Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

Note 7. Debt

The following tables summarize outstanding debt as of September 30, 2023, and December 31, 2022.

	Principal		Unaccreted Discount		Debt Issuance Costs		Carrying Value
Convertible senior notes, due 2026	$	225,000	$	—	$	(3,611)	$	221,389
Convertible senior notes, due 2028	333,334		(119,106)		(4,562)		209,666
Advance funding arrangement	1,497		—		—		1,497
Other notes	300		(19)		—		281
Balance as of September 30, 2023	$	560,131	$	(119,125)	$	(8,173)	$	432,833

	Principal		Unaccreted Discount		Debt Issuance Costs		Carrying Value
Convertible senior notes, due 2026	$	425,000	$	—	$	(8,508)	$	416,492
Advance funding arrangement	15,670		(760)		—		14,910
Term loan facility, due 2029	10,000		—		—		10,000
Other notes	450		(87)		—		363
Balance as of December 31, 2022	$	451,120	$	(847)	$	(8,508)	$	441,765

Convertible Senior Notes

Interest expense recognized related to the 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”) was approximately $0.7 million and $1.4 million for the three months ended September 30, 2023 and 2022, respectively, and $2.9 million and $4.1 million for the nine months ended September 30, 2023 and 2022, respectively, including contractual interest expense and amortization of debt issuance costs. The effective interest rate for the 2026 Notes is 1.3%.

In April 2023, we issued $333.3 million of 6.75% Senior Secured Convertible Notes due in 2028 (the “2028 Notes”) in a private placement transaction. We used a portion of the net proceeds from the 2028 Notes to repurchase $200 million of the 2026 Notes and to fund the repayment of $9.7 million outstanding under the term loan facility, in each case plus accrued and unpaid interest thereon and related fees and expenses. In connection with the partial repurchase of the 2026 Notes, we recognized an $81.4 million gain on extinguishment of debt, calculated as the difference between the reacquisition price and the net carrying amount of the portion of the 2026 Notes that was extinguished.

The 2028 Notes are convertible into cash, shares of common stock, or a combination of cash and shares of common stock at our election at an initial conversion rate of 39.9956 shares of common stock per one thousand  dollars principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $25.00 per share.

The 2028 Notes are senior secured obligations, accrue interest at a rate of 6.75%, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2023, and were initially issued at 95% of par value. The 2028 Notes will mature on October 1, 2028, unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding July 1, 2028, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of certain conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2028 Notes will be convertible at the option of the holders at any time regardless of these conditions.

Interest expense recognized related to the 2028 Notes was approximately $9.5 million and $16.8 million in the three and nine months ended September 30, 2023, respectively. Interest expense includes $5.6 million contractual interest expense and $3.9 million amortization of debt issuance costs and discount for the three months ended September 30, 2023, and

$10.1 million contractual interest expense and $6.7 million amortization of debt issuance costs and discount for the nine months ended September 30, 2023. The effective interest rate for the 2028 Notes is 17.9%.

Advance Funding Arrangement

For certain home warranty contracts, we participate in financing arrangements with third-party financers that provide us with the contract premium upfront, less a financing fee. Third-party financers collect installment payments from the warranty contract customer which satisfy our repayment obligation over a portion of the contract term. We remain obligated to repay the third-party financer if a customer cancels its warranty contract prior to full repayment of the advance funding amount we received. As part of the arrangement, we pay financing fees, which are collected by the third-party financers upfront and are initially recognized as a debt discount. Financing fees are amortized as interest expense under the effective interest method. The implied interest rate varies per contract and is generally approximately 14% of total funding received. Interest expense recognized related to advance funding arrangement was less than $0.1 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $0.9 million and $2.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Term Loan Facility

In April 2023, the term loan facility was repaid in full by using a portion of the proceeds received from the 2028 Notes.