Convertible Senior Notes

3 Months Ended

Mar. 31, 2024

Outstanding Convertible Senior Notes

As of March 31, 2024, the Company had three series of convertible senior notes outstanding. The issuances of such notes originally consisted of (i) $1.0 billion aggregate principal amount of 1.25% convertible senior notes due 2027 (the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $975.9 million after deducting offering costs of approximately $24.1 million, (ii) $287.5 million aggregate principal amount of 1.375% convertible senior notes due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $279.1 million after deducting offering costs of approximately $8.4 million, and (iii) $550.0 million aggregate principal amount of 0.875% convertible senior notes due 2025 that were issued by Livongo Health, Inc. (“Livongo”) on June 4, 2020 for which the Company agreed to assume all of Livongo’s rights and obligations (the “Livongo Notes;” and together with the 2027 Notes and the 2025 Notes, the “Notes”).

The following table presents certain terms of the Notes that were outstanding as of March 31, 2024:


	2027 Notes			2025 Notes			Livongo Notes
Principal Amount Outstanding as of March 31, 2024 (in millions)	$	1,000.0		$	0.7		$	550.0
Interest Rate Per Year	1.25		%	1.375		%	0.875		%
Fair Value as of March 31, 2024 (in millions) (1)	$	843.0		$	0.2		$	519.8
Fair Value as of December 31, 2023 (in millions) (1)	$	822.0		$	0.3		$	513.7
Maturity Date	June 1, 2027			May 15, 2025			June 1, 2025
Optional Redemption Date	June 5, 2024			May 22, 2022			June 5, 2023
Conversion Date	December 1, 2026			November 15, 2024			March 1, 2025
Conversion Rate Per $1,000 Principal Amount as of March 31, 2024	4.1258			18.6621			13.9400
Remaining Contractual Life as of March 31, 2024	3.2 years			1.1 years			1.2 years

(1)The Company estimates the fair value of its Notes utilizing market quotations for debt that have quoted prices in active markets. Since the Notes do not trade on a daily basis in an active market, the fair value estimates

are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities. The Notes would be classified as Level 2 within the fair value hierarchy, as defined in Note 2. “Basis of Presentation and Principles of Consolidation.”

All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s liabilities that are not so subordinated; 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 structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.

Holders may convert all or any portion of their Notes in integral multiples of $1,000 principal amount, at their option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date only under the following circumstances:

•during any quarter (and only during such quarter), if the last reported sale price of the shares of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price for the applicable Notes on each applicable trading day;

•during the five business day period after any 10 consecutive trading day period (or five consecutive trading day period in the case of the Livongo Notes) in which the trading price was less than 98% of the product of the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on each such trading day;

•upon the occurrence of specified corporate events described under the applicable indenture; or

•if the Company calls the applicable Notes for redemption, at any time until the close of business on the second business day immediately preceding the redemption date.

On or after the applicable conversion date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing circumstances.

The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable conversion rate shown in the table above. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of the Company’s common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 25 consecutive trading day observation period.

The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of 0.592 of a share of the Company’s common stock and $4.24 in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property, or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40 consecutive trading day observation period.

For each Note series, the Company may redeem for cash all or part of the Notes, at its option, on or after the applicable optional redemption date shown in the table above (and prior to the 41st scheduled trading day immediately preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will

be increased in certain circumstances as described in the applicable indenture. If the Company undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date of the Livongo Notes, holders will have the right, at their option, to require the Company to repurchase for cash all or any portion of their Livongo Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Livongo Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Company accounts for each Note series at amortized cost within the liability section of its Condensed Consolidated Balance Sheets. The Company has reserved an aggregate of 8.7 million shares of common stock for the Notes.

The net carrying values of the Notes consisted of the following (in thousands):


	As of March 31, 2024		As of December 31, 2023
2027 Notes
Principal	$	1,000,000	$	1,000,000
Less: Debt discount, net (1)	(11,175)		(12,033)
Net carrying amount	988,825		987,967

2025 Notes
Principal	725		725
Less: Debt discount, net (1)	(4)		(4)
Net carrying amount	721		721

Livongo Notes
Principal	550,000		550,000
Less: Debt discount, net (1)	—		—
Net carrying amount	550,000		550,000

Total net carrying amount	$	1,539,546	$	1,538,688

(1)Included in the accompanying Condensed Consolidated Balance Sheets within convertible senior notes and amortized to interest expense over the expected life of the Notes using the effective interest rate method.

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


	Three Months Ended March 31,
2027 Notes	2024			2023
Contractual interest expense	$	3,125		$	3,125
Amortization of debt discount	858			844
Total	$	3,983		$	3,969
Effective interest rate	1.6		%	1.6		%

	Three Months Ended March 31,
2025 Notes	2024			2023
Contractual interest expense	$	2		$	2
Amortization of debt discount	1			1
Total	$	3		$	3
Effective interest rate	1.8		%	1.6		%

	Three Months Ended March 31,
Livongo Notes	2024			2023
Contractual interest expense	$	1,203		$	1,203
Amortization of debt discount	—			—
Total	$	1,203		$	1,203
Effective interest rate	0.9		%	1.3		%