Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

9.Debt

Convertible Senior Notes

In August 2021, the Company completed a private offering of $977.5 million principal amount of 0.25% convertible senior notes due 2026 (the “2026 Notes”). The 2026 Notes are unsecured obligations and bear interest at a fixed rate of 0.25% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2022. The 2026 Notes will mature on August 1, 2026, unless earlier converted, redeemed, or repurchased. The Company incurred $17.6 million of debt issuance costs in connection with the 2026 Notes offering consisting of the initial purchasers’ commissions and legal, accounting, and other direct costs of the offering. The total proceeds from the offering, net of the debt issuance costs, were $959.9 million. The Company used $75.3 million of the net proceeds from the sale of the 2026 Notes to pay the premiums of the capped call options described further below.

As of March 31, 2022, none of the conversion conditions of the 2026 Notes described in the Amended 2021 Annual Report were met.

The net carrying amount of the 2026 Notes was as follows (in thousands):

	March 31,			December 31,
	2022			2021
Principal	$	977,500		$	977,500
Unamortized debt issuance costs		(15,356	)		(16,241	)
Net carrying amount	$	962,144		$	961,259

The following table sets forth the interest expense recognized related to the 2026 Notes (in thousands):

	For the Three Months Ended March 31,
	2022
Contractual interest expense	$	611
Amortization of debt issuance costs		885
Total interest expense related to 2026 Notes	$	1,496

Capped Call Transactions

In connection with the offering of the 2026 Notes, the Company purchased capped calls from certain financial institutions with respect to its common stock. The capped calls each have an initial strike price of $238.44 per share of the Company’s common stock, which corresponds to the initial conversion price of the 2026 Notes. The capped calls each have an initial cap price of $323.30 per share and expire in incremental components on each trading date beginning on June 4, 2026, and ending on July 30, 2026. The capped calls are intended to offset potential dilution to the Company’s common stock or offset any cash payments the Company is required to make in excess of the principal amount, as the case may be, with such reduction or offset subject to the cap price. The capped calls are subject to adjustments for certain corporate events and standard anti-dilution provisions.

The Company paid an aggregate amount of $75.3 million for the capped calls, covering approximately 4.1 million shares of the Company’s common stock. As the capped calls are both legally detachable and separately exercisable from the 2026 Notes, the Company accounts for the capped calls separately from the 2026 Notes. The capped calls are indexed to the Company’s own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped calls have been included as a net reduction to additional paid-in capital in the consolidated balance sheet.