| Debt | Debt Senior Notes On March 11, 2021, we completed an offering of $400.0 million aggregate principal amount of 4.0% senior notes due 2029, or the Senior Notes, in a private offering. The Senior Notes were issued pursuant to an indenture, dated as of March 11, 2021, or the Indenture, by and among our company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee. The Indenture provides that the Senior Notes will bear interest at a rate of 4.0% per annum, payable in cash semi-annually in arrears on December 15 and June 15 of each year, commencing on June 15, 2021. The Senior Notes will mature on June 15, 2029 and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our current and future domestic restricted subsidiaries that guarantee our obligations under our senior secured credit facilities. On or after June 15, 2024, we may redeem some or all of the Senior Notes at the redemption prices specified below, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date: Year Price 2024 102 % 2025 101 % 2026 and thereafter 100 % The Senior Notes are the general unsecured obligations of our company. The Senior Note guarantees are the senior unsecured obligations of each guarantor. Under certain circumstances, the guarantors may be released from their Senior Note guarantees without consent of the holders of Senior Notes. Under the terms of the Indenture, the Senior Notes rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness, and rank contractually senior in right of payment to our and the guarantors’ future indebtedness and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Notes. The Senior Notes are effectively subordinated to our and the guarantors’ existing and future secured indebtedness, including secured indebtedness under our senior secured credit facilities, to the extent of the value of the assets securing such indebtedness. The Senior Notes and guarantees are structurally subordinated to all existing and future indebtedness and liabilities (including trade payables) of our subsidiaries that do not guarantee the Senior Notes. The Indenture contains covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our Restricted Subsidiaries (as defined in the Indenture) to (i) incur additional indebtedness and guarantee indebtedness; (ii) pay dividends or make other distributions or repurchase or redeem our company’s or any parent’s capital stock; (iii) prepay, redeem or repurchase certain indebtedness; (iv) issue certain preferred stock or similar equity securities; (v) make loans and investments; (vi) dispose of assets; (vii) incur liens; (viii) enter into transactions with affiliates; (ix) enter into agreements restricting its subsidiaries’ ability to pay dividends; and (x) consolidate, merge or sell all, or substantially all, of its assets. The Indenture contains customary events of default including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Indenture will allow either the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Senior Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the maturity of the principal, and accrued and unpaid interest, if any, on all outstanding Notes. Revolving Credit Facility On November 21, 2024, we entered into a Fourth Amendment and Lender Joinder Agreement, or the Fourth Amendment, to our existing Second Amended and Restated Credit Agreement, as amended, or the Credit Agreement, with the lenders party thereto and Wells Fargo Bank, National Association, as the administrative agent, or the Administrative Agent, dated as of March 11, 2021. The Fourth Amendment extends the maturity date to be the earlier of (i) November 21, 2029 and (ii) ninety one (91) days prior to any maturity of the Senior Notes. Clause (ii) will not apply if we have Liquidity (as defined in the Fourth Amendment) in an amount of at least $100.0 million in excess of the amount that would be required to be paid on such date. The Fourth Amendment is arranged by a syndicate of financial institutions and, among other things, increases the revolving commitments from $250.0 million to $350.0 million. Additionally, the Fourth Amendment includes a $25.0 million sublimit for letters of credit and a $25.0 million sublimit for swingline loans. Under the terms of the Fourth Amendment we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $170.0 million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. Future proceeds under the revolving credit facility are available for working capital and general corporate purposes. As of December 2024, there was no balance outstanding under the revolving credit facility. Debt issuance costs relating to the revolving credit facility of $2.0 million, included in non-current other assets on our consolidated balance sheet, are being amortized over 60 months. The amortization of debt issuance costs on the revolving credit facility was $0.1 million and $0.2 million for the three and six months ended December 2024 and December 2023, respectively. Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of the Company, subject to certain exceptions, who collectively with the Company are referred to as the Credit Parties. The obligations of the Credit Parties under the Amended Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65% of the voting capital stock and 100% of the non-voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions. The Credit Agreement bears interest, at our election, of a Base Rate plus an Applicable Margin or Adjusted Term SOFR, as defined in the Second Amendment, plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis points, or Adjusted Term SOFR plus 100 basis points. The Applicable Margin is based on a sliding scale which ranges from 25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for Adjusted Term SOFR loans. We are required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-based sliding scale ranging from 0.175% to 0.25% per annum. Interest and fees are payable on a quarterly basis. Under the Credit Agreement, there are various restrictive covenants, including two financial covenants which limit the consolidated total net leverage ratio, or net leverage ratio, the consolidated net interest coverage ratio, or net interest coverage ratio. The net leverage ratio is the ratio of net debt as of the measurement date to Consolidated EBITDA, for the four consecutive quarters ending with the quarter of measurement. The current net leverage ratio shall not exceed 3.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 4.75 to 1.00, and thereafter 3.75 to 1.0. The net interest coverage ratio is Consolidated EBITDA to interest expense for the four consecutive quarters ending with the quarter of measurement net of total cash interest income. The current net interest coverage ratio shall not be less than 2.75 to 1.0, provided that such net interest coverage ratio shall be 3.0 to 1.0 starting with the last day of the first fiscal quarter ending after the 18 month anniversary of the Fourth Amendment Effective Date, or May 21, 2026, and thereafter. As of December 2024, we remain in compliance with the restrictive covenants. Convertible Senior Notes due 2031 On November 19, 2024 and November 26, 2024, we issued and sold $400.0 million and $50.0 million, respectively, in aggregate principal amount of 0.75% Convertible Senior Notes due 2031, or the 2031 Notes, in a private placement. The 2031 Notes were issued pursuant to an indenture, dated November 19, 2024, by and among us, and U.S. Bank Trust Company, National Association, as trustee, or the 2031 Indenture. The 2031 Notes are unsecured, bear interest at a fixed rate of 0.75% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025 and mature on December 1, 2031, unless earlier converted, redeemed or repurchased by us. The net proceeds from the 2031 Notes were approximately $435.6 million after deducting the debt issuance costs and our estimated offering expenses. We used approximately (i) $67.0 million to repurchase shares of our common stock with which we repurchased 890,484 shares at $75.24 a share, the stock price on November 14, 2024, the date of the offering memorandum, and (ii) $49.9 million to pay the cost of the capped call transactions (as described below). Additionally, the remainder of the net proceeds, together with our cash on hand, were used to repay the outstanding balance of our Term Loan Facility. The initial conversion rate of the 2031 Notes is 10.0308 shares of our common stock per $1,000 principal amount of 2031 Notes (which is equivalent to an initial conversion price of approximately $99.69 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2031 Indenture. In addition, upon the occurrence of a Make-Whole Fundamental Change (as defined in the 2031 Indenture) or if we deliver a Redemption Notice (as defined in the 2031 Indenture), we will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock as described in the 2031 Indenture for a holder who elects to convert its 2031 Notes in connection with such Make-Whole Fundamental Change or to convert its 2031 Notes called (or deemed called as provided in the 2031 Indenture) for redemption in connection with such Redemption Notice, as the case may be. At any time from, and including, September 2, 2031, the 2031 Notes are convertible at the option of the holders thereof only under the following circumstances: (1) during any calendar quarter commencing after the first calendar quarter ending on March 31, 2025, if the last reported sale price per share of our common stock exceeds 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days after any ten consecutive trading day period (such ten consecutive trading day period, the "measurement period") in which the Trading Price per $1,000 principal amount of the 2031 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) if we call such 2031 Notes for redemption; or (4) upon the occurrence of specified corporate events or distributions on our common stock, (as defined in the 2031 Indenture). As of December 28, 2024, none of the conditions allowing holders of the 2031 Notes to convert had been met. On or after September 2, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2031 Notes, holders of the 2031 Notes may convert all or a portion of their 2031 Notes, regardless of the foregoing conditions. Upon conversion, the 2031 Notes will be settled in cash, shares of the our common stock based on the conversion rate (as defined in the 2031 Indenture) or any combination thereof, at our election. The 2031 Notes are redeemable, at our option at any time, and from time to time, on or after December 6, 2028. We may redeem for cash all or any portion of the 2031 Notes (subject to the limitation described below), at our option, on or after December 6, 2028 and on or before the 40th scheduled trading day immediately before December 1, 2031 at a cash redemption price equal to the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if (i) the notes are Freely Tradable (as defined in 2031 Indenture) as of the date we send the related redemption notice and all accrued and unpaid additional interest, if any, has been paid in full as of the most recent interest payment date occurring on or before the date we send such notice; and (ii) the last reported sale price per share of our common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send such redemption notice; and (2) the trading day immediately before the date we send such notice. However, we may not redeem less than all of the outstanding notes unless at least $100.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time we send, and after giving effect to, the related redemption notice. In addition, calling any note for redemption will constitute a Make-Whole Fundamental Change with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption. No sinking fund is provided for the 2031 Notes. The 2031 Notes will be our senior, unsecured obligations and will be (i) equal in right of payment with our existing and future senior unsecured indebtedness; (ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated 2031 Notes; (iii) effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities. Upon the occurrence of a Fundamental Change (as defined in the 2031 Indenture) prior to the maturity date of the 2031 Notes, holders of the 2031 Notes may require us to repurchase their notes for a cash repurchase price equal to the principal amount of the 2031 Notes to be repurchased, plus any accrued and unpaid interest, if any, to, but excluding, the Fundamental Change Repurchase Date (as defined in the 2031 Indenture). 2031 Capped Calls In connection with the issuance of the 2031 Notes, we entered into privately negotiated capped call transactions, or, each, a 2031 Capped Call, and, collectively, the 2031 Capped Calls, with certain financial institutions. The 2031 Capped Calls have an initial strike price of $99.69, subject to certain adjustments, which corresponds to the initial conversion price of the 2031 convertible senior notes. The 2031 Capped Calls have an initial cap price of $150.48 per share, subject to certain adjustments. The 2031 Capped Calls are expected to partially offset the potential dilution to the Company’s common stock upon any conversion of the 2031 convertible senior notes, with such offset subject to a cap based on the cap price. Each 2031 Capped Call covers, subject to anti-dilution adjustments, approximately 4.5 million shares of the Company’s common stock. The 2031 Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers, and announcement events. In addition, each 2031 Capped Call is subject to certain specified additional disruption events that may give rise to a termination of the 2031 Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings, and hedging disruptions. For accounting purposes, each 2031 Capped Call is treated as a separate transaction from, and not part of, the terms of the 2031 convertible senior notes. As these transactions meet certain accounting criteria, the 2031 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The 2031 Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification. Term Loan Facility On December 2, 2021, we entered into that certain First Amendment and Lender Joinder Agreement to the Credit Agreement, to, among other things, establish a new $600.0 million incremental term loan facility, or the Term Loan Facility. The Term Loan Facility was advanced by certain existing and new lenders under the Credit Agreement to finance the DSPG acquisition. The Term Loan Facility matures on December 2, 2028. Principal on the Term Loan Facility is payable in equal quarterly installments on the last day of each March, June, September and December of each year, beginning December 31, 2021, at a rate of 1.00% per annum. We used a portion of the net proceeds from the 2031 Notes, together with our cash on hand, to repay the outstanding balance under our Term Loan Facility. On November 19, 2024, we paid a total of $583.4 million, which consisted of (i) the remaining outstanding principal balance of $582.0 million and (ii) accrued and unpaid interest of $1.4 million. The repayment of the Term Loan Facility was accounted for as a debt extinguishment. The consideration used to extinguish the Term Loan Facility and the carrying value of the Term Loan Facility (including unamortized debt issuance costs) resulted in a loss on early extinguishment of debt of $6.5 million included in loss on early extinguishment of debt within our condensed consolidated statements of operations. The net carrying amounts of our debt agreements are as follows (in millions): December 2024 June 2024 Senior Notes Term Loan Facility 2031 Notes Total Senior Notes Term Loan Facility Total Principal balance $ 400.0 $ — $ 450.0 $ 850.0 $ 400.0 $ 583.5 $ 983.5 Unamortized issuance costs (3.3) — (14.2) (17.5) (3.7) (6.9) (10.6) Net carrying amount $ 396.7 $ — $ 435.8 $ 832.5 $ 396.3 $ 576.6 $ 972.9 Interest expense related to the debt agreements for the three months ended December 2024 and December 2023 was as follows (in millions): Three Months Ended December 2024 December 2023 Senior Notes Term Loan Facility 2031 Notes Total Senior Notes Term Loan Facility Total Interest expense $ 4.0 $ 7.5 $ 0.4 $ 11.9 $ 4.0 $ 11.6 $ 15.6 Amortization of debt issuance costs 0.2 — 0.2 0.4 0.2 0.4 0.6 Total interest expense $ 4.2 $ 7.5 $ 0.6 $ 12.3 $ 4.2 $ 12.0 $ 16.2 Interest expense related to the debt agreements for the six months ended December 2024 and December 2023 was as follows (in millions): Six Months Ended December 2024 December 2023 Senior Notes Term Loan Facility 2031 Notes Total Senior Notes Term Loan Facility Total Interest expense $ 8.0 $ 19.0 $ 0.4 $ 27.4 $ 8.0 $ 23.1 $ 31.1 Amortization of debt issuance costs 0.3 0.4 0.2 0.9 0.3 0.8 1.1 Total interest expense $ 8.3 $ 19.4 $ 0.6 $ 28.3 $ 8.3 $ 23.9 $ 32.2 The amortization of debt issuance costs on the Term Loan Facility during the three and six months ended December 2024 excludes the loss on early extinguishment of debt of $6.5 million. |
