Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.21.2
Debt
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Debt Debt
 
The Company’s outstanding debt obligations as of September 30, 2021 and December 31, 2020 were as follows: 
  September 30, December 31,
  2021 2020
(in thousands)
Revolving credit facility balance $ —  $ — 
Convertible Notes due 2023 $ 345,000  $ 345,000 
Unamortized issuance costs on Convertible Notes due 2023 (3,491) (4,306)
Unaccreted discount on Convertible Notes due 2023 —  (24,058)
Convertible Notes due 2023 carrying value $ 341,509  $ 316,636 
Convertible Notes due 2025 $ 517,500  $ 517,500 
Unamortized issuance costs on Convertible Notes due 2025 (11,376) (11,731)
Unaccreted discount on Convertible Notes due 2025 —  (65,902)
Convertible Notes due 2025 carrying value $ 506,124  $ 439,867 

Amended Credit Agreement

At September 30, 2021, the Company was not in compliance with a covenant in its revolving credit agreement (the “Amended Credit Agreement”) that limits the Company's ability to make investments in an aggregate amount not to exceed $25.0 million, unless specifically identified in the Amended Credit Agreement. The banks have waived this non-compliance. Furthermore, on October 29, 2021, the banks and the Company entered into a Third Amendment to the Amended Credit Agreement whereby the investment threshold was increased from $25.0 million to $50.0 million. The Company was in compliance with all other covenants in the Amended Credit Agreement as of September 30, 2021.

As of September 30, 2021, the Company had all $500.0 million available to borrow under the revolving credit facility, subject to covenant compliance.
Convertible Notes due 2023

Upon adoption of ASU 2020-06, effective January 1, 2021, the embedded conversion option, or equity component, is no longer separated from the host contract and recognized within additional paid-in capital and is instead now accounted for as a single liability measured at amortized cost within Long-term debt in the condensed consolidated balance sheets. Accordingly, as of September 30, 2021, the Convertible Notes due 2023 are presented at their gross proceeds of $345.0 million less unamortized debt issuance costs of $3.5 million with no future accretion of the original issue discount necessary.

In connection with the issuance of the Convertible Notes due 2023, the Company incurred $10.0 million of issuance costs in 2018, of which $8.6 million was originally allocated to the debt component and presented net in Long-term debt and $1.4 million was originally allocated to the equity component and presented within additional paid-in capital in the condensed consolidated balance sheets. Upon adoption of ASU 2020-06, effective January 1, 2021, the costs originally allocated to the equity component are reflected within Long-term debt and are being amortized and recorded as additional interest expense over the life of the Convertible Notes due 2023.

The effective interest rate of the Convertible Notes due 2023 was approximately 2.4% for the three and nine months ended September 30, 2021. The effective interest rate of the Convertible Notes due 2023 was approximately 6% for the three and nine months ended September 30, 2020. The effective interest rate of the Convertible Notes due 2023 is equal to the stated interest rate plus the amortization of the debt issuance costs subsequent to adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, the effective interest rate calculation also included the amortization of the original issue discount.

Convertible Notes due 2025

Upon adoption of ASU 2020-06, effective January 1, 2021, the embedded conversion option, or equity component, is no longer separated from the host contract and recognized within additional paid-in capital and is instead now accounted for as a single liability measured at amortized cost within Long-term debt in the condensed consolidated balance sheets. Accordingly, as of September 30, 2021, the Convertible Notes due 2025 are presented at their gross proceeds of $517.5 million less unamortized debt issuance costs of $11.4 million with no future accretion of the original issue discount necessary.

In connection with the issuance of the Convertible Notes due 2025, the Company incurred a total of $14.5 million of issuance costs in 2020, of which $12.6 million was originally allocated to the debt component and presented net in Long-term debt and $1.9 million was originally allocated to the equity component and presented within additional paid-in capital in the condensed consolidated balance sheets. Upon adoption of ASU 2020-06, effective January 1, 2021, the costs originally allocated to the equity component are reflected within Long-term debt and are being amortized and recorded as additional interest expense over the life of the Convertible Notes due 2025.

The effective interest rate of the Convertible Notes due 2025 was approximately 1.3% for the three and nine months ended September 30, 2021. The effective interest rate of the Convertible Notes due 2025 was approximately 4.0% for the three months ended September 30, 2020. The effective interest rate of the Convertible Notes due 2025 was equal to the stated interest rate plus the amortization of the debt issuance costs subsequent to adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, the effective interest rate calculation also included the amortization of the original issue discount.

See “Note 14—Net Income (Loss) Per Share” for further discussion of the effect of conversion on net income per share.
Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2021 2020 2021 2020
(in thousands)
Coupon interest $ 2,479  $ 1,951  $ 7,439  $ 4,962 
Amortization of issuance costs 1,443  922  4,295  2,186 
Undrawn and other fees 320  191  948  477 
Interest on revolving credit facility —  1,259  —  5,786 
Accretion of debt discount —  3,816  —  8,496 
 Total interest expense $ 4,242  $ 8,139  $ 12,682  $ 21,907 

For the three and nine months ended September 30, 2021, total interest expense related to the Convertible Notes due 2023 and the Convertible Notes due 2025 (collectively, the "Convertible Notes") was $3.7 million and $11.1 million, respectively, with coupon interest expense of $2.5 million and $7.4 million and the amortization of debt discount and issuance costs of $1.2 million and $3.7 million, respectively.

For the three and nine months ended September 30, 2020, total interest expense related to the Convertible Notes was $6.5 million and $15.0 million, respectively, with coupon interest expense of $2.0 million and $5.0 million and the amortization of debt discount and issuance costs of $4.5 million and $10.0 million, respectively.