AKAMAI TECHNOLOGIES INC

Previous wording

We primarily derive revenue from the sale of services to customers executing contracts having terms of one year or longer, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. In addition to a base level of revenue, we are also dependent on our ability to increase our product offerings and to cross-sell additional services to our new and existing customers, particularly for our security and compute solution portfolios. Our revenue is also impacted by customer renewals, the rate of adoption and timing of customer offerings, variability of one-time events, usage of cloud computing services and the amount of traffic we serve on our network. Geopolitical, economic and other developments that impact our customers' businesses can also impact our ability to attract new customers or continue to cross-sell additional services to existing customers. Over the longer term, our ability to expand our product portfolio and to effectively manage the prices we charge for our solutions are key factors impacting our revenue growth.

Current wording

We primarily derive revenue from the sale of services to customers pursuant to contracts having terms of one year or longer, which allows us to have a consistent and predictable base level of revenue. Services included in our contracts consist of security solutions, the delivery of content, applications and software over the internet, cloud computing solutions and professional services. In addition to a base level of revenue, we are also dependent on our ability to increase our product offerings and to cross-sell additional services to our new and existing customers, particularly for our security and compute solutions portfolios. Our revenue is also impacted by customer renewals, the rate of adoption and timing of customer offerings, variability of one-time events, usage of cloud computing services and the amount of traffic we serve on our network. Geopolitical, economic and other developments that impact our customers' businesses can also impact our ability to attract new customers or continue to cross-sell additional services to existing customers. Over the longer term, our ability to expand our product portfolio and to effectively manage the prices we charge for our solutions are key factors impacting our revenue growth.

Previous wording

•Increased sales of our security solutions, led by application security solutions and segmentation solutions from our acquisition of Guardicore Ltd., and increased sales of our compute solutions, primarily attributable to our acquisition of Linode Limited Liability Company ("Linode") in early 2022, have made a significant contribution to revenue growth. Beginning in 2023, security now represents our largest share of revenue. Together with compute, our security and compute solutions represent almost two-thirds of our total revenue beginning in the first quarter of 2024. We plan to continue to invest in these areas with a focus on further advancing our product portfolios.

Current wording

•Increased sales of our security solutions, led by application security solutions and segmentation solutions from our acquisition of Guardicore Ltd., and increased sales of our compute solutions, attributable to our acquisition of Linode Limited Liability Company ("Linode") and enhanced services on our compute platform, have made a significant contribution to revenue growth. Our security and compute solutions represented almost two-thirds of our total revenue during the first half of 2024. We plan to continue to invest in these areas with a focus on further advancing our product portfolios and sales capabilities.

Previous wording

•Traffic on our network continues to grow as compared to prior years, but we, and the content delivery industry more broadly, are seeing growth at a more moderate pace than we've experienced in the past. We and our customers have been managing through a time of economic headwinds and uncertainty. In particular, a large social media customer has taken steps to lower costs by optimizing its platform, which has reduced traffic on our network and negatively impacted our delivery revenue.

Current wording

•Traffic on our network continues to grow as compared to prior years, but we, and the content delivery industry more broadly, are seeing growth at a more moderate pace than we've experienced in the past. We and our customers have been managing through a time of global economic and geopolitical headwinds and uncertainty. In particular, a large social media customer has taken steps to lower costs and reduce reliance on U.S. providers by optimizing its platform, including using a “do-it-yourself” component, which has reduced traffic on our network and negatively impacted our delivery revenue. If our customers increase their reliance on “do-it-yourself” solutions, it may negatively impact traffic on our network and delivery revenue.

Previous wording

•The prices paid by some of our delivery and security customers have declined in recent years due to competition and contract renewals, which negatively impacts our revenue growth rates. We have been able to mitigate some of the negative impacts to our revenue growth rates by upselling incremental solutions to our existing delivery and security customers. We are taking steps upon contract renewals to optimize how we charge certain high-volume traffic delivery customers, including charging a premium for higher-cost destinations and continuing to maintain alignment between customer traffic volumes and unit pricing.

Current wording

•The prices paid by some of our delivery and security customers have declined in recent years due to competition and contract renewals, which negatively impacts our revenue growth rates. We have been able to mitigate some of the negative impacts to our revenue growth rates by upselling incremental solutions to our existing delivery and security customers. We continue to take steps upon contract renewals to optimize how we charge certain high-volume traffic delivery customers, including charging a premium for higher-cost destinations and continuing to maintain alignment between customer traffic volumes and unit pricing.

Previous wording

•Revenue from our international operations has generally been growing at a faster pace in recent years than from our U.S. operations, particularly from new customer acquisition and cross-selling of incremental solutions. Because we publicly report in U.S. dollars our reported revenue results are negatively impacted when the dollar strengthens and benefit when the dollar weakens.

Current wording

•Revenue from our international operations continues to grow, particularly from new customer acquisition and cross-selling of incremental solutions. Because we publicly report in U.S. dollars our reported revenue results are negatively impacted when the dollar strengthens and benefit when the dollar weakens.

Previous wording

•Co-location costs are also a significant portion of our cost of revenue. As we continue to build out our new compute locations to provide us with the ability to scale our platform, we expect to enter into longer term leases that include certain financial commitments in order to achieve more favorable unit economics. The costs of the financial commitments are expensed ratably over the life of the lease, and, as a result, in some cases, we are incurring costs in advance of these compute locations being fully utilized. We continue to improve our internal-use software and remain disciplined in managing our hardware deployments, particularly for our delivery platform, which enables us to use servers more efficiently. With these efficiencies we have been able to moderate the impact of rising energy costs. We expect to continue to scale our network in the future, which we believe will allow us to effectively manage our co-location costs to maintain or improve current levels of profitability.

Current wording

•Co-location costs are a significant portion of our cost of revenue. As we continue to build out our new compute locations to provide us with the ability to scale our platform, we have entered into, and expect to continue to enter into, longer term leases that include certain financial commitments in order to achieve more favorable unit economics. The costs of the financial commitments are expensed ratably over the lease term, and, as a result, in some cases, we are incurring costs in advance of these compute locations being fully utilized. We continue to improve our internal-use software and remain disciplined in managing our hardware deployments, which enables us to use servers more efficiently. We expect to continue to scale our network in the future, which we believe will allow us to effectively manage our co-location costs to maintain or improve current levels of profitability.

Previous wording

•Network bandwidth costs represent a significant portion of our cost of revenue. Historically, we have been able to mitigate increases in these costs by reducing our network bandwidth costs per unit and investing in internal-use software development to improve the performance and efficiency of our network. We will need to continue to effectively manage our bandwidth costs to maintain or improve current levels of profitability.

Current wording

•Network bandwidth costs are also a significant portion of our cost of revenue. Historically, we have been able to mitigate increases in these costs through investment in internal-use software development to improve the performance and efficiency of our network. We will need to continue to effectively manage our bandwidth costs to maintain or improve current levels of profitability.

Previous wording

In May 2024, we announced our intention to acquire Noname Gate Ltd. ("Noname Security"), for approximately $450.0 million, subject to cash acquired and post-closing adjustments. Noname Security is intended to enhance our existing API Security solution and accelerate its ability to meet growing customer demand and market requirements as the use of APIs continues to expand. Noname Security has approximately 200 employees, and the acquisition is expected to be dilutive to our earnings per share at least through 2024.

Current wording

In June 2024, we acquired Noname Gate Ltd. ("Noname Security") for $452.3 million, subject to post-closing adjustments. Noname Security is intended to expand our existing API Security offering by providing more flexible deployment options, extensive vendor integrations and enhanced attack analysis. We believe this acquisition will accelerate our ability to meet increasing customer and market demand. Noname Security has approximately 200 employees. The acquisition is expected add approximately $20.0 million of revenue for 2024 and will be dilutive to our earnings per share through 2024.

Previous wording

Global macroeconomic and geopolitical conditions continue to impact our business and revenue growth rates. We, along with our customers, continue to manage through an uncertain period of fluctuating inflation, regulations that may negatively impact business, economic uncertainty, uncertain energy supplies, heightened geopolitical tensions, potential for supply chain disruptions, changes in international tax laws, fluctuations in foreign exchange rates and elevated interest rates. To the extent these macroeconomic conditions continue, we expect that it may adversely affect our business, operations and financial results.

Current wording

Global macroeconomic and geopolitical conditions continue to impact our customers, as well as our business and revenue growth rates. We, along with our customers, continue to manage through an uncertain period of fluctuating inflation, regulations that may negatively impact business, economic uncertainty, uncertain energy supplies, heightened geopolitical tensions, potential for supply chain disruptions, changes in international tax laws, fluctuations in foreign exchange rates and elevated interest rates. To the extent these macroeconomic conditions continue, we expect that it may adversely affect our business, operations and financial results.

Previous wording

During the three month period ended March 31, 2024, the increase in our revenue, as compared to the same period in 2023, was primarily the result of continued growth in sales of our security and compute solutions, partially offset by a decline in revenue from our delivery solutions due to impacts from economic headwinds our customers are facing and contract pricing.

Current wording

During the three and six months ended June 30, 2024, the increase in our revenue, as compared to the same periods in 2023, was primarily the result of continued growth in sales of our security and compute solutions, partially offset by a decline in revenue from our delivery solutions due to impacts from economic and geopolitical uncertainty our customers are facing.

Previous wording

The increase in security solutions revenue for the three month period ended March 31, 2024, as compared to the same period in 2023, was due to growth in a number of key products in our security solutions portfolio, including our web application and segmentation solutions.

Current wording

The increase in security solutions revenue for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was due to growth in sales of key products in our security solutions portfolio, including our segmentation and web application solutions.

Previous wording

The decrease in delivery solutions revenue for the three month period ended March 31, 2024, as compared to the same period in 2023, was due to our customers' economic headwinds and the pricing impact of renewals. During the first quarter of 2024, a large social media customer has taken steps to lower its costs through a series of optimizations across its platform, which reduced traffic on our network and had a negative impact on our delivery revenue.

Current wording

The decrease in delivery solutions revenue for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was due to our customers' economic and geopolitical headwinds which resulted in moderation of traffic growth rates and the continued pricing impact of renewals. These headwinds are also causing a large social media customer to increase their focus on cost optimization and "do-it-yourself" solutions, which reduced traffic on our network and had a negative impact on our delivery revenue.

Previous wording

The increase in compute solutions revenue for the three month period ended March 31, 2024, as compared to the same period in 2023, was due to growth in compute products, including continued growth in cloud optimization solutions.

Current wording

The increase in compute solutions revenue for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was due to growth in sales of compute products, including cloud optimization solutions, to new and existing customers.

Previous wording

For the three months ended March 31, 2024 and 2023, no single country outside the U.S. accounted for 10% or more of revenue during either of these periods. Changes in foreign currency exchange rates unfavorably impacted our revenue by $3.7 million during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

For the three and six months ended June 30, 2024 and 2023, no single country outside the U.S. accounted for 10% or more of revenue during these periods. Changes in foreign currency exchange rates unfavorably impacted our revenue by $9.8 million and $13.6 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023.

Previous wording

The increase in cost of revenue for the three month period ended March 31, 2024, as compared to the same period in 2023, was primarily due to co-location fees and depreciation of network equipment as a result of investment in Akamai Connected Cloud, particularly as we build out our compute infrastructure to support future growth and scalability, as well as stock-based compensation as a result of the timing of our performance-based equity award grants. These increases were partially offset by lower network build-out and supporting services due to a decrease in third-party cloud costs as we have been migrating third-party cloud services onto our own cloud solutions and optimizing third-party cloud spending.

Current wording

The increase in cost of revenue for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to co-location fees and depreciation of network equipment as a result of investment in Akamai Connected Cloud, particularly as we build out our compute infrastructure to support future growth and scalability, as well as stock-based compensation as a result of the shift in one of our compensation programs from cash-based to stock-based for certain employees in 2024. These increases were partially offset by lower network build-out and supporting services due to a decrease in third-party cloud costs as we have been migrating third-party cloud services onto our own cloud solutions and optimizing third-party cloud spending. Additionally, the increase in stock-based compensation for the six months ended June 30, 2024, as compared to the same period in 2023, was a result of the timing of our performance-based equity award grants.

Previous wording

During the remainder of 2024, we expect our cost of revenue to increase as compared to 2023, in particular our co-location costs, due to investments in our network to support the continued growth of our compute solutions. We plan to continue to focus our efforts on managing our operating margins, including our bandwidth and network build-out costs. Specifically, we are continuing to migrate third-party cloud services onto Akamai Connected Cloud, which we expect will continue to reduce third-party cloud services costs.

Current wording

During the remainder of 2024, we expect our cost of revenue to increase as compared to 2023, in particular our co-location costs and depreciation of network equipment, due to investments in our network to support the continued growth of our compute solutions. We plan to continue to focus our efforts on managing our operating margins, including our bandwidth and network build-out costs. Specifically, we are continuing to migrate third-party cloud services onto Akamai Connected Cloud, which we expect will continue to reduce third-party cloud services costs.

Previous wording

The increase in research and development expenses during the three month period ended March 31, 2024, as compared to the same period in 2023, was due to higher payroll and related costs, including stock-based compensation, as a result of headcount growth from our strategic initiatives, mid-year annual merit increases and the timing of our performance-based equity award grants. These increases were partially offset by an increase in capitalized salaries and related costs due to headcount growth focused on development of our activities related to our platform and solutions.

Current wording

The increase in research and development expenses during the three and six months ended June 30, 2024, as compared to the same periods in 2023, was due to higher payroll and related costs, including stock-based compensation, as a result of headcount growth from our strategic initiatives and prior year annual merit increases, partially offset by increases in capitalized salaries and related costs as we had additional resources focused on development activities related to our platform and solutions.

Previous wording

Research and development costs are expensed as incurred, other than certain internal-use software development costs eligible for capitalization. Capitalized development costs consist of payroll and related costs for personnel and external consulting expenses involved in the development of internal-use software used to deliver our services and operate our network. During the three months ended March 31, 2024 and 2023, we capitalized $24.8 million and $13.2 million, respectively, of stock-based compensation. These capitalized internal-use software development costs are amortized to cost of revenue over their estimated useful lives, ranging from two to ten years based on the software developed and its expected useful life.

Current wording

Research and development costs are expensed as incurred, other than certain internal-use software development costs eligible for capitalization. Capitalized development costs consist of payroll and related costs for personnel and external consulting expenses involved in the development of internal-use software used to deliver our services and operate our network. During the three months ended June 30, 2024 and 2023, we capitalized $25.5 million and $20.1 million, respectively, of stock-based compensation. During the six months ended June 30, 2024 and 2023, we capitalized $50.3 million and $33.3 million, respectively, of stock-based compensation. These capitalized internal-use software development costs are amortized to cost of revenue over their estimated useful lives, ranging from two to ten years based on the software developed and its expected useful life.

Previous wording

During the remainder of 2024, we expect our research and development costs to increase as compared to 2023, in particular payroll and related costs, including stock-based compensation, in support of our faster growing security and compute solutions. However, we plan to continue to focus our efforts on managing our operating margins.

Current wording

During the remainder of 2024, we expect our research and development costs to increase as compared to 2023, in particular payroll and related costs, in support of our faster growing security and compute solutions. However, we plan to continue to focus our efforts on managing our operating margins.

Previous wording

The increase in sales and marketing expenses during the three month period ended March 31, 2024, as compared to the same period in 2023, was due to higher payroll and related costs, including stock-based compensation, as a result of mid-year annual merit increases and the timing of our performance-based equity award grants. These increases were partially offset by a decrease in marketing programs as a result of the timing of events and advertising spend.

Current wording

The increase in sales and marketing expenses during the three and six months ended June 30, 2024, as compared to the same periods in 2023, was due to higher payroll and related costs as a result of prior year annual merit increases. Additionally, the increase during the six months ended June 30, 2024, as compared to the same period in 2023, was due to stock-based compensation as a result of the timing of our performance-based equity award grants, partially offset by a reduction in marketing programs as a result of the timing of events and advertising spend.

Previous wording

During the remainder of 2024, we expect our sales and marketing expenses to increase as compared to 2023 due to to our continued investment in go-to-market efforts. However, we plan to continue to carefully manage costs in an effort to manage our operating margins.

Current wording

During the remainder of 2024, we expect our sales and marketing expenses to increase as compared to 2023 due to to our continued investment in go-to-market efforts and the sales and marketing personnel added from the Noname Security acquisition. However, we plan to continue to carefully manage costs in an effort to manage our operating margins.

Previous wording

During the remainder of 2024, we expect our general and administrative expenses to increase as compared to 2023, in particular payroll and related costs, including stock-based compensation, due to the impact of merit increases to support the operations of the business. However, we plan to continue to control costs in an effort to manage our operating margins.

Current wording

During the remainder of 2024, we expect our general and administrative expenses to increase as compared to 2023, to support the operations of the business. However, we plan to continue to control costs in an effort to manage our operating margins.

Previous wording

The increase in amortization of acquired intangible assets for the three month period ended March 31, 2024, as compared to the same period in 2023, was the result of amortization of acquired intangible assets related to our recent acquisitions. Based on acquired intangible assets at March 31, 2024, we expect amortization of acquired intangible assets to be approximately $63.3 million for the remainder of 2024, and $80.3 million, $76.0 million, $61.9 million and $49.5 million for 2025, 2026, 2027 and 2028, respectively. We anticipate these amortization amounts will increase in future periods as a result of our acquisition of Noname Security, which is expected to close in the second quarter of 2024.

Current wording

The increase in amortization of acquired intangible assets for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was the result of amortization of acquired intangible assets related to our recent acquisitions. Based on acquired intangible assets at June 30, 2024, we expect amortization of acquired intangible assets to be approximately $43.1 million for the remainder of 2024, and $82.7 million, $84.1 million, $79.3 million and $74.2 million for 2025, 2026, 2027 and 2028, respectively.

Previous wording

The restructuring charge for the three month period ended March 31, 2024 was driven by our FlexBase program as we exited certain facilities that were no longer needed, resulting in impairments of right-of-use-assets and leasehold improvements. We expect to continue to reduce our facility footprint, but we do not expect to incur material additional charges related to the program.

Current wording

The restructuring charge for the three and six months ended June 30, 2024 was driven by our FlexBase program as we exited certain facilities that were no longer needed, resulting in impairments of right-of-use-assets and leasehold improvements. We do not expect to incur material additional charges related to this program.

Previous wording

The restructuring charge for the three month period ended March 31, 2023 was primarily the result of management's commitment to an action to restructure certain parts of the company to enable the prioritization of investments in the fastest growing areas of the business. The restructuring charge for the action included severance and related expenses for certain headcount reductions. We do not expect to incur material additional charges related to the action.

Current wording

The restructuring charge for the three and six months ended June 30, 2023 was primarily related to impairments of right-of-use assets and leasehold improvements that are no longer needed as a result of our FlexBase program. Additionally, the restructuring charge for the six months ended June 30, 2023 included the result of management's commitment to an action to restructure certain parts of the company to enable the prioritization of investments in the fastest growing areas of the business. The restructuring charge for the action included severance and related expenses for certain headcount reductions. We do not expect to incur material additional charges related to the action.

Previous wording

Interest and marketable securities income, net consists of interest earned on invested cash and marketable securities balances and income and losses on mutual funds that are associated with our employee non-qualified deferred compensation plan. The increase for the three month period ended March 31, 2024, as compared to the same period in 2023, was the result of increased cash, cash equivalents and marketable securities balances as a result of our August 2023 issuance of $1,265.0 million in par value of convertible senior notes due 2029 and higher interest rates, as well as increased gains associated with the non-qualified deferred compensation plan.

Current wording

Interest and marketable securities income, net consists of interest earned on invested cash and marketable securities balances and income and losses on mutual funds that are associated with our employee non-qualified deferred compensation plan. The increase for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was the result of increased cash, cash equivalents and marketable securities balances as a result of our August 2023 issuance of $1,265.0 million in par value of convertible senior notes due 2029 and higher interest rates, as well as increased gains associated with the non-qualified deferred compensation plan.

Previous wording

Interest expense is related to our debt transactions, which are described in Note 7 to the interim condensed consolidated financial statements. The increase to interest expense for three month period ended March 31, 2024, as compared to the same period in 2023, was primarily due to the August 2023 issuance of $1,265.0 million in par value of convertible senior notes due 2029.

Current wording

Interest expense is related to our debt transactions, which are described in Note 7 to the interim condensed consolidated financial statements. The increase to interest expense for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to the August 2023 issuance of $1,265.0 million in par value of convertible senior notes due 2029.

Previous wording

Other income (expense), net primarily represents net foreign exchange gains and losses mainly due to foreign exchange rate fluctuations on intercompany transactions and other non-operating expense and income items as well as gains and losses on equity investments. Other income (expense), net may fluctuate in the future based on changes in foreign currency exchange rates or other events.

Current wording

Other expense, net primarily represents net foreign exchange gains and losses mainly due to foreign exchange rate fluctuations on intercompany transactions and other non-operating expense and income items as well as gains and losses on equity investments. Other expense, net may fluctuate in the future based on changes in foreign currency exchange rates or other events.

Previous wording

For the three month period ended March 31, 2024, as compared to the same period in 2023, our provision for income taxes decreased due to an increase in the excess tax benefit related to stock-based compensation, a decrease in the tax on global intangible low-taxed income and a decrease in the valuation allowance recorded against state and foreign credits. These items were partially offset by an increase in non-deductible stock-based compensation and the impact of the enactment of a 15% global minimum corporate income tax that the Organisation for Economic Co-operation and Development ("OECD") and OECD member countries have begun implementing and which was effective for us beginning January 1, 2024.

Current wording

For the three months ended June 30, 2024, as compared to the same period in 2023, our provision for income taxes increased due to higher profitability, a decrease in foreign income taxed at lower rates and the impact of the enactment of a 15% global minimum corporate income tax that the Organisation for Economic Co-operation and Development ("OECD") and OECD member countries have begun implementing and which was effective for us beginning January 1, 2024. These items were partially offset by an increase in the benefit of U.S. federal, state and foreign research and development credits. For the six months ended June 30, 2024, as compared to the same period in 2023, our provision for income taxes decreased due to an increase in the excess tax benefit related to stock-based compensation, a decrease in the tax on global intangible low-taxed income and a decrease in the valuation allowance recorded against state and foreign credits. These items were partially offset by an increase in profitability and the 15% global minimum corporate income tax.

Previous wording

For the three month period ended March 31, 2023, our effective income tax rate was higher than the federal statutory tax rate due to tax on global intangible low-taxed income, non-deductible stock-based compensation, a shortfall related to stock-based compensation and an increase to the valuation allowance recorded against tax credits and foreign net operating loss carryforwards. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits.

Current wording

For the three months ended June 30, 2024, our effective income tax rate was higher than the federal statutory tax rate due to non-deductible stock-based compensation, tax on an intercompany transaction and the 15% global minimum corporate income tax. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. For the six months ended June 30, 2024, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.

Previous wording

For the three month period ended March 31, 2024, our effective income tax rate was lower than the federal statutory tax rate due to the excess tax benefit related to stock-based compensation, foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by non-deductible stock-based compensation and the 15% global minimum corporate income tax.

Current wording

For the three and six months ended June 30, 2023, our effective income tax rate was lower than the federal statutory tax rate due to foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits. These amounts were partially offset by tax on global intangible low-taxed income, non-deductible stock-based compensation and a shortfall related to stock-based compensation.

Previous wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three months ended March 31, 2024, for the benefit of our note hedge transactions. During this period, our average stock price was in excess of $95.10, which is the initial conversion price of our convertible senior notes due in 2025. See further definition below.

Current wording

(1) Shares used in non-GAAP per diluted share calculations have been adjusted for the three and six months ended June 30, 2024, for the benefit of our note hedge transactions. During these periods, our average stock price was in excess of $95.10, which is the initial conversion price of our convertible senior notes due in 2025. See further definition below.

Previous wording

To date, we have financed our operations primarily through public and private sales of debt and equity securities and cash generated by operations. As of March 31, 2024, our cash, cash equivalents and marketable securities, which primarily consisted of corporate bonds, U.S. government agency obligations and money market funds, totaled $2.3 billion. We place our cash investments in instruments that meet high-quality credit standards, as specified in our investment policy. Our investment policy is also designed to limit the amount of our credit exposure to any one issue or issuer and seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity at all times.

Current wording

To date, we have financed our operations primarily through public and private sales of debt and equity securities and cash generated by operations. As of June 30, 2024, our cash, cash equivalents and marketable securities, which primarily consisted of corporate bonds, U.S. government agency obligations, time deposits and money market funds, totaled $1.9 billion. We place our cash investments in instruments that meet high-quality credit standards, as specified in our investment policy. Our investment policy is also designed to limit the amount of our credit exposure to any one issue or issuer and seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity at all times.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $252.4 million held in accounts outside the U.S. The U.S. Tax Cuts and Jobs Act establishes a territorial tax system in the U.S., which provides companies with the potential ability to repatriate earnings with minimal U.S. federal income tax impact. As a result, our liquidity is not expected to be materially impacted by the amount of cash and cash equivalents held in accounts outside the U.S.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $319.6 million held in accounts outside the U.S. The U.S. Tax Cuts and Jobs Act establishes a territorial tax system in the U.S., which provides companies with the potential ability to repatriate earnings with minimal U.S. federal income tax impact. As a result, our liquidity is not expected to be materially impacted by the amount of cash and cash equivalents held in accounts outside the U.S.

Previous wording

The increase in cash provided by operating activities for the three months ended March 31, 2024, as compared to the same period in 2023, was due to increased profitability and timing of collections from customers.

Current wording

The increase in cash provided by operating activities for the six months ended June 30, 2024, as compared to the same period in 2023, was due to increased profitability, timing of collections from customers and the shift in our performance-based compensation program from cash-based to stock-based.

Previous wording

The increase in cash used in investing activities during the three months ended March 31, 2024, as compared to the same period in 2023, was due to an increase in maturities and sales of marketable securities, during the three month period ended March 31, 2023, some of which were not reinvested in order to fund current operating and strategic cash needs, which was partially offset by a reduction of purchases of property and equipment as we continued investment in our compute infrastructure during the three months ended March 31, 2023.

Current wording

The increase in cash used in investing activities during the six months ended June 30, 2024, as compared to the same period in 2023, was driven by cash paid for the acquisition of Noname Security, partially offset by an increase in cash proceeds from net marketable securities activity to fund the acquisition and a reduction of purchases of property and equipment related to our compute infrastructure build-out during the first half of 2023.

Previous wording

The decrease in cash used in financing activities during the three months ended March 31, 2024, as compared to the same period in 2023, was due to a decrease in repurchases of our common stock as part of our share repurchase program, partially offset by increased employee taxes paid related to vesting of stock awards driven by the shift in our performance-based compensation program from cash-based to stock-based and the increase in stock price.

Current wording

The decrease in cash used in financing activities during the six months ended June 30, 2024, as compared to the same period in 2023, was due to a decrease in repurchases of our common stock as part of our share repurchase program, partially offset by increased employee taxes paid related to vesting of stock awards driven by the shift in our performance-based compensation program from cash-based to stock-based and the increase in stock price.

Previous wording

Our board of directors authorized a share repurchase program that is effective from January 2022 through December 2024, and during the three months ended March 31, 2024, we repurchased 1.1 million shares of common stock at a weighted average price of $109.79 per share for an aggregate of $125.4 million. In May 2024, our board of directors authorized a new $2.0 billion share repurchase program, effective May 2024 through June 2027. As of March 31, 2024, $412.5 million remained available for future share repurchases under the prior authorization. Our goals for the share repurchase programs are to offset the dilution created by our employee equity compensation programs over time and provide the flexibility to return capital to stockholders as business and market conditions warrant, while still preserving our ability to pursue other strategic opportunities. The timing and amount of any future share repurchases will be determined by our management based on its evaluation of market conditions and other factors.

Current wording

Our board of directors authorized a share repurchase program that is effective from January 2022 through December 2024. In May 2024, our board of directors authorized a new $2.0 billion share repurchase program, effective May 2024 through June 2027. During the six months ended June 30, 2024, we repurchased 2.5 million shares of common stock at a weighted average price of $101.38 per share for an aggregate of $253.3 million. As of June 30, 2024, $2.3 billion remained available for future share repurchases under the authorization programs. Our goals for the share repurchase programs are to offset the dilution created by our employee equity compensation programs over time and provide the flexibility to return capital to stockholders as business and market conditions warrant, while still preserving our ability to pursue other strategic opportunities. The timing and amount of any future share repurchases will be determined by our management based on its evaluation of market conditions and other factors.

Previous wording

Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances and our forecasted cash flows from operations to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments and settlements of other liabilities. In particular, our anticipated acquisition of Noname Security will require approximately $450.0 million, subject to cash acquired and post-closing adjustments. We plan to fund the acquisition of Noname Security with cash, cash equivalents and marketable securities on hand. We also have access to our 2022 Credit Agreement, should we require additional resources to fund the acquisition of Noname Security or other recurring operating costs.

Current wording

Based on our present business plan, we expect our current cash, cash equivalents and marketable securities balances and our forecasted cash flows from operations to be sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures, investments in information technology, potential strategic acquisitions, anticipated share repurchases, lease and purchase commitments, settlements of other liabilities and repayment of our $1,150.0 million convertible senior notes due in May 2025. We intend to repay these notes using a portion of the net proceeds from our $1,265.0 million convertible senior notes due in 2029.

Previous wording

Generally, these indemnification agreements require us to reimburse losses suffered by a third-party due to various events, such as lawsuits arising from patent or copyright infringement or our negligence. These indemnification obligations are considered off-balance sheet arrangements in accordance with the authoritative guidance for guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others. See also Note 13 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023 for further discussion of these indemnification agreements. The fair value of guarantees issued or modified during the three months ended March 31, 2024 was determined to be immaterial.

Current wording

We have entered into indemnification agreements with third parties, including vendors, customers, landlords, our officers and directors, stockholders of acquired companies, joint venture partners and third parties to which we license technology. Generally, these indemnification agreements require us to reimburse losses suffered by a third-party due to various events, such as lawsuits arising from patent or copyright infringement or our negligence. These indemnification obligations are considered off-balance sheet arrangements in accordance with the authoritative guidance for guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others. See also Note 13 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023 for further discussion of these indemnification agreements. The fair value of guarantees issued or modified during the six months ended June 30, 2024 was determined to be immaterial.