What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-22 compared with 2022-04-22 · 133 added, 104 removed, 298 unchanged (44% 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 First Quarter 2022 Results

Our key user metrics and financial results for the first quarter of 2022 were as follows:

Overview of Second Quarter 2022 Results

Our key user metrics and financial results for the second quarter of 2022 were as follows:

Daily Active Users, or DAUs, increased 18% year-over-year to 347 million in Q2 2022.

Average revenue per user, or ARPU, increased 17% year-over-year to $3.20 in Q1 2022.

Average revenue per user, or ARPU, decreased 4% year-over-year to $3.20 in Q2 2022.

Financial Results

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Total costs and expenses, excluding stock-based compensation and other payroll related tax expense, increased 32% to $1,183.0 million in Q2 2022.

Net loss was $359.6 million, compared to $286.9 million in Q1 2021 .

Net loss was $422.1 million in Q2 2022, compared to $151.7 million in Q2 2021 .

Diluted net loss per share was $(0.26) in Q2 2022, compared to $(0.10) in Q2 2021.

Adjusted EBITDA was $64.5 million, compared to $(1.7) million in Q1 2021.

Cash provided by operating activities was $127.5 million in Q1 2022, compared to cash provided by operating activities of $136.9 million in Q1 2021.

Adjusted EBITDA was $7.2 million in Q2 2022, compared to $117.4 million in Q2 2021.

Cash used in operating activities was $124.1 million in Q2 2022, compared to $101.1 million in Q2 2021.

Free Cash Flow was $(147.5) million in Q2 2022, compared to $(115.7) million in Q2 2021.

Cash, cash equivalents, and marketable securities were $5.0 billion as of March 31, 2022.

Cash, cash equivalents, and marketable securities were $4.9 billion as of June 30, 2022.

is a camera company.

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

We had 332 million DAUs on average in the first quarter of 2022, an increase of 52 million, or 18%, from the first quarter of 2021.

We had 347 million DAUs on average in the second quarter of 2022, an increase of 54 million, or 18%, from the second quarter of 2021.

Quarterly Average Daily Active Users

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Europe includes Russia and Turkey.

We recorded revenue of $1,062.7 million for the three months ended March 31, 2022, compared to revenue of $769.6 million for the same period in 2021, an increase of 38% year-over-year.

We recorded revenue of $1,110.9 million for the three months ended June 30, 2022, compared to revenue of $982.1 million for the same period in 2021, an increase of 13% 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 $3.20 in the first quarter of 2022, up from $2.74 in the first quarter of 2021.

ARPU was $3.20 in the second quarter of 2022, down from $3.35 in the second quarter of 2021.

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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Europe includes Russia and Turkey.

Effective March 2022, we halted advertising sales to Russian and Belarusian entities.

Results of Operations

The following table summarizes certain selected historical financial results:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 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 losses on strategic investments.

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

Income Tax Benefit (Expense)

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Interest expense

Other (expense) income, net

Other income (expense), net

Loss before income taxes

Income tax expense

Income tax benefit (expense)

Adjusted EBITDA ( 3)

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Depreciation and amortization expense included in the above line items:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Consolidated Statements of Operations Data:

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Interest expense

Other (expense) income, net

Other income (expense), net

Loss before income taxes

Income tax expense

Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31,

Income tax benefit (expense)

For Three and Six Months Ended June 30, 2022 and 2021

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Revenue as a percentage change

Revenue for the three months ended March 31, 2022 increased $293.1 million compared to the same period in 2021.

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

Revenue for the three and six months ended June 30, 2022 increased $128.8 million and $421.9 million compared to the same periods in 2021.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Cost of Revenue as a percentage change

Cost of revenue for the three months ended March 31, 2022 increased $8.3 million compared to the same period in 2021.

The increase was primarily driven by the growth in revenue share due to the overall increase in revenue and higher mix of revenue subject to revenue share, partially offset by lower Spotlight-related expenses.

The increase was also a result of increased infrastructure costs attributable to DAU growth net of infrastructure cost efficiencies and content review costs across the platform.

Cost of revenue for the three and six months ended June 30, 2022 increased $1.4 million and $9.7 million compared to the same periods in 2021.

The changes were primarily driven by the growth in revenue share due to the overall increase in revenue and higher mix of revenue subject to revenue share, increased infrastructure costs attributable to DAU growth net of infrastructure cost efficiencies and content review costs across the platform, offset by lower content costs.

Research and Development Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Research and Development Expenses as a percentage change

Research and development expenses for the three months ended March 31, 2022 increased $107.0 million compared to the same period in 2021.

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

Research and development expenses for the three and six months ended June 30, 2022 increased $134.4 million and $241.3 million compared to the same periods in 2021.

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

Sales and Marketing Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Sales and Marketing Expenses as a percentage change

Sales and marketing expenses for the three months ended March 31, 2022 increased $91.6 million compared to the same period in 2021.

The increase was 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.

Sales and marketing expenses for the three and six months ended June 30, 2022 increased $131.7 million and $223.3 million compared to the same periods in 2021.

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, and marketing investments.

These increases were also due to higher amortization expense, which resulted from our revision of the useful lives of certain customer relationships and trademarks.

General and Administrative Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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General and Administrative Expenses as a percentage change

General and administrative expenses for the three months ended March 31, 2022 increased $54.2 million compared to the same period in 2021.

The increase was 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 other administrative expenses.

General and administrative expenses for the three and six months ended June 30, 2022 increased $69.9 million and $124.0 million compared to the same periods in 2021.

These 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 other administrative expenses.

Interest Income

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Interest Income as a percentage change

Interest income for the three months ended March 31, 2022 increased $2.0 million compared to the same period in 2021.

The increase was primarily a result of higher interest rates on U.S.

Interest income for the three and six months ended June 30, 2022 increased $7.1 million and $9.1 million compared to the same periods in 2021.

The increases were primarily a result of higher interest rates on U.S.

government-backed securities and a higher overall invested cash balance.

Interest Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Interest Expense as a percentage change

Interest expense for the three months ended March 31, 2022 increased $0.1 million compared to the same period in 2021, primarily due to the increase in amortization of debt issuance costs, partially offset by lower contractual interest expense.

Interest expense for the three and six months ended June 30, 2022 increased $1.0 million and $1.1 million compared to the same periods in 2021, primarily due to the increases in amortization of debt issuance costs, partially offset by lower contractual interest expense.

Other Income (Expense), Net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Other (Expense) Income, Net

Other (Expense) Income, Net as a dollar change

Other (Expense) Income, Net as a percentage change

Other expense, net for the three months ended March 31, 2022 was $77.5 million compared to other income, net of $22.1 million in the same period in 2021.

Other expense, net for the three months ended March 31, 2022 was primarily a result of a $92.1 million unrealized loss on publicly traded securities classified as marketable securities, offset by a $13.3 million unrealized gain on strategic investments.

Other income, net for the three months ended March 31, 2021 was primarily a result of a $23.3 million unrealized gain on strategic investments.

Income Tax Expense

Three Months Ended March 31,

Other Income (Expense), Net

Other Income (Expense), Net as a dollar change

Other Income (Expense), Net as a percentage change

Other expense, net for the three and six months ended June 30, 2022 was $16.9 million and $94.4 million compared to other income, net of $42.3 million and $64.3 million in the same periods in 2021.

Other expense, net for the three months ended June 30, 2022 was primarily a result of a $63.9 million unrealized loss on publicly traded securities classified as marketable securities, offset by a $6.4 million unrealized gain and $45.9 million realized gain on strategic investments.

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 strategic investments offset by induced conversion expense related to the Convertible Notes.

Other expense, net for the six months ended June 30, 2022 was primarily a result of $156.0 million unrealized loss on publicly traded securities classified as marketable securities, offset by a $19.7 million unrealized gain and a $45.9 million realized gain on strategic investments.

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 strategic investments offset by induced conversion expense related to the Convertible Notes.

Income Tax Benefit (Expense)

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Income Tax Expense

Income Tax Expense as a dollar change

Income Tax Expense as a percentage change

Income Tax Benefit (Expense)

Income Tax Benefit (Expense) as a dollar change

Income Tax Benefit (Expense) as a percentage change

Effective Tax Rate

Income tax expense for the three months ended March 31, 2022 and 2021, was $8.5 million and $1.4 million, respectively.

Income tax expense for the three and six months ended June 30, 2022 was $7.0 million and $15.5 million, respectively, compared to an income tax benefit of $1.9 million and $0.4 million, respectively, for the same periods in 2021.

This change was primarily attributable to the partial valuation allowance releases on our deferred tax assets in the prior period due to deferred tax liabilities acquired in business acquisitions.

Our effective tax rate differs from the U.S.

statutory tax rate primarily due to valuation allowances on our deferred tax assets as it is more likely than not that some or all of our deferred tax assets will not be realized.

statutory tax rate primarily due to valuation allowances on our deferred tax assets as it is more likely than not that some or all of the deferred tax assets will not be realized.

Net Loss and Adjusted EBITDA

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Adjusted EBITDA as a percentage change

Net loss for the three months ended March 31, 2022 was $359.6 million compared to $286.9 million for the same period in 2021.

Adjusted EBITDA for the three months ended March 31, 2022 was $64.5 million compared to $(1.7) million for the same period in 2021.

The increase in Adjusted EBITDA was attributable to higher revenue, partially offset by increased research and development and sales and marketing expenses between the periods.

Net loss for the three and six months ended June 30, 2022 was $422.1 million and $781.7 million, respectively, compared to $151.7 million and $438.5 million, respectively, for the same periods in 2021.

Adjusted EBITDA for the three and six months ended June 30, 2022 was $7.2 million and $71.7 million, respectively, compared to $117.4 million and $115.7 million, respectively, for the same periods in 2021.

These decreases in Adjusted EBITDA were driven by increased overall operating expenses, partially offset by higher revenue, stock-based compensation expense, depreciation and amortization, and other (income) expense, net.

For a discussion of the limitations associated with using Adjusted EBITDA rather than GAAP measures and a reconciliation of this measure to net loss, see “Non-GAAP Financial Measures.”

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Adjusted EBITDA excludes income tax expense.

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 March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Free Cash Flow reconciliation:

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Purchases of property and equipment

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Interest expense

Other expense (income), net

Income tax expense

Other (income) expense, net

Income tax expense (benefit)

Depreciation and amortization

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Liquidity and Capital Resources

Cash, cash equivalents, and marketable securities were $5.0 billion as of March 31, 2022, primarily consisting of cash on deposit with banks and highly liquid investments in U.S.

Cash, cash equivalents, and marketable securities were $4.9 billion as of June 30, 2022, primarily consisting of cash on deposit with banks and highly liquid investments in U.S.

government and agency securities, publicly traded equity 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 May 2022, we entered into a five-year senior unsecured revolving credit facility (“Credit Facility”) with certain lenders that allows us to borrow up to $1.05 billion to fund working capital and general corporate-purpose expenditures.

prior revolving credit facility entered into in July 2016 (as amended) was terminated concurrently with the entry into the Credit Facility.

Loans bear interest, at our option, at a rate equal to ( i ) a term secured overnight financing rate (“SOFR”) plus 0.75% or the base rate, if selected by us, for loans made in U.S.

dollars, (ii) the Sterling overnight index average plus 0.7826% for loans made in Sterling, and (iii) foreign indices as stated in the credit agreement plus 0.75% for loans made in other permitted foreign currencies.

The base rate is defined as the greatest of ( i ) the Wall Street Journal prime rate, (ii) the greater of the (a) federal funds rate and (b) the overnight bank funding rate, plus 0.50%, and (iii) the applicable SOFR for a period of one month (but not less than zero) plus 1.00.

The Credit Facility also contains an annual commitment fee of 0.10% on the daily undrawn balance of the facility.

As of June 30, 2022, we had $ 26.6 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.

In February 2022, we entered into a purchase agreement for the sale of an aggregate of $1.5 billion principal amount of convertible senior notes due in 2028.

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The 2028 Notes mature on March 1, 2028 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The 2028 Notes were not convertible as of March 31, 2022.

The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2028 Notes will not be eligible for optional conversion during the third quarter of 2022 .

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 March 31, 2022.

The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2027 Notes will not be eligible for optional conversion during the third quarter of 2022 .

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 March 3 1 , 202 2 and as a result, the 2025 Note s will continue to be eligible for optional conversion during the second quarter of 202 2 .

The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2025 Notes will not be eligible for optional conversion during the third quarter of 2022 .

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 March 31, 2022 and as a result, the 2026 Notes will continue to be eligible for optional conversion during the second quarter of 2022 .

In July 2016, we entered into a senior unsecured revolving credit facility, or the Credit Facility, with certain lenders, some of which are affiliated with certain members of the underwriting syndicate for our Convertible Notes offerings, to fund working capital and general corporate-purpose expenditures.

Since July 2016, we have amended the Credit Facility multiple times.

As of March 31, 2022, the Credit Facility has a maximum borrowing amount of $1.05 billion, 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 and terminates in August 2023.

As of March 31, 2022, no amounts were outstanding under the Credit Facility.

As of March 31, 2022, we had $25.5 million in the form of outstanding standby letters of credit.

The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2026 Notes will not be eligible for optional conversion during the third quarter of 2022 .

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 March 31, 2022, approximately 5% of our cash, cash equivalents, and marketable securities was held outside the United States.

As of June 30, 2022, approximately 7% 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Change in cash, cash equivalents, and restricted cash

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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 Months Ended March 31, 2022 and 2021

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $127.5 million in the three months ended March 31, 2022, as compared to net cash provided by operations of $136.9 million in the three months ended March 31, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $275.4 million, depreciation and amortization expense of $38.1 million and losses on debt and equity securities, net of $79.1 million.

Net cash provided by operating activities for the three months ended March 31, 2022 was also impacted by a decrease of $62.8 million in accrued expenses and other current liabilities primarily due to the timing of payments.

For Three and Six Months Ended June 30, 2022 and 2021

Net Cash Provided by (Used in) Operating Activities

Net cash used in operating activities was $124.1 million in the three months ended June 30, 2022, as compared to net cash used in operations of $101.1 million in the three months ended June 30, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $318.8 million, depreciation and amortization expense of $79.3 million and losses on debt and equity securities, net of $12.2 million.

Net cash used in operating activities for the three months ended June 30, 2022 was also driven by an increase in the accounts receivable balance of $81.0 million due to an increase in revenue in the period and a $14.4 million decrease in accrued expenses and other current liabilities, primarily due to the timing of payments.

Net cash provided by operating activities was $3.4 million in the six months ended June 30, 2022, as compared to net cash provided by operating activities of $35.8 million in the six months ended June 30, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $594.3 million, depreciation and amortization expense of $117.4 million and losses on debt and equity securities, net of $91.3 million.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $1.0 billion for the three months ended March 31, 2022, compared to net cash provided by investing activities of $280.6 million for the same period in 2021.

Our investing activities in the three months ended March 31, 2022 consisted mainly of the purchase of marketable securities of $1.3 billion, partially offset by maturities of marketable securities of $342.5 million.

Net cash provided by investing activities for the three months ended March 31, 2021 consisted of cash provided by the sales and maturities of marketable securities of $925.0 million, partially offset by the purchase of marketable securities of $523.2 million and cash paid for acquisitions of $108.9 million .

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1.3 billion and $4.5 million for the three months ended March 31, 2022 and 2021, respectively.

Our financing activities for the three months ended March 31, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million.

Net cash provided by financing activities in the three months ended March 31, 2021, includes proceeds from the exercise of stock options.

Net cash provided by investing activities was $11.4 million for the three months ended June 30, 2022, compared to net cash provided by investing activities of $131.9 million for the same period in 2021.

Our investing activities in the three months ended June 30, 2022 primarily consisted of maturities of marketable securities of $544.0 million and sales of strategic investments of $63.3 million, partially offset by purchases of marketable securities of $568.1 million .

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

Net cash used in investing activities was $1.0 billion for the six months ended June 30, 2022, compared to net cash provided by investing activities of $412.4 million for the same period in 2021.

Our investing activities in the six months ended June 30, 2022 consisted mainly of purchases of marketable securities of $1.9 billion, partially offset by maturities of marketable securities of $896.6 million.

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

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities was $1.6 million for the three months ended June 30, 2022 and net cash provided by financing activities was $1.3 billion for the six months ended June 30, 2022, compared to net cash provided by financing activities of $1.1 billion and $1.1 billion for the same periods in 2021, respectively.

Our financing activities for the three months ended June 30, 2022 were not material.

Our financing activities for the six months ended June 30, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million.

Our financing activities for the three and six months ended June 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.

Free Cash Flow

Free Cash Flow was $106.3 million for the three months ended March 31, 2022, compared to $126.0 million for the three months ended March 31, 2021.

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 $21.2 million for the three months ended March 31, 2022 compared to $10.9 million for the three months ended March 31, 2021.

See “Non-GAAP Financial Measures.”

Free Cash Flow was $(147.5) million and $ (41.2) million for the three and six months ended June 3 0 , 202 2 , respectively, compared to ($115.7) million and $10.3 million for the three and six months ended June 3 0 , 20 2 1 , respectively .

Free Cash Flow in all periods was composed of net cash provided by (used in) 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 $ 23.4 million and $44.5 million for the three and six months ended June 3 0 , 202 2 , respectively, compared to $14.6 million and $25.5 million for the three and six months ended June 3 0 , 20 2 1 , respectively .

S ee “Non-GAAP Financial Measures.”

Contingencies

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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.

We have non-cancelable contractual agreements primarily related to the hosting of our data storage processing, storage, and other computing services, as well as lease, content and developer partner, and other commitments.

We had $4.4 billion in commitments, as of March 31, 2022, primarily due within three years.

We have non-cancelable contractual agreements primarily related to the hosting of our data processing, storage, and other computing services, as well as lease, content and developer partner, and other commitments.

We had $4.2 billion in commitments, as of June 30, 2022, primarily due within three years.

For additional discussion on our leases see Note 9 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Interest Rate Risk

We had cash and cash equivalents totaling $2.4 billion and $2.0 billion at March 31, 2022 and December 31, 2021, respectively.

We had marketable securities totaling $2.6 billion and $1.7 billion at March 31, 2022 and December 31, 2021, respectively.

We had cash and cash equivalents totaling $2.3 billion and $2.0 billion at June 30, 2022 and December 31, 2021, respectively.

We had marketable securities totaling $2.6 billion and $1.7 billion at June 30, 2022 and December 31, 2021, 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 February 2022, we issued the 2028 Notes with an aggregate principal amount of $1.5 billion, the full amount of which is outstanding as of March 31, 2022.

In February 2022, we issued the 2028 Notes with an aggregate principal amount of $1.5 billion, the full amount of which is outstanding as of June 30, 2022.

We carry the 2028 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.

2 unchanged sentences

The fair value of the 2028 Notes changes when the market price of our stock fluctuates or market interest rates change.

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 March 31, 2022.

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 June 30, 2022.

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, of which $0.3 billion remains outstanding as of March 31, 2022.

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 June 30, 2022.

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, of which $0.8 billion remains outstanding as of March 31, 2022.

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 June 30, 2022.

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