XML 33 R18.htm IDEA: XBRL DOCUMENT v3.22.0.1
Convertible Senior Notes
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Convertible Senior Notes Convertible Senior Notes
The following table presents details of our convertible senior notes, which are further discussed below (original principal in thousands):
Month Issued
Maturity Date (1)
Original Principal
Interest Rate per Annum
Effective Interest Rate for Liability Component
Conversion Rate for Each $1,000 Principal (2)
Initial Conversion Price per Share
2023 Notes
February 15, 2018
February 15, 2023
$230,000 0.75 %5.88 %$17.4292 $57.38 
2026 Notes
June 1, 2019
June 1, 2026
$316,250 0.75 %5.38 %$11.2851 $88.61 
2025 NotesNovember 15, 2020November 15, 2025$350,000 0.125 %5.00 %$7.1355 $140.14 
____________________________________________________________________________
(1) Unless earlier converted or repurchased in accordance with their terms prior to such date
(2) Subject to adjustment upon the occurrence of certain specified events

As further defined and described below, the 2023 Notes, 2026 Notes and the 2025 Notes are collectively referred to as the Notes.
In February 2018, the Company issued $230.0 million principal amount of convertible senior notes due in February 2023, or the 2023 Notes. Interest is payable semi-annually on February 15 and August 15 of each year, commencing on August 15, 2018. In November 2020, the Company exchanged $181.9 million in aggregate principal amount of the 2023 Notes for $210.7 million in aggregate principal of 2025 Notes and 1.3 million shares of common stock. The Company did not receive any cash proceeds from the exchange. In exchange for issuing 2025 Notes pursuant to the exchange transaction, the Company received and cancelled the exchanged 2023 Notes. As of the exchange date, the carrying value of the 2023 Notes, net of unamortized debt discount and issuance costs, was $42.9 million. The partial exchange of the 2023 Notes resulted in an $8.9 million loss on early debt extinguishment, of which $2.0 million consisted of unamortized debt issuance costs.
In May 2021, the Company repurchased $37.1 million in aggregate principal amount of the 2023 Notes for $63.7 million in cash. As of the repurchase date, the carrying value of the notes, net of unamortized debt discount and issuance costs, was $10.0 million. The partial repurchase of the 2023 Notes resulted in a $1.5 million loss on early debt extinguishment, of which $0.3 million consisted of unamortized debt issuance costs. The Company may repurchase additional 2023 Notes and/or its 2025 Notes and 2026 Notes from time to time through open market purchases, block trades, and/or privately negotiated transactions, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of the repurchases will be determined by the Company based on the capital needs of the business, market conditions, applicable legal requirements, and other factors.
In June 2019, the Company issued $316.3 million principal amount of convertible senior notes due in June 2026, or the 2026 Notes. Interest  is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2019.
In November 2020, the Company issued $350.0 million principal amount of convertible senior notes due in November 2025, or the 2025 Notes. This was achieved by exchanging $181.9 million principal amount of the 2023 Notes for $210.7 million principal amount of the 2025 Notes and issuing an additional $139.3 million of new notes. Interest is payable semi-annually on May 15 and November 15 of each year, commencing on May 15, 2021.
The Notes are the Company's senior unsecured obligations and rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, rank equally in right of payment with any of the Company's indebtedness that is not so subordinated, are effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally junior to all indebtedness and other liabilities (including trade payables) of the Company's current and future subsidiaries.
On or after June 5, 2023 or November 20, 2023 for the 2026 Notes and 2025 Notes, respectively, the Company may redeem for cash all or any portion of the 2026 or 2025 Notes, at the Company's option if the last reported sale price of the Company's common stock has been at least 130% of the conversion price in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading-day period. If the Company calls any or all of the 2026 or 2025 Notes for redemption, holders may convert all or any portion of their 2026 or 2025 Notes at any time prior to the close of business on the scheduled trading day prior to the redemption date, even if the 2026 or 2025 Notes are not otherwise convertible at such time. After that time, the right to convert such 2026 or 2025 Notes will expire, unless the Company defaults in the payment of the redemption price, in which case a holder of 2026 or 2025 Notes may convert all or any portion of its 2026 or 2025 Notes until the redemption price has been paid or duly provided for.
On or after November 15, 2022, March 1, 2026 or August 15, 2025 for the 2023 Notes, 2026 Notes and 2025 Notes, respectively, holders may convert all or any portion of their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the succeeding conditions described herein. Upon conversion, the Company will pay or deliver cash, shares of its common stock or a combination of cash and shares of its common stock, at its election, as described in the indenture governing the Notes.
Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding November 15, 2022, March 1, 2026 or August 15, 2025 for the 2023 Notes, 2026 Notes and 2025 Notes, respectively, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on June 30, 2018, September 30, 2019 or March 30, 2021 (and only during such calendar quarter), for the 2023 Notes, 2026 Notes and 2025 Notes, respectively, if the last reported sale price of the 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 on each applicable trading day;
•during the five consecutive business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or
•upon the occurrence of specified corporate events.
If a fundamental change (as defined in the relevant indenture governing each of the Notes) occurs prior to the maturity date, holders of each of the Notes may require the Company to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount of the Notes, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
For more than 20 trading days during the 30 consecutive trading days ended December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021, the last reported sale price of the Company's common stock exceeded 130% of the conversion price of the 2023 Notes. As a result, the 2023 Notes became convertible at the option of the holders on January 1, 2021 and will remain convertible through March 31, 2022. Of the initial 2023 Notes outstanding, 22 notes, with a principal amount of $1,000 each, have been converted since original issuance of the 2023 Notes through the date of this filing. As of December 31, 2021, the 2026 Notes and 2025 Notes were not convertible.
In accordance with accounting guidance for cash conversion features, the Company valued the liability component for the Notes at the estimated fair value, as of the date of issuance, of a similar debt without the conversion feature. The liability component of the Notes is recorded in long-term debt, and the interest payable is recorded in accrued liabilities on the consolidated balance sheets as of December 31, 2021. The Company recorded the difference between the initial proceeds of the convertible debt and the fair value of the conversion feature, and the difference was allocated to additional paid-in capital on the consolidated balance sheet as the carrying amount of the equity component.
In accounting for the transaction costs for the Notes, the Company allocated the costs incurred to the liability and equity components in proportion to the allocation of the proceeds from issuance to the liability and equity components. Issuance costs attributable to the liability component are being amortized to expense over the expected life of the Notes using the effective interest method. The liability issuance costs originally totaled $5.3 million, $6.4 million and $5.4 million for the 2023 Notes, 2026 Notes, and 2025 Notes, respectively. Issuance costs attributable to the equity component related to the conversion feature were netted with the equity component. The equity issuance costs originally totaled $1.5 million, $2.9 million and $1.5 million for the 2023 Notes, 2026 Notes and 2025 Notes, respectively.
The 2023 Notes, 2026 Notes and 2025 Notes consist of the following:
As of December 31, 2021As of December 31, 2020
2023 Notes2026 Notes2025 Notes2023 Notes2026 Notes2025 Notes
Liability component:
Principal$10,908 $316,250 $350,000 $48,035 $316,250 $350,000 
Unamortized debt discount(634)(56,918)(59,436)(4,915)(67,977)(73,075)
Unamortized debt issuance costs(64)(4,276)(4,232)(501)(5,114)(5,235)
Net carrying amount10,210 255,056 286,332 42,619 243,159 271,690 
Equity component:
Net carrying amount$2,321 $81,550 $73,109 $10,217 $81,550 $73,097 
The following table sets forth total interest expense recognized related to the 2023 Notes, 2026 Notes and 2025 Notes:
As of December 31, 2021As of December 31, 2020As of December 31, 2019
2023 Notes2026 Notes2025 Notes2023 Notes2026 Notes2025 Notes2023 Notes2026 Notes2025 Notes
Contractual interest expense$192 $2,372 $436 $1,566 $2,365 $51 $1,725 $593 $— 
Amortization of debt issuance costs215 852 971 999 821 157 1,001 466 — 
Amortization of debt discount 1,218 11,026 13,580 9,080 10,696 1,541 9,414 5,740 — 
Total$1,625 $14,250 $14,987 $11,645 $13,882 $1,749 $12,140 $6,799 $— 
As of December 31, 2021, the remaining period over which the debt discount and debt issuance costs will be amortized for the 2023 Notes, 2026 Notes, and 2025 Notes was 1.1 years, 4.4 years, and 3.9 years, respectively.
As of December 31, 2021 and 2020, the if-converted values of the 2023 Notes exceeded the principal amount by $4.2 million and $57.9 million, respectively. As of December 31, 2021, the if-converted value of the 2026 Notes did not exceed the principal amount and as of December 31, 2020, the if-converted value exceeded the principal amount by $135.3 million, respectively. These if-converted values were determined based on the closing price of the Company's stock of $79.44 and $126.53 on December 31, 2021 and 2020, respectively.
Bond Hedges and Warrants Transactions
Concurrent with the February 2018 convertible note offering, the Company entered into separate convertible notes bond hedges, or Bond Hedges, and Warrants transactions. The Bond Hedges are generally expected to reduce potential dilution to the Company's common stock upon conversion of the 2023 Notes. The Bond Hedges are call options that give the Company the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2023 Notes, approximately 0.9 million shares of its common stock for $57.38 per share, exercisable upon conversion of the 2023 Notes and expires in February 2023. The total cost of the Bond Hedges transactions was $41.7 million.
In November 2020, and in connection with the partial exchange of the 2023 Notes, the Company terminated Bond Hedges corresponding to approximately 0.7 million shares for cash proceeds of $171.7 million. In May 2021, and in connection with the partial repurchase of the 2023 Notes, the Company terminated Bond Hedges corresponding to approximately 0.1 million shares for cash proceeds of $26.3 million. The proceeds were recorded as an increase to additional paid-in capital in the consolidated balance sheets. As of December 31, 2021, there remained outstanding Bond Hedges giving the Company the option to repurchase approximately 0.1 million shares.
Under the February 2018 Warrant transactions, the Company issued warrants to acquire, subject to anti-dilution adjustments, up to approximately 4.0 million shares over 80 scheduled trading days beginning on May 15, 2023 at an exercise price of $78.75 per share. If the Warrants are not exercised on their exercise dates, they will expire. Pursuant to the Warrants, if the average market value per share of the Company's common stock for the reporting period, as measured under the Warrants, exceeds the exercise price of the Warrants of $78.75, the Warrants will have a dilutive effect on the Company's earnings per share, assuming the Company is profitable. The Company received $22.4 million in cash proceeds from the sale of the Warrants.
In November 2020, and in connection with the partial exchange of the 2023 Notes, the Company terminated Warrants corresponding to approximately 3.2 million shares for total cash payments of $137.5 million. In May 2021, and in connection with the partial repurchase of the 2023 Notes, the Company terminated Warrants corresponding to approximately 0.6 million shares for total cash payments of $19.7 million. The termination payment was recorded as a decrease to additional paid-in capital in the consolidated balance sheets. As of December 31, 2021, there remained outstanding Warrants to acquire up to approximately 0.2 million shares.
The Bond Hedges and the Warrants are separate transactions, in each case, entered into by the Company with counterparties, and are not part of the terms of the 2023 Notes and will not affect any holders' rights under the 2023 Notes. The holders of the 2023 Notes will not have any rights with respect to the Bond Hedges or Warrants transactions. The Bond Hedges and Warrants do not meet the criteria for derivative accounting as they are indexed to the Company's stock. The amounts paid for the Bond Hedges and the proceeds received from the sale of the Warrants have been included as a net reduction to additional paid-in capital.
Capped Call Transactions
In connection with the issuance of the 2026 Notes and 2025 Notes, the Company entered into two separate capped call transactions with one or more counterparties, or the Capped Calls. The Capped Calls each have an initial strike price of $88.6124 and $140.1443 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Notes and 2025 Notes, respectively. The Capped Calls have initial cap prices of $139.00 and $211.54 per share corresponding to the 2026 Notes and 2025 Notes, respectively. The Capped Calls are expected to offset the potential dilution to the common stock upon any conversion of the 2026 Notes or 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the 2026 Notes or 2025 Notes in the event the market price per share of common stock is greater than the strike price of the Capped Call, with such offset subject to a cap. If, however, the market price per share of the common stock exceeds the cap price of the Capped Calls, there would be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that the then-market price per share of the common stock exceeds the cap price. As the Capped Calls are considered indexed to the Company's stock and are considered equity classified, they are recorded in stockholders' equity on the consolidated balance sheet and are not accounted for as derivatives. The cost of $40.8 million and $39.8 million incurred in connection with the 2026 Note Capped Calls and 2025 Note Capped Calls, respectively, was recorded as a reduction to additional paid-in capital.