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FINANCING ARRANGEMENTS | 3 Months Ended
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Mar. 31, 2025
Debt Disclosure [Abstract] |
FINANCING ARRANGEMENTS | FINANCING ARRANGEMENTS Convertible Senior Secured Notes due 2027 In November 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, with an annual effective interest rate of 7.17%. 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. The 2027 Notes are convertible into Common Stock or a combination of cash and Common Stock, at the Company's election. 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, unless such assets are sold. 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. The carrying amount of the 2027 Notes consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 |  | December 31, 2024
Fair value of principal recorded at issuance (1) | $ | 196,210 |  |  | $ | 196,210 |
Less: debt discount | (3,159) |  |  | (3,483) |
Total | $ | 193,051 |  |  | $ | 192,727 |
(1) The principal of the 2027 Notes was recorded at fair value of $196.2 million, which is equal to the exchanged principal of $176.3 million and cash consideration received of $19.9 million. 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 March 31, 2025 and December 31, 2024 was $207.6 million and $192.0 million and was determined using a lattice model. During the three months ended March 31, 2025, we recognized interest costs on the 2027 Notes as follows (in thousands):
| Three Months Ended March 31, 2025
Contractual interest | $ | 3,082 |
Amortization of debt discount | 372 |
Total | $ | 3,454 |
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 semi-annually 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. In connection with the issuance of the 2027 Notes in November 2024, the Company exchanged $176.3 million aggregate principal amount of 2026 Notes held by the Offering Participants for $176.3 million aggregate principal amount of the 2027 Notes. 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. The 2026 Notes are convertible into cash, shares of our Common Stock, or any combination of cash and shares of our Common Stock. 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. The carrying amount of the 2026 Notes consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 |  | December 31, 2024
Principal amount | $ | 53,740 |  |  | $ | 53,740 |
Less: debt discount | (361) |  |  | (454) |
Net carrying amount of liability component | $ | 53,379 |  |  | $ | 53,286 |
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 March 31, 2025 and December 31, 2024 was $50.2 million and $48.7 million and was determined using a lattice model. During the three months ended March 31, 2025 and 2024, we recognized interest costs on the 2026 Notes as follows (in thousands):
| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Contractual interest | $ | 151 |  |  | $ | 730 |  |  |  |  |
Amortization of debt discount | 93 |  |  | 391 |  |  |  |  |
Total | $ | 244 |  |  | $ | 1,121 |  |  |  |  |
Capped Call Transactions In connection with the 2026 Notes, we entered into privately-negotiated capped call transactions. 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. No changes to the capped call transactions occurred in connection with the Exchange and Subscription agreements pertaining to the issuance of the 2027 Notes. Revolving Credit Agreement In February 2024, we prepaid $43.1 million to terminate all commitments to access further credit under the Credit Agreement using a portion of the $80.0 million in proceeds received from the Rights Offering. See Note 7, Stockholders' Equity (Deficit) and Compensation Arrangements, for additional information regarding the Rights Offering. The Payoff Amount included $42.8 million in principal, $0.1 million in interest and $0.2 million in fees. 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, 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. The amounts committed to letters of credit under the Cash Collateral Agreement and Credit Agreement as of March 31, 2025 and December 31, 2024 were $31.8 million and $33.7 million. 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 expense and other current assets on the Condensed Consolidated Balance Sheets. See Note 4, Supplemental Condensed 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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