CONVERTIBLE NOTES

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

CONVERTIBLE NOTES

NOTE 10. CONVERTIBLE NOTES

On March 27, 2018, the Company issued $150.0 million aggregate principal amount of 2.50% Senior Convertible Notes due 2023. In connection with the offering of the Notes, the Company granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $22.5 million aggregate principal amount of the Notes on the same terms and conditions. On April 4, 2018 the option was partially exercised, which resulted in $21.5 million of additional proceeds, for total proceeds of $171.5 million. The Notes matured on March 15, 2023.

The Company incurred issuance costs related to the issuance of the Notes which is amortized over the five-year contractual term of the Notes using the effective interest method. The effective interest rate on the Notes, including accretion of the Notes to par was 3.2%.

The Notes include customary terms and covenants, including certain events of default upon which the Notes may be due and payable immediately. Holders had the option to convert the Notes in multiples of $1,000 principal amount at any time prior to December 15, 2022, but only in the following circumstances:

•if the Company’s stock price exceeds 130% of the conversion price for 20 of the last 30 trading days of any calendar quarter after June 30, 2018;

•during the 5 business day period after any 5 consecutive trading day period in which the Notes’ trading price is less than 98% of the product of the common stock price times the conversion rate; or

•the occurrence of certain corporate events, such as a change of control, merger or liquidation.

At any time on or after December 15, 2022, a holder could have converted its Notes in multiples of $1,000 principal amount. Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the indenture pursuant to which the Notes were issued (the “Indenture”)) were, under certain circumstances, entitled to an increase in the conversion rate. In addition, in the event of a fundamental change or event of default prior to the Maturity Date, holders, subject to certain conditions, had the right, at their option, to require the Company to repurchase for cash all or part of the Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date.

As of December 31, 2022, $56.4 million aggregate principal amount of the Notes were outstanding and convertible pursuant to their original terms, none of which were converted prior to the Maturity Date. The Notes matured on March 15, 2023 and became due and payable. On March 9, 2023, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”), which became effective on March 13, 2023, with certain holders of the Notes holding approximately 85% of the Company’s outstanding Notes (collectively, the “Ad Hoc Noteholder Group”), the trustee for the Notes (the “Trustee”) and any other owner of the Notes who executes and delivers to the Company a joinder to the Forbearance Agreement (collectively with the Trustee and Ad Hoc Noteholder Group, the “Counterparties”). Pursuant to the Forbearance Agreement, the members of the Ad Hoc Noteholder Group have agreed, and have directed the Trustee, to forbear from exercising their rights and remedies under the Indenture in connection with certain events of default under the Indenture, including, but not limited to, the failure to timely pay in full the principal of any Note when due and payable on March 15, 2023 and the failure to pay any interest on any Note when due and payable. See Note 21, Subsequent Events for additional information regarding the Forbearance Agreement.

The carrying value of the Notes consisted of the following at December 31 (in thousands):

	2022		2021
Outstanding principal	$	56,595	$	120,500
Unamortized debt issuance	(182)		(729)
Unamortized debt discount	—		(11,787)
Net carrying amount	$	56,413	$	107,984

As of December 31, 2022 the Notes were classified as follows (in thousands):

	2022		2021
Current portion of convertible notes	$	56,413	$	—
Non-current portion of convertible notes	—		107,984
Total convertible notes	$	56,413	$	107,984

Interest expense consisted of the following at December 31 (in thousands):

	2022		2021		2020
Contractual coupon interest	$	1,794	$	3,934	$	4,288
Amortization of the debt discount	—		10,869		10,518
Amortization of debt issuance costs	474		672		651
Total interest expense on convertible notes	$	2,268	$	15,475	$	15,457

Net gain on extinguishment of exchanged Notes for the years ended December 31 is as follows (in thousands):

	2022		2021		2020
Gain on extinguishment	$	3,565	$	4,916	$	—

2021 Exchange Transactions

On September 22, 2021, the Company entered into separate exchange agreements with certain holders of the Notes. Under the terms of the exchange agreements, such holders agreed to exchange Notes held by them for shares of the Company’s common stock. During the year ended December 31, 2021, $51.0 million in aggregate principal amount of Notes were exchanged for 6,602,974 shares of the Company's common stock. The carrying value of the Notes was $44.7 million while the estimated fair value of the shares was $38.9 million at the time of the exchange. The Company incurred $0.9 million of reacquisition costs, which was as an offset to gain on extinguishment of debt during the year ended December 31, 2021. This resulted in a net gain of $4.9 million reflected in other income (expense), net in the consolidated statement of operations during the year ended December 31, 2021. See Note 19, Stockholders' Equity for additional information.

March 2022 Exchange Transaction

On March 21, 2022, the Company entered into an exchange agreement with one holder of the Notes. Under the terms of the exchange agreement, the holder agreed to exchange Notes held by them for shares of the Company’s common stock. During the year ended December 31, 2022, $14.0 million in aggregate principal amount of Notes were exchanged for 10,798,482 shares of the Company's common stock. The carrying value of the Notes was $14.0 million while the estimated fair value of the shares was $10.2 million at the time of the exchange. The Company incurred $0.2 million of reacquisition costs, which was recorded as an offset to gain on extinguishment of debt during the year ended December 31, 2022. This resulted in a net gain of $3.6 million reflected in other income (expense), net in the consolidated statement of operations during the year ended December 31, 2022. See Note 19, Stockholders' Equity for additional information.

August 2022 Exchange Transaction

On August 15, 2022, the Company entered into an exchange agreement (the “August 2022 Exchange Agreement”) with the Jack W. Schuler Living Trust (the “Schuler Trust”). Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it for (a) a secured promissory note in an aggregate principal amount of $34.9 million (the “Secured Note”) and (b) a warrant to acquire the Company’s common stock (the “Warrant”) at an exercise price of $2.12 per share (the “Exercise Price”). The carrying value of the Notes was $49.6 million at the time of the exchange. The estimated fair value of the Secured Note and the Warrant at the time of the exchange was $16.0 million and $3.8 million, respectively, which resulted in a net gain of $29.8 million that was recorded to contributed capital.

The Secured Note includes various features that were advantageous to the Company, including a lower interest rate compared to current market rates and a share conversion feature. There were no other negotiating parties that had similar terms or economic outcomes. As such, the exchange was considered not to be an arm’s length transaction, and therefore the resulting gain was accounted for as a capital transaction. See Note 11, Long-Term Debt Related-Party and Note 19, Stockholders' Equity for additional information.

Prepaid Forward

In 2018, in connection with the Notes, the Company entered into a prepaid forward stock repurchase transaction (“Prepaid Forward”) with a financial institution (“Forward Counterparty”). Pursuant to the Prepaid Forward, the Company used approximately $45.1 million of the net proceeds from its issuance of the Notes to fund the Prepaid Forward. The aggregate number of shares of the Company’s common stock underlying the Prepaid Forward was approximately 1,858,500. During March 2023, 1,858,500 shares of Common Stock were returned to the Company pursuant to our agreement with the counterparty. As of December 31, 2022, these shares purchased under the Prepaid Forward were treated as treasury stock on the consolidated balance sheet (and not outstanding for purposes of the calculation of basic and diluted earnings per share), but remain outstanding for corporate law purposes, including for purposes of any future stockholders' votes. See Note 21, Subsequent Events for additional information.