Long-term Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt, Net

In March 2020, the Company issued $230.0 million in aggregate principal amount of its Convertible Notes in a private offering (the “Convertible Notes”). The Convertible Notes are governed by an indenture dated March 9, 2020 between the Company and U.S. Bank, National Association, as trustee. The Company received net proceeds from the offering of $222.6 million.

The Convertible Notes bear interest at a rate of 2.625% per year, payable semi-annually in arrears on March 1st and September 1st. The Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under, or if the Convertible Notes are not freely tradeable as required by, the indenture governing the Convertible Notes. Upon conversion, the Convertible Notes will be convertible into cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.

The Convertible Notes are general unsecured senior obligations and will mature on March 1, 2025, unless earlier repurchased, redeemed or converted, subject to satisfaction of certain conditions and during the periods described below. The initial conversion rate for the Convertible Notes is 20.9161 shares of common stock, par value $0.0001 per share, per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of approximately $47.81 per share). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that may occur prior to the maturity date or if the Company issues a notice of

redemption, the Company will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or in connection with such redemption, as the case may be, in certain circumstances.

The Company was not allowed to redeem the Convertible Notes prior to March 5, 2023, and no sinking fund is provided for the Convertible Notes. On or after March 5, 2023, the Company may redeem for cash all or any portion of the Convertible Notes, at its option, if the last reported sale price of the common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

The Convertible Notes do not contain any financial or operating covenants or any restrictions on the issuance of other indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes indenture contains customary events of default, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the Convertible Notes will automatically become due and payable. The debt issuance costs of $7.4 million are amortized to interest expense using the effective interest method over five years, the contractual term of the Convertible Notes, with an effective interest rate of 3.3%.

The Company monitors the provision of the Convertible Notes that allow for certain conversion rights at each quarterly reporting date in order to determine whether the Convertible Notes are convertible or subject to an event triggering potential redemption during the prescribed measurement periods. As of the date of this report, none of the outstanding convertible notes had been redeemed by the Company. Based on the closing price of our common stock of $4.05 on the last trading day of the quarter, the if-converted values of the Convertible Notes did not exceed the remaining principal balance as of June 30, 2023.

All future principal payments related to the Convertible Notes are due in March 2025. The outstanding balances of the Company’s Convertible Notes and previously outstanding term loan consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Outstanding principal of Convertible Notes	$	230,000	$	230,000
Less: unamortized issuance costs	(2,621)		(3,378)
Long-term debt, net	$	227,379	$	226,622

The following table sets forth total interest expense recognized related to the Convertible Notes (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Contractual interest expense	$	1,509	$	1,509	$	3,019	$	3,018
Amortization of issuance costs	378		366		757		733
Total interest expense	$	1,887	$	1,875	$	3,776	$	3,751