In August 2019, we entered into a purchase agreement with certain counterparties for the sale of an aggregate of $1.265 billion principal amount of the Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Convertible Notes consisted of a $1.1 billion initial placement and an over-allotment option that provided the initial purchasers of the Convertible Notes with the option to purchase an additional $165.0 million aggregate principal amount of the Convertible Notes, which was fully exercised. The Convertible Notes were issued pursuant to an Indenture, dated August 9, 2019 (the “Indenture”). The net proceeds from the

issuance of the Convertible Notes were $1.15 billion, net of debt issuance costs and cash used to purchase the capped call transactions (“Capped Call Transactions”) discussed below.

The Convertible Notes are unsecured and unsubordinated obligations. Interest is payable in cash semi-annually in arrears beginning on February 1, 2020 at a rate of 0.75% per year. The Convertible Notes mature on August 1, 2026 unless repurchased, redeemed, or converted in accordance with the terms prior to such date.

The Convertible Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election, at an initial conversion rate of 43.8481 shares of Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $22.81 (the “Conversion Price”) per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture.

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 6, 2023 if the last reported sale price of our Class A common stock has been at least 130% of the Conversion Price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.

Holders of the Convertible Notes may convert all or a portion of their Convertible Notes at their option prior to May 1, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:

•

during any calendar quarter commencing after December 31, 2019, if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the Convertible Notes on each such trading day;

•

during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Notes for each day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the Convertible Notes on such trading day;

•

on a notice of redemption, in which case we may be required to increase the conversion rate for the Convertible Notes so surrendered for conversion in connection with such redemption notice; or

On or after May 1, 2026, the Convertible Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Holders of the Convertible Notes who convert in connection with a make-whole fundamental change, as defined in the Indenture, or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the Convertible Notes may require us to repurchase all or a portion of the Convertible Notes at a price equal to 100% of the principal amount of Convertible Notes, plus any accrued and unpaid interest, including any additional interest.

In accounting for the issuance of the Convertible Notes, we separated the Convertible Notes into liability and equity components. The carrying amount of the equity component was $381.5 million and was recorded as a debt discount, which is amortized to interest expense at an effective interest rate of 6.22%. We allocated $4.1 million of debt issuance costs to the equity component and the remaining debt issuance costs of $9.5 million were allocated to the liability component, which are amortized to interest expense under the effective interest rate method. The equity component of the Convertible Notes will not be remeasured as long as it continues to meet the conditions for equity classification.

	Amount
	(in thousands)
Liability:
Principal	$	1,265,000
Unamortized debt discount and issuance costs		(373,224	)
Net carrying amount	$	891,776
Carrying amount of the equity component	$	377,432

As of December 31, 2019, the debt discount and debt issuance costs on the Convertible Notes will be amortized over the remaining period of approximately 6.6 years.

The following table details interest expense recognized related to the Convertible Notes for the year ended December 31, 2019:

	Amount
	(in thousands)
Contractual interest expense	$	3,723
Amortization of debt issuance costs		433
Amortization of debt discount		17,364
Total	$	21,520

As of December 31, 2019, the if-converted value of the Convertible Notes did not exceed the principal amount.

In connection with the pricing of the Convertible Notes, we entered into separate Capped Call Transactions with certain counterparties at a net cost of $102.1 million. The cap price of the Capped Call Transactions is initially $32.58 per share of our Class A common stock, representing a premium of 100% above the last reported sale price of $16.29 per share of our Class A common stock on August 6, 2019, and is subject to certain adjustments under the terms of the Capped Call Transactions. Conditions that cause adjustments to the initial strike price of the Capped Call Transactions mirror conditions that result in corresponding adjustments for the Convertible Notes.

The Capped Call Transactions are intended to reduce potential dilution to holders of our Class A common stock beyond the conversion price of $22.81, up to $32.58, on any conversion of the Convertible Notes or offset any cash payments we are required to make in excess of the principal amount of such converted Convertible Notes, as the case may be, with such reduction or offset subject to a cap. The cost of the Capped Call Transactions was recorded as a reduction of our additional paid-in capital in our consolidated balance sheets.

In July 2016, we entered into a five-year senior unsecured revolving credit facility (“Credit Facility”) with lenders, some of which are affiliated with certain members of the underwriting syndicate for our IPO and convertible note offering,

that allows us to borrow up to $1.1 billion to fund working capital and general corporate-purpose expenditures. The loan bears interest at LIBO plus 0.75%, as well as an annual commitment fee of 0.10% on the daily undrawn balance of the facility. No origination fees were incurred at the closing of the Credit Facility. In December 2016, the amount we are permitted to borrow under the Credit Facility was increased to $1.2 billion. In February 2018, the amount we are permitted to borrow under the Credit Facility was increased to $1.25 billion. In August 2018, we amended the Credit Facility to extend the term to August 2023 with respect to an aggregate of $1.05 billion of the $1.25 billion that we may borrow under the Credit Facility. In August 2019, we amended the Credit Facility to revise the covenants that restrict the repurchase of equity securities and the incurrence of indebtedness to permit the Capped Call Transactions and issuance of the Convertible Notes. As of December 31, 2019, no amounts were outstanding under the Credit Facility. As of December 31, 2019, we had $25.5 million in the form of outstanding standby letters of credit.