Note 7. Long-term Debt

Convertible Senior Notes

In November 2021, we issued $287.5 million aggregate principal amount of convertible promissory notes due May 15, 2027, or the 2021 Notes, and in September 2025, we issued $190.0 million aggregate principal amount of convertible promissory notes due September 15, 2029, or the 2025 Notes, and collectively, the Notes.

The Notes are senior unsecured obligations and do not contain any financial covenants. Each series of Notes is governed by an indenture (collectively, the “Indentures”). The 2025 Notes do not bear regular interest and the principal amount of the 2025 Notes does not accrete. The total net proceeds from the 2021 Notes and the 2025 Notes, after deducting initial debt issuance costs, fees and expenses, were $278.4 million and $183.6 million, respectively. We used approximately $183.6 million of the 2021 Notes net proceeds, excluding accrued interest, to repurchase approximately $76.4 million aggregate principal amount of the 2019 Notes through individual privately negotiated transactions concurrent with us offering the 2021 Notes. We used approximately $17.6 million, excluding accrued interest, to repurchase the remaining $9.9 million aggregate principal amount of the 2019 Notes in June 2022. We used the remainder of the net proceeds from the 2021 Notes for general corporate purposes. We used the 2025 Notes net proceeds, and cash on hand to exchange $190.0 million aggregate principal amount of the 2021 Notes for approximately $190.0 million in cash, representing the principal amount exchanged, and approximately 811,000 shares of our common stock, representing the exchange value in excess thereof, and also paid accrued and unpaid interest thereon, in privately negotiated transactions concurrently with the 2025 Notes offering.

Terms of the Notes

The holders of each series of Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding the respective conversion dates under the following circumstances:

Regardless of the foregoing circumstances, holders may convert all or any portion of the 2021 Notes, in increments of $1,000 principal amount, on or after February 15, 2027, and may convert all or any portion of the 2025 Notes, in increments of $1,000 principal amount, on or after June 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date for the applicable series of Notes.

We may redeem all or any portion of the 2021 Notes for cash, at our option, on or after November 20, 2024, and all or any portion of the 2025 Notes for cash, at our option, on or after March 20, 2028, if the last reported sale price of our common stock has been at least 130% of the conversion price for the applicable series of Notes for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period at a redemption price equal to 100% of the principal amount of the Notes being redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date for such Notes.

Holders who convert their Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indenture governing each series of Notes) are, under certain circumstances, entitled to an increase in the conversion rate for such Notes. Additionally in the event of a corporate event constituting a fundamental change (as defined in the Indenture governing each series of Notes), holders of the Notes may require us to repurchase all or a portion of their Notes of such series at a repurchase price equal to 100% of the principal amount of the Notes of such series being repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.

Accounting for the Notes

We account for each series of Notes as a single liability measured at its amortized cost. We presented the unamortized issuance costs as a direct deduction from the face amount of the Notes. We amortize the issuance costs to interest expense over the respective term of each series of Notes using the effective interest rate method.

Accrued interest related to the 2021 Notes was immaterial as of September 30, 2026 and $0.1 million as of December 31, 2025. There is no accrued interest for the 2025 Notes. We record accrued interest in accrued liabilities in our consolidated balance sheet.

We estimate the fair value of the 2021 Notes to be $1.7 million and $159.1 million as of September 30, 2026 and December 31, 2025, respectively, which we determined through consideration of quoted market prices. We estimate the fair value of the 2025 Notes to be $199.1 million and $195.6 million as of September 30, 2026 and December 31, 2025, respectively, which we determined through consideration of quoted market prices. The fair value for the Notes is classified as Level 2, as defined in Note 2.

Capped Call Transactions

In connection with issuing the 2019 Notes and the 2025 Notes, we entered into privately negotiated capped call transactions with certain financial counterparties. The capped call transactions are generally expected to reduce the potential dilution to our common stock upon any conversion of the 2019 Notes or the 2025 Notes, and/or offset any cash payments we would be required to make in excess of the principal amount of converted 2019 Notes or 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. If, however, the market price per share of our common stock exceeds the cap price of the respective capped call transactions, then our stock would experience some dilution and/or such capped call transactions would not fully offset the potential cash payments, in each case, to the extent the then-market price per share of our common stock exceeds the cap price.

The capped call transactions we entered into in connection with the 2019 Notes remain outstanding even though we have repurchased the 2019 Notes. The initial cap price of these capped call transactions is $54.20 per share, subject to certain adjustments under the terms of these capped call transactions and expire over 40 consecutive scheduled trading days ending on December 11, 2026. In September 2026, we irrevocably elected cash settlement as the settlement method for the capped call transactions. As a result of the election, the capped call transactions no longer qualify for equity classification and were reclassified from additional paid-in capital and recognized as derivative assets at a fair value of $48.6 million within other current assets on our Condensed Consolidated Balance Sheet. The derivative assets are recorded at fair value each reporting period until settlement. During the three months ended September 30, 2026, we recorded a gain of $0.1 million, which is included in other income, net.

The initial cap price of the capped call transactions entered into in connection with the 2025 Notes is $340.32 per share, subject to certain adjustments under the terms of the capped call transactions. These capped call transactions expire on September 15, 2029. We recorded the cost of $11.2 million incurred in connection with the 2025 capped call as a reduction to additional paid-in capital. The capped call transactions are separate transactions, and not part of the terms of the 2025 Notes. These 2025 capped call transactions meet the criteria for classification in equity, are not accounted for as derivatives and are not remeasured each reporting period.

Partial Exchange of the 2021 Notes

In September 2025, we entered into privately-negotiated exchanges with certain holders of our outstanding 2021 Notes with respect to the exchange of $190.0 million principal amount of the 2021 Notes, or the 2021 Note Exchange. We accounted for the 2021 Note Exchange transaction as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options, as amended for ASU 2024-04, or ASC 470-20, as amended, which we early adopted on January 1, 2025, using the prospective transition approach. In connection with the induced conversion, we paid approximately $190.0 million in cash, representing the principal amount exchanged, issued approximately 811,000 shares of our common stock, representing the exchange value in excess thereof, and also paid accrued and unpaid interest thereon. As a result of the induced conversion, we recorded $15.0 million in induced conversion expense, which is included in the Condensed Consolidated Statements of Operations. We did not receive any cash proceeds from issuing the shares of common stock but recognized additional paid-in-capital of $13.1 million representing the induced conversion expense, net of approximately $2.0 million of unamortized debt issuance costs related to the converted 2021 Notes.

Partial Repurchase of the 2021 Notes

In March 2026, we entered into separate, privately-negotiated repurchase agreements with certain holders of our outstanding 2021 Notes to repurchase approximately $40.2 million principal amount of the 2021 Notes, or the 2021 Note Repurchase. We accounted for the 2021 Note Repurchase as an induced conversion in accordance with ASC 470-20, as amended. In connection with the induced conversion, we paid approximately $47.2 million in cash (including accrued and unpaid interest). As a result of the induced conversion, we recorded $11.9 million in induced conversion expense, which is included in the Condensed Consolidated Statements of Operations. The induced conversion expense represents the fair value of the consideration issued upon conversion in excess of the fair value of the securities issuable under the original terms of the 2021 Notes. We accounted for the remaining cash consideration under the original terms of the 2021 Notes under the general conversion accounting guidance, where the difference between the carrying amount of the 2021 Notes retired, including unamortized debt issuance costs of $0.3 million, and the cash consideration paid, was recorded in additional paid-in capital.

In September 2026, we entered into privately-negotiated exchange agreements with certain holders of our outstanding 2021 Notes to exchange approximately $56.3 million principal amount of the 2021 Notes for cash and shares of our common stock, or the second 2021 Note Repurchase. We accounted for the second 2021 Note Repurchase as an induced conversion in accordance with ASC 470-20. In connection with the induced conversion, we paid approximately $56.5 million in cash, representing the principal amount repurchased and accrued and unpaid interest and issued approximately 198,000 shares of our common stock, representing the repurchase value in excess thereof. As a result of the induced conversion, we recorded $1.8 million in induced conversion expense, which is included in the Condensed Consolidated Statements of Operations. The induced conversion expense represents the fair value of the consideration issued upon conversion in excess of the fair value of the securities issuable under the original terms of the 2021 Notes. We did not receive any cash proceeds from issuing the shares of common stock but recognized additional paid-in-capital of $1.4 million representing the induced conversion expense, net of approximately $0.2 million of unamortized debt issuance costs related to the converted 2021 Notes.