| DEBT | DEBT December 31, (in thousands) 2023 2022 2021 Credit Facility $ 275,000 $ 275,000 Sellers’ notes 18,591 27,606 Finance liabilities 18,100 18,100 Financing Agreement 1,766 19,364 Finance leases 1,692 902 Total debt $ 315,149 $ 340,972 Current portion of debt $ 11,148 $ 11,347 Less: unamortized deferred financing costs — 18 Current portion of debt, net $ 11,148 $ 11,329 Long-term debt $ 304,001 $ 329,625 Less: unamortized deferred financing costs 6,436 10,328 Long-term debt, net $ 297,565 $ 319,297 2021 Credit Facility On August 27, 2021, the Company entered into a credit agreement with a group of lenders (the “2021 Credit Agreement”) that provided for an initial term loan of $210,000, which was borrowed in full. The 2021 Credit Agreement provided for an expansion feature that allowed the Company to request an increase in the term loan outstanding up to $275,000 if the then-existing lenders (or other lenders) agreed to provide such additional term loans. During the second quarter of 2022, the Company borrowed an additional $65,000 pursuant to this expansion feature (the “2022 Loans” and, together with the initial term loan, the “2021 Credit Facility”) for total borrowings of $275,000 outstanding under the 2021 Credit Facility. The 2021 Credit Facility matures on August 27, 2025 and does not require scheduled principal amortization payments. Borrowings under the 2021 Credit Facility bear interest at a rate of 9.5% per annum, payable quarterly and, as to any portion of the term loan that is prepaid, on the date of prepayment. The 2021 Credit Agreement permits the Company to request an extension of the maturity date for 364 days, subject to the lenders’ discretion. Mandatory prepayments are required from the proceeds of (i) indebtedness that is not permitted by the 2021 Credit Agreement, and (ii) asset sales and casualty events, subject to customary reinvestment rights. The Company may prepay the 2021 Credit Facility at any time, subject to (a) a customary make-whole payment if paid prior to February 27, 2023 (which did not occur), (b) a prepayment premium equal to 4.75% of the principal amount prepaid if paid after February 27, 2023 but prior February 27, 2024 (which did not occur), and (c) a prepayment premium of 2.375% if paid after February 27, 2024 but prior to February 27, 2025. No prepayment premium is required for prepayment on or after February 27, 2025. Once repaid, amounts borrowed under the 2021 Credit Facility may not be re-borrowed. The Company is required to comply with two financial covenants under the 2021 Credit Agreement. The Company may not permit its liquidity (defined as unrestricted cash and cash equivalents pledged under the 2021 Credit Facility plus any future revolving credit availability) to be below $20,000 as of the last day of any fiscal quarter. Additionally, the Company may not permit the ratio of Consolidated EBITDA (as defined in the 2021 Credit Agreement) to consolidated cash interest expense for any period of four consecutive fiscal quarters to be less than 2.00:1.00 for the period ending December 31, 2021 and increased to not less than 2.50:1.00 for the period ending June 30, 2022 and thereafter. The Company has a customary equity cure right for each of these financial covenants. The Company is in compliance with these covenants as of December 31, 2023. The 2021 Credit Agreement requires the Company to make certain representations and warranties and to comply with customary covenants, including restrictions on the payment of dividends, repurchase of stock, incurrence of indebtedness, dispositions, and acquisitions. The 2021 Credit Agreement also contains customary events of default including: non-payment of principal or interest; violations of covenants; bankruptcy; change of control; cross defaults to other debt; and material judgments. The 2021 Credit Facility is guaranteed by all of the Company’s subsidiaries and is secured by substantially all of the assets of the Company and its subsidiaries. We incurred financing costs of $8,806 related to the initial term loan and additional financing costs of $7,606 related to the 2022 Loans, which includes warrants issued to certain lenders to acquire 3,130 shares of Class A common stock that had a fair value of $2,639 at issuance (refer to Note 12, “Stockholders’ Equity,” for additional information). The financing costs are being amortized to interest expense over the term of 2021 Credit Facility using the straight-line method, which approximates the interest rate method. Proceeds from the initial term loan under the 2021 Credit Facility were used, in part, to repay certain then-outstanding debt obligations, as further described below, and, together with the 2022 Loans, fund working capital and general corporate matters, including, but not limited to, growth investments, acquisitions, capital expenditures, and other strategic initiatives. The 2022 Loans were funded by a combination of new and existing lenders. Borrowings from the existing lenders were accounted for as a modification of existing debt, with the exception of one lender that was considered an extinguishment. We recognized a loss on extinguishment of $2,180 as a component of interest expense during 2022, comprised of the write-off of $337 related to the lender’s initial term loan and $1,843 related to the lender’s new loan, which included the estimated fair value of the warrants issued to the lender. Sellers’ Notes Sellers’ notes consist of amounts owed for acquisitions or other purchases. Sellers’ notes includes a total of $8,100 related to the acquisition of two additional licenses in Illinois that is included in “Current portion of debt, net” at December 31, 2023 and “Long-term debt, net” at December 31, 2022, as well as $9,705 and $8,366 outstanding at December 31, 2023 and 2022, respectively, related to the OPA Sellers’ Note that is included in “Long-term debt, net” at each date. Refer to Note 4, “Acquisitions,” for additional information regarding these transactions. The $11,000 OPA Sellers’ Note was recorded net of an initial discount of $3,010 that was calculated as of the transaction date utilizing the Company’s estimated incremental borrowing rate based on the anticipated close date and is being accreted to interest expense over the expected term. Additionally, $786 and $3,140 was outstanding as of December 31, 2023 and 2022, respectively, for the purchase of a previous non-controlling interest, which amounts are included in “Current portion of debt, net” at each period end and the final payment was made in January 2024. Sellers’ notes as of December 31, 2022 also includes the final $8,000 holdback payment due for an acquisition from 2020, which was paid in 2023. Financing Agreement In December 2022, the Company received $19,364 pursuant to a financing agreement with a third-party lender (the “Financing Agreement”). The Company assigned to the lender its interests in an employee retention tax credit claim (the “ERTC Claim”) that it submitted in November 2022 totaling approximately $22,794. If the Company does not receive the ERTC Claim, in whole or in part, the Company is required to repay the related portion of the funds received plus interest of 10% accrued from the date of the Financing Agreement through the repayment date. The Financing Agreement does not have a stated maturity date and the discount is being accreted to interest expense over an expected term. The Company’s obligations under the Financing Agreement will be satisfied upon receipt of the ERTC Claim, in full, or other full repayment. The total claim amount of $22,794 was recognized as a component of “Other, net” on the Consolidated Statements of Operations during 2023. The Company received $20,830 of the ERTC Claim during 2023, which was remitted to the lender per the terms of the Financing Agreement. A total of $1,964 of the ERTC Claim remains outstanding as of December 31, 2023, which receivable is included in “Other current assets” on the Consolidated Balance Sheet, and the balance outstanding under the Financing Agreement is included in “Current portion of debt, net” at December 31, 2023 and “Long-term debt, net” at December 31, 2022. Finance Liabilities Finance liabilities consist of amounts related to failed sale leaseback transactions. See Note 10, “Leases,” for additional information. Finance Leases Finance leases consist of liabilities related to finance lease arrangements. See Note 10, “Leases,” for additional information. Other Activity 2021 Repayments In August 2021, the Company utilized proceeds from the initial term loan under the 2021 Credit Facility to repay certain then-outstanding debt obligations, as further described below. The Company prepaid $11,624 of principal outstanding and accrued interest of $1,007 related to a loan and security agreement that was entered into in May 2019, which borrowings were used for the purchase of a building and related renovation expenses. The prepayment was considered a debt extinguishment and the Company recognized a loss on extinguishment of $355, resulting from a prepayment penalty less a final interest adjustment. The Company prepaid $10,000 of principal outstanding and accrued interest of $283 related to two notes outstanding under a note purchase agreement that was entered into in July 2019 and had a maturity date of July 1, 2024. In conjunction with these notes, the Company issued warrants to purchase 1,094 AWH historical common units at an exercise price of $3.20 per unit. The fair value of these warrants was de minimis , was recorded as a discount to the notes, and was being amortized to interest expense over the exercise term of three years. In April 2021, these warrants were cancelled in exchange for a payment of $4,156 (refer to Note 12, “Stockholders’ Equity,” for additional details). The prepayment was considered a debt extinguishment and the Company recognized a loss on extinguishment of $34, resulting from a final interest adjustment. The Company prepaid $4,750 of principal that remained due under a secured promissory note that was entered into in September 2019, which was due September 10, 2022. The Company previously prepaid $500 of principal due under this note in January 2021, without penalty. The prepayment in August 2021 was considered a debt extinguishment and the Company recognized a gain on extinguishment of $290, resulting from partial forgiveness of principal and the final interest payment due. The Company prepaid total principal outstanding of $25,000 that was due under a senior secured credit facility that was entered into in October 2020 (the “October 2020 Credit Facility”), in addition to interest of $642 and the reimbursement of $26 of lender expenses. Additionally, per the terms of the October 2020 Credit Facility, the lender was due an additional interest payment of $3,750 at maturity (the “Maturity Interest Payment”), which was being accrued to interest expense over the term of the October 2020 Credit Facility. The prepayment was considered a debt extinguishment and the Company recognized a loss on extinguishment of $3,915, resulting from a $2,656 true-up for the Maturity Interest Payment, the write off of $1,282 of unamortized deferred financing costs, $26 of lender expenses, and a reduction of $49 for the final adjustment to interest expense. The lenders elected to receive the Maturity Interest Payment in equity and received 1,986 shares of Class A common stock that was calculated in accordance with the settlement terms of the original agreement and is accounted for as share-settled debt. The share issuance is included within “Issuance of common stock” on the Consolidated Statements of Changes in Stockholder’s Equity for 2021. The October 2020 Credit Facility contained certain covenants with which the Company was in compliance through prepayment. In conjunction with the initial borrowings, the Company issued warrants for an aggregate of 1,250 AWH historical common units with an exercise price of $4.00 per unit that can be exercised for five years from issuance. These warrants remain outstanding for an equivalent number of shares of Class A common stock following the Conversion. The fair value at issuance was recorded as a discount to the loan and was amortized to interest expense over the initial term of the loan. The Company prepaid total principal of $20,000 due under term loans borrowed under a financing agreement that was entered into in October 2020 (the “NJ Term Loan”) in addition to interest of $595 and a make-whole interest payment of $831. The prepayment was considered a debt extinguishment and the Company recognized a loss on extinguishment of $2,059, resulting from the make-whole interest payment plus the write-off of $1,228 of unamortized deferred financing costs. The NJ Term Loan contained certain covenants with which the company was in compliance prior to prepayment, including a maximum debt to assets ratio of 70% as defined in the agreement. The Company prepaid total principal of $4,500 due under a loan and security agreement that was entered into in December 2020 (the “NJ Real Estate Loan”). The prepayment was considered a debt extinguishment and the Company recognized a loss on extinguishment of $564, resulting from a prepayment penalty and interest, the reimbursement of lender expenses, and the write-off of unamortized deferred financing costs. Convertible Promissory Notes In June 2019, the Company entered into a convertible note purchase agreement (the “2019 Convertible Promissory Note Purchase Agreement”) whereby the Company could issue up to $35,000 of convertible notes, which amount could be increased at the Company’s sole discretion (the “AWH Convertible Promissory Notes,” each an “AWH Note”). The AWH Convertible Promissory Notes were convertible into equity units of the Company upon the occurrence of certain events, such as a change of control or an IPO. Each AWH Note had a maturity date of two years from its issue date and could either be paid in full at maturity or converted into equity units if not otherwise converted prior to maturity. Each AWH Note had an interest rate of 8% for the first twelve months, 10% for months thirteen through fifteen, and 13% thereafter through maturity. Interest was paid-in-kind and added to the outstanding balance of the note, to be paid at maturity or upon conversion. In conjunction with these notes, the Company issued warrants to purchase 1,969 AWH historical common units at an exercise price of $4.00 per share that can be exercised for three years from issuance. These warrants remain outstanding for an equivalent number of shares of Class A common stock following the Conversion. The total fair value of the warrants at issuance was de minimis and was recorded as a discount on the related notes and amortized to interest expense over the term of the related notes. Refer to Note 12, “Stockholders’ Equity,” for additional details regarding the warrants. On April 22, 2021, the 2019 Convertible Promissory Note Purchase Agreement was amended (the “Amended Notes Consent”) to clarify the conversion rate of the AWH Convertible Promissory Notes. Prior to the Amended Notes Consent, the conversion feature in connection with a going public transaction specified that the holders would receive a number of shares of Class A common stock equal to the outstanding principal and accrued and unpaid interest under the notes divided by a price per share equal to the lesser of (a)(i) a 20% discount to the price per share of Class A common stock offered pursuant to an offering in the event such offering occurs on or before 12 months from the closing date; (ii) a 25% discount to the price per share of Class A common stock offered pursuant to an offering in the event such offering occurs after 12 months from the closing date, but before the maturity date; and (b) the price per security, which equals the price per share resulting from a pre-money valuation of the company of $295,900, which was determined by the Company to be $2.96. The Amended Notes Consent was solely made to clarify the conversion price in connection with a going public transaction. The 2019 Convertible Promissory Note Purchase Agreement includes provisions to the effect that the notes may be amended with the written consent of the holders of a majority of the outstanding principal amount of all such notes, and which such consent was obtained, and any amendment so approved is binding on all holders of the notes. Refer to Note 15, “Commitments and Contingencies,” for information regarding a stockholder dispute related to this agreement. In conjunction with the Company’s IPO, the total principal outstanding under the AWH Convertible Promissory Notes, plus accrued interest thereon, automatically converted into 28,478 shares of Class A common stock based on a conversion price of $2.96 per share in accordance with the Amended Notes Consent. The conversion was treated as a share-settled redemption and the related principal plus accrued interest was reclassified to equity with no gain or loss recorded. Per the terms of the notes, any AWH Convertible Promissory Notes outstanding for less than twelve months received a full twelve months of interest at conversion. $1,000 of these notes were with related party entities that are managed by one of the founders of the Company. In January 2021 the Company entered into a convertible note purchase agreement under which the Company issued $49,500 notes (the “2021 AWH Convertible Promissory Notes”). Each note had an interest rate of 8% for the first twelve months, 10% for months thirteen through fifteen, and 13% thereafter through maturity. Interest was to be paid-in-kind and added to the outstanding balance of the note, to be paid at maturity or upon conversion. Prior to the Conversion, the 2021 AWH Convertible Promissory Notes were convertible into common units of the Company on occurrence of certain events, such as a change of control or an initial public offering. Pursuant to the terms of the notes, upon the occurrence of an initial public offering, each note, including interest thereon less applicable withholding taxes, would automatically convert into equity securities issued in connection with such initial public offering, with the number of securities issued on the basis of a price equal to the lesser of: (a)(i) a 20% discount to the issue price if an initial public offering occurred on or before 12 months from each note issuance; (ii) a 25% discount to the issue price if an initial public offering occurred after 12 months of each note issuance, but before maturity; and (b) the conversion price then in effect based on a defined pre-money valuation of the Company. In conjunction with the Company’s IPO on May 4, 2021, the total principal outstanding under the 2021 AWH Convertible Promissory Notes, plus accrued interest thereon, automatically converted into 8,910 shares of Class A common stock based on a conversion price of $6.00 per share in accordance with the terms of the agreement. Per the terms of the notes, the 2021 AWH Convertible Promissory Notes received a full twelve months of interest at conversion. Debt Maturities During 2023, we repaid $8,000 of sellers’ notes related to the final holdback payment for an acquisition from 2020 and $2,358 of sellers’ notes related to the former owners of a previous non-controlling interest. During 2022, we repaid a total of $24,839 of sellers’ notes related to two previous acquisitions and $3,143 of sellers’ notes related to the former owners of a previous non-controlling interest. During 2021, we repaid $76,124 of principal under our then-outstanding term notes, $3,143 of sellers’ notes related to the former owners of a previous non-controlling interest, $11,174 of sellers’ notes related to an acquisition from 2020, and $4,712 of sellers’ notes related to the Hemma acquisition. As of December 31, 2023, the following cash payments are required under our debt arrangements: (in thousands) 2024 2025 Total Sellers’ notes (1) $ 8,886 $ 11,000 $ 19,886 Term note maturities — 275,000 275,000 (1) Certain cash payments include an interest accretion component. The timing of certain payments may vary based on regulatory approval of the underlying transactions. The table above excludes the remaining amount due under the Financing Arrangement, as the timing of the repayment is uncertain. Interest Expense Interest expense during 2023, 2022, and 2021 consisted of the following: Year Ended December 31, (in thousands) 2023 2022 2021 Cash interest $ 25,992 $ 24,524 $ 17,638 Accretion 8,486 3,576 9,710 Interest on financing liabilities (1) 2,308 2,113 2,643 Interest on finance leases 198 43 — Loss on extinguishment of debt (2) — 2,180 6,637 Non-cash interest related to beneficial conversion feature (3) — — 27,361 Total $ 36,984 $ 32,436 $ 63,989 (1) Interest on financing liabilities related to failed sale leaseback transactions. See Note 10, “Leases,” for additional details. (2) The amount recorded for 2021 includes $1,656 of pre-payment fees and additional cash interest payments and $4,981 of non-cash components, including the write-off of unamortized deferred financing costs. (3) See Note 12, “Stockholders’ Equity,” for additional details. |
