In December 2021, we issued in a private placement an aggregate principal amount of $345.0 million of 1.875% convertible senior notes due 2028, or 2028 Notes. The aggregate principal amount on the 2028 Notes sold reflects the full exercise by the initial purchasers of their option to purchase an additional $45.0 million in aggregate principal amount of the 2028 Notes. We received total proceeds, net of debt issuance and offering costs of $11.0 million, of $334.0 million from the offering. We used $46.8 million of the net proceeds to pay the costs of the capped call transactions described below.

The 2028 Notes are senior unsecured obligations and accrue interest at a rate of 1.875% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The 2028 Notes mature on December 15, 2028, unless converted, redeemed or repurchased in accordance with their terms prior to such date.

The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, on or after December 20, 2027 and prior to the 31st scheduled trading day immediately preceding the maturity date, at an initial conversion rate of 31.4985 shares of our common stock per $1,000 principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $31.75 per share of our common stock. The 2028 Notes are convertible at the option of the holders prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

We may redeem for cash all or any portion of the 2028 Notes, at our option, on or after December 20, 2027 and prior to the 31st scheduled trading day immediately preceding the maturity date, if the last reported sale price of our 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 the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If we elect to redeem fewer than all the outstanding notes, at least $100.0 million aggregate principal amount of notes must be outstanding and not subject to redemption as of, and after giving effect to,

delivery of the relevant notice of redemption. We have elected to irrevocably fix the settlement method to physical settlement in the indenture governing the 2028 Notes. No “sinking fund” is provided for the 2028 Notes, which means that we are not required to redeem or retire the 2028 Notes periodically.

If we undergo a fundamental change (as set forth in the indenture governing the 2028 Notes), noteholders may require us to repurchase for cash all or any portion of their 2028 Notes at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

As a result of adopting ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), we accounted for the 2028 Notes as a single liability. As of June 30, 2022, the 2028 Notes were recorded at the aggregate principal amount of $345.0 million less unamortized issuance costs of $10.2 million as a long-term liability on the consolidated balance sheets. The debt issuance costs are amortized to interest expense over the contractual term of the 2028 Notes at an effective interest rate of 2.37%.

The following table presents the components of interest expense related to 2028 Notes (in thousands):


	Three months ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stated coupon interest	$	1,617	$	—	$	3,234	$	—
Amortization of debt issuance cost		364		—		726		—
Total interest expense	$	1,981	$	—	$	3,960	$	—

As of June 30, 2022, the fair value of the 2028 Notes was $407.2 million. The fair value was estimated using a third-party valuation model based on observable inputs and is considered Level 2 in the fair value hierarchy.

In connection with the issuance of the 2028 Notes, we entered into capped call transactions with certain of the initial purchasers of the 2028 Notes and other financial institutions, totaling $46.8 million, which we refer to as the Capped Calls. The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock that initially underlie the 2028 Notes (or 10,866,983 shares of our common stock). The Capped Calls have an initial strike price and an initial cap price of $31.7475 per share and $49.80 per share, respectively, subject to certain adjustments. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments to the conversion price of the 2028 Notes. The Capped Calls are expected to offset the potential dilution to our common stock as a result of any conversion of the 2028 Notes, subject to a cap based on the cap price.

We considered the Capped Calls as separate financial instruments and not part of the 2028 Notes. We recorded the cost of the Capped Calls, totaling $46.8 million, as a reduction to additional paid-in capital for the year ended December 31, 2021.