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Unsecured Convertible Senior Notes | 6 Months Ended
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Jun. 30, 2021
Unsecured Convertible Senior Notes |
Unsecured Convertible Senior Notes | Note 7—Unsecured Convertible Senior Notes On January 1, 2021, we adopted ASU 2020-06 on a modified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for our outstanding convertible senior notes. Consequently, we now account for our convertible senior notes wholly as debt. Adoption of ASU 2020-06 resulted in a cumulative effect adjustment of $75.5 million to restore our unsecured convertible notes and additional paid-in capital to the balances without an equity allocation component. The carrying value of the notes are reflective of their face value less unamortized debt issuance costs. Subsequent to the adoption date, interest expense is reduced as a result of accounting for the unsecured convertible notes wholly as a liability measured at amortized cost. ​ Unsecured convertible senior notes outstanding at June 30, 2021 and December 31, 2020 are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Balance as of June 30, 2021
​ |  | 2023 Notes |  | 2026 Notes |  | Total
​ | ​ | (In thousands)
Principal amount | ​ | $ | 95,000 | ​ | $ | 225,030 | ​ | $ | 320,030
Unamortized debt issuance costs | ​ |  | (1,596) | ​ |  | (5,849) | ​ |  | (7,445)
Total unsecured convertible senior notes, net | ​ | $ | 93,404 | ​ | $ | 219,181 | ​ | $ | 312,585
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of outstanding unsecured convertible senior notes (1) | ​ | $ | 104,856 | ​ | $ | 251,192 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount | ​ | $ | 9,856 | ​ | $ | 26,162 | ​ | ​ | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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 unsecured convertible senior notes, net | ​ | $ | 76,418 | ​ | $ | 159,870 | ​ | $ | 236,288
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of outstanding unsecured convertible senior notes (1) | ​ | $ | 101,769 | ​ | $ | 246,779 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount | ​ | $ | 6,769 | ​ | $ | 21,749 | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equity component | ​ | $ | 25,854 | ​ | $ | 63,544 | ​ | ​ | ​
Unamortized issuance costs | ​ |  | (837) | ​ |  | (1,916) | ​ | ​ | ​
Net carrying amount of equity component (2) | ​ | $ | 25,017 | ​ | $ | 61,628 | ​ | ​ | ​
(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 Condensed Consolidated Balance Sheet within additional paid-in capital at December 31, 2020. With adoption of ASU 2020-06 on January 1, 2021, amounts were reclassified to unsecured convertible senior notes, net.
2023 Unsecured Convertible Senior Notes On November 15, 2018, we issued $210.0 million in aggregate principal amount of our 6.25% convertible senior notes due 2023 (the “2023 Notes”). The 2023 Notes 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. On August 14, 2020, we issued the 5.25% convertible senior notes due 2026 (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 Unsecured Convertible Senior Notes” below). 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 the conversion of the 2023 Notes, we entered into a capped call transaction (the “2023 Capped Call”), which covers the number of shares of our common stock underlying the 2023 Notes when our common stock share price is trading between the initial conversion price of $19.22 and $28.84. In connection with the partial repurchase of the 2023 Notes, we entered into a capped call termination contract to unwind a proportionate amount of the 2023 Capped Call. As of June 30, 2021, 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: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended June 30, | ​ | Six Months Ended June 30, | ​
​ | ​ | 2021 |  | 2020 |  | 2021 |  | 2020 |
​ | ​ | (In thousands) | ​ | (In thousands)
Contractual interest expense | ​ | $ | 1,484 | ​ | $ | 3,281 | ​ | $ | 2,969 | ​ | $ | 6,563 | ​
Amortization of debt issuance costs | ​ |  | 153 | ​ |  | 209 | ​ |  | 303 | ​ |  | 411 | ​
Amortization of debt discount | ​ |  | - | ​ |  | 2,417 | ​ |  | — | ​ |  | 4,748 | ​
Total | ​ | $ | 1,637 | ​ | $ | 5,907 | ​ | $ | 3,272 | ​ | $ | 11,722 | ​
​ 2026 Unsecured Convertible Senior Notes 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 of common stock 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. 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.
At our sole discretion, we may elect to convert the 2026 Notes into cash, shares of our common stock or a combination thereof at maturity. Subject to the satisfaction of certain conditions, beginning August 15, 2023, we may redeem in whole or in part the 2026 Notes at our option at a cash redemption price equal to the principal amount of the 2026 Notes plus any accrued and unpaid interest. To reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions (the “2026 Capped Calls”). The 2026 Capped Calls will cover the number of shares of our common stock underlying the 2026 Notes when our common stock share price is trading between the initial conversion price of $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 a dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. The following table sets forth interest expense recognized related to the 2026 Notes: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ | ​ | 2021 | ​ | 2020 | ​ | 2021 | ​ | 2020
​ | ​ | (In thousands) | ​ | (In thousands)
Contractual interest expense | ​ | $ | 2,954 | ​ | $ | — | ​ | $ | 5,907 | ​ | $ | —
Amortization of debt issuance costs | ​ | ​ | 273 | ​ | ​ | — | ​ |  | 519 | ​ |  | —
Total | ​ | $ | 3,227 | ​ | $ | — | ​ | $ | 6,426 | ​ | $ | —
​ ​ Future minimum payments for the 2023 and 2026 Notes as of June 30, 2021 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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