Debt

The following table presents the carrying value of the Company’s debt as of December 31, 2018 and 2017 (in thousands):



	2018			2017
First term loan—18 months of interest-only payments ending in March 2019 followed by 36 equal monthly installments of principal plus interest, maturing March 2022; interest at Prime plus 0.25% per annum	$	15,000		$	15,000
Second term loan—11 months of interest-only payments ending in October 2018 followed by 47 equal monthly installments of principal plus interest, maturing September 2022. As of September 30, 2018, the Company achieved trailing six-month EBITDA of at least $1.0 million; as a result, the interest-only repayment period extended to March 2019, followed by 42 equal monthly installments of principal plus interest; bears interest at Prime plus 5.25% per annum. As a result of the Company's IPO, the interest rate was reduced to Prime plus 0.25% per annum	9,000			9,000
Line of credit—interest at Prime with accrued interest due monthly; matures September 2020	—			10,000
Total debt	24,000			34,000
Less: Unamortized debt discount issuance costs	(90		)	(167		)
Balance	23,910			33,833
Debt, current	(5,671		)	(10,342		)
Debt, noncurrent	$	18,239		$	23,491
Weighted-average interest rate	6.89		%	5.93		%

In September 2017, the Company entered into a Loan and Security Agreement (the “Loan Agreement”), which was subsequently amended in November 2017 and September 2018. The Loan Agreement consisted initially of a term loan (the “First Term Loan”) of $15.0 million and a $15.0 million revolving line of credit based on eligible trade and client accounts receivable, for an aggregate facility amount of up to $30.0 million. However, upon the Company achieving adjusted net revenue of at least $49.0 million in a trailing three-month period on or before June 30, 2018, the revolving line of credit increased to $25.0 million with a corresponding increase to the aggregate facility amount to up to $40.0 million. The Loan Agreement was amended in November 2017 to include a second term loan of $9.0 million (the “Second Term Loan,” and together with the First Term Loan, the “Term Loans”), which, in turn, increased the aggregate maximum amount of the facility up to $49.0 million. The Company incurred debt issuance costs of $0.2 million, which was primarily classified as a deduction to the long-term portion of the Term Loans. In November 2017, the Company drew down $10.0 million under the revolving line of credit and $9.0 million under the Term Loans. The Company has granted its lender first-priority liens against substantially all of its assets, as collateral, excluding the Company’s intellectual property (but including proceeds therefrom) and the funds and assets held by the Company’s subsidiary, Upwork Escrow Inc. The Company has also agreed to a negative pledge on its intellectual property. The Loan Agreement is also subject to the Company maintaining an adjusted quick ratio of 1.30 and achieving minimum EBITDA levels over trailing periods ranging from three to twelve months. The Loan Agreement also includes a restrictive covenant on dividend payments other than dividends paid solely in common stock. The Company used $19.0 million of its borrowings to repurchase shares of its redeemable convertible preferred stock in 2017 (see Note 7).

In September 2018, the Company entered into a second amendment (the “Second Amendment”) to the Loan Agreement which expanded the types of eligible trade and client accounts receivable considered for the determination of the borrowing base of the revolving line of credit. The Second Amendment also provided for a reduction in the interest rate for the Second Term Loan, from prime plus 5.25% to prime plus 0.25%, from and after the occurrence of an initial public offering by the Company with net proceeds of more than $50.0 million; this reduction became effective following the completion of the Company’s IPO in October 2018. To the extent the Company has not yet collected funds for hourly billings from clients which are in-transit due to timing differences in receipt of cash from clients, the Company from time to time utilizes the revolving line of credit to satisfy escrow funding requirements. In September 2018, the Company drew down $15.0 million under the revolving line of credit for such purpose and repaid the borrowings in full in the first week of October 2018 when the Company collected funds from clients. In October 2018, the Company used part of the net proceeds from the IPO to repay $10.0 million of indebtedness owed under the revolving line of credit.

The amortization expense related to the debt discount was immaterial for the years ended December 31, 2018, 2017, and 2016. The Company was in compliance with all financial-related covenants under the Loan Agreement as of December 31, 2018 and 2017.

Future maturities of principal payments, excluding potential early payments, as of December 31, 2018, were expected to be as follows (in thousands):



Year Ended December 31,	Principal Payments
2019	$	5,679
2020	7,571
2021	7,571
2022	3,179
Total	$	24,000