Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

DATADOG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)


	September 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	337,418	$	330,339
Marketable securities	2,861,536		2,252,559
Accounts receivable, net of allowance for credit losses of $14,310 and $12,096 as of September 30, 2024 and December 31, 2023, respectively	487,064		509,279
Deferred contract costs, current	52,225		44,938
Prepaid expenses and other current assets	51,191		41,022
Total current assets	3,789,434		3,178,137
Property and equipment, net	215,810		171,872
Operating lease assets	168,610		126,562
Goodwill	352,870		352,694
Intangible assets, net	4,424		9,617
Deferred contract costs, non-current	79,996		73,728

Other assets	20,327		23,462
TOTAL ASSETS	$	4,631,471	$	3,936,072
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	92,005	$	87,712
Accrued expenses and other current liabilities	120,234		127,631
Operating lease liabilities, current	27,342		21,974
Convertible senior notes, net, current	744,858		—
Deferred revenue, current	795,824		765,735
Total current liabilities	1,780,263		1,003,052
Operating lease liabilities, non-current	197,044		138,128
Convertible senior notes, net, non-current	—		742,235
Deferred revenue, non-current	18,404		21,210
Other liabilities	6,615		6,093
Total liabilities	2,002,326		1,910,718
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY:
Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 312,921,519 and 305,395,175 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	3		3
Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 26,348,891 and 25,684,571 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	2,632,085		2,181,267
Accumulated other comprehensive income (loss)	12,603		(2,218)
Accumulated deficit	(15,546)		(153,698)
Total stockholders’ equity	2,629,145		2,025,354
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,631,471	$	3,936,072

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	690,016	$	547,536	$	1,946,548	$	1,538,710
Cost of revenue	137,756		103,319		371,353		305,079
Gross profit	552,260		444,217		1,575,195		1,233,631
Operating expenses:
Research and development	291,802		240,225		836,389		709,197
Sales and marketing	187,772		156,870		548,658		449,296
General and administrative	52,408		51,352		145,256		136,344
Total operating expenses	531,982		448,447		1,530,303		1,294,837
Operating income (loss)	20,278		(4,230)		44,892		(61,206)
Other income:
Interest expense	(1,574)		(1,303)		(4,425)		(5,010)
Interest income and other income, net	37,432		29,833		109,647		69,184
Other income, net	35,858		28,530		105,222		64,174
Income before provision for income taxes	56,136		24,300		150,114		2,968
Provision for income taxes	4,439		1,670		11,962		8,393
Net income (loss)	$	51,697	$	22,630	$	138,152	$	(5,425)
Net income (loss) attributable to common stockholders	$	51,697	$	22,630	$	138,152	$	(5,425)
Basic net income (loss) per share	$	0.15	$	0.07	$	0.41	$	(0.02)

Diluted net income (loss) per share	$	0.14	$	0.06	$	0.39	$	(0.02)
Weighted average shares used in calculating basic net income (loss) per share:	337,562		325,557		334,779		322,395
Weighted average shares used in calculating diluted net income (loss) per share:	357,635		351,309		357,331		322,395

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (loss)	$	51,697	$	22,630	$	138,152	$	(5,425)
Other comprehensive income (loss):
Foreign currency translation adjustments	4,039		(2,822)		960		(2,761)
Unrealized gain on available-for-sale marketable securities	18,280		1,251		13,861		1,294
Other comprehensive income (loss)	22,319		(1,571)		14,821		(1,467)
Comprehensive income (loss)	$	74,016	$	21,059	$	152,973	$	(6,892)

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

(unaudited)


	Class A and Class B Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Equity
Shares		Amount
BALANCE—June 30, 2024	336,769,659		$	3	$	2,484,264	$	(9,716)	$	(67,243)	$	2,407,308
Issuance of common stock upon exercise of stock options	1,164,593		—		1,256		—		—		1,256
Vesting of restricted and performance stock units	1,336,158		—		—		—		—		—
Stock-based compensation	—		—		146,565		—		—		146,565


Change in accumulated other comprehensive income	—		—		—		22,319		—		22,319
Net income	—		—		—		—		51,697		51,697
BALANCE—September 30, 2024	339,270,410		$	3	$	2,632,085	$	12,603	$	(15,546)	$	2,629,145


	Class A and Class B Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
Shares		Amount
BALANCE—June 30, 2023	324,576,728		$	3	$	1,891,995	$	(12,318)	$	(230,321)	$	1,649,359
Issuance of common stock upon exercise of stock options	2,360,179		—		9,873		—		—		9,873
Vesting of restricted and performance stock units	1,311,795		—		—		—		—		—
Retirement of restricted shares of common stock from acquisitions	(3,043)		—		—		—		—		—
Stock-based compensation	—		—		126,185		—		—		126,185
Change in accumulated other comprehensive loss	—		—		—		(1,571)		—		(1,571)
Net income	—		—		—		—		22,630		22,630
BALANCE—September 30, 2023	328,245,659		$	3	$	2,028,053	$	(13,889)	$	(207,691)	$	1,806,476


	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount
BALANCE—December 31, 2023	331,079,746	$	3	$	2,181,267	$	(2,218)	$	(153,698)	$	2,025,354
Issuance of common stock upon exercise of stock options	3,752,432	—		5,155		—		—		5,155

Vesting of restricted and performance stock units	4,059,497	—		—		—		—		—
Issuance of restricted shares of common stock from acquisitions	136,079	—		—		—		—		—
Issuance of common stock under the Employee Stock Purchase Plan	242,656	—		22,507		—		—		22,507
Stock-based compensation	—	—		423,156		—		—		423,156
Change in accumulated other comprehensive income	—	—		—		14,821		—		14,821
Net income	—	—		—		—		138,152		138,152
BALANCE—September 30, 2024	339,270,410	$	3	$	2,632,085	$	12,603	$	(15,546)	$	2,629,145


		Class A and Class B Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares		Amount
BALANCE—December 31, 2022		319,189,843		$	3	$	1,625,190	$	(12,422)	$	(202,266)	$	1,410,505
Issuance of common stock upon exercise of stock options		5,103,045		—		17,390		—		—		17,390
Vesting of restricted and performance stock units		3,540,441		—		—		—		—		—
Issuance of restricted shares of common stock from acquisitions		127,119		—				—		—		—
Issuance of common stock under the Employee Stock Purchase Plan		285,211		—		19,986		—		—		19,986
Stock-based compensation		—		—		365,487		—		—		365,487
Changes in accumulated other comprehensive loss		—		—		—		(1,467)		—		(1,467)
Net loss		—		—		—		—		(5,425)		(5,425)
BALANCE—September 30, 2023		328,245,659		$	3	$	2,028,053	$	(13,889)	$	(207,691)	$	1,806,476

See accompanying notes to condensed consolidated financial statements

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	138,152	$	(5,425)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	39,227		32,434
Accretion of discounts on marketable securities	(39,539)		(26,256)
Amortization of issuance costs	2,672		2,539
Amortization of deferred contract costs	37,768		28,223
Stock-based compensation, net of amounts capitalized	411,875		354,179
Non-cash lease expense	20,261		19,332
Allowance for credit losses on accounts receivable	10,374		9,097
Loss on disposal of property and equipment	352		419
Changes in operating assets and liabilities:
Accounts receivable, net	11,842		(10,194)
Deferred contract costs	(51,323)		(42,612)
Prepaid expenses and other current assets	(10,073)		(10,314)
Other assets	3,636		1,243
Accounts payable	8,576		57,268
Accrued expenses and other liabilities	(5,709)		(68,242)
Deferred revenue	27,284		98,037
Net cash provided by operating activities	605,375		439,728

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities	(2,145,933)		(2,011,857)
Maturities of marketable securities	1,590,387		1,467,975
Proceeds from sale of marketable securities	(32)		36,393
Purchases of property and equipment	(26,958)		(17,191)
Capitalized software development costs	(44,286)		(26,279)
Cash paid for acquisition of businesses; net of cash acquired	(654)		(6,369)
Net cash used in investing activities	(627,476)		(557,328)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	5,201		17,404
Proceeds from issuance of common stock under the employee stock purchase plan	22,507		19,986
Repayments of convertible senior notes	(49)		—
Net cash provided by financing activities	27,659		37,390

Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,521		(769)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	7,079		(80,979)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period	330,339		342,288
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period	$	337,418	$	261,309

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	15,811	$	14,163

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued property and equipment purchases	$	2,743	$	5,147
Stock-based compensation included in capitalized software development costs	$	11,281	$	11,308


Acquisition holdback	$	—	$	750

RECONCILIATION OF CASH AND CASH EQUIVALENTS WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:
Cash and cash equivalents	$	337,418	$	261,309

Total cash and cash equivalents	$	337,418	$	261,309

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Description of Business

Datadog, Inc. (“Datadog” or the “Company”) was incorporated in the State of Delaware on June 4, 2010. The Company is the observability and security platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security, and many other capabilities to provide unified, real-time observability and security of its customers’ entire technology stack. The Company is headquartered in New York City and has various other global office locations.

2. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 23, 2024 (the “Annual Report”).

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for credit losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software and finite lived intangibles, stock-based compensation, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate for operating leases, estimated expected period of benefit for deferred contract costs, fair value of the liability component of the convertible debt, realization of deferred tax assets and uncertain tax positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07**,** Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU No. 2023-07”), which intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied retrospectively to all prior

periods presented in the financial statements. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09**,** Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which intends to increase the transparency of income tax disclosures, particularly the rate reconciliation table and disclosures about income taxes paid. For public business entities, it is effective for annual periods beginning after December 15, 2024, and interim periods beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

3. Marketable Securities

The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024
	Amortized Cost		Unrealized Gain		Unrealized Losses		Fair Value
Corporate debt securities	$	1,878,511	$	11,358	$	(205)	$	1,889,664
U.S. government treasury securities	459,034		1,213		(202)		460,045
Commercial paper	370,243		577		(9)		370,811
Certificates of deposit	124,404		214		—		124,618
U.S. government agency securities	16,408		—		(10)		16,398
Marketable securities	$	2,848,600	$	13,362	$	(426)	$	2,861,536


	December 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Losses		Fair Value
Corporate debt securities	$	776,323	$	770	$	(1,140)	$	775,953
Commercial paper	605,291		570		(75)		605,786
U.S. government treasury securities	460,854		390		(1,399)		459,845
Certificates of deposit	264,405		335		(15)		264,725
U.S. government agency securities	146,611		—		(361)		146,250
Marketable securities	$	2,253,484	$	2,065	$	(2,990)	$	2,252,559

As of September 30, 2024, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):


Due within one year	$	1,646,340
Due in one year through five years	1,215,196
Total	$	2,861,536

The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses on marketable securities are presented net of tax.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):


	Fair Value Measurement as of September 30, 2024
	Level 1			Level 2		Level 3			Total
Financial Assets:
Cash equivalents:
Money market funds	$	291,451		$	—	$	—		$	291,451
Commercial paper	—			27,252		—			27,252
Certificates of deposit	—			8,259		—			8,259
U.S. government treasury securities	—			4,346		—			4,346
Corporate debt securities	—		—	1,156		—		—	1,156
Marketable Securities:
Corporate debt securities	—			1,889,664		—			1,889,664
U.S. government treasury securities	—			460,045		—			460,045
Commercial paper	—			370,811		—			370,811
Certificates of deposit	—			124,618		—			124,618
U.S. government agency securities	—			16,398		—			16,398
Total financial assets	$	291,451		$	2,902,549	$	—		$	3,194,000


	Fair Value Measurement as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	240,909	$	—	$	—	$	240,909
Corporate debt securities	—		484		—		484
U.S. government treasury securities	—		53,972		—		53,972
Marketable Securities:
Corporate debt securities	—		775,953		—		775,953
Commercial paper	—		605,786		—		605,786
Certificates of deposit	—		264,725		—		264,725
U.S. government treasury securities	—		459,845		—		459,845
U.S. government agency securities	—		146,250		—		146,250
Total financial assets	$	240,909	$	2,307,015	$	—	$	2,547,924

The Company classifies its highly liquid money market funds and securities purchased within three months of maturity within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its commercial paper, corporate debt securities, certificates of deposit, U.S. government agency securities, and U.S. government treasury securities within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.

In addition to its cash equivalents and marketable securities, the Company measures the fair value of its outstanding convertible senior notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the convertible senior notes to be a Level 2 measurement due to limited trading activity of the convertible senior notes. Refer to Note 7, Convertible Senior Notes, to the condensed consolidated financial statements for further details.

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
Computers and equipment	$	44,960	$	35,736
Furniture and fixtures	20,551		17,202
Leasehold improvements	65,633		55,111
Capitalized software development costs	258,957		192,691
Total property and equipment	$	390,101	$	300,740
Less: accumulated depreciation and amortization	(174,291)		(128,868)
Total property and equipment, net	$	215,810	$	171,872

The Company capitalizes costs related to the development of computer software for internal use and is included in capitalized software development costs within property and equipment, net.

Depreciation and amortization expense was approximately $12.4 million and $34.0 million for the three and nine months ended September 30, 2024, respectively. Depreciation and amortization expense was approximately $9.4 million and $25.8 million for the three and nine months ended September 30, 2023, respectively.

6. Acquisitions, Intangible Assets and Goodwill

2023 Acquisitions

During the year ended December 31, 2023, the Company entered into three purchase agreements for acquisitions of businesses, each of which were accounted for as business combinations in accordance with ASC 805, Business Combinations. The Company does not consider these acquisitions to be material, individually or in aggregate. The total purchase price was allocated to intangible assets in the amount of $2.1 million and goodwill in the amount of $3.5 million based on the respective estimated fair values. The resulting goodwill from each of the agreements is not deductible for income tax purposes. Pro forma results of operations from these acquisitions have not been presented because they were not material to the consolidated results of operations.

Intangible Assets

Intangible assets, net consisted of the following (in thousands):


	September 30, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Amortization Period
Developed technology	$	14,595	$	(10,604)	$	3,991	3 Years
Customer relationships	3,300		(2,867)		433		4 Years
Total	$	17,895	$	(13,471)	$	4,424


	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Amortization Period
Developed technology	$	24,995	$	(16,428)	$	8,567	3 years
Customer relationships	3,300		(2,250)		1,050		4 years
Total	$	28,295	$	(18,678)	$	9,617

Intangible amortization expense was approximately $1.4 million and $2.2 million for the three months ended September 30, 2024 and 2023, respectively, and $5.2 million and $6.6 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, future amortization expense by year is expected to be as follows (in thousands):


	Amount
Remainder of 2024	$	1,306
2025	2,592
2026	526

Total	$	4,424

Goodwill

The changes in the carrying amount of goodwill were as follows (in thousands):


	Amount
Balance as of December 31, 2023	$	352,694

Foreign currency translation adjustments	176
Balance as of September 30, 2024	$	352,870

7. Convertible Senior Notes

On June 2, 2020, the Company issued $747.5 million aggregate principal amount of 0.125% convertible senior notes due 2025 (the “2025 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). The total net proceeds from the sale of the 2025 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $730.2 million. The 2025 Notes bear interest at a rate of 0.125% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The 2025 Notes will mature on June 15, 2025, unless earlier converted, redeemed or repurchased.

Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 only under the following circumstances:

(1)during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(2)during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;

(3)if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

(4)upon the occurrence of specified corporate events, as set forth in the indenture governing the 2025 Notes (“the Indenture”).

On or after March 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in integral multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The conversion rate for the 2025 Notes is initially 10.8338 shares of Class A common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $92.30 per share of Class A common stock), subject to adjustment as set forth in the Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company’s election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of Class A common stock, the amount of cash and shares of Class A common stock, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 30 trading day observation period as described in the Indenture. In addition, if specific corporate events occur prior to the applicable maturity date, or if the Company elects to redeem the 2025 Notes, the Company will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event or redemption in certain circumstances.

During the three months ended September 30, 2024, the conditional conversion feature of the 2025 Notes was not triggered as the last reported sale price of the Company's Class A common stock was not greater than or equal to 130% of the conversion price for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the quarter ended September 30, 2024. Therefore the 2025 Notes are not convertible, in whole or in part, at the option of the holders between October 1, 2024 through December 31, 2024. Whether the 2025 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.

When a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Since the issuance of the 2025 Notes, the Company received and settled an immaterial amount of conversion notices from the holders in cash. As of September 30, 2024, the 2025 Notes were classified as short-term debt on the Company's condensed consolidated balance sheet.

The Company may redeem for cash all or any portion of the 2025 Notes prior to the 31st scheduled trading day immediately preceding the maturity date, at its option, if the last reported sale price of its Class A common stock was at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

On January 1, 2021 the Company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU No. 2020-06”) using the modified retrospective approach. As a result, the 2025 Notes are accounting for as a single liability measured at their amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands):


	September 30, 2024		December 31, 2023
Convertible senior notes, net:
Principal	$	747,447	$	747,496
Unamortized debt issuance costs	(2,589)		(5,261)
Net carrying amount	$	744,858	$	742,235

As of September 30, 2024, the total estimated fair value of the 2025 Notes was approximately $970.3 million. The fair value was determined based on the closing trading price or quoted market price per $100 of the 2025 Notes as of the last day of trading for the period. The fair value of the 2025 Notes is primarily affected by the trading price of the Company’s Class A common stock and market interest rates.

The following table sets forth the interest expense related to the 2025 Notes for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Contractual interest expense	$	234	$	233	$	701	$	701
Amortization of issuance costs	912		848		2,672		2,539
Total	$	1,146	$	1,081	$	3,373	$	3,240

Capped Calls

In connection with the pricing of the 2025 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (“Capped Calls”). The Capped Calls each have an initial strike price of approximately $92.30 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2025 Notes. The Capped Calls have initial cap prices of $151.04 per share, subject to certain adjustments. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes, with such offset subject to a cap based on the cap price. The Capped Calls cover, subject to anti-dilution adjustments, approximately 8.1 million shares of the Company’s Class A common stock. For accounting purposes, the Capped Calls are separate transactions, and not part of the

2025 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $89.6 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital and will not be remeasured.

8. Commitments and Contingencies

**Non-cancelable Material Commitments—**During the nine months ended September 30, 2024, other than certain non-cancelable operating leases described in Note 9, Leases, there have been no other material changes outside the ordinary course of business to the Company’s contractual obligations and commitments from those disclosed in the Annual Report.

401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. The Company is responsible for administrative costs of the 401(k) plan and makes matching contributions to the 401(k) plan. For the three and nine months ended September 30, 2024, the Company incurred expense of $2.6 million and $6.4 million, respectively, for matching contributions. For the three and nine months ended September 30, 2023, the Company incurred expense of $1.6 million and $4.7 million, respectively, for matching contributions.

Legal Matters—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.

Indemnification—The Company enters into indemnification provisions under some agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s condensed consolidated statements of operations in connection with the indemnification provisions have not been material.

9. Leases

The Company has entered into various non-cancelable operating leases for its facilities expiring between 2025 and 2033. Certain lease agreements contain an option for the Company to renew a lease for a term of up to three years or an option to terminate a lease early within one year. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis.

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

The components of lease cost recognized within the Company’s condensed consolidated statements of operations were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease cost (1)	$	10,550	$	9,330	$	31,613	$	24,779

Short-term lease cost	1,485		2,651		4,204		7,370

1)Includes non-cash lease expense of $6.7 million and $7.0 million for the three months ended September 30, 2024 and 2023, respectively, and $20.3 million and $19.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):


	Nine Months Ended September 30,
	2024		2023
Cash paid for amounts included in measurement of lease liabilities	$	8,988	$	10,916
Operating lease assets obtained in exchange for new lease liabilities	61,635		53,660

Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):


	Amount
Remainder of 2024	$	9,393
2025	41,953
2026	42,110
2027	38,795
2028	35,584
2029 and beyond	121,709
Total lease payments	$	289,544
Less: imputed interest	(65,158)
Present value of lease liabilities	$	224,386

As of September 30, 2024, the Company had various operating leases that had not yet commenced, which are excluded from the table above. The operating leases will commence in fiscal year 2025 with total undiscounted future payments of $57.2 million and a weighted-average lease term of 8.5 years.

Weighted average remaining lease term and discount rate for the Company’s operating leases are as follows:


	September 30, 2024
Weighted-average remaining lease term (years)	7.1
Weighted-average discount rate	6.62	%

10. Revenue

Geographical Information

Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
North America (1)	$	484,533	$	381,194	$	1,358,135	$	1,078,374
International	205,483		166,342		588,413		460,336
Total	$	690,016	$	547,536	$	1,946,548	$	1,538,710

1)Includes revenue from the United States of $462.4 million and $361.3 million for the three months ended September 30, 2024 and 2023, respectively, and $1,293.5 million and $1,022.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Deferred Revenue and Remaining Performance Obligations

Certain of the Company’s customers pay in advance of satisfaction of performance obligations and other customers with monthly contract terms are billed in arrears on a monthly basis. The Company records contract liabilities to deferred revenue when customers are billed or when the Company receives customer payments in advance of the performance obligations being satisfied on the Company’s contracts.

Revenue recognized during the three months ended September 30, 2024 and 2023, which was included in the deferred revenue balances at the beginning of each such period, was $378.6 million and $276.8 million, respectively. Revenue recognized during the nine months ended September 30, 2024 and 2023 that was included in the deferred revenue balances at the beginning of each such period was $701.4 million and $486.5 million, respectively.

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. As of September 30, 2024 and December 31, 2023, the

aggregate transaction price allocated to remaining performance obligations was $1,821.8 million and $1,839.4 million, respectively. There is uncertainty in the timing of revenues associated with the Company’s drawdown contracts, as future revenue can often vary significantly from past revenue. However, the Company expects to recognize substantially all of the remaining performance obligations over the next 24 months.

Accounts Receivable

Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. During the nine months ended September 30, 2024 and 2023, the Company charged $6.8 million and $3.7 million, respectively, of accounts receivable deemed uncollectible against the allowance for credit losses.

Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date. The unbilled accounts receivable balance is due within one year. As of September 30, 2024 and December 31, 2023, unbilled accounts receivable of approximately $88.2 million and $61.2 million, respectively, was included in accounts receivable on the Company’s condensed consolidated balance sheets.

Deferred Contract Costs

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit, which is determined to be four years. Amounts expected to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current; the remaining portion is recorded as deferred contract costs, non-current, in the condensed consolidated balance sheets.

Deferred contract costs on the Company’s condensed consolidated balance sheets were $132.2 million and $118.7 million as of September 30, 2024 and December 31, 2023, respectively. Amortization expense was $13.5 million and $10.2 million for the three months ended September 30, 2024 and 2023, respectively, and $37.8 million and $28.2 million for the nine months ended September 30, 2024 and 2023, respectively.

**11.**Stockholders’ Equity

Class A and Class B Common Stock

The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder and are automatically converted to Class A common stock upon sale or transfer, subject to certain limited exceptions.

During the three months and nine months ended September 30, 2024, 129,356 shares and 780,072 shares of Class B common stock were converted into Class A common stock, respectively.

As of September 30, 2024, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each at a par value per share of $0.00001, of which 312,921,519 shares of Class A common stock and 26,348,891 shares of Class B common stock were issued and outstanding.

Equity Incentive Plans

The Company has two equity incentive plans, the 2012 Equity Incentive Plan (the “2012 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”). In connection with the Company’s initial public offering of Class A common stock (the “IPO”), the Company ceased granting awards under the 2012 Plan, and all shares that remained available for issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Additionally, as of September 30, 2024, there were 8,303,956 shares of Class A common stock issuable upon conversion of Class B common stock underlying options outstanding under the 2012 Plan. Under the 2019 Plan, the Board and any other committee or subcommittee of the Board may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance stock units (“PSUs”) and other awards, each equity award valued or based on the Company’s Class A common stock, to employees, directors, consultants and advisors of the Company. As of September 30, 2024, there were 86,556,049 shares available for grant under the 2019 Plan.

Stock Options

The following table summarizes the Company’s stock option activity and weighted-average exercise prices:


	Number Of Options Outstanding	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Balance outstanding—December 31, 2023	12,077,635	$	3.24	3.4	$	1,426,912
Options granted	—	—
Options exercised	(3,752,432)	1.37
Options forfeited or expired	(1,277)	5.20
Balance outstanding—September 30, 2024	8,323,926	$	4.07	3.1	$	923,842
Ending Exercisable—September 30, 2024	8,323,119	$	4.07	3.1	$	923,771

As of September 30, 2024, there were 19,970 shares of Class A common stock and 8,303,956 shares of Class B common stock issuable upon the exercise of options outstanding. As of December 31, 2023, there were 22,926 shares of Class A common stock and 12,054,709 shares of Class B common stock issuable upon the exercise of options outstanding.

Approximately all compensation cost related to unvested stock options was recognized as of September 30, 2024 and December 31, 2023.

There were no options granted during the nine months ended September 30, 2024 and 2023. The Company received approximately $5.2 million and $17.4 million in cash proceeds from options exercised during the nine months ended September 30, 2024 and 2023, respectively. The intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023 was approximately $445.1 million and $423.0 million, respectively. The aggregate fair value of options vested during the nine months ended September 30, 2024 was insignificant. The aggregate fair value of options vested during the nine months ended September 30, 2023 was $12.5 million.

Restricted Stock Units, Restricted Stock and Performance Stock Units

The following table summarizes the activity for the Company’s unvested RSUs and PSUs:


	Shares	Weighted- Average Grant Date Fair Value
Balance—December 31, 2023	13,663,501	$	99.13
Awarded	4,201,096	120.28
Vested	(4,059,497)	96.02
Forfeited/canceled	(1,012,221)	101.26
Balance—September 30, 2024	12,792,879	$	106.89

The Company granted no restricted shares of Class A common stock in connection with acquisitions during the nine months ended September 30, 2024.

Total compensation cost related to unvested RSUs and restricted shares of common stock not yet recognized was approximately $1,147.1 million and $1,187.3 million as of September 30, 2024 and December 31, 2023, respectively. The weighted-average period over which this compensation cost related to unvested RSUs and restricted shares of common stock will be recognized is 2.6 years and 2.8 years as of September 30, 2024 and December 31, 2023, respectively.

Total compensation cost related to unvested PSUs not yet recognized was approximately $61.2 million and $25.1 million as of September 30, 2024 and December 31, 2023, respectively. The weighted-average period over which this compensation cost related to unvested PSUs will be recognized is 1.5 years and 1.3 years as of September 30, 2024 and December 31, 2023, respectively.

Employee Stock Purchase Plan

In September 2019, the Board adopted and approved the 2019 Employee Stock Purchase Plan (the “ESPP”).

The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Historically offering periods have been approximately 6 months. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.

The Company recognized $3.4 million and $11.4 million of stock-based compensation expense related to the ESPP during the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, $19.6 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. During the nine months ended September 30, 2024, the Company issued 242,656 shares of Class A common stock under the ESPP. As of September 30, 2024, 20,549,200 shares of Class A common stock remain available for grant under the ESPP.

Stock-Based Compensation

The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors and nonemployees, including stock options, restricted stock units (“RSUs”), performance-based awards (“PSUs”), and the employee stock purchase plan (the “ESPP”) based on the fair value of the awards on the date of grant. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs and PSUs is determined by the closing price on the date of grant of the Company’s Class A common stock, as reported on the Nasdaq Global Select Market. The Company estimates the fair value of the rights to acquire stock under the ESPP using the Black-Scholes option-pricing model. Stock-based compensation for stock options and RSUs is recognized on a straight-line basis over the requisite service period and account for forfeitures as they occur. Stock-based compensation for PSUs is amortized under the accelerated attribution method and may be adjusted over the vesting period based on interim estimates of performance against pre-set objectives. PSUs will vest upon achievement of specified performance targets and subject to continuous service through the applicable vesting dates. The compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied and the Company accounts for forfeitures as they occur.

The Company also has certain options that have performance-based vesting conditions; stock-based compensation expense for such awards is recognized on a straight-line basis from the time the vesting condition is likely to be met through the time the vesting condition has been achieved.

Stock-based compensation expense was included in the condensed consolidated statement of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	6,249	$	4,570	$	18,169	$	12,452
Research and development	90,507		79,174		266,025		229,607
Sales and marketing	30,749		26,159		88,481		75,057
General and administrative	14,685		13,211		39,200		37,063
Stock-based compensation, net of amounts capitalized	142,190		123,114		411,875		354,179
Capitalized stock-based compensation expense	4,375		3,071		11,281		11,308
Total stock-based compensation expense	$	146,565	$	126,185	$	423,156	$	365,487

**12.**Interest Income and Other Income, Net

Interest income and other income, net consist of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Interest income	$	40,082	$	28,801	$	112,758	$	70,676
Other (loss) income, net	(2,650)		1,032		(3,111)		(1,492)
Interest income and other income, net	$	37,432	$	29,833	$	109,647	$	69,184

13.Income Taxes

The Company recorded a provision for income taxes of $4.4 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively. The Company has generated U.S. operating income and has minimal profits in its foreign jurisdictions during the quarter.

The Company has applied ASC 740, Income Taxes, and has determined that it has uncertain positions that would result in a tax reserve deemed immaterial for each of the nine months ended September 30, 2024 and 2023. The Company’s policy is to recognize interest and penalties related to uncertain income tax positions in income tax expense. The Company is subject to U.S. federal tax authority, U.S. state tax authority and foreign tax authority examinations.

The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company recorded a full valuation allowance against substantially all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.

On August 16, 2022, the Inflation Reduction Act (“the Act”) was signed into law. The Act includes a 15.0% corporate alternative minimum tax on the adjusted financial statement income of applicable corporations and a 1.0% excise tax on all corporate stock buybacks of public companies for tax years beginning after December 31, 2022. For the nine months ended September 30, 2024, the Act did not materially impact the Company’s provision for income tax. The Company will continue to monitor any changes in tax law.

**14.**Net Income (Loss) Per Share

Basic and diluted net income (loss) per common share is presented in conformity with the two-class method required for participating securities. Basic and diluted net income (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as the conversion of Class B common stock is assumed in the computation of the diluted net income (loss) per share of Class A common stock, the undistributed earnings are equal to net income (loss) for that computation.

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Basic net income (loss) per share:	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Numerator:
Net income (loss)	$	47,688	$	4,009	$	20,809	$	1,821	$	127,401	$	10,751	$	(4,990)	$	(435)
Denominator:
Weighted-average shares used in calculating net income (loss) per share, basic	311,388		26,174		299,366		26,191		308,727		26,052		296,555		25,840
Basic net income (loss) per share	$	0.15	$	0.15	$	0.07	$	0.07	$	0.41	$	0.41	$	(0.02)	$	(0.02)
Diluted net income (loss) per share:
Numerator:
Allocation of distributed net income (loss) for basic computation	$	47,688	$	4,009	$	20,809	$	1,821	$	127,401	$	10,751	$	(4,990)	$	(435)
Reallocation of undistributed net income (loss) as a result of conversion of Class B to Class A shares	4,009		—		1,821		—		10,751		—		(435)		—
Allocation of undistributed income (loss)	$	51,697	$	4,009	$	22,630	$	1,821	$	138,152	$	10,751	$	(5,425)	$	(435)
Denominator:
Number of shares used in basic calculation	311,388		26,174		299,366		26,191		308,727		26,052		296,555		25,840
Weighted-average effect of diluted securities:
Conversion of Class B to Class A common shares outstanding	26,174		—		26,191		—		26,052		—		25,840		—
Employee stock options	8,496		—		14,108		—		9,748		—		—		—
Employee stock purchase plan	10		—		26		—		25		—		—		—

Restricted stock units and performance stock units	3,236		—		3,013		—		4,332		—		—		—
Unvested restricted stock in connection with acquisition	233		—		507		—		349		—		—		—
Shares issuable upon conversion of the convertible senior notes	8,098		—		8,098		—		8,098		—		—		—
Number of shares used in diluted calculation	357,635		26,174		351,309		26,191		357,331		26,052		322,395		25,840
Diluted net income (loss) per share	$	0.14	$	0.15	$	0.06	$	0.07	$	0.39	$	0.41	$	(0.02)	$	(0.02)

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):


	As of September 30,
	2024	2023
Shares subject to outstanding stock options, RSUs and PSUs	480	25,989
Unvested restricted shares of common stock	—	761
Shares subject to the employee stock purchase plan	—	248
Shares issuable upon conversion of the convertible senior notes	—	8,098
Total	480	35,096

ASU No. 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share when the instruments may be settled in cash or shares. The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the 2025 Notes on diluted net income per share as required under ASU No. 2020-06 to determine the dilutive effect of the Notes. Refer to Note 7, Convertible Senior Notes, for more information.

The Company entered into Capped Calls in connection with the issuance of the 2025 Notes. The effect of the Capped Calls was also excluded from the calculation of diluted net income per share as the effect of the Capped Calls would have been anti-dilutive. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes.

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