v3.24.3
Debt
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt
Note 9—Debt
The following table presents the outstanding principal amount and carrying value of the Notes as of the dates indicated (in thousands):
As of September 30, 2024
2021 Notes2020 Notes2019 NotesTotal
Principal$1,000,000 $650,000 $649,887 $2,299,887 
Unamortized debt issuance costs7,046 3,481 2,344 12,871 
Net carrying value$992,954 $646,519 $647,543 $2,287,016 
As of December 31, 2023
2021 Notes2020 Notes2019 NotesTotal
Principal$1,000,000 $650,000 $649,887 $2,299,887 
Unamortized debt issuance costs8,471 4,376 3,223 16,070 
Net carrying value$991,529 $645,624 $646,664 $2,283,817 
Terms of the Notes
The Notes will mature at their maturity date unless earlier converted or repurchased. The terms of the Notes are summarized below:
Convertible NotesMaturity DateContractual Convertibility Date (1)Initial Conversion Rate per $1,000 PrincipalInitial Conversion PriceAnnual Effective Interest Rate
2021 Notes
June 15, 2028February 15, 20284.0518 $246.80 0.4 %
2020 Notes
September 1, 2027May 1, 20275.0007 199.97 0.3 %
2019 Notes
October 1, 2026June 1, 202611.4040 87.69 0.3 %
(1)During any calendar quarter preceding the respective convertibility date of each series of Notes, in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may, in the immediate quarter following, convert all or a portion of their Notes. Based on the daily closing prices of the Company’s stock during the quarter ended September 30, 2024, holders of the 2021 Notes, 2020 Notes, and 2019 Notes are not eligible to convert their 2021 Notes, 2020 Notes, and remaining 2019 Notes, respectively, during the fourth quarter of 2024.
Based on the terms of each series of Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the Notes in cash and, therefore, the Notes are classified as long-term debt as of September 30, 2024.
The Company may redeem all or any portion of the 2021 Notes, at the Company’s option, subject to partial redemption limitations, on or after June 20, 2025, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), 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 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of the Company’s liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries.
Interest Expense
Interest expense, which consists of coupon interest and amortization of debt issuance costs, related to the Notes was $2.1 million in both the three months ended September 30, 2024 and September 30, 2023 and $6.3 million in both the nine months ended September 30, 2024 and September 30, 2023.
Fair Value of Notes
The estimated fair value of each of the Notes was determined through inputs that are observable in the market, and are classified as Level 2. See “Note 7—Fair Value Measurements” for more information regarding the fair value of the Notes.
Capped Call Transactions
The Company used a portion of the net proceeds from each of the Note offerings to enter into separate privately negotiated capped call instruments (the 2019, 2020, and 2021 capped call instruments collectively referred to as the “Capped Call Transactions”) with certain financial institutions, initial purchasers, and/or their respective affiliates. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Notes upon conversion of the Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the respective Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes.
The initial terms of the Company’s outstanding Capped Call Transactions are presented below:
Capped Call TransactionsMaturity DateInitial Cap Price per ShareCap Price Premium
2021 Capped Call TransactionsJune 15, 2028$340.42 100 %
2020 Capped Call TransactionsSeptember 1, 2027327.83150 %
2019 Capped Call TransactionsOctober 1, 2026148.63150 %
2023 Credit Agreement
On March 24, 2023, the Company entered into a $400.0 million senior secured revolving credit facility pursuant to an Amended and Restated Credit Agreement (the “2023 Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders, and JPMorgan Chase Bank N.A., as administrative Agent. The 2023 Credit Agreement will mature in March 2028 and includes a letter of credit sublimit of $60.0 million and a swingline loan sublimit of $20.0 million.
The 2023 Credit Agreement amends and restates in its entirety the Credit Agreement dated as of February 25, 2019 between the Company, as borrower, the lenders party thereto from time to time, and Citibank N.A., as administrative Agent.
Borrowings under the 2023 Credit Agreement (other than swingline loans) bear interest, at the Company’s option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, and (c) an adjusted Term SOFR rate for a one-month interest period plus 1.00%, in each case plus a margin ranging from 0.50% to 1.25% or (ii) an adjusted Term SOFR rate plus a margin ranging from 1.50% to 2.25%. Swingline loans under the 2023 Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the senior secured net leverage ratio (defined as secured funded debt, net of unrestricted cash up to $100.0 million, to EBITDA (as defined in the 2023 Credit Agreement)) for the preceding four fiscal quarter periods. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee, ranging from 0.20% to 0.35%
depending on the Company’s senior secured net leverage ratio, and fees associated with letters of credit. The 2023 Credit Agreement also permits the Company, in certain circumstances, to request an increase in the facility by an amount of up to $200.0 million at the same maturity, pricing and other terms and to request an extension of the maturity date for the facility. In connection with the 2023 Credit Agreement, the Company also paid the lenders certain upfront fees.
The Company had no outstanding borrowings under the 2023 Credit Agreement and was in compliance with all financial covenants as of September 30, 2024.