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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
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)
 
Delaware20-1677033
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1465 North Scottsdale Road, Suite 400
Scottsdale, AZ 85257
(Address of principal executive offices, including Zip Code)
(602850-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act;
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareLLNWNasdaq
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      No  
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      No  
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 filerAccelerated filer
Non-accelerated filer
Smaller Reporting Company
Emerging Growth Company
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. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  
The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of October 15, 2020: 122,973,706 shares.


LIMELIGHT NETWORKS, INC.
FORM 10-Q
Quarterly Period Ended September 30, 2020
TABLE OF CONTENTS
  Page
PART I. FINANCIAL INFORMATION
Item 1.FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019
Unaudited Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019
Unaudited Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2020 and 2019
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019
Notes to Unaudited Consolidated Financial Statements
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 4.CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
Item 1A.RISK FACTORS
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 3.DEFAULTS UPON SENIOR SECURITIES
Item 4.MINE SAFETY DISCLOSURES
Item 5.OTHER INFORMATION
Item 6.EXHIBITS
SIGNATURES
 


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, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. 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 and edge services;
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 and our sources of funding;
our beliefs regarding our interest rate risk;
our beliefs regarding inflation risks;
our beliefs regarding expense and productivity of and competition for our sales force;
our beliefs regarding the significance of our large customers;
our beliefs regarding the impact of health epidemics and pandemics, including the recent outbreak of COVID-19, on our current and potential customers; and
our beliefs regarding the impact of health epidemics and pandemics, including the recent outbreak of COVID-19, on our balance sheet, financial condition, and results of operations.
    The risks included here are not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors which could adversely affect our business and financial performance. Also, 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, headcount 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,
2020
December 31,
2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$75,169 $18,335 
Marketable securities49,623  
Accounts receivable, net42,222 34,476 
Income taxes receivable81 82 
Prepaid expenses and other current assets12,561 9,920 
Total current assets179,656 62,813 
Property and equipment, net47,493 46,136 
Operating lease right of use assets10,844 12,842 
Marketable securities, less current portion40 40 
Deferred income taxes1,428 1,319 
Goodwill77,126 77,102 
Other assets7,459 9,117 
Total assets$324,046 $209,369 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$12,437 $12,020 
Deferred revenue797 976 
Operating lease liability obligations2,654 2,056 
Income taxes payable153 178 
Other current liabilities17,584 13,398 
Total current liabilities33,625 28,628 
Convertible senior notes, net99,937  
Operating lease liability obligations, less current portion11,745 13,488 
Deferred income taxes251 239 
Deferred revenue, less current portion230 161 
Other long-term liabilities579 316 
Total liabilities146,367 42,832 
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; 122,824 and 118,368 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
123 118 
Additional paid-in capital552,559 530,285 
Accumulated other comprehensive loss(9,379)(9,210)
Accumulated deficit(365,624)(354,656)
Total stockholders’ equity177,679 166,537 
Total liabilities and stockholders’ equity$324,046 $209,369 

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,
 2020201920202019
Revenue$59,243 $51,321 $174,801 $140,505 
Cost of revenue:
Cost of services31,905 25,602 92,406 71,311 
Depreciation — network5,602 4,961 16,112 13,905 
Total cost of revenue37,507 30,563 108,518 85,216 
Gross profit21,736 20,758 66,283 55,289 
Operating expenses:
General and administrative7,751 7,356 23,820 23,231 
Sales and marketing10,456 10,713 33,279 32,679 
Research and development5,425 5,160 16,614 17,075 
Depreciation and amortization384 172 1,049 545 
Total operating expenses24,016 23,401 74,762 73,530 
Operating loss(2,280)(2,643)(8,479)(18,241)
Other income (expense):
Interest expense(1,674)(10)(1,756)(30)
Interest income10 81 40 402 
Other, net25 (13)(396)(89)
Total other (expense) income (1,639)58 (2,112)283 
Loss before income taxes(3,919)(2,585)(10,591)(17,958)
Income tax expense 66 166 377 544 
Net loss$(3,985)$(2,751)$(10,968)$(18,502)
Net loss per share:
Basic$(0.03)$(0.02)$(0.09)$(0.16)
Diluted$(0.03)$(0.02)$(0.09)$(0.16)
Weighted average shares used in per share calculation:
Basic122,363 116,270 120,519 115,318 
Diluted122,363 116,270 120,519 115,318 

The accompanying notes are an integral part of the unaudited consolidated financial statements.
5

Limelight Networks, Inc.
Unaudited Consolidated Statements of Comprehensive Loss
(In thousands)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net loss$(3,985)$(2,751)$(10,968)$(18,502)
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on investments(80)2 (80)39 
Foreign currency translation gain (loss)732 (357)(89)157 
Other comprehensive income (loss)652 (355)(169)196 
Comprehensive loss$(3,333)$(3,106)$(11,137)$(18,306)
The accompanying notes are an integral part of the unaudited consolidated financial statements.
6

Limelight Networks, Inc.
Unaudited Consolidated Statements of Stockholders' Equity
(In thousands)
For the Three Months Ended September 30, 2020
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance June 30, 2020121,692 $122 $541,363 $(10,031)$(361,639)$169,815 
Net loss— — — — (3,985)(3,985)
Change in unrealized loss on available-for-sale investments, net of taxes— — — (80)(80)
Foreign currency translation adjustment, net of taxes— — — 732 — 732 
Exercise of common stock options812 1 2,598 — — 2,599 
Vesting of restricted stock units488 — — — —  
Restricted stock units surrendered in lieu of withholding taxes(168)— (1,041)— — (1,041)
Share-based compensation— — 4,305 — — 4,305 
Equity component of convertible senior notes, net— — 21,747 — — 21,747 
Purchase of capped calls related to issuance of convertible senior notes— — (16,413)— — (16,413)
Balance September 30, 2020122,824 $123 $552,559 $(9,379)$(365,624)$177,679 

For the Three Months Ended September 30, 2019
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance June 30, 2019115,760 $116 $520,375 $(9,482)$(354,363)$156,646 
Net loss— — — — (2,751)(2,751)
Change in unrealized loss on available-for-sale investments, net of taxes— — — 2 — 2 
Foreign currency translation adjustment, net of taxes— — — (357)— (357)
Exercise of common stock options5 — 13 — — 13 
Vesting of restricted stock units1,129 1 (1)— —  
Restricted stock units surrendered in lieu of withholding taxes(381)— (1,015)— — (1,015)
Share-based compensation— — 5,386 — — 5,386 
Balance September 30, 2019116,513 $117 $524,758 $(9,837)$(357,114)$157,924 




7

For the Nine Months Ended September 30, 2020
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance December 31, 2019118,368 $118 $530,285 $(9,210)$(354,656)$166,537 
Net loss— — — — (10,968)(10,968)
Change in unrealized loss on available-for-sale investments, net of taxes— — — (80)— (80)
Foreign currency translation adjustment, net of taxes— — — (89)— (89)
Exercise of common stock options2,672 3 7,607 — — 7,610 
Vesting of restricted stock units2,233 2 5 — — 7 
Restricted stock units surrendered in lieu of withholding taxes(749)— (3,986)— — (3,986)
Issuance of common stock under employee stock purchase plan300 — 1,074 — — 1,074 
Share-based compensation— — 12,240 — — 12,240 
Equity component of convertible senior notes, net— — 21,747 — — 21,747 
Purchase of capped calls related to issuance of convertible senior notes— — (16,413)— — (16,413)
Balance September 30, 2020122,824 $123 $552,559 $(9,379)$(365,624)$177,679 

For the Nine Months Ended September 30, 2019
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance December 31, 2018114,246 114 513,682 (10,033)(338,612)165,151 
Net loss— — — — (18,502)(18,502)
Change in unrealized loss on available-for-sale investments, net of taxes— — — 39 — 39 
Foreign currency translation adjustment, net of taxes— — — 157 — 157 
Exercise of common stock options10 — 21 — — 21 
Vesting of restricted stock units2,695 3 (3)— —  
Restricted stock units surrendered in lieu of withholding taxes(887)— (2,528)— — (2,528)
Issuance of common stock under employee stock purchase plan449 — 1,095 — — 1,095 
Share-based compensation— — 12,491 — — 12,491 
Balance September 30, 2019116,513 117 524,758 (9,837)(357,114)157,924 

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


8

Limelight Networks, Inc.
Unaudited Consolidated Statements of Cash Flows
(In thousands)
 Nine Months Ended September 30,
 20202019
Operating activities
Net loss$(10,968)$(18,502)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization17,161 14,450 
Share-based compensation12,238 10,463 
Foreign currency remeasurement gain(113)(104)
Deferred income taxes(80)(30)
Gain on sale of property and equipment(1)(56)
Accounts receivable charges476 1,274 
Amortization of premium on marketable securities87 29 
Noncash interest expense868  
Changes in operating assets and liabilities:
Accounts receivable(8,221)(11,051)
Prepaid expenses and other current assets(2,679)(777)
Income taxes receivable3 43 
Other assets2,504 (2,641)
Accounts payable and other current liabilities8,159 3,675 
Deferred revenue(109)(557)
Income taxes payable(15)204 
Payments related to litigation, net (3,040)
Other long term liabilities265 (137)
Net cash provided by (used in) operating activities 19,575 (6,757)
Investing activities
Purchases of marketable securities(52,690)(10,279)
Sale and maturities of marketable securities2,900 32,153 
Purchases of property and equipment(22,128)(24,224)
Proceeds from sale of property and equipment1 51 
Net cash used in investing activities (71,917)(2,299)
Financing activities
Proceeds from issuance of debt, net121,600  
Purchase of capped calls(16,413) 
Payment of debt issuance costs(784) 
Payments of employee tax withholdings related to restricted stock vesting(3,987)(2,528)
Proceeds from employee stock plans8,691 1,116 
Net cash provided by (used in) financing activities109,107 (1,412)
Effect of exchange rate changes on cash and cash equivalents69 (83)
Net increase (decrease) in cash and cash equivalents56,834 (10,551)
Cash and cash equivalents, beginning of period18,335 25,383 
Cash and cash equivalents, end of period$75,169 $14,832 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$97 $30 
Cash paid during the period for income taxes, net of refunds$452 $340 

The accompanying notes are an integral part of the unaudited consolidated financial statements.
9

Limelight Networks, Inc.
Notes to Unaudited Consolidated Financial Statements
September 30, 2020
1. Nature of Business
Limelight Networks Inc., a provider of digital content delivery, online video delivery, cloud security, edge computing and cloud storage services, empowers customers to provide exceptional digital experiences. Limelight’s edge services platform includes a globally distributed, high performance private network, 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, 2019. 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, 2020, or for any future periods.
Recent Accounting Standards
Adopted Accounting Standards            
    In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, which requires measurement and recognition of expected credit losses for financial assets held. The standard is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We adopted this guidance effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures and there was no cumulative-effect adjustment required.
    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. We adopted this guidance effective January 1, 2020, using a prospective approach. The adoption of this guidance did not 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. 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 adopted this guidance effective January
10

1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
    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. We adopted this guidance effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12 to simplifying the accounting for income taxes. ASU 2019-12 is intended to simplify various aspects related to accounting for income taxes, eliminates certain exceptions to the general principles in the Accounting Standards Codification (ASC) Topic 740 related to intra-period tax allocation, simplifies when companies recognize deferred taxes in an interim period, and clarifies certain aspects of the current guidance to promote consistent application. This guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. ASU 2019-12 requires a retrospective, modified retrospective or prospective transition approach for individual aspects of the ASU. This guidance is applicable to us for our fiscal year beginning January 1, 2021. We are currently evaluating the potential impact of this guidance on our consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. ASU 2020-06 also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for our fiscal year beginning after December 15, 2021, including interim periods within this fiscal year. Early adoption is permitted, but no earlier than our fiscal year beginning after December 15, 2020, including interim periods within those fiscal years. This guidance can be applied using either a modified or full retrospective approach. We expect to early adopt this guidance, however at this time we are currently evaluating the impact this guidance will have on our consolidated financial statements.
Significant Accounting Policies
There have been no changes in the significant accounting policies from those that were disclosed in our Annual Report, except for convertible senior notes as described below:
Convertible Senior Notes
In July 2020, we issued $125,000 aggregate principal amount of 3.50% convertible senior notes. We separate our convertible senior notes (the Notes) into liability and equity components. The carrying amount of the liability component is calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option is determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component (debt discount) is amortized to interest expense at an effective interest rate over the contractual term of the Notes. The equity component is recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. We allocate the issuance costs to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component are netted with the equity component in stockholders’ equity.
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.
11

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, 2020, we have approximately $3,641 of remaining unsatisfied performance obligations. We recognized revenue of approximately $1,911 and $2,200, respectively, during the three months ended September 30, 2020 and 2019, related to these types of contracts with our customers. During the nine months ended September 30, 2020 and 2019, we recognized approximately $6,008 and $7,400, respectively. We expect to recognize approximately 37% of the remaining unsatisfied performance obligations in 2020, approximately 57% in 2021, and approximately 6% in 2022.
3. Investments in Marketable Securities
The following is a summary of marketable securities (designated as available-for-sale) at September 30, 2020.
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Certificate of deposit$40 $ $ $40 
Corporate notes and bonds46,705  78 46,627 
Municipal securities2,997 1 2 2,996 
Total marketable securities$49,742 $1 $80 $49,663 
The amortized cost and estimated fair value of marketable securities at September 30, 2020, 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$42,175 $1 $69 $42,107 
Due after one year and through five years7,567  11 7,556 
Total marketable securities$49,742 $1 $80 $49,663 
The following is a summary of marketable securities (designated as available-for-sale) at December 31, 2019.
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Certificate of deposit$40 $ $ $40 
The amortized cost and estimated fair value of marketable securities at December 31, 2019, by maturity are shown below:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Available-for-sale securities:
Due after one year and through five years40   40 
12

4. Accounts Receivable, net
    Accounts receivable, net include:
 September 30,December 31,
 20202019
Accounts receivable$43,306 $35,619 
Less: credit allowance(200)(170)
Less: allowance for doubtful accounts(884)(973)
Total accounts receivable, net$42,222 $34,476 
    All trade receivables are reported on the Consolidated Balance Sheets at their amortized cost adjusted for any write-offs and net of allowances for credit losses. We maintain an allowance for credit losses, which represents an estimate of expected losses of our receivables considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of our ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses for our trade receivables. For trade receivables, we apply a reserve percentage to the specific age of the receivable to estimate the allowance for doubtful accounts. The reserve percentages are determined based on our historical write-off experience. Determination of the proper amount of allowance requires management to exercise judgment about the timing, frequency and severity of potential credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.
    We evaluate the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect our customers’ ability to pay. These factors may include the customer’s financial condition, past payment experience, and credit bureau information.
    The following is a roll-forward of the allowances for doubtful accounts related to trade accounts receivable for the nine months ended September 30, 2020:
Nine Months Ended
September 30, 2020
Beginning of period973 
  Provision for credit losses476 
  Write-offs(565)
End of period884 
5. Prepaid Expenses and Other Current Assets
    Prepaid expenses and other current assets include:
 September 30,December 31,
 20202019
Prepaid bandwidth and backbone1,324 1,717 
VAT receivable3,877 3,068 
Prepaid expenses and insurance2,731 1,685 
Vendor deposits and other4,629 3,450 
Total prepaid expenses and other current assets$12,561 $9,920 





13

6. Property and Equipment, net
    Property and equipment, net include:
 September 30,December 31,
 20202019
Network equipment$134,082 $126,975 
Computer equipment and software7,293 7,603 
Furniture and fixtures1,785 1,906 
Leasehold improvements7,455 7,888 
Other equipment21 54 
Total property and equipment150,636 144,426 
Less: accumulated depreciation (103,143)(98,290)
Total property and equipment, net$47,493 $46,136 
    Cost of revenue depreciation expense related to property and equipment was approximately $5,602 and $4,961, respectively, for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, respectively, cost of revenue depreciation expense related to property and equipment was approximately $16,112 and $13,905, respectively.
    Operating expense depreciation and amortization expense related to property and equipment was approximately $384 and $172, respectively, for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, respectively, operating expense depreciation and amortization expense related to property and equipment was approximately $1,049 and $545, respectively.
7. Other Current Liabilities
    Other current liabilities include:
 September 30,December 31,
 20202019
Accrued compensation and benefits$8,565 $4,918 
Accrued cost of revenue5,104 4,176 
Accrued interest payable791  
Other accrued expenses3,124 4,304 
Total other current liabilities$17,584 $13,398 
8. Debt
Convertible Senior Notes - Due 2025
On July 27, 2020, we issued $125,000 aggregate principal amount of 3.50% Convertible Senior Notes due 2025 (the Notes), including the initial purchasers’ exercise in full of their option to purchase an additional $15,000 principal amount of the Notes, in a private placement to qualified institutional buyers in an offering exempt from registration under the Securities Act of 1933, as amended. The net proceeds from the issuance of the Notes was $120,816 after deducting transaction costs.
The Notes are governed by an indenture (the Indenture) between us, as the issuer, and U.S. Bank, National Association, as trustee. The Notes are senior, unsecured obligations of ours and will be equal in right of payment with our senior, unsecured indebtedness; senior in right of payment to our indebtedness that is expressly subordinated to the notes; effectively subordinated to our senior, secured indebtedness, including future borrowings, if any, under our $20,000 credit facility with SVB, to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the Notes become automatically due and payable.
The Notes mature on August 1, 2025 unless earlier converted, redeemed or repurchased in accordance with their term prior to the maturity date. Interest is payable semiannually in arrears on February 1 and August 1 of each year, beginning on
14

February 1, 2021. The holders of the Notes may convert all or any portion of their Notes at their option only in the following circumstances:
(1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price of $8.53 for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
(2) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price per $1 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
(3) upon the occurrence of certain c