CONVERTIBLE NOTES AND CREDIT FACILITY

6 Months Ended

Jun. 30, 2020

Convertible Notes

On September 17, 2019, the Company issued $86.25 million aggregate principal amount of 3.750% Convertible Senior Notes due 2026 (the "Notes"), which included the exercise in full of an $11.25 million purchase option, to certain financial institutions as the initial purchasers of the Notes (the "Initial Purchasers"). The Company pays interest on the Notes semiannually in arrears at a rate of 3.750% per annum on March 15 and September 15 of each year. The Notes are senior unsecured obligations of the Company. The Notes were issued pursuant to an Indenture, dated September 17, 2019 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.

The net proceeds from the sale of the Notes were approximately $83.7 million after deducting the initial purchasers' discounts and the offering expenses payable by the Company. The Company used approximately $12.8 million of the net proceeds from the Notes to repay all outstanding indebtedness on its existing Credit Facility, and an additional $2.0 million to fully fund a cash collateralized letter of credit facility as required under the amendment to the Credit Agreement entered into in September 2019. The Company subsequently terminated the Credit Facility with JPMorgan Chase Bank, N.A. on December 31, 2019. The Company expects to use the remainder of the net proceeds from the sale of the Notes to fund its intended expansion efforts, including through acquisitions of complementary businesses or technologies or other strategic transactions, and for working capital and other general corporate purposes.

Refer to Note 16, Convertible Notes and Credit Facility, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company's 2019 Form 10-K for further information on the Notes.

During the three and six months ended June 30, 2020, the conditions allowing holders of the Notes to convert have not been met. The Notes were therefore not convertible during the three and six months ended June 30, 2020 and the liability component was classified as long-term debt on the Company's Condensed Consolidated Balance Sheet as of June 30, 2020.

The following table summarizes the net carrying amount of the liability component of the Notes (in thousands):


	June 30, 2020		December 31, 2019
Carrying amount of equity component	$	39,508	$	39,508

Principal amount of the Notes	86,250		86,250
Unamortized debt discount	(37,854)		(40,902)
Net carrying amount	$	48,396	$	45,348

Interest expense related to the Notes for the three and six months ended June 30, 2020 was $2.3 million and $4.7 million, respectively, which is comprised of the amortization of debt discount and debt issuance costs and the contractual coupon interest as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Interest expense related to contractual coupon interest	$	809	$	—	$	1,617	$	—
Interest expense related to amortization of the debt discount	1,524		—		3,049		—
	$	2,333	$	—	$	4,666	$	—

As of June 30, 2020, the remaining period over which the unamortized discount will be amortized is 74.5 months.

The estimated fair value of the Notes was $110.0 million and $116.0 million as of June 30, 2020 and December 31, 2019, respectively, determined through consideration of quoted market prices in less active markets. The fair value measurement is classified as Level 2 in the fair value hierarchy, which is defined in ASC 820 as inputs other than quoted prices in active markets that are either directly or indirectly observable. Based on our closing stock price of $93.17 on June 30, 2020, the if-converted value exceeded the aggregate principal amount of the Notes by $6.5 million.