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INDEBTEDNESS | 9 Months Ended
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Sep. 30, 2024
Debt Disclosure [Abstract] |
INDEBTEDNESS | INDEBTEDNESS A) Notes The 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (each, as defined below, and collectively, the “Convertible Notes”), together with the Senior Notes (as defined below), are collectively referred to as the “Notes.” The following table summarizes the Company's Notes as of September 30, 2024 (in thousands):
| Principal Outstanding |  | Unamortized Debt Issuance Costs |  | Net Carrying Value
2026 Senior Notes | $ | 1,000,000 |  |  | $ | (4,691) |  |  | $ | 995,309 |
2031 Senior Notes | 1,000,000 |  |  | (9,383) |  |  | 990,617 |
2032 Senior Notes | 2,000,000 |  |  | (25,623) |  |  | 1,974,377 |
2025 Convertible Notes (i) | 1,000,000 |  |  | (1,273) |  |  | 998,727 |
2026 Convertible Notes | 575,000 |  |  | (2,707) |  |  | 572,293 |
2027 Convertible Notes | 575,000 |  |  | (4,134) |  |  | 570,866 |
Total | $ | 6,150,000 |  |  | $ | (47,811) |  |  | $ | 6,102,189 |
(i) Net carrying value disclosed as current portion of long-term debt within total current liabilities on the condensed consolidated balance sheet. The following table summarizes the Company's Notes as of December 31, 2023 (in thousands):
| Principal Outstanding |  |  |  | Unamortized Debt Issuance Costs |  | Net Carrying Value
2026 Senior Notes | $ | 1,000,000 |  |  |  |  | $ | (6,792) |  |  | $ | 993,208 |
2031 Senior Notes | 1,000,000 |  |  |  |  | (10,433) |  |  | 989,567 |
2025 Convertible Notes | 1,000,000 |  |  |  |  | (3,563) |  |  | 996,437 |
2026 Convertible Notes | 575,000 |  |  |  |  | (3,986) |  |  | 571,014 |
2027 Convertible Notes | 575,000 |  |  |  |  | (5,135) |  |  | 569,865 |
Total | $ | 4,150,000 |  |  |  |  | $ | (29,909) |  |  | $ | 4,120,091 |
The Company recognized interest expense on the Notes as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Contractual interest expense | $ | 48,822 |  |  | $ | 16,291 |  |  | $ | 99,550 |  |  | $ | 49,223 |
Amortization of debt issuance costs | 3,232 |  |  | 2,587 |  |  | 8,717 |  |  | 7,947 |
Total | $ | 52,054 |  |  | $ | 18,878 |  |  | $ | 108,267 |  |  | $ | 57,170 |
Senior Unsecured Notes due 2032 On May 9, 2024, the Company issued $2.0 billion in aggregate principal amount of senior unsecured notes due 2032 ("2032 Senior Notes"). The 2032 Senior Notes mature on May 15, 2032, unless earlier redeemed or repurchased, and bear interest at a rate of 6.50% payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2024. At any time prior to May 15, 2027, the Company may redeem the 2032 Senior Notes, in whole or part, at a price equal to 100% of the principal amount of the 2032 Senior Notes to be redeemed plus an applicable premium and accrued and unpaid interest, if any, to but excluding the redemption date. The applicable premium for the 2032 Senior Notes is the greater of (1) 1.0% of the principal amount of such note, and (2) the excess, if any, of (a) the sum of the present values at the redemption date of (i) the applicable redemption price of such note that would apply if such note were redeemed on May 15, 2027 plus (ii) the remaining scheduled payments of interest due on such note to, and including, May 15, 2027 (excluding accrued but unpaid interest to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate (as defined in the indenture governing the 2032 Senior Notes) plus 50 basis points, over (b) the principal amount of such note to be redeemed. On and after May 15, 2027, the Company may redeem the 2032 Senior Notes at specified prices as set forth in the indenture governing the 2032 Senior Notes plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company experiences a change of control triggering event (as defined in the indenture governing the 2032 Senior Notes), the Company must offer to repurchase the 2032 Senior Notes at a repurchase price equal to 101% of the principal amount of the applicable 2032 Senior Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. The indenture governing the 2032 Senior Notes contains covenants that, among other things, restrict the ability of the Company and/or its domestic restricted subsidiaries to create certain liens and certain indebtedness, enter into sale and leaseback transactions, or to transfer all or substantially all of the Company and its subsidiaries assets to another person. These covenants are subject to a number of other limitations and exceptions set forth in the indenture governing the 2032 Senior Notes. The indenture governing the 2032 Senior Notes provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving the Company and its significant subsidiaries. In the case of an event of default arising from specified events of bankruptcy or insolvency involving the Company, all outstanding 2032 Senior Notes will become due and payable immediately without further action or notice. If any other event of default under the indenture governing the 2032 Senior Notes occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the outstanding 2032 Senior Notes may declare all the 2032 Senior Notes to be due and payable immediately. Debt issuance costs related to the 2032 Senior Notes were comprised of commissions payable to the initial purchasers of $21.0 million and third party offering costs of $5.6 million. Issuance costs are amortized to interest expense using the effective interest method at an effective interest rate of 6.7% for the term of the 2032 Senior Notes. Convertible Notes due in 2026 and 2027 On November 13, 2020, the Company issued an aggregate principal amount of $1.2 billion of convertible senior notes comprised of $575.0 million of convertible senior notes due 2026 ("2026 Convertible Notes") and $575.0 million of convertible senior notes due 2027 ("2027 Convertible Notes"). The 2026 Convertible Notes mature on May 1, 2026, unless earlier converted or repurchased, and bear a zero rate of interest. The 2027 Convertible Notes mature on November 1, 2027, unless earlier converted or repurchased, and bear interest at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year. The circumstances to allow the holders to convert their 2026 Convertible Notes and 2027 Convertible Notes were not met during the nine months ended September 30, 2024. As of September 30, 2024, no principal had converted and the if-converted value did not exceed the outstanding principal amount on either the 2026 Convertible Notes or 2027 Convertible Notes. Convertible Notes due in 2025 On March 5, 2020, the Company issued an aggregate principal amount of $1.0 billion of convertible senior notes ("2025 Convertible Notes"). The 2025 Convertible Notes mature on March 1, 2025, unless earlier converted or repurchased, and bear interest at a rate of 0.125% payable semi-annually on March 1 and September 1 of each year. The circumstances to allow the holders to convert their 2025 Convertible Notes were not met during the nine months ended September 30, 2024. As of September 30, 2024, certain holders of the 2025 Convertible Notes converted an immaterial aggregate principal amount of their 2025 Convertible Notes. The Company has settled the conversions through the issuance of an immaterial amount of shares of the Company's Class A common stock. As of September 30, 2024, the if-converted value did not exceed the outstanding principal amount of the 2025 Convertible Notes. B) Revolving Credit Facility & Other In May 2020, the Company entered into a revolving credit agreement (as amended, the “Credit Agreement”) with certain lenders, which provides for a $775.0 million senior unsecured revolving credit facility maturing on June 9, 2028. The Credit Agreement contains a financial covenant requiring the Company to maintain a minimum liquidity amount (consisting of the sum of Unrestricted Cash and Cash Equivalents plus Marketable Securities, each as defined in the Credit Agreement, plus undrawn available commitments under the Credit Agreement) of at least $250.0 million, tested on the last day of each fiscal quarter. The Company is obligated to pay customary fees for a credit facility of this size and type including a commitment fee of 0.10% to 0.20% per annum on the undrawn portion of the revolving loan commitments available under the Credit Agreement. To date, no funds have been drawn and no letters of credit have been issued under the Credit Agreement. As of September 30, 2024, $775.0 million remained available for draw subject to compliance with our covenants. The Company incurred immaterial unused commitment fees during the three and nine months ended September 30, 2024 and September 30, 2023. As of September 30, 2024, the Company was in compliance with all financial covenants under the Credit Agreement. Loans under the Credit Agreement bear interest at the Company's option of (i) an annual rate based on the forward-looking term rate based on the Secured Overnight Financing Rate ("Term SOFR") or (ii) a base rate. Loans based on Term SOFR shall bear interest at a rate equal to Term SOFR plus a margin of between 1.25% and 1.75%, depending on the Company's total net leverage ratio. Loans based on the base rate shall bear interest at a rate based on the highest of the prime rate, the federal funds rate plus 0.50%, and Term SOFR with a tenor of one-month plus 1.00%, in each case, plus a margin ranging from 0.25% to 0.75%, depending on the Company's total net leverage ratio. The Credit Agreement also contains customary affirmative and negative covenants typical for a financing of this type that, among other things, restricts the Company and certain of its subsidiaries’ ability to incur additional indebtedness, create liens, merge or consolidate or make certain dispositions, pay dividends and make distributions, enter into restrictive agreements, enter into agreements with affiliates, and make certain investments and acquisitions. The Company also has uncommitted and unsecured lines of credit with certain third-party banks for short-term liquidity needs, subject to availability of funds, through Square Financial Services. These lines of credit were immaterial in the aggregate and there were no outstanding balances as of September 30, 2024 and December 31, 2023. C) Warehouse Funding Facilities Following the acquisition of Afterpay, the Company assumed Afterpay's existing warehouse funding facilities. The Company has financing arrangements with financial institutions in Australia, New Zealand, the United States, and the United Kingdom (collectively, the “Warehouse Facilities”). The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities (collectively, the "Warehouse Special Purpose Entities ("Warehouse SPEs")) formed for the sole purpose of financing the origination of consumer receivables to partly fund the Company's BNPL platform. Borrowings under the Warehouse Facilities are secured against the respective consumer receivables. While the Warehouse SPEs are included in our condensed consolidated financial statements, they are separate legal entities that maintain legal ownership of the receivables they hold. The assets of the Warehouse SPEs are not available to satisfy our claims or those of our creditors. These Warehouse Facilities have maturity dates through September 2027. As of September 30, 2024, the aggregate amount of the Warehouse Facilities, using the respective exchange rates at period-end, was $1.5 billion on a revolving basis, of which $965.8 million was drawn and $517.8 million remained available. All Warehouse Facilities contain portfolio parameters based on performance of the underlying consumer receivables, which each respective region has satisfied as of September 30, 2024. None of the Warehouse Facilities contain corporate financial covenants. All Warehouse Facilities are on a variable rate basis which aligns closely to the weighted-average life of the consumer receivables they finance. Borrowings under these facilities bear interest at (i) a base rate aligned to either the local risk free rate, such as Term SOFR and the Sterling Overnight Index Average or similar, and (ii) a margin which is set for the term of the availability period. The interest expense incurred on the Company's Warehouse Facilities is included within general and administrative as part of the Company's operating expenses. Interest expense on the Company's Warehouse Facilities was $16.4 million and $52.3 million for the three and nine months ended September 30, 2024, respectively, and $16.0 million and $44.4 million for the three and nine months ended September 30, 2023, respectively. In addition, each Warehouse Facility requires payment of immaterial commitment fees. The table below summarizes the future scheduled principal payments of amounts drawn on the Company's Warehouse Facilities (in thousands):
| September 30, 2024
2025 (i) | $ | 138,136 |
2026 | 649,841 |
2027 | 177,788 |
Total | $ | 965,765 |
(i) Future scheduled principal payments in 2025 are disclosed as warehouse funding facilities, current within total current liabilities on the condensed consolidated balance sheet.

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