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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, 2021
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 500
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 29, 2021: 133,811,874 shares.


LIMELIGHT NETWORKS, INC.
FORM 10-Q
Quarterly Period Ended September 30, 2021
TABLE OF CONTENTS
  Page
PART I. FINANCIAL INFORMATION
Item 1.FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020
Unaudited Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020
Unaudited Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2021 and 2020
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020
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 (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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 and Application Operations (AppOps), our coordinated complete solution to deliver instant, secure website applications, as well as other products and technologies;
our beliefs regarding the competition within the digital edge platform industry;
our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;
our expectations regarding headcount and our ability to recruit personnel;
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 expectations regarding litigation and other pending or potential disputes;
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 clients, our focus on core market growth segments where we have a right-to-win, as well as our expectations regarding client turnover;
the sufficiency of our sources of funding;
the sufficiency of our facilities to meet our needs;
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 clients; and
our beliefs regarding the impact of health epidemics and pandemics, including the outbreak of COVID-19, on our current and potential clients, and our balance sheet, financial condition, and results of operations.
    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, client 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,
2021
December 31,
2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$39,585 $46,795 
Marketable securities36,201 76,928 
Accounts receivable, net46,179 31,675 
Income taxes receivable62 68 
Prepaid expenses and other current assets13,396 15,588 
Total current assets135,423 171,054 
Property and equipment, net36,392 46,418 
Operating lease right of use assets7,683 10,150 
Marketable securities, less current portion40 40 
Deferred income taxes1,693 1,530 
Goodwill105,221 77,753 
Intangible assets, net23,680  
Other assets5,972 7,233 
Total assets$316,104 $314,178 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$13,768 $4,587 
Deferred revenue7,965 933 
Operating lease liability obligations1,966 2,465 
Income taxes payable443 253 
Other current liabilities17,950 17,560 
Total current liabilities42,092 25,798 
Convertible senior notes, net121,576 100,945 
Operating lease liability obligations, less current portion10,045 11,265 
Deferred income taxes308 279 
Deferred revenue, less current portion307 220 
Other long-term liabilities453 479 
Total liabilities174,781 138,986 
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; 133,812 and 123,653 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
134 124 
Additional paid-in capital571,268 556,512 
Accumulated other comprehensive loss(8,491)(7,511)
Accumulated deficit(421,588)(373,933)
Total stockholders’ equity141,323 175,192 
Total liabilities and stockholders’ equity$316,104 $314,178 

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,
 2021202020212020
Revenue$55,202 $59,243 $154,745 $174,801 
Cost of revenue:
Cost of services (1)33,687 31,905 99,708 92,406 
Depreciation — network5,685 5,602 17,293 16,112 
Total cost of revenue39,372 37,507 117,001 108,518 
Gross profit15,830 21,736 37,744 66,283 
Operating expenses:
General and administrative10,532 7,751 30,944 23,820 
Sales and marketing5,987 10,456 21,619 33,279 
Research and development5,205 5,425 16,520 16,614 
Depreciation and amortization730 384 1,818 1,049 
Restructuring charges1,770  10,798  
Total operating expenses24,224 24,016 81,699 74,762 
Operating loss(8,394)(2,280)(43,955)(8,479)
Other income (expense):
Interest expense(1,308)(1,674)(3,899)(1,756)
Interest income17 10 104 40 
Other, net(209)25 (864)(396)
Total other expense(1,500)(1,639)(4,659)(2,112)
Loss before income taxes(9,894)(3,919)(48,614)(10,591)
Income tax expense 211 66 718 377 
Net loss$(10,105)$(3,985)$(49,332)$(10,968)
Net loss per share:
Basic$(0.08)$(0.03)$(0.39)$(0.09)
Diluted$(0.08)$(0.03)$(0.39)$(0.09)
Weighted average shares used in per share calculation:
Basic126,791 122,363 125,710 120,519 
Diluted126,791 122,363 125,710 120,519 

(1) Cost of services excludes amortization related to certain intangibles, including technology, customer relationships, and trade names, which are included in depreciation and amortization

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,
 2021202020212020
Net loss$(10,105)$(3,985)$(49,332)$(10,968)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investments3 (80)32 (80)
Foreign currency translation gain (loss)(529)732 (1,012)(89)
Other comprehensive income (loss)(526)652 (980)(169)
Comprehensive loss$(10,631)$(3,333)$(50,312)$(11,137)
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, 2021
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance June 30, 2021126,705 $127 $550,205 $(7,965)$(411,483)$130,884 
Net loss— — — — (10,105)(10,105)
Change in unrealized gain on available-for-sale investments, net of taxes— — — 3 — 3 
Foreign currency translation adjustment, net of taxes— — — (529)— (529)
Vesting of restricted stock units306 — — — — — 
Restricted stock units surrendered in lieu of withholding taxes(77)— (217)— — (217)
Share-based compensation— — 2,854 — — 2,854 
Issuance of common stock for business acquisition6,878 7 18,426 — — 18,433 
Balance September 30, 2021133,812 $134 $571,268 $(8,491)$(421,588)$141,323 
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 




7

For the Nine Months Ended September 30, 2021
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance December 31, 2020123,653 $124 $556,512 $(7,511)$(373,933)$175,192 
Cumulative effect of adoption of new accounting pronouncement— — (21,733)— 1,677 (20,056)
Net loss— — — — (49,332)(49,332)
Change in unrealized gain on available-for-sale investments, net of taxes— — — 32 — 32 
Foreign currency translation adjustment, net of taxes— — — (1,012)— (1,012)
Exercise of common stock options1,935 2 4,545 — — 4,547 
Vesting of restricted stock units1,401 1 (1)— —  
Restricted stock units surrendered in lieu of withholding taxes(410)— (1,314)— — (1,314)
Issuance of common stock under employee stock purchase plan355 — 913 — — 913 
Share-based compensation— — 13,920 — — 13,920 
Issuance of common stock for business acquisition6,878 7 18,426 — — 18,433 
Balance September 30, 2021133,812 $134 $571,268 $(8,491)$(421,588)$141,323 
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 

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,
 20212020
Operating activities
Net loss$(49,332)$(10,968)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization19,111 17,161 
Share-based compensation16,477 12,238 
Foreign currency remeasurement gain(66)(113)
Deferred income taxes(198)(80)
Gain on sale of property and equipment(219)(1)
Accounts receivable charges1,047 476 
Amortization of premium on marketable securities1,597 87 
Noncash interest expense604 868 
Changes in operating assets and liabilities:
Accounts receivable(13,037)(8,221)
Prepaid expenses and other current assets1,678 (2,679)
Income taxes receivable4 3 
Other assets2,017 2,504 
Accounts payable and other current liabilities8,163 8,159 
Deferred revenue4,640 (109)
Income taxes payable210 (15)
Other long term liabilities(26)265 
Net cash (used in) provided by operating activities (7,330)19,575 
Investing activities
Purchases of marketable securities(44,838)(52,690)
Sale and maturities of marketable securities84,000 2,900 
Purchases of property and equipment(11,909)(22,128)
Proceeds from sale of property and equipment219 1 
Acquisition of business, net of cash acquired(30,968) 
Net cash used in investing activities (3,496)(71,917)
Financing activities
Proceeds from issuance of debt, net 121,600 
Purchase of capped calls (16,413)
Payment of debt issuance costs(30)(784)
Payments of employee tax withholdings related to restricted stock vesting(1,315)(3,987)
Proceeds from employee stock plans5,460 8,691 
Net cash provided by financing activities4,115 109,107 
Effect of exchange rate changes on cash and cash equivalents(499)69 
Net (decrease) increase in cash and cash equivalents(7,210)56,834 
Cash and cash equivalents, beginning of period46,795 18,335 
Cash and cash equivalents, end of period$39,585 $75,169 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$4,460 $97 
Cash paid during the period for income taxes, net of refunds$714 $452 
Common stock issued in connection with acquisition of business$18,433 $ 

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, 2021
1. Nature of Business
Limelight Networks, Inc., is an industry-leader in content delivery services and AppOps, our coordinated complete solution to deliver instant, secure website applications at the edge that provides powerful tools and a client-first approach to optimize and deliver digital experiences at the edge. We are a trusted partner to the world’s biggest brands and serve their global customers with experiences such as livestream sporting events, global movie launches, video games, or file downloads for new phone apps. We offer one of the largest, best-optimized private networks coupled with a global team of industry experts to provide edge services that are fast, secure, and reliable.
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 Securities Exchange Commission (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, 2020. 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, 2021, or for any future periods.
Recent Accounting Standards
Adopted Accounting Standards            
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. We adopted this guidance effective January 1, 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
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. We early adopted this guidance on January 1, 2021, on a modified retrospective basis. As a result of the adoption of ASU 2020-06, our total remaining interest expense over the contractual terms of our convertible debt will be approximately $20,823 less than under the previous accounting standards. The adoption resulted in a $21,733 decrease in additional paid in capital from the derecognition of the bifurcated equity component, $20,255 increase in debt from the derecognition of the discount associated with the bifurcated equity component and $1,677 decrease to the opening balance of accumulated deficit, representing the cumulative interest expense recognized related to the
10

amortization of the bifurcated conversion option. We wrote-off the related deferred tax liabilities with a corresponding adjustment to the valuation allowance, resulting in no net tax impact to the cumulative adjustment to retained earnings.
Recently Issued Accounting Standards
In October 2021, the FASB issued ASU 2021-08, which provides amendments to improve, simplify, and provide consistency for recognition and measurement of acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments require that an acquirer recognize and measure such contract assets and contract liabilities under Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. The amendments also allow for election of certain practical expedients, which are applied on an acquisition-by-acquisition basis. The new accounting amendments are effective for us beginning in fiscal 2023 with prospective application. Early adoption is permitted, including in any interim period, and if elected, the amendments are applied retrospectively for any acquisitions that occurred in the fiscal year of interim adoption. We expect to early adopt this ASU and are evaluating the impacts of the amendments on our condensed 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 restructuring charge, convertible senior notes, business combinations, finite intangible assets and share-based compensation as described below:
Restructuring Charges
We account for restructuring costs under ASC 420, Exit or Disposal Obligations. Restructuring costs are recognized when the liability is incurred. A restructuring liability related to employee terminations is recorded when a one-time benefit arrangement is communicated to an employee who is involuntarily terminated as part of a reorganization and the amount of the termination benefit is known, provided that the employee is not required to render future services in order to receive the termination benefit. If fixed assets, or other assets are to be disposed of as a result of our restructuring efforts, the assets are written off when we commit to dispose of them, and they are no longer in use. If applicable, depreciation is accelerated on fixed assets for the period of time the asset continues to be used until the asset ceases to be used. Other restructuring costs are generally recorded as the cost is incurred or the service is provided.
Convertible Senior Notes
In July 2020, we issued $125,000 aggregate principal amount of 3.50% convertible senior notes. Effective January 1, 2021, we early adopted ASU 2020-06. The conversion option that was previously accounted for under the cash conversion model or beneficial conversion feature model was recombined into a single instrument that is classified as a liability for convertible debt or equity for equity-classified preferred stock.
Business Combinations                         
In accounting for acquisitions through which a set of assets and activities are transferred to us, we perform an initial test to determine whether substantially all of the fair value of the gross assets transferred are concentrated in a single identifiable asset or a group of similar identifiable assets, such that the acquisition would not represent a business. If the initial test does not result in substantially all of the fair value concentrated in a single or group of similar assets, we then perform a second test to evaluate whether the assets and activities transferred include inputs and substantive processes that, together, significantly contribute to the ability to create outputs, which would constitute a business. If the result of the second test indicates that the acquired assets and activities constitute a business, we account for the transaction as a business combination.
For our business combinations, we allocate the purchase consideration of the acquisition, which includes the estimated acquisition date fair value of contingent consideration (if applicable), to the tangible assets, liabilities and identifiable intangible assets acquired based on each of the estimated fair values at the acquisition date. The excess of the purchase consideration over the fair values is recorded as goodwill. Determining the fair value of such items requires judgment, including estimating future cash flows or the cost to recreate an acquired asset.
Acquisition-related expenses are expensed as incurred, except for those costs incurred to issue debt or equity securities (if applicable), and are included in general and administrative expense in our consolidated statements of operations. During and up to the one-year period beginning with the acquisition date, we may record certain purchase accounting adjustments related to the fair value of assets acquired and liabilities assumed against goodwill. After the final determination of the fair value of assets acquired or liabilities assumed, any subsequent adjustments are recorded to our consolidated statements of operations. The fair value of contingent consideration liabilities assumed from an acquisition are remeasured each reporting period after the acquisition date and the changes in the estimated fair value, if any, are recorded within operating expenses in our consolidated
11

statement of operations for such period. In accounting for income taxes in a business combination, changes in the deferred tax asset valuations allowance and income tax uncertainties after the acquisition date will be recognized through income tax expense in our consolidated statement of operations each reporting period.
The results of operations of the acquired business are included in our consolidated statement of operations since the date of acquisition.
Finite Intangible Assets
Finite-lived intangible assets are amortized over the following estimated useful lives:

Trade name3.0 years
Customer relationships5.0 years
Technology7.0 years
Our finite-lived intangible assets are primarily amortized on a straight-line basis. We annually evaluate the estimated remaining useful lives of our intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization.
Long-lived and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be fully recoverable. An impairment loss is recognized if the sum of the expected long-term undiscounted cash flows the asset is expected to generate is less than its carrying amount. Any write-downs are treated as permanent reductions in the carrying amount of the respective asset. Our analysis did not indicate impairment during any of the periods presented.
Share-Based Compensation
We account for our share-based compensation awards using the fair-value method. The grant date fair value was determined using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton valuation calculation requires us to make key assumptions such as future stock price volatility, expected terms, risk-free rates, and dividend yield. Our expected volatility is derived from our volatility rate as a publicly traded company. The expected term is based on our historical experience. The risk-free interest factor is based on the United States Treasury yield curve in effect at the time of the grant for zero coupon United States Treasury notes with maturities of approximately equal to each grant’s expected term. We have never paid cash dividends and do not currently intend to pay cash dividends, and therefore, we have assumed a 0% dividend yield.
We apply the straight-line attribution method to recognize compensation costs associated with awards that are not subject to graded vesting. For awards subject to graded vesting, we recognize expense separately for each vesting tranche. We regularly estimate when and if performance-based award will be earned and record expense over the estimated service period only for awards considered probable of being earned. Any previously recognized expense is reversed in the period in which an award is determined to no longer be probable of being earned.
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
For contracts that contain minimum commitments over the contractual term, we estimate an amount of variable consideration by using the expected value 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 clients have entered into contracts with contract terms generally from one to four years. As of September 30, 2021, we have approximately $4,051 of remaining unsatisfied performance obligations. We recognized revenue of approximately $2,418 and $1,911, respectively, during the three months ended September 30, 2021 and 2020, related to these types of contracts with our clients. During the nine months ended September 30, 2021 and 2020, we recognized approximately $6,774 and $6,008, respectively. We expect to recognize approximately 47% of the remaining unsatisfied performance obligations in 2021, approximately 51% in 2022, and approximately 2% in 2023.
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We recorded deferred revenue of $2,479 in accordance with the allocation of purchase consideration related to the acquisition of Moov Corporation (Moov). Deferred revenue is primarily driven by payments received in advance of satisfying our performance obligations. We recognized approximately $498 in September 2021 that was included in the deferred revenue purchase consideration allocation. The deferred revenue balance of approximately $1,981 as of September 30, 2021 represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied. We expect to recognize approximately 46% of the remaining unsatisfied performance obligations in 2021, and approximately 54% in 2022.
3. Business Acquisition
In September 2021, we closed the acquisition of 100% of the equity interests of Moov, a California corporation doing business as Layer0, a sub-scale SaaS based application acceleration and developer support platform, for total purchase consideration of $52,487. The total purchase consideration included $34,054 in cash, and 6,878 shares of our common stock valued at $18,433 at the acquisition date.
In connection with this transaction, a shareholder of Moov entered into an employment agreement with us. As part of the employment agreement, the employee will receive contingent consideration of approximately $4,300 to be paid out ratably over a three year period on each anniversary of the acquisition closing date if the employee remains employed by us. As the employee is required to render services to us following the acquisition, this contingent consideration is not included in the purchase consideration.
The acquisition was accounted for under the acquisition method of accounting and the operating results of Moov have been included in our consolidated financial statements as of the closing date of the acquisition. Under the acquisition method of accounting, the aggregate amount of consideration paid by us was allocated to Moov net tangible assets and intangible assets based on their estimated fair values as of the acquisition closing date. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The factors contributing to the recognition of goodwill were based upon our conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill, which is non-deductible for tax purposes, represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and is primarily attributable to the technology, customer relationships and trade name of the acquired business and expected synergies at the time of the acquisition.
We retained an independent third-party valuation firm to assist management in our valuation of the acquired assets and liabilities.
The following table presents the allocation of the purchase price for Moov:
Consideration:
Cash$34,054 
Common stock18,433 
Total consideration$52,487 
The fair value of our common stock consideration of 6,878 shares, is based on the closing price of our common stock of $2.68 per share on the acquisition closing date.
The following table summarizes the allocation of the purchase consideration to the acquisition date fair value of the assets, including intangible assets, liabilities assumed and related goodwill acquired:
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Cash$3,130 
Accounts receivable2,515 
Prepaid expenses and other current assets273 
Goodwill27,479 
Intangible assets
  Trade name91 
  Customer relationships7,090 
  Technology16,820 
Total assets acquired57,398 
Accounts payable and accrued liabilities2,432 
Deferred revenue2,479 
Total liabilities4,911 
Total purchase consideration$52,487 
Certain amounts noted above are preliminary and subject to change during the respective measurement period (up to one year from the acquisition date) as we obtain additional information for the preliminary fair value estimates of the assets acquired and liabilities assumed. The primary preliminary estimates that are not yet finalized relate to certain assets and liabilities assumed, identifiable intangible assets, income and non-income based taxes and residual goodwill.
The fair value of the acquired intangible assets were determined as follows, trade name - income approach using the relief from royalty methodology, customer relationships - utilizing the cost approach methodology, and technology - excess earnings methodology under the income approach. The weighted-average amortization period of the acquired intangible assets was 6.4 years at acquisition.
During the three and nine months ended September 30, 2021, Moov represented $817 of our total revenue and $450 of our consolidated net loss. For the period January 1, 2021 to the acquisition closing date, Moov's unaudited revenue was approximately $8,969, and their net loss was approximately $628. For the year ended December 31, 2020, Moov's unaudited revenue was approximately $13,400, and their net loss was approximately $600.
Transaction costs incurred by us in connection with the Moov acquisition were $1,263 and $1,441 for the three and nine months ended September 30, 2021, respectively, and were recorded within general and administrative expenses in our consolidated statements of operations.
4. Investments in Marketable Securities
The following is a summary of marketable securities (designated as available-for-sale) at September 30, 2021:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Certificate of deposit$1,915 $ $ $1,915 
Corporate notes and bonds14,780 7 16 14,771 
Municipal securities19,562  7 19,555 
Total marketable securities$36,257 $7 $23 $36,241 
The amortized cost and estimated fair value of marketable securities at September 30, 2021, 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$36,217 $7 $23 $36,201 
Due after one year and through five years40   40 
Total marketable securities$36,257 $7 $23 $36,241 
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The following is a summary of marketable securities (designated as available-for-sale) at December 31, 2020:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Certificate of deposit$551 $ $ $551 
Corporate notes and bonds45,426  41 45,385 
Municipal securities31,039 1 8 31,032 
Total marketable securities$77,016 $1 $49 $76,968 
The amortized cost and estimated fair value of marketable securities at December 31, 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$76,976 $1 $49 $76,928 
Due after one year and through five years40   40 
Total marketable securities$77,016 $1 $49 $76,968 
5. Accounts Receivable, net
    Accounts receivable, net include:
 September 30,December 31,
 20212020
Accounts receivable$48,007 $32,857 
Less: credit allowance(150)(170)
Less: allowance for doubtful accounts(1,678)(1,012)
Total accounts receivable, net$46,179 $31,675 
    The following is a roll-forward of the allowances for doubtful accounts related to trade accounts receivable for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020:
Nine Months EndedTwelve Months Ended
September 30, 2021December 31, 2020
Beginning of period$1,012 $973 
  Provision for credit losses1,047 801 
  Write-offs(381)(762)
End of period$1,678 $1,012 
6. Prepaid Expenses and Other Current Assets
    Prepaid expenses and other current assets include:
 September 30,December 31,
 20212020
Prepaid bandwidth and backbone1,530 3,519 
VAT receivable4,454 4,392 
Prepaid expenses and insurance3,011 2,906 
Vendor deposits and other4,401 4,771 
Total prepaid expenses and other current assets$13,396 $15,588 

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7. Property and Equipment, net
    Property and equipment, net include:
 September 30,December 31,
 20212020
Network equipment$125,665 $136,788 
Computer equipment and software7,014 7,358 
Furniture and fixtures1,412 1,703 
Leasehold improvements7,158 7,470 
Other equipment18 21 
Total property and equipment141,267 153,340 
Less: accumulated depreciation (104,875)(106,922)
Total property and equipment, net$36,392 $46,418 
    Cost of revenue depreciation expense related to property and equipment was approximately $5,685 and $5,602, respectively, for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, respectively, cost of revenue depreciation expense related to property and equipment was approximately $17,293 and $16,112, respectively.
    Operating expense depreciation and amortization expense related to property and equipment was approximately $409 and $384, respectively, for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, respectively, operating expense depreciation expense related to property and equipment was approximately $1,497 and $1,049, respectively.
8. Goodwill and Other Intangible Assets
We have recorded goodwill as a result of past and current business acquisitions. We review goodwill for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may exceed their fair value. We concluded that we have one reporting unit and assigned the entire balance of goodwill to this reporting unit as of September 30, 2021.
The changes in the carrying amount of goodwill for the nine months ended September 30, 2021, were as follows:
Balance, December 31, 2020$77,753 
Foreign currency translation adjustment(332)
Balance, March 31, 2021$77,421 
Foreign currency translation adjustment221 
Balance, June 30, 2021