Convertible Notes

9 Months Ended

Sep. 30, 2024

Convertible Notes [Abstract]

Convertible Notes

10. Convertible Notes

The Company has the following convertible notes outstanding as of September 30, 2024:

● $150,000 in aggregate principal amount of 3.25% Convertible Senior Notes due 2026 (the “2026 Notes”);

● $25,845 in aggregate principal amount of 5.75% Convertible Senior Notes due 2028 (the “2028 Notes”); and

● $345,000 in aggregate principal amount of 3.25% Convertible Senior Notes due 2029 (the “2029 Notes”).

Each class of notes were issued pursuant to indentures dated as of the issuance dates between the Company and either U.S. Bank National Association or U.S Bank Trust Company, National Association, as trustee (or its successor in interest, the “Trustee”), in private offerings to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

In connection with the issuance of the 2029 Notes, the Company repurchased $104,155 in aggregate principal amount of the 2028 Notes. As a result of this repurchase, the Company recognized a loss on extinguishment of $30,632 during the three and nine months ended September 30, 2024.

As of September 30, 2024, the Company had an aggregate principal amount of $520,845 outstanding of the 2026 Notes, the 2028 Notes and the 2029 Notes (collectively, the “Convertible Notes”).

Key terms of the Convertible Notes are as follows:

	2026 Notes	2028 Notes	2029 Notes
Principal outstanding	$150,000	$25,845	$345,000
Issuance date	June 14, 2021	February 14, 2023	August 13, 2024
Maturity date (unless earlier converted, repurchased or redeemed)	June 15, 2026	August 15, 2028	August 15, 2029
Interest rate	3.25%	5.75%	3.25%
Initial conversion price	$11.04	$9.54	$11.82
Initial conversion rate	90.5797	104.8658	84.5934
Redemption price	$14.35	$12.40	$15.37

● Interest rate: Payable semiannually in arrears on February 15 and August 15 of each year for the 2029 Notes and the 2028 Notes and on June 15 and December 15 of each year for the 2026 Notes.

● Conversion price: Convertible at an initial conversion rate into shares of the Company’s common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price set forth in the table above), subject to adjustment.

● Conversion: Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2029 and May 15, 2028 for the 2029 Notes and the 2028 Notes, respectively, and March 15, 2026 for the 2026 Notes, only under the following circumstances: (i) if the last reported sale price of the Company’s common stock for at least 20 trading days 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 for the respective Convertible Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by the Company in accordance with the terms of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events. On or after May 15, 2029 and May 15, 2028 in respect of the 2029 Notes and the 2028 Notes, respectively, and March 15, 2026 in respect of the 2026 Notes, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances.

● Cash settlement of principal amount: Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted. At its election, the Company will also settle its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of its common stock or a combination of cash and shares of its common stock.

● Redemption price: The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after August 20, 2026 and August 20, 2025 in respect of the 2029 Notes and the 2028 Notes, respectively, and June 20, 2023 in respect of the 2026 Notes and on or prior to the 55^th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price for the respective Convertible Notes then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes.

● Limited investor put rights: Holders of the Convertible Notes have the right to require the Company to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events.

● Conversion rate increase in certain customary circumstances: In certain circumstances, conversions in connection with a “make-whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 103.6269 shares, 167.7853 shares and 144.9275 shares of the Company’s common stock per $1,000 principal amount of the 2029 Notes, the 2028 Notes and the 2026 Notes, respectively (the equivalent of 61,826,817 shares of the Company’s common stock), subject to adjustment.

● Seniority and Security: The Convertible Notes rank equal in right of payment and are the Company’s senior unsecured obligations.

The indentures contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the respective holders of not less than 25% in aggregate principal amount of the respective series of Convertible Notes outstanding may declare the entire principal amount of all such respective Convertible Notes to be repurchased, plus any accrued special interest, if any, to be immediately due and payable.

The following table provides a summary of the Convertible Notes at September 30, 2024 and December 31, 2023:

	September 30, 2024												December 31, 2023
	2026 Notes			2028 Notes			2029 Notes			Total			2026 Notes			2028 Notes			Total
Principal amount	$	150,000		$	25,845		$	345,000		$	520,845		$	150,000		$	130,000		$	280,000
Less: Unamortized issuance costs		(1,479	)		(498	)		(7,462	)		(9,439	)		(2,125	)		(2,987	)		(5,112	)
Carrying amount	$	148,521		$	25,347		$	337,538		$	511,406		$	147,875		$	127,013		$	274,888
Effective interest rate(1)		3.83%			6.25%			3.70%			3.86%			6.25%			3.83%			4.96%

_____________________________

⁽¹⁾  Includes amortization of the issuance costs and premium.

Interest expense on the Convertible Notes was $4,330 and $11,256 respectively, during the three and nine months ended September 30, 2024 and $3,461 and $11,484, respectively, during the comparable periods in 2023. Interest payable of $3,151 and $2,391 at September 30, 2024 and December 31, 2023, respectively, is included in accounts payable and other liabilities on the Consolidated Balance Sheets.

The fair value of the Convertible Notes (classified as Level 2 in the fair value hierarchy) was $553,602 and $281,897 at September 30, 2024 and December 31, 2023, respectively. The if-converted value of the 2028 Notes was $27,064 at September 30, 2024. The if-converted value of the 2026 Notes and the 2029 Notes did not exceed the principal amount at September 30, 2024. The if-converted value of the Convertible Notes did not exceed the principal amount at December 31, 2023.