Lines of Credit and Long-Term Debt

6 Months Ended

Jun. 30, 2022

Lines of Credit and Long-Term Debt

Lines of Credit and Long-Term Debt

11.      Lines of Credit and Long-Term Debt

(a)    Lines of Credit

On December 18, 2020, the Company and its subsidiaries entered into a Loan and Security Agreement (the “2020 Credit Facility”), with Western Alliance Bank (“WAB”). The 2020 Credit Facility provided for a $120,000 secured revolving credit facility, with a $1,000 sublimit for cash management services and letters of credit and foreign exchange transactions.

Amounts under the 2020 Credit Facility could be borrowed, repaid, and re-borrowed from time to time until the maturity date on May 16, 2025, and were permitted to be used for, among other things, working capital and other general corporate purposes. Loans under the 2020 Credit Facility bore interest at a rate equal to the LIBOR rate plus 3.25%. In the event LIBOR for any applicable interest period was less than zero percent, then the LIBOR rate would have been determined as zero percent for such interest period. If LIBOR ceased to exist or was no longer available, then the interest rate would have been replaced with an alternate base rate and spread. The obligations under the 2020 Credit Facility were secured by all of the assets of the borrowers, subject to certain exceptions and exclusions as set forth in the 2020 Credit Facility.

The 2020 Credit Facility contained certain affirmative and negative covenants that were binding on the Company, including, but not limited to, restrictions (subject to specified exceptions and qualifications) on the Company’s ability to incur indebtedness, create liens, merge or consolidate, make dispositions, pay dividends or make distributions, make investments, pay any subordinated indebtedness, enter into certain transactions with affiliates, or make capital expenditures. In addition, the 2020 Credit Facility imposed certain financial covenants, including that the Company (i) maintain unrestricted cash balances with WAB, plus amounts available for draw under the 2020 Credit Facility of at least $10,000 at all times, and (ii) maintain a leverage ratio of less than 3.00:1.00, on a trailing twelve-month basis, measured quarterly. The 2020 Credit Facility defined amounts available for borrowing as three times the Company’s trailing twelve months EBITDA (as defined therein) less amounts outstanding under the 2020 Credit Facility.

The 2020 Credit Facility was subject to a commitment fee of 0.50% of the total commitment amount payable on the closing date, and 0.25% of the total commitment amount payable on each anniversary thereafter. Additionally, the 2020 Credit Facility was subject to an unused line fee.

As of June 30, 2022, the Company had $57,200 outstanding under the 2020 Credit Facility, plus an outstanding letter of credit of $100 issued in connection with the Company’s lease agreement for its office space in Moorestown, New Jersey. The letter of credit renewed annually until its expiration in September 2027, and reduced amounts available under the 2020 Credit Facility. As discussed in Note 18, on August 1, 2022, the Company entered into payoff letter with WAB pursuant to which the Company voluntarily elected to pay all amounts outstanding under the 2020 Credit Facility and terminated the 2020 Credit Facility and all related loan documents.

As of June 30, 2022, the interest rate on the 2020 Credit Facility was 4.37% and the effective rate for the unused line fee was 0.35%. Interest expense on the 2020 Credit Facility was $637 and $1,097 for the three and six months ended June 30, 2022, respectively. As of June 30, 2021, the interest rate on the 2020 Credit Facility was 3.34% and the effective rate for the unused line fee was 0.45%. Interest expense on the 2020 Credit Facility was $267 and $528 for the three and six months ended June 30, 2021, respectively.

In connection with the 2020 Credit Facility, the Company recorded deferred financing costs of $1,534. The Company is amortizing the deferred financing costs associated with the 2020 Credit Facility to interest expense using the effective-interest method over the term of the agreement. The Company amortized $138 and $275 to interest expense for the three and six months ended June 30, 2022, respectively, for deferred financing costs. The Company amortized $135 and $268 to interest expense during the three and six months ended June 30, 2021, respectively, for deferred financing costs. Deferred financing costs of $699 and $624, net of accumulated amortization, are included in other assets on the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. The remaining balance of deferred financing costs will be amortized to interest expense during the third quarter of 2022 in connection with the termination of the 2020 Credit Facility as described in Note 18.

(b)    Convertible Senior Subordinated Notes

On February 12, 2019, the Company issued and sold an aggregate principal amount of $325,000 of 1.75% convertible senior subordinated notes (the “2026 Notes”) in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2026 Notes bear interest at a rate of 1.75% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The 2026 Notes will mature on February 15, 2026, unless earlier converted or repurchased. The initial conversion rate for the notes is 14.2966 shares of the Company’s common stock per $1 principal amount of the 2026 Notes. This conversion rate is equal to an initial conversion price of approximately $69.95 per share of the Company’s common stock.

Holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the business day immediately preceding August 15, 2025 only under the following circumstances: (1) during any calendar quarter commencing after March 31, 2019 (and only during such calendar quarter), if the last reported sale price 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 calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 2026 Notes) per $1 principal amount of 2026 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 (3) upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change or make-whole fundamental change (as defined in the indenture governing the 2026 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets. On or after August 15, 2025 until the close of business on the first scheduled trading day immediately preceding the maturity date, a holder may convert all or any portion of its 2026 Notes regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver shares of our common stock, cash or a combination thereof at the Company’s option. As of June 30, 2022, none of the conditions allowing holders of the 2026 Notes to convert had been met. Debt issuance costs related to the 2026 Notes of $9,372 are being amortized to interest expense using the effective interest method over the contractual term, resulting in an effective interest rate of 2.20%.

During the three months ended June 30, 2022, the Company recognized $1,755 of interest expense related to the 2026 Notes, of which $1,422 was paid or accrued and $333 was non-cash accretion of the debt discounts recorded. During the six months ended June 30, 2022, the Company recognized $3,508 of interest expense related to the 2026 Notes, of which $2,844 was paid or accrued and $664 was non-cash accretion of the debt discounts recorded.

During the three months ended June 30, 2021, the Company recognized $1,747 of interest expense related to the 2026 Notes, of which $1,421 was paid or accrued, and $326 was non-cash accretion of the debt discounts recorded. During the six months ended June 30, 2021, the Company recognized $3,493 of interest expense related to the 2026 Notes, of which $2,843 was paid or accrued, and $650 was non-cash accretion of the debt discounts recorded. In addition, unpaid additional interest payable as a result of the failure to remove the restrictive legend on the 2026 Notes had accrued on the 2026 Notes from and including February 17, 2020, but ceased accruing on February 16, 2021 as a result of the restrictive legend being removed. The Company recorded $212 of additional interest expense for the six months ended June 30, 2021.

As of June 30, 2022, total accrued interest payable related to the 2026 Notes was $2,133, which is included in accrued expenses and other liabilities on the consolidated balance sheets. The 2026 Notes have a carrying value of $319,963 as of June 30, 2022. The 2026 Notes are classified as long-term debt on the Company’s consolidated balance sheets, and will be until such 2026 Notes are within one year of maturity.

(c)    Convertible Note Hedge and Warrant Transactions

In connection with the offering of the 2026 Notes, the Company entered into convertible note hedge transactions with affiliates of certain of the initial purchasers (the “option counterparties”) of the 2026 Notes pursuant to the terms of call option confirmations. The Company has the option to purchase a total of 4,646,393 shares of its common stock at a price of approximately $69.95 per share. The total premiums paid for the note hedges were $101,660. The Company also entered into warrant transactions with the option counterparties whereby they have the option to purchase 4,646,393 shares of the Company’s common stock at a price of $105.58 per share. The Company received $65,910 in cash proceeds from the sale of the warrants. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the convertible note hedges and warrants are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period. The net costs incurred in connection with the convertible note hedge and warrant transactions were recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheets.

The convertible note hedge transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of the 2026 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2026 Notes, as the case may be. The warrant transactions could separately have a dilutive effect on the Company’s common stock to the extent that the market price per share of the Company’s common stock exceeds the strike price of the warrants.

As of June 30, 2022, no warrants have been exercised and all warrants to purchase shares of the Company’s common stock were outstanding.

(d)    Long-Term Debt

The following table represents the total long-term debt obligations of the Company at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
Convertible senior subordinated notes	$	235,272	$	325,000
Convertible senior subordinated notes - related party		89,728		—
Unamortized discount, including debt issuance costs, on convertible senior subordinated notes		(5,037)		(5,701)
Total long-term debt, net	$	319,963	$	319,299