Notes Payable

6 Months Ended

Jun. 30, 2021

Long-term Debt, Unclassified [Abstract]

Notes Payable

Notes Payable

Long-term debt consisted of the following:

	As of		As of
	June 30,		December 31,
	2021		2020
	(In thousands)
2029 and 2031 Senior Notes
2029 Senior Notes
Principal	$	500,000	$	—
Unamortized discount	(6,041)		—
Unamortized issuance costs	(1,323)		—
Net carrying amount	492,636		—
2031 Senior Notes
Principal	500,000		—
Unamortized discount	(6,091)		—
Unamortized issuance costs	(1,326)		—
Net carrying amount	492,583		—
Convertible Senior Notes and Capped Call Transactions
Convertible Senior Notes
Principal	—		343,702
Unamortized discount	—		(38,406)
Unamortized issuance costs	—		(3,228)
Net carrying amount	—		302,068
Total long-term debt	$	985,219	$	302,068

2029 and 2031 Senior Notes

In March 2021, the Company issued $1.0 billion aggregate principal amount of senior notes, consisting of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”). Initially, none of the Company’s subsidiaries guaranteed the Notes. However, under certain circumstances in the future the Notes can be guaranteed by each of the Company’s material domestic subsidiaries. The 2029 Notes and 2031 Notes will mature on March 15, 2029 and March 15, 2031, respectively. Interest payments are payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.

The aggregate net proceeds from offering of the Notes were approximately $985.1 million, after deducting underwriting discounts and issuance costs, paid and payable by the Company. The issuance costs of $2.4 million will be amortized into interest expense using the effective interest method over the term of the Notes.

The Company may voluntarily redeem the 2029 Notes, in whole or in part, under the following circumstances:

(1)at any time prior to March 15, 2024 with the net cash proceeds received by the Company from an equity offering at a redemption price equal to 103.625% of the principal amount, provided the aggregate principal amount of all such redemptions does not exceed 40% of the original aggregate principal amount of the 2029 Notes. Such redemption shall occur within 180 days after the closing of an equity offering and at least 50% of the then-outstanding aggregate principal amount of the 2029 Notes shall remain outstanding, unless all 2029 Notes are redeemed concurrently;

(2)at any time prior to March 15, 2024 at 100% of the principal amount, plus a “make-whole” premium;

(3)at any time on or after March 15, 2024 at a prepayment price equal to 101.813% of the principal amount;

(4)at any time on or after March 15, 2025 at a prepayment price equal to 100.906% of the principal amount; and

(5)at any time on or after March 15, 2026 at a prepayment price equal to 100.000% of the principal amount;

in each case, the redemption will include the accrued and unpaid interest, as applicable.

The Company may voluntarily redeem the 2031 Notes, in whole or in part, under the following circumstances:

(1)at any time prior to March 15, 2024 with the net cash proceeds received by the Company from an equity offering at a redemption price equal to 103.875% of the principal amount, provided the aggregate principal amount of all such redemptions does not to exceed 40% of the original aggregate principal amount of the 2031 Notes. Such redemption shall occur within 180 days after the closing of an equity offering and at least 50% of the then-outstanding aggregate principal amount of the 2031 Notes shall remain outstanding, unless all 2031 Notes are redeemed concurrently;

(2)at any time prior to March 15, 2026 at 100% of the principal amount, plus a “make-whole” premium;

(3)at any time on or after March 15, 2026 at a prepayment price equal to 101.938% of the principal amount;

(4)at any time on or after March 15, 2027 at a prepayment price equal to 101.292% of the principal amount;

(5)at any time on or after March 15, 2028 at a prepayment price equal to 100.646% of the principal amount; and

(6)at any time on or after March 15, 2029 at a prepayment price equal to 100.000% of the principal amount;

in each case, the redemption will include accrued and unpaid interest, as applicable.

The Notes are 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 Notes that the Company may incur in the future and equal in right of payment with the Company’s existing and future liabilities that are not subordinated.

In certain circumstances involving a change of control event, the Company will be required to make an offer to repurchase all, or, at the holder’s option, any part, of each holder’s notes of that series at 101% of the aggregate principal amount, plus accrued and unpaid interest, as applicable.

The indenture governing the Notes (the “Indenture”) contains covenants limiting the Company’s ability and the ability of its subsidiaries to: (i) create liens on certain assets to secure debt; (ii) grant a subsidiary guarantee of certain debt without also providing a guarantee of the Notes; and (iii) consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services.

For the three and six months ended June 30, 2021, the interest expense recognized related to the 2029 Notes and 2031 Notes was as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2021
	(In thousands)
2029 Notes
Contractual interest expense	$	4,531	$	5,651
Amortization of debt discount and issuance costs	168		217
Total interest expense - 2029 Notes	4,699		5,868
2031 Notes
Contractual interest expense	4,844		6,041
Amortization of debt discount and issuance costs	127		164
Total interest expense - 2031 Notes	4,971		6,205
Total interest expense	$	9,670	$	12,073

As of June 30, 2021, the Company was in compliance with all of its financial covenants under the Indenture.

Convertible Senior Notes and Capped Call Transactions

On May 18, 2021, the Company issued a notice of redemption for its Convertible Notes and as of June 30, 2021, redeemed all of the remaining outstanding $261.6 million aggregate principal amount of the Convertible Notes by issuing 3,688,584 shares of its Class A common stock and $52 thousand in cash. Of the $1.3 billion total value of these transactions, $1.0 billion and $255.6 million were allocated to the equity and liability components, respectively, utilizing an effective interest rate to determine the fair value of the liability component. The selected interest rate reflects the Company’s incremental borrowing rate, adjusted for the Company’s credit standing on nonconvertible debt with similar maturity. The extinguishment of these Convertible Notes resulted in a $21.4 million loss that is included in other (expenses) income, net, in the accompanying condensed consolidated statements of operations.

The net carrying amount of the equity component of the Convertible Notes was as follows:

	As of		As of
	June 30,		December 31,
	2021		2020
	(In thousands)
Proceeds allocated to the conversion options (debt discount)	$	—	$	74,636
Issuance costs	(2,819)		(2,819)
Net carrying amount	$	(2,819)	$	71,817

The following table sets forth the interest expense recognized related to the Convertible Notes:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Contractual interest expense	$	106	$	344	$	276	$	688
Amortization of debt issuance costs	69		484		328		968
Amortization of debt discount	1,287		5,694		4,315		11,388
Total interest expense	$	1,462	$	6,522	$	4,919	$	13,044

Concurrently with the above redemption, the Company settled its capped call arrangement that was entered into contemporaneously with the Convertible Notes offering in May 2018. This capped call arrangement is described in detail in the Company’s Annual Report. The capped call arrangement was settled for an aggregate cash consideration of $229.8 million received by the Company and recorded in the additional paid-in-capital, net of $1.4 million transaction costs and $3.2 million realized gain. The gain was primarily driven by the change in the fair value of the Company’s Class A common stock on the transaction settlement date. The gain was recorded in other (expenses) income, net, in the accompanying condensed consolidated statement of operations.