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FINANCING ARRANGEMENTS | 12 Months Ended
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Dec. 31, 2024
Debt Disclosure [Abstract] |
FINANCING ARRANGEMENTS | FINANCING ARRANGEMENTS As of December 31, 2024, the Company has the following material financing arrangements outstanding: the 2027 Notes, the 2026 Notes, capped call transactions and letters of credit pursuant to the Cash Collateral Agreement. On November 19, 2024, the Company issued $197.3 million aggregate principal amount of the 2027 Notes (i) in exchange for $176.3 million aggregate principal amount of the 2026 Notes held by the Operating Participants (ii) issued and sold to certain Offering Participants for $21.0 million aggregate principal amount of the 2027 Notes for gross cash proceeds of $19.9 million, representing an issue price of 95%. We assessed whether the exchange of the $176.3 million of the 2026 Notes resulted in an insubstantial modification or an extinguishment of the existing debt for each loan in the syndication by grouping the lenders that participated in both the 2026 Notes and the 2027 Notes. The exchanged amount of the 2026 Notes is a non-cash financing activity. The Company determined that $176.3 million of the 2026 Notes was extinguished and new debt pertaining to the 2027 Notes was obtained, resulting in a loss on extinguishment of $1.6 million. In addition, the 2027 Notes raised additional cash proceeds which resulted in a cash inflow from financing activities of $19.9 million in the Consolidated Statements of Cash Flows. We used the $19.9 million of net cash proceeds to offset the cash outflows associated with the debt issuance costs as well as for general corporate purposes. 6.25% Convertible Senior Secured Notes due 2027 On November 19, 2024, the Company issued $197.3 million aggregate principal amount of the 2027 Notes to the Offering Participants in a private offering. The 2027 Notes bear interest at a rate of 6.25% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing March 15, 2025. The 2027 Notes will mature on March 15, 2027, subject to earlier repurchase or conversion. The initial conversion rate of the 2027 Notes is 33.333 shares of Common Stock, par value $0.0001 per share per $1,000 principal amount of 2027 Notes, which is the equivalent to an initial conversion price of approximately $30 per share, subject to customary adjustments. Upon the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2027 Notes in connection with such make-whole fundamental change. Based on the closing price of the Common Stock of $12.15 as of December 31, 2024, the if-converted value of the 2027 Notes was less than the principal amount. The 2027 Notes are not redeemable by the Company. Certain conditions apply to the conversion by holders of the 2027 Notes. If the Company undergoes a fundamental change, holders of the 2027 Notes have the right to require the Company to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest, if any. The 2027 Notes are convertible into Common Stock or a combination of cash and Common Stock, at the Company’s election. Subject to certain conditions, holders of the 2027 Notes may convert the 2027 Notes at their option at any time on or after December 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date. In addition, if specified events occur in a calendar quarter prior to December 15, 2026, the holders may elect to convert on an effective date of such event. Pursuant to the 2027 Notes Indenture, the Company is entitled to not effect any conversion that will result in any holder thereof, together with any Attribution Parties, beneficially owning more than 9.9% of the Company’s Common Stock (the “Exchange Cap”), after giving effect to such conversion. The Company’s obligation to deliver any shares of Common Stock that will result in any holder thereof to exceed the Exchange Cap (the “Excess Shares”) is not extinguished and is suspended until such holder advises the Company in writing that it may receive the Excess Shares without exceeding the Exchange Cap. The 2027 Notes are fully and unconditionally guaranteed by certain material wholly owned domestic subsidiaries of the Company (the “Guarantors”), subject to the terms of the 2027 Notes Indenture. The 2027 Notes and related guarantees will be secured on a first-priority basis by liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions and permitted liens. The Company may be required to pay additional interest of 2.5% per annum of the 2027 Notes in the event that it fails to pledge certain of its assets as part of the collateral for the 2027 Notes by November 20, 2025, unless such assets are sold. The 2027 Notes Indenture contains customary terms and conditions as well as various affirmative and negative covenants that, among other things, may restrict the ability of the Company and its subsidiaries to incur additional indebtedness, pay dividends, repurchase stock, prepay junior or unsecured indebtedness or make certain investments. In addition, the 2027 Notes Indenture contains limitations on the Company’s and its subsidiaries’ ability to dispose of certain assets, and, in certain circumstances, requires the Company to make an offer to repurchase the 2027 Notes using proceeds from certain asset sales at a price of par plus accrued and unpaid interest, and a premium equal to the lesser of all remaining interest on the 2027 Notes or one year of accrued interest on the 2027 Notes. The 2027 Notes Indenture includes customary events of default. If an event of default occurs and is continuing, the principal amount of the 2027 Notes and any accrued and unpaid interest may be declared immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the 2027 Notes and any accrued and unpaid interest would automatically become immediately due and payable. We account for the 2027 Notes as a single liability-classified instrument measured at amortized cost. The carrying value of the 2027 Notes was determined by deducting third party transaction costs incurred in connection with the issuance of the 2027 Notes of $3.7 million from the 2027 Notes fair value amount of $196.2 million, which is based on the exchanged amount of $176.3 million plus the cash consideration received of $19.9 million. The transaction costs were recorded as a debt discount in the Consolidated Balance Sheets and are amortized as interest expense and presented in Other income (expense) on the Consolidated Statements of Operations. Together with the cash interest, this results in an effective interest rate of 7.17% over the term of the 2027 Notes. We have presented the 2027 Notes in non-current liabilities in the accompanying Consolidated Balance Sheets. The carrying amount of the 2027 Notes consisted of the following as of December 31, 2024 (in thousands):
| December 31, 2024
Fair value of principal recorded at issuance | $ | 196,210 |
Less: debt discount | (3,483) |
Total | $ | 192,727 |
During the year ended December 31, 2024, we recognized interest costs on the 2027 Notes as follows (in thousands):
| Year ended December 31, 2024
Contractual interest | $ | 1,438 |
Amortization of debt discount | 220 |
Total | $ | 1,658 |
We classified the fair value of the 2027 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2027 Notes and our cost of debt. The estimated fair value of the 2027 Notes as of December 31, 2024 was $192.0 million and was determined using a lattice model. 1.125% Convertible Senior Notes due 2026 In March and April 2021, we issued $230.0 million aggregate principal amount of 2026 Notes in a private offering to qualified institutional buyers. The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually in arrears on March 15 and September 15 of each year, with an annual effective interest rate of 1.83%. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion. Each $1,000 of principal amount of the 2026 Notes initially is convertible into 14.6800 shares of Common Stock, which is equivalent to an initial conversion price of $68.12 per share, subject to adjustment upon the occurrence of specified events. In addition, upon the occurrence of a make-whole fundamental change, or if we issue a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Notes in connection with such make-whole fundamental change or redemption. Upon conversion, we can elect to settle the conversion value in cash, shares of our Common Stock, or any combination of cash and shares of our Common Stock. Subject to certain conditions, holders of the 2026 Notes may convert the 2026 Notes at their option at any time until the close of business on the scheduled trading day immediately preceding the maturity date. In addition, if specified corporate events occur prior to the maturity date, we may be required to increase the conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock price attributable to the event. Based on the closing price of the Common Stock of $12.15 as of December 31, 2024, the if-converted value of the 2026 Notes was less than the principal amount. Certain conditions apply to the conversion by holders and redemption by us of the 2026 Notes. In addition, upon the occurrence of a fundamental change prior to the maturity date, holders may require us to repurchase all or a portion of the 2026 Notes for cash. The 2026 Notes are our senior unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2026 Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries, including trade payables. The 2026 Notes Indenture includes customary events of default. If an event of default occurs and is continuing, the principal amount of the 2026 Notes and any accrued and unpaid interest may be declared immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the 2026 Notes and any accrued and unpaid interest would automatically become immediately due and payable. We account for the 2026 Notes as a single liability-classified instrument measured at amortized cost. The carrying value of the 2026 Notes was determined by deducting transaction costs incurred in connection with the issuance of the 2026 Notes of $7.8 million from the principal amount. Those transaction costs were recorded as a debt discount in the Consolidated Balance Sheets and are amortized to interest expense. We have presented the 2026 Notes in Convertible senior notes, net in the accompanying Consolidated Balance Sheets The carrying amount of the 2026 Notes consisted of the following as of December 31, 2024 and 2023 (in thousands):
| December 31,
| 2024 |  | 2023
Principal amount | $ | 53,740 |  |  | $ | 230,000 |
Less: debt discount | (454) |  |  | (3,530) |
Net carrying amount of liability component | $ | 53,286 |  |  | $ | 226,470 |
During the years ended December 31, 2024 and 2023, we recognized interest costs and a loss on extinguishment on the 2026 Notes as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023
Contractual interest | $ | 2,227 |  |  | $ | 2,588 |
Amortization of debt discount | 1,434 |  |  | 1,547 |
Loss on extinguishment of exchanged debt | 1,631 |  |  | — |
Total | $ | 5,292 |  |  | $ | 4,135 |
We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt. The estimated fair value of the 2026 Notes as of December 31, 2024 and 2023 was $48.7 million and $141.9 million and was determined using a lattice model. Capped Call Transactions In connection with the 2026 Notes, we entered into privately-negotiated capped call transactions with each of Barclays Bank PLC, BNP Paribas and Mizuho Markets Americas LLC. The capped call transactions cover, subject to customary adjustments, the number of shares of Common Stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our Common Stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80, which represents a premium of 100% over the last reported sale price of our Common Stock on The Nasdaq Global Select Market on March 22, 2021, subject to certain adjustments under the terms of the capped call transactions. The capped call transactions are accounted for as freestanding derivatives and recorded at the initial fair value, net of tax, in Additional paid-in-capital in the Consolidated Balance Sheets with no recorded subsequent change to fair value as long as they meet the criteria for equity classification. Under the if-converted method, the shares of Common Stock underlying the conversion option in the 2026 Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, are added to the numerator. However, upon conversion, there will be minimized economic dilution from the 2026 Notes, as exercise of the capped call transactions reduces dilution from the 2026 Notes that would have otherwise occurred when the price of our Common Stock exceeds the conversion price. The capped call transactions are intended to offset actual dilution from the conversion of the 2026 Notes and to effectively increase the overall conversion price from $68.12 to $104.80 per share. No changes to the Capped Call Agreement occurred in connection with the Exchange and Subscription agreements pertaining to the issuance of the 2027 Notes. Revolving Credit Agreement In May 2019, we entered into the Credit Agreement, as amended from time to time, with a maturity date of May 14, 2024. From September 28, 2022 to June 30, 2023, the borrowing bore an (a) interest at a rate per annum equal to (i) SOFR plus 10 basis points or (ii) a customary base rate, with loans denominated in certain currencies bearing interest at rates specific to such currencies, plus an additional margin ranging between 0.50% and 2.50% and (b) commitment fee of 0.40% on the daily amount of the unused commitments. After June 30, 2023, the borrowings bore an (a) interest at a rate per annum equal to (i) SOFR plus 10 basis points or (ii) a customer base rate, with loans denominated in certain currencies bearing interest at rates specific to such currencies, plus an additional margin ranging between 0.50% and 2.00% and (b) commitment fees ranging from 0.25% to 0.35% on the daily amount of unused commitments. Additionally, in the event the ratio of funded indebtedness to EBITDA exceeded 3.00:1.00, ABR and Canadian prime spreads increased to 1.25%, fixed rate spreads increased to 2.25% and the commitment fee increased to 0.40% on the daily amount of the unused commitments under the Credit Agreement. In March 2023, we entered into the Fourth Amendment to the Credit Agreement to modify certain financial covenants and provide for additional flexibility in our operations, among other changes, including our requirement to maintain a monthly minimum liquidity balance of at least $50.0 million, inclusive of any undrawn amounts under the revolving credit facility. In addition, the Fourth Amendment reduced our borrowing capacity under our senior secured revolving credit facility from $150.0 million to $75.0 million, with letters of credit up to $75.0 million, so long as that the sum of outstanding borrowings and letters of credit did not exceed the maximum funding commitment of $75.0 million. In November 2023, the Company entered into the Fifth Amendment to the Credit Agreement for additional flexibility with regards to the fully backstopped Rights Offering. See Note 10, Stockholders' Equity (Deficit), for additional information regarding the Rights Offering. The Fifth Amendment effected certain modifications to the definition of the term “Change in Control” and added the term “Disqualified Equity Interest” to the Credit Agreement, among other changes. In addition, the Fifth Amendment modified the restricted payment covenant to permit the Company to declare and pay dividends with respect to its Equity Interests, other than Disqualified Equity Interests, payable solely in additional shares of its Equity Interests, other than Disqualified Equity Interests. The Credit Agreement was secured by substantially all of our tangible and intangible assets, including a pledge of 100% of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65% of the shares or equity interests of first-tier foreign subsidiaries and each U.S. entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions. Certain of our domestic and foreign subsidiaries were guarantors under the Credit Agreement. On February 12, 2024, we prepaid $43.1 million to terminate all commitments to extend further credit under the Credit Agreement using our $80.0 million in proceeds received from the Rights Offering. The terms of the Rights Offering permit the Company to use the proceeds for general corporate purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, including compliance with certain financial covenants, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement, pursuant to our pre-existing Cash Collateral Agreement. Amounts committed to outstanding borrowings and letters of credit under the Cash Collateral Agreement and Credit Agreement as of December 31, 2024 and 2023 were as follows (in thousands):
| December 31, 2024 |  | December 31, 2023
Letters of credit and other cash collateral (1) | $ | 33,726 |  |  | $ | 25,200 |
Borrowings | — |  |  | 42,776 |
(1) Pursuant to the Cash Collateral Agreement, cash collateral is required for all letters of credit and treated as restricted cash, which is presented in Prepaid expenses and other current assets on the Consolidated Balance Sheets. See Note 6, Supplemental Consolidated Balance Sheets and Statements of Operations Information, for additional information.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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