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CONVERTIBLE NOTES | 9 Months Ended
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Sep. 30, 2023
CONVERTIBLE NOTES [Abstract] |
CONVERTIBLE NOTES | CONVERTIBLE NOTES Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of September 30, 2023:
|  |  |  |  |  |  |  | Fair Value (1)
(In thousands) |  | Principal Amount |  | Unamortized Debt Discount and Issuance Costs |  | Net Carrying Amount |  | Amount |  | Leveling
2030 Convertible Notes - 2.000% |  | $ | 572,993 |  |  | $ | (4,527) |  |  | $ | 568,466 |  |  | $ | 645,511 |  |  | 2
2028 Convertible Notes - 0.375% |  | 949,042 |  |  | (11,134) |  |  | 937,908 |  |  | 811,431 |  |  | 2
2027 Convertible Notes - 0.375% |  | 563,822 |  |  | (5,856) |  |  | 557,966 |  |  | 513,078 |  |  | 2
2025 Convertible Notes - 1.000% |  | 249,172 |  |  | (591) |  |  | 248,581 |  |  | 276,152 |  |  | 2
Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of December 31, 2022:
|  |  |  |  |  |  |  | Fair Value (1)
(In thousands) |  | Principal Amount |  | Unamortized Debt Discount and Issuance Costs |  | Net Carrying Amount |  | Amount |  | Leveling
2028 Convertible Notes - 0.375% |  | $ | 1,150,000 |  |  | $ | (15,775) |  |  | $ | 1,134,225 |  |  | $ | 908,500 |  |  | 2
2027 Convertible Notes - 0.375% |  | 747,500 |  |  | (9,445) |  |  | 738,055 |  |  | 612,950 |  |  | 2
2025 Convertible Notes - 1.000% |  | 315,005 |  |  | (1,179) |  |  | 313,826 |  |  | 326,808 |  |  | 2
______________ (1)The fair values are based on observable market prices for this debt, which is traded in less active markets and therefore is classified as a Level 2 fair value measurement. Issuances and Settlements In February 2023, the Company entered into a privately negotiated exchange and purchase agreement with a single holder of certain of the Company’s convertible notes due in 2027 (the “2027 Notes”) and 2028 (the “2028 Notes”). The Company issued the holder $500.0 million aggregate principal amount of 2.0% Convertible Notes due in 2030 (collectively, the “2030 Notes”) in exchange for $183.7 million of aggregate principal of 2027 Notes, $201.0 million of aggregate principal of 2028 Notes, and $138.0 million of cash. The extinguishment resulted in a gain on settlement of convertible notes of $17.7 million, which is included in interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2023. The gain represents the difference between (i) the fair value of the consideration transferred and (ii) the carrying value of the debt at the time of exchange. In March 2023, the Company entered into a privately negotiated exchange agreement with two holders of certain of the Company’s convertible notes due in 2025 (the “2025 Notes”). The Company issued the holder $73.0 million aggregate principal amount of 2030 Notes in exchange for $65.8 million of aggregate principal of 2025 Notes. The extinguishment resulted in a loss on settlement of convertible notes of $7.4 million, which is included in interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2023. The loss represents the difference between (i) the fair value of the consideration transferred and (ii) the carrying value of the debt at the time of exchange. The net proceeds from the issuance of the 2030 Notes were approximately $133.0 million, after deducting commissions and offering expenses payable by the Company. The 2030 Notes will mature on March 1, 2030 and bear interest at a rate of 2.0% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2023. Summary of Conversion Features Until the six-months immediately preceding the maturity date of the applicable series of the Company’s convertible notes (the “Notes”), each series of Notes is convertible only upon the occurrence of certain events and during certain periods, as set forth in the Indentures filed at the time of the original offerings. On or after the date that is six-months immediately preceding the maturity date of the applicable series of Notes until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert such Notes at any time. The Notes will be convertible into cash, shares of the Company’s common stock (plus, if applicable, cash in lieu of any fractional share), or a combination of cash and shares of the Company’s common stock, at the Company’s election. It is the Company’s intent and policy to settle all conversions through combination settlement. The initial conversion rate is 13.26, 8.96, 8.21, and 12.37 shares of common stock per $1,000 principal amount for the 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes, respectively, which is equivalent to an initial conversion price of approximately $75.43, $111.66, $121.84, and $80.83 per share of the Company’s common stock for the 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes, respectively. The 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes are potentially convertible into up to 3.3 million, 5.0 million, 7.8 million, and 7.1 million shares, respectively. The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the Indentures filed at the time of the original offerings but will not be adjusted for accrued and unpaid interest. In addition, holders of the Notes who convert their Notes in connection with a “make-whole fundamental change” (as defined in the Indenture), will, under certain circumstances, be entitled to an increase in the conversion rate. If the Company undergoes a “fundamental change” (as defined in the Indentures), holders of the Notes may require the Company to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest. Based on the closing price of the Company’s common stock of $68.22 on September 30, 2023, the if-converted values on the Notes do not exceed the principal amount. The Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness, or the issuance or repurchase of securities by the Company. Ranking of Convertible Notes The Notes are the Company’s senior unsecured obligations and (i) rank senior in right of payment to all of its future indebtedness that is expressly subordinated in right of payment to the Notes; (ii) rank equal in right of payment to each outstanding series thereof and to all of the Company’s future liabilities that are not so subordinated, unsecured indebtedness; (iii) are effectively junior to all of the Company’s existing and future secured indebtedness and other secured obligations, to the extent of the value of the assets securing that indebtedness and other secured obligations; and (iv) are structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries. Issuance Costs Issuance costs are amortized to interest expense over the term of the Notes. The following table summarizes the original issuance costs at the time of issuance for each set of Notes:
(In thousands) |  |
2030 Convertible Notes |  | $ | 4,938 |
2028 Convertible Notes |  | 24,453 |
2027 Convertible Notes |  | 14,285 |
2025 Convertible Notes |  | 17,646 |
Interest Expense Interest expense on the Notes includes the following:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Debt issuance costs amortization |  | $ | 1,329 |  |  | $ | 1,444 |  |  | $ | 4,021 |  |  | $ | 4,284 |
Debt discount amortization |  | 25 |  |  | 37 |  |  | 81 |  |  | 110 |
Gain on settlements of convertible notes |  | — |  |  | — |  |  | (10,324) |  |  | — |
Coupon interest expense |  | 4,906 |  |  | 2,566 |  |  | 13,166 |  |  | 7,699 |
Total interest expense (income) on convertible notes |  | $ | 6,260 |  |  | $ | 4,047 |  |  | $ | 6,944 |  |  | $ | 12,093 |
The following table summarizes the effective interest rates of the Notes:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
2030 Convertible Notes |  | 2.12 | % |  | — | % |  | 2.09 | % |  | — | %
2028 Convertible Notes |  | 0.64 | % |  | 0.64 | % |  | 0.63 | % |  | 0.64 | %
2027 Convertible Notes |  | 0.68 | % |  | 0.68 | % |  | 0.67 | % |  | 0.67 | %
2025 Convertible Notes |  | 1.18 | % |  | 1.18 | % |  | 1.17 | % |  | 1.18 | %
The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 1.30, 3.46, 4.42, and 6.42 years for the 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes, respectively.

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