Convertible Senior Notes | Convertible Senior Notes 2026 Convertible Senior Notes In September 2020, the Company issued $650 million aggregate principal amount of 0% convertible senior notes due 2026 in a private placement to qualified institutional buyers (the "2026 Notes"). The 2026 Notes are senior, unsecured obligations that do not bear regular interest, and the principal amount of the 2026 Notes does not accrete. The 2026 Notes may bear special interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the indenture governing the 2026 Notes (the "2026 Indenture") or if the 2026 Notes are not freely tradeable as required by the 2026 Indenture. The 2026 Notes will mature on March 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $640.2 million. Each $1,000 principal amount of the 2026 Notes is initially convertible into 2.3583 shares of the Company’s Class A common stock par value $0.0001 (“Class A Common Stock”), which is equivalent to an initial conversion price of approximately $424.03 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest. In addition, upon the occurrence of a make-whole fundamental change or a redemption period, each as defined in the 2026 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Notes in connection with such make-whole fundamental change or during the relevant redemption period. Prior to the close of business on the business day immediately preceding December 15, 2025, the 2026 Notes will be convertible only under the following circumstances: (1) during any calendar quarter commencing after December 31, 2020, and only during such calendar quarter, if the last reported sale price of the Class A Common Stock for at least 20 trading days (whether or not consecutive) during a 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; (2) during the five-business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2026 Notes for such trading day was less than 98% of the product of the last reported sale price of the Class A Common Stock and the conversion rate for the 2026 Notes on each such trading day; (3) upon the Company’s notice that it is redeeming any or all of the 2026 Notes, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after December 15, 2025, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2026 Notes may convert all or a portion of their 2026 Notes regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, either cash, shares of Class A Common Stock or a combination of cash and shares of Class A Common Stock, at the Company’s election. It is the Company’s current intent to settle the principal amount of the 2026 Notes with cash. During the three months ended September 30, 2020, the conditions allowing holders of the 2026 Notes to convert were not met. The Company may redeem the 2026 Notes, at its option, on or after March 20, 2023, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid special interest if the last reported sale price of the Company’s Class A Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption. No sinking fund is provided for the 2026 Notes. Upon the occurrence of a fundamental change (as defined in the 2026 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2026 Notes for cash at a price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date. The 2026 Notes are senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2026 Notes; equal in right of payment with the Company’s existing and future liabilities that are not so subordinated, including the 2023 Notes and the 2025 Notes; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company. In accounting for the issuance of the 2026 Notes, the Company separated the 2026 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $138.9 million and was determined by deducting the fair value of the liability component from the par value of the 2026 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense at an effective interest rate over the contractual terms of the 2026 Notes. In accounting for the transaction costs related to the 2026 Notes, the Company allocated the total amount incurred to the liability and equity components of the 2026 Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component recorded as additional debt discount were $7.7 million and will be amortized to interest expense using the effective interest method over the contractual terms of the 2026 Notes. Issuance costs attributable to the equity component of $2.1 million were netted with the equity component in stockholders’ equity. The net carrying amount of the liability component of the 2026 Notes was as follows (in thousands): September 30, 2020 Principal $ 650,000 Unamortized discount (137,991) Unamortized issuance cost (7,627) Net carrying amount $ 504,382 The net carrying amount of the equity component of the 2026 Notes was as follows (in thousands): September 30, 2020 Proceeds allocated to the conversion option (debt discount) $ 138,923 Issuance cost (2,085) Net carrying amount $ 136,838 The following table sets forth the interest expense recognized related to the 2026 Notes (in thousands): Three Months Ended September 30, 2020 Amortization of debt discount $ 932 Amortization of debt issuance costs 43 Total interest expense related to the 2026 Notes $ 975 2026 Capped Calls In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call transactions with certain counterparties (the “2026 Capped Calls”). The 2026 Capped Calls each have an initial strike price of approximately $424.03 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Notes. The 2026 Capped Calls have initial cap prices of approximately $556.10 per share, subject to certain adjustments. The 2026 Capped Calls cover, subject to anti-dilution adjustments, approximately 1.5 million shares of Class A Common Stock. The 2026 Capped Calls are generally intended to reduce or offset the potential dilution to the Class A Common Stock upon any conversion of the 2026 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2026 Capped Calls settle in components commencing on February 13, 2025 with the last component scheduled to expire on March 13, 2025. The 2026 Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the 2026 Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the 2026 Capped Calls, including changes in law; insolvency filings; and hedging disruptions. The 2026 Capped Call transactions are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost of $41.8 million incurred to purchase the Capped Call transactions was recorded as a reduction to additional paid-in capital on the Company's Condensed Consolidated Balance Sheets. 2025 Convertible Senior Notes In March 2020, the Company issued $1.0 billion aggregate principal amount of 0% convertible senior notes due 2025 in a private placement to qualified institutional buyers (the "2025 Notes"). The 2025 Notes are senior, unsecured obligations that do not bear regular interest, and the principal amount of the 2025 Notes does not accrete. The 2025 Notes may bear special interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the indenture governing the 2025 Notes (the "2025 Indenture") or if the 2025 Notes are not freely tradeable as required by the 2025 Indenture. The 2025 Notes will mature on March 1, 2025, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $986.5 million. Each $1,000 principal amount of the 2025 Notes is initially convertible into 2.7745 shares of Class A Common Stock, which is equivalent to an initial conversion price of approximately $360.43 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest. In addition, upon the occurrence of a make-whole fundamental change or a redemption period, each as defined in the 2025 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2025 Notes in connection with such make-whole fundamental change or during the relevant redemption period. Prior to the close of business on the business day immediately preceding December 1, 2024, the 2025 Notes will be convertible only under the following circumstances: (1) during any calendar quarter commencing after June 30, 2020, and only during such calendar quarter, if the last reported sale price of the Class A Common Stock for at least 20 trading days (whether or not consecutive) during a 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; (2) during the five-business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2025 Notes for such trading day was less than 98% of the product of the last reported sale price of the Class A Common Stock and the conversion rate for the 2025 Notes on each such trading day; (3) upon the Company’s notice that it is redeeming any or all of the 2025 Notes, but only with respect to the 2025 Notes called for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after December 1, 2024, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2025 Notes may convert all or a portion of their 2025 Notes regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, either cash, shares of Class A Common Stock or a combination of cash and shares of Class A Common Stock, at the Company’s election. It is the Company’s current intent to settle the principal amount of the 2025 Notes with cash. During the three months ended September 30, 2020, the conditions allowing holders of the 2025 Notes to convert were not met. The Company may redeem the 2025 Notes, at its option, on or after March 5, 2022, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid special interest if the last reported sale price of the Company’s Class A Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption. No sinking fund is provided for the 2025 Notes. Upon the occurrence of a fundamental change (as defined in the 2025 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2025 Notes for cash at a price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date. The 2025 Notes are senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment with the Company’s existing and future liabilities that are not so subordinated, including the 2023 Notes; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company. In accounting for the issuance of the 2025 Notes, the Company separated the 2025 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $195.1 million and was determined by deducting the fair value of the liability component from the par value of the 2025 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense at an effective interest rate over the contractual terms of the 2025 Notes. In accounting for the transaction costs related to the 2025 Notes, the Company allocated the total amount incurred to the liability and equity components of the 2025 Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component recorded as additional debt discount were $10.9 million and will be amortized to interest expense using the effective interest method over the contractual terms of the 2025 Notes. Issuance costs attributable to the equity component of $2.6 million were netted with the equity component in stockholders’ equity. The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands): September 30, 2020 Principal $ 1,000,000 Unamortized discount (174,624) Unamortized issuance cost (9,856) Net carrying amount $ 815,520 The net carrying amount of the equity component of the 2025 Notes was as follows (in thousands): September 30, 2020 Proceeds allocated to the conversion option (debt discount) $ 195,074 Issuance cost (2,632) Net carrying amount $ 192,442 The following table sets forth the interest expense recognized related to the 2025 Notes (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2020 Amortization of debt discount $ 8,912 20,451 Amortization of debt issuance costs 442 1,004 Total interest expense related to the 2025 Notes $ 9,354 $ 21,455 2025 Capped Calls In connection with the offering of the 2025 Notes, the Company entered into privately-negotiated capped call transactions with certain counterparties (the “2025 Capped Calls”). The 2025 Capped Calls each have an initial strike price of approximately $360.43 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2025 Notes. The 2025 Capped Calls have initial cap prices of approximately $480.56 per share, subject to certain adjustments. The 2025 Capped Calls cover, subject to anti-dilution adjustments, approximately 2.8 million shares of Class A Common Stock. The 2025 Capped Calls are generally intended to reduce or offset the potential dilution to the Class A Common Stock upon any conversion of the 2025 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2025 Capped Calls settle in components commencing on January 31, 2024 with the last component scheduled to expire on February 28, 2024. The 2025 Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the 2025 Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the 2025 Capped Calls, including changes in law; insolvency filings; and hedging disruptions. The Capped Call transactions are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost of $60.9 million incurred to purchase the Capped Call transactions was recorded as a reduction to additional paid-in capital on the Company's Condensed Consolidated Balance Sheets. 2023 Convertible Senior Notes In March 2018, the Company issued $460.0 million aggregate principal amount of 0% convertible senior notes due 2023 in a private placement, including the exercise in full of the over-allotment options of the initial purchasers (the "2023 Notes"). The 2023 Notes are senior unsecured obligations of the Company, do not bear regular interest, and the principal amount of the 2023 Notes does not accrete. The 2023 Notes may bear special interest under specified circumstances as outlined in the indenture governing the 2023 Notes (the “2023 Indenture”) or if the 2023 Notes are not freely tradeable as required by the 2023 Indenture. The 2023 Notes will mature on March 15, 2023, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $449.5 million. Each $1,000 principal amount of the 2023 Notes is initially convertible into 12.2782 shares of the Company’s Class A Common Stock, which is equivalent to an initial conversion price of approximately $81.45 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest. In addition, upon the occurrence of a make-whole fundamental change or a redemption period, each as defined in the 2023 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2023 Notes in connection with such make-whole fundamental change or during the relevant redemption period. The 2023 Notes will be convertible at certain times and upon the occurrence of certain events in the future. Further, on or after December 15, 2022, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their 2023 Notes regardless of these conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A Common Stock, or a combination of cash and shares of Class A Common Stock, at the Company’s election. It is the Company’s current intent to settle the principal amount of the 2023 Notes with cash. In March 2020, the Company used $509.6 million of the net proceeds from the offering of the 2025 Notes to repurchase $172.5 million aggregate principal amount of the 2023 Notes in cash through individual privately negotiated transactions (the “First Partial Repurchase of 2023 Notes”). Of the $509.6 million net proceeds, $153.7 million and $355.9 million were allocated to the debt and equity components, respectively, utilizing an effective interest rate to determine the fair value of the liability component. This interest rate reflected the Company’s incremental borrowing rate, adjusted for the Company’s credit standing on nonconvertible debt with similar maturity. As of the repurchase date, the carrying value of the 2023 Notes subject to the First Partial Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $146.4 million. The First Partial Repurchase of 2023 Notes resulted in a $7.3 million loss on early debt extinguishment. In September 2020, the Company used $452.6 million of the net proceeds from the offering of the 2026 Notes to repurchase $132.6 million aggregate principal amount of the 2023 Notes in cash through individual privately negotiated transactions (the “Second Partial Repurchase of 2023 Notes”). Of the $452.6 million net proceeds, $121.1 million and $331.5 million were allocated to the debt and equity components, respectively, utilizing an effective interest rate to determine the fair value of the liability component. This interest rate reflected the Company’s incremental borrowing rate, adjusted for the Company’s credit standing on nonconvertible debt with similar maturity. As of the repurchase date, the carrying value of the 2023 Notes subject to the Second Partial Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $115.6 million. The Second Partial Repurchase of 2023 Notes resulted in a $5.5 million loss on early debt extinguishment. During the three months ended September 30, 2020, the stock price condition allowing holders of the 2023 Notes to convert was met. As a result, holders have the option to convert their 2023 Notes at any time during the fiscal quarter ending December 31, 2020. The 2023 Notes may be convertible thereafter if one or more of the conversion conditions specified in the 2023 Indenture is satisfied during future measurement periods. During the three months ended September 30, 2020, the Company settled approximately $51.2 million principal amount of unsettled requests received as of June 30, 2020, and received additional conversion requests on the principal amount of the 2023 Notes totaling approximately $16.1 million, out of which an immaterial amount was settled during the quarter ended September 30, 2020. During the quarter ended September 30, 2020, the Company recognized an immaterial gain on these conversions representing the net carrying amount in excess of the fair value of the liability component of the converted notes on the respective settlement dates. During the nine months ended September 30, 2020, the Company settled approximately $53.1 million principal amount and recognized an immaterial gain on these conversions. The amount is included in other income (expense), net in the Condensed Consolidated Statement of Operations. In relation to the remaining $16.1 million principal amount of unsettled conversion requests, as of September 30, 2020, the Company reclassified the net carrying value of the debt of $14.2 million from long-term to short-term debt and a portion of equity of approximately $1.9 million representing the difference between the principal and net carrying amount of the liability component of the 2023 Notes requested for conversion, into temporary equity, as these requests will be settled during the fourth quarter of fiscal 2020. In addition, from October 1, 2020 to the date of this filing, the Company has received additional conversion requests for $5.5 million principal amounts, which are expected to be settled during the quarter ending December 31, 2020. The Company may redeem the 2023 Notes, at its option, on or after September 20, 2020, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid special interest to, but excluding the redemption date, subject to certain conditions. No sinking fund is provided for the 2023 Notes. Upon the occurrence of a fundamental change (as defined in the 2023 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2023 Notes for cash at a price equal to 100% of the principal amount of the 2023 Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date. The net carrying amount of the liability component of the 2023 Notes was as follows (in thousands): September 30, 2020 Principal $ 101,787 Unamortized discount (11,620) Unamortized issuance cost (1,015) Net carrying amount (1) $ 89,152 (1) As of September 30, 2020, $14.2 million net carrying amount of the liability component was classified as a current liability on the Condensed Consolidated Balance Sheets. The following table sets forth the interest expense recognized related to the 2023 Notes (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Amortization of debt discount $ 2,097 $ 4,759 $ 9,445 $ 14,102 Amortization of debt issuance costs 169 359 745 1,047 Total interest expense related to the 2023 Notes $ 2,266 $ 5,118 $ 10,190 $ 15,149 2023 Capped Calls |