Akamai Technologies Inc 10-K for FY2021

Akamai Technologies Inc (AKAM)

10-K 2022-02-28 For: 2021-12-31

Added on April 10, 2026

About this 10-K

Akamai Technologies Inc filed this 10-K on February 28, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.46B; up 8.2% from $3.2B a year earlier
Net income: $651.64M; up 17.0% from net income of $557.05M a year earlier
Diluted EPS: $3.93; up 16.6% from $3.37 a year earlier

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Delaware						04-3432319
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - par value $0.01 per share	AKAM	Nasdaq Global Select Market


PART I

Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	22

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	[Reserved]	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	91
Item 9A.	Controls and Procedures	91
Item 9B.	Other Information	92
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	92

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	92
Item 11.	Executive Compensation	93
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	93
Item 13.	Certain Relationships and Related Transactions, and Director Independence	93
Item 14.	Principal Accounting Fees and Services	93

PART IV

Item 15.	Exhibits, Financial Statement Schedules	93
Item 16.	Form 10-K Summary	96

SIGNATURES		97


Period(1)	Total Number of Shares Purchased(2)	Average Price Paid per Share(3)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(4)	Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs(4)
October 1, 2021 – October 31, 2021	362,034	$	105.22	362,034	$	282,542
November 1, 2021 – November 30, 2021	704,875	110.45		704,875	204,691
December 1, 2021 – December 31, 2021	1,373,341	112.90		1,373,341	49,637
Total	2,440,250	$	111.05	2,440,250


	2021		2020		2019
Revenue	100.0	%	100.0	%	100.0	%
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)	36.7		35.4		34.1
Research and development	9.7		8.4		9.0
Sales and marketing	13.3		16.0		18.1
General and administrative	16.0		17.1		17.8
Amortization of acquired intangible assets	1.4		1.3		1.3
Restructuring charge	0.3		1.2		0.6
Total costs and operating expenses	77.4		79.4		80.9
Income from operations	22.6		20.6		19.1
Interest income	0.5		0.9		1.2
Interest expense	(2.1)		(2.2)		(1.7)
Other income (expense), net	0.1		(0.1)		—
Income before provision for income taxes	21.1		19.2		18.6
Provision for income taxes	(1.8)		(1.4)		(1.8)
Loss from equity method investment	(0.4)		(0.4)		—
Net income	18.9	%	17.4	%	16.8	%


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


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


	For the Years Ended December 31,								For the Years Ended December 31,
	2021		2020		% Change		% Change at Constant Currency		2020		2019		% Change		% Change at Constant Currency
Security Technology Group	$	1,334,836	$	1,061,622	25.7	%	24.6	%	$	1,061,622	$	848,733	25.1	%	25.3	%
Edge Technology Group	2,126,387		2,136,527		(0.5)		(1.2)		2,136,527		2,044,884		4.5		4.4
Total revenue	$	3,461,223	$	3,198,149	8.2	%	7.3	%	$	3,198,149	$	2,893,617	10.5	%	10.6	%


	For the Years Ended December 31,								For the Years Ended December 31,
(in thousands)	2021			2020			% Change		2020			2019			% Change
Amortization of acquired intangible assets	$	48,019		$	42,049		14.2	%	$	42,049		$	38,581		9.0	%
As a percentage of revenue	1.4		%	1.3		%			1.3		%	1.3		%


	Payments Due by Period
	Total		Less than 12 Months		12 to 36 Months		36 to 60 Months		More than 60 Months
Operating lease obligations: (1)
Real estate arrangements	$	784,239	$	80,070	$	153,089	$	134,800	$	416,280
Co-location arrangements	245,468		97,494		89,370		37,964		20,640
Bandwidth agreements	126,223		102,144		24,079		—		—
Open vendor purchase orders	315,379		226,926		88,162		291		—
Convertible senior notes	2,300,000		—		—		1,150,000		1,150,000
Total contractual obligations	$	3,771,309	$	506,634	$	354,700	$	1,323,055	$	1,586,920


(in thousands, except share data)	December 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	536,725	$	352,917
Marketable securities	541,470		745,156
Accounts receivable, net of reserves of $1,397 and $1,822 at December 31, 2021 and 2020, respectively	675,926		660,052
Prepaid expenses and other current assets	166,313		171,406
Total current assets	1,920,434		1,929,531
Marketable securities	1,088,048		1,398,802
Property and equipment, net	1,534,329		1,478,272
Operating lease right-of-use assets	815,754		793,945
Acquired intangible assets, net	313,225		234,724
Goodwill	2,156,254		1,674,371
Deferred income tax assets	168,342		106,918
Other assets	142,287		147,567
Total assets	$	8,138,673	$	7,764,130
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	109,928	$	118,546
Accrued expenses	411,590		380,468
Deferred revenue	86,517		76,600

Operating lease liabilities	175,683		154,801
Other current liabilities	6,623		27,755
Total current liabilities	790,341		758,170
Deferred revenue	25,342		5,262
Deferred income tax liabilities	40,974		37,458
Convertible senior notes	1,976,167		1,906,707
Operating lease liabilities	707,087		715,404
Other liabilities	68,748		89,833
Total liabilities	3,608,659		3,512,834
Commitments and contingencies (Note 13)
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; 160,512,111 and 162,709,720 shares issued and outstanding at December 31, 2021 and 2020, respectively	1,605		1,627
Additional paid-in capital	3,340,822		3,664,820
Accumulated other comprehensive loss	(69,105)		(20,201)
Retained earnings	1,256,692		605,050
Total stockholders’ equity	4,530,014		4,251,296
Total liabilities and stockholders’ equity	$	8,138,673	$	7,764,130


(in thousands, except per share data)	For the Years Ended December 31,
	2021		2020		2019
Revenue	$	3,461,223	$	3,198,149	$	2,893,617
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)	1,268,956		1,132,672		987,624
Research and development	335,372		269,315		261,365
Sales and marketing	461,967		510,405		523,883
General and administrative	553,024		547,888		516,093
Amortization of acquired intangible assets	48,019		42,049		38,581
Restructuring charge	10,737		37,286		17,153
Total costs and operating expenses	2,678,075		2,539,615		2,344,699
Income from operations	783,148		658,534		548,918
Interest income	15,620		29,122		34,355
Interest expense	(72,332)		(69,120)		(49,364)
Other income (expense), net	1,785		(2,454)		(1,428)
Income before provision for income taxes	728,221		616,082		532,481
Provision for income taxes	(62,571)		(45,922)		(53,350)
Loss from equity method investment	(14,008)		(13,106)		(1,096)
Net income	$	651,642	$	557,054	$	478,035
Net income per share:
Basic	$	4.01	$	3.43	$	2.94
Diluted	$	3.93	$	3.37	$	2.90
Shares used in per share calculations:
Basic	162,665		162,490		162,706
Diluted	165,804		165,213		164,573


(in thousands, except share data)	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity
	Shares	Amount
Balance at January 1, 2019	162,904,550	$	1,629	$	3,670,033	$	—	$	(48,912)	$	(430,890)	$	3,191,860
Cumulative-effect adjustment to accumulated deficit related to adoption of new accounting pronouncement										851		851
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes	2,251,840	22		(72,350)								(72,328)
Issuance of common stock under employee stock purchase plan	879,648	9		53,680								53,689
Stock-based compensation				222,857								222,857

Equity component of convertible senior notes, net of deferred tax of $23,170 and issuance costs of $2,880				240,820								240,820
Issuance of warrants related to convertible senior notes				185,150								185,150
Purchase of note hedge related to convertible senior notes				(312,225)								(312,225)
Repurchases of common stock	(4,035,195)					(334,519)						(334,519)
Treasury stock retirement		(40)		(334,479)		334,519						—
Net income										478,035		478,035
Foreign currency translation adjustment								(1,020)				(1,020)
Change in unrealized gain on investments, net of tax								4,788				4,788
Balance at December 31, 2019	162,000,843	$	1,620	$	3,653,486	$	—	$	(45,144)	$	47,996	$	3,657,958


			Gross Unrealized				Aggregate Fair Value		Classification on Balance Sheet
	Amortized Cost								Short-Term Marketable Securities		Long-Term Marketable Securities
As of December 31, 2021			Gains		Losses

Commercial paper	$	25,056	$	—	$	(24)	$	25,032	$	25,032	$	—
Corporate bonds	1,268,991		1,191		(4,275)		1,265,907		459,012		806,895

U.S. government agency obligations	316,728		3		(1,281)		315,450		56,530		258,920
	$	1,610,775	$	1,194	$	(5,580)	$	1,606,389	$	540,574	$	1,065,815

As of December 31, 2020

Commercial paper	$	46,931	$	13	$	(8)	$	46,936	$	46,936	$	—
Corporate bonds	1,628,462		9,482		(262)		1,637,682		607,403		1,030,279
Municipal securities	3,495		—		(6)		3,489		—		3,489
U.S. government agency obligations	435,653		329		(63)		435,919		89,951		345,968
	$	2,114,541	$	9,824	$	(339)	$	2,124,026	$	744,290	$	1,379,736


	Total Fair Value		Fair Value Measurements at Reporting Date Using
			Level 1		Level 2
As of December 31, 2021
Cash Equivalents and Marketable Securities:
Money market funds	$	109,313	$	109,313	$	—

Commercial paper	39,031		—		39,031
Corporate bonds	1,265,907		—		1,265,907

U.S. government agency obligations	315,450		—		315,450
Mutual funds	23,129		23,129		—
	$	1,752,830	$	132,442	$	1,620,388

As of December 31, 2020
Cash Equivalents and Marketable Securities:
Money market funds	$	74,417	$	74,417	$	—

Commercial paper	75,785		—		75,785
Corporate bonds	1,637,682		—		1,637,682
Municipal securities	3,489		—		3,489
U.S. government agency obligations	435,919		—		435,919
Mutual funds	19,932		19,932		—
	$	2,247,224	$	94,349	$	2,152,875


	For the Years Ended December 31,								For the Years Ended December 31,
	2021			2020			% Change		2020			2019			% Change
Bandwidth fees	$	209,288		$	200,167		4.6	%	$	200,167		$	165,335		21.1	%
Co-location fees	177,950			156,275			13.9		156,275			127,024			23.0
Network build-out and supporting services	157,234			134,952			16.5		134,952			101,135			33.4
Payroll and related costs	276,544			262,972			5.2		262,972			248,146			6.0
Stock-based compensation, including amortization of prior capitalized amounts	57,390			52,863			8.6		52,863			51,607			2.4
Depreciation of network equipment	226,384			167,017			35.5		167,017			125,589			33.0
Amortization of internal-use software	164,166			158,426			3.6		158,426			168,788			(6.1)
Total cost of revenue	$	1,268,956		$	1,132,672		12.0	%	$	1,132,672		$	987,624		14.7	%
As a percentage of revenue	36.7		%	35.4		%			35.4		%	34.1		%


	For the Years Ended December 31,								For the Years Ended December 31,
	2021			2020			% Change		2020			2019			% Change
Payroll and related costs	$	223,238		$	199,992		11.6	%	$	199,992		$	194,232		3.0	%
Stock-based compensation	63,324			58,470			8.3		58,470			52,826			10.7
Depreciation and amortization	81,934			82,862			(1.1)		82,862			78,587			5.4
Facilities-related costs	100,769			98,805			2.0		98,805			90,674			9.0
Provision for doubtful accounts	763			2,881			(73.5)		2,881			1,924			49.7
Acquisition-related costs	13,317			5,579			138.7		5,579			1,920			190.6
License of patent	—			—			—		—			(8,855)			(100.0)
Legal settlements	—			275			(100.0)		275			10,000			(97.3)
Endowment of Akamai Foundation	—			20,000			(100.0)		20,000			—			100.0
Other expenses	69,679			79,024			(11.8)		79,024			94,785			(16.6)
Total general and administrative	$	553,024		$	547,888		0.9	%	$	547,888		$	516,093		6.2	%
As a percentage of revenue	16.0		%	17.1		%			17.1		%	17.8		%


	2021		2020		2019
















GAAP net income per diluted share	$	3.93	$	3.37	$	2.90
Adjustments to net income:
Amortization of acquired intangible assets	0.29		0.25		0.23
Stock-based compensation	1.22		1.19		1.14
Amortization of capitalized stock-based compensation and capitalized interest expense	0.22		0.20		0.21
Restructuring charge	0.06		0.23		0.10
Acquisition-related costs	0.08		0.03		0.01
Legal settlements	—		—		0.06
Endowment of Akamai Foundation	—		0.12		—
Transformation costs	—		—		0.03
Amortization of debt discount and issuance costs	0.40		0.38		0.28
(Gain) loss on investments	(0.02)		(0.04)		—
Loss from equity method investment	0.08		0.08		0.01
Income tax effect of above non-GAAP adjustments and certain discrete tax items	(0.58)		(0.63)		(0.49)
Adjustment for shares (1)	0.06		0.04		—
Non-GAAP net income per diluted share (2)	$	5.74	$	5.22	$	4.49

Shares used in GAAP per diluted share calculations	165,804		165,213		164,573
Impact of benefit from note hedge transactions (1)	(1,600)		(873)		—
Shares used in non-GAAP per diluted share calculations (1)	164,204		164,340		164,573


	2021			2020			2019
Net income	$	651,642		$	557,054		$	478,035
Amortization of acquired intangible assets	48,019			42,049			38,581
Stock-based compensation	202,759			197,411			187,140
Amortization of capitalized stock-based compensation and capitalized interest expense	35,894			33,202			34,438
Restructuring charge	10,737			37,286			17,153
Acquisition-related costs	13,317			5,579			1,920
Legal settlements	—			275			10,000
Interest income	(15,620)			(29,122)			(34,355)
Endowment of Akamai Foundation	—			20,000			—
Transformation costs	—			—			5,527
Amortization of debt discount and issuance costs	72,332			69,120			49,364
Provision for income taxes	62,571			45,922			53,350
Depreciation and amortization	467,048			403,160			367,655
(Gain) loss on investments	(3,680)			(7,228)			60
Loss from equity method investment	14,008			13,106			1,096
Other expense, net	1,895			9,682			1,368
Adjusted EBITDA	$	1,560,922		$	1,397,496		$	1,211,332

Net income margin	19		%	17		%	17		%
Adjusted EBITDA margin	45		%	44		%	42		%


	December 31, 2021		December 31, 2020
Due in 1 year or less	$	540,574	$	744,290
Due after 1 year through 5 years	1,065,815		1,379,736
	$	1,606,389	$	2,124,026


	December 31, 2021		December 31, 2020
Trade accounts receivable	$	501,959	$	473,474
Unbilled accounts receivable	175,364		188,400
Gross accounts receivable	677,323		661,874
Allowance for current expected credit losses and other reserves	(1,397)		(1,822)
Accounts receivable, net	$	675,926	$	660,052


	December 31, 2021		December 31, 2020
Prepaid income taxes	$	32,021	$	30,682
Prepaid sales and other taxes	28,300		24,034
Prepaid equipment and software maintenance	10,661		15,526
Deferred commissions	43,562		54,516
Other prepaid expenses	35,109		26,187
Other current assets	16,660		20,461
Total	$	166,313	$	171,406


	December 31, 2021		December 31, 2020
Deferred costs included in prepaid and other current assets	$	43,562	$	54,516
Deferred costs included in other assets	30,436		23,200
Total deferred costs	$	73,998	$	77,716


	December 31, 2021		December 31, 2020		Estimated Useful Life (in years)
Computer and networking equipment	$	1,981,775	$	1,847,717	3-7
Purchased software	89,347		95,662		3-10
Furniture and fixtures	71,381		71,119		1-7
Office equipment	42,616		40,235		3-5
Leasehold improvements	227,358		230,423		1-15
Internal-use software	1,382,099		1,234,934		2-7
Property and equipment, gross	3,794,576		3,520,090
Accumulated depreciation and amortization	(2,260,247)		(2,041,818)
Property and equipment, net	$	1,534,329	$	1,478,272


	December 31, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Completed technologies	$	257,857	$	(128,715)	$	129,142	$	172,346	$	(111,435)	$	60,911
Customer-related intangible assets	398,182		(216,192)		181,990		358,032		(186,733)		171,299
Non-compete agreements	258		(107)		151		373		(77)		296
Trademarks and trade names	8,039		(6,097)		1,942		7,658		(5,440)		2,218
Acquired license rights	490		(490)		—		490		(490)		—
Total	$	664,826	$	(351,601)	$	313,225	$	538,899	$	(304,175)	$	234,724


	2021		2020
Beginning balance	$	1,674,371	$	1,600,265

Acquisition of Guardicore Ltd.	479,110		—
Acquisition of Inverse, Inc.	10,741		—
Acquisition of Asavie Technologies Limited	—		70,200
Measurement period adjustments related to acquisitions completed in prior years	(267)		(1,056)
Foreign currency translation	(7,701)		4,962
Ending balance	$	2,156,254	$	1,674,371


Total purchase consideration	$	610,439

Allocation of the purchase consideration:
Cash	$	27,252
Accounts receivable	10,179
Prepaid expenses and other current assets	1,334
Property and equipment	1,221
Operating lease right-of-use assets	4,609
Identifiable intangible assets	123,600
Goodwill	479,110
Deferred income tax assets	7,124
Other assets	890
Total assets acquired	655,319
Accounts payable	(1,523)
Accrued liabilities	(7,218)
Deferred revenue	(34,548)
Operating lease liabilities	(1,591)


Total liabilities assumed	(44,880)
Net assets acquired	$	610,439


	Gross Carrying Amount		Weighted Average Useful Life (in years)
Completed technologies	$	79,000	15.0
Customer-related intangible assets	44,200		14.0
Trademarks	400		1.9

Total	$	123,600


Total purchase consideration	$	154,952

Allocation of the purchase consideration:
Cash	$	26,847
Accounts receivable	14,002
Prepaid expenses and other current assets	995
Property and equipment	2,274
Operating lease right-of-use assets	6,104
Identifiable intangible assets	58,070
Goodwill	70,228
Other assets	395
Total assets acquired	178,915
Accounts payable	(951)
Accrued liabilities	(5,926)
Deferred revenue	(3,136)
Operating lease liabilities	(6,104)
Deferred income tax liabilities	(6,965)
Other liabilities	(881)
Total liabilities assumed	(23,963)
Net assets acquired	$	154,952


Total purchase consideration	$	123,632

Allocation of the purchase consideration:
Cash	$	2,223
Accounts receivable	7,318
Prepaid expenses and other current assets	838
Identifiable intangible assets	26,930
Goodwill	92,188
Deferred tax asset	12,622
Other assets	87
Total assets acquired	142,206
Accounts payable	(1,642)
Accrued liabilities	(2,596)
Deferred revenue	(14,336)

Total liabilities assumed	(18,574)
Net assets acquired	$	123,632


	December 31, 2021		December 31, 2020
Payroll and other related benefits	$	222,535	$	218,588
Income tax payable	72,946		50,812
Bandwidth and co-location	72,904		67,170
Property, use and other taxes	33,883		35,390
Professional service fees	2,929		2,245
Other accrued expenses	6,393		6,263
Total	$	411,590	$	380,468


	Employee Severance and Related Benefits
Balance January 1, 2019	$	10,508
Costs incurred	12,455
Cash disbursements	(17,294)

Translation adjustments and other	38
Balance December 31, 2019	5,707
Costs incurred	26,332
Cash disbursements	(10,118)

Translation adjustments and other	130
Balance December 31, 2020	22,051
Costs incurred	6,600
Cash disbursements	(27,095)

Translation adjustments and other	(368)
Balance December 31, 2021	$	1,188


	December 31, 2021		December 31, 2020
Liability component:
Principal	$	1,150,000	$	1,150,000
Less: debt discount and issuance costs, net of amortization	(169,030)		(196,359)
Net carrying amount	$	980,970	$	953,641

Equity component:	$	220,529	$	220,529


	Real Estate Arrangements		Co-location Arrangements
2022	$	80,070	$	97,494
2023	79,583		53,838
2024	73,506		35,532
2025	69,486		23,130
2026	65,314		14,834
Thereafter	416,280		20,640
Total lease payments	784,239		245,468
Less: imputed interest	139,550		7,387
Total lease liabilities	$	644,689	$	238,081


	Bandwidth Commitments		Purchase Order Commitments
2022	$	102,144	$	226,926
2023	21,979		58,972
2024	2,100		29,190
2025	—		230
2026	—		61

Total	$	126,223	$	315,379


	Foreign Currency Translation		Net Unrealized Gains (Losses) on Investments		Total
Balance as of January 1, 2020	$	(52,924)	$	7,780	$	(45,144)
Other comprehensive income	19,629		5,314		24,943
Balance as of December 31, 2020	(33,295)		13,094		(20,201)
Other comprehensive loss	(38,514)		(10,390)		(48,904)
Balance as of December 31, 2021	$	(71,809)	$	2,704	$	(69,105)


	Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2021	6	$	11.60
Exercised	(5)	3.94


Outstanding at December 31, 2021	1	$	41.08	1.55	$	100
Exercisable at December 31, 2021	1	$	41.08	1.55	$	100
Vested or expected to vest December 31, 2021	1	$	41.08	1.55	$	100


	Units (in thousands)	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021	114	$	65.09
Granted	21	114.56
Vested and distributed	(37)	72.39
Outstanding at December 31, 2021	98	$	72.96


			December 31, 2021
RSUs with service-based vesting conditions			2,818
RSUs with market-based vesting conditions			85
RSUs with performance-based vesting conditions			396
Total			3,299