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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, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to    
            

Commission file number 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
Accelerated filerNon-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 3, 2021: 162,829,841
1

Table of Content
AKAMAI TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

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

2

Table of Content
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

AKAMAI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) (unaudited)June 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$581,068 $352,917 
Marketable securities 835,420 745,156 
Accounts receivable, net of reserves of $1,947 and $1,822 at June 30, 2021, and December 31, 2020, respectively
656,609 660,052 
Prepaid expenses and other current assets180,155 171,406 
Total current assets2,253,252 1,929,531 
Marketable securities 1,164,620 1,398,802 
Property and equipment, net1,538,422 1,478,272 
Operating lease right-of-use assets830,022 793,945 
Acquired intangible assets, net217,519 234,724 
Goodwill1,685,859 1,674,371 
Deferred income tax assets99,634 106,918 
Other assets131,610 147,567 
Total assets$7,920,938 $7,764,130 

3

Table of Content
AKAMAI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS, continued

(in thousands, except share data) (unaudited)June 30,
2021
December 31,
2020
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$93,465 $118,546 
Accrued expenses289,189 380,468 
Deferred revenue95,216 76,600 
Operating lease liabilities158,390 154,801 
Other current liabilities11,189 27,755 
Total current liabilities647,449 758,170 
Deferred revenue4,623 5,262 
Deferred income tax liabilities36,124 37,458 
Convertible senior notes1,941,113 1,906,707 
Operating lease liabilities733,523 715,404 
Other liabilities81,449 89,833 
Total liabilities3,444,281 3,512,834 
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; 164,481,023 shares issued and 163,018,768 shares outstanding at June 30, 2021, and 162,709,720 shares issued and outstanding at December 31, 2020
1,645 1,627 
Additional paid-in capital3,743,743 3,664,820 
Accumulated other comprehensive loss(31,557)(20,201)
Treasury stock, at cost, 1,462,255 shares at June 30, 2021, and no shares at December 31, 2020
(154,416) 
Retained earnings917,242 605,050 
Total stockholders’ equity4,476,657 4,251,296 
Total liabilities and stockholders’ equity$7,920,938 $7,764,130 

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

Table of Content
AKAMAI TECHNOLOGIES, INC.
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)2021202020212020
Revenue$852,824 $794,715 $1,695,532 $1,559,017 
Costs and operating expenses:
Cost of revenue (exclusive of amortization of acquired intangible assets shown below)320,000 276,804 626,687 545,386 
Research and development77,255 64,090 159,300 135,314 
Sales and marketing111,894 123,469 228,248 247,255 
General and administrative134,295 129,709 271,010 257,070 
Amortization of acquired intangible assets12,060 10,381 23,487 20,815 
Restructuring (benefit) charge(2,114)(167)5,002 10,418 
Total costs and operating expenses653,390 604,286 1,313,734 1,216,258 
Income from operations199,434 190,429 381,798 342,759 
Interest income4,736 9,502 9,314 16,545 
Interest expense(18,037)(17,249)(35,871)(34,454)
Other expense, net(811)(1,603)(1,628)(5,711)
Income before provision for income taxes185,322 181,079 353,613 319,139 
Provision for income taxes(18,009)(18,671)(29,907)(32,963)
Loss from equity method investment(10,816)(493)(11,514)(1,115)
Net income$156,497 $161,915 $312,192 $285,061 
Net income per share:
Basic$0.96 $1.00 $1.91 $1.76 
Diluted$0.94 $0.98 $1.88 $1.74 
Shares used in per share calculations:
Basic163,074 162,413 163,067 162,203 
Diluted166,263 164,768 165,976 164,226 

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

Table of Content
AKAMAI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
(in thousands) (unaudited)2021202020212020
Net income$156,497 $161,915 $312,192 $285,061 
Other comprehensive income (loss):
Foreign currency translation adjustments16,981 5,808 (7,284)(20,469)
Change in unrealized (loss) gain on investments, net of income tax benefit (provision) of $410, $(5,144), $1,347, and $(3,679) for the three and six months ended June 30, 2021 and 2020, respectively
(1,191)15,880 (4,072)8,306 
Other comprehensive income (loss)15,790 21,688 (11,356)(12,163)
Comprehensive income$172,287 $183,603 $300,836 $272,898 

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

6

Table of Content
AKAMAI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months
Ended June 30,
(in thousands) (unaudited)20212020
Cash flows from operating activities:
Net income$312,192 $285,061 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization269,186 231,788 
Stock-based compensation104,786 96,684 
Provision for deferred income taxes7,225 11,394 
Amortization of debt discount and issuance costs32,717 31,310 
Other non-cash reconciling items, net13,654 14,804 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(4,404)(105,546)
Prepaid expenses and other current assets(10,849)(9,979)
Accounts payable and accrued expenses(83,059)(47,402)
Deferred revenue18,094 21,342 
Other current liabilities(16,230)(1,115)
Other non-current assets and liabilities(15,386)(6,407)
Net cash provided by operating activities627,926 521,934 
Cash flows from investing activities:
Cash (paid) received for business acquisitions, net of cash acquired(15,638)106 
Cash paid for asset acquisition (36,376)
Purchases of property and equipment(194,453)(214,952)
Capitalization of internal-use software development costs(124,835)(120,716)
Purchases of short- and long-term marketable securities(382,236)(842,516)
Proceeds from sales of short- and long-term marketable securities7,596 29,667 
Proceeds from maturities of short- and long-term marketable securities513,850 984,333 
Other non-current assets and liabilities(212)79 
Net cash used in investing activities(195,928)(200,375)
Cash flows from financing activities:
Proceeds related to the issuance of common stock under stock plans31,122 29,805 
Employee taxes paid related to net share settlement of stock-based awards(76,260)(63,930)
Repurchases of common stock(154,416)(107,880)
Other non-current assets and liabilities(67) 
Net cash used in financing activities(199,621)(142,005)
Effects of exchange rate changes on cash, cash equivalents and restricted cash(4,148)(828)
Net increase in cash, cash equivalents and restricted cash228,229 178,726 
Cash, cash equivalents and restricted cash at beginning of period353,466 394,146 
Cash, cash equivalents and restricted cash at end of period$581,695 $572,872 

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

 For the Six Months
Ended June 30,
(in thousands) (unaudited)20212020
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds received of $6,550 and $6,711 for the six months ended June 30, 2021 and 2020, respectively
$56,995 $26,409 
Cash paid for interest expense2,875 3,079 
Cash paid for operating lease liabilities117,632 94,157 
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities131,962 65,832 
Purchases of property and equipment and capitalization of internal-use software development costs included in accounts payable and accrued expenses43,520 98,235 
Capitalization of stock-based compensation19,524 18,856 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$581,068 $572,288 
Restricted cash627 584 
Cash, cash equivalents and restricted cash$581,695 $572,872 

The accompanying notes are an integral part of the consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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 


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

Three Months Ended June 30, 2020
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance at April 1, 2020162,176,589 $1,631 $3,658,990 $(78,995)$(80,550)$171,142 $3,672,218 
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes331,544 3 (12,595)(12,592)
Issuance of common stock under employee stock purchase plan393,921 4 29,166 29,170 
Stock-based compensation59,226 59,226 
Repurchases of common stock(271,577)(27,330)(27,330)
Net income161,915 161,915 
Foreign currency translation adjustment5,808 5,808 
Change in unrealized gain on investments, net of tax15,880 15,880 
Balance at June 30, 2020162,630,477 $1,638 $3,734,787 $(57,307)$(107,880)$333,057 $3,904,295 

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AKAMAI TECHNOLOGIES, INC.
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, 2021163,018,768 $1,645 $3,743,743 $(31,557)$(154,416)$917,242 $4,476,657 

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

Six Months Ended June 30, 2020
(in thousands, except share data) (unaudited)Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance as of January 1, 2020162,000,843 $1,620 $3,653,486 $(45,144)$ $47,996 $3,657,958 
Issuance of common stock upon the exercise of stock options and vesting of restricted and deferred stock units, net of shares withheld for employee taxes1,378,584 14 (63,306)(63,292)
Issuance of common stock under employee stock purchase plan393,921 4 29,166 29,170 
Stock-based compensation115,441 115,441 
Repurchases of common stock(1,142,871)(107,880)(107,880)
Net income285,061 285,061 
Foreign currency translation adjustment(20,469)(20,469)
Change in unrealized gain on investments, net of tax8,306 8,306 
Balance as of June 30, 2020162,630,477 $1,638 $3,734,787 $(57,307)$(107,880)$333,057 $3,904,295 

The accompanying notes are an integral part of the consolidated financial statements.
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AKAMAI TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Akamai Technologies, Inc. (the “Company”) provides solutions for protecting and delivering content and business applications over the internet. Its globally-distributed platform is comprised of more than 325,000 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 industry segment: providing cloud services for delivering, optimizing and securing content and business applications over the internet.

The accompanying interim 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 the accompanying financial statements.

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 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, 2020, filed with the Securities and Exchange Commission on February 26, 2021. The December 31, 2020 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 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.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board 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. This guidance will be effective for the Company on January 1, 2022. The Company is evaluating the potential impact of adopting this new accounting guidance on its consolidated financial statements related to the accounting for convertible debt arrangements.

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2. Fair Value Measurements

The following is a summary of available-for-sale marketable securities held as of June 30, 2021 and December 31, 2020 (in thousands):

Gross UnrealizedClassification on Balance Sheet
Amortized CostGainsLossesAggregate
Fair Value
Short-Term
Marketable
Securities
Long-Term
Marketable
Securities
As of June 30, 2021
Commercial paper$77,775 $8 $(1)$77,782 $77,782 $ 
Corporate bonds1,529,918 4,965 (760)1,534,123 673,847 860,276 
U.S. government agency obligations365,819 90 (304)365,605 83,457 282,148 
$1,973,512 $5,063 $(1,065)$1,977,510 $835,086 $1,142,424 
As of December 31, 2020
Commercial paper$46,931 $13 $(8)$46,936 $46,936 $ 
Corporate bonds1,628,462 9,482 (262)1,637,682 607,403 1,030,279 
Municipal securities3,495  (6)3,489  3,489 
U.S. government agency obligations435,653 329 (63)435,919 89,951 345,968 
$2,114,541 $9,824 $(339)$2,124,026 $744,290 $1,379,736 

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 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 consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest income in the consolidated statements of income. As of June 30, 2021, the Company did not hold for investment any corporate bonds that were classified as available-for-sale marketable securities that had been in a continuous unrealized loss position for more than 12 months.
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The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets as of June 30, 2021 and December 31, 2020 (in thousands):

Total Fair ValueFair Value Measurements at
Reporting Date Using
 Level 1Level 2
As of June 30, 2021
Cash Equivalents and Marketable Securities:
Money market funds$123,331 $123,331 $ 
Commercial paper79,732  79,732 
Corporate bonds1,534,123  1,534,123 
U.S. government agency obligations365,605  365,605 
Mutual funds22,530 22,530  
$2,125,321 $145,861 $1,979,460 
As of December 31, 2020
Cash Equivalents and Marketable Securities:
Money market funds$74,417 $74,417 $ 
Commercial paper75,785  75,785 
Corporate bonds1,637,682  1,637,682 
Municipal securities3,489  3,489 
U.S. government agency obligations435,919  435,919 
Mutual funds19,932 19,932  
$2,247,224 $94,349 $2,152,875 

As of June 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, the Company grouped commercial paper, U.S. government agency obligations, corporate bonds and municipal securities 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, Level 2 or Level 3 of the fair value measurement hierarchy during the six months ended June 30, 2021.

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 primarily use 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 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, 2021 and December 31, 2020 were as follows (in thousands):

June 30,
2021
December 31,
2020
Due in 1 year or less$835,086 $744,290 
Due after 1 year through 5 years1,142,424 1,379,736 
$1,977,510 $2,124,026 

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3. Accounts Receivable

Net accounts receivable consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):
 
June 30,
2021
December 31,
2020
Trade accounts receivable$466,351 $473,474 
Unbilled accounts receivable192,205 188,400 
Gross accounts receivable658,556 661,874 
Allowances for current expected credit losses and other reserves(1,947)(1,822)
Accounts receivable, net$656,609 $660,052 

The following table summarizes the activity of the Company's allowance for current expected credit losses and other reserves during the six months ended June 30, 2021 and 2020 (in thousands):

June 30,
2021
June 30,
2020
Beginning balance$1,822 $1,880 
Charges to income from operations2,399 7,523 
Collections from customers previously reserved and other(2,274)(3,178)
Ending balance$1,947 $6,225 

Charges to income from operations primarily represents charges to bad debt expense for increases in the allowance for current expected credit losses. The allowance for current expected credit losses has been developed using historical loss rates for the previous twelve months as well as expectations about the future where the Company has been able to develop forecasts to support its estimates.

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, 2021 and December 31, 2020 (in thousands):

June 30,
2021
December 31,
2020
Deferred costs included in prepaid and other current assets$44,465 $54,516 
Deferred costs included in other assets28,034 23,200 
Total deferred costs$72,499 $77,716 

The following table summarizes additional information related to incremental costs to obtain a contract with a customer for each of the three and six month periods ended June 30, 2021 and 2020 (in thousands):

 For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2021202020212020
Amortization expense related to deferred costs
$14,676 $16,069 $28,403 $30,191 
Incremental costs capitalized
$13,921 $12,590 $23,793 $23,375 

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

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5. Acquired Intangible Assets and Goodwill

Acquired intangible assets that are subject to amortization consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

 June 30, 2021December 31, 2020
 Gross
Carrying
Amount
Accumulated AmortizationNet
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Completed technology$179,694 $(119,853)$59,841 $172,346 $(111,435)$60,911 
Customer-related intangible assets357,146 (201,584)155,562 358,032 (186,733)171,299 
Non-compete agreements369 (145)224 373 (77)296 
Trademarks and trade names7,662 (5,770)1,892 7,658 (5,440)2,218 
Acquired license rights490 (490) 490 (490) 
Total$545,361 $(327,842)$217,519 $538,899 $(304,175)$234,724 

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. Aggregate expense related to amortization of acquired intangible assets for the three and six months ended June 30, 2020 was $10.4 million and $20.8 million, respectively. Based on the Company’s acquired intangible assets as of June 30, 2021, aggregate expense related to amortization of acquired intangible assets is expected to be $24.2 million for the remainder of 2021, and $44.3 million, $36.9 million, $29.2 million and $23.7 million for 2022, 2023, 2024 and 2025, respectively.

The change in the carrying amount of goodwill for the six months ended June 30, 2021 was as follows (in thousands):

Balance as of January 1, 2021$1,674,371 
Acquisition of Inverse, Inc. 10,741 
Measurement period adjustments related to acquisitions completed in 2020(296)
Foreign currency translation1,043 
Balance as of June 30, 2021$1,685,859 

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

6. Acquisitions

Inverse

In February 2021, the Company acquired Inverse, Inc. ("Inverse"), a Montreal-based company, for $17.1 million. Inverse provides a data repository and algorithms capable of identifying device types accessing the internet. The acquisition is intended to enhance the Company's enterprise security capabilities and expand its portfolio of zero trust and secure access service edge solutions for the internet of things. The Company allocated $10.7 million of the cost of the acquisition to goodwill and $7.6 million to a technology-related identifiable intangible asset. The acquired goodwill and intangible assets are partially offset by acquired negative working capital balances. The value of the goodwill is primarily attributable to synergies related to the integration of Inverse technology onto the Company's platform as well as a trained technical workforce. The total amount of goodwill related to the acquisition of Inverse expected to be deductible for tax purposes is $10.7 million. Pro forma results of operations, as well as the revenue and earnings generated by Inverse since its acquisition and included in the Company's results of operations, were not presented since they are not material. The allocation of the purchase price has not been finalized as of the filing of these financial statements.

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7. Debt

Convertible 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 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of 2027 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or

upon the occurrence of specified corporate events.

On or after May 1, 2027, holders may convert all or any portion of their 2027 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

Upon conversion, the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The initial conversion rate is 8.6073 shares of the Company's common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $116.18 per share, subject to adjustments in certain events, and represents a potential conversion into 9.9 million shares.

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components. The carrying cost of the liability component was calculated by measuring the fair value of a similar debt obligation that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2027 Notes. The difference between the principal amount of the 2027 Notes and the proceeds allocated to the liability component (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2027 Notes. The equity component is recorded in additional paid-in capital in the consolidated balance sheet and will not be remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the issuance of the 2027 Notes, the Company allocated the total transaction costs incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to interest expense over the term of the 2027 Notes, and transaction costs attributable to the equity component are netted against the equity component of the 2027 Notes in stockholders’ equity.

The 2027 Notes consisted of the following components as of June 30, 2021 and December 31, 2020 (in thousands):

June 30,
2021
December 31,
2020
Liability component:
Principal$1,150,000 $1,150,000 
Less: debt discount and issuance costs, net of amortization(182,791)(196,359)
Net carrying amount$967,209 $953,641 
Equity component:$220,529 $220,529 

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The estimated fair value of the 2027 Notes at June 30, 2021 and December 31, 2020 was $1,339.3 million and $1,277.8 million, respectively. The fair value was determined based on the quoted price of the 2027 Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 within the fair value hierarchy. Based on the closing price of the Company's common stock of $116.60 on June 30, 2021, the value of the 2027 Notes if converted to common stock was more than the principal amount of $1,150.0 million.

The Company used $100.0 million of the proceeds from the offering to repurchase shares of its common stock, concurrent with the issuance of the 2027 Notes. The repurchase was made in accordance with a share repurchase program previously approved by the board of directors. Additionally, $127.1 million of the proceeds was used for the net cost of the convertible note hedge and warrant transactions. The remaining net proceeds are intended to be used for working capital, share repurchases, potential acquisitions and strategic transactions and other corporate purposes.

Note Hedge

To minimize the impact of potential dilution upon conversion of the 2027 Notes, the Company entered into convertible note hedge transactions with respect to its common stock in August 2019. The Company paid $312.2 million for the note hedge transactions. The note hedge transactions cover approximately 9.9 million shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the 2027 Notes, also subject to adjustment, and are exercisable upon conversion of the 2027 Notes. The Company determined that the note hedge meets the definition of a derivative and is classified in stockholders’ equity, as the note hedge is indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the purchase of the hedge as a decrease to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the note hedge in its consolidated financial statements.

Warrants

Separately, in August 2019, the Company entered into warrant transactions, whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, up to 9.9 million shares of the Company’s common stock at a strike price of approximately $178.74 per share. The Company received aggregate proceeds of $185.2 million from the sale of the warrants. The convertible note hedge and warrant transactions will generally have the effect of increasing the conversion price of the 2027 Notes to approximately $178.74 per share. The Company determined that the warrants meet the definition of a derivative and are classified in stockholders’ equity, as the warrants are indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the proceeds from issuance of the warrants as an increase to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the warrants in its consolidated financial statements.

Convertible Notes Due 2025

In May 2018, the Company issued $1,150.0 million in par value of convertible senior notes due 2025 (the "2025 Notes"). The 2025 Notes are senior unsecured obligations of the Company, bear regular interest of 0.125%, payable semi-annually on May 1 and November 1 of each year, and mature on May 1, 2025, unless repurchased or converted prior to maturity.

At their option, holders may convert their 2025 Notes prior to the close of business on the business day immediately preceding January 1, 2025, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ended June 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or

upon the occurrence of specified corporate events.

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On or after January 1, 2025, holders may convert all or any portion of their 2025 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances.

Upon conversion, the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The initial conversion rate is 10.5150 shares of the Company's common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $95.10 per share, subject to adjustments in certain events, and represents a potential conversion into 12.1 million shares.

In accounting for the issuance of the 2025 Notes, the Company separated the 2025 Notes into liability and equity components. The carrying cost of the liability component was calculated by measuring the fair value of a similar debt obligation that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2025 Notes. The difference between the principal amount of the 2025 Notes and the proceeds allocated to the liability component (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component is recorded in additional paid-in capital in the consolidated balance sheet and will not be remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the issuance of the 2025 Notes, the Company allocated the total transaction costs incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to interest expense over the term of the 2025 Notes, and transaction costs attributable to the equity component are netted against the equity component of the 2025 Notes in stockholders’ equity.

The 2025 Notes consisted of the following components as of June 30, 2021 and December 31, 2020 (in thousands):

June 30,
2021
December 31,
2020
Liability component:
Principal$1,150,000 $1,150,000 
Less: debt discount and issuance costs, net of amortization(176,096)(196,934)
Net carrying amount$973,904 $953,066 
Equity component:$285,225 $285,225 

The estimated fair value of the 2025 Notes at June 30, 2021 and December 31, 2020 was $1,506.5 million and $1,422.8 million, respectively. The fair value was determined based on the quoted price of the 2025 Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 within the fair value hierarchy. Based on the closing price of the Company's common stock of $116.60 on June 30, 2021, the value of the 2025 Notes if converted to common stock was more than the principal amount of $1,150.0 million.

The Company used $46.2 million of the proceeds from the offering to repurchase shares of its common stock, concurrent with the issuance of the 2025 Notes. The repurchase was made in accordance with a share repurchase program previously approved by the board of directors. Additionally, $141.8 million of the proceeds was used for the net cost of convertible note hedge and warrant transactions. The Company also used a portion of the net proceeds to repay at maturity the $690.0 million in par value of convertible senior notes due in 2019.

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Note Hedge

To minimize the impact of potential dilution upon conversion of the 2025 Notes, the Company entered into convertible note hedge transactions with respect to its common stock in May 2018. The Company paid $261.7 million for the note hedge transactions. The note hedge transactions cover approximately 12.1 million shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the 2025 Notes, also subject to adjustment, and are exercisable upon conversion of the 2025 Notes. The Company determined that the note hedge meets the definition of a derivative and is classified in stockholders’ equity, as the note hedge is indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the purchase of the hedge as a decrease to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the note hedge in its consolidated financial statements.

Warrants

Separately, in May 2018, the Company entered into warrant transactions, whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, up to 12.1 million shares of the Company’s common stock at a strike price of approximately $149.18 per share. The Company received aggregate proceeds of $119.9 million from the sale of the warrants. The convertible note hedge and warrant transactions will generally have the effect of increasing the conversion price of the 2025 Notes to approximately $149.18 per share. The Company determined that the warrants meet the definition of a derivative and are classified in stockholders’ equity, as the warrants are indexed to the Company's common stock, and the Company, at its election, may pay or deliver to holders cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock. The Company recorded the proceeds from issuance of the warrants as an increase to additional paid-in capital. The Company does not recognize subsequent changes in fair value of the warrants in its consolidated financial statements.

Revolving Credit Facility

In May 2018, the Company entered into a $500.0 million