Debt

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Debt

Debt

As of December 31, 2023, outstanding borrowings of our debt are as follows:

	Maturity of Debt
Lender	2024		2025		2026		2027		2028		Thereafter
Warehouse Credit Facilities
City National Bank	$	20,046	$	—	$	—	$	—	$	—	$	—
Origin Bank	30,110		—		—		—		—		—
M&T Bank	18,870		—		—		—		—		—
Prosperity Bank	29,358		—		—		—		—		—
Republic Bank & Trust Company	23,415		—		—		—		—		—
Wells Fargo Bank, N.A.	30,165		—		—		—		—		—
Term Loan	—		—		—		—		124,416		—
Convertible Senior Notes
2025 notes	—		192,002		—		—		—		—
2027 notes	—		—		—		496,735		—		—
Total borrowings	$	151,964	$	192,002	$	—	$	496,735	$	124,416	$	—

Warehouse Credit Facilities—To provide capital for the mortgage loans that it originates, our mortgage segment utilizes warehouse credit facilities that are classified as current liabilities on our consolidated balance sheets. Borrowings under each warehouse credit facility are secured by the related mortgage loan, and rights and income related to the loans.

Each warehouse credit facility contains various restrictive and financial covenants and provides that a breach or failure to satisfy these covenants constitutes an event of default. As of December 31, 2023 we received a waiver of our financial covenants pursuant to the Republic Bank & Trust Company credit facility.

The following table summarizes borrowings under these facilities as of the periods presented:

	December 31, 2023						December 31, 2022
Lender	Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings		Borrowing Capacity		Outstanding Borrowings		Weighted-Average Interest Rate on Outstanding Borrowings
City National Bank	$	50,000	$	20,046	7.24	%	$	75,000	$	27,288	5.89	%
Comerica Bank	N/A		N/A		N/A		75,000		26,526		6.36	%
Origin Bank	75,000		30,110		7.25	%	75,000		23,739		5.98	%
M&T Bank	50,000		18,870		7.39	%	50,000		19,126		6.45	%
Prosperity Bank	75,000		29,358		7.23	%	100,000		35,856		6.18	%
Republic Bank & Trust Company	45,000		23,415		7.28	%	75,000		26,636		5.81	%
Wells Fargo Bank, N.A.	100,000		30,165		7.36	%	100,000		31,338		6.41	%
Total	$	395,000	$	151,964			$	550,000	$	190,509

Term Loan—On October 20, 2023, we entered into a definitive agreement with Apollo Capital Management, L.P. and its affiliates (“Apollo”) whereby Apollo agreed to commit up to $250,000 of financing for us in the form of a first lien term loan facility (the “facility”). We borrowed half of the loan on October 20, 2023 and the remainder will be available as a delayed draw during the following 12 months.

The facility is pre-payable at par, after 12 months of call protection (during which prepayment would be at 101% of par), or with respect to prepayments made with respect to a change of control, at 101% of par, and carries a five-year term, maturing October 20, 2028. Interest will be charged at the Secured Overnight Financing Rate (“SOFR”) +575 basis points for the first five full fiscal quarters after closing, with step-downs to SOFR +550 basis points and SOFR +525 basis points thereafter upon achieving agreed performance metrics. The facility requires that we maintain cash and cash equivalents of $75,000 which is tested on a quarterly basis. The negative covenants include restrictions on the incurrence of liens and indebtedness, investments, certain merger transactions, and other matters, all subject to certain exceptions. The effective interest rate for our term loan is 11.97%.

The facility includes customary events of default that, include among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control, and certain material ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the facility. In addition, the facility prohibits us from making any cash payments on the conversion or repurchase of our notes if an event of default exists under our term loan facility, or if, after giving effect to such conversion or repurchase, we would not be in compliance with the financial covenants under our term loan facility.

As security for our obligations under the facility, we granted Apollo a first priority security interest on substantially all of our assets and the assets of our material subsidiaries, subject to certain exceptions. Therefore, in a bankruptcy, Apollo first, and the holders of our convertible senior notes second, would have a claim to our assets senior to the claims of holders of our common stock.

As part of the transaction, we repurchased $5,000 principal amount of our 2025 convertible notes held by Apollo and $71,894 principal amount of 2027 convertible notes held by Apollo for an aggregate repurchase price of $57,075 using cash on our balance sheet. Additionally, we paid $2,471 in debt issuance costs in connection with the Apollo term loan, which is currently recorded in prepaid expenses on our consolidated balance sheet.

The components of the term loan were as follows:

December 31, 2023
Aggregate Principal Amount	Unamortized Debt Discount	Unamortized Debt Issuance Costs	Net Carrying Amount
124,688	—	272	124,416

Convertible Senior Notes—We have issued convertible senior notes with the following characteristics:

Issuance	Maturity Date	Stated Cash Interest Rate		Effective Interest Rate		First Interest Payment Date	Semi-Annual Interest Payment Dates	Conversion Rate
2025 notes	October 15, 2025	—	%	0.42	%	—	—	13.7920
2027 notes	April 1, 2027	0.50	%	0.90	%	October 1, 2021	April 1; October 1	10.6920

We issued our 2025 notes on October 20, 2020, with an aggregate principal amount of $661,250. We issued our 2027 notes on March 25, 2021 and April 5, 2021, with an aggregate principal amount of $575,000.

The following table describes repurchase activity for the year ended December 31, 2023:

	Repurchase Program			Repurchases in Conjunction with Apollo Term Loan
Issuance	Principal	Cash Paid	Gain on Extinguishment	Principal	Cash Paid	Gain on Extinguishment
2025 notes	320,283	241,808	75,204	5,000	4,075	664
2027 notes	—	—	—	71,894	46,754	18,151

The components of the convertible senior notes are as follows:

	December 31, 2023
Issuance	Aggregate Principal Amount	Unamortized Debt Issuance Costs	Net Carrying Amount
2025 notes	193,445	1,443	192,002
2027 notes	503,106	6,371	496,735

	December 31, 2022
Issuance	Aggregate Principal Amount		Unamortized Debt Issuance Costs		Net Carrying Amount
2023 notes	$	23,512	$	81	$	23,431
2025 notes	518,728		6,045		512,683
2027 notes	575,000		9,526		565,474

	Year End December 31,
	2023		2022		2021
2023 notes
Contractual interest expense	$	223	$	411	$	413
Amortization of debt issuance costs	81		150		189
Total interest expense	$	304	$	561	$	602
2025 notes
Contractual interest expense	—		—		—
Amortization of debt issuance costs	4,602		2,706		2,760
Total interest expense	$	4,602	$	2,706	$	2,760
2027 notes
Contractual interest expense	2,785		2,875		2,187
Amortization of debt issuance costs	3,151		2,240		1,705
Total interest expense	$	5,936	$	5,115	$	3,892
Total
Contractual interest expense	3,008		3,286		2,600
Amortization of debt issuance costs	7,834		5,096		4,654
Total interest expense	$	10,842	$	8,382	$	7,254

Conversion of Our Convertible Senior Notes

Prior to the free conversion date, a holder of each tranche of our convertible senior notes may convert its notes in multiples of $1,000 principal amount only if one or more of the conditions described below is satisfied. On or after the free conversion date, a holder may convert its notes in such multiples without any conditions. The free conversion date is July 15, 2025 for our 2025 notes and January 1, 2027 for our 2027 notes.

The conditions are:

•during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day;

•during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the applicable notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;

•if we call any or all of the applicable notes for redemption, at any time prior to the close of business on the scheduled trading day prior to the redemption date; or

•upon the occurrence of specified corporate events.

We intend to settle any future conversions of our convertible senior notes by paying or delivering, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We apply the if-converted method to calculate diluted earnings per share when applicable. Under the if-converted method, the denominator of the diluted earnings per share calculation is adjusted to reflect the full number of common shares issuable upon conversion, while the numerator is adjusted to add back interest expense for the period. None of the above conditions were satisfied during the year ended December 31, 2023.

Classification of Our Convertible Senior Notes

Historically, we had separated our 2025 notes into liability and equity components. With our adoption of ASU 2020-06 on January 1, 2021, using the modified retrospective approach, this accounting treatment is no longer applicable. All of our convertible senior notes are now accounted for wholly as liabilities. The difference between the principal amount of the notes and the net carrying amount represents the unamortized debt discount, which we record as a deduction from the debt liability in our consolidated balance sheets. This discount is amortized to interest expense using the effective interest method over the term of the notes.

See Note 4 for fair value information related to our convertible senior notes.

Cross-acceleration and Cross-default Provisions of our Convertible Senior Notes, Term Loan, and Warehouse Credit Facilities—The indentures governing our 2025 and 2027 convertible senior notes contain cross-acceleration and cross-default provisions. These provisions could have the effect of creating an event of default under the indenture for either our 2025 or 2027 convertible senior notes, despite our compliance with that agreement, due solely to an event of default or failure to pay amounts owed under the indenture for the other tranche of convertible senior notes. Accordingly, all or a significant portion of our outstanding convertible senior notes could become immediately payable due solely to our failure to comply with the terms of a single agreement governing either our 2025 or 2027 convertible senior notes. In addition, each of our warehouse credit facilities and term loan facility contain cross-acceleration and cross-default provisions. These provisions could have the effect of creating an event of default under the agreement for any such facility, despite our compliance with that agreement, due solely to an event of default or failure to pay amounts owed under the agreement for another facility. Accordingly, all or a significant portion of our outstanding warehouse indebtedness or outstanding term loan indebtedness could become immediately payable due solely to our failure to comply with the terms of a single agreement governing one of our facilities. While the cross-default provisions in our existing warehouse credit facilities do not pick up defaults under our convertible senior notes and our existing warehouse credit facilities are carved out of the cross-payment default provisions in our 2025 and 2027 senior notes given that they constitute non-recourse debt, any default under our convertible senior notes would trigger an event of default under our term loan facility and, similarly, any default under our term loan facility would trigger the cross-payment default provisions in our 2025 and 2027 senior notes.

2027 Capped Calls—In connection with the pricing of our 2027 notes, we entered into capped call transactions with certain counterparties (the “2027 capped calls”). The 2027 capped calls have initial strike prices of $93.53 per share and initial cap prices of $138.56 per share, in each case subject to certain adjustments. Conditions that cause adjustments to the initial strike price and initial cap price of the 2027 capped calls are similar to the conditions that result in corresponding adjustments to the conversion rate for our 2027 notes. The 2027 capped calls cover, subject to anti-dilution adjustments, 6,147,900 shares of our common stock and are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the 2027 notes, with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2027 capped calls are separate transactions, and not part of the terms of our 2027 notes. As these instruments meet certain accounting criteria, the 2027 capped calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $62,647 incurred in connection with the 2027 capped calls was recorded as a reduction to additional paid-in capital on our consolidated balance sheets.