilities	385			558
Total liabilities	37,871			52,303
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued   and outstanding	—			—
Common stock, $0.001 par value; 300,000 shares authorized; 113,198 and 110,824 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	113			111
Additional paid-in capital	509,846			502,312
Accumulated other comprehensive loss	(9,477		)	(8,328		)
Accumulated deficit	(333,419		)	(349,950		)
Total stockholders’ equity	167,063			144,145
Total liabilities and stockholders’ equity	$	204,934		$	196,448

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

Limelight Networks, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue	$	49,315		$	46,069		$	151,678		$	136,173
Cost of revenue:
Cost of services	21,519			19,287			63,779			57,758
Depreciation — network	3,761			4,506			12,337			13,594
Total cost of revenue	25,280			23,793			76,116			71,352
Gross profit	24,035			22,276			75,562			64,821
Operating expenses:
General and administrative	7,851			8,079			24,890			23,397
Sales and marketing	9,766			8,836			30,068			27,100
Research and development	5,882			6,443			18,294			19,377
Depreciation and amortization	616			603			1,837			1,789
Total operating expenses	24,115			23,961			75,089			71,663
Operating (loss) income	(80		)	(1,685		)	473			(6,842		)
Other income (expense):
Interest expense	(10		)	(18		)	(76		)	(42		)
Interest income	177			127			440			365
Settlement and patent license income	—			—			14,900			—
Other, net	(246		)	8			(355		)	249
Total other (expense) income	(79		)	117			14,909			572
(Loss) income before income taxes	(159		)	(1,568		)	15,382			(6,270		)
Income tax expense	113			188			347			448
Net (loss) income	(272		)	(1,756		)	15,035			(6,718		)
Net income (loss) per share:
Basic	$	—		$	(0.02	)	$	0.13		$	(0.06	)
Diluted	$	—		$	(0.02	)	$	0.13		$	(0.06	)
Weighted average shares used in per share calculation:
Basic	112,760			109,342			111,626			108,376
Diluted	112,760			109,342			120,025			108,376

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

LIMELIGHT NETWORKS, INC.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net (loss) income	$	(272	)	$	(1,756	)	$	15,035		$	(6,718	)
Other comprehensive income (loss), net of tax:
Unrealized gain on investments	18			26			38			83
Foreign exchange translation (loss) gain	(171		)	340			(1,187		)	2,276
Other comprehensive income (loss)	(153		)	366			(1,149		)	2,359
Comprehensive income (loss)	$	(425	)	$	(1,390	)	$	13,886		$	(4,359	)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

6

Limelight Networks, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

	Nine Months Ended September 30,
	2018			2017
Operating activities
Net income (loss)	$	15,035		$	(6,718	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	14,174			15,383
Share-based compensation	10,345			9,442
Settlement and patent license income	(14,900		)	—
Foreign currency remeasurement (gain) loss	(97		)	658
Deferred income taxes	(86		)	(217		)
Gain on sale of property and equipment	(131		)	(94		)
Accounts receivable charges	453			732
Amortization of premium on marketable securities	82			228
Changes in operating assets and liabilities:
Accounts receivable	5,781			(2,026		)
Prepaid expenses and other current assets	(2,530		)	545
Income taxes receivable	(56		)	34
Other assets	(759		)	21
Accounts payable and other current liabilities	(2,526		)	4,749
Deferred revenue	85			(450		)
Income taxes payable	(350		)	180
Payments related to litigation, net	(7,540		)	(13,500		)
Other long term liabilities	(173		)	(584		)
Net cash provided by operating activities	16,807			8,383
Investing activities
Purchases of marketable securities	(15,962		)	(10,383		)
Sale and maturities of marketable securities	20,365			17,744
Purchases of property and equipment	(10,495		)	(15,806		)
Proceeds from sale of property and equipment	131			83
Net cash used in investing activities	(5,961		)	(8,362		)
Financing activities
Payments of employee tax withholdings related to restricted stock vesting	(3,808		)	(2,571		)
Cash paid for purchase of common stock	(3,800		)	—
Proceeds from employee stock plans	4,799			1,200
Net cash used in financing activities	(2,809		)	(1,371		)
Effect of exchange rate changes on cash and cash equivalents	(271		)	360
Net increase (decrease) in cash and cash equivalents	7,766			(990		)
Cash and cash equivalents, beginning of period	20,912			21,734
Cash and cash equivalents, end of period	$	28,678		$	20,744
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	76		$	11
Cash paid during the period for income taxes, net of refunds	$	843		$	400

The accompanying notes are an integral part of the unaudited consolidated financial statements.

7

Limelight Networks, Inc.

Notes to Unaudited Consolidated Financial Statements

September 30, 2018

1. Nature of Business

Limelight Networks Inc., a leading provider of digital content delivery, video, cloud security, and edge computing services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows.

We were incorporated in Delaware in 2003, and have operated in the Phoenix metropolitan area since 2001 and elsewhere throughout the United States since 2003. We began international operations in 2004.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the interim periods presented and of a normal recurring nature. This quarterly report on Form 10-Q should be read in conjunction with our audited financial statements and footnotes included in our annual report on Form 10-K for the fiscal year ended December 31, 2017. All information is presented in thousands, except per share amounts and where specifically noted.

The consolidated financial statements include accounts of Limelight and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In addition, certain other reclassifications have been made to prior year amounts to conform to the current year presentation.

Use of Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results and outcomes may differ from those estimates. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or for any future periods.

Recent Accounting Standards

Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 (Topic 606) "Revenue from Contracts with Customers." Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net decrease to opening accumulated deficit of $1,496 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the costs to obtain a customer contract ($1,129), specifically commissions and upfront incentive payments, and from the recognition of revenue from customers with contracts that contain minimum commitments billed ratably over the contract term ($367).

The costs associated with obtaining a customer contract were previously expensed in the period they were incurred. Under Topic 606, these payments have been deferred on our consolidated balance sheets and amortized over the expected life of the customer contract. The impact to sales and marketing expense for the three and nine months ended September 30, 2018 was not material as a result of applying Topic 606. As of September 30, 2018, prepaid commissions were $1,310, with the short

8

term portion of $767 included in prepaid expenses and other current assets, and the long term portion of $543 included in other assets.

For customers with contracts that contain minimum commitments billed ratably over the contract term, previously, we either accrued or deferred revenue based on actual usage. Under Topic 606, we are required to evaluate the impact of estimating variable consideration related to these types of contracts. We use the expected value method to estimate the total revenue of the contract, constrained by the probability that there would not be a significant revenue reversal in a future period, and recognize a pro-rata share of the total revenue of the contract each month. We continue to evaluate the expected value of revenue over the term of the contract and adjust revenue recognition as appropriate. The impact to revenues for the three and nine months ended September 30, 2018 was an increase of $450 and $145, respectively, as a result of applying Topic 606.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our customers generally execute contracts with terms of one year or longer, which are referred to as recurring revenue contracts or long-term contracts. These contracts generally allow the customer access to our network and commit the customer to a minimum monthly level of usage with additional charges applicable for actual usage above the monthly minimum commitment, or are entirely usage based. We define usage as customer data sent or received using our content delivery service, or content that is hosted or cached by us at the request or direction of our customers. For contracts that contain minimum monthly commitments, we recognize revenue equal to the greater of the minimum monthly committed amount or actual usage, if actual usage exceeds the monthly committed amount, using the right to invoice practical expedient allowable under Topic 606.

For contracts that contain minimum commitments over the contractual term, we estimate an amount of variable consideration by using either the expected value method or the most likely amount method. We include estimates of variable consideration in revenue only when we have a high degree of confidence that revenue will not be reversed in a subsequent reporting period. We believe that the expected value method is the most appropriate estimate of the amount of variable consideration. These customers have entered into contracts with contract terms generally from one to four years. As of September 30, 2018, we have approximately $6,600 of remaining unsatisfied performance obligations. We recognized revenue of approximately $1,900 and $3,900 during the three and nine months ended September 30, 2018, respectively, related to these types of contracts with our customers. We expect to recognize approximately 25% of the remaining unsatisfied performance obligations in 2018, approximately 55% in 2019 and the remainder in 2020.

We may charge the customer an installation fee when services are first activated. We do not charge installation fees for contract renewals. Installation fees are not distinct within the context of the overall contractual commitment with the customer to perform our content delivery service and are therefore recognized initially as deferred revenue and recognized as revenue ratably over the estimated life of the customer arrangement.

We also derive revenue from services and events sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

At the inception of a customer contract for service, we make an assessment as to that customer’s ability to pay for the services provided. If we subsequently determine that collection from the customer is not probable, we record an allowance for doubtful accounts and bad debt expense or deferred revenue for that customer’s unpaid invoices and cease recognizing revenue for continued services provided until it is probable that revenue will not be reversed in a subsequent reporting period. Our standard payment terms vary by the type and location of our customer.

Arrangements with Multiple Performance Obligations

Certain of our revenue arrangements include multiple promises to our customers. Revenue arrangements with multiple promises are accounted for as separate performance obligations if each promise is distinct. Such arrangements may include a combination of some or all of the following: content delivery services, video content management services, performance services for website and web application acceleration and security, professional services, cloud storage, edge computing services, and sale of equipment. Consideration is allocated to the performance obligations using the relative standalone selling price method. Generally, arrangements with performance obligations are provided over the same contract period, and therefore, revenue is recognized over the same period.

9

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not been recognized. Deferred revenue primarily consists of the unearned portion of monthly billed service fees and prepayments made by customers for services to be rendered in future periods.

Adopted Accounting Standards - continued

In August 2016, the FASB issued ASU No. 2016-15, which amends ASC 230, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. ASU 2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award's fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, which establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for most leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. We are utilizing a comprehensive approach to assess the impact of the guidance on our lease portfolio by reviewing our current accounting policies and practices to identify potential differences that would result from applying the new requirements. We continue to make significant progress on the potential impact on our accounting policies, internal control processes including system readiness and the related disclosures that will be required under the new guidance. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted and should be applied using a modified retrospective approach. We do not plan to early adopt this guidance. We continue to review additional leases to assess the impact under the new guidance, and expect it will result in an increase to total assets and liabilities on our consolidated balance sheet. We expect to utilize the short-term lease recognition and measurement practical expedient, which will lower the overall impact of this guidance on our financial statements. We expect to make an accounting policy election, where leases that are 12 months or less and do not include an option to purchase the underlying asset, will be treated similar to current operating lease accounting. We do not know and cannot reasonably estimate quantitative information related to the impact of the new standard on our financial statements at this time.

In January 2017, the FASB issued ASU 2017-04, which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. We will adopt this guidance using a prospective approach. Earlier adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this updated guidance are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. We do not plan to early adopt this ASU. We are currently evaluating the

10

potential impacts of this updated guidance, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted upon issuance of this updated guidance. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this updated guidance and delay adoption of the additional disclosures until their effective date. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments. This guidance will become effective for us in fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.

3. Investments in Marketable Securities

The following is a summary of marketable securities (designated as available-for-sale) at September 30, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	23,980		—		23		23,957
Total marketable securities	$	24,020	$	—	$	23	$	23,997

The amortized cost and estimated fair value of marketable securities at September 30, 2018, by maturity, are shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,980	$	—	$	23	$	23,957
Due after one year and through five years	40		—		—		40
	$	24,020	$	—	$	23	$	23,997

The following is a summary of marketable securities (designated as available-for-sale) at December 31, 2017:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	28,472		—		68		28,404
Total marketable securities	$	28,512	$	—	$	68	$	28,444

The amortized cost and estimated fair value of marketable securities at December 31, 2017, by maturity, are shown below:

11

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,924	$	—	$	62	$	23,862
Due after one year and through five years	4,588		—		6		4,582
	$	28,512	$	—	$	68	$	28,444

4. Accounts Receivable, net

Accounts receivable, net include:

	September 30,			December 31,
	2018			2017
Accounts receivable	$	27,014		$	33,519
Less: credit allowance	(190		)	(240		)
Less: allowance for doubtful accounts	(677		)	(898		)
Total accounts receivable, net	$	26,147		$	32,381

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include:

	September 30,		December 31,
	2018		2017
Settlement and patent license receivable	$	8,940	$	—
Prepaid bandwidth and backbone	1,415		1,487
VAT receivable	1,847		1,454
Prepaid expenses and insurance	2,056		1,870
Vendor deposits and other	3,601		586
Total prepaid expenses and other current assets	$	17,859	$	5,397

6. Property and Equipment, net

Property and equipment, net include:

	September 30,			December 31,
	2018			2017
Network equipment	$	104,550		$	107,916
Computer equipment and software	9,112			9,801
Furniture and fixtures	1,316			2,432
Leasehold improvements	4,266			3,969
Other equipment	156			183
Total property and equipment	119,400			124,301
Less: accumulated depreciation	(92,008		)	(95,310		)
Total property and equipment, net	$	27,392		$	28,991

Depreciation expense related to property and equipment classified in operating expense was $616 and $603 for the three months ended September 30, 2018 and 2017, respectively and was $1,837 and $1,789 for the nine months ended September 30, 2018 and 2017, respectively.

7. Goodwill

We have recorded goodwill as a result of past business acquisitions. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. In each of

12

our acquisitions, the objective of the acquisition was to expand our product offerings and customer base and to achieve synergies related to cross selling opportunities, all of which contributed to the recognition of goodwill.

No interim indicators of impairment were identified as of September 30, 2018. Foreign currency translation adjustments increased the carrying amount of goodwill by $35 for the three months ended September 30, 2018. For the nine months ended September 30, 2018, foreign currency translation adjustments decreased the carrying value of goodwill by $371.

8. Other Current Liabilities

Other current liabilities include:

	September 30,		December 31,
	2018		2017
Accrued compensation and benefits	$	7,317	$	12,181
Accrued cost of revenue	2,583		3,170
Deferred rent	213		434
Accrued legal fees	28		383
Other accrued expenses	3,663		2,339
Total other current liabilities	$	13,804	$	18,507

9. Line of Credit

In February 2018, we entered into a Fourth Amendment (Fourth Amendment) to the Loan and Security Agreement (the Credit Agreement) with Silicon Valley Bank (SVB) originally entered into in November 2015. Under the Fourth Amendment, we increased the maximum principal commitment amount from $10,000 to $20,000. Our borrowing capacity is the lesser of the commitment amount or 80% of eligible accounts receivable. The Fourth Amendment extends the Credit Agreement one year. All outstanding borrowings owed under the Credit Agreement become due and payable no later than the final maturity date of November 2, 2020.

As of September 30, 2018, we had no outstanding borrowings, and we had availability under the Credit Agreement of approximately $18,300. We had no outstanding borrowings at December 31, 2017, and we had availability under the Credit Agreement of approximately $10,000.

As of September 30, 2018, borrowings under the Credit Agreement bear interest at the current prime rate minus 0.25%. In the event of default, obligations shall bear interest at a rate per annum that is 3% above the then applicable rate. We incurred an amendment fee of $50 upon entering into the Fourth Amendment. The amendment fee and other commitment fees are included in interest expense. During the three months ended September 30, 2018 and 2017, there was no interest expense, and fees expense and amortization was $10 and $18, respectively. For the nine months ended September 30, 2018 and 2017, there was no interest expense, and fees expense and related amortization was $76 and $42, respectively.

Any borrowings are secured by essentially all of our domestic personal property, with a negative pledge on intellectual property. SVB’s security interest in our foreign subsidiaries is limited to 65% of voting stock of each such foreign subsidiary.

Under the Fourth Amendment, we are required to maintain a minimum liquidity of $10,000 at all times, measured quarterly, with a minimum of $5,000 of the $10,000 in cash at SVB. In addition, we are required to maintain an Adjusted Quick Ratio of at least 1.0 to 1.0. We are also subject to certain customary limitations on our ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. As of September 30, 2018, we were in compliance with all covenants under the Credit Agreement.

10. Contingencies                      

Legal Matters

Akamai ‘703 Litigation

    In June 2006, Akamai Technologies, Inc. (Akamai) and the Massachusetts Institute of Technology (MIT) filed a lawsuit against us in the United States District Court for the District of Massachusetts alleging that we were infringing multiple patents assigned to MIT and exclusively licensed by MIT to Akamai. In August 2016, we entered into a settlement and license

13

agreement with Akamai with respect to U.S. Patent No. 6,108,703 (the ’703 patent) and certain other related patents, which settled all asserted and unasserted claims with respect to the licensed patents. The terms of the agreement require us to pay $54,000 over twelve equal quarterly installments, which began on August 1, 2016. We recorded a charge in the quarter ended June 30, 2016 for the full, undiscounted amount of $54,000. As of September 30, 2018, there remained $13,500 due to Akamai under the terms of the settlement and license agreement.

Other Akamai Litigation

In November 2015, we filed a lawsuit against Akamai and XO Communications in the District Court for the Eastern District of Virginia alleging the infringement of six of our patents covering a broad range of inventions that we believe are critical to the effective and efficient delivery of bytes by a content delivery network (the Akamai and XO Litigation). Akamai also filed counterclaims in April 2016, alleging the infringement of five of its patents. We filed an answer to Akamai’s counterclaims, denying each of the allegations of infringement in May 2016.

In February 2016, Akamai filed a complaint against us in the District Court for the District of Massachusetts alleging infringement of three of its patents. In April 2016, Akamai amended its complaint by withdrawing one of the asserted patents. In April 2016, we filed our answer to the complaint, denying each of the allegations of infringement, and asserting two counterclaims alleging infringement of two of our patents. In December 2016, Akamai filed a second complaint against us in the District Court for the District of Massachusetts alleging infringement of three additional patents, and we later filed our answer to the complaint, denying each of the allegations of infringement. The two cases were ultimately consolidated into a single action by the court.

On April 9, 2018, we entered into a definitive settlement and patent license agreement where the parties agreed to (i) license certain patents to the other party, (ii) a covenant not to sue for three years for certain patents related to the licensed patents, and (iii) settle all outstanding legal disputes between the parties. The terms of the agreement also require Akamai to pay to Limelight a total of $14,900 over five equal quarterly installments. The second quarterly payment of $2,980 was received in July 2018.

We include litigation expenses in general and administrative expenses as incurred, as reported in the consolidated statement of operations.

Other Matters

We are subject to various other legal proceedings and claims, either asserted or unasserted, arising in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe the outcome of any of these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows. Litigation relating to the content delivery services industry is not uncommon, and we are, and from time to time have been, subject to such litigation. No assurances can be given with respect to the extent or outcome of any such litigation in the future.

Taxes

We are subject to indirect taxation in various states and foreign jurisdictions. Laws and regulations that apply to communications and commerce conducted over the Internet are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on us conducting business online or providing Internet-related services. Increased regulation could negatively affect our business directly, as well as the businesses of our customers, which could reduce their demand for our services. For example, tax authorities in various states and abroad may impose taxes on the Internet-related revenue we generate based on regulations currently being applied to similar but not directly comparable industries.

There are many transactions and calculations where the ultimate tax determination is uncertain. In addition, domestic and international taxation laws are subject to change. In the future, we may come under audit, which could result in changes to our tax estimates. We believe we maintain adequate tax reserves, that are not material in amount, to offset potential liabilities that may arise upon audit. Although we believe our tax estimates and associated reserves are reasonable, the final determination of tax audits and any related litigation could be materially different than the amounts established for tax contingencies. To the extent these estimates ultimately prove to be inaccurate, the associated reserves would be adjusted, resulting in the recording of a benefit or expense in the period in which a change in estimate or a final determination is made.

14

11. Net Income (Loss) per Share

We calculate basic and diluted income (loss) per weighted average share. We use the weighted-average number of shares of common stock outstanding during the period for the computation of basic income (loss) per share. Diluted income (loss) per share include the dilutive effect of all potentially dilutive common stock, including awards granted under our equity incentive compensation plans in the weighted-average number of shares of common stock outstanding.

The following table sets forth the components used in the computation of basic and diluted net income (loss) per share for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Net (loss) income	$	(272	)	$	(1,756	)	$	15,035	$	(6,718	)
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Dilutive effect of stock options, restricted stock units, and other equity incentive plans	—			—			8,399		—
Diluted weighted average outstanding shares of common stock	112,760			109,342			120,025		108,376
Basic net income (loss) per share	$	—		$	(0.02	)	$	0.13	$	(0.06	)
Diluted net income (loss) per share:	$	—		$	(0.02	)	$	0.13	$	(0.06	)

For the three and nine months ended September 30, 2018 and 2017, respectively, the following potentially dilutive common stock, including awards granted under our equity incentive compensation plans, were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
Employee stock purchase plan	214	276	—	276
Stock options	5,660	3,002	2,941	1,509
Restricted stock units	2,101	3,145	21	2,808
	7,975	6,423	2,962	4,593

12. Stockholders’ Equity

Common Stock

On March 14, 2017, our board of directors authorized a $25,000 share repurchase program. Any shares repurchased under this program will be canceled and returned to authorized but unissued status. This share repurchase program replaced the $9,500 remaining from the previously announced $15,000 share repurchase program. During the three months ended September 30, 2018, we did not repurchase any shares under the repurchase program. During the nine months ended September 30, 2018, we purchased and canceled 1,000 shares for $3,800, including commissions and fees. During the three and nine months ended September 30, 2017, we did not repurchase any shares under the repurchase programs. As of September 30, 2018, there remained $21,200 under this share repurchase program.

Amended and Restated Equity Incentive Plan

We established the 2007 Equity Incentive Plan, or the 2007 Plan, which allows for the grant of equity, including stock options and restricted stock unit awards. In June 2016, our stockholders approved the Amended and Restated Equity Incentive Plan, or the Restated 2007 Plan, which amended and restated the 2007 Plan.  Approval of the Restated 2007 Plan replaced the terms and conditions of the 2007 Plan with the terms and conditions of the Restated 2007 Plan, and extended the term of the plan to April 2026. There was no increase in the aggregate amount of shares available for issuance. The total number of shares authorized for issuance under the Restated 2007 Plan as of September 30, 2018 was approximately 10,706.

15

Employee Stock Purchase Plan

In June 2013, our stockholders approved our 2013 Employee Stock Purchase Plan (ESPP). The ESPP allows participants to purchase our common stock at a 15% discount of the lower of the beginning or end of the offering period using the closing price on that day. During the three months ended September 30, 2018, we did not issue any shares under the ESPP. During the nine months ended September 30, 2018, we issued 250 shares under the ESPP. Total cash proceeds from the purchase of the shares under the ESPP was approximately $1,110. As of September 30, 2018, shares reserved for issuance to employees under this plan totaled 380, and we held employee contributions of $911 (included in other current liabilities) for future purchases under the ESPP.

Preferred Stock

Our board of directors has authorized the issuance of up to 7,500 shares of preferred stock at September 30, 2018. The preferred stock may be issued in one or more series pursuant to a resolution or resolutions providing for such issuance duly adopted by the board of directors. As of September 30, 2018, the board of directors had not adopted any resolutions for the issuance of preferred stock.

13. Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2018, was as follows:

				Unrealized
				Gains (Losses) on
	Foreign			Available for
	Currency			Sale Securities			Total
Balance, December 31, 2017	$	(8,259	)	$	(69	)	$	(8,328	)
Other comprehensive (loss) income before reclassifications	(1,187		)	38			(1,149		)
Amounts reclassified from accumulated other comprehensive   loss	—			—			—
Net current period other comprehensive (loss) income	(1,187		)	38			(1,149		)
Balance, September 30, 2018	$	(9,446	)	$	(31	)	$	(9,477	)

14. Share-Based Compensation

The following table summarizes the components of share-based compensation expense included in our consolidated statement of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Share-based compensation expense by type:
Stock options	$	1,044	$	917	$	3,151	$	2,776
Restricted stock units	2,177		2,075		6,524		6,213
ESPP	200		120		670		453
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442
Share-based compensation expense:
Cost of services	$	352	$	352	$	1,059	$	1,075
General and administrative expense	1,887		1,565		5,666		4,773
Sales and marketing expense	638		611		1,874		1,848
Research and development expense	544		584		1,746		1,746
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442

Unrecognized share-based compensation expense totaled approximately $17,172 at September 30, 2018, of which $5,443 related to stock options and $11,729 related to restricted stock units. We currently expect to recognize share-based

16

compensation expense of $3,059 during the remainder of 2018, $9,121 in 2019 and the remainder thereafter based on scheduled vesting of the stock options and restricted stock units outstanding at September 30, 2018.

15. Related Party Transactions

In July 2006, an aggregate of 39,869,960 shares of Series B Preferred Stock was issued at a purchase price of $3.26

per share to certain accredited investors in a private placement transaction. As a result of this transaction, entities affiliated with

Goldman, Sachs & Co., one of the lead underwriters of our initial public offering (IPO), became holders of more than 10% of

our common stock. On June 14, 2007, upon the closing of our IPO, all outstanding shares of our Series B Preferred Stock automatically converted into shares of common stock on a 1-for-1 share basis. Between November 2017 and March 2018, investment partnerships affiliated with Goldman Sachs & Co. LLC and Goldman Sachs Group, Inc. sold 30,272,493 shares that they had acquired upon the conversation of their Series B Preferred Stock at the time of the Company’s IPO in June 2007. As of September 30, 2018, Goldman, Sachs & Co. owned less than 1% of our outstanding common stock. We had no other material related party transactions during the three and nine months ended September 30, 2018 and 2017.

16. Leases and Purchase Commitments

Operating Leases

We are committed to various non-cancellable operating leases for office space and office equipment which expire through 2022. Certain leases contain provisions for renewal options and rent escalations upon expiration of the initial lease terms. Approximate future minimum lease payments over the remaining lease periods as of September 30, 2018, are as follows:

Remainder of 2018	$	740
2019	1,705
2020	781
2021	466
2022	55
Thereafter	—
Total minimum payments	$	3,747

Purchase Commitments

We have long-term commitments for bandwidth usage and co-location with various networks and internet service providers. The following summarizes minimum commitments for future periods as of September 30, 2018:

Remainder of 2018	$	10,358
2019	18,597
2020	3,312
2021	795
2022	244
Thereafter	—
Total minimum payments	$	33,306

17. Concentrations

During the three months ended September 30, 2018, we had one customer, Amazon, who represented 10% or more of our total revenue. During the three months ended September 30, 2017, we had two customers, Amazon and Apple, who each represented 10% or more of our total revenue. During the nine months ended September 30, 2018 and 2017, respectively, we had one customer, Amazon, who represented 10% or more of our total revenue.

Revenue from customers located within the United States, our country of domicile, was $27,823 for the three months ended September 30, 2018, compared to $28,630 for the three months ended September 30, 2017. For the nine months ended September 30, 2018, revenue from customers located within the United States was $88,443, compared to $83,021 for the nine months ended September 30, 2017.

During the three months ended September 30, 2018, based on customer location, we had three countries, the United

17

States, the United Kingdom, and Japan, that accounted for 10% or more of our total revenue. For the three months ended September 30, 2017, based on customer location, we had two countries, the United States, and the United Kingdom, that accounted for 10% or more of our total revenue. During the nine months ended September 30, 2018, we had two countries, the United States and the United Kingdom, that accounted for 10% or more of our total revenue based on customer location. For the nine months ended September 30, 2017, we had three countries, the United States, Japan, and the United Kingdom, that accounted for 10% or more of our total revenue based on customer location.

18. Income Taxes

Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. Based on an estimated annual effective tax rate and discrete items, income tax expense for the three months ended September 30, 2018 and 2017, was $113 and $188, respectively. For the nine months ended September 30, 2018 and 2017, income tax expense was $347 and $448, respectively. Income tax expense was different than the statutory income tax rate primarily due to us providing for a valuation allowance on deferred tax assets in certain jurisdictions, and the recording of state and foreign tax expense for the three and nine month periods.

We file income tax returns in jurisdictions with varying statutes of limitations. Tax years 2014 through 2016 remain subject to examination by federal tax authorities. Tax years 2013 through 2016 generally remain subject to examination by state tax authorities. As of September 30, 2018, we are not under any federal or state examination for income taxes.

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) significantly revised the U.S. corporate income tax law, by among other things, reducing the corporate income tax rate to 21% for tax years beginning in 2018, implementing a modified territorial system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries and creating new taxes on certain foreign sourced earnings.

Also on December 22, 2017, The SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. SAB 118 provides for a measurement period of up to one year from the date of enactment. During the measurement period, companies need to reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

At September 30, 2018 we have not yet completed our analysis of the Tax Act; however, in certain circumstances, as described below, we have made a reasonable estimate of the effects of the Tax Act.

Provisional Amounts

Our deferred tax balances for the year ending December 31, 2017 reflected an estimated $41 tax benefit related to the re-measurement of a deferred tax liability on a long-lived asset. The remaining impact from the re-measurement of our net U.S. deferred tax asset at the lower 21% rate was offset by the valuation allowance.

Our deferred tax balances for the year ending December 31, 2017 reflected the estimated impact from the one-time transition tax that we previously deferred from U.S. income taxes. The transition tax that we calculated resulted in an immaterial amount of additional federal taxable income. The additional taxable income from the transition tax was offset by net operating losses (NOLs) and did not result in cash taxes payable.

There were no changes to the provisional amounts recorded as of December 31, 2017. We will consider the revaluation of our deferred balances and the one-time transition tax amount as provisional amounts until we finalize our analysis.

The tax provision incorporates assumptions made based upon the Company’s current interpretation of the Tax Act, and may change as we receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time. The Tax Act contains several base broadening provisions that became effective on January 1, 2018 that we do not expect to have a material impact on future earnings due to our NOL and valuation allowance position. Also effective for 2018 is a new Global Intangible Low-Taxed Income inclusion (GILTI). There was no impact to income tax expense related to the GILTI as a result of our NOL and valuation allowance position. We do not expect the GILTI to have a material impact on future earnings due to our NOL and valuation allowance position.

18

19. Segment Reporting and Geographic Areas

Our chief operating decision maker (whom is our Chief Executive Officer) reviews our financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. We operate in one industry segment — content delivery and related services and we operate in three geographic areas — Americas, Europe, Middle East, and Africa (EMEA), and Asia Pacific.

Revenue by geography is based on the location of the customer from which the revenue is earned. The following table sets forth our revenue by geographic area:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Americas	$	28,700	58	%	$	29,485	64	%	$	92,317	61	%	$	86,093	63	%
EMEA	9,656		20	%	9,280		20	%	31,156		20	%	26,543		20	%
Asia Pacific	10,959		22	%	7,304		16	%	28,205		19	%	23,537		17	%
Total revenue	$	49,315	100	%	$	46,069	100	%	$	151,678	100	%	$	136,173	100	%

The following table sets forth the individual countries and their respective revenue for those countries whose revenue exceeded 10% of our total revenue:

	Three Months Ended September 30,		Nine Months Ended September 30,
Country / Region	2018	2017	2018	2017
United States / Americas	27,823	28,630	88,443	83,021
United Kingdom / EMEA	6,590	5,629	21,896	15,207
Japan / Asia Pacific	5,610	4,379	14,841	14,196

The following table sets forth long-lived assets by geographic area in which the assets are located:

	September 30,		December 31,
	2018		2017
Americas	$	19,639	$	17,119
International	7,753		11,872
Total long-lived assets	$	27,392	$	28,991

20. Fair Value Measurements

As of September 30, 2018, and December 31, 2017, we held certain assets and liabilities that were required to be measured at fair value on a recurring basis.

The following is a summary of fair value measurements at September 30, 2018:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	1,763	$	1,763	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	23,957		—		23,957		—
Total assets measured at fair value	$	25,760	$	1,763	$	23,997	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

19

The following is a summary of fair value measurements at December 31, 2017:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	6,789	$	6,789	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	28,404		—		28,404		—
Total assets measured at fair value	$	35,233	$	6,789	$	28,444	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

The carrying amount of cash equivalents approximates fair value because their maturity is less than three months. The carrying amount of short-term and long-term marketable securities approximates fair value as the securities are marked to market as of each balance sheet date with any unrealized gains and losses reported in stockholders’ equity. The carrying amount of accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term maturity of the amounts.

20

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2017, included in Part II of our annual report on Form 10-K, as amended filed with the SEC, on February 8, 2018.

Prior period information has been modified to conform to current year presentation. All information in this Item 2 is presented in thousands, except per share amounts, customer count and where specifically noted.

Overview

We were founded in 2001 as a provider of content delivery network services to deliver digital content over the Internet. We began development of our infrastructure in 2001 and began generating meaningful revenue in 2002. Today, we are a leading provider of digital content delivery, video, cloud security, and edge computing services, empowering customers to provide exceptional digital experiences. Our edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows. Our mission is to securely manage and globally deliver digital content, building customer satisfaction through exceptional reliability and performance.

Our delivery services represented approximately 81% of our total revenue during the three and nine months ended September 30, 2018. We also generate revenue through the sale of professional services and other infrastructure services, such as transit and rack space services.

We operate in markets that are highly competitive. We have experienced and expect to continue to experience increased competition in price, features, functionality, integration and other factors leading to customer churn and customers operating their own networks. Competition and technology advancements have resulted in declining average selling prices in the industry. We believe continued increases in content delivery traffic growth rates, driven by increased migration of applications and data to the cloud, continued growth rates of mobile device usage and increased consumption of rich media content and larger file sizes, are all important trends that will continue to outpace declining average selling prices in the industry.

During the three months ended September 30, 2018, we had one customer, Amazon, who represented 10% or more of our total revenue. During the three months ended September 30, 2017, we had two customers, Amazon and Apple, who each represented 10% or more of our total revenue. During the nine months ended September 30, 2018 and 2017, respectively, we had one customer, Amazon, who represented 10% or more of our total revenue.

In addition to these revenue-related trends, our profitability is impacted by trends in our costs of services and operating expenses. We continuously work with our vendors to optimize our data center footprint. We continuously renegotiate our infrastructure contracts in order to scale our operations based on traffic levels and lower bandwidth costs per unit. Our operating expenses are largely driven by payroll and related employee costs. Our headcount increased from 533 at December 31, 2017, to 551 as of September 30, 2018.

In August 2016, we entered into a settlement and license agreement with Akamai Technologies, Inc. (Akamai) with respect to the U.S. Patent No. 6,108,703 (the ‘703 patent) and certain other related patents. The agreement settles all asserted and unasserted claims with respect to the licensed patents. The terms of the agreement require us to pay $54,000 over twelve equal quarterly installments beginning on August 1, 2016. As of September 30, 2018, there remained $13,500 due to Akamai under the terms of the settlement and license agreement.

On April 9, 2018, we entered into a definitive settlement and patent license agreement with Akamai in a separate matter where the parties agreed to (i) license certain patents to the other party, (ii) a covenant not to sue for three years for certain patents related to the licensed patents, and (iii) settle all outstanding legal disputes between the parties. The terms of the agreement also require Akamai to pay to Limelight a total of $14,900, over five equal quarterly installments. The second quarterly payment of $2,980 was received in July 2018. As of September 30, 2018, there remained $8,940 due from Akamai.

Please see our discussion in Note 10 "Contingencies - Legal Matters" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this quarterly report on Form 10-Q for more information on this and other lawsuits.

Based on current conditions, we expect full-year 2018 revenue to be between $200,000 and $203,000. We expect more than a 150 basis point improvement in gross margin for the full year. We expect full-year GAAP earnings per share to be

21

between $0.12 and $0.14, and we expect full-year non-GAAP earnings per share to be between $0.14 and $0.17, and full-year Adjusted EBITDA to be between $35,000 and $37,000. We expect capital expenditures to be below $18,000 for the full year.

The following table summarizes our revenue, costs and expenses in thousands of dollars and as a percentage of total revenue for the three and nine months ended September 30, 2018 and 2017.

	Three Months Ended September 30,										Nine Months Ended September 30,
	2018					2017					2018				2017
Revenues	$	49,315		100.0	%	$	46,069		100.0	%	$	151,678	100.0	%	$	136,173		100.0	%
Cost of revenue	25,280			51.3	%	23,793			51.6	%	76,116		50.2	%	71,352			52.4	%
Gross profit	24,035			48.7	%	22,276			48.4	%	75,562		49.8	%	64,821			47.6	%
Operating expenses	24,115			48.9	%	23,961			52.0	%	75,089		49.5	%	71,663			52.6	%
Operating income (loss)	(80		)	(0.2	)%	(1,685		)	(3.7	)%	473		0.3	%	(6,842		)	(5.0	)%
Settlement and patent license income	—			—	%	—			—	%	14,900		9.8	%	—			—	%
Total other income (expense)	(79		)	(0.2	)%	117			0.3	%	9		—	%	572			0.4	%
Income (loss) before income taxes	(159		)	(0.3	)%	(1,568		)	(3.4	)%	15,382		10.1	%	(6,270		)	(4.6	)%
Income tax expense	113			0.2	%	188			0.4	%	347		0.2	%	448			0.3	%
Net income (loss)	$	(272	)	(0.6	)%	$	(1,756	)	(3.8	)%	$	15,035	9.9	%	$	(6,718	)	(4.9	)%

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss), EBITDA and Adjusted EBITDA as supplemental measures of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income (loss) to be an important indicator of overall business performance. We define Non-GAAP net income (loss) to be U.S. GAAP net income (loss), adjusted to exclude the settlement and patent license income, share-based compensation, and litigation expenses. We believe that EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define EBITDA as U.S. GAAP net income (loss), adjusted to exclude depreciation and amortization, interest expense, interest and other (income) expense, and income tax expense. We define Adjusted EBITDA as EBITDA adjusted to exclude the settlement and patent license income, share-based compensation and litigation expenses. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. Our management uses these Non-GAAP financial measures because, collectively, they provide valuable information on the performance of our on-going operations, excluding non-cash charges, taxes and non-core activities (including interest payments related to financing activities). These measures also enable our management to compare the results of our on-going operations from period to period, and allow management to review the performance of our on-going operations against our peer companies and against other companies in our industry and adjacent industries. We believe these measures also provide similar insights to investors, and enable investors to review our results of operations “through the eyes of management.”

Furthermore, our management uses these Non-GAAP financial measures to assist them in making decisions regarding our strategic priorities and areas for future investment and focus.

In our October 18, 2018, earnings press release, as furnished on Form 8-K, we included Non-GAAP net income (loss), EBITDA and Adjusted EBITDA. The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Our Non-GAAP net income (loss), EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, Non-GAAP net income (loss), EBITDA and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

• EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• these measures do not reflect changes in, or cash requirements for, our working capital needs;

• Non- GAAP net income (loss) and Adjusted EBITDA do not reflect the cash requirements necessary for litigation costs, including provision for litigation and litigation expenses;

22

• these measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;

• these measures do not reflect income taxes or the cash requirements for any tax payments;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

• while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and

• other companies may calculate Non-GAAP net income (loss), EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income (loss), EBITDA, and Adjusted EBITDA only as supplemental support for management’s analysis of business performance. Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are calculated as follows for the periods presented.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Item 10(e) of Regulation S-K, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures.

Reconciliation of U.S. GAAP Net Income (Loss) to Non-GAAP Net Income

(Unaudited)

	Three Months Ended									Nine Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2018			2018			2017			2018			2017
U.S. GAAP net (loss) income	$	(272	)	$	15,159		$	(1,756	)	$	15,035		$	(6,718	)
Settlement and patent license income	—			(14,900		)	—			(14,900		)	—
Share-based compensation	3,421			3,557			3,112			10,345			9,442
Litigation expenses	19			215			863			2,904			4,048
Non-GAAP net income	$	3,168		$	4,031		$	2,219		$	13,384		$	6,772

Reconciliation of U.S. GAAP Net Income (Loss) to EBITDA to Adjusted EBITDA

(Unaudited)

	Three Months Ended									Nine Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2018			2018			2017			2018			2017
U.S. GAAP net (loss) income	$	(272	)	$	15,159		$	(1,756	)	$	15,035		$	(6,718	)
Depreciation and amortization	4,377			4,829			5,109			14,174			15,383
Interest expense	10			7			18			76			42
Interest and other (income) expense	69			87			(135		)	(85		)	(614		)
Income tax expense	113			249			188			347			448
EBITDA	$	4,297		$	20,331		$	3,424		$	29,547		$	8,541
Settlement and patent license income	—			(14,900		)	—			(14,900		)	—
Share-based compensation	3,421			3,557			3,112			10,345			9,442
Litigation expenses	19			215			863			2,904			4,048
Adjusted EBITDA	$	7,737		$	9,203		$	7,399		$	27,896		$	22,031

23

Critical Accounting Policies and Estimates

Please see Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of changes in significant accounting policies. In addition, our critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. During the nine months ended September 30, 2018, there have been no other significant changes in our critical accounting policies and estimates.

Results of Operations

Revenue

We derive revenue primarily from the sale of our digital content delivery, video, cloud security, and edge computing services. We also generate revenue through the sale of professional services and other infrastructure services, such as transit and rack space services.

The following table reflects our revenue for the three and nine months ended September 30, 2018, compared to the three and nine months ended September 30, 2017:

	Three Months Ended September 30,								Nine Months Ended September 30,
					$		%						$		%
	2018		2017		Change		Change		2018		2017		Change		Change
Revenue	$	49,315	$	46,069	$	3,246	7	%	$	151,678	$	136,173	$	15,505	11	%

Our revenue increased during the three and nine months ended September 30, 2018, versus the comparable 2017 periods primarily due to an increase in our content delivery revenue, which was driven by increases in volumes with certain of our larger customers. During the three months ended September 30, 2018, we experienced a small decrease in average selling price versus the comparable 2017 period, due to customer and product mix. For the nine months ended September 30, 2018, we experienced a small increase in average selling price versus the comparable 2017 period, again due to customer and product mix.

Our active customers worldwide decreased to 667 as of September 30, 2018, compared to 753 as of September 30, 2017. We are continuing our selective approach to accepting profitable business by following a clear process for identifying customers that value quality, performance, availability, and service.

During the three months ended September 30, 2018 and 2017, sales to our top 20 customers accounted for approximately 72% and 66%, respectively, of our total revenue. For the nine months ended September 30, 2018 and 2017, sales to our top 20 customers accounted for approximately 72% and 65%, respectively, of our total revenue. The customers that comprised our top 20 customers change from time to time, and our large customers may not continue to be as significant going forward as they have been in the past.

During the three months ended September 30, 2018, we had one customer, Amazon, who represented 10% or more of our total revenue. During the three months ended September 30, 2017, we had two customers, Amazon and Apple, who each represented 10% or more of our total revenue. During the nine months ended September 30, 2018 and 2017, respectively, we had one customer, Amazon, who represented 10% or more of our total revenue.

    Revenue by geography is based on the location of the customer from which the revenue is earned. The following table sets forth revenue by geographic area (in thousands and as a percentage of total revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Americas	$	28,700	58	%	$	29,485	64	%	$	92,317	61	%	$	86,093	63	%
EMEA	9,656		20	%	9,280		20	%	31,156		20	%	26,543		20	%
Asia Pacific	10,959		22	%	7,304		16	%	28,205		19	%	23,537		17	%
Total revenue	$	49,315	100	%	$	46,069	100	%	$	151,678	100	%	$	136,173	100	%

Cost of Revenue

Cost of revenue consists primarily of fees paid to network providers for bandwidth and backbone, costs incurred for non-settlement free peering and connection to Internet service providers, and fees paid to data center operators for housing of our network equipment in third party network data centers, also known as co-location costs. Cost of revenue also includes

24

leased warehouse space and utilities, depreciation of network equipment used to deliver our content delivery services, payroll and related costs, and share-based compensation for our network operations and professional services personnel. Other costs include professional fees and outside services, travel and travel-related expenses, and royalty expenses.

Cost of revenue was composed of the following (in thousands and as a percentage of total revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Bandwidth and co-location fees	$	14,095	28.6	%	$	13,166	28.6	%	$	42,749	28.2	%	$	39,606	29.1	%
Depreciation - network	3,761		7.6	%	4,506		9.8	%	12,337		8.1	%	13,594		10.0	%
Payroll and related employee costs	3,991		8.1	%	4,183		9.1	%	11,979		7.9	%	12,536		9.2	%
Share-based compensation	352		0.7	%	352		0.8	%	1,059		0.7	%	1,075		0.8	%
Other costs	3,081		6.2	%	1,586		3.4	%	7,992		5.3	%	4,541		3.3	%
Total cost of revenue	$	25,280	51.3	%	$	23,793	51.6	%	$	76,116	50.2	%	$	71,352	52.4	%

Our cost of revenue increased in aggregate dollars and decreased as a percentage of total revenue for the three and nine months ended September 30, 2018, versus the comparable 2017 periods. The changes in cost of revenue were primarily a result of the following:

• Bandwidth expenses, in aggregate dollars, increased due to higher transit costs resulting from increased traffic volumes on our network and expansion into new geographies. As a percentage of total revenue, our bandwidth expenses remained consistent versus the comparable 2017 periods due to renegotiated lower rates with our vendors. Our co-location costs remained consistent in aggregate dollars, but decreased as a percentage of total revenue versus the comparable 2017 periods, due to improved server and operational efficiencies, resulting in additional revenue without corresponding proportional costs.

• Payroll and related employee costs decreased due to lower variable compensation.

• Other costs increased primarily due to an increase in international re-seller costs.

We anticipate an improvement in gross margin of more than 150 basis points for the full year 2018 compared to 2017.

General and Administrative

General and administrative expense was composed of the following (in thousands and as a percentage of total revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Payroll and related employee costs	$	2,797	5.7	%	$	3,312	7.2	%	$	8,736	5.8	%	$	9,427	6.9	%
Professional fees and outside services	1,602		3.2	%	788		1.7	%	3,181		2.1	%	2,463		1.8	%
Share-based compensation	1,887		3.8	%	1,565		3.4	%	5,666		3.7	%	4,773		3.5	%
Litigation expenses	19		—	%	863		1.9	%	2,904		1.9	%	4,048		3.0	%
Other costs	1,546		3.1	%	1,551		3.4	%	4,403		2.9	%	2,686		2.0	%
Total general and administrative	$	7,851	15.9	%	$	8,079	17.5	%	$	24,890	16.4	%	$	23,397	17.2	%

Our general and administrative expense decreased in aggregate dollars for the three months ended September 30, 2018, versus the comparable 2017 period. For the nine months ended September 30, 2018, our general and administrative expenses increased in aggregate dollars versus the comparable 2017 period. As a percentage of sales, for the three and nine months ended September 30, 2018, our general and administrative expense decreased versus the comparable 2017 periods.

The decrease in aggregate dollars for the three months ended September 30, 2018, versus the comparable 2017 period was primarily driven by reduced litigation expenses due to the settlement of our intellectual property lawsuits and lower payroll and related employee costs due to reduced variable compensation. These decreases were partially off-set by increased professional fees and higher share-based compensation.

The increase in aggregate dollars for the nine months ended September 30, 2018, versus the comparable 2017 period was primarily driven by our receipt of a state sales tax refund in 2017. In addition, we incurred an increase in professional fees

25

and increased share-based compensation. These increases were off-set by decreased litigation expenses, due to the settlement of our intellectual property lawsuits and decreased payroll and related employee costs, primarily due to lower variable compensation.

Excluding litigation expenses, we expect our general and administrative expenses for 2018 to remain consistent with 2017.

Sales and Marketing

Sales and marketing expense was composed of the following (in thousands and as a percentage of total revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Payroll and related employee costs	$	6,979	14.2	%	$	6,239	13.5	%	$	21,437	14.1	%	$	18,848	13.8	%
Share-based compensation	638		1.3	%	611		1.3	%	1,874		1.2	%	1,848		1.4	%
Marketing programs	519		1.1	%	498		1.1	%	1,662		1.1	%	1,519		1.1	%
Other costs	1,630		3.3	%	1,488		3.2	%	5,095		3.4	%	4,885		3.6	%
Total sales and marketing	$	9,766	19.8	%	$	8,836	19.2	%	$	30,068	19.8	%	$	27,100	19.9	%

Our sales and marketing expense increased in aggregate dollars for the three and nine months ended September 30, 2018, versus the comparable 2017 periods. For the three months ended September 30, 2018, our sales and marketing expense increased as a percentage of total revenue with the comparable 2017 period. For the nine months ended September 30, 2018, our sales and marketing expense remained consistent as a percentage of total revenue versus the comparable 2017 period.

The increase in sales and marketing expense was primarily as a result of the following:

• Increased payroll and related employee costs, due to increased headcount and higher variable compensation.

• Increased marketing spending related to public relations and trade shows.

• Increased other costs primarily due to increased travel and entertainment, increased facilities costs and higher fees and licenses.

We expect our sales and marketing expenses for 2018 to increase compared to 2017 as we expand our sales force and marketing efforts.

Research and Development

Research and development expense was composed of the following (in thousands and as a percentage of total revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Payroll and related employee costs	$	4,127	8.4	%	$	4,701	10.2	%	$	13,159	8.7	%	$	14,309	10.5	%
Share-based compensation	544		1.1	%	584		1.3	%	1,746		1.2	%	1,746		1.3	%
Other costs	1,211		2.5	%	1,158		2.5	%	3,389		2.2	%	3,322		2.4	%
Total research and development	$	5,882	11.9	%	$	6,443	14.0	%	$	18,294	12.1	%	$	19,377	14.2	%

Our research and development expense decreased in aggregate dollars and decreased as a percentage of total revenue for the three and nine months ended September 30, 2018, versus the comparable 2017 periods. The decrease in aggregate dollars was primarily due to a decrease in payroll and related employee costs due to lower variable compensation and lower average salary expense. Other costs increased due to increased casual labor and other employee costs.

We expect our research and development expenses for 2018 to be lower than 2017 due to the aforementioned reasons.

Depreciation and Amortization (Operating Expenses)

Depreciation and amortization expense was $616, or 1.2% of revenue, for the three months ended September 30, 2018, versus $603, or 1.3% of revenue, for the comparable 2017 period. For the nine months ended September 30, 2018, depreciation and amortization expense was $1,837, or 1.2% of revenue versus $1,789, or 1.3% of revenue, for the comparable 2017 period.

26

Depreciation expense consists of depreciation on equipment and furnishings used by general administrative, sales and marketing, and research and development personnel. Amortization expense consists of amortization of intangible assets acquired in business combinations.

Interest Expense

Interest expense was $10 for the three months ended September 30, 2018, versus $18 for the comparable 2017 period. For the nine months ended September 30, 2018, interest expense was $76 versus $42 for the comparable 2017 period. The increase in the nine months ended September 30, 2018 was due to fees associated with the Fourth Amendment (Fourth Amendment) to the Loan and Security Agreement (the Credit Agreement) with Silicon Valley Bank (SVB) originally entered into in November 2015.

Interest Income

Interest income was $177 for the three months ended September 30, 2018, versus $127 for the comparable 2017 period. For the nine months ended September 30, 2018, interest income was $440 versus $365 for the comparable 2017 period. Interest income includes interest earned on invested cash balances and marketable securities.

Settlement and Patent License Income

On April 9, 2018, we entered into a definitive Settlement and Patent License Agreement (the Agreement) where the parties agreed to (i) license certain patents to the other party, (ii) a covenant not to sue for three years for certain patents related to the licensed patents, and (iii) settle all outstanding legal disputes between the parties. The terms of the Agreement also require Akamai to pay to Limelight a total of $14,900 over five equal quarterly installments. The second quarterly payment of $2,980 was received in July 2018. As of September 30, 2018, there remained $8,940 due from Akamai.

Other Income (Expense)

Other expense was $246 for the three months ended September 30, 2018, versus other income of $8 for the comparable 2017 period. For the nine months ended September 30, 2018, other expense was $355 versus other income of $249 for the comparable 2017 period. For the three and nine months ended September 30, 2018 and 2017, respectively, other income consisted primarily of foreign currency transaction gains and losses and the gain on sale of fixed assets.

Income Tax Expense

Based on an estimated annual effective tax rate and discrete items, the estimated income tax expense for the three and nine months ended September 30, 2018, was $113 and $347, respectively, versus $188 and $448 for the comparable 2017 period. Income tax expense on our income (loss) before income taxes was different than the statutory income tax rate primarily due to our providing for a valuation allowance on deferred tax assets in certain jurisdictions, and recording of state and foreign tax expense for the quarter and year to date periods. The effective income tax rate is based primarily upon forecasted income or loss for the year, the composition of the income or loss in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions for tax audits.

Liquidity and Capital Resources

As of September 30, 2018, our cash, cash equivalents and marketable securities classified as current totaled $52,635. Included in this amount is approximately $5,851 of cash and cash equivalents held outside the United States. Changes in cash, cash equivalents and marketable securities are dependent upon changes in, among other things, working capital items such as deferred revenues, accounts payable, accounts receivable, accrued provision for litigation, accrued settlement and patent license agreement, and various accrued expenses, as well as purchases of property and equipment and changes in our capital and financial structure due to debt repurchases and issuances, stock option exercises, sales of equity investments, and similar events.

In August 2016, we entered into a settlement and license agreement with Akamai with respect to the ‘703 and certain other related patents. The agreement settles all asserted and unasserted claims with respect to the licensed patents. The terms of the agreement require us to pay $54,000 over twelve equal quarterly installments beginning on August 1, 2016. As of September 30, 2018, there remained $13,500 due to Akamai under the terms of the settlement and license agreement.

On April 9, 2018, we entered into a definitive settlement patent license agreement with Akamai in a separate matter where the parties agreed to (i) license certain patents to the other party, (ii) a covenant not to sue for three years for certain patents related to the licensed patents, and (iii) settle all outstanding legal disputes between the parties. The terms of the

27

Agreement also require Akamai to pay to us a total of $14,900, over five equal quarterly installments. The second quarterly payment of $2,980 was received in July 2018. As of September 30, 2018, there remained $8,940 due from Akamai.

We believe that our existing cash, cash equivalents and marketable securities, and available borrowing capacity will be sufficient to meet our anticipated cash needs for at least the next 12 months. If the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or debt securities.

The major components of changes in cash flows for the nine months ended September 30, 2018 and 2017, are discussed in the following paragraphs.

Operating Activities

Net cash provided by operating activities was $16,807 for the nine months ended September 30, 2018, versus net cash provided by operating activities of $8,383 for the comparable 2017 period, an increase of $8,424. Changes in operating assets and liabilities of $(8,068) during the nine months ended September 30, 2018, versus $(11,031) in the comparable 2017 period were primarily due to:

• accounts receivable decreased $5,781 during the nine months ended September 30, 2018 as a result of timing of collections as compared to a $2,026 increase in the comparable 2017 period;

• prepaid expenses and other current assets increased $2,530 during the nine months ended September 30, 2018, due to an increase in customer acquisition costs off-set by the amortization of prepaid bandwidth expenses and other prepaid expenses, compared to a $545 decrease in the comparable 2017 period;

• accounts payable and other current liabilities decreased $2,526 during the nine months ended September 30, 2018, versus an increase of $4,749 for the comparable 2017 period due to timing of vendor payments and the payment of 2017 variable compensation accruals; and

• net payments for provision for litigation decreased $5,960 as a result of the first two payments received from Akamai under the settlement and patent license agreement.

Cash provided by operating activities may not be sufficient to cover new purchases of property and equipment during the remainder of 2018 and 2019. The timing and amount of future working capital changes and our ability to manage our days sales outstanding will also affect the future amount of cash used in or provided by operating activities.

Investing Activities

Net cash used in investing activities was $5,961 for the nine months ended September 30, 2018, versus net cash used in investing activities of $8,362 for the comparable 2017 period. Net cash used in investing activities was primarily related to the purchase of marketable securities, and capital expenditures primarily for servers and network equipment associated with the build-out and expansion of our global computing platform, partially offset by cash received from the sale and maturities of marketable securities.

We expect to have ongoing capital expenditure requirements as we continue to invest in and expand our content delivery network. During the nine months ended September 30, 2018, we made capital expenditures of $10,495 which represented approximately 7% of our total revenue. Our capital expenditures may increase in 2018 compared to 2017, as we continue to increase the capacity of our global network and re-fresh our systems.

Financing Activities

Net cash used in financing activities was $2,809 for the nine months ended September 30, 2018, versus net cash used in financing activities of $1,371 for the comparable 2017 period. Net cash used in financing activities in the nine months ended September 30, 2018, primarily relates to the payments of employee tax withholdings related to the net settlement of vested restricted stock units of $3,808, the repurchase of our common stock of $3,800, offset by cash received from the exercise of stock options and our employee stock purchase plan of $4,799.

Net cash used in financing activities in the nine months ended September 30, 2017, primarily relates to payments of employee tax withholdings related to the net settlement of vested restricted stock units of $2,571, offset by cash received from the exercise of stock options and our employee stock purchase plan of $1,200.

28

Line of Credit                 

In February 2018, we entered into the Fourth Amendment to the Credit Agreement with SVB originally entered into in November 2015. Under the Fourth Amendment, we increased the maximum principal commitment amount from $10,000 to $20,000. Our borrowing capacity is the lesser of the commitment amount or 80% of eligible accounts receivable. The Fourth Amendment extended the Credit Agreement one year. All outstanding borrowings owed under the Credit Agreement become due and payable no later than the final maturity date of November 2, 2020.

As of September 30, 2018, borrowings under the Credit Agreement bear interest at the current prime rate minus 0.25%. In the event of default, obligations shall bear interest at a rate per annum which is 3% above the then applicable rate.  As of September 30, 2018, and December 31, 2017, respectively, we had no outstanding borrowings, and we had availability under the Credit Agreement of approximately $18,300 and $10,000, respectively.

Financial Covenants and Borrowing Limitations

The Credit Agreement requires, and any future credit facilities will likely require, us to comply with specified financial requirements that may limit the amount we can borrow. A breach of any of these covenants could result in a default. Our ability to satisfy those covenants depends principally upon our ability to meet or exceed certain financial performance results. Any debt agreements we enter into in the future may further limit our ability to enter into certain types of transactions.

Under the Fourth Amendment, we are required to maintain a minimum liquidity of $10,000 at all times, measured quarterly, with a minimum of $5,000 of the $10,000 in cash at SVB. In addition, we are required to maintain an Adjusted Quick Ratio of at least 1.0 to 1.0. We are also subject to certain customary limitations on our ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. As of September 30, 2018, we were in compliance with all covenants under the Credit Agreement.

For a more detailed discussion regarding our Credit Agreement and Fourth Amendment, please refer to Note 9 "Line of Credit" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by restrictive covenants within the Credit Agreement. These restrictions may also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions, execute our business strategy, effectively compete with companies that are not similarly restricted or engage in other business activities that would be in our interest. In the future, we may also incur debt obligations that might subject us to additional and different restrictive covenants that could affect our financial and operational flexibility. We cannot assure you that we will be granted waivers or amendments to the indenture governing the Credit Agreement, or such other debt obligations if for any reason we are unable to comply with our obligations thereunder or that we will be able to refinance our debt on acceptable terms, or at all, should we seek to do so. Any such limitations on borrowing under the Credit Agreement, including payments related to litigation, could have a material adverse impact on our liquidity and our ability to continue as a going concern could be impaired.

Share Repurchases

On March 14, 2017, our board of directors authorized a $25,000 share repurchase program. Any shares repurchased under this program will be canceled and returned to authorized but unissued status. This share repurchase program replaced the $9,500 remaining from the previously announced $15,000 share repurchase program. During the nine months ended September 30, 2018, we purchased and canceled 1,000 shares for $3,800, including commissions and fees. During the nine months ended September 30, 2017, we did not repurchase any shares under the repurchase programs. As of September 30, 2018, there remained $21,200 under this share repurchase program.

Contractual Obligations, Contingent Liabilities, and Commercial Commitments

In the normal course of business, we make certain long-term commitments for operating leases, primarily office facilities, bandwidth, and computer rack space. These leases expire on various dates ranging from 2018 to 2022. We expect that the growth of our business will require us to continue to add to and increase our long-term commitments in 2018 and beyond. As a result of our growth strategies, we believe that our liquidity and capital resources requirements will grow.

The following table presents our contractual obligations and commercial commitments, as of September 30, 2018, over the next five years and thereafter:

29

	Payments Due by Period
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Operating Leases
Bandwidth leases	$	23,251	$	18,133	$	5,110	$	8	$	—
Rack space leases	10,055		7,956		1,791		308		—
Real estate leases	3,747		2,182		1,456		109		—
Total operating leases	37,053		28,271		8,357		425		—
Settlement agreement	13,500		13,500		—		—		—
Total commitments	$	50,553	$	41,771	$	8,357	$	425	$	—

Off Balance Sheet Arrangements

As of September 30, 2018, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk        

Our exposure to market risk for changes in interest rates relates primarily to our debt and investment portfolio. In our investment portfolio, we do not use derivative financial instruments. Our investments are primarily with our commercial and investment banks and, by policy, we limit the amount of risk by investing primarily in money market funds, United States Treasury obligations, high quality corporate and municipal obligations, and certificates of deposit. Interest expense on our line of credit under the Fourth Amendment is at the current prime rate minus 0.25%.  In the event of default, obligations shall bear interest at a rate per annum which is 3% above the then applicable rate. An increase in interest rates of 100 basis points would add $10 of interest expense per year, to our financial position or results of operations, for each $1,000 drawn on the line of credit. As of September 30, 2018, there were no outstanding borrowings against the line of credit.

Foreign Currency Risk

We operate in the Americas, EMEA, and Asia-Pacific. As a result of our international business activities, our financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations will not harm our business in the future. We have foreign currency exchange rate exposure on our results of operations as it relates to revenues and expenses denominated in foreign currencies. A portion of our cost of revenues and operating expenses are denominated in foreign currencies as are our revenues associated with certain international customers. To the extent that the U.S. dollar weakens, similar foreign currency denominated transactions in the future will result in higher revenues and higher cost of revenues and operating expenses, with expenses having the greater impact on our financial results. Similarly, our revenues and expenses will decrease if the U.S. dollar strengthens against these foreign currencies. Although we will continue to monitor our exposure to currency fluctuations, and, where appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, we are not currently engaged in any financial hedging transactions. Assuming a 10% weakening of the U.S. dollar relative to our foreign currency denominated revenues and expenses, our net income (loss) for the year ended December 31, 2017, and the nine months ended September 30, 2018, would have been higher by approximately $1,946 and $1,242, respectively. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that foreign exchange rate movements across multiple jurisdictions are similar and would be linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex markets or other changes that could arise, which may positively or negatively affect our results of operations.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

30

Credit Risk

During any given fiscal period, a relatively small number of customers typically account for a significant percentage of our revenue. During the three months ended September 30, 2018 and 2017, sales to our top 20 customers accounted for approximately 72% and 66%, respectively, of our total revenue. During the three months ended September 30, 2018, we had one customer, Amazon, who represented more than 10% of our total revenue. During the three months ended September 30, 2017, we had two customers, Amazon and Apple, who each represented more than 10% of our total revenue.

For the nine months ended September 30, 2018 and 2017, sales to our top 20 customers accounted for approximately 72% and 65%, respectively, of our total revenue. During the nine months ended September 30, 2018 and 2017, we had one customer, Amazon, who accounted for more than 10% of our total revenue. We anticipate that our top 20 customer concentration levels will remain consistent throughout 2018. In the past, the customers that comprised our top 20 customers have continually changed, and our large customers may not continue to be as significant going forward as they have been in the past.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in SEC Rules 13a-15(e) and 15d-15(e). We maintain disclosure controls and procedures, as such term is defined in SEC Rules 13a-15(e) and 15d-15(e), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of September 30, 2018. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in SEC Rules 13a-15(f) and 15d-15(f), during the fiscal quarter ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

PART II. OTHER INFORMATION

Item 1.        Legal Proceedings         

For a description of our material pending legal proceedings, please refer to Note 10 "Contingencies - Legal Matters" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A.    Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item II, and our consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment. All information is presented in thousands, except per share amounts, customer count, head count and where specifically noted.

Risks Related to Our Business         

We currently face competition from established competitors and may face competition from others in the future.

We compete in markets that are intensely competitive, rapidly changing and characterized by frequently declining prices. In these markets, vendors offer a wide range of alternate solutions. We have experienced and expect to continue to experience increased competition on price, features, functionality, integration and other factors. Several of our current competitors, as well as a number of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances, and substantially greater financial, technical and marketing resources than we do. As a consequence of the competitive dynamics in our markets, we have experienced reductions in our prices, and an increased requirement for product advancement and innovation in order to remain competitive, which in turn have adversely affected and may continue to adversely affect our revenue, gross margin and operating results.

Our primary competitors for the content delivery service offering of our include Akamai, Level 3, Amazon, Fastly, CDNetworks, Highwinds and Verizon Digital Media Services. In addition, a number of companies have recently entered or are currently attempting to enter our market, either directly or indirectly, as a result of the growth in the content delivery market. These new entrants include companies that have built internal content delivery networks to solely deliver their own traffic, rather than relying solely, largely or in part on content delivery specialists, such as us. Some of these new entrants may become significant competitors in the future. Given the relative ease by which customers typically can switch among content delivery service providers, differentiated offerings or pricing by competitors could lead to a rapid loss of customers. Some of our current or potential competitors may bundle their offerings with other services, software or hardware in a manner that may discourage content providers from purchasing the services that we offer. In addition, we face different market characteristics and competition with local content delivery service providers as we expand internationally. Many of these international competitors are very well positioned within their local markets. Increased competition could result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could harm our business, financial condition and results of operations.

We face different competitors for our other service offerings. However, the competitive landscape is different from content delivery in this area in that the process of changing vendors can be more costly and complicated for the customer, which could make it difficult for us to attract new customers and increase our market share.

Several of our competitors have greater financial and sales resources than we do. Many have been offering similar services in the markets in which we compete longer than we have. We may not be able to successfully compete against these or new competitors. If we are unable to increase our customer base and increase our market share, our business, financial condition and results of operations may suffer.

Any unplanned interruption or degradation in the functioning or availability of our network or services, or attacks on or disruptions to our internal information technology systems, could lead to increased costs, a significant decline in our revenue and harm to our reputation.

32

Our business is dependent on providing our customers with fast, efficient, and reliable distribution of content delivery and digital asset management services over the Internet every minute of every day. Many of our customers depend primarily or exclusively on our services to operate their businesses. Consequently, any disruption, or substantial and extensive degradation, of our services could have a material impact on our customers’ businesses. Our network or services could be disrupted by numerous events, including natural disasters, failure or refusal of our third-party network providers to provide the necessary capacity or access, failure of our software or global network infrastructure and power losses. In addition, we deploy our servers in third-party co-location facilities, and these third-party co-location providers could experience system outages or other disruptions that could constrain our ability to deliver our services. We may also experience disruptions caused by software viruses, unauthorized hacking of our systems, security breaches or other cyberattacks by unauthorized users. Any hacking of our systems or other cyberattacks could lead to the unauthorized release of confidential information that could damage our customers’ business and reputation, as well as our own. The economic costs to us to eliminate or alleviate cyber or other security problems, viruses, worms, malicious software programs, and other security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service, and loss of existing or potential customers. In addition, our release of a security-related solution may increase our visibility as a security-focused company and make us a more attractive target for attacks on our infrastructure intended to steal information about our technology, financial data, or customer information or take other actions that would be damaging to our customers and us.

We could experience a significant, unplanned disruption, or substantial and extensive degradation of our services, or our network may fail in the future. Despite our significant infrastructure investments, we may have insufficient communications and server capacity to address these or other disruptions, which could result in interruptions in our services. Any widespread interruption or substantial and extensive degradation in the functioning of our services for any reason would reduce our revenue and could harm our business and results of operations. If such a widespread interruption occurred, or if we failed to deliver content to users as expected during a high-profile media event, game release or other well-publicized circumstance, our reputation could be damaged severely. Moreover, any disruptions, significant degradation, cybersecurity threats, security breaches, or attacks on our internal information technology systems could undermine confidence in our services and cause us to lose customers or make it more difficult to attract new ones, either of which could harm our business and results of operations.

We have a history of losses and we may not achieve or maintain profitability in the future.

Since 2006, we have been profitable only one year, which was as a result of a reversal of a significant reserve for litigation. We incur significant expenses in developing our technology, and maintaining and expanding our network. We also incur significant share-based compensation expense and have incurred (and may in the future incur) significant costs associated with litigation.  Accordingly, we may not be able to achieve or maintain profitability for the foreseeable future.

We also may not achieve sufficient revenue to achieve or maintain profitability and thus may continue to incur losses in the future for a number of reasons, including, among others:

• slowing demand for our services;

• increasing competition and competitive pricing pressures;

• any inability to provide our services in a cost-effective manner;

• the incurrence of unforeseen expenses, difficulties, complications and delays; and

• other risks described in this report.

If we fail to achieve and maintain profitability, the price of our common stock could decline, and our business, financial condition and results of operations could suffer.

If we are unable to sell our services at acceptable prices relative to our costs, our revenue and gross margins will decrease and our business and financial results will suffer.

Prices for content delivery services have fallen in recent years and are likely to fall further in the future. We have invested significant amounts in purchasing capital equipment as part of our effort to increase the capacity of our global content delivery network. Our investments in our infrastructure are based upon our assumptions regarding future demand, as well as prices that we will be able to charge for our services. These assumptions may prove to be wrong. If the price that we are able to charge customers to deliver their content falls to a greater extent than we anticipate, if we over-estimate future demand for our services, or if our costs to deliver our services do not fall commensurate with any future price declines, we may not be able to achieve acceptable rates of return on our infrastructure investments, and our gross profit and results of operations may suffer dramatically.

As we further expand our global network and services, and as we refresh our network equipment, we are dependent on significant future growth in demand for our services to justify additional capital expenditures. If we fail to generate significant additional demand for our services, our results of operations will suffer, and we may fail to achieve planned or expected

33

financial results. There are numerous factors that could, alone or in combination with other factors, impede our ability to increase revenue, moderate expenses or maintain gross margins, including:

• continued price declines arising from significant competition;

• increasing settlement fees for certain peering relationships;

• failure to increase sales of our services;

• increases in electricity, bandwidth and rack space costs or other operating expenses, and failure to achieve decreases in these costs and expenses relative to decreases in the prices we can charge for our services and products;

• failure of our current and planned services and software to operate as expected;

• loss of any significant customers or loss of existing customers at a rate greater than our increase in new customers or our sales to existing customers;

• failure to increase sales of our services to current customers as a result of their ability to reduce their monthly usage of our services to their minimum monthly contractual commitment;

• failure of a significant number of customers to pay our fees on a timely basis or at all or to continue to purchase our services in accordance with their contractual commitments; and

• inability to attract high quality customers to purchase and implement our current and planned services.

A significant portion of our revenue is derived collectively from our video content management services, website and web application acceleration services, cloud security and cloud storage services. These services tend to have higher gross margins than our content delivery services. We may not be able to achieve the growth rates in revenue from such services that we or our investors expect or have experienced in the past. If we are unable to achieve the growth rates in revenue that we expect for these service offerings, our revenue and operating results could be significantly and negatively affected.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. As of December 31, 2017, we had federal and state net operating loss carryforwards, or NOLs, of $176,000 and $115,500, respectively, due to prior period losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” can be subject to limitations on its ability to utilize its NOLs to offset future taxable income. Our existing NOLs may be subject to limitations arising from past ownership changes. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code.  In addition, under the Tax Cuts and Jobs Act (the Tax Act), the amount of post 2017 NOLs that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. In addition, the Tax Act generally eliminates the ability to carry back any NOL to prior taxable years, while allowing post 2017 unused NOLs to be carried forward indefinitely. There is a risk that due to changes under the Tax Act, regulatory changes, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability.

Our involvement in litigation may have a material adverse effect on our financial condition and operations.

We have been involved in multiple intellectual property lawsuits in the past (see discussion of such lawsuits in Note 10 "Contingencies - Legal Matters" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this quarterly report on Form 10-Q). We are from time to time party to other lawsuits. The outcome of all litigation is inherently unpredictable. The expenses of defending these lawsuits, particularly fees paid to our lawyers and expert consultants, have been significant to date. If the cost of prosecuting or defending current or future lawsuits continues to be significant, it may continue to adversely affect our operating results during the pendency of such lawsuits. Lawsuits also require a diversion of management and technical personnel time and attention away from other activities to pursue the defense or prosecution of such matters. In addition, adverse rulings in such lawsuits either alone or cumulatively may have an adverse impact on our revenue, expenses, market share, reputation, liquidity and financial condition.

If we are required to seek funding, such funding may not be available on acceptable terms or at all.

We may need to obtain funding due to a number of factors, including a shortfall in revenue, increased expenses, increased investment in capital equipment, the acquisition of significant businesses or technologies, or adverse judgments or settlements in connection with future, unforeseen litigation. We believe that our cash, cash equivalents and marketable securities classified as current plus cash from operations will be sufficient to fund our operations and proposed capital expenditures for at least the next 12 months. However, we may need or desire funding before such time. If we do need to obtain funding, it may not be available on commercially reasonable terms or at all. If we are unable to obtain sufficient funding, our business would be harmed. Even if we were able to find outside funding sources, we might be required to issue securities in a

34

transaction that could be highly dilutive to our investors or we may be required to issue securities with greater rights than the securities we have outstanding today. We might also be required to take other actions that could lessen the value of our common stock, including borrowing money on terms that are not favorable to us. If we are unable to generate or raise capital that is sufficient to fund our operations, we may be required to curtail operations, reduce our capabilities or cease operations in certain jurisdictions or completely.

We may have difficulty scaling and adapting our existing architecture to accommodate increased traffic and technology advances or changing business requirements. This could lead to the loss of customers and cause us to incur unexpected expenses to make network improvements.

Our services and solutions are highly complex and are designed to be deployed in and across numerous large and complex networks. Our global network infrastructure has to perform well and be reliable for us to be successful. We will need to continue to invest in infrastructure and customer support to account for the continued growth in traffic (and the increased complexity of that traffic) delivered via content delivery networks such as ours. We have spent and expect to continue to spend substantial amounts on the purchase and lease of equipment and data centers and the upgrade of our technology and network infrastructure to handle increased traffic over our network, implement changes to our network architecture and integrate existing solutions and to roll out new solutions and services. This expansion is expensive and complex and could result in inefficiencies, operational failures or defects in our network and related software. If we do not implement such changes or expand successfully, or if we experience inefficiencies and operational failures, the quality of our solutions and services and user experience could decline. From time to time, we have needed to correct errors and defects in our software or in other aspects of our network. In the future, there may be additional errors and defects that may harm our ability to deliver our services, including errors and defects originating with third party networks or software on which we rely. These occurrences could damage our reputation and lead to the loss of current and potential customers, which would harm our operating results and financial condition. We must continuously upgrade our infrastructure in order to keep pace with our customers’ evolving demands. Cost increases or the failure to accommodate increased traffic or these evolving business demands without disruption could harm our operating results and financial condition.

If we are unable to develop new services and enhancements to existing services or fail to predict and respond to emerging technological trends and customers’ changing needs, our operating results and market share may suffer.

The market for our services is characterized by rapidly changing technology, evolving industry standards, and new product and service introductions. Our operating results depend on our ability to understand user preferences or predict industry changes. Our operating results also depend on our ability to modify our solutions and services on a timely basis or develop and introduce new services into existing and emerging markets. The process of developing new technologies is complex and uncertain. We must commit significant resources to developing new services or enhancements to our existing services before knowing whether our investments will result in services the market will accept. Furthermore, we may not successfully execute our technology initiatives because of errors in planning or timing, technical hurdles that we fail to overcome in a timely fashion, misunderstandings about market demand or a lack of appropriate resources. As prices for content delivery services fall, we will increasingly rely on new product offerings and other service offerings to maintain or increase our gross margins. Failures in execution, delays in bringing new or improved products or services to market, failure to effectively integrate service offerings, or market acceptance of new services we introduce could result in competitors providing those solutions before we do, which could lead to loss of market share, revenue and earnings.

We depend on a limited number of customers for a substantial portion of our revenue in any fiscal period, and the loss of, or a significant shortfall in demand from, these customers could significantly harm our results of operations.

During any given fiscal period, a relatively small number of customers typically account for a significant percentage of our revenue. For the nine months ended September 30, 2018, sales to our top 20 customers accounted for approximately 72% of our total revenue. During the nine months ended September 30, 2018, we had one customer, Amazon, who represented 10% or more of our total revenue.

In the past, the customers that comprised our top 20 customers have continually changed, and we also have experienced significant fluctuations in our individual customers’ usage of, or decreased usage of, our services. As a consequence, we may not be able to adjust our expenses in the short term to address the unanticipated loss of a large customer during any particular period. As such, we may experience significant, unanticipated fluctuations in our operating results that may cause us to not meet our expectations or those of stock market analysts, which could cause our stock price to decline.

Rapidly evolving technologies or new business models could cause demand for our services to decline or could cause these services to become obsolete.

35

Customers, potential customers or third parties may develop technological or business model innovations that address digital delivery requirements in a manner that is, or is perceived to be, equivalent or superior to our service offerings. This is particularly true as our customers increase their operations and begin expending greater resources on delivering their content using third party solutions. If we fail to offer content delivery, video content management and other related services that are competitive to in-sourced solutions, we may lose additional customers or fail to attract customers that may consider pursuing this in-sourced approach, and our business and financial results would suffer.

If competitors introduce new products or services that compete with or surpass the quality or the price or performance of our services, we may be unable to renew our agreements with existing customers or attract new customers at the prices and levels that allow us to generate attractive rates of return on our investment. We may not anticipate such developments and may be unable to adequately compete with these potential solutions. In addition, our customers’ business models may change in ways that we do not anticipate, and these changes could reduce or eliminate our customers’ needs for our services. If this occurred, we could lose customers or potential customers, and our business and financial results would suffer.

As a result of these or similar potential developments, it is possible that competitive dynamics in our market may require us to reduce our prices faster than we anticipate, which could harm our revenue, gross margin and operating results.

Failure to effectively enhance our sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our services.

Increasing our customer base and achieving broader market acceptance of our services will depend to a significant extent on our ability to enhance our sales and marketing operations. We have a concentration of our sales force at our headquarters in Tempe, Arizona, but we also have a widely deployed field sales force. We have aligned our sales resources to improve our sales productivity and efficiency and to bring our sales personnel closer to our current and potential customers. Adjustments to our sales force have been and will continue to be expensive and could cause some near-term productivity impairments. As a result, we may not be successful in improving the productivity and efficiency of our sales force, which could cause our results of operations to suffer.

We believe that there is significant competition for both inside and direct sales personnel with the sales skills and technical knowledge that we require. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of inside and direct sales personnel. New hires require significant training and, in most cases, take a significant period of time before they achieve full productivity. Our recent hires and planned hires may not become as productive as we would like, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business. Our business will be seriously harmed if our sales force productivity efforts do not generate a corresponding significant increase in revenue.

Many of our significant current and potential customers are pursuing emerging or unproven business models, which, if unsuccessful, or ineffective at monetizing delivery of their content, could lead to a substantial decline in demand for our content delivery and other services.

Because the proliferation of broadband Internet connections and the subsequent monetization of content libraries for distribution to Internet users are relatively recent phenomena, many of our customers’ business models that center on the delivery of rich media and other content to users remain unproven. Some of our customers will not be successful in selling advertising, subscriptions, or otherwise monetizing the content we deliver on their behalf and consequently may not be successful in creating a profitable business model. This will result in some of our customers discontinuing their Internet or web-based business operations and discontinuing use of our services and solutions. Further, any deterioration and related uncertainty in the global financial markets and economy could result in, among other things, reductions in available capital and liquidity from banks and other providers of credit, fluctuations in equity and currency values worldwide, and concerns that portions of the worldwide economy may be in a prolonged recessionary period. Any one or more of these occurrences could materially adversely impact our customers’ access to capital or willingness to spend capital on our services or, in some cases, ultimately cause the customer to file for protection from creditors under applicable insolvency or bankruptcy laws or simply go out of business. This uncertainty may also impact our customers’ levels of cash liquidity, which could affect their ability or willingness to timely pay for services that they will order or have already ordered from us. From time to time we discontinue service to customers for non-payment of services. We expect further customers may discontinue operations or not be willing or able to pay for services that they have ordered from us. Further loss of customers may adversely affect our financial results.

If we are unable to attract new customers or to retain our existing customers, our revenue could be lower than expected and our operating results may suffer.

To increase our revenue, we must add new customers and sell additional services to existing customers and encourage existing customers to increase their usage levels. If our existing and prospective customers do not perceive our services to be of

36

sufficiently high value and quality, we may not be able to retain our current customers or attract new customers. We sell our services pursuant to service agreements that generally include some form of financial minimum commitment. Our customers have no obligation to renew their contracts for our services after the expiration of their initial commitment, and these service agreements may not be renewed at the same or higher level of service, if at all. Moreover, under some circumstances, some of our customers have the right to cancel their service agreements prior to the expiration of the terms of their agreements. Aside from minimum financial commitments, customers are not obligated to use our services for any particular type or amount of traffic. These facts, in addition to the changing competitive landscape in our market, means that we cannot accurately predict future customer renewal rates or usage rates. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including:

• their satisfaction or dissatisfaction with our services;

• the quality and reliability of our content delivery network;

• the prices of our services;

• the prices of services offered by our competitors;

• discontinuation by our customers of their Internet or web-based content distribution business;

• mergers and acquisitions affecting our customer base; and

• reductions in our customers’ spending levels.

If our customers do not renew their service agreements with us, or if they renew on less favorable terms, our revenue may decline and our business may suffer. Similarly, our customer agreements often provide for minimum commitments that are often significantly below our customers’ historical usage levels. Consequently, even if we have agreements with our customers to use our services, these customers could significantly curtail their usage without incurring any penalties under our agreements. In this event, our revenue would be lower than expected and our operating results could suffer.

It also is an important component of our growth strategy to market our services and solutions to particular industries or market segments. As an organization, we may not have significant experience in selling our services into certain of these markets. Our ability to successfully sell our services into these markets to a meaningful extent remains unproven. If we are unsuccessful in such efforts, our business, financial condition and results of operations could suffer.

Rapid increase in the use of mobile and alternative devices to access the Internet present significant development and deployment challenges.

The number of people who access the Internet through devices other than PCs, including mobile devices, game consoles and television set-top devices, has increased dramatically in the past few years. The capabilities of these devices are advancing dramatically and the increasing need to provide a high-quality video experience will present us and other providers with significant challenges. If we are unable to deliver our service offerings to a substantial number of alternative device users and at a high quality, or if we are slow to develop services and technologies that are more compatible with these devices, we may fail to capture a significant share of an increasingly important portion of the market. Such a failure could limit our ability to compete effectively in an industry that is rapidly growing and changing, which, in turn, could cause our business, financial condition and results of operations to suffer.

We need to defend our intellectual property and processes against patent or copyright infringement claims, which may cause us to incur substantial costs and threaten our ability to do business.

Companies, organizations or individuals, including our competitors and non-practicing entities, may hold or obtain patents or other proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our services or develop new services, which could make it more difficult for us to operate our business. From time to time, we may receive inquiries from holders of patents inquiring whether we infringe their proprietary rights. Companies holding Internet-related patents or other intellectual property rights are increasingly bringing suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. Any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources from the defense of such claims. In addition, many of our agreements with customers require us to defend and indemnify those customers for third-party intellectual property infringement claims against them, which could result in significant additional costs and diversion of resources. If we are determined to have infringed upon a third party’s intellectual property rights, we may also be required to do one or more of the following:

• cease selling, incorporating or using products or services that incorporate the challenged intellectual property;

• pay substantial damages;

• obtain a license from the holder of the infringed intellectual property right, which license may or may not be available on reasonable terms or at all; or

• redesign products or services.

37

If we are forced to litigate any claims or to take any of these other actions, our business may be seriously harmed.

Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties.

We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We have applied for patent protection in the United States and a number of foreign countries. These legal protections afford only limited protection and laws in foreign jurisdictions may not protect our proprietary rights as fully as in the United States. Monitoring infringement of our intellectual property rights is difficult, and we cannot be certain that the steps we have taken will prevent unauthorized use of our intellectual property rights. Developments and changes in patent law, such as changes in interpretations of the joint infringement standard, could restrict how we enforce certain patents we hold. We also cannot be certain that any pending or future patent applications will be granted, that any future patent will not be challenged, invalidated or circumvented, or that rights granted under any patent that may be issued will provide competitive advantages to us.

Our results of operations may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.

Our results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control. If our results of operations fall below the expectations of securities analysts or investors, the price of our common stock could decline substantially. In addition to the effects of other risks discussed in this section, fluctuations in our results of operations may be due to a number of factors, including, among others:

• our ability to increase sales to existing customers and attract new customers to our content delivery and other services;

• the addition or loss of large customers, or significant variation in their use of our content delivery and other services;

• costs associated with current or future intellectual property lawsuits and other lawsuits;

• service outages or third party security breaches to our platform or to one or more of our customers’ platforms;

• the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business, operations and infrastructure and the adequacy of available funds to meet those requirements;

• the timing and success of new product and service introductions by us or our competitors;

• the occurrence of significant events in a particular period that result in an increase in the use of our content delivery and other services, such as a major media event or a customer’s online release of a new or updated video game or operating system;

• changes in our pricing policies or those of our competitors;

• the timing of recognizing revenue;

• limitations of the capacity of our global network and related systems;

• the timing of costs related to the development or acquisition of technologies, services or businesses;

• the potential write-down or write-off of intangible or other long-lived assets;

• general economic, industry and market conditions (such as fluctuations experienced in the stock and credit markets during times of deteriorated global economic conditions) and those conditions specific to Internet usage;

• limitations on usage imposed by our customers in order to limit their online expenses; and

• war, threat of war or terrorist actions, including cyber terrorism targeted at us, our customers, or both, and inadequate cybersecurity.

We believe that our revenue and results of operations may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful. You should not rely on the results of one period as an indication of future performance.

We generate our revenue primarily from the sale of content delivery services, and the failure of the market for these services to expand as we expect or the reduction in spending on those services by our current or potential customers would seriously harm our business.

While we offer our customers a number of services and solutions, we generate the majority of our revenue from charging our customers for the content delivered on their behalf through our global network. We are subject to an elevated risk of reduced demand for these services. Furthermore, if the market for delivery of rich media content in particular does not continue to grow as we expect or grows more slowly, then we may fail to achieve a return on the significant investment we are making to prepare for this growth. Our success, therefore, depends on the continued and increasing reliance on the Internet for delivery of media content and our ability to cost-effectively deliver these services. Many different factors may have a general

38

tendency to limit or reduce the number of users relying on the Internet for media content, the amount of content consumed by our customers’ users, or the number of providers making this content available on-line, including, among others:

• a general decline in Internet usage;

• third party restrictions on on-line content (including copyright restrictions, digital rights management and restrictions in certain geographic regions);

• system impairments or outages, including those caused by hacking or cyberattacks; and

• a significant increase in the quality or fidelity of off-line media content beyond that available online to the point where users prefer the off-line experience.

The influence of any of these or other factors may cause our current or potential customers to reduce their spending on content delivery services, which would seriously harm our operating results and financial condition.

We could incur charges due to impairment of goodwill and long-lived assets.

As of September 30, 2018, we had a goodwill balance of approximately $76,683, which is subject to periodic testing for impairment. Our long-lived assets also are subject to periodic testing for impairment. A significant amount of judgment is involved in the periodic testing. Failure to achieve sufficient levels of cash flow could result in impairment charges for goodwill or fixed asset impairment for long-lived assets, which could have a material adverse effect on our reported results of operations. Our goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of our reporting unit to our total market capitalization. If our stock trades below our book value, a significant and sustained decline in our stock price and market capitalization could result in goodwill impairment charges. During times of financial market volatility, significant judgment will be used to determine the underlying cause of the decline and whether stock price declines are short-term in nature or indicative of an event or change in circumstances. Impairment charges, if any, resulting from the periodic testing are non-cash.

Our operations are dependent in part upon communications capacity provided by third party telecommunications providers. A material disruption of the communications capacity we have leased could harm our results of operations, reputation and customer relations.

We lease private line capacity for our backbone from third party providers. Our contracts for private line capacity generally have terms of three to four years. The communications capacity we have leased may become unavailable for a variety of reasons, such as physical interruption, technical difficulties, contractual disputes, or the financial health of our third party providers. Also, industry consolidation among communications providers could result in fewer viable market alternatives, which could have an impact on our costs of providing services. Alternative providers are currently available; however, it could be time consuming and expensive to promptly identify and obtain alternative third party connectivity. Additionally, as we grow, we anticipate requiring greater private line capacity than we currently have in place. If we are unable to obtain such capacity from third party providers on terms commercially acceptable to us or at all, our business and financial results would suffer. Similarly, if we are unable to timely deploy enough network capacity to meet the needs of our customer base or effectively manage the demand for our services, our reputation and relationships with our customers would be harmed, which, in turn, could harm or business, financial condition and results of operations.

We face risks associated with international operations that could harm our business.

We have operations in numerous foreign countries and may continue to expand our sales and support organizations internationally. As part of our business strategy, we intend to expand our international network infrastructure. Expansion could require us to make significant expenditures, including the hiring of local employees or resources, in advance of generating any revenue. As a consequence, we may fail to achieve profitable operations that will compensate our investment in international locations. We are subject to a number of risks associated with international business activities that may increase our costs, lengthen our sales cycle and require significant management attention. These risks include:

• increased expenses associated with sales and marketing, deploying services and maintaining our infrastructure in foreign countries;

• competition from local content delivery service providers, many of which are very well positioned within their local markets;

• challenges caused by distance, language and cultural differences;

• unexpected changes in regulatory requirements preventing or limiting us from operating our global network or resulting in unanticipated costs and delays;

• 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;

• longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

39

• corporate and personal liability for violations of local laws and regulations;

• currency exchange rate fluctuations and repatriation of funds;

• potentially adverse tax consequences;

• credit risk and higher levels of payment fraud; and

• foreign exchange controls that might prevent us from repatriating cash earned in countries outside the United States.

International operations are subject to significant additional risks not generally faced in our domestic operations, including, but not limited to, risks relating to legal systems that may not adequately protect contract and intellectual property rights, policies and taxation, the physical infrastructure of the country, as well as risks relating to potential political turmoil and currency exchange controls.  There can be no assurance that these international risks will not materially adversely affect our business. For example, our operations include software development and quality assurance activities in Ukraine, which has experienced social unrest in recent years.  Should there be significant productivity losses, or if we become unable to conduct operations in Ukraine in the future, and our contingency plans are unsuccessful in addressing the related risks, our business could be adversely affected.

Our business depends on continued and unimpeded access to third party controlled end-user access networks.

Our content delivery services depend on our ability to access certain end-user access networks in order to complete the delivery of rich media and other on-line content to end-users. Some operators of these networks may take measures that could degrade, disrupt or increase the cost of our or our customers’ access to certain of these end-user access networks. Such measures may include restricting or prohibiting the use of their networks to support or facilitate our services, or charging increased fees to us, our customers or end-users in connection with our services. In 2015, the U.S. Federal Communications Commission (FCC) released network neutrality and open internet rules that reclassified broadband Internet access services as a telecommunications service subject to some elements of common carrier regulation. Among other things, the FCC order prohibited blocking or discriminating against lawful services and applications and prohibited "paid prioritization," or providing faster speeds or other benefits in return for compensation. In December 2017, the FCC overturned these rules. As a result, we or our customers could experience increased cost or slower data on these third-party networks.  If we or our customers experience increased cost in delivering content to end users, or otherwise, or if end users perceive a degradation of quality, our business and that of our customers may be significantly harmed. This or other types of interference could result in a loss of existing customers, increased costs and impairment of our ability to attract new customers, thereby harming our revenue and growth.

In addition, the performance of our infrastructure depends in part on the direct connection of our global network to a large number of end-user access networks, known as peering, which we achieve through mutually beneficial cooperation with these networks. In some instances, network operators charge us for the peering connections. If, in the future, a significant percentage of these network operators elected to no longer peer with our network or peer with our network on less favorable economic terms, then the performance of our infrastructure could be diminished, our costs could increase and our business could suffer.

If our ability to deliver media files in popular proprietary content formats was restricted or became cost-prohibitive, demand for our content delivery services could decline, we could lose customers and our financial results could suffer.

Our business depends on our ability to deliver media content in all major formats. If our legal right or technical ability to store and deliver content in one or more popular proprietary content formats, such as HTTP Live Streaming was limited, our ability to serve our customers in these formats would be impaired and the demand for our content delivery and other services would decline by customers using these formats. Owners of propriety content formats may be able to block, restrict or impose fees or other costs on our use of such formats, which could lead to additional expenses for us and for our customers, or which could prevent our delivery of this type of content altogether. Such interference could result in a loss of existing customers, increased costs and impairment of our ability to attract new customers, which would harm our revenue, operating results and growth.

We use certain “open-source” software the use of which could result in our having to distribute our proprietary software, including our source code, to third parties on unfavorable terms, which could materially affect our business.

Certain of our service offerings use software that is subject to open-source licenses. Open-source code is software that is freely accessible, usable and modifiable. Certain open-source code is governed by license agreements, the terms of which could require users of such open-source code to make any derivative works of such open-source code available to others on unfavorable terms or at no cost. Because we use open-source code, we may be required to take remedial action to protect our proprietary software. Such action could include replacing certain source code used in our software, discontinuing certain of our products or features or taking other actions that could divert resources away from our development efforts.

40

In addition, the terms relating to disclosure of derivative works in many open-source licenses are unclear. We periodically review our compliance with the open-source licenses we use and do not believe we will be required to make our proprietary software freely available. Nevertheless, if a court interprets one or more such open-source licenses in a manner that is unfavorable to us, we could be required to make some components of our software available at no cost, which could materially and adversely affect our business and financial condition.

If we are unable to retain our key employees and hire qualified sales and technical personnel, our ability to compete could be harmed.

Our future success depends upon the continued services of our executive officers and other key technology, sales, marketing and support personnel who have critical industry experience and relationships that they rely on in implementing our business plan. There is increasing competition for talented individuals with the specialized knowledge to deliver our services and this competition affects both our ability to retain key employees and hire new ones. Historically, we have experienced a significant amount of employee turnover, especially with respect to our sales personnel. As a result, a significant number of our sales personnel are relatively new and may need time to become fully productive. The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our services, and negatively impact our ability to sell our services.

We are subject to the effects of fluctuations in foreign exchange rates, which could affect our operating results.

The financial condition and results of operations of our operating foreign subsidiaries are reported in the relevant local currency and are then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated U.S. dollar financial statements. Also, although a large portion of our customer and vendor agreements are denominated in U.S. dollars, we may be exposed to fluctuations in foreign exchange rates with respect to customer agreements with certain of our international customers. Exchange rates between these currencies and U.S. dollars in recent years have fluctuated significantly and may do so in the future. In addition to currency translation risk, we incur currency transaction risk whenever one of our operating subsidiaries enters into a transaction using a different currency than the relevant local currency. Given the volatility of exchange rates, we may be unable to manage our currency transaction risks effectively. Currency fluctuations could have a material adverse effect on our future international sales and, consequently, on our financial condition and results of operations.

As part of our business strategy, we may acquire businesses or technologies and may have difficulty integrating these operations.

We have completed a number of business acquisitions and may seek to acquire businesses or technologies that are complementary to our business in the future. Acquisitions are often complex and involve a number of risks to our business, including, among others;

• the difficulty of integrating the operations, services, solutions and personnel of the acquired companies;

• the potential disruption of our ongoing business;

• the potential distraction of management;

• the possibility that our business culture and the business culture of the acquired companies will not be compatible;

• the difficulty of incorporating or integrating acquired technology and rights with or into our other services and solutions;

• expenses related to the acquisition and to the integration of the acquired companies;

• the impairment of relationships with employees and customers as a result of any integration of new personnel;

• employee turnover from the acquired companies or from our current operations as we integrate businesses;

• risks related to the businesses of acquired companies that may continue to impact the businesses following the merger; and

• potential unknown liabilities associated with acquired companies.

Any inability to integrate services, solutions, operations or personnel in an efficient and timely manner could harm our results of operations.

If we are not successful in completing acquisitions that we may pursue in the future, we may be required to reevaluate our business strategy, and we may incur substantial expenses and devote significant management time and resources without a productive result. In addition, future acquisitions will require the use of our available cash or dilutive issuances of securities. Future acquisitions or attempted acquisitions could also harm our ability to achieve profitability.

Internet-related and other laws relating to taxation issues, privacy, data security, and consumer protection and liability for content distributed over our network could harm our business.

41

Laws and regulations that apply to communications and commerce conducted over the Internet are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on companies conducting business on-line or providing Internet-related services such as ours. Increased regulation could negatively affect our business directly, as well as the businesses of our customers, which could reduce their demand for our services. For example, tax authorities abroad may impose taxes on the Internet-related revenue we generate based on where our internationally deployed servers are located. In addition, domestic and international taxation laws are subject to change. Our services, or the businesses of our customers, may become subject to increased taxation, which could harm our financial results either directly or by forcing our customers to scale back their operations and use of our services in order to maintain their operations. Also, the Communications Act of 1934, as amended by the Telecommunications Act of 1996 (the Act), and the regulations promulgated by the FCC under Title II of the Act, may impose obligations on the Internet and those participants involved in Internet-related businesses. In addition, the laws relating to the liability of private network operators for information carried on, processed by or disseminated through their networks are unsettled, both in the United States and abroad. Network operators have been sued in the past, sometimes successfully, based on the content of material disseminated through their networks. We may become subject to legal claims such as defamation, invasion of privacy and copyright infringement in connection with content stored on or distributed through our network. In addition, our reputation could suffer as a result of our perceived association with the type of content that some of our customers deliver. If we need to take costly measures to reduce our exposure to the risks posed by laws and regulations that apply to communications and commerce conducted over the Internet, or are required to defend ourselves against related claims, our financial results could be negatively affected.

Several other federal laws also could expose us to liability and impose significant additional costs on us. For example, the Digital Millennium Copyright Act has provisions that limit, but do not eliminate, our liability for the delivery of customer content that infringe copyrights or other rights, so long as we comply with certain statutory requirements. In addition, the Children’s On-line Privacy Protection Act restricts the ability of on-line services to collect information from minors and the Protection of Children from Sexual Predators Act of 1998 requires on-line service providers to report evidence of violations of federal child pornography laws under certain circumstances. Also, there are emerging regulation and industry standards regarding the collection and use of personal information and protecting the security of data on networks. Compliance with these laws, regulations and standards is complex and any failure on our part to comply with these regulations may subject us to additional liabilities.

Privacy concerns could lead to regulatory and other limitations on our business, including our ability to use “cookies” and video player “cookies” that are crucial to our ability to provide services to our customers.

Our ability to compile data for customers depends on the use of “cookies” and video player “cookies” to identify certain on-line behavior that allows our customers to measure a website or video’s effectiveness. A cookie is a small file of information stored on a user’s computer that allows us to recognize that user’s browser or video player when the user makes a request for a web page or to play a video. Government authorities inside the United States concerned with the privacy of Internet users have suggested the enactment of legislation that would regulate cookies and/or require certain disclosures regarding cookies. Bills aimed at regulating the collection, use and/or storage of personal data from Internet users are currently pending in United States Congress and many state legislatures. Attempts at such regulation may be drafted in such a way as to limit or otherwise regulate the collection of certain technology like cookies, thereby creating restrictions that could reduce our ability to use them. In addition, the Federal Trade Commission and the Department of Commerce have conducted hearings regarding user profiling, the collection of non-personally identifiable information and on-line privacy.

Our foreign operations may also be adversely affected by regulatory action outside the United States. These regulations, which can be enforced by private parties or governmental entities, are constantly evolving and can be subject to significant change. For example, the European Union has enacted an electronic communications directive that imposes certain restrictions on the use of cookies, requires certain disclosures with respect to cookie usages and also places restrictions on the sending of unsolicited communications. Each European Union member country was required to enact legislation to comply with the provisions of the electronic communications directive. Germany has also enacted additional laws limiting the use of user profiling, and other countries, both in and out of the European Union, may impose similar limitations.

Internet users may directly limit or eliminate the placement of cookies on their computers by using third-party software that blocks cookies, or by disabling or restricting the cookie functions of their Internet browser software and in their video player software. Internet browser software upgrades also may result in limitations on the use of cookies. Technologies like the Platform for Privacy Preferences Project may limit collection of cookies. Plaintiffs’ attorneys also have organized class action suits against companies related to the use of cookies and several companies, including companies in the Internet advertising industry, have had claims brought against them before the Federal Trade Commission regarding the collection and use of Internet user information. We may be subject to such suits in the future, which could limit or eliminate our ability to collect such information. If our ability to use cookies were substantially restricted due to the foregoing, or for any other reason, we would have to generate and use other technology or methods that allow the gathering of user data in order to provide

42

services to customers. This change in technology or methods could require significant re-engineering time and resources, and may not be complete in time to avoid negative consequences to our business. In addition, alternative technology or methods might not be available on commercially reasonable terms, if at all. If the use of cookies is prohibited and we are not able to efficiently and cost effectively create new technology, our business, financial condition and results of operations would be materially adversely affected. In addition, any compromise of security that results in the release of Internet users’ and/or our customers’ data could seriously limit the adoption of our service offerings as well as harm our reputation and brand, expose us to liability and subject us to reporting obligations under various state laws, which could have an adverse effect on our business. The risk that these types of events could seriously harm our business is likely to increase as the amount of data stored for customers on our servers and the number of countries where we operate has been increasing, and we may need to expend significant resources to protect against security breaches, which could have an adverse effect on our business, financial condition or results of operations.

Also, a number of new privacy laws and/or proposals pending could affect our business. For example, the European Commission has enacted the General Data Protection Regulation, or GDPR, which became effective in May 2018. GDPR superseded prior EU data protection legislation, imposes more stringent EU data protection requirements, and provides for greater penalties for noncompliance. Additionally, in October 2015, the European Court of Justice invalidated the U.S.-EU Safe Harbor framework that had been in place since 2000, which allowed companies to meet certain European legal requirements for the transfer of personal data from the European Economic Area to the United States. Although U.S. and EU authorities reached a political agreement regarding a new potential means for legitimizing personal data transfers from the European Economic Area to the United States, the EU-U.S. Privacy Shield, there continue to be concerns about whether the EU-US Privacy Shield will face additional challenges (similar to the fate of the Safe Harbor framework). We expect that for the immediate future, we will continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers. These existing and proposed laws and regulations can be costly to comply with, could expose us to significant penalties for non-compliance, can delay or impede the development or adoption of our products and services, reduce the overall demand for our services, result in negative publicity, increase our operating costs, require significant management time and attention, slow the pace at which we close (or prevent us from closing) sales transactions, and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices.

Our business requires the continued development of effective business support systems to support our customer growth and related services.

The growth of our business depends on our ability to continue to develop effective business support systems. This is a complicated undertaking requiring significant resources and expertise. Business support systems are needed for:

• implementing customer orders for services;

• delivering these services; and

• timely and accurate billing for these services.

Because our business plan provides for continued growth in the number of customers that we serve and services offered, there is a need to continue to develop our business support systems on a schedule sufficient to meet proposed service roll-out dates. The failure to continue to develop effective business support systems could harm our ability to implement our business plans and meet our financial goals and objectives.

We have incurred, and will continue to incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.

As a public company, we have incurred, and will continue to incur, significant expenses, including accounting, legal and other professional fees, insurance premiums, investor relations costs, and costs associated with compensating our independent directors. In addition, rules implemented by the SEC and the Nasdaq Global Select Market impose additional requirements on public companies, including requiring changes in corporate governance practices. For example, the listing requirements of the Nasdaq Global Select Market require that we satisfy certain corporate governance requirements relating to independent directors, audit committees, distribution of annual and interim reports, stockholder meetings, stockholder approvals, solicitation of proxies, conflicts of interest, stockholder voting rights and codes of conduct. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance.

43

If the accounting estimates we make, and the assumptions on which we rely, in preparing our financial statements prove inaccurate, our actual results may be adversely affected.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments about, among other things, taxes, revenue recognition, share-based compensation costs, contingent obligations and doubtful accounts. These estimates and judgments affect the reported amounts of our assets, liabilities, revenue and expenses, the amounts of charges accrued by us, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. If our estimates or the assumptions underlying them are not correct, we may need to accrue additional charges or reduce the value of assets that could adversely affect our results of operations, investors may lose confidence in our ability to manage our business and our stock price could decline.

If we fail to maintain proper and effective internal controls or fail to implement our controls and procedures with respect to acquired or merged operations, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and investors’ views of us.

We must ensure that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis. We are required to spend considerable effort on establishing and maintaining our internal controls, which is costly and time-consuming and needs to be re-evaluated frequently.

We have operated as a public company since June 2007, and we will continue to incur significant legal, accounting, and other expenses as we comply with the Sarbanes-Oxley Act of 2002, as well as new rules implemented from time to time by the SEC and the Nasdaq Global Select Market. These rules impose various requirements on public companies, including requiring changes in corporate governance practices, increased reporting of compensation arrangements and other requirements. Our management and other personnel will continue to devote a substantial amount of time to these compliance initiatives. Moreover, new rules and regulations will likely increase our legal and financial compliance costs and make some activities more time-consuming and costly. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include in our annual report our assessment of the effectiveness of our internal control over financial reporting and our audited financial statements as of the end of each fiscal year. Furthermore, our independent registered public accounting firm, Ernst & Young LLP (EY), is required to report on whether it believes we maintained, in all material respects, effective internal control over financial reporting as of the end of the year. Our continued compliance with Section 404 will require that we incur substantial expense and expend significant management time on compliance related issues, including our efforts in implementing controls and procedures related to acquired or merged operations. We currently do not have an internal audit group and use an international accounting firm to assist us with our assessment of the effectiveness of our internal controls over financial reporting. In future years, if we fail to timely complete this assessment, or if EY cannot timely attest, there may be a loss of public confidence in our internal controls, the market price of our stock could decline, and we could be subject to regulatory sanctions or investigations by the Nasdaq Global Select Market, the SEC or other regulatory authorities, which would require additional financial and management resources. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to timely meet our regulatory reporting obligations.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

A change in accounting standards or practices can have a significant effect on our operating results and may affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of existing accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Divestiture of our businesses or product lines, including those that we have acquired or will acquire, may materially adversely affect our financial condition, results of operations or cash flows, or may result in impairment charges that may adversely affect our results of operations.

Divestitures involve risks, including difficulties in the separation of operations, services, products and personnel, the diversion of management’s attention from other business concerns, the disruption of our business, the potential loss of key employees and the retention of uncertain contingent liabilities related to the divested business, any of which could result in a material adverse effect to our financial condition, results of operations or cash flows. Divestitures of previously acquired businesses may result in significant asset impairment charges, including those related to goodwill and other intangible assets,

44

which could have a material adverse effect on our financial condition and results of operations. Future impairment may result from, among other things, deterioration in the performance of the acquired business or product line, adverse market conditions and changes in the competitive landscape, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business or product line, changes in accounting rules and regulations, and a variety of other circumstances. The amount of any impairment is recorded as a charge to the statement of operations. We may never realize the full value of our goodwill and intangible assets, and any determination requiring the write-off of a significant portion of these assets may have an adverse effect on our financial condition and results of operations. We cannot assure you that we will be successful in managing these or any other significant risks that we encounter in divesting a business or product line.

Risks Related to Ownership of Our Common Stock

The trading price of our common stock has been, and is likely to continue to be, volatile.

The trading prices of our common stock and the securities of technology companies generally have been highly volatile. Factors affecting the trading price of our common stock will include:

•variations in our operating results;

• announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors;

• commencement or resolution of, our involvement in and uncertainties arising from litigation;

•recruitment or departure of key personnel;

• changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;

• if we or our stockholders sell substantial amounts of our common stock (including shares issued upon the exercise of options and warrants);

•developments or disputes concerning our intellectual property or other proprietary rights;

•the gain or loss of significant customers;

•market conditions in our industry, the industries of our customers and the economy as a whole; and

•adoption or modification of regulations, policies, procedures or programs applicable to our business.

In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might also decline in reaction to events or speculation of events that affect other companies in our industry even if these events do not directly affect us.

If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion or report, our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Future equity issuances or a sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Because we may need to raise additional capital in the future to continue to expand our business and our research and development activities, among other things, we may conduct additional equity offerings. If we or our stockholders sell substantial amounts of our common stock (including shares issued upon the exercise of options and warrants) in the public market, the market price of our common stock could fall. For example, in November 2017 and March 2018, investment entities affiliated with Goldman, Sachs & Co. sold 15,000,000 and 15,372,493 shares of our commons stock, respectively, in two registered public offering. A decline in the market price of our common stock could make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

45

Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions:

• establish that members of the board of directors may be removed only for cause upon the affirmative vote of stockholders owning a majority of our capital stock;

• authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

• limit who may call special meetings of stockholders;

• prohibit stockholder action by written consent, thereby requiring stockholder actions to be taken at a meeting of the stockholders;

• establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings;

• provide for a board of directors with staggered terms; and

• provide that the authorized number of directors may be changed only by a resolution of our board of directors.

In addition, Section 203 of the Delaware General Corporation Law, which imposes certain restrictions relating to transactions with major stockholders, may discourage, delay or prevent a third party from acquiring us.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3.    Defaults upon Senior Securities

Not applicable

Item 4.    Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

46

Item 6. Exhibits                    

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Provided Herewith
3.01	Amended and Restated Certificate of Incorporation of Limelight Networks, Inc.	8-K	001-33508	3.1	6/14/11
3.02	Second Amended and Restated Bylaws of Limelight Networks, Inc.	8-K	001-33508	3.2	2/19/13
31.1	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).					X
31.2	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).					X
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*					X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*					X
101.INS	XBRL INSTANCE DOCUMENT					X
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT					X
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT					X
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT					X
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT					X
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT					X

*This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Limelight Networks, Inc. specifically incorporates it by reference.

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		LIMELIGHT NETWORKS, INC.
Date:	October 19, 2018	By:	/s/    SAJID MALHOTRA
			Sajid Malhotra Chief Financial Officer (Principal Financial Officer)

48

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Robert A. Lento, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Limelight Networks, 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:	October 19, 2018	By:	/s/    ROBERT A. LENTO
		Name:	Robert A. Lento
		Title:	President, Chief Executive Officer and Director (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Sajid Malhotra, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Limelight Networks, 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:	October 19, 2018	By:	/s/    SAJID MALHOTRA
		Name:	Sajid Malhotra
		Title:	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to

18 U.S.C. Section 1350,

As Adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert A. Lento, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Limelight Networks, Inc. on Form 10-Q for the period ended September 30, 2018, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Limelight Networks, Inc.

Date:	October 19, 2018	By:	/s/    ROBERT A. LENTO
		Name:	Robert A. Lento
		Title:	President, Chief Executive Officer and Director (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Limelight Networks, Inc. and will be retained by, Limelight Networks, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to

18 U.S.C. Section 1350,

As Adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Sajid Malhotra, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Limelight Networks, Inc. on Form 10-Q for the period ended September 30, 2018, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Limelight Networks, Inc.

Date:	October 19, 2018	By:	/s/    SAJID MALHOTRA
		Name:	Sajid Malhotra
		Title:	Chief Financial Officer (Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to Limelight Networks, Inc. and will be retained by, Limelight Networks, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 12, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	LIMELIGHT NETWORKS, INC.
Entity Central Index Key	0001391127
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		113,202,864

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 28,678	$ 20,912
Marketable securities	23,957	28,404
Accounts receivable, net	26,147	32,381
Income taxes receivable	154	98
Prepaid expenses and other current assets	17,859	5,397
Total current assets	96,795	87,192
Property and equipment, net	27,392	28,991
Marketable securities, less current portion	40	40
Deferred income taxes	1,590	1,506
Goodwill	76,683	77,054
Other assets	2,434	1,665
Total assets	204,934	196,448
Current liabilities:
Accounts payable	8,976	4,439
Deferred revenue	853	1,187
Income taxes payable	111	452
Provision for litigation	13,500	18,000
Other current liabilities	13,804	18,507
Total current liabilities	37,244	42,585
Deferred income taxes	174	144
Deferred revenue, less current portion	68	16
Provision for litigation, less current portion	0	9,000
Other long-term liabilities	385	558
Total liabilities	37,871	52,303
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 7,500 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.001 par value; 300,000 shares authorized; 113,198 and 110,824 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	113	111
Additional paid-in capital	509,846	502,312
Accumulated other comprehensive loss	(9,477)	(8,328)
Accumulated deficit	(333,419)	(349,950)
Total stockholders’ equity	167,063	144,145
Total liabilities and stockholders’ equity	$ 204,934	$ 196,448

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Convertible Preferred Stock, Par Value (in usd per share)	$ 0.001	$ 0.001
Convertible Preferred Stock, Shares Authorized	7,500,000	7,500,000
Convertible Preferred Stock, Shares Issued	0	0
Convertible Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value (in usd per share)	$ 0.001	$ 0.001
Common Stock, Shares Authorized	300,000,000	300,000,000
Common Stock, Shares Issued	113,198,000	110,824,000
Common Stock, Shares Outstanding	113,198,000	110,824,000

XML

Unaudited Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue	$ 49,315	$ 46,069	$ 151,678	$ 136,173
Cost of revenue:
Cost of services	21,519	19,287	63,779	57,758
Depreciation — network	3,761	4,506	12,337	13,594
Total cost of revenue	25,280	23,793	76,116	71,352
Gross profit	24,035	22,276	75,562	64,821
Operating expenses:
General and administrative	7,851	8,079	24,890	23,397
Sales and marketing	9,766	8,836	30,068	27,100
Research and development	5,882	6,443	18,294	19,377
Depreciation and amortization	616	603	1,837	1,789
Total operating expenses	24,115	23,961	75,089	71,663
Operating (loss) income	(80)	(1,685)	473	(6,842)
Other income (expense):
Interest expense	(10)	(18)	(76)	(42)
Interest income	177	127	440	365
Settlement and patent license income	0	0	14,900	0
Other, net	(246)	8	(355)	249
Total other (expense) income	(79)	117	14,909	572
(Loss) income before income taxes	(159)	(1,568)	15,382	(6,270)
Income tax expense	113	188	347	448
Net (loss) income	$ (272)	$ (1,756)	$ 15,035	$ (6,718)
Net loss per share, Basic and diluted:
Basic (in dollars per share)	$ 0.00	$ (0.02)	$ 0.13	$ (0.06)
Diluted (in dollars per share)	$ 0.00	$ (0.02)	$ 0.13	$ (0.06)
Weighted average shares used in per share calculation:
Basic weighted average outstanding shares of common stock	112,760	109,342	111,626	108,376
Diluted (shares)	112,760	109,342	120,025	108,376

XML

Unaudited Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (272)	$ (1,756)	$ 15,035	$ (6,718)
Other comprehensive income (loss), net of tax:
Unrealized gain on investments	18	26	38	83
Foreign exchange translation (loss) gain	(171)	340	(1,187)	2,276
Other comprehensive income (loss)	(153)	366	(1,149)	2,359
Comprehensive income (loss)	$ (425)	$ (1,390)	$ 13,886	$ (4,359)

XML

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Net (loss) income	$ 15,035	$ (6,718)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	14,174	15,383
Share-based compensation	10,345	9,442
Settlement and patent license income	(14,900)	0
Foreign currency remeasurement (gain) loss	(97)	658
Deferred income taxes	(86)	(217)
Gain on sale of property and equipment	(131)	(94)
Accounts receivable charges	453	732
Amortization of premium on marketable securities	82	228
Changes in operating assets and liabilities:
Accounts receivable	5,781	(2,026)
Prepaid expenses and other current assets	(2,530)	545
Income taxes receivable	(56)	34
Other assets	(759)	21
Accounts payable and other current liabilities	(2,526)	4,749
Deferred revenue	85	(450)
Income taxes payable	(350)	180
Payments related to litigation, net	(7,540)	(13,500)
Other long term liabilities	(173)	(584)
Net cash provided by operating activities	16,807	8,383
Investing activities
Purchases of marketable securities	(15,962)	(10,383)
Sale and maturities of marketable securities	20,365	17,744
Purchases of property and equipment	(10,495)	(15,806)
Proceeds from sale of property and equipment	131	83
Net cash used in investing activities	(5,961)	(8,362)
Financing activities
Payments of employee tax withholdings related to restricted stock vesting	(3,808)	(2,571)
Cash paid for purchase of common stock	(3,800)	0
Proceeds from employee stock plans	4,799	1,200
Net cash used in financing activities	(2,809)	(1,371)
Effect of exchange rate changes on cash and cash equivalents	(271)	360
Net increase (decrease) in cash and cash equivalents	7,766	(990)
Cash and cash equivalents, beginning of period	20,912	21,734
Cash and cash equivalents, end of period	28,678	20,744
Supplemental disclosure of cash flow information
Cash paid during the period for interest	76	11
Cash paid during the period for income taxes, net of refunds	$ 843	$ 400

XML

Nature of Business

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

Nature of Business

Limelight Networks Inc., a leading provider of digital content delivery, video, cloud security, and edge computing services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a unique combination of global private infrastructure, intelligent software, and expert support services that enable current and future workflows.

We were incorporated in Delaware in 2003, and have operated in the Phoenix metropolitan area since 2001 and elsewhere throughout the United States since 2003. We began international operations in 2004.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the interim periods presented and of a normal recurring nature. This quarterly report on Form 10-Q should be read in conjunction with our audited financial statements and footnotes included in our annual report on Form 10-K for the fiscal year ended December 31, 2017. All information is presented in thousands, except per share amounts and where specifically noted.

The consolidated financial statements include accounts of Limelight and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In addition, certain other reclassifications have been made to prior year amounts to conform to the current year presentation.

Use of Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results and outcomes may differ from those estimates. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or for any future periods.

Recent Accounting Standards

Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 (Topic 606) "Revenue from Contracts with Customers." Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net decrease to opening accumulated deficit of $1,496 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the costs to obtain a customer contract ($1,129), specifically commissions and upfront incentive payments, and from the recognition of revenue from customers with contracts that contain minimum commitments billed ratably over the contract term ($367).

The costs associated with obtaining a customer contract were previously expensed in the period they were incurred. Under Topic 606, these payments have been deferred on our consolidated balance sheets and amortized over the expected life of the customer contract. The impact to sales and marketing expense for the three and nine months ended September 30, 2018 was not material as a result of applying Topic 606. As of September 30, 2018, prepaid commissions were $1,310, with the short term portion of $767 included in prepaid expenses and other current assets, and the long term portion of $543 included in other assets.

For customers with contracts that contain minimum commitments billed ratably over the contract term, previously, we either accrued or deferred revenue based on actual usage. Under Topic 606, we are required to evaluate the impact of estimating variable consideration related to these types of contracts. We use the expected value method to estimate the total revenue of the contract, constrained by the probability that there would not be a significant revenue reversal in a future period, and recognize a pro-rata share of the total revenue of the contract each month. We continue to evaluate the expected value of revenue over the term of the contract and adjust revenue recognition as appropriate. The impact to revenues for the three and nine months ended September 30, 2018 was an increase of $450 and $145, respectively, as a result of applying Topic 606.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our customers generally execute contracts with terms of one year or longer, which are referred to as recurring revenue contracts or long-term contracts. These contracts generally allow the customer access to our network and commit the customer to a minimum monthly level of usage with additional charges applicable for actual usage above the monthly minimum commitment, or are entirely usage based. We define usage as customer data sent or received using our content delivery service, or content that is hosted or cached by us at the request or direction of our customers. For contracts that contain minimum monthly commitments, we recognize revenue equal to the greater of the minimum monthly committed amount or actual usage, if actual usage exceeds the monthly committed amount, using the right to invoice practical expedient allowable under Topic 606.

For contracts that contain minimum commitments over the contractual term, we estimate an amount of variable consideration by using either the expected value method or the most likely amount method. We include estimates of variable consideration in revenue only when we have a high degree of confidence that revenue will not be reversed in a subsequent reporting period. We believe that the expected value method is the most appropriate estimate of the amount of variable consideration. These customers have entered into contracts with contract terms generally from one to four years. As of September 30, 2018, we have approximately $6,600 of remaining unsatisfied performance obligations. We recognized revenue of approximately $1,900 and $3,900 during the three and nine months ended September 30, 2018, respectively, related to these types of contracts with our customers. We expect to recognize approximately 25% of the remaining unsatisfied performance obligations in 2018, approximately 55% in 2019 and the remainder in 2020.

We may charge the customer an installation fee when services are first activated. We do not charge installation fees for contract renewals. Installation fees are not distinct within the context of the overall contractual commitment with the customer to perform our content delivery service and are therefore recognized initially as deferred revenue and recognized as revenue ratably over the estimated life of the customer arrangement.

We also derive revenue from services and events sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

At the inception of a customer contract for service, we make an assessment as to that customer’s ability to pay for the services provided. If we subsequently determine that collection from the customer is not probable, we record an allowance for doubtful accounts and bad debt expense or deferred revenue for that customer’s unpaid invoices and cease recognizing revenue for continued services provided until it is probable that revenue will not be reversed in a subsequent reporting period. Our standard payment terms vary by the type and location of our customer.

Arrangements with Multiple Performance Obligations

Certain of our revenue arrangements include multiple promises to our customers. Revenue arrangements with multiple promises are accounted for as separate performance obligations if each promise is distinct. Such arrangements may include a combination of some or all of the following: content delivery services, video content management services, performance services for website and web application acceleration and security, professional services, cloud storage, edge computing services, and sale of equipment. Consideration is allocated to the performance obligations using the relative standalone selling price method. Generally, arrangements with performance obligations are provided over the same contract period, and therefore, revenue is recognized over the same period.

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not been recognized. Deferred revenue primarily consists of the unearned portion of monthly billed service fees and prepayments made by customers for services to be rendered in future periods.

Adopted Accounting Standards - continued

In August 2016, the FASB issued ASU No. 2016-15, which amends ASC 230, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. ASU 2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award's fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, which establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for most leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. We are utilizing a comprehensive approach to assess the impact of the guidance on our lease portfolio by reviewing our current accounting policies and practices to identify potential differences that would result from applying the new requirements. We continue to make significant progress on the potential impact on our accounting policies, internal control processes including system readiness and the related disclosures that will be required under the new guidance. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted and should be applied using a modified retrospective approach. We do not plan to early adopt this guidance. We continue to review additional leases to assess the impact under the new guidance, and expect it will result in an increase to total assets and liabilities on our consolidated balance sheet. We expect to utilize the short-term lease recognition and measurement practical expedient, which will lower the overall impact of this guidance on our financial statements. We expect to make an accounting policy election, where leases that are 12 months or less and do not include an option to purchase the underlying asset, will be treated similar to current operating lease accounting. We do not know and cannot reasonably estimate quantitative information related to the impact of the new standard on our financial statements at this time.

In January 2017, the FASB issued ASU 2017-04, which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. We will adopt this guidance using a prospective approach. Earlier adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this updated guidance are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. We do not plan to early adopt this ASU. We are currently evaluating the potential impacts of this updated guidance, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted upon issuance of this updated guidance. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this updated guidance and delay adoption of the additional disclosures until their effective date. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments. This guidance will become effective for us in fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.

XML

Investments in Marketable Securities

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investments in Marketable Securities

Investments in Marketable Securities

The following is a summary of marketable securities (designated as available-for-sale) at September 30, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	23,980		—		23		23,957
Total marketable securities	$	24,020	$	—	$	23	$	23,997

The amortized cost and estimated fair value of marketable securities at September 30, 2018, by maturity, are shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,980	$	—	$	23	$	23,957
Due after one year and through five years	40		—		—		40
	$	24,020	$	—	$	23	$	23,997

The following is a summary of marketable securities (designated as available-for-sale) at December 31, 2017:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	28,472		—		68		28,404
Total marketable securities	$	28,512	$	—	$	68	$	28,444

The amortized cost and estimated fair value of marketable securities at December 31, 2017, by maturity, are shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,924	$	—	$	62	$	23,862
Due after one year and through five years	4,588		—		6		4,582
	$	28,512	$	—	$	68	$	28,444

XML

Accounts Receivable, net

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts Receivable, net

Accounts Receivable, net

Accounts receivable, net include:

	September 30,			December 31,
	2018			2017
Accounts receivable	$	27,014		$	33,519
Less: credit allowance	(190		)	(240		)
Less: allowance for doubtful accounts	(677		)	(898		)
Total accounts receivable, net	$	26,147		$	32,381

XML

Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2018

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include:

	September 30,		December 31,
	2018		2017
Settlement and patent license receivable	$	8,940	$	—
Prepaid bandwidth and backbone	1,415		1,487
VAT receivable	1,847		1,454
Prepaid expenses and insurance	2,056		1,870
Vendor deposits and other	3,601		586
Total prepaid expenses and other current assets	$	17,859	$	5,397

XML

Property and Equipment, net

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net include:

	September 30,			December 31,
	2018			2017
Network equipment	$	104,550		$	107,916
Computer equipment and software	9,112			9,801
Furniture and fixtures	1,316			2,432
Leasehold improvements	4,266			3,969
Other equipment	156			183
Total property and equipment	119,400			124,301
Less: accumulated depreciation	(92,008		)	(95,310		)
Total property and equipment, net	$	27,392		$	28,991

Depreciation expense related to property and equipment classified in operating expense was $616 and $603 for the three months ended September 30, 2018 and 2017, respectively and was $1,837 and $1,789 for the nine months ended September 30, 2018 and 2017, respectively.

XML

Goodwill

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

We have recorded goodwill as a result of past business acquisitions. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. In each of our acquisitions, the objective of the acquisition was to expand our product offerings and customer base and to achieve synergies related to cross selling opportunities, all of which contributed to the recognition of goodwill.

No interim indicators of impairment were identified as of September 30, 2018. Foreign currency translation adjustments increased the carrying amount of goodwill by $35 for the three months ended September 30, 2018. For the nine months ended September 30, 2018, foreign currency translation adjustments decreased the carrying value of goodwill by $371.

XML

Other Current Liabilities

9 Months Ended

Sep. 30, 2018

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

Other Current Liabilities

Other current liabilities include:

	September 30,		December 31,
	2018		2017
Accrued compensation and benefits	$	7,317	$	12,181
Accrued cost of revenue	2,583		3,170
Deferred rent	213		434
Accrued legal fees	28		383
Other accrued expenses	3,663		2,339
Total other current liabilities	$	13,804	$	18,507

XML

Line of Credit

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Line of Credit

Line of Credit

In February 2018, we entered into a Fourth Amendment (Fourth Amendment) to the Loan and Security Agreement (the Credit Agreement) with Silicon Valley Bank (SVB) originally entered into in November 2015. Under the Fourth Amendment, we increased the maximum principal commitment amount from $10,000 to $20,000. Our borrowing capacity is the lesser of the commitment amount or 80% of eligible accounts receivable. The Fourth Amendment extends the Credit Agreement one year. All outstanding borrowings owed under the Credit Agreement become due and payable no later than the final maturity date of November 2, 2020.

As of September 30, 2018, we had no outstanding borrowings, and we had availability under the Credit Agreement of approximately $18,300. We had no outstanding borrowings at December 31, 2017, and we had availability under the Credit Agreement of approximately $10,000.

As of September 30, 2018, borrowings under the Credit Agreement bear interest at the current prime rate minus 0.25%. In the event of default, obligations shall bear interest at a rate per annum that is 3% above the then applicable rate. We incurred an amendment fee of $50 upon entering into the Fourth Amendment. The amendment fee and other commitment fees are included in interest expense. During the three months ended September 30, 2018 and 2017, there was no interest expense, and fees expense and amortization was $10 and $18, respectively. For the nine months ended September 30, 2018 and 2017, there was no interest expense, and fees expense and related amortization was $76 and $42, respectively.

Any borrowings are secured by essentially all of our domestic personal property, with a negative pledge on intellectual property. SVB’s security interest in our foreign subsidiaries is limited to 65% of voting stock of each such foreign subsidiary.

Under the Fourth Amendment, we are required to maintain a minimum liquidity of $10,000 at all times, measured quarterly, with a minimum of $5,000 of the $10,000 in cash at SVB. In addition, we are required to maintain an Adjusted Quick Ratio of at least 1.0 to 1.0. We are also subject to certain customary limitations on our ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividends, dispose of assets or undergo a change in control. As of September 30, 2018, we were in compliance with all covenants under the Credit Agreement.

XML

Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies                      

Legal Matters

Akamai ‘703 Litigation

    In June 2006, Akamai Technologies, Inc. (Akamai) and the Massachusetts Institute of Technology (MIT) filed a lawsuit against us in the United States District Court for the District of Massachusetts alleging that we were infringing multiple patents assigned to MIT and exclusively licensed by MIT to Akamai. In August 2016, we entered into a settlement and license agreement with Akamai with respect to U.S. Patent No. 6,108,703 (the ’703 patent) and certain other related patents, which settled all asserted and unasserted claims with respect to the licensed patents. The terms of the agreement require us to pay $54,000 over twelve equal quarterly installments, which began on August 1, 2016. We recorded a charge in the quarter ended June 30, 2016 for the full, undiscounted amount of $54,000. As of September 30, 2018, there remained $13,500 due to Akamai under the terms of the settlement and license agreement.

Other Akamai Litigation

In November 2015, we filed a lawsuit against Akamai and XO Communications in the District Court for the Eastern District of Virginia alleging the infringement of six of our patents covering a broad range of inventions that we believe are critical to the effective and efficient delivery of bytes by a content delivery network (the Akamai and XO Litigation). Akamai also filed counterclaims in April 2016, alleging the infringement of five of its patents. We filed an answer to Akamai’s counterclaims, denying each of the allegations of infringement in May 2016.

In February 2016, Akamai filed a complaint against us in the District Court for the District of Massachusetts alleging infringement of three of its patents. In April 2016, Akamai amended its complaint by withdrawing one of the asserted patents. In April 2016, we filed our answer to the complaint, denying each of the allegations of infringement, and asserting two counterclaims alleging infringement of two of our patents. In December 2016, Akamai filed a second complaint against us in the District Court for the District of Massachusetts alleging infringement of three additional patents, and we later filed our answer to the complaint, denying each of the allegations of infringement. The two cases were ultimately consolidated into a single action by the court.

On April 9, 2018, we entered into a definitive settlement and patent license agreement where the parties agreed to (i) license certain patents to the other party, (ii) a covenant not to sue for three years for certain patents related to the licensed patents, and (iii) settle all outstanding legal disputes between the parties. The terms of the agreement also require Akamai to pay to Limelight a total of $14,900 over five equal quarterly installments. The second quarterly payment of $2,980 was received in July 2018.

We include litigation expenses in general and administrative expenses as incurred, as reported in the consolidated statement of operations.

Other Matters

We are subject to various other legal proceedings and claims, either asserted or unasserted, arising in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe the outcome of any of these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows. Litigation relating to the content delivery services industry is not uncommon, and we are, and from time to time have been, subject to such litigation. No assurances can be given with respect to the extent or outcome of any such litigation in the future.

Taxes

We are subject to indirect taxation in various states and foreign jurisdictions. Laws and regulations that apply to communications and commerce conducted over the Internet are becoming more prevalent, both in the United States and internationally, and may impose additional burdens on us conducting business online or providing Internet-related services. Increased regulation could negatively affect our business directly, as well as the businesses of our customers, which could reduce their demand for our services. For example, tax authorities in various states and abroad may impose taxes on the Internet-related revenue we generate based on regulations currently being applied to similar but not directly comparable industries.

There are many transactions and calculations where the ultimate tax determination is uncertain. In addition, domestic and international taxation laws are subject to change. In the future, we may come under audit, which could result in changes to our tax estimates. We believe we maintain adequate tax reserves, that are not material in amount, to offset potential liabilities that may arise upon audit. Although we believe our tax estimates and associated reserves are reasonable, the final determination of tax audits and any related litigation could be materially different than the amounts established for tax contingencies. To the extent these estimates ultimately prove to be inaccurate, the associated reserves would be adjusted, resulting in the recording of a benefit or expense in the period in which a change in estimate or a final determination is made.

XML

Net Loss per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Loss per Share

Net Income (Loss) per Share

We calculate basic and diluted income (loss) per weighted average share. We use the weighted-average number of shares of common stock outstanding during the period for the computation of basic income (loss) per share. Diluted income (loss) per share include the dilutive effect of all potentially dilutive common stock, including awards granted under our equity incentive compensation plans in the weighted-average number of shares of common stock outstanding.

The following table sets forth the components used in the computation of basic and diluted net income (loss) per share for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Net (loss) income	$	(272	)	$	(1,756	)	$	15,035	$	(6,718	)
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Dilutive effect of stock options, restricted stock units, and other equity incentive plans	—			—			8,399		—
Diluted weighted average outstanding shares of common stock	112,760			109,342			120,025		108,376
Basic net income (loss) per share	$	—		$	(0.02	)	$	0.13	$	(0.06	)
Diluted net income (loss) per share:	$	—		$	(0.02	)	$	0.13	$	(0.06	)

For the three and nine months ended September 30, 2018 and 2017, respectively, the following potentially dilutive common stock, including awards granted under our equity incentive compensation plans, were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
Employee stock purchase plan	214	276	—	276
Stock options	5,660	3,002	2,941	1,509
Restricted stock units	2,101	3,145	21	2,808
	7,975	6,423	2,962	4,593

XML

Stockholders' Equity

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

On March 14, 2017, our board of directors authorized a $25,000 share repurchase program. Any shares repurchased under this program will be canceled and returned to authorized but unissued status. This share repurchase program replaced the $9,500 remaining from the previously announced $15,000 share repurchase program. During the three months ended September 30, 2018, we did not repurchase any shares under the repurchase program. During the nine months ended September 30, 2018, we purchased and canceled 1,000 shares for $3,800, including commissions and fees. During the three and nine months ended September 30, 2017, we did not repurchase any shares under the repurchase programs. As of September 30, 2018, there remained $21,200 under this share repurchase program.

Amended and Restated Equity Incentive Plan

We established the 2007 Equity Incentive Plan, or the 2007 Plan, which allows for the grant of equity, including stock options and restricted stock unit awards. In June 2016, our stockholders approved the Amended and Restated Equity Incentive Plan, or the Restated 2007 Plan, which amended and restated the 2007 Plan.  Approval of the Restated 2007 Plan replaced the terms and conditions of the 2007 Plan with the terms and conditions of the Restated 2007 Plan, and extended the term of the plan to April 2026. There was no increase in the aggregate amount of shares available for issuance. The total number of shares authorized for issuance under the Restated 2007 Plan as of September 30, 2018 was approximately 10,706.

Employee Stock Purchase Plan

In June 2013, our stockholders approved our 2013 Employee Stock Purchase Plan (ESPP). The ESPP allows participants to purchase our common stock at a 15% discount of the lower of the beginning or end of the offering period using the closing price on that day. During the three months ended September 30, 2018, we did not issue any shares under the ESPP. During the nine months ended September 30, 2018, we issued 250 shares under the ESPP. Total cash proceeds from the purchase of the shares under the ESPP was approximately $1,110. As of September 30, 2018, shares reserved for issuance to employees under this plan totaled 380, and we held employee contributions of $911 (included in other current liabilities) for future purchases under the ESPP.

Preferred Stock

Our board of directors has authorized the issuance of up to 7,500 shares of preferred stock at September 30, 2018. The preferred stock may be issued in one or more series pursuant to a resolution or resolutions providing for such issuance duly adopted by the board of directors. As of September 30, 2018, the board of directors had not adopted any resolutions for the issuance of preferred stock.

XML

Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2018, was as follows:

				Unrealized
				Gains (Losses) on
	Foreign			Available for
	Currency			Sale Securities			Total
Balance, December 31, 2017	$	(8,259	)	$	(69	)	$	(8,328	)
Other comprehensive (loss) income before reclassifications	(1,187		)	38			(1,149		)
Amounts reclassified from accumulated other comprehensive   loss	—			—			—
Net current period other comprehensive (loss) income	(1,187		)	38			(1,149		)
Balance, September 30, 2018	$	(9,446	)	$	(31	)	$	(9,477	)

XML

Share-Based Compensation

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

The following table summarizes the components of share-based compensation expense included in our consolidated statement of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Share-based compensation expense by type:
Stock options	$	1,044	$	917	$	3,151	$	2,776
Restricted stock units	2,177		2,075		6,524		6,213
ESPP	200		120		670		453
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442
Share-based compensation expense:
Cost of services	$	352	$	352	$	1,059	$	1,075
General and administrative expense	1,887		1,565		5,666		4,773
Sales and marketing expense	638		611		1,874		1,848
Research and development expense	544		584		1,746		1,746
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442

Unrecognized share-based compensation expense totaled approximately $17,172 at September 30, 2018, of which $5,443 related to stock options and $11,729 related to restricted stock units. We currently expect to recognize share-based compensation expense of $3,059 during the remainder of 2018, $9,121 in 2019 and the remainder thereafter based on scheduled vesting of the stock options and restricted stock units outstanding at September 30, 2018.

XML

Related Party Transactions

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

In July 2006, an aggregate of 39,869,960 shares of Series B Preferred Stock was issued at a purchase price of $3.26

per share to certain accredited investors in a private placement transaction. As a result of this transaction, entities affiliated with

Goldman, Sachs & Co., one of the lead underwriters of our initial public offering (IPO), became holders of more than 10% of

our common stock. On June 14, 2007, upon the closing of our IPO, all outstanding shares of our Series B Preferred Stock automatically converted into shares of common stock on a 1-for-1 share basis. Between November 2017 and March 2018, investment partnerships affiliated with Goldman Sachs & Co. LLC and Goldman Sachs Group, Inc. sold 30,272,493 shares that they had acquired upon the conversation of their Series B Preferred Stock at the time of the Company’s IPO in June 2007. As of September 30, 2018, Goldman, Sachs & Co. owned less than 1% of our outstanding common stock. We had no other material related party transactions during the three and nine months ended September 30, 2018 and 2017.

XML

Leases and Purchase Commitments

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Leases and Purchase Commitments

Leases and Purchase Commitments

Operating Leases

We are committed to various non-cancellable operating leases for office space and office equipment which expire through 2022. Certain leases contain provisions for renewal options and rent escalations upon expiration of the initial lease terms. Approximate future minimum lease payments over the remaining lease periods as of September 30, 2018, are as follows:

Remainder of 2018	$	740
2019	1,705
2020	781
2021	466
2022	55
Thereafter	—
Total minimum payments	$	3,747

Purchase Commitments

We have long-term commitments for bandwidth usage and co-location with various networks and internet service providers. The following summarizes minimum commitments for future periods as of September 30, 2018:

Remainder of 2018	$	10,358
2019	18,597
2020	3,312
2021	795
2022	244
Thereafter	—
Total minimum payments	$	33,306

XML

Concentrations

9 Months Ended

Sep. 30, 2018

Risks and Uncertainties [Abstract]

Concentrations

Concentrations

During the three months ended September 30, 2018, we had one customer, Amazon, who represented 10% or more of our total revenue. During the three months ended September 30, 2017, we had two customers, Amazon and Apple, who each represented 10% or more of our total revenue. During the nine months ended September 30, 2018 and 2017, respectively, we had one customer, Amazon, who represented 10% or more of our total revenue.

Revenue from customers located within the United States, our country of domicile, was $27,823 for the three months ended September 30, 2018, compared to $28,630 for the three months ended September 30, 2017. For the nine months ended September 30, 2018, revenue from customers located within the United States was $88,443, compared to $83,021 for the nine months ended September 30, 2017.

During the three months ended September 30, 2018, based on customer location, we had three countries, the United States, the United Kingdom, and Japan, that accounted for 10% or more of our total revenue. For the three months ended September 30, 2017, based on customer location, we had two countries, the United States, and the United Kingdom, that accounted for 10% or more of our total revenue. During the nine months ended September 30, 2018, we had two countries, the United States and the United Kingdom, that accounted for 10% or more of our total revenue based on customer location. For the nine months ended September 30, 2017, we had three countries, the United States, Japan, and the United Kingdom, that accounted for 10% or more of our total revenue based on customer location.

XML

Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. Based on an estimated annual effective tax rate and discrete items, income tax expense for the three months ended September 30, 2018 and 2017, was $113 and $188, respectively. For the nine months ended September 30, 2018 and 2017, income tax expense was $347 and $448, respectively. Income tax expense was different than the statutory income tax rate primarily due to us providing for a valuation allowance on deferred tax assets in certain jurisdictions, and the recording of state and foreign tax expense for the three and nine month periods.

We file income tax returns in jurisdictions with varying statutes of limitations. Tax years 2014 through 2016 remain subject to examination by federal tax authorities. Tax years 2013 through 2016 generally remain subject to examination by state tax authorities. As of September 30, 2018, we are not under any federal or state examination for income taxes.

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) significantly revised the U.S. corporate income tax law, by among other things, reducing the corporate income tax rate to 21% for tax years beginning in 2018, implementing a modified territorial system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries and creating new taxes on certain foreign sourced earnings.

Also on December 22, 2017, The SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. SAB 118 provides for a measurement period of up to one year from the date of enactment. During the measurement period, companies need to reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

At September 30, 2018 we have not yet completed our analysis of the Tax Act; however, in certain circumstances, as described below, we have made a reasonable estimate of the effects of the Tax Act.

Provisional Amounts

Our deferred tax balances for the year ending December 31, 2017 reflected an estimated $41 tax benefit related to the re-measurement of a deferred tax liability on a long-lived asset. The remaining impact from the re-measurement of our net U.S. deferred tax asset at the lower 21% rate was offset by the valuation allowance.

Our deferred tax balances for the year ending December 31, 2017 reflected the estimated impact from the one-time transition tax that we previously deferred from U.S. income taxes. The transition tax that we calculated resulted in an immaterial amount of additional federal taxable income. The additional taxable income from the transition tax was offset by net operating losses (NOLs) and did not result in cash taxes payable.

There were no changes to the provisional amounts recorded as of December 31, 2017. We will consider the revaluation of our deferred balances and the one-time transition tax amount as provisional amounts until we finalize our analysis.

The tax provision incorporates assumptions made based upon the Company’s current interpretation of the Tax Act, and may change as we receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time. The Tax Act contains several base broadening provisions that became effective on January 1, 2018 that we do not expect to have a material impact on future earnings due to our NOL and valuation allowance position. Also effective for 2018 is a new Global Intangible Low-Taxed Income inclusion (GILTI). There was no impact to income tax expense related to the GILTI as a result of our NOL and valuation allowance position. We do not expect the GILTI to have a material impact on future earnings due to our NOL and valuation allowance position.

XML

Segment Reporting and Geographic Areas

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Reporting and Geographic Areas

Segment Reporting and Geographic Areas

Our chief operating decision maker (whom is our Chief Executive Officer) reviews our financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. We operate in one industry segment — content delivery and related services and we operate in three geographic areas — Americas, Europe, Middle East, and Africa (EMEA), and Asia Pacific.

Revenue by geography is based on the location of the customer from which the revenue is earned. The following table sets forth our revenue by geographic area:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Americas	$	28,700	58	%	$	29,485	64	%	$	92,317	61	%	$	86,093	63	%
EMEA	9,656		20	%	9,280		20	%	31,156		20	%	26,543		20	%
Asia Pacific	10,959		22	%	7,304		16	%	28,205		19	%	23,537		17	%
Total revenue	$	49,315	100	%	$	46,069	100	%	$	151,678	100	%	$	136,173	100	%

The following table sets forth the individual countries and their respective revenue for those countries whose revenue exceeded 10% of our total revenue:

	Three Months Ended September 30,		Nine Months Ended September 30,
Country / Region	2018	2017	2018	2017
United States / Americas	27,823	28,630	88,443	83,021
United Kingdom / EMEA	6,590	5,629	21,896	15,207
Japan / Asia Pacific	5,610	4,379	14,841	14,196

The following table sets forth long-lived assets by geographic area in which the assets are located:

	September 30,		December 31,
	2018		2017
Americas	$	19,639	$	17,119
International	7,753		11,872
Total long-lived assets	$	27,392	$	28,991

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

As of September 30, 2018, and December 31, 2017, we held certain assets and liabilities that were required to be measured at fair value on a recurring basis.

The following is a summary of fair value measurements at September 30, 2018:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	1,763	$	1,763	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	23,957		—		23,957		—
Total assets measured at fair value	$	25,760	$	1,763	$	23,997	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

The following is a summary of fair value measurements at December 31, 2017:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	6,789	$	6,789	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	28,404		—		28,404		—
Total assets measured at fair value	$	35,233	$	6,789	$	28,444	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

The carrying amount of cash equivalents approximates fair value because their maturity is less than three months. The carrying amount of short-term and long-term marketable securities approximates fair value as the securities are marked to market as of each balance sheet date with any unrealized gains and losses reported in stockholders’ equity. The carrying amount of accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term maturity of the amounts.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the interim periods presented and of a normal recurring nature. This quarterly report on Form 10-Q should be read in conjunction with our audited financial statements and footnotes included in our annual report on Form 10-K for the fiscal year ended December 31, 2017. All information is presented in thousands, except per share amounts and where specifically noted.

The consolidated financial statements include accounts of Limelight and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In addition, certain other reclassifications have been made to prior year amounts to conform to the current year presentation.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results and outcomes may differ from those estimates. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or for any future periods.

Recent Accounting Standards

Recent Accounting Standards

Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 (Topic 606) "Revenue from Contracts with Customers." Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net decrease to opening accumulated deficit of $1,496 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the costs to obtain a customer contract ($1,129), specifically commissions and upfront incentive payments, and from the recognition of revenue from customers with contracts that contain minimum commitments billed ratably over the contract term ($367).

The costs associated with obtaining a customer contract were previously expensed in the period they were incurred. Under Topic 606, these payments have been deferred on our consolidated balance sheets and amortized over the expected life of the customer contract. The impact to sales and marketing expense for the three and nine months ended September 30, 2018 was not material as a result of applying Topic 606. As of September 30, 2018, prepaid commissions were $1,310, with the short term portion of $767 included in prepaid expenses and other current assets, and the long term portion of $543 included in other assets.

For customers with contracts that contain minimum commitments billed ratably over the contract term, previously, we either accrued or deferred revenue based on actual usage. Under Topic 606, we are required to evaluate the impact of estimating variable consideration related to these types of contracts. We use the expected value method to estimate the total revenue of the contract, constrained by the probability that there would not be a significant revenue reversal in a future period, and recognize a pro-rata share of the total revenue of the contract each month. We continue to evaluate the expected value of revenue over the term of the contract and adjust revenue recognition as appropriate. The impact to revenues for the three and nine months ended September 30, 2018 was an increase of $450 and $145, respectively, as a result of applying Topic 606.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our customers generally execute contracts with terms of one year or longer, which are referred to as recurring revenue contracts or long-term contracts. These contracts generally allow the customer access to our network and commit the customer to a minimum monthly level of usage with additional charges applicable for actual usage above the monthly minimum commitment, or are entirely usage based. We define usage as customer data sent or received using our content delivery service, or content that is hosted or cached by us at the request or direction of our customers. For contracts that contain minimum monthly commitments, we recognize revenue equal to the greater of the minimum monthly committed amount or actual usage, if actual usage exceeds the monthly committed amount, using the right to invoice practical expedient allowable under Topic 606.

For contracts that contain minimum commitments over the contractual term, we estimate an amount of variable consideration by using either the expected value method or the most likely amount method. We include estimates of variable consideration in revenue only when we have a high degree of confidence that revenue will not be reversed in a subsequent reporting period. We believe that the expected value method is the most appropriate estimate of the amount of variable consideration. These customers have entered into contracts with contract terms generally from one to four years. As of September 30, 2018, we have approximately $6,600 of remaining unsatisfied performance obligations. We recognized revenue of approximately $1,900 and $3,900 during the three and nine months ended September 30, 2018, respectively, related to these types of contracts with our customers. We expect to recognize approximately 25% of the remaining unsatisfied performance obligations in 2018, approximately 55% in 2019 and the remainder in 2020.

We may charge the customer an installation fee when services are first activated. We do not charge installation fees for contract renewals. Installation fees are not distinct within the context of the overall contractual commitment with the customer to perform our content delivery service and are therefore recognized initially as deferred revenue and recognized as revenue ratably over the estimated life of the customer arrangement.

We also derive revenue from services and events sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

At the inception of a customer contract for service, we make an assessment as to that customer’s ability to pay for the services provided. If we subsequently determine that collection from the customer is not probable, we record an allowance for doubtful accounts and bad debt expense or deferred revenue for that customer’s unpaid invoices and cease recognizing revenue for continued services provided until it is probable that revenue will not be reversed in a subsequent reporting period. Our standard payment terms vary by the type and location of our customer.

Arrangements with Multiple Performance Obligations

Certain of our revenue arrangements include multiple promises to our customers. Revenue arrangements with multiple promises are accounted for as separate performance obligations if each promise is distinct. Such arrangements may include a combination of some or all of the following: content delivery services, video content management services, performance services for website and web application acceleration and security, professional services, cloud storage, edge computing services, and sale of equipment. Consideration is allocated to the performance obligations using the relative standalone selling price method. Generally, arrangements with performance obligations are provided over the same contract period, and therefore, revenue is recognized over the same period.

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not been recognized. Deferred revenue primarily consists of the unearned portion of monthly billed service fees and prepayments made by customers for services to be rendered in future periods.

Adopted Accounting Standards - continued

In August 2016, the FASB issued ASU No. 2016-15, which amends ASC 230, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. ASU 2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award's fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. We have adopted this guidance effective January 1, 2018. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, which establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for most leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. We are utilizing a comprehensive approach to assess the impact of the guidance on our lease portfolio by reviewing our current accounting policies and practices to identify potential differences that would result from applying the new requirements. We continue to make significant progress on the potential impact on our accounting policies, internal control processes including system readiness and the related disclosures that will be required under the new guidance. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted and should be applied using a modified retrospective approach. We do not plan to early adopt this guidance. We continue to review additional leases to assess the impact under the new guidance, and expect it will result in an increase to total assets and liabilities on our consolidated balance sheet. We expect to utilize the short-term lease recognition and measurement practical expedient, which will lower the overall impact of this guidance on our financial statements. We expect to make an accounting policy election, where leases that are 12 months or less and do not include an option to purchase the underlying asset, will be treated similar to current operating lease accounting. We do not know and cannot reasonably estimate quantitative information related to the impact of the new standard on our financial statements at this time.

In January 2017, the FASB issued ASU 2017-04, which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. We will adopt this guidance using a prospective approach. Earlier adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this updated guidance are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. We do not plan to early adopt this ASU. We are currently evaluating the potential impacts of this updated guidance, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will become effective for us in fiscal years beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted upon issuance of this updated guidance. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this updated guidance and delay adoption of the additional disclosures until their effective date. We do not plan to early adopt this ASU, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments. This guidance will become effective for us in fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.

Revenue Recognition

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our customers generally execute contracts with terms of one year or longer, which are referred to as recurring revenue contracts or long-term contracts. These contracts generally allow the customer access to our network and commit the customer to a minimum monthly level of usage with additional charges applicable for actual usage above the monthly minimum commitment, or are entirely usage based. We define usage as customer data sent or received using our content delivery service, or content that is hosted or cached by us at the request or direction of our customers. For contracts that contain minimum monthly commitments, we recognize revenue equal to the greater of the minimum monthly committed amount or actual usage, if actual usage exceeds the monthly committed amount, using the right to invoice practical expedient allowable under Topic 606.

For contracts that contain minimum commitments over the contractual term, we estimate an amount of variable consideration by using either the expected value method or the most likely amount method. We include estimates of variable consideration in revenue only when we have a high degree of confidence that revenue will not be reversed in a subsequent reporting period. We believe that the expected value method is the most appropriate estimate of the amount of variable consideration. These customers have entered into contracts with contract terms generally from one to four years. As of September 30, 2018, we have approximately $6,600 of remaining unsatisfied performance obligations. We recognized revenue of approximately $1,900 and $3,900 during the three and nine months ended September 30, 2018, respectively, related to these types of contracts with our customers. We expect to recognize approximately 25% of the remaining unsatisfied performance obligations in 2018, approximately 55% in 2019 and the remainder in 2020.

We may charge the customer an installation fee when services are first activated. We do not charge installation fees for contract renewals. Installation fees are not distinct within the context of the overall contractual commitment with the customer to perform our content delivery service and are therefore recognized initially as deferred revenue and recognized as revenue ratably over the estimated life of the customer arrangement.

We also derive revenue from services and events sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

At the inception of a customer contract for service, we make an assessment as to that customer’s ability to pay for the services provided. If we subsequently determine that collection from the customer is not probable, we record an allowance for doubtful accounts and bad debt expense or deferred revenue for that customer’s unpaid invoices and cease recognizing revenue for continued services provided until it is probable that revenue will not be reversed in a subsequent reporting period. Our standard payment terms vary by the type and location of our customer.

Arrangements with Multiple Performance Obligations

Certain of our revenue arrangements include multiple promises to our customers. Revenue arrangements with multiple promises are accounted for as separate performance obligations if each promise is distinct. Such arrangements may include a combination of some or all of the following: content delivery services, video content management services, performance services for website and web application acceleration and security, professional services, cloud storage, edge computing services, and sale of equipment. Consideration is allocated to the performance obligations using the relative standalone selling price method. Generally, arrangements with performance obligations are provided over the same contract period, and therefore, revenue is recognized over the same period.

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not been recognized. Deferred revenue primarily consists of the unearned portion of monthly billed service fees and prepayments made by customers for services to be rendered in future periods.

XML

Investments in Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Debt Securities, Available-for-sale [Table Text Block]

The following is a summary of marketable securities (designated as available-for-sale) at September 30, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	23,980		—		23		23,957
Total marketable securities	$	24,020	$	—	$	23	$	23,997

Summary of Marketable Securities (designated as available-for-sale)

The following is a summary of marketable securities (designated as available-for-sale) at December 31, 2017:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificate of deposit	$	40	$	—	$	—	$	40
Corporate notes and bonds	28,472		—		68		28,404
Total marketable securities	$	28,512	$	—	$	68	$	28,444

Amortized Cost and Estimated Fair Value of Marketable Securities (designated as available-for-sale) by maturity

The amortized cost and estimated fair value of marketable securities at September 30, 2018, by maturity, are shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,980	$	—	$	23	$	23,957
Due after one year and through five years	40		—		—		40
	$	24,020	$	—	$	23	$	23,997

The amortized cost and estimated fair value of marketable securities at December 31, 2017, by maturity, are shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities
Due in one year or less	$	23,924	$	—	$	62	$	23,862
Due after one year and through five years	4,588		—		6		4,582
	$	28,512	$	—	$	68	$	28,444

XML

Accounts Receivable, net (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Summary of Accounts Receivable, net

Accounts receivable, net include:

	September 30,			December 31,
	2018			2017
Accounts receivable	$	27,014		$	33,519
Less: credit allowance	(190		)	(240		)
Less: allowance for doubtful accounts	(677		)	(898		)
Total accounts receivable, net	$	26,147		$	32,381

XML

Prepaid Expenses and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2018

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include:

	September 30,		December 31,
	2018		2017
Settlement and patent license receivable	$	8,940	$	—
Prepaid bandwidth and backbone	1,415		1,487
VAT receivable	1,847		1,454
Prepaid expenses and insurance	2,056		1,870
Vendor deposits and other	3,601		586
Total prepaid expenses and other current assets	$	17,859	$	5,397

XML

Property and Equipment, net (Tables)

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and equipment, net include:

	September 30,			December 31,
	2018			2017
Network equipment	$	104,550		$	107,916
Computer equipment and software	9,112			9,801
Furniture and fixtures	1,316			2,432
Leasehold improvements	4,266			3,969
Other equipment	156			183
Total property and equipment	119,400			124,301
Less: accumulated depreciation	(92,008		)	(95,310		)
Total property and equipment, net	$	27,392		$	28,991

XML

Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

Other current liabilities include:

	September 30,		December 31,
	2018		2017
Accrued compensation and benefits	$	7,317	$	12,181
Accrued cost of revenue	2,583		3,170
Deferred rent	213		434
Accrued legal fees	28		383
Other accrued expenses	3,663		2,339
Total other current liabilities	$	13,804	$	18,507

XML

Net Loss per Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Loss Per Share

The following table sets forth the components used in the computation of basic and diluted net income (loss) per share for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Net (loss) income	$	(272	)	$	(1,756	)	$	15,035	$	(6,718	)
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Basic weighted average outstanding shares of common stock	112,760			109,342			111,626		108,376
Dilutive effect of stock options, restricted stock units, and other equity incentive plans	—			—			8,399		—
Diluted weighted average outstanding shares of common stock	112,760			109,342			120,025		108,376
Basic net income (loss) per share	$	—		$	(0.02	)	$	0.13	$	(0.06	)
Diluted net income (loss) per share:	$	—		$	(0.02	)	$	0.13	$	(0.06	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

For the three and nine months ended September 30, 2018 and 2017, respectively, the following potentially dilutive common stock, including awards granted under our equity incentive compensation plans, were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
Employee stock purchase plan	214	276	—	276
Stock options	5,660	3,002	2,941	1,509
Restricted stock units	2,101	3,145	21	2,808
	7,975	6,423	2,962	4,593

XML

Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2018, was as follows:

				Unrealized
				Gains (Losses) on
	Foreign			Available for
	Currency			Sale Securities			Total
Balance, December 31, 2017	$	(8,259	)	$	(69	)	$	(8,328	)
Other comprehensive (loss) income before reclassifications	(1,187		)	38			(1,149		)
Amounts reclassified from accumulated other comprehensive   loss	—			—			—
Net current period other comprehensive (loss) income	(1,187		)	38			(1,149		)
Balance, September 30, 2018	$	(9,446	)	$	(31	)	$	(9,477	)

XML

Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Components of Share-based Compensation Expense

The following table summarizes the components of share-based compensation expense included in our consolidated statement of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Share-based compensation expense by type:
Stock options	$	1,044	$	917	$	3,151	$	2,776
Restricted stock units	2,177		2,075		6,524		6,213
ESPP	200		120		670		453
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442
Share-based compensation expense:
Cost of services	$	352	$	352	$	1,059	$	1,075
General and administrative expense	1,887		1,565		5,666		4,773
Sales and marketing expense	638		611		1,874		1,848
Research and development expense	544		584		1,746		1,746
Total share-based compensation expense	$	3,421	$	3,112	$	10,345	$	9,442

XML

Leases and Purchase Commitments (Tables)

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Lease Payments Over Remaining Lease Periods

Approximate future minimum lease payments over the remaining lease periods as of September 30, 2018, are as follows:

Remainder of 2018	$	740
2019	1,705
2020	781
2021	466
2022	55
Thereafter	—
Total minimum payments	$	3,747

Minimum Purchase Commitments

The following summarizes minimum commitments for future periods as of September 30, 2018:

Remainder of 2018	$	10,358
2019	18,597
2020	3,312
2021	795
2022	244
Thereafter	—
Total minimum payments	$	33,306

XML

Segment Reporting and Geographic Areas (Tables)

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Revenue Earned by Geographic Area

The following table sets forth our revenue by geographic area:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Americas	$	28,700	58	%	$	29,485	64	%	$	92,317	61	%	$	86,093	63	%
EMEA	9,656		20	%	9,280		20	%	31,156		20	%	26,543		20	%
Asia Pacific	10,959		22	%	7,304		16	%	28,205		19	%	23,537		17	%
Total revenue	$	49,315	100	%	$	46,069	100	%	$	151,678	100	%	$	136,173	100	%

Schedules of Concentration of Revenue by Country

The following table sets forth the individual countries and their respective revenue for those countries whose revenue exceeded 10% of our total revenue:

	Three Months Ended September 30,		Nine Months Ended September 30,
Country / Region	2018	2017	2018	2017
United States / Americas	27,823	28,630	88,443	83,021
United Kingdom / EMEA	6,590	5,629	21,896	15,207
Japan / Asia Pacific	5,610	4,379	14,841	14,196

Long-lived Assets by Geographical Area

The following table sets forth long-lived assets by geographic area in which the assets are located:

	September 30,		December 31,
	2018		2017
Americas	$	19,639	$	17,119
International	7,753		11,872
Total long-lived assets	$	27,392	$	28,991

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Summary of Money Market Funds, Marketable Securities, Other Investment-related Assets and Current Liabilities

The following is a summary of fair value measurements at September 30, 2018:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	1,763	$	1,763	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	23,957		—		23,957		—
Total assets measured at fair value	$	25,760	$	1,763	$	23,997	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

The following is a summary of fair value measurements at December 31, 2017:

			Fair Value Measurements at Reporting Date Using
Description	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (2)	$	6,789	$	6,789	$	—	$	—
Certificate of deposit (1)	40		—		40		—
Corporate notes and bonds (1)	28,404		—		28,404		—
Total assets measured at fair value	$	35,233	$	6,789	$	28,444	$	—

____________

(1) Classified in marketable securities

(2) Classified in cash and cash equivalents

XML

Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jan. 01, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effect on accumulated deficit		$ (333,419)		$ (333,419)		$ (349,950)
Effect on revenues		(49,315)	$ (46,069)	$ (151,678)	$ (136,173)
Contract terms				These customers have entered into contracts with contract terms generally from one to four years.
Committed revenue from minimum commitment contracts		6,600		$ 6,600
Minimum commitment contracts revenue recognized in period		1,900		3,900
ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effect on accumulated deficit	$ 1,496
Effect on sales commissions and incentive payments	(1,129)
Effect on revenues		(450)		(145)
ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | Commitments Billed Ratably Over the Contract Term
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effect on revenues	$ (367)
Sales Commissions | ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid commissions		1,310		1,310
Sales Commissions | ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | Prepaid Expenses and Other Current Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid commissions		767		767
Sales Commissions | ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | Other Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid commissions		$ 543		$ 543

XML

Summary of Significant Accounting Policies - Performance Obligations (Details)	Sep. 30, 2018
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining unsatisfied performance obligations to be recognized period	3 years
Percent of remaining unsatisfied performance obligations to be recognized	25.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining unsatisfied performance obligations to be recognized period	1 year
Percent of remaining unsatisfied performance obligations to be recognized	55.00%

XML

Investments in Marketable Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 24,020	$ 28,512
Gross Unrealized Gains	0	0
Gross Unrealized Losses	23	68
Estimated Fair Value	23,997	28,444
Certificate of deposit
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	40	40
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	40	40
Corporate notes and bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	23,980	28,472
Gross Unrealized Gains	0	0
Gross Unrealized Losses	23	68
Estimated Fair Value	$ 23,957	$ 28,404

XML

Investments in Marketable Securities (Details 1) - Debt securities - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale [Line Items]
Amortized Cost, Due in one year or less	$ 23,980	$ 23,924
Amortized Cost, Due after one year and through five years	40	4,588
Amortized Cost	24,020	28,512
Gross Unrealized Gains, Due in one year or less	0	0
Gross Unrealized Gains, Due after one year and through five years	0	0
Gross Unrealized Gains	0	0
Gross Unrealized Losses, Due in one year or less	23	62
Gross Unrealized Losses, Due after one year and through five years	0	6
Gross Unrealized Losses	23	68
Estimated Fair Value, Due in one year or less	23,957	23,862
Estimated Fair Value, Due after one year and through five years	40	4,582
Estimated Fair Value	$ 23,997	$ 28,444

XML

Accounts Receivable, net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Summary of Accounts Receivable, net
Accounts receivable	$ 27,014	$ 33,519
Less: credit allowance	(190)	(240)
Less: allowance for doubtful accounts	(677)	(898)
Total accounts receivable, net	$ 26,147	$ 32,381

XML

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Prepaid Expense and Other Assets, Current [Abstract]
Settlement and patent license receivable	$ 8,940	$ 0
Prepaid bandwidth and backbone	1,415	1,487
VAT receivable	1,847	1,454
Prepaid expenses and insurance	2,056	1,870
Vendor deposits and other	3,601	586
Total prepaid expenses and other current assets	$ 17,859	$ 5,397

XML

Property and Equipment, net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property and equipment, net
Property and equipment, gross	$ 119,400	$ 124,301
Less: accumulated depreciation	(92,008)	(95,310)
Total property and equipment, net	27,392	28,991
Network equipment
Property and equipment, net
Property and equipment, gross	104,550	107,916
Computer equipment and software
Property and equipment, net
Property and equipment, gross	9,112	9,801
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	1,316	2,432
Leasehold improvements
Property and equipment, net
Property and equipment, gross	4,266	3,969
Other equipment
Property and equipment, net
Property and equipment, gross	$ 156	$ 183

XML

Property and Equipment, net (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Property, Plant and Equipment [Abstract]
Operating expense depreciation	$ 616	$ 603	$ 1,837	$ 1,789

XML

Goodwill (Details Textual) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Foreign currency translation adjustment	$ 35	$ 371

XML

Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Other Liabilities Disclosure [Abstract]
Accrued compensation and benefits	$ 7,317	$ 12,181
Accrued cost of revenue	2,583	3,170
Deferred rent	213	434
Accrued legal fees	28	383
Other accrued expenses	3,663	2,339
Total other current liabilities	$ 13,804	$ 18,507

XML

Line of Credit (Details) - Revolving Credit Facility - Credit Agreement	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2018 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Nov. 02, 2015 USD ($)
Line of Credit Facility [Line Items]
Maximum borrowing amount	$ 20,000,000						$ 10,000,000
Borrowing capacity limit, percent of accounts receivable	80.00%
Proceeds from line of credit						$ 0
Current borrowing capacity		$ 18,300,000		$ 18,300,000		$ 10,000,000
Increase in interest rate in event of default		3.00%		3.00%
Commitment fee percentage paid at closing				5000000.00%
Commitment fees amortization		$ 10,000	$ 18,000	$ 76,000	$ 42,000
Voting stock percentage in foreign subsidiaries				65.00%
Line of credit facility, covenant compliance, minimum cash and revolver availability	$ 10,000,000
Line of credit facility, covenant compliance, minimum cash at lender	$ 5,000,000
Line of credit facility, covenant compliance, adjusted quick ratio	1.0
Alternative Base Rate
Line of Credit Facility [Line Items]
Variable rate minimum				0.25%

XML

Contingencies (Details) $ in Thousands				1 Months Ended
	May 09, 2018 USD ($)	Apr. 09, 2018 USD ($) installment_payment	Aug. 01, 2016 USD ($) installment_payment	Apr. 30, 2016 Patent counterclaim	Dec. 31, 2017 USD ($)	Dec. 28, 2016 Patent	Apr. 29, 2016 Patent	Feb. 16, 2016 Patent	Nov. 30, 2015 Patent
Akamai '703 Litigation | Settled Litigation
Loss Contingencies [Line Items]
Legal settlement awarded to other party | $			$ (54,000)
Number of quarterly installment payments for litigation settlement | installment_payment			12
Litigation reserve, remaining amount due | $					$ 13,500
Akamai and XO Communications Litigation | Pending Litigation
Loss Contingencies [Line Items]
Number of company patents infringed									6
Akamai Litigation | Pending Litigation
Loss Contingencies [Line Items]
Number of patents Company was infringing							5
Akamai Litigation | Settled Litigation
Loss Contingencies [Line Items]
Number of quarterly installment payments for litigation settlement | installment_payment		5
Litigation Settlement, Period of Agreement to Not Sue		3 years
Legal settlement awarded from other party | $		$ 14,900
Proceeds from legal settlement | $	$ 2,980
2016 Akamai Litigation | Pending Litigation
Loss Contingencies [Line Items]
Number of company patents infringed				2
Number Of Patents Company Infringed, Additional						3
Number of patents Company was infringing								3
Number of patents company infringed, withdrawn				1
Number of counterclaims | counterclaim				2

XML

Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share [Abstract]
Net (loss) income	$ (272)	$ (1,756)	$ 15,035	$ (6,718)
Basic weighted average outstanding shares of common stock	112,760	109,342	111,626	108,376
Dilutive effect of stock options, restricted stock units, and other equity incentive plans	0	0	8,399	0
Diluted weighted average outstanding shares of common stock	112,760	109,342	120,025	108,376
Basic net income (in dollars per share)	$ 0.00	$ (0.02)	$ 0.13	$ (0.06)
Diluted net income (in dollars per share)	$ 0.00	$ (0.02)	$ 0.13	$ (0.06)

XML

Net Loss per Share Dilutive Common Stock (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded outstanding options and restricted stock units (in shares)	7,975	6,423	2,962	4,593
Employee stock purchase plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded outstanding options and restricted stock units (in shares)	214	276	0	276
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded outstanding options and restricted stock units (in shares)	5,660	3,002	2,941	1,509
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded outstanding options and restricted stock units (in shares)	2,101	3,145	21	2,808

XML

Stockholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Mar. 14, 2017	Feb. 12, 2014
Equity, Class of Treasury Stock [Line Items]
Cash paid for purchase of common stock			$ 3,800	$ 0
Issuance of preferred stock authorized (in shares)	7,500,000		7,500,000		7,500,000
Employee Stock Purchase Plan
Equity, Class of Treasury Stock [Line Items]
Discount from market price for employees			15.00%
Shares issued (in shares)	0		250,000
Proceeds from issuance of shares	$ 1,110
Common Stock reserved for future options and restricted stock awards (in shares)	380,000		380,000
Employee funds held by company for future purchase of shares	$ 911		$ 911
2007 Equity Incentive Plan
Equity, Class of Treasury Stock [Line Items]
Shares authorized for issuance under Restated 2007 Plan (in shares)	10,706,000		10,706,000
2017 Share Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Stock repurchase amount authorized						$ 25,000
Remaining authorized repurchase amount	$ 21,200		$ 21,200
Shares purchased and canceled	0	0	1,000,000	0
Cash paid for purchase of common stock			$ 3,800
2012 Share Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Stock repurchase amount authorized							$ 15,000
Remaining authorized repurchase amount						$ 9,500

XML

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Accumulated other comprehensive income, beginning balance			$ 144,145
Other comprehensive income (loss)	$ (153)	$ 366	(1,149)	$ 2,359
Accumulated other comprehensive income, ending balance	167,063		167,063
Foreign Currency
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Accumulated other comprehensive income, beginning balance			(8,259)
Other comprehensive (loss) income before reclassifications			(1,187)
Amounts reclassified from accumulated other comprehensive loss			0
Other comprehensive income (loss)			(1,187)
Accumulated other comprehensive income, ending balance	(9,446)		(9,446)
Unrealized Gains (Losses) on Available for Sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Accumulated other comprehensive income, beginning balance			(69)
Other comprehensive (loss) income before reclassifications			38
Amounts reclassified from accumulated other comprehensive loss			0
Other comprehensive income (loss)			38
Accumulated other comprehensive income, ending balance	(31)		(31)
AOCI
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Accumulated other comprehensive income, beginning balance			(8,328)
Other comprehensive (loss) income before reclassifications			(1,149)
Amounts reclassified from accumulated other comprehensive loss			0
Other comprehensive income (loss)			(1,149)
Accumulated other comprehensive income, ending balance	$ (9,477)		$ (9,477)

XML

Share-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Components of share-based compensation expense
Share-based compensation	$ 3,421	$ 3,112	$ 10,345	$ 9,442
Cost of services
Components of share-based compensation expense
Share-based compensation	352	352	1,059	1,075
General and administrative expense
Components of share-based compensation expense
Share-based compensation	1,887	1,565	5,666	4,773
Sales and marketing expense
Components of share-based compensation expense
Share-based compensation	638	611	1,874	1,848
Research and development expense
Components of share-based compensation expense
Share-based compensation	544	584	1,746	1,746
Stock options
Components of share-based compensation expense
Share-based compensation	1,044	917	3,151	2,776
Restricted stock units
Components of share-based compensation expense
Share-based compensation	2,177	2,075	6,524	6,213
ESPP
Components of share-based compensation expense
Share-based compensation	$ 200	$ 120	$ 670	$ 453

XML

Share-Based Compensation (Details Textual) $ in Thousands	Sep. 30, 2018 USD ($)
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Unrecognized share-based compensation expense total	$ 17,172
Share-based compensation expense, remainder of 2016	3,059
Share-based compensation expense, 2017	9,121
Stock options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Unrecognized share-based compensation expense total	5,443
Restricted stock units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Unrecognized share-based compensation expense total	$ 11,729

XML

Related Party Transactions (Details) - Goldman, Sachs & Co. Affiliates [Member]	1 Months Ended	5 Months Ended	12 Months Ended
	Jul. 31, 2006 $ / shares shares	Mar. 31, 2018 shares	Dec. 31, 2017	Sep. 30, 2018
Related Party Transaction [Line Items]
Ownership percentage				1.00%
Series B Preferred Stock
Related Party Transaction [Line Items]
Aggregate issuance of Series B Preferred Stock (in shares)	39,869,960
Aggregate issuance of Series B Preferred Stock, purchase price (in dollars per share) | $ / shares	$ 3.26
Preferred Stock conversion ratio			1
Common Stock
Related Party Transaction [Line Items]
Number of shares sold by related party		30,272,493

XML

Leases and Purchase Commitments (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Future minimum lease payments over remaining lease periods
Remainder of 2018	$ 740
2019	1,705
2020	781
2021	466
2022	55
Thereafter	0
Total minimum payments	$ 3,747

XML

Leases and Purchase Commitments (Details 1) $ in Thousands	Sep. 30, 2018 USD ($)
Minimum purchase commitments
Remainder of 2018	$ 10,358
2019	18,597
2020	3,312
2021	795
2022	244
Thereafter	0
Total minimum payments	$ 33,306

XML

Concentrations (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) customer country	Sep. 30, 2017 USD ($) customer country	Sep. 30, 2018 USD ($) customer country	Sep. 30, 2017 USD ($) customer country
Concentration Risk [Line Items]
Number of customers who represented 10% or more of total revenue | customer	1	2	1	1
Revenue	$ 49,315	$ 46,069	$ 151,678	$ 136,173
Geographic concentration | Total revenue
Concentration Risk [Line Items]
Number of countries accounting for 10% or more of revenue | country	3	2	2	3
United States | Geographic concentration | Total revenue
Concentration Risk [Line Items]
Revenue	$ 27,823	$ 28,630	$ 88,443	$ 83,021

XML

Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income tax expense	$ 113	$ 188	$ 347	$ 448
Re-measurement of deferred tax liabilities benefit					$ 41

XML

Segment Reporting and Geographic Areas (Details Textual)	9 Months Ended
	Sep. 30, 2018 Segment Location
Segment Reporting [Abstract]
Number of industry segment | Segment	1
Number of geographic areas | Location	3

XML

Segment Reporting and Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue earned by geographic area
Revenue	$ 49,315	$ 46,069	$ 151,678	$ 136,173
Americas
Revenue earned by geographic area
Revenue	28,700	29,485	92,317	86,093
EMEA
Revenue earned by geographic area
Revenue	9,656	9,280	31,156	26,543
Asia Pacific
Revenue earned by geographic area
Revenue	$ 10,959	$ 7,304	$ 28,205	$ 23,537
Geographic concentration
Revenue earned by geographic area
Percent of revenue	100.00%	100.00%	100.00%	100.00%
Geographic concentration | Americas
Revenue earned by geographic area
Percent of revenue	58.00%	64.00%	61.00%	63.00%
Geographic concentration | EMEA
Revenue earned by geographic area
Percent of revenue	20.00%	20.00%	20.00%	20.00%
Geographic concentration | Asia Pacific
Revenue earned by geographic area
Percent of revenue	22.00%	16.00%	19.00%	17.00%

XML

Segment Reporting and Geographic Areas Segment Reporting and Geographic Areas (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Concentration Risk [Line Items]
Revenue	$ 49,315	$ 46,069	$ 151,678	$ 136,173
Geographic concentration | Total revenue | United States
Concentration Risk [Line Items]
Revenue	27,823	28,630	88,443	83,021
Geographic concentration | Total revenue | United Kingdom
Concentration Risk [Line Items]
Revenue	6,590	5,629	21,896	15,207
Geographic concentration | Total revenue | Japan
Concentration Risk [Line Items]
Revenue	$ 5,610	$ 4,379	$ 14,841	$ 14,196

XML

Segment Reporting and Geographic Areas (Details 2) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Long-lived assets by geographical area
Long-lived assets	$ 27,392	$ 28,991
Americas
Long-lived assets by geographical area
Long-lived assets	19,639	17,119
International
Long-lived assets by geographical area
Long-lived assets	$ 7,753	$ 11,872

XML

Fair Value Measurements (Details) - Recurring basis - USD ($) $ in Thousands	Sep. 30, 2018		Dec. 31, 2017
Assets:
Total assets measured at fair value	$ 25,760		$ 35,233
Money market funds
Assets:
Total assets measured at fair value	1,763	[1]	6,789	[2]
Certificate of deposit
Assets:
Total assets measured at fair value	40	[3]	40	[4]
Corporate notes and bonds
Assets:
Total assets measured at fair value	23,957	[3]	28,404	[4]
Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets:
Total assets measured at fair value	1,763		6,789
Quoted Prices In Active Markets for Identical Assets (Level 1) | Money market funds
Assets:
Total assets measured at fair value	1,763	[1]	6,789	[2]
Quoted Prices In Active Markets for Identical Assets (Level 1) | Certificate of deposit
Assets:
Total assets measured at fair value	0	[3]	0	[4]
Quoted Prices In Active Markets for Identical Assets (Level 1) | Corporate notes and bonds
Assets:
Total assets measured at fair value	0	[3]	0	[4]
Significant Other Observable Inputs (Level 2)
Assets:
Total assets measured at fair value	23,997		28,444
Significant Other Observable Inputs (Level 2) | Money market funds
Assets:
Total assets measured at fair value	0	[1]	0	[2]
Significant Other Observable Inputs (Level 2) | Certificate of deposit
Assets:
Total assets measured at fair value	40	[3]	40	[4]
Significant Other Observable Inputs (Level 2) | Corporate notes and bonds
Assets:
Total assets measured at fair value	23,957	[3]	28,404	[4]
Significant Unobservable Inputs (Level 3)
Assets:
Total assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Money market funds
Assets:
Total assets measured at fair value	0	[1]	0	[2]
Significant Unobservable Inputs (Level 3) | Certificate of deposit
Assets:
Total assets measured at fair value	0	[3]	0	[4]
Significant Unobservable Inputs (Level 3) | Corporate notes and bonds
Assets:
Total assets measured at fair value	$ 0	[3]	$ 0	[4]

[1] Classified in cash and cash equivalents

[2] Classified in cash and cash equivalents

[3] Classified in marketable securities

[4] Classified in marketable securities