What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-22 compared with 2021-07-23 · 103 added, 103 removed, 353 unchanged (37% of the section changed)

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Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors,” “Note Regarding Forward-Looking Statements,” and “Note Regarding User Metrics and Other Data.”

Overview of Second Quarter 2021 Results

Our key user metrics and financial results for the second quarter of 2021 were as follows:

Overview of Third Quarter 2021 Results

Our key user metrics and financial results for the third quarter of 2021 were as follows:

Daily Active Users, or DAUs, increased 23% year-over-year to reach 306 million in Q3 2021.

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Adjusted EBITDA improved by $117.8 million year-over-year to $174.2 million in Q3 2021.

Cash used in operating activities was $101.1 million in Q2 2021, compared to $66.6 million in Q2 2020.

Cash provided by operating activities was $71.6 million in Q3 2021, compared to cash used in operating activities of $(54.8) million in Q3 2020.

Capital expenditures were $19.8 million in Q3 2021, compared to $14.7 million in Q3 2020.

Free Cash Flow was $51.7 million in Q3 2021, compared to $(69.6) million in Q3 2020.

Cash, cash equivalents, and marketable securities were $3.5 billion as of June 30, 2021.

Common shares outstanding plus shares underlying stock-based awards, including restricted stock units, restricted stock awards, and outstanding stock options, totaled 1,681 million at June 30, 2021, compared to 1,616 million one year ago.

Cash, cash equivalents, and marketable securities were $3.5 billion as of September 30, 2021.

Common shares outstanding plus shares underlying stock-based awards, including restricted stock units, restricted stock awards, and outstanding stock options, totaled 1,698 million at September 30, 2021, compared to 1,624 million one year ago.

is a camera company.

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DAUs are broken out by geography because markets have different characteristics .

We had 293 million DAUs on average in the second quarter of 2021, an increase of 55 million, or 23%, from the second quarter of 2020.

We had 306 million DAUs on average in the third quarter of 2021, an increase of 57 million, or 23%, from the third quarter of 2020.

Quarterly Average Daily Active Users

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Europe includes Russia and Turkey.

We recorded revenue of $982.1 million for the three months ended June 30, 2021, compared to revenue of $454.2 million for the same period in 2020, an increase of 116% year-over-year.

We recorded revenue of $1,067.5 million for the three months ended September 30, 2021, compared to revenue of $678.7 million for the same period in 2020, an increase of 57% year-over-year.

We monetize our business primarily through advertising.

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We measure our business using ARPU because it helps us understand the rate at which we’re monetizing our daily user base.

ARPU was $3.35 in the second quarter of 2021, up from $1.91 in the second quarter of 2020.

ARPU was $3.49 in the third quarter of 2021, up from $2.73 in the third quarter of 2020.

For purposes of calculating ARPU, revenue by user geography is apportioned to each region based on a determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity.

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The following table summarizes certain selected historical financial results:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Other Income (Expense), Net

Other income (expense), net consists of realized and unrealized gains and losses on sales of marketable securities, foreign currency transaction gains and losses, and gains and impairment on non-marketable investments.

Income Tax Benefit (Expense)

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The broader impact of the recent COVID-19 pandemic on our results of operations and overall financial performance continues to remain uncertain.

The COVID-19 pandemic has impacted revenue growth and will likely continue to adversely impact many aspects of our business and our partners.

The COVID-19 pandemic has impacted revenue growth and will likely continue to adversely impact many aspects of our business and our partners and contribute to uncertainty in various aspects of our business.

See “Risk Factors” for further discussion of the potential adverse impacts of the COVID-19 pandemic and related events on our business and partners.

The following table sets forth our consolidated statements of operations data:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Stock-based compensation expense included in the above line items:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

5 unchanged sentences

Depreciation and amortization expense included in the above line items:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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The following table sets forth the components of our consolidated statements of operations data for each of the periods presented as a percentage of revenue:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consolidated Statements of Operations Data:

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Income tax benefit (expense)

Three and Six Months Ended June 30, 2021 and 2020

Three Months Ended June 30,

Six Months Ended June 30,

Three and Nine Months Ended September 30, 2021 and 2020

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Revenue as a percentage change

Revenue for the three and six months ended June 30, 2021 increased $528.0 million and $835.1 million, respectively, compared to the same periods in 2020.

Revenue for the three and nine months ended September 30, 2021 increased $388.8 million and $1,223.9 million, respectively, compared to the same periods in 2020.

Revenue increased in both periods due to a combination of growth in advertisers and auction-based advertising demand and optimization efficiencies.

Cost of Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Cost of Revenue as a percentage change

Cost of revenue for the three and six months ended June 30, 2021 increased $194.6 million and $353.8 million, respectively, compared to the same periods in 2020.

The increase in cost of revenue was primarily driven by higher content costs which included $75.6 million and $165.6 million for the three and six months ended June 30, 2021, respectively, for Spotlight, which launched in Q4 2020.

Cost of revenue for the three and nine months ended September 30, 2021 increased $150.4 million and $504.1 million, respectively, compared to the same periods in 2020.

The increase in cost of revenue was primarily driven by higher content costs which included $35.5 million and $201.2 million for the three and nine months ended September 30, 2021, respectively, for Spotlight, which launched in Q4 2020.

In addition, the increases were driven by the growth in revenue share due to the overall increase in revenue and higher mix of revenue subject to revenue share.

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Research and Development Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Research and Development Expenses as a percentage change

Research and development expenses for the three and six months ended June 30, 2021 increased $109.8 million and $219.8 million, respectively, compared to the same periods in 2020.

The increases were primarily driven by higher personnel expenses due to increased stock-based compensation expense , growth in research and development headcount, and changes to our cash compensation programs.

Research and development expenses for the three and nine months ended September 30, 2021 increased $128.4 million and $348.2 million, respectively, compared to the same periods in 2020.

The increases were primarily driven by higher personnel expenses due to growth in research and development headcount, including increased cash- and stock-based compensation expense .

Sales and Marketing Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Sales and Marketing Expenses as a percentage change

Sales and marketing expenses for the three and six months ended June 30, 2021 increased $47.6 million and $75.7 million, respectively, compared to the same periods in 2020.

T he increases were primarily driven by higher personnel expenses due to increased stock-based compensation expense and growth in sales and marketing headcount as well as increased marketing investments.

For the six months ended June 30, 2021, t he year-over-year increase was partially offset by the impact of lower travel and event-related spending due to COVID-19 related restrictions on these activities in 2021 and for the three months ended June 30, 2020.

Sales and marketing expenses for the three and nine months ended September 30, 2021 increased $74.0 million and $149.7 million, respectively, compared to the same periods in 2020.

The increases were primarily driven by higher personnel expenses due to growth in sales and marketing headcount, including increased cash- and stock-based compensation expense , as well as increased marketing investments.

General and Administrative Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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General and Administrative Expenses as a percentage change

General and administrative expenses for the three and six months ended June 30, 2021 increased $57.9 million and $85.0 million, respectively, compared to the same periods in 2020.

The increases were primarily due to higher personnel expenses driven by stock-based compensation expense as well as headcount growth.

For the six months ended June 30, 2021, the year- over-year increase was partially offset by the impact of lower travel and event-related spending due to COVID-19 related restrictions on these activities in 2021 and for the three months ended June 30, 2020.

General and administrative expenses for the three and nine months ended September 30, 2021 increased $49.0 million and $134.0 million, respectively, compared to the same periods in 2020.

The increases were primarily driven by higher personnel expenses due to growth in headcount, including increased cash- and stock-based compensation expense, as well as an increase in professional service fees.

Interest Income

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Interest Income as a percentage change

Interest income for the three and six months ended June 30, 2021 decreased $3.5 million and $11.0 million, respectively, compared to the same periods in 2020.

Interest income for the three and nine months ended September 30, 2021 decreased $1.5 million and $12.5 million, respectively, compared to the same periods in 2020.

The decreases were primarily a result of lower interest rates on U.S.

1 unchanged sentence

Interest Expense

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2 unchanged sentences

Interest Expense as a percentage change

Interest expense for the three and six months ended June 30, 2021 decreased $20.2 million and $30.2 million, respectively, compared to the same periods in 2020 due to the early adoption of ASU 2020-06 on January 1, 2021.

Interest expense for the three and nine months ended September 30, 2021 decreased $24.2 million and $54.4 million, respectively, compared to the same periods in 2020 primarily due to the early adoption of ASU 2020-06 on January 1, 2021.

As a result of this adoption, we account for the Convertible Notes as a single liability, which eliminates the amortization of the debt discount.

Prior to January 1, 2021, the carrying amount of the equity component was recorded as a debt discount and amortized to interest expense.

Interest expense related to the amortization of debt issuance costs was $1.1 million and $2.2 million for the three and six months ended June 30, 2021, respectively, while interest expense related to the amortization of debt discount and issuance costs was $20.4 million and $32.0 million for the three and six months ended June 30, 2020, respectively.

Contractual interest expense was $2.3 million and $5.3 million for the three and six months ended June 30, 2021, respectively, and $2.8 million and $5.2 million for the three and six months ended June 30, 2020, respectively.

Interest expense related to the amortization of debt issuance costs was $1.1 million and $3.3 million for the three and nine months ended September 30, 2021, respectively, while interest expense related to the amortization of debt discount and issuance costs was $24.5 million and $56.5 million for the three and nine months ended September 30, 2020, respectively.

Contractual interest expense was $1.9 million and $7.2 million for the three and nine months ended September 30, 2021, respectively, and $3.0 million and $8.2 million for the three and nine months ended September 30, 2020, respectively.

Other Income (Expense), Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

(NM = Not Meaningful)

Other Income (Expense), Net

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Other Income (Expense), Net as a percentage change

Other income, net for the three and six months ended June 30, 2021 was $42.3 million and $64.3 million, respectively, compared to other income, net of $3.6 million and other expense, net of $8.8 million, respectively, in the same periods in 2020.

Other income, net for the three months ended June 30, 2021 was primarily a result of a $52.1 million unrealized gain and a $27.8 million realized gain on non-marketable investments offset by induced conversion expense related to the Convertible Notes.

Other income, net for the six months ended June 30, 2021 was primarily a result of a $75.4 million unrealized gain and a $27.8 million realized gain on non-marketable investments offset by induced conversion expense related to the Convertible Notes.

Other expense, net for the six months ended June 30, 2020 was primarily a result of a $10.5 million impairment of non-marketable investments.

Other income, net for the three and nine months ended September 30, 2021 was $112.6 million and $177.0 million, respectively, compared to other expense, net of $5.7 million and other expense, net of $14.5 million, respectively, in the same periods in 2020.

Other income, net for the three months ended September 30, 2021 was primarily a result of a $123.2 million unrealized gain on strategic investments.

Other income, net for the nine months ended September 30, 2021 was primarily a result of a $198.6 million unrealized gain and a $27.8 million realized gain on strategic investments offset by induced conversion expense related to the Convertible Notes of $41.5 million.

Other expense, net for the nine months ended September 30, 2020 was primarily a result of a $15.5 million impairment of strategic investments.

Income Tax Benefit (Expense)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Effective Tax Rate

Income tax benefit for the three and six months ended June 30, 2021 was $1.9 million and $0.4 million, respectively, compared to an income tax benefit of $1.0 million and $0.4 million, respectively, for the same periods in 2020.

The income tax benefits for all periods were primarily from partial valuation allowance releases on our deferred tax assets due to deferred tax liabilities originating from acquisitions.

Income tax expense for the three and nine months ended September 30, 2021 was $(1.0) million and $(0.6) million, respectively, compared to an income tax expense of $(0.9) million and $(0.5) million, respectively, for the same periods in 2020.

Our effective tax rate differs from the U.S.

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Net Loss and Adjusted EBITDA

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Adjusted EBITDA as a percentage change

Net loss for the three and six months ended June 30, 2021 was $151.7 million and $438.5 million, respectively, compared to $326.0 million and $631.9 million, respectively, for the same periods in 2020.

Adjusted EBITDA for the three and six months ended June 30, 2021 was $117.4 million and $115.7 million, respectively, compared to $(95.6) million and $(176.8) million, respectively, for the same periods in 2020.

Net loss for the three and nine months ended September 30, 2021 was $72.0 million and $510.5 million, respectively, compared to $199.9 million and $831.7 million, respectively, for the same periods in 2020.

Adjusted EBITDA for the three and nine months ended September 30, 2021 was $174.2 million and $289.9 million, respectively, compared to $56.4 million and $(120.4) million, respectively, for the same periods in 2020.

The increases in Adjusted EBITDA were attributable to increased revenues, partially offset by increased cost of revenue primarily due to higher content acquisition costs between the periods.

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The following table presents a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure, for each of the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Liquidity and Capital Resources

Cash, cash equivalents, and marketable securities were $3.5 billion as of June 30, 2021, primarily consisting of cash on deposit with banks and highly liquid investments in U.S.

Cash, cash equivalents, and marketable securities were $3.5 billion as of September 30, 2021, primarily consisting of cash on deposit with banks and highly liquid investments in U.S.

government and agency securities, corporate debt securities, certificates of deposit, and commercial paper.

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We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position.

In 2021, we entered into the Exchange Agreements with certain holders of the 2025 Notes and the 2026 Notes pursuant to which we exchanged approximately $715.9 million principal amount of the 2025 Notes and approximately $426.5 million principal amount of the 2026 Notes for aggregate consideration of approximately 52.4 million shares of Class A common stock.

In April 2021, we entered into a purchase agreement for the sale of an aggregate of $1.15 billion principal amount of convertible senior notes due in 2027.

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The 2027 Notes mature on May 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The 2027 Notes were not convertible as of June 30, 2021.

In addition, i n April 2021, we entered into the Exchange Agreements with certain holders of the 2025 Notes and the 2026 Notes pursuant to which we exchanged approximately $413.5 million principal amount of the 2025 Notes and approximately $426.5 million principal amount of the 2026 Notes for aggregate consideration of approximately 38.4 million shares of Class A common stock.

The 2027 Notes were not convertible as of September 30, 2021.

In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025.

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The 2025 Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was satisfied as of June 30, 2021 and as a result, the 2025 Notes will continue to be eligible for optional conversion during the third quarter of 2021 .

The sale price requirement for conversion was satisfied as of September 30, 2021 and as a result, the 2025 Notes will continue to be eligible for optional conversion during the fourth quarter of 2021 .

In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026.

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The 2026 Notes mature on August 1, 2026 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was satisfied as of June 30, 2021 and as a result, the 2026 Notes will continue to be eligible for optional conversion during the third quarter of 2021 .

The sale price requirement for conversion was satisfied as of September 30, 2021 and as a result, the 2026 Notes will continue to be eligible for optional conversion during the fourth quarter of 2021 .

In July 2016, we entered into a five-year senior unsecured revolving credit facility, or the Credit Facility, with lenders some of which are affiliated with certain members of the underwriting syndicate for the Convertible Notes offerings 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.

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.

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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 2026 Capped Call Transactions and issuance of the 2026 Notes.

In April 20 20 , we amended the Credit Facility to revise the covenants that restrict the incurrence of indebtedness to permit the issuance of the 2025 Notes .

In April 2021, we amended the Credit Facility to revise the covenants that restrict the incurrence of indebtedness to permit the issuance of the 2027 Notes and subject to satisfaction of a specified senior net leverage ratio , additional future indebtedness .

As of June 30, 2021, no amounts were outstanding under the Credit Facility.

As of June 30, 2021, we had $23.9 million in the form of outstanding standby letters of credit.

In July 2021 , the amount we are permitted to borrow under the Credit Facility decreased to $1.05 billion.

As of September 30, 2021 , no amounts were outstanding under the Credit Facility.

As of September 30, 2021 , we had $ 2 2 .

4 million in the form of outstan ding standby letters of credit.

We believe our existing cash balance is sufficient to fund our ongoing working capital, investing, and financing requirements for at least the next 12 months.

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We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position.

As of June 30, 2021, approximately 8% of our cash, cash equivalents, and marketable securities was held outside the United States.

As of September 30, 2021, approximately 8% of our cash, cash equivalents, and marketable securities was held outside the United States.

These amounts were primarily held in the United Kingdom and are utilized to fund our foreign operations.

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The following table sets forth the major components of our consolidated statements of cash flows for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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For information on how we define and calculate Free Cash Flow and a reconciliation to net cash provided by (used in) operating activities to Free Cash Flow, see “Non-GAAP Financial Measures.”

Three and Six Months Ended June 30, 2021 and 2020

Three and Nine Months Ended September 30, 2021 and 2020

Net Cash Provided by (Used In) Operating Activities

Net cash used in operating activities increased $34.5 million in the three months ended June 30, 2021, compared to the same period in 2020.

Net cash used in operating activities was $101.1 million for the three months ended June 30, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $256.6 million and depreciation and amortization expense of $28.3 million.

Net cash used in operating activities for the three months ended June 30, 2021 was also driven by an increase in the accounts receivable balance of $174.5 million due to an increase in revenue in the period and a $50.2 million decrease in accounts payable primarily due to the timing of payments.

Net cash provided by operating activities was $35.8 million in the six months ended June 30, 2021 as compared to net cash used in operations of $60.3 million in the six months ended June 30, 2020 resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $493.7 million and depreciation and amortization expense of $51.8 million.

Net cash provided by operating activities for the six months ended June 30, 2021 was also driven by an increase in the accounts receivable balance of $45.1 million due to an increase in revenue in the period and a $33.0 million increase in accrued expenses and other current liabilities primarily due to the timing of payments.

Net cash provided by operating activities was $71.6 million in the three months ended September 30, 2021, as compared to net cash used in operations of $54.8 million in the three months ended September 30, 2020 resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $300.9 million and depreciation and amortization expense of $32.5 million, partially offset by gains on debt and equity securities, net of $121.0 million.

Net cash provided by operating activities for the three months ended September 30, 2021 was also impacted by an increase in the accounts receivable balance of $132.9 million due to an increase in revenue in the period.

Net cash provided by operating activities was $107.4 million in the nine months ended September 30, 2021, as compared to net cash used in operations of $115.1 million in the nine months ended September 30, 2020 resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $794.6 million and depreciation and amortization expense of $84.3 million, partially offset by gains on debt and equity securities, net of $223.5 million.

Net cash provided by operating activities for the nine months ended September 30, 2021 was also impacted by an increase in the accounts receivable balance of $178.0 million due to an increase in revenue in the period, partially offset by a $89.7 million increase in accrued expenses and other current liabilities primarily due to the timing of payments.

Net Cash Provided by (Used In) Investing Activities

Net cash provided by investing activities was $131.9 million for the three months ended June 30, 2021, compared to net cash used in investing activities of $492.1 million for the same period in 2020.

Our investing activities in the three months ended June 30, 2021 consisted of cash provided by the sales and maturities of marketable securities of $936.4 million, partially offset by the purchase of marketable securities of $764.4 million.

Net cash used in investing activities for the three months ended June 30, 2020 consisted primarily of cash used in the purchase of marketable securities of $875.9 million and non-marketable investments of $56.3 million, partially offset by the maturities of marketable securities of $476.6 million.

Net cash provided by investing activities was $412.4 million for the six months ended June 30, 2021, compared to net cash used in investing activities of $120.5 million for the same period in 2020.

Our investing activities in the six months ended June 30, 2021 consisted of cash provided by the sales and maturities of marketable securities of $1.9 billion, partially offset by the purchase of marketable securities of $1.3 billion and cash paid for acquisitions of $139.2 million.

Net cash used in investing activities for the six months ended June 30, 2020 consisted of cash used in the purchase of marketable securities of $1.4 billion and non-marketable investments of $91.8 million, partially offset by the sales and maturities of marketable securities of $1.4 billion.

Net cash used in investing activities was $155.2 million for the three months ended September 30, 2021, compared to net cash used in investing activities of $375.3 million for the same period in 2020.

Our investing activities in the three months ended September 30, 2021 consisted of cash used in the purchase of marketable securities of $609.2 million partially offset by cash provided by the sales and maturities of marketable securities of $512.9 million.

Net cash used in investing activities for the three months ended September 30, 2020 consisted primarily of cash used in the purchase of marketable securities of $1.1 billion, partially offset by the sales and maturities of marketable securities of $824.8 million.

Net cash provided by investing activities was $257.2 million for the nine months ended September 30, 2021, compared to net cash used in investing activities of $495.8 million for the same period in 2020.

Our investing activities in the nine months ended September 30, 2021 consisted of cash provided by the sales and maturities of marketable securities of $2.4 billion, partially offset by the purchase of marketable securities of $1.9 billion and cash paid for acquisitions of $176.6 million.

Net cash used in investing activities for the nine months ended September 30, 2020 consisted of cash used in the purchase of marketable securities of $2.6 billion and strategic investments of $95.3 million, partially offset by the sales and maturities of marketable securities of $2.3 billion.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1.1 billion for both the three and six months ended June 30, 2021, compared to net cash provided by financing activities of $909.1 million and $912.2 million for the same periods in 2020, respectively.

Our financing activities for the three and six months ended June 30, 2021 consisted primarily of net proceeds of $1.14 billion from the issuance of the 2027 Notes, offset by the purchase of the 2027 Capped Call Transactions of $86.8 million.

Our financing activities for the three and six months ended June 30, 2020 consisted primarily of net proceeds of $988.6 million from the issuance of the 2025 Notes, offset by the purchase of the 2025 Capped Call Transactions of $100.0 million.

Net cash provided by financing activities was $4.0 million and $1.1 billion for the three and nine months ended September 30, 2021, compared to net cash provided by financing activities of $2.4 million and $914.6 million for the same periods in 2020, respectively.

Our financing activities for the nine months ended September 30, 2021 consisted primarily of net proceeds of $1.1 billion from the issuance of the 2027 Notes, offset by the purchase of the 2027 Capped Call Transactions of $86.8 million.

Our financing activities for the nine months ended September 30, 2020 consisted primarily of net proceeds of $988.6 million from the issuance of the 2025 Notes, offset by the purchase of the 2025 Capped Call Transactions of $100.0 million.

Net cash provided by financing activities in all periods presented includes proceeds from the exercise of stock options.

Free Cash Flow

Free Cash Flow was $(115.7) million and $10.3 million for the three and six months ended June 30, 2021, respectively, compared to $(82.3) million and $(86.9) million for the three and six months ended June 30, 2020, respectively.

Free Cash Flow was $51.7 million and $62.0 million for the three and nine months ended September 30, 2021, respectively, compared to $(69.6) million and $(156.5) million for the three and nine months ended September 30, 2020, respectively.

Free Cash Flow in all periods was composed of net cash provided by operating activities, resulting primarily from net loss, adjusted for non-cash items as well as changes in working capital and other operating assets and liabilities.

Free Cash Flow also included purchases of property and equipment of $14.6 million and $25.5 million for the three and six months ended June 30, 2021, respectively, compared to $15.8 million and $26.7 million for the three and six months ended June 30, 2020, respectively.

Free Cash Flow also included purchases of property and equipment of $19.8 million and $45.3 million for the three and nine months ended September 30, 2021, respectively, compared to $14.7 million and $41.4 million for the three and nine months ended September 30, 2020, respectively.

See “Non-GAAP Financial Measures.”

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Should any of these estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows.

The following table summarizes our contractual obligations as of June 30, 2021:

The following table summarizes our contractual obligations as of September 30, 2021:

(Remainder of

30 unchanged sentences

Interest Rate Risk

We had cash and cash equivalents totaling $2.1 billion and $545.6 million at June 30, 2021 and December 31, 2020, respectively.

We had marketable securities totaling $1.4 billion and $2.0 billion at June 30, 2021 and December 31, 2020, respectively.

We had cash and cash equivalents totaling $2.0 billion and $545.6 million at September 30, 2021 and December 31, 2020, respectively.

We had marketable securities totaling $1.5 billion and $2.0 billion at September 30, 2021 and December 31, 2020, respectively.

Our cash and cash equivalents consist of cash in bank accounts and marketable securities consisting of U.S.

3 unchanged sentences

Due to the relatively short-term nature of our investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio for the periods presented.

In April 2021, we issued the 2027 Notes with an aggregate principal amount of $1.15 billion.

In April 2021, we issued the 2027 Notes with an aggregate principal amount of $1.15 billion, the full amount of which is outstanding as of September 30, 2021.

We carry the 2027 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.

2 unchanged sentences

The fair value of the 2027 Notes changes when the market price of our stock fluctuates or market interest rates change.

In April 2020, we issued the 2025 Notes with an aggregate principal amount of $1.0 billion.

In April 2020, we issued the 2025 Notes with an aggregate principal amount of $1.0 billion, of which $0.3 billion remains outstanding as of September 30, 2021.

We carry the 2025 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.

2 unchanged sentences

The fair value of the 2025 Notes changes when the market price of our stock fluctuates or market interest rates change.

In August 2019, we issued the 2026 Notes with an aggregate principal amount of $1.265 billion.

In August 2019, we issued the 2026 Notes with an aggregate principal amount of $1.265 billion, of which $0.8 billion remains outstanding as of September 30, 2021.

We carry the 2026 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis