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Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. ("Equinix" or the "Company") and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented. The condensed consolidated balance sheet data as of December 31, 2019 has been derived from audited consolidated financial statements as of that date. The condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC"), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For further information, refer to the Consolidated Financial Statements and Notes thereto included in Equinix's Form 10-K as filed with the SEC on February 21, 2020. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.

Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Equinix and its subsidiaries, including the acquisitions of Packet Host, Inc. from March 2, 2020, three data centers in Mexico acquired from Axtel S.A.B. de C.V from January 8, 2020, and Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands from April 18, 2019. All intercompany accounts and transactions have been eliminated in consolidation.

Income Taxes

The Company elected to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with its 2015 taxable year. As a result, the Company may deduct the distributions made to its stockholders from taxable income generated by the Company and its qualified REIT subsidiaries ("QRSs"). The Company's dividends paid deduction generally eliminates the U.S. federal taxable income of the Company and its QRSs, resulting in no U.S. federal income tax due. However, the Company's domestic taxable REIT subsidiaries ("TRSs") are subject to U.S. corporate income taxes on any taxable income generated by them. In addition, the foreign operations of the Company are subject to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.

The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the Company, tax law changes and future business acquisitions.

The Company's effective tax rates were 20.2% and 26.6% for the three months ended March 31, 2020 and 2019, respectively.

Coronavirus (COVID-19) Update

In December 2019, a novel strain of coronavirus, referred to as Coronavirus disease 2019, or COVID-19, emerged. On February 29, 2020, the World Health Organization (“WHO”) raised the COVID-19 threat from high to very high, and on March 11, 2020, the WHO characterized COVID-19 as a global pandemic. The extent to which the Company’s operations will be impacted by COVID-19 will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from these estimates.

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Recent Accounting Pronouncements

Accounting Standards Not Yet Adopted

In December 2019, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes. The ASU simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also improves consistent application of and simplifies generally accepted accounting principles ("GAAP") for other areas of Topic 740 by clarifying and amending existing guidance. For public entities, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted including adoption in any interim period for periods for which financial statements have not yet been issued. The Company is currently evaluating the extent of the impact that the adoption of this standard will have on its condensed consolidated financial statements.

Accounting Standards Adopted

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform ("Topic 848"): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company adopted the ASU upon its issuance and there was no impact on the Company's condensed consolidated financial statements for the three months ended March 31, 2020 as a result of adopting this standard. The Company will evaluate its debt, derivative and lease contracts that are eligible for modification relief and may apply the elections prospectively as needed.

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("Topic 326"): Measurement of Credit Losses on Financial Instruments. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this new ASU on January 1, 2020 using the modified retrospective approach and recorded a net decrease to retained earnings of $0.9 million and a corresponding increase to allowance for doubtful accounts. The adoption did not have any significant impact on other financial assets within the scope of ASC 326, such as contract asset.

Accounts Receivable

Accounts receivables are recorded at invoice amount and are generally due in less than one year. Allowance for doubtful accounts are estimated losses resulting from the inability of customers making payments. An estimate of uncollectible amounts is made based on historical bad debts, age of customer receivable balances, customers' financial conditions and current economic trends. As of March 31, 2020, our allowance for doubtful accounts considered the current and potential future impacts caused by the COVID-19 pandemic based on information available to such date.

Accounts receivable, net, consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):

	March 31, 2020				December 31, 2019
Accounts receivable	$	701,946			$	702,160
Allowance for doubtful accounts	(14,793		)		(13,026		)
Accounts receivable, net	$	687,153			$	689,134

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The following table summarizes the activity of the Company's allowance for doubtful accounts (in thousands):

Balance at December 31, 2019	$	13,026
Adjustments due to adoption of ASU 2016-13	900
Provision for allowance for doubtful accounts	3,934
Net write-offs and recoveries	(2,688		)
Impact of foreign currency exchange and others	(379		)
Balance at March 31, 2020	$	14,793

Contract Balances

The following table summarizes the opening and closing balances of the Company's accounts receivable, net; contract asset, current; contract asset, non-current; deferred revenue, current; and deferred revenue, non-current (in thousands):

	Accounts receivable, net				Contract asset, current				Contract asset, non-current				Deferred revenue, current				Deferred revenue, non-current
Beginning balances as of January 1, 2020	$	689,134			$	10,033			$	31,521			$	76,193			$	46,555
Closing balances as of March 31, 2020	687,153				10,457				33,619				79,575				48,107
Increase/(decrease)	$	(1,981	)		$	424			$	2,098			$	3,382			$	1,552

The difference between the opening and closing balances of the Company's accounts receivable, net, contract assets and deferred revenues primarily results from revenue growth and the timing difference between the satisfaction of the Company's performance obligation and the customer's payment, as well as business combinations closed during the three months ended March 31, 2020. The amounts of revenue recognized during the three months ended March 31, 2020 from the opening deferred revenue balance as of January 1, 2020 was $38.1 million.

Remaining performance obligations

As of March 31, 2020, approximately $7.2 billion of total revenues including deferred installation revenues are expected to be recognized in future periods, the majority of which will be recognized over the next 24 months. While initial contract terms vary in length, substantially all contracts thereafter automatically renew in one-year increments. Included in the remaining performance obligations is either 1) remaining performance obligations under the initial contract terms or 2) remaining performance obligations related to contracts in the renewal period once the initial terms have lapsed. The remaining performance obligations do not include variable consideration related to unsatisfied performance obligations such as the usage of metered power, service fees from xScale^TM data centers, which are calculated based on future events or actual costs incurred in the future, or any contracts that could be terminated without any significant penalties such as the majority of interconnection revenues. The remaining performance obligations above include revenues to be recognized in the future related to arrangements where the Company is considered the lessor.

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The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods presented (in thousands, except per share amounts):

	Three Months Ended March 31,
	2020				2019
Net income	$	118,957			$	117,747
Net (income) loss attributable to non-controlling interests	(165		)		331
Net income attributable to Equinix	$	118,792			$	118,078
Weighted-average shares used to calculate basic EPS	85,551				81,814
Effect of dilutive securities:
Employee equity awards	593				276
Weighted-average shares used to calculate diluted EPS	86,144				82,090
EPS attributable to Equinix:
Basic EPS	$	1.39			$	1.44
Diluted EPS	$	1.38			$	1.44

The Company has excluded common stock related to employee equity awards in the diluted EPS calculation above of approximately 45,000 shares and 469,000 shares for the three months ended March 31, 2020 and 2019, respectively, because their effect would be anti-dilutive.

2020 Acquisitions

On March 2, 2020, the Company acquired all outstanding shares and equity awards of Packet Host, Inc. (“Packet”), a leading bare metal automation platform for a total purchase consideration of approximately $290.3 million in cash. In addition, the Company paid $16.1 million in cash to accelerate the vesting of unvested Packet equity awards for certain Packet employees, which was recorded as stock-based compensation expense during the three months ended March 31, 2020. In connection with the acquisition, the Company also issued restricted stock awards with an aggregated fair value of $30.2 million and a three-year vesting period, which will be recognized as stock-based compensation costs over the vesting period. The acquisition, combined with the Company’s own organic bare metal service in development, is expected to accelerate Equinix's strategy to help enterprises deploy hybrid multicloud architectures on Equinix's data center platform.

On January 8, 2020, the Company completed the acquisition of three data centers in Mexico from Axtel S.A.B. de C.V. (“Axtel”) for a total purchase consideration of approximately $189.0 million, including $175.0 million in cash and $14.0 million the Company paid to the seller for recoverable value-added taxes ("VAT") incurred prior to the acquisition, which related to a corresponding VAT receivable acquired upon acquisition. The acquisition supports the Company’s ongoing expansion to meet customer demand in the Americas region.

Both acquisitions constitute a business under the accounting standard for business combinations and, therefore, were accounted for as business combinations using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed measured at fair value on the date of acquisition. As of March 31, 2020, the Company had not completed the detailed valuation analysis to derive the fair value of assets acquired and liabilities assumed, including property, plant and equipment, intangible assets and the related tax impacts; therefore, the purchase price allocation is based on provisional estimates and subject to continuing management analysis.

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A summary of the preliminary allocation of total purchase consideration is presented as follows (in thousands):

	Packet				Axtel
Cash and cash equivalents	$	1,029			$	—
Accounts receivable	5,148				—
Other current assets	108				14,048
Property, plant and equipment	28,980				76,407
Operating lease right-of-use assets	1,445				1,646
Intangible assets	68,600				22,750
Goodwill	223,117				78,902
Other assets	138				—
Total assets acquired	328,565				193,753
Accounts payable and accrued liabilities	(987		)		(238		)
Other current liabilities	(826		)		—
Operating lease liabilities	(1,445		)		(1,586		)
Finance lease liabilities	(28,980		)		—
Other liabilities	—				(162		)
Deferred tax liabilities	(6,029		)		(2,749		)
Net assets acquired	$	290,298			$	189,018

The following table presents certain information on the acquired intangible assets (in thousands):

Intangible Assets		Fair Value				Estimated Useful Lives (Years)		Weighted-average Estimated Useful Lives (Years)
Packet:
Trade names		$	1,600			3.0		3.0
Existing technology		5,100				3.0		3.0
Customer relationships		61,900				10.0		10.0
Axtel:
Customer relationships		22,750				15.0		15.0

The fair value of the Packet trade name was estimated using the relief from royalty method under the income approach. The Company applied a relief from royalty rate of 1.0% and a discount rate of 8.0%. The fair value of existing technology was estimated under the cost approach by projecting the cost to recreate a new asset with an equivalent utility of the existing technology. The key assumptions of the cost approach include total cost, time to recreate and functional obsolescence.

The fair value of customer relationships acquired from Packet and Axtel was estimated by applying an income approach, by calculating the present value of estimated future operating cash flows generated from existing customers less costs to realize the revenue. The Company applied a discount rate of 8.0% for Packet and 13.3% for Axtel, which reflects the nature of the assets as they relate to the risk and uncertainty of the estimated future operating cash flows, as well as the risk of the country within which the acquired business operates.

The fair value of property, plant and equipment was estimated by applying the cost approach, with the exception of land, which was estimated by applying the market approach. The key assumptions of the cost approach include replacement cost new, physical deterioration, functional and economic obsolescence, economic useful life, remaining useful life, age and effective age.

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Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is attributable to the workforce of the acquired business and the projected revenue increase expected to arise from future customers after the Packet and Axtel acquisitions. Goodwill from both acquisitions is not amortizable for local tax purposes and is attributable to the Company's Americas region.

The Company incurred transaction costs of approximately $9.6 million during the three months ended March 31, 2020 for both acquisitions combined. The operating results of both acquisitions are reported in the Americas region following the date of acquisition. During the three months ended March 31, 2020, the Company's results of operations include $8.1 million of revenues and $13.6 million of net loss from operations from the combined operations of Packet and Axtel. The net loss was primarily attributable to the $16.1 million stock-based compensation expense incurred to accelerate the vesting of certain Packet employees’ unvested Packet equity awards at the close of the Packet acquisition.

2019 Acquisition

5.	Equity Method Investments

On October 8, 2019, the Company entered into a joint venture in the form of a limited liability partnership with GIC, Singapore's sovereign wealth fund (the "EMEA Joint Venture"), to develop and operate xScale^TM data centers in Europe.  xScale data centers are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments and also offer access to Equinix's comprehensive suite of interconnection and edge services.

Upon closing, GIC contributed €152.6 million in cash, or $167.4 million at the exchange rate in effect on October 8, 2019, for an 80% partnership interest in the EMEA Joint Venture. Equinix sold certain xScale data center facilities to the EMEA Joint Venture in exchange for net cash proceeds of $351.8 million, as well as a 20% partnership interest in the EMEA Joint Venture with a fair value of $41.9 million. The Company accounts for its investments in the EMEA Joint Venture using the equity method of accounting, whereby the investments were recorded initially at fair value, which equals to the cost of the Company's initial equity contribution, and subsequently adjusted for cash contributions and the Company's share of the income and losses of the investees.

During the three months ended March 31, 2020, the Company made an additional equity contribution of $5.1 million to the EMEA Joint Venture. As of March 31, 2020 and December 31, 2019, the Company's equity method investments were $72.7 million and $59.7 million, respectively, and were included within other assets on the consolidated balance sheet. The Company's share of the income and losses of the equity method investments was not significant for the three months ended March 31, 2020, and was included in other income on the condensed consolidated statement of operations.

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Derivatives Designated as Hedging Instruments

Net Investment Hedges. The Company is exposed to the impact of foreign exchange rate fluctuations on the value of investments in its foreign subsidiaries whose functional currencies are other than the U.S. Dollar. In order to mitigate the impact of foreign currency exchange rates, the Company has entered into various foreign currency debt obligations, which are designated as hedges against the Company's net investments in foreign subsidiaries. As of March 31, 2020 and December 31, 2019, the total principal amounts of foreign currency debt obligations designated as net investment hedges were $4,245.1 million and $4,078.7 million, respectively.

The Company also uses cross-currency interest rate swaps to hedge a portion of its net investment in its European operations. As of both March 31, 2020 and December 31, 2019, U.S. Dollar to Euro cross-currency interest rate swap contracts with a total notional amount of $750.0 million were outstanding, with maturity dates in April 2022, January 2024 and January 2025. At maturity of each outstanding contract, the Company will receive U.S. Dollars from and pay Euros to the contract counterparty. During the term of each contract, the Company receives interest payments in U.S. Dollars and makes interest payments in Euros based on a notional amount and fixed interest rates determined at contract inception.

The effect of net investment hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 was as follows (in thousands):

Amount of gain or (loss) recognized in accumulated other comprehensive income:
			Three Months Ended March 31,
			2020				2019
Foreign currency debt			$	99,102			$	63,914
Cross-currency interest rate swaps (included component) (1)			14,140				15,515
Cross-currency interest rate swaps (excluded component) (2)			31,704				(2,590		)
Total			$	144,946			$	76,839
Amount of gain or (loss) recognized in earnings:
	Location of gain or (loss)		Three Months Ended March 31,
			2020				2019
Cross-currency interest rate swaps (excluded component) (2)	Interest expense		$	5,089			$	4,163
Total			$	5,089			$	4,163

(1)	Included component represents foreign exchange spot rates.

(2)	Excluded component represents cross-currency basis spread and interest rates.

Cash Flow Hedges. The Company hedges its foreign currency translation exposure for forecasted revenues and expenses in its EMEA region between the U.S. Dollar and the British Pound, Euro, Swedish Krona and Swiss Franc. The foreign currency forward and option contracts that the Company uses to hedge this exposure are designated as cash flow hedges. As of March 31, 2020 and December 31, 2019, the total notional amounts of these foreign exchange contracts were $985.7 million and $824.8 million, respectively. As of March 31, 2020, the Company's foreign exchange contracts had maturity dates ranging from April 2020 to March 2022 and the Company recorded a net gain of $33.0 million within accumulated other comprehensive income (loss) relating to cash flow hedges that will be reclassified to revenues and expenses as they mature in the next 12 months. As of December 31, 2019, the Company's foreign exchange contracts had maturity dates ranging from January 2020 to December 2021 and the Company recorded a net gain of $16.3 million within accumulated other comprehensive income (loss) relating to cash flow hedges that will be reclassified to revenues and expenses as they mature in the next 12 months.

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The Company hedges the interest rate exposure created by anticipated fixed rate debt issuances through the use of treasury locks and forward starting swaps (collectively, interest rate locks), which are designated as cash flow hedges. As of March 31, 2020, the total notional amount of interest rate locks was approximately $1.2 billion. As of December 31, 2019, the Company had no interest rate cash flow hedges outstanding. When interest rate locks are settled, any accumulated gain or loss included as a component of other comprehensive income (loss) will be amortized to interest expense over the life of the related debt. As of March 31, 2020 and December 31, 2019, the net loss and gain in accumulated other comprehensive income (loss) to be reclassified to interest expense in the next 12 months for interest rate locks is not significant.

The Company enters into intercompany hedging instruments ("intercompany derivatives") with wholly-owned subsidiaries of the Company in order to hedge certain forecasted revenues and expenses denominated in currencies other than the U.S. Dollar. Simultaneously, the Company enters into derivative contracts with unrelated third parties to externally hedge the net exposure created by such intercompany derivatives.

The effect of cash flow hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 was as follows (in thousands):

Amount of gain or (loss) recognized in accumulated other comprehensive income:
			Three Months Ended March 31,
			2020				2019
Foreign currency forward and option contracts (included component) (1)			$	28,025			$	10,965
Foreign currency option contracts (excluded component) (2)			1,318				—
Interest rate locks			(26,232		)		—
Total			$	3,111			$	10,965
Amount of gain or (loss) reclassified from accumulated other comprehensive income to income:
			Three Months Ended March 31,
	Location of gain or (loss)		2020				2019
Foreign currency forward contracts	Revenues		$	21,219			$	9,861
Foreign currency forward contracts	Costs and operating expenses		(11,000		)		(5,329		)
Interest rate locks	Interest Expense		168				—
Total			$	10,387			$	4,532
Amount of gain or (loss) excluded from effectiveness testing included in income:
			Three Months Ended March 31,
	Location of gain or (loss)		2020				2019
Foreign currency forward contracts	Other income (expense)		$	—			$	88
Foreign currency option contracts (excluded component) (2)	Revenues		(521		)		—
Total			$	(521	)		$	88

(1)	Included component represents foreign exchange spot rates.

(2)	Excluded component represents option's time value.

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Derivatives Not Designated as Hedging Instruments

Embedded Derivatives. The Company is deemed to have foreign currency forward contracts embedded in certain of the Company's customer agreements that are priced in currencies different from the functional or local currencies of the parties involved. These embedded derivatives are separated from their host contracts and carried on the Company's balance sheet at their fair value. The majority of these embedded derivatives arise as a result of the Company's foreign subsidiaries pricing their customer contracts in U.S. Dollars.

Economic Hedges of Embedded Derivatives. The Company uses foreign currency forward contracts to manage the foreign exchange risk associated with the Company's customer agreements that are priced in currencies different from the functional or local currencies of the parties involved ("economic hedges of embedded derivatives"). Foreign currency forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date.

Foreign Currency Forward Contracts. The Company also uses foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated monetary assets and liabilities. As a result of foreign currency fluctuations, the U.S. Dollar equivalent values of its foreign currency-denominated monetary assets and liabilities change. Gains and losses on these contracts are included in other income (expense), on a net basis, along with the foreign currency gains and losses of the related foreign currency-denominated monetary assets and liabilities associated with these foreign currency forward contracts. As of March 31, 2020 and December 31, 2019, the total notional amounts of these foreign currency contracts were $4.2 billion and $2.5 billion, respectively.

The following table presents the effect of derivatives not designated as hedging instruments in the Company's condensed consolidated statements of operations (in thousands):

Amount of gain or (loss) recognized in earnings:
			Three Months Ended March 31,
	Location of gain or (loss)		2020				2019
Embedded derivatives	Revenues		$	7,451			$	907
Economic hedge of embedded derivatives	Revenues		(7,902		)		(57		)
Foreign currency forward contracts	Other income (expense)		133,824				8,351
Total			$	133,373			$	9,201

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Fair Value of Derivative Instruments

The following table presents the fair value of derivative instruments recognized in the Company's condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands):

	March 31, 2020								December 31, 2019
	Assets (1)				Liabilities (2)				Assets (1)				Liabilities (2)
Designated as hedging instruments:
Cash flow hedges
Foreign currency forward and option contracts	$	46,544			$	19			$	24,853			$	5,898
Interest rate locks	4,373				21,295				—				—
Net investment hedges
Cross-currency interest rate swaps	72,095				—				26,251				—
Total designated as hedging	123,012				21,314				51,104				5,898
Not designated as hedging instruments:
Embedded derivatives	10,733				1,102				4,595				2,268
Economic hedges of embedded derivatives	4,507				23				1,367				—
Foreign currency forward contracts	73,939				59,751				641				27,446
Total not designated as hedging	89,179				60,876				6,603				29,714
Total Derivatives	$	212,191			$	82,190			$	57,707			$	35,612

(1)	As presented in the Company's condensed consolidated balance sheets within other current assets and other assets.

(2)	As presented in the Company's condensed consolidated balance sheets within other current liabilities and other liabilities.

Offsetting Derivative Assets and Liabilities

The Company presents its derivative instruments and the accrued interest related to cross-currency interest rate swaps at gross fair values in the condensed consolidated balance sheets. The Company enters into master netting agreements with its counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for individual derivative contracts with a single counterparty to offset in the event of default. For presentation on the condensed consolidated balance sheets, the Company does not offset fair value amounts recognized for derivative instruments or the accrued interest related to cross-currency interest rate swaps under master netting arrangements. The following table presents information related to these offsetting arrangements as of March 31, 2020 and December 31, 2019 (in thousands):

	Gross Amounts Offset in Consolidated Balance Sheet
	Gross Amounts				Gross Amounts Offset in the Balance Sheet				Net Amounts				Gross Amounts not Offset in the Balance Sheet				Net
March 31, 2020
Derivative assets	$	224,453			$	—			$	224,453			$	(85,190	)		$	139,263
Derivative liabilities	88,477				—				88,477				(85,190		)		3,287
December 31, 2019
Derivative assets	$	76,640			$	—			$	76,640			$	(37,820	)		$	38,820
Derivative liabilities	45,832				—				45,832				(37,820		)		8,012

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Valuation Methods

Fair value estimates are made as of a specific point in time based on methods using the market approach valuation method which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities or other valuation techniques. These techniques involve uncertainties and are affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.

Cash Equivalents and Investments. The fair value of the Company's investments in money market funds approximates their face value. Such instruments are included in cash equivalents. The Company's money market funds and publicly traded equity securities are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets. The fair value of the Company's other investments, including certificates of deposit, approximates their face value. The fair value of these investments is priced based on the quoted market price for similar instruments or nonbinding market prices that are corroborated by observable market data. Such instruments are classified within Level 2 of the fair value hierarchy. The Company determines the fair values of its Level 2 investments by using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data, which are obtained from quoted market prices, custody bank, third-party pricing vendors or other sources. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs. The Company is responsible for its consolidated financial statements and underlying estimates.

The Company uses the specific identification method in computing realized gains and losses. Realized gains and losses from the sale of investments are included within other income (expense) in the Company's consolidated statements of operations. The Company's investments in publicly traded equity securities are carried at fair value. Unrealized gains and losses on publicly traded equity securities are reported within other income (expense) in the Company's consolidated statements of operations.

Derivative Assets and Liabilities. Inputs used for valuations of derivatives are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data. The significant inputs used include spot currency rates and forward points, interest rate curves, and published credit default swap rates of its foreign exchange trading counterparties and other comparable companies. The Company has determined that the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, therefore the derivatives are categorized as Level 2.

The Company did not have any nonfinancial assets or liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.

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The Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 were as follows (in thousands):

	Fair Value at March 31, 2020				Fair Value Measurement Using
					Level 1				Level 2
Assets:
Money market and deposit accounts	$	453,349			$	453,349			$	—
Publicly traded equity securities	2,664				2,664				—
Certificates of deposit	23,169				—				23,169
Derivative instruments (1)	212,191				—				212,191
Total	$	691,373			$	456,013			$	235,360
Liabilities:
Derivative instruments (1)	$	82,190			$	—			$	82,190

(1)	Amounts are included within other current assets, other assets, others current liabilities and other liabilities in the Company's accompanying condensed consolidated balance sheet.

The Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands):

	Fair Value at December 31, 2019				Fair Value Measurement Using
					Level 1				Level 2
Assets:
Money market and deposit accounts	$	886,547			$	886,547			$	—
Publicly traded equity securities	2,779				2,779				—
Certificates of deposit	7,583				—				7,583
Derivative instruments (1)	57,707				—				57,707
Total	$	954,616			$	889,326			$	65,290
Liabilities:
Derivative instruments (1)	$	35,612			$	—			$	35,612

(1)	Amounts are included within other current assets, other assets, other current liabilities and other liabilities in the Company's accompanying condensed consolidated balance sheet.

The Company did not have any Level 3 financial assets or financial liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.

Significant Lease Transactions

Silicon Valley 4 ("SV4") Data Center

In February 2020, the Company exercised its first renewal option available to extend the lease term for the SV4 Data Center for 5 years. After exercising the first renewal option, there are two renewal options of 5 years each remaining. The Company concluded that the two remaining renewal options of 5 years each are reasonably certain to be exercised after considering all relevant factors that create an economic incentive for the Company. Therefore, the concluded lease term is 15 years and 7 months with the lease ending on September 30, 2035. The Company assessed the lease classification of the SV4 lease at the modification date and determined the lease should be accounted for as a finance lease. During the three months ended March 31, 2020, the Company recorded finance lease ROU asset and liability of $62.8 million and $63.3 million, respectively.

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Hong Kong 1 ("HK1") Data Center

In March 2020, the Company entered into several lease agreements with the landlord to lease several premises in the HK1 Data Center. One of the premises commenced in March 2020 with an initial term of 18 years. The Company assessed the lease classification of that premises at the commencement date and determined the lease should be accounted for as a finance lease. The Company will assess the remaining premises when the leases commence. During the three months ended March 31, 2020, the Company recorded finance lease ROU asset and liability of 163.0 million Hong Kong dollars or $21.0 million at the exchange rate in effect on March 31, 2020.

Lease Expenses

The components of lease expenses are as follows (in thousands):

	Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
Finance lease cost
Amortization of right-of-use assets (1)	$	25,166			$	20,086
Interest on lease liabilities	27,825				27,523
Total finance lease cost	52,991				47,609
Operating lease cost	53,791				51,639
Total lease cost	$	106,782			$	99,248

 

⁽¹⁾ Amortization of right-of-use assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

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Other Information

Other information related to leases is as follows (in thousands):

	Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	26,967			$	26,604
Operating cash flows from operating leases	51,985				49,262
Financing cash flows from finance leases	18,977				31,158
Right-of-use assets obtained in exchange for lease obligations: (1)
Finance leases	$	115,274			$	16,307
Operating leases	6,612				28,987
	As of March 31, 2020				As of December 31, 2019
Weighted-average remaining lease term - finance leases (2)	15 years				15 years
Weighted-average remaining lease term - operating leases (2)	13 years				13 years
Weighted-average discount rate - finance leases	8		%		9		%
Weighted-average discount rate - operating leases	4		%		4		%
Finance lease assets (3)	$	1,343,406			$	1,277,614

⁽¹⁾ Represents all non-cash changes in ROU assets.

⁽²⁾ Includes lease renewal options that are reasonably certain to be exercised.

⁽³⁾ As of March 31, 2020 and December 31, 2019, the Company recorded accumulated amortization of finance lease assets of $498.1 million and $474.8 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.

Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2020 are as follows (in thousands):

	Operating Leases				Finance Leases				Total
2020 (9 months remaining)	$	137,567			$	141,162			$	278,729
2021	190,031				191,679				381,710
2022	182,747				188,362				371,109
2023	167,266				183,177				350,443
2024	155,392				181,116				336,508
Thereafter	1,080,313				1,796,773				2,877,086
Total lease payments	1,913,316				2,682,269				4,595,585
Plus amount representing residual property value	—				17,639				17,639
Less imputed interest	(510,756		)		(1,120,701		)		(1,631,457		)
Total	$	1,402,560			$	1,579,207			$	2,981,767

The Company entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of March 31, 2020. These leases will commence between fiscal years 2020 and 2022, with lease terms of 2 to 49 years and a total lease commitment of approximately $680.8 million.

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Mortgage and Loans Payable

As of March 31, 2020 and December 31, 2019, the Company's mortgage and loans payable consisted of the following (in thousands):

	March 31, 2020				December 31, 2019
Term loans	$	1,219,047