10-Q 1 akam-20220630.htm 10-Q akam-20220630
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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 June 30, 2022
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 000-27275
______________________________________________ 
Akamai Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware 04-3432319
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
145 Broadway
Cambridge, MA 02142
(617) 444-3000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
______________________________________________ 
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 $0.01 per share
AKAMNasdaq Global Select Market

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 (the “Exchange Act”) 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  
x    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  x    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 filer
xAccelerated 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  x
The number of shares outstanding of the registrant’s common stock as of August 5, 2022: 158,957,143
1

AKAMAI TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) (unaudited)June 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$426,710 $536,725 
Marketable securities 263,979 541,470 
Accounts receivable, net of reserves of $2,012 and $1,397 at June 30, 2022, and December 31, 2021, respectively
668,425 675,926 
Prepaid expenses and other current assets207,043 166,313 
Total current assets1,566,157 1,920,434 
Marketable securities 640,668 1,088,048 
Property and equipment, net1,541,875 1,534,329 
Operating lease right-of-use assets797,313 815,754 
Acquired intangible assets, net476,707 313,225 
Goodwill2,763,828 2,156,254 
Deferred income tax assets292,817 168,342 
Other assets131,689 142,287 
Total assets$8,211,054 $8,138,673 

3

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(in thousands, except share data) (unaudited)June 30,
2022
December 31,
2021
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$131,649 $109,928 
Accrued expenses306,402 411,590 
Deferred revenue111,771 86,517 
Revolving credit facility75,000  
Operating lease liabilities186,945 175,683 
Other current liabilities5,317 6,623 
Total current liabilities817,084 790,341 
Deferred revenue25,448 25,342 
Deferred income tax liabilities39,367 40,974 
Convertible senior notes2,283,037 1,976,167 
Operating lease liabilities679,031 707,087 
Other liabilities86,609 68,748 
Total liabilities3,930,576 3,608,659 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding
  
Common stock, $0.01 par value; 700,000,000 shares authorized; 162,029,136 shares issued and 159,469,828 shares outstanding at June 30, 2022, and 160,512,111 shares issued and outstanding at December 31, 2021
1,620 1,605 
Additional paid-in capital3,054,200 3,340,822 
Accumulated other comprehensive loss(143,079)(69,105)
Treasury stock, at cost, 2,559,308 shares at June 30, 2022, and no shares at December 31, 2021
(267,642) 
Retained earnings1,635,379 1,256,692 
Total stockholders’ equity4,280,478 4,530,014 
Total liabilities and stockholders’ equity$8,211,054 $8,138,673 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    
 For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(in thousands, except per share data) (unaudited)2022202120222021
Revenue$903,332 $852,824 $1,806,979 $1,695,532 
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)346,649 320,000 679,401 626,687 
Research and development92,070 77,255 192,005 159,300 
Sales and marketing126,665 111,894 249,384 228,248 
General and administrative141,219 134,295 294,481 271,010 
Amortization of acquired intangible assets16,972 12,060 30,616 23,487 
Restructuring charge (benefit)4,715 (2,114)12,731 5,002 
Total costs and operating expenses728,290 653,390 1,458,618 1,313,734 
Income from operations175,042 199,434 348,361 381,798 
Interest and marketable securities (loss) income, net(2,331)4,736 (2,542)9,314 
Interest expense(2,932)(18,037)(5,627)(35,871)
Other income (expense), net816 (811)(8,749)(1,628)
Income before provision for income taxes170,595 185,322 331,443 353,613 
Provision for income taxes(51,058)(18,009)(85,108)(29,907)
Loss from equity method investment (10,816)(7,635)(11,514)
Net income$119,537 $156,497 $238,700 $312,192 
Net income per share:
Basic$0.75 $0.96 $1.49 $1.91 
Diluted$0.74 $0.94 $1.47 $1.88 
Shares used in per share calculations:
Basic160,038 163,074 160,266 163,067 
Diluted161,710 166,263 162,674 165,976 

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

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(in thousands) (unaudited)2022202120222021
Net income$119,537 $156,497 $238,700 $312,192 
Other comprehensive (loss) income:
Foreign currency translation adjustments(49,278)16,981 (47,242)(7,284)
Change in unrealized loss on investments, net of income tax benefit of $567, $410, $5,515 and $1,347 for the three and six months ended June 30, 2022 and 2021, respectively
(5,190)(1,191)(26,732)(4,072)
Other comprehensive (loss) income(54,468)15,790 (73,974)(11,356)
Comprehensive income$65,069 $172,287 $164,726 $300,836 

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

6

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months
Ended June 30,
(in thousands) (unaudited)20222021
Cash flows from operating activities:
Net income$238,700 $312,192 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization293,199 269,186 
Stock-based compensation108,109 104,786 
(Benefit) provision for deferred income taxes(43,464)7,225 
Amortization of debt discount and issuance costs2,210 32,717 
Loss on investments15,895 11,514 
Other non-cash reconciling items, net22,643 2,140 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(3,947)(4,404)
Prepaid expenses and other current assets(38,132)(10,849)
Accounts payable and accrued expenses(59,975)(83,059)
Deferred revenue26,178 18,094 
Other current liabilities(5,901)(16,230)
Other non-current assets and liabilities8,367 (15,386)
Net cash provided by operating activities563,882 627,926 
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired(872,099)(15,638)
Purchases of property and equipment(125,220)(194,453)
Capitalization of internal-use software development costs(124,306)(124,835)
Purchases of short- and long-term marketable securities (382,236)
Proceeds from sales of short- and long-term marketable securities573,274 7,596 
Proceeds from maturities and redemptions of short- and long-term marketable securities120,433 513,850 
Other, net(4,206)(212)
Net cash used in investing activities(432,124)(195,928)
Cash flows from financing activities:
Net proceeds from borrowings and repayments under revolving credit facility75,000  
Proceeds related to the issuance of common stock under stock plans29,145 31,122 
Employee taxes paid related to net share settlement of stock-based awards(63,142)(76,260)
Repurchases of common stock(267,642)(154,416)
Other, net(104)(67)
Net cash used in financing activities(226,743)(199,621)
Effects of exchange rate changes on cash, cash equivalents and restricted cash(15,260)(4,148)
Net (decrease) increase in cash, cash equivalents and restricted cash(110,245)228,229 
Cash, cash equivalents and restricted cash at beginning of period537,751 353,466 
Cash, cash equivalents and restricted cash at end of period$427,506 $581,695 


7

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

 For the Six Months
Ended June 30,
(in thousands) (unaudited)20222021
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds received of $2,061 and $6,550 for the six months ended June 30, 2022 and 2021, respectively
$113,082 $56,995 
Cash paid for interest expense2,875 2,875 
Cash paid for operating lease liabilities111,601 117,632 
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities78,189 131,962 
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses39,075 43,520 
Capitalization of stock-based compensation16,180 19,524 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$426,710 $581,068 
Restricted cash796 627 
Cash, cash equivalents and restricted cash$427,506 $581,695 

The accompanying notes are an integral part of the condensed consolidated financial statements.
8

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended June 30, 2022
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance at April 1, 2022160,535,769 $1,615 $2,974,529 $(88,611)$(102,853)$1,515,842 $4,300,522 
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes233,231 2 (9,891)(9,889)
Issuance of common stock under employee stock purchase plan335,644 3 29,305 29,308 
Stock-based compensation60,257 60,257 
Repurchases of common stock(1,634,816)(164,789)(164,789)
Net income119,537 119,537 
Foreign currency translation adjustment(49,278)(49,278)
Change in unrealized loss on investments, net of tax(5,190)(5,190)
Balance at June 30, 2022159,469,828 $1,620 $3,054,200 $(143,079)$(267,642)$1,635,379 $4,280,478 


9

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued

Three Months Ended June 30, 2021
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance at April 1, 2021163,245,941 $1,638 $3,664,568 $(47,347)$(58,241)$760,745 $4,321,363 
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes284,735 3 (12,878)(12,875)
Issuance of common stock under employee stock purchase plan358,384 4 31,527 31,531 
Stock-based compensation60,526 60,526 
Repurchases of common stock(870,292)(96,175)(96,175)
Net income156,497 156,497 
Foreign currency translation adjustment16,981 16,981 
Change in unrealized loss on investments, net of tax(1,191)(1,191)
Balance at June 30, 2021163,018,768 $1,645 $3,743,743 $(31,557)$(154,416)$917,242 $4,476,657 


10

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued

Six Months Ended June 30, 2022
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance at January 1, 2022160,512,111 $1,605 $3,340,822 $(69,105)$ $1,256,692 $4,530,014 
Cumulative-effect adjustment from adoption of new accounting pronouncement
(375,414)139,987 (235,427)
Issuance of common stock upon the vesting of restricted and deferred stock units, net of shares withheld for employee taxes1,181,381 12 (64,540)(64,528)
Issuance of common stock under employee stock purchase plan335,644 3 29,305 29,308 
Stock-based compensation124,027 124,027 
Repurchases of common stock(2,559,308)(267,642)(267,642)
Net income238,700 238,700 
Foreign currency translation adjustment(47,242)(47,242)
Change in unrealized loss on investments, net of tax(26,732)(26,732)
Balance at June 30, 2022
159,469,828 $1,620 $3,054,200 $(143,079)$(267,642)$1,635,379 $4,280,478 


11

AKAMAI TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, continued

Six Months Ended June 30, 2021
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance at January 1, 2021162,709,720 $1,627 $3,664,820 $(20,201)$ $605,050 $4,251,296 
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes1,412,919 14 (76,895)(76,881)
Issuance of common stock under employee stock purchase plan358,384 4 31,527 31,531 
Stock-based compensation124,291 124,291 
Repurchases of common stock(1,462,255)(154,416)(154,416)
Net income312,192 312,192 
Foreign currency translation adjustment(7,284)(7,284)
Change in unrealized loss on investments, net of tax(4,072)(4,072)
Balance at June 30, 2021
163,018,768 $1,645 $3,743,743 $(31,557)$(154,416)$917,242 $4,476,657 

The accompanying notes are an integral part of the condensed consolidated financial statements.
12

AKAMAI TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Akamai Technologies, Inc. (the “Company”) provides solutions to power and protect life online. Its globally-distributed platform is comprised of more than 350,000 servers in over 130 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. The Company currently operates in one reportable and operating segment: providing solutions to power and protect life online.

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed in, or omitted from, these interim financial statements. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 28, 2022. The December 31, 2021 consolidated balance sheet included herein is derived from the Company's audited consolidated financial statements.

The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein.

Newly-Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board ("FASB") issued guidance that is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The Company adopted this guidance on January 1, 2022 on a modified retrospective basis.

The convertible senior notes included on the Company's condensed consolidated balance sheet more closely reflect the principal amounts. Prior to the adoption of this guidance, the Company separated its convertible senior notes into a liability and an equity component. The equity portion is now eliminated. The cumulative effect of the changes was an increase to convertible senior notes of $304.7 million, an increase to deferred income tax liabilities of $0.7 million, an increase to deferred income tax assets of $77.7 million, a decrease to property and equipment of $7.7 million, and a decrease to additional paid-in capital of $375.4 million on the condensed consolidated balance sheet. The net effect of these adjustments was recorded as an increase to retained earnings as of January 1, 2022.

Additionally, the new guidance eliminates the use of the treasury stock method for convertible instruments that can be settled in whole or in part with equity, when calculating diluted earnings per share. Instead, it requires application of the if-converted method. Under that method, diluted earnings per share would generally be calculated assuming that all the convertible senior notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be antidilutive. The application of the if-converted method reduces the Company’s reported diluted earnings per share after the adoption date. However, in December 2021, the Company made an irrevocable election to settle the principal portion of the convertible senior notes with cash. Accordingly, the if-converted method is only impacted by any potential shares to be delivered for the amount in excess of the principal portion. The changes to the diluted earnings per share guidance did not materially impact our results of operations.

With the elimination of the debt discount created by the equity component, amortization of the debt discount is eliminated, which decreases interest expense, and therefore increases net income and earnings per share, from the period of adoption. This had the effect of increasing our basic and diluted earnings per share for the three and six month periods ended June 30, 2022 by $0.08 and $0.16, respectively.
13

2. Fair Value Measurements

The following is a summary of available-for-sale marketable securities held as of June 30, 2022 and December 31, 2021 (in thousands):

Gross UnrealizedClassification on Balance Sheet
Amortized CostGainsLossesAggregate
Fair Value
Short-Term
Marketable
Securities
Long-Term
Marketable
Securities
As of June 30, 2022
Corporate bonds$644,104 $ $(21,749)$622,355 $239,659 $382,696 
U.S. government agency obligations272,113  (8,766)263,347 23,710 239,637 
$916,217 $ $(30,515)$885,702 $263,369 $622,333 
As of December 31, 2021
Commercial paper$25,056 $ $(24)$25,032 $25,032 $ 
Corporate bonds1,268,991 1,191 (4,275)1,265,907 459,012 806,895 
U.S. government agency obligations316,728 3 (1,281)315,450 56,530 258,920 
$1,610,775 $1,194 $(5,580)$1,606,389 $540,574 $1,065,815 

The Company offers certain eligible employees the ability to participate in a non-qualified deferred compensation plan. The mutual funds held by the Company that are associated with this plan are classified as restricted trading securities. These securities are not included in the available-for-sale securities table above but are included in marketable securities in the condensed consolidated balance sheets.

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive loss in the condensed consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest income in the condensed consolidated statements of income. As of June 30, 2022, the Company held for investment corporate bonds with a fair value of $137.9 million, which were classified as available-for-sale marketable securities that had been in a continuous unrealized loss position for more than 12 months. The unrealized loss related to these corporate bonds was $4.2 million and is included in accumulated other comprehensive loss as of June 30, 2022. The unrealized loss is attributable to changes in interest rates. Based on the evaluation of available evidence, the Company has determined that any unrealized losses do not represent other than temporary impairments.
14


The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets as of June 30, 2022 and December 31, 2021 (in thousands):

Total Fair ValueFair Value Measurements at
Reporting Date Using
 Level 1Level 2
As of June 30, 2022
Cash Equivalents and Marketable Securities:
Money market funds$2,517 $2,517 $ 
Corporate bonds622,355  622,355 
U.S. government agency obligations263,347  263,347 
Mutual funds18,945 18,945  
$907,164 $21,462 $885,702 
As of December 31, 2021
Cash Equivalents and Marketable Securities:
Money market funds$109,313 $109,313 $ 
Commercial paper39,031  39,031 
Corporate bonds1,265,907  1,265,907 
U.S. government agency obligations315,450  315,450 
Mutual funds23,129 23,129  
$1,752,830 $132,442 $1,620,388 

As of June 30, 2022 and December 31, 2021, the Company grouped money market funds and mutual funds using a Level 1 valuation because market prices for such investments are readily available in active markets. As of June 30, 2022 and December 31, 2021, the Company grouped commercial paper, U.S. government agency obligations and corporate bonds using a Level 2 valuation because quoted prices for similar assets in active markets (or identical assets in an inactive market) are available. The Company did not have any transfers of assets between Level 1 or Level 2 of the fair value measurement hierarchy during the six months ended June 30, 2022.

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about the assumptions market participants would use to estimate the fair value of a financial instrument.

Contractual maturities of the Company’s available-for-sale marketable securities held as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30,
2022
December 31,
2021
Due in 1 year or less$263,369 $540,574 
Due after 1 year through 5 years622,333 1,065,815 
$885,702 $1,606,389 

15

3. Accounts Receivable

Net accounts receivable consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
 
June 30,
2022
December 31,
2021
Trade accounts receivable$479,071 $501,959 
Unbilled accounts receivable191,366 175,364 
Gross accounts receivable670,437 677,323 
Allowances for current expected credit losses and other reserves(2,012)(1,397)
Accounts receivable, net$668,425 $675,926 

A summary of activity in the accounts receivable allowance for current expected credit losses and other reserves for the six months ended June 30, 2022 and 2021 is as follows (in thousands):

June 30,
2022
June 30,
2021
Beginning balance$1,397 $1,822 
Charges to income from operations2,968 2,399 
Collections from customers previously reserved and other(2,353)(2,274)
Ending balance$2,012 $1,947 

Charges to income from operations primarily represents charges to provision for doubtful accounts for increases in the allowance for current expected credit losses.

4. Incremental Costs to Obtain a Contract with a Customer

The following table summarizes the deferred costs associated with obtaining customer contracts, specifically commission and incentive payments, as of June 30, 2022 and December 31, 2021 (in thousands):

June 30,
2022
December 31,
2021
Deferred costs included in prepaid expenses and other current assets$37,192 $43,562 
Deferred costs included in other assets26,865 30,436 
Total deferred costs$64,057 $73,998 

The following table summarizes additional information related to incremental costs to obtain a contract with a customer for the three and six months ended June 30, 2022 and 2021 (in thousands):

 For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2022202120222021
Amortization expense related to deferred costs
$13,150 $14,676 $28,172 $28,403 
Incremental costs capitalized
11,269 13,921 20,753 23,793 

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

16

5. Acquired Intangible Assets and Goodwill

Acquired intangible assets that are subject to amortization consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

 June 30, 2022December 31, 2021
 Gross
Carrying
Amount
Accumulated AmortizationNet
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Completed technology$327,466 $(143,589)$183,877 $257,857 $(128,715)$129,142 
Customer-related intangible assets481,593 (230,323)251,270 398,182 (216,192)181,990 
Non-compete agreements238 (139)99 258 (107)151 
Trademarks and trade names14,641 (6,738)7,903 8,039 (6,097)1,942 
Acquired license rights34,810 (1,252)33,558 490 (490) 
Total$858,748 $(382,041)$476,707 $664,826 $(351,601)$313,225 

Aggregate expense related to amortization of acquired intangible assets for the three and six months ended June 30, 2022 was $17.0 million and $30.6 million, respectively. Aggregate expense related to amortization of acquired intangible assets for the three and six months ended June 30, 2021 was $12.1 million and $23.5 million, respectively. Based on the Company’s acquired intangible assets as of June 30, 2022, aggregate expense related to amortization of acquired intangible assets is expected to be $33.6 million for the remainder of 2022, and $61.3 million, $62.5 million, $63.3 million and $57.4 million for 2023, 2024, 2025 and 2026, respectively.

The change in the carrying amount of goodwill for the six months ended June 30, 2022 was as follows (in thousands):

Balance as of January 1, 2022$2,156,254 
Acquisition of Linode Limited Liability Company617,827 
Measurement period adjustments related to an acquisition completed in 20212,630 
Foreign currency translation(12,883)
Balance as of June 30, 2022$2,763,828 

The Company tests goodwill for impairment at least annually. Through the date the interim condensed consolidated financial statements were issued, no triggering events had occurred that would indicate that a potential impairment exists.

6. Acquisitions

Acquisition-related costs during the three and six months ended June 30, 2022 were $0.1 million and $10.4 million, respectively, and are included in general and administrative expense in the condensed consolidated statements of income. Pro forma results of operations for the acquisition completed during the six months ended June 30, 2022 have not been presented because the effects of the acquisition were not material to the Company's consolidated financial results.

Linode

In March 2022, the Company acquired all the outstanding equity interests of Linode Limited Liability Company ("Linode") for $898.8 million in cash. Linode is an infrastructure-as-a-service platform provider that allows for developer-friendly cloud computing capabilities. The acquisition is intended to enhance the Company’s computing services by enabling it to create a unique cloud platform to build, run and secure applications from the cloud to the edge. Revenue attributable to Linode since the date of the acquisition, and included in the Company's condensed consolidated statements of income, for the three and six months ended June 30, 2022 was $32.0 million and $35.8 million, respectively. Earnings included in the Company's condensed consolidated statements of income since the date of the acquisition are not material.
17

The following table represents the preliminary allocation of the purchase price for Linode (in thousands):

Total purchase consideration$898,777 
Allocation of the purchase consideration:
Cash$26,678 
Accounts receivable9,161 
Prepaid expenses and other current assets4,478 
Property and equipment56,300 
Operating lease right-of-use assets17,000 
Identifiable intangible assets 197,520 
Goodwill617,827 
Deferred income tax assets1,390 
Other assets292 
Total assets acquired930,646 
Accounts payable(7,757)
Accrued expenses(1,958)
Operating lease liabilities(17,235)
Other liabilities(4,919)
Total liabilities assumed(31,869)
Net assets acquired$898,777 

As of June 30, 2022, the purchase price allocation is preliminary,pending final valuations of certain tangible and intangible assets acquired, certain income tax matters, and net working capital. Measurement period adjustments to goodwill recognized during the three months ended June 30, 2022 were $29.4 million and primarily related to property and equipment and intangible asset adjustments. The measurement period adjustments did not have a material effect on our results of operations.

The value of the goodwill can be attributed to a number of business factors, including a trained technical workforce and cost synergies expected to be realized. The Company expects that all of the goodwill related to the acquisition of Linode will be deductible for tax purposes.

The following were the identified intangible assets acquired and their respective weighted average useful lives (in thousands, except years):

Gross Carrying AmountWeighted Average Useful Life (in years)
Customer-related intangible assets$85,700 11
Completed technologies70,900 6
Acquired license rights34,320 15
Trademarks and trade name6,600 9
Total$197,520 

The Company applied the relief-from-royalty method to estimate the fair values of the completed technologies and trademarks and the excess earnings method to estimate the fair values of the customer-related acquired intangible assets. The Company used readily available market data to estimate the fair values of the acquired license rights. The total weighted average amortization period for the intangible assets acquired from Linode is 9.6 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.

18

7. Debt

Convertible Senior Notes Due 2027

In August 2019, the Company issued $1,150.0 million in par value of convertible senior notes due 2027 (the "2027 Notes"). The 2027 Notes are senior unsecured obligations of the Company, bear regular interest of 0.375%, payable semi-annually in arrears on March 1 and September 1 of each year and mature on September 1, 2027, unless repurchased or converted in accordance with their terms prior to maturity.

At their option, holders may convert their 2027 Notes prior to the close of business on the business day immediately preceding May 1, 2027, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ended December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least