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Debt | 9 Months Ended
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Sep. 30, 2020
Debt Disclosure [Abstract] |
Debt | Debt Convertible Senior Notes In August 2018, we issued $230.0 million aggregate principal amount of convertible senior notes due August 1, 2023 (the 2023 Notes) and in May 2020, we issued $230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the 2025 Notes) (collectively, the Notes). The 2023 Notes bear interest at a fixed rate of 1.25% per annum, payable semi-annually in arrears on February 1 and August 1 of each year. The 2025 Notes bear interest at a fixed rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2020. The 2023 Notes and the 2025 Notes mature on August 1, 2023 and May 1, 2025, respectively unless earlier converted, redeemed or repurchased. The 2023 Notes and 2025 Notes are senior unsecured obligations, do not contain any financial covenants and are governed by an indenture between the Company, as issuer, and U.S. Bank National Association, as trustee (the 2023 Indenture and the 2025 Indenture, respectively). The total net proceeds from the 2023 Notes and the 2025 Notes offerings, after deducting initial purchase discounts and estimated debt issuance costs, were $223.1 million and $222.8 million, respectively. Terms of the 2023 Notes and the 2025 Notes The holders of the Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances: •during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 for the 2023 Notes and September 30, 2020 for the 2025 Notes (and only during such calendar quarter), if the last reported sale price of our 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 of the respective Notes on each applicable trading day; •during the five business day period after any five consecutive trading day period (measurement period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day; •if we call any or all of the respective Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the respective redemption date; or •upon the occurrence of specified corporate events (as set forth in the Indenture). During the three months ended September 30, 2020, the conversion feature of the 2023 Notes was triggered as the last reported price of our common stock was more than or equal to 130% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, and therefore the 2023 Notes are currently convertible, in whole or in part, at the option of the holders between October 1, 2020 through December 31, 2020. Whether the 2023 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future. We had not received any conversion notices through the issuance date of our consolidated financial statements. Since we may elect to repay the 2023 Notes in cash, shares of our common stock, or a combination of both, we have continued to classify the 2023 Notes as long-term debt on our consolidated balance sheet as of September 30, 2020. As of September 30, 2020, the 2025 Notes are not convertible at the option of the holder. The following table presents details of the Notes (number of shares in millions):
| Initial Conversion Price per $1,000 Principal |  | Initial Conversion Price |  | Initial Number of Shares
2023 Notes | 24.0460 |  | $ | 41.59 |  |  | 5.5
2025 Notes | 16.3875 |  | $ | 61.02 |  |  | 3.8
The holders may convert the 2023 Notes and 2025 Notes at any time on or after February 1, 2023 and November 1, 2024, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture. If we undergo a fundamental change (as set forth in the Indentures) at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require us to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, in each case as described in the Indentures, we will increase the conversion rate for a holder of the Notes who elects to convert its Notes in connection with such a corporate event or during the related redemption period in certain circumstances. We may not redeem the 2023 Notes or 2025 Notes prior to August 6, 2021 and May 6, 2023 (Redemption Dates), respectively. On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2023 Notes or 2025 Notes, at our option, if the last reported sale price of our common stock has been 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 we provide the redemption notice at a redemption price equal to 100% principal amount of the 2023 Notes or 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The foregoing description is qualified in its entirety by reference to the text of the Indenture and the Form of the 2023 Notes, which were incorporated by reference as Exhibits 4.4 and 4.5 to our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020. In addition, the foregoing description of the 2025 Notes is qualified in its entirety by reference to the text of the Indenture and the Form of the 2025 Notes, which were filed with the SEC as Exhibit 4.1 to our Current Report on Form 8-K on May 4, 2020. Accounting for the 2023 Notes and the 2025 Notes In accounting for the transactions, the 2023 Notes and the 2025 Notes have been separated into liability and equity components. The initial carrying amounts of the liability components were calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The initial carrying amounts of the equity components representing the Conversion Option was $53.8 million and $48.3 million for the 2023 Notes and the 2025 Notes, respectively, and were determined by deducting the fair values of the liability components from the par value of the 2023 Notes and 2025 Notes. The equity components were recorded as an increase to additional paid-in capital and are not remeasured as long as they continue to meet the conditions for equity classification. The excess of the principal amount of the 2023 Notes and the 2025 Notes over their respective carrying amount of the liability component, or debt discount, are amortized to interest expense using the effective interest method over the contractual terms of the respective Notes. In accounting for the debt issuance costs of $6.9 million and $7.2 million related to the 2023 Notes and the 2025 Notes, respectively, we allocated the total amount incurred to the liability and equity components of the 2023 Notes and 2025 Notes based on their relative values. Issuance costs attributable to the liability component were $5.3 million and $5.7 million, for the 2023 Notes and the 2025 Notes, respectively, and will be amortized to interest expense using the effective interest method over the contractual term of the 2023 Notes and 2025 Notes, respectively. Issuance costs attributable to the equity component of $1.6 million and $1.5 million for the 2023 Notes and the 2025 Notes, respectively, were netted with the equity component in additional paid-in capital. The effective interest rates for the 2023 Notes and the 2025 Notes were 7.36% and 7.85%, respectively. The net carrying amounts of the liability components of the 2023 Notes and the 2025 Notes were as follows (in thousands):
|  | As of September 30, 2020 |  | As of December 31, 2019
|  | 2023 Notes |  | 2025 Notes |  | Total |  | 2023 Notes
Principal |  | $ | 230,000 |  |  | $ | 230,000 |  |  | $ | 460,000 |  |  | $ | 230,000 |
Unamortized debt discount |  | (33,101) |  |  | (45,012) |  |  | (78,113) |  |  | (40,768) |
Unamortized issuance costs |  | (3,274) |  |  | (5,295) |  |  | (8,569) |  |  | (4,032) |
Net carrying amount |  | $ | 193,625 |  |  | $ | 179,693 |  |  | $ | 373,318 |  |  | $ | 185,200 |
The net carrying amount of the equity component as of September 30, 2020 and December 31, 2019 (for the 2023 Notes only) was as follows (in thousands):
|  | 2023 Notes |  | 2025 Notes |  | Total
Debt discount for conversion option |  | $ | 53,820 |  |  | $ | 48,346 |  |  | $ | 102,166 |
Issuance costs |  | (1,626) |  |  | (1,514) |  |  | (3,140) |
Net carrying amount |  | $ | 52,194 |  |  | $ | 46,832 |  |  | $ | 99,026 |
Interest expense related to the 2023 Notes and the 2025 Notes was as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
| 2023 |  | 2025 |  |  |  | 2023 |  | 2025 |  |  |  | 2023 |  | 2025 |  |  |  | 2023 |  | 2025 |  |
| Notes |  | Notes |  | Total |  | Notes |  | Notes |  | Total |  | Notes |  | Notes |  | Total |  | Notes |  | Notes |  | Total
Contractual interest expense | $ | 718 |  |  | $ | 1,293 |  |  | $ | 2,011 |  |  | $ | 719 |  |  | $ | — |  |  | $ | 719 |  |  | $ | 2,156 |  |  | $ | 2,156 |  |  | $ | 4,312 |  |  | $ | 2,156 |  |  | $ | — |  |  | $ | 2,156 |
Amortization of debt discount | 2,627 |  |  | 2,041 |  |  | 4,668 |  |  | 2,437 |  |  | — |  |  | 2,437 |  |  | 7,666 |  |  | 3,334 |  |  | 11,000 |  |  | 7,082 |  |  | — |  |  | 7,082 |
Amortization of issuance costs | 260 |  |  | 241 |  |  | 501 |  |  | 242 |  |  | — |  |  | 242 |  |  | 758 |  |  | 393 |  |  | 1,151 |  |  | 701 |  |  | — |  |  | 701 |
Total interest expense | $ | 3,605 |  |  | $ | 3,575 |  |  | $ | 7,180 |  |  | $ | 3,398 |  |  | $ | — |  |  | $ | 3,398 |  |  | $ | 10,580 |  |  | $ | 5,883 |  |  | $ | 16,463 |  |  | $ | 9,939 |  |  | $ | — |  |  | $ | 9,939 |
Capped Calls In connection with the offering of the 2023 Notes and the 2025 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the 2023 Capped Calls and 2025 Capped Calls). The initial strike prices for the 2023 Capped Calls and the 2025 Capped Calls are $41.59 and $61.02 per share, respectively, subject to certain adjustments, which correspond to the initial conversion price of the 2023 Notes and the 2025 Notes. The initial cap prices for the 2023 Capped Calls and the 2025 Capped Calls are $63.98 and $93.88 per share, respectively, subject to certain adjustments. The 2023 Capped Calls and the 2025 Capped Calls are expected to offset potential dilution to our common stock upon conversion of the respective 2023 Notes or the 2025 Notes, with such offset subject to a cap based on the cap price. The 2023 Capped Calls and the 2025 Capped Calls cover, subject to anti-dilution adjustments, approximately 5.5 million and 3.8 million shares of our common stock, respectively. For accounting purposes, the 2023 Capped Calls and the 2025 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes and the 2025 Notes. The 2023 Capped Calls and the 2025 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. Accordingly, the cost of $26.9 million and $27.3 million, respectively, for the 2023 Capped Calls and 2025 Capped Calls was recorded as a reduction to additional paid-in capital. The net impact to our stockholders' equity, included in additional paid-in capital, of the above components of the 2023 Notes and the 2025 Notes was as follows (in thousands):
|  | 2023 Notes |  | 2025 Notes
Conversion option |  | $ | 53,820 |  |  | $ | 48,346 |
Purchase of capped calls |  | (26,910) |  |  | (27,255) |
Issuance costs |  | (1,626) |  |  | (1,514) |
Total |  | $ | 25,284 |  |  | $ | 19,577 |
Credit Agreement On April 23, 2020, we entered into a Credit and Security Agreement (the Credit Agreement), with KeyBank National Association that provides for a $30.0 million revolving credit facility, with a letter of credit sublimit of $15.0 million and an accordion feature under which we can increase the credit facility to up to $70.0 million. We incurred fees of $0.4 million in connection with entering into the Credit Agreement. The fees are recorded in other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement. The commitment fee of 0.2% per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations. The Credit Agreement matures on April 23, 2023 and contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts. In May 2020, we utilized the accordion feature to increase the credit facility to $50.0 million. The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either the London Interbank Offered Rate (LIBOR) rate (subject to a 1.00% floor), plus an applicable margin equal to 2.50% per annum or the alternate base rate (subject to a floor), plus an applicable margin equal to 0% per annum. As of September 30, 2020, we did not have any outstanding borrowings under the Credit Agreement.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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