v3.24.3
Debt Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt Commitments and Contingencies

(13) Debt Commitments and Contingencies

2027 Convertible Notes

In February 2022, we entered into a purchase agreement with certain counterparties for the sale of an aggregate of $287.5 million principal amount of convertible senior notes due in 2027 (the “2027 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes consisted of a $250 million initial placement and an over-allotment option that provided the initial purchasers of the 2027 Notes with the option to purchase an additional $37.5 million aggregate principal amount of the 2027 Notes, which was fully exercised. The 2027 Notes were issued pursuant to an indenture dated February 4, 2022. The net proceeds from the issuance of the 2027 Notes were $278.2 million, net of debt issuance costs. The debt issuance costs are amortized to interest expense using the effective interest rate method.

The 2027 Notes are unsecured obligations which bear regular interest at 1% per annum and for which the principal balance will not accrete. Interest payments are due on February 1 and August 1 of each year the Notes remain outstanding. The 2027 Notes will mature on February 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The 2027 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election, at an initial conversion rate of 17.8213 shares of Class A common stock per $1,000 principal amount of 2027 Notes, which is equivalent to an initial conversion price of approximately $56.11 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2027 Notes.

We may redeem for cash all or any portion of the 2027 Notes, at our option, on or after February 5, 2025 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest or additional interest, if any.

Holders of the 2027 Notes may convert all or a portion of their 2027 Notes at their option prior to November 1, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:

•
if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the 2027 Notes on each such trading day;
•
during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2027 Notes for each day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the 2027 Notes;
•
on a notice of redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, in which case we may be required to increase the conversion rate for the 2027 Notes so surrendered for conversion in connection with such redemption notice; or
•
on the occurrence of specified corporate events.

 

On or after November 1, 2026, the 2027 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Holders of the 2027 Notes who convert the 2027 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2027 Notes, or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2027 Notes may require us to repurchase all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of 2027 Notes, plus any accrued and unpaid special interest, if any.

We accounted for the issuance of the 2027 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

 

The following table presents the outstanding principal amount and carrying value of the 2027 Notes as of the dates indicated (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Principal

 

$

287,500

 

 

 

287,500

 

Unamortized debt discount

 

 

(4,025

)

 

 

(5,319

)

Unamortized debt issuance costs

 

 

(312

)

 

 

(412

)

Net carrying value

 

$

283,163

 

 

 

281,769

 

 

 

The annual effective interest rate for the 2027 Notes was approximately 1.6%. Interest expense related to the 2027 Notes for the periods presented below was as follows (in thousands):

 

 

 

Three Months Ended
September 30,

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Coupon interest

 

$

718

 

 

$

718

 

 

$

2,156

 

 

$

2,156

 

Amortization of debt discount

 

 

431

 

 

 

432

 

 

 

1,294

 

 

 

1,294

 

Amortization of transaction costs

 

 

33

 

 

 

34

 

 

 

100

 

 

 

102

 

Total interest expense

 

$

1,182

 

 

$

1,184

 

 

$

3,550

 

 

$

3,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the carrying value and estimated fair value of the 2027 Notes as of the date indicated (in thousands):

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

2027 Notes(1)

 

$

283,163

 

 

$

238,079

 

 

$

281,769

 

 

$

268,554

 

(1) As of September 30, 2024 and December 31, 2023, the fair value of the 2027 Notes was measured using Level 2 inputs based on the frequency of trading on our debt at the end of the year.

Contingencies

The Company from time to time may be subject to various claims and legal proceedings covering a range of matters that arise in the ordinary course of its business activities. In the opinion of the Company, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings is not expected to have a material adverse effect on the Company’s financial position or operations.

 

Restructuring

In May 2023, the Company reduced its workforce to help manage its operating expenses. During the three months ended June 30, 2023, the Company incurred $0.7 million for employee termination costs related to the May 2023 restructuring.

 

Exit from the Tools and Materials Business

The Company previously provided suppliers with access to competitively priced tools, materials and supplies in the U.S. As a result of the exit from the tools and materials business during the second quarter of 2023, the Company recognized $0.6 million of costs associated with its closure, of which $0.2 million is recognized in cost of revenue and $0.4 million is recognized in operations and support on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Defined Contribution Plans

The Company sponsors a defined contribution plan for qualifying employees, including a 401(k) Plan in the United States to which it makes matching contributions of 50% of participating employee contributions up to 6% of eligible income. The Company's total matching contribution to the 401(k) Plan was $0.6 million and $0.5 million for the three months ended September 30, 2024 and 2023, respectively, and was $1.8 million and $1.6 million for the nine months ended September 30, 2024 and 2023, respectively.