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Unsecured Convertible Senior Notes | 12 Months Ended
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Dec. 31, 2020
Unsecured Convertible Senior Notes |
Unsecured Convertible Senior Notes | Note 8—Unsecured Convertible Senior Notes In November 2018, we issued $210.0 million in aggregate principal amount on our 2023 Notes, and in August and September 2020, we issued an aggregate principal amount of $225.0 million on our 2026 Notes. We used a portion of the proceeds from the 2026 Notes to repurchase $115.0 million principal amount of the 2023 Notes and terminate a corresponding portion of the related capped call. Unsecured convertible senior notes outstanding at December 31, 2020 and 2019, respectively, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Balance as of December 31, 2020
​ |  | 2023 Notes |  | 2026 Notes |  | Total
​ | ​ | (In thousands)
Principal amount | ​ | $ | 95,000 | ​ | $ | 225,030 | ​ | $ | 320,030
Unamortized discount | ​ |  | (17,101) | ​ |  | (60,544) | ​ |  | (77,645)
Unamortized issuance costs attributable to liability component | ​ |  | (1,481) | ​ |  | (4,616) | ​ |  | (6,097)
Total Convertible Senior Notes, net | ​ | $ | 76,418 | ​ | $ | 159,870 | ​ | $ | 236,288
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of outstanding Convertible Senior Notes (1) | ​ | $ | 101,769 | ​ | $ | 246,779 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amount by which the Convertible Senior Notes if-converted value exceeds their principal amount | ​ | $ | 6,769 | ​ | $ | 21,749 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity component | ​ | $ | 25,854 | ​ | $ | 63,544 | ​ | ​ | ​
Issuance costs | ​ |  | (837) | ​ |  | (1,916) | ​ | ​ | ​
Net carrying amount of equity component (2) | ​ | $ | 25,017 | ​ | $ | 61,628 | ​ | ​ | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Balance as of | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2019 | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 Notes |  | ​ | ​ |  | ​ | ​
​ | ​ | (In thousands) | ​ | ​ | ​ | ​ | ​ | ​
Principal amount | ​ | $ | 210,000 | ​ | ​ | ​ | ​ | ​ | ​
Unamortized discount | ​ |  | (47,660) | ​ | ​ | ​ | ​ | ​ | ​
Unamortized issuance costs attributable to liability component | ​ |  | (4,127) | ​ | ​ | ​ | ​ | ​ | ​
Total Convertible Senior Notes, net | ​ | $ | 158,213 | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of outstanding Convertible Senior Notes (1) | ​ | $ | 208,163 | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amount by which the Convertible Senior Notes if-converted value exceeds their principal amount | ​ | $ | — | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity component | ​ | $ | 57,152 | ​ | ​ | ​ | ​ | ​ | ​
Issuance costs | ​ |  | (1,851) | ​ | ​ | ​ | ​ | ​ | ​
Net carrying amount of equity component (2) | ​ | $ | 55,301 | ​ | ​ | ​ | ​ | ​ | ​
(1) | The fair value is classified as Level 3 due to the limited trading activity for the unsecured convertible senior notes.
(2) | Included in the consolidated balance sheet within additional paid-in capital.
2023 Convertible Senior Notes In November 2018, we issued $210.0 million in aggregate principal amount on our 2023 Notes. The 2023 Notes are unsecured and accrue interest at an annual rate of 6.25% per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The 2023 Notes mature on November 15, 2023 unless earlier purchased, redeemed or converted in accordance with their terms. We received net proceeds of $24.0 million as summarized below: ​
​ | ​ | ​ | ​
​ |  | (In thousands)
2023 Notes principal amount issued | ​ | $ | 210,000
Repayment of previously outstanding note payable (see "Note 7--Debt") | ​ |  | (146,046)
Purchase of 2023 Capped Call | ​ |  | (33,180)
Issuance costs | ​ |  | (6,800)
Net proceeds available for corporate use | ​ | $ | 23,974
​ The 2023 Notes are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. The initial conversion rate is 52.0183 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $19.22 per share of common stock), subject to adjustment in certain circumstances. To reduce the dilutive impact or potential cash expenditure associated with conversion of the 2023 Notes, we entered into a capped call transaction (the 2023 Capped Call), which essentially covers the number of shares of our common stock underlying the 2023 Notes when our common stock is trading between the initial conversion price of $19.22 per share and $28.84 per share. However, should the market price of our common stock exceed the $28.84 cap, then the conversion of the 2023 Notes would have an additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. In August and September 2020, we issued the 2026 Notes and used approximately $125.6 million of the net proceeds to repurchase $115.0 million principal amount of the 2023 Notes (see “2026 Convertible Senior Notes” below). The settlement consideration was allocated between the repurchase of the liability and the equity component with the fair value of the liability component estimated to be $103.6 million based on the expected future cash flows associated with the $115.0 million principal amount discounted at a 9.9% effective interest rate. The remaining $22.0 million was accounted for as a repurchase of the equity component, reducing additional paid-in capital. As of the repurchase date of August 14, 2020, the carrying value of the repurchased 2023 Notes, net of unamortized debt discount and issuance costs, was $90.2 million. The difference between the $103.6 million fair value of the 2023 Notes repurchased and the carrying value of $90.2 million resulted in a $13.4 million loss on early extinguishment of debt. After giving effect to the repurchase, the total principal amount outstanding under the 2023 Notes as of August 14, 2020 was $95.0 million. In connection with the repurchase of $115.0 million in principal amount of the 2023 Notes, we terminated a proportionate amount of the related 2023 Capped Call for approximately 6.0 million underlying shares. Upon settlement, the Company received $7.5 million in cash and recorded a $0.8 million loss due to the change in fair value of the contract between signing and settlement dates. The proceeds were recorded as cash with a corresponding increase in additional paid-in capital, and the loss was recorded to other expense in the consolidated statements of operations and comprehensive loss. As of December 31, 2020, approximately 4.9 million shares remained outstanding on the 2023 Capped Call. The following table sets forth total interest expense recognized in connection with the 2023 Notes: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ |  | 2020 |  | 2019 |  | 2018
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contractual interest expense | ​ | $ | 10,410 | ​ | $ | 13,089 | ​ | $ | 1,677
Amortization of debt issuance costs | ​ |  | 669 | ​ |  | 8,496 | ​ |  | 996
Amortization of debt discount | ​ |  | 7,728 | ​ |  | 736 | ​ |  | 86
Total | ​ | $ | 18,807 | ​ | $ | 22,321 | ​ | $ | 2,759
​ ​ 2026 Convertible Senior Notes In August and September 2020, we issued $225.0 million aggregate principal amount on our 2026 Notes. The issuance of the 2026 Notes and use of proceeds are as follows: ​
​ | ​ | ​ | ​
​ |  | (In thousands)
2026 Notes principal amount issued | ​ | $ | 225,030
Repurchase of 2023 Notes | ​ |  | (125,638)
Purchase of 2026 Capped Call | ​ |  | (23,223)
Termination of the 2023 Capped Call contracts related to debt repurchased | ​ |  | 7,549
Issuance costs | ​ |  | (6,785)
Net proceeds available for corporate use | ​ | $ | 76,933
​ The 2026 Notes are unsecured and accrue interest at an annual rate of 5.25% per annum, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms. The initial conversion rate is 54.0906 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $18.4875 per share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances. The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026, the second scheduled trading day immediately before the stated maturity date of February 15, 2026. Additionally, holders may convert their 2026 Notes at their option at specified times prior to the maturity date only if:
| (1) | during any calendar quarter, beginning after September 30, 2020, that the last reported sale price per share of our common stock exceeds 130% of the conversion price of the 2026 Notes for each of 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;
| (2) | during the five consecutive business days immediately after any five-consecutive-trading-day period (such five-consecutive-trading-day period, the “measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
| (3) | there is an occurrence of one or more certain corporate events or distributions of our common stock; or
| (4) | we call the 2026 Notes for redemption.
We may elect, at our sole discretion, to convert the 2026 Notes into cash, shares of our common stock or a combination thereof. Subject to the satisfaction of certain conditions, we may redeem in whole or in part the 2026 Notes at our option beginning August 15, 2023 through the 50th scheduled trading day immediately before the maturity date at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. The 2026 Notes are subject to redemption only if certain requirements are satisfied, including that the last reported sale price per share of our common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice and (ii) the trading day immediately before the date we send such notice. In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions in connection with the issuances of the 2026 Notes (the 2026 Capped Call). The 2026 Capped Call will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2026 Notes, the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of approximately $18.49 and $26.10. However, should the market price of our common stock exceed the $26.10 cap, then the conversion of the 2026 Notes would have an additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. The 2026 Capped Call will expire on various dates over the 50-trading-day period ranging from December 2, 2025 to February 12, 2026, if not exercised earlier. The 2026 Capped Call is a separate transaction and not part of the terms of the 2026 Notes and was executed separately from the issuance of the 2026 Notes. The amount paid for the 2026 Capped Call was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheet. As of December 31, 2020, approximately 12.2 million shares remained outstanding under the 2026 Capped Call. We evaluated the accounting for the issuance of the 2026 Notes and concluded that the embedded conversion features meet the requirements for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet, and that the cash conversion guidance applies. Therefore, proceeds of $225.0 million are allocated first to the liability component based on the fair value of non-convertible debt with the residual proceeds allocated to the equity component for the conversion features. The Company allocated $6.8 million in issuance costs associated with the 2026 Notes to the liability and equity component in the same proportion as the $225.0 million in proceeds. Further, we concluded the 2026 Capped Call qualifies for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet. Consequently, the fair value of the 2026 Capped Call of $23.2 million is classified as equity, not accounted for as derivatives, and will not be subsequently remeasured. In accounting for the issuance of the 2026 Notes, we separated the 2026 Notes into liability and equity components, using an effective interest rate of 12.5% to determine the fair value of the liability component. The following table sets forth interest expense recognized related to the 2026 Notes: ​
​ | ​ | ​ | ​
​ |  | ​
​ | ​ | Year Ended
​ | ​ | December 31, 2020
​ | ​ | (In thousands)
Contractual interest expense | ​ | $ | 4,397
Amortization of debt issuance costs | ​ |  | 230
Amortization of debt discount | ​ |  | 3,022
Total | ​ | $ | 7,649
​ Future minimum payments for the 2023 and 2026 Notes as of December 31, 2020 are as follows: ​
​ | ​ | ​ | ​
​ |  | (In thousands)
2021 | ​ | $ | —
2022 |  | ​ | —
2023 |  | ​ | 95,000
2024 |  | ​ | —
2025 |  | ​ | —
2026 |  | ​ | 225,030
Total future minimum payments under the convertible senior notes |  | $ | 320,030
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