10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

__________________________________________________ 

FORM 10-Q

 __________________________________________________ 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to ________

Commission file number 000-28440

 __________________________________________________ 

ENDOLOGIX, INC.

(Exact name of registrant as specified in its charter)

 __________________________________________________ 

Delaware	68-0328265
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2 Musick, Irvine, California 92618

(Address of principal executive offices)

(949) 595-7200

(Registrant’s telephone number, including area code)

  ________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

On April 27, 2015, there were 67,418,357 shares outstanding of the registrant’s only class of common stock.

ENDOLOGIX, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2015

TABLE OF CONTENTS

Item	Description	Page
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March, 2015 and 2014	2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
Part II. Other Information
Item 1.	Legal Proceedings	25
Item 6.	Exhibits	25
	Signatures	26

Part I. Financial Information

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)

	March 31,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	20,183		$	26,798
Marketable securities	53,467			59,871
Accounts receivable, net allowance for doubtful accounts of $182 and $185, respectively.	26,672			26,113
Other receivables	448			498
Inventories	35,143			31,325
Prepaid expenses and other current assets	2,501			3,162
Total current assets	$	138,414		$	147,767
Property and equipment, net	25,329			25,696
Goodwill	28,673			28,866
Intangibles, net	43,067			43,465
Deposits and other assets	2,282			2,415
Total assets	$	237,765		$	248,209
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,130		$	11,027
Accrued payroll	10,916			13,337
Accrued expenses and other current liabilities	5,403			5,260
Total current liabilities	$	27,449		$	29,624
Deferred income tax	879			879
Deferred rent	8,047			8,060
Other liabilities	419			489
Contingently issuable common stock	14,700			14,600
Convertible notes	71,270			70,407
Total liabilities	$	122,764		$	124,059
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.	—			—
Common stock, $0.001 par value; 100,000,000 shares authorized. 67,579,721 and 67,321,769 shares issued, respectively. 67,415,229 and 67,159,511 shares outstanding, respectively.	67			67
Treasury stock, at cost, 164,492 and 162,258 shares, respectively.	(2,363		)	(2,328		)
Additional paid-in capital	376,492			372,639
Accumulated deficit	(259,713		)	(248,500		)
Accumulated other comprehensive income	518			2,272
Total stockholders’ equity	$	115,001		$	124,150
Total liabilities and stockholders’ equity	$	237,765		$	248,209

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2015			2014
Revenue	$	36,671		$	33,264
Cost of goods sold	9,765			8,969
Gross profit	26,906			24,295
Operating expenses:
Research and development	6,231			4,105
Clinical and regulatory affairs	3,450			2,200
Marketing and sales	19,599			16,143
General and administrative	7,289			7,163
Total operating expenses	36,569			29,611
Loss from operations	(9,663		)	(5,316		)
Other income (expense):
Interest income	45			59
Interest expense	(1,462		)	(1,390		)
Other income (expense), net	59			358
Change in fair value of contingent consideration related to acquisition	(100		)	11,800
Total other income (expense)	(1,458		)	10,827
Net income (loss) before income tax expense	$	(11,121	)	$	5,511
Income tax expense	(92		)	(216		)
Net income (loss)	$	(11,213	)	$	5,295
Other comprehensive loss- foreign currency translation	(1,754		)	(46		)
Comprehensive income (loss)	$	(12,967	)	$	5,249
Basic net income (loss) per share	$	(0.17	)	$	0.08
Diluted net income (loss) per share	$	(0.17	)	$	0.08
Shares used in computing basic net income (loss) per share	67,263			63,405
Shares used in computing diluted net income (loss) per share	67,263			66,017

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	(11,213	)	$	5,295
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	1,489			602
Stock-based compensation	2,211			1,613
Change in fair value of contingent consideration related to acquisition	100			(11,800		)
Accretion of interest on convertible note	863			800
Amortization of deferred financing costs	113			97
Non-cash foreign exchange loss (gain)	111			(367		)
Changes in operating assets and liabilities:
Accounts receivable and other receivables	48			(254		)
Inventories	(4,637		)	(4,360		)
Prepaid expenses and other current assets	681			(147		)
Accounts payable	859			4,005
Accrued payroll	(2,482		)	(1,654		)
Accrued expenses and other liabilities	130			3,190
Net cash used in operating activities	$	(11,727	)	$	(2,980	)
Cash flows from investing activities:
Purchases of marketable securities	(28,059		)	(53,023		)
Maturities of marketable securities	34,430			6,918
Purchases of property and equipment	(2,174		)	(3,491		)
Net cash provided by (used in) investing activities	$	4,197		$	(49,596	)
Cash flows from financing activities:
Proceeds from exercise of stock options	1,642			246
Minimum tax withholding paid on behalf of employees for restricted stock units	(35		)	(644		)
Net cash provided by (used in) financing activities	$	1,607		$	(398	)
Effect of exchange rate changes on cash and cash equivalents	(692		)	1
Net decrease in cash and cash equivalents	$	(6,615	)	$	(52,973	)
Cash and cash equivalents, beginning of period	26,798			95,152
Cash and cash equivalents, end of period	$	20,183		$	42,179
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	35		$	129
Non-cash investing and financing activities:
Landlord funded leasehold improvements	$	—		$	2,425

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

1. Description of Business, Basis of Presentation, and Operating Segment

(a) Description of Business

Endologix, Inc. (the "Company") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. The Company develops, manufactures, markets, and sells innovative medical devices for the treatment of aortic disorders. The Company's products are intended for the treatment of abdominal aortic aneurysms ("AAA"). The Company's AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), the Company's innovative solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens. The Company's current EVAR products include the Endologix AFX Endovascular AAA System (“AFX”), the VELA Proximal Endograft (“VELA”) and the Endologix Intuitrak Endovascular AAA System (“Intuitrak”). The Company's current EVAS product is the Nellix Endovascular Aneurysm Sealing System (“Nellix EVAS System”). Sales of the Company's EVAR and EVAS platforms (including extensions and accessories) to hospitals in the U.S. and Europe, and to third-party international distributors, provide the sole source of the Company's reported revenue.

The Company's EVAR products consist of (i) a cobalt chromium alloy stent covered by polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (“Stent Graft”) and (ii) an accompanying delivery system. Once fixed in its proper position within the abdominal aorta, the Company's EVAR device provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel wall, which greatly reduces the potential for the AAA to rupture.

The Company's EVAS product consists of (i) bilateral covered stents with endobags, (ii) a biocompatible polymer injected into the endobags to seal the aneurysm and (iii) a delivery system and polymer dispenser. The Company's EVAS product seals the entire aneurysm sac effectively excluding the aneurysm sac reducing the likelihood of future aneurysm rupture. Additionally, it has the potential to reduce post procedural re-interventions.

(b)Basis of Presentation

The accompanying Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. For the three months endedMarch 31, 2015 and 2014, there were no related party transactions.

The interim financial data as of March 31, 2015 is unaudited and is not necessarily indicative of the results for a full year. In the opinion of the Company's management, the interim data includes normal and recurring adjustments necessary for a fair presentation of the Company's financial results for the three months endedMarch 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements.

The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 2, 2015.

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU ") No. 2014-09, "Revenue from Contracts with Customers", which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. On April 1, 2015 the FASB agreed to propose a one-year deferral of the revenue recognition standard's effective date for all entities. Early application would be permitted, but not before the original effective date. The option to use either a retrospective or cumulative-effective transition method would not change. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

4

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

On April 7, 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The ASU is effective for the Company on January 1, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-03 will have on its consolidated financial statements and related disclosures.

(c) Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of EVAR and EVAS product for the treatment of aortic disorders. For the three months endedMarch 31, 2015, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

2. Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to (i) collectibility of customer accounts; (ii) whether the cost of inventories can be recovered; (iii) the value of goodwill and intangible assets; (iv) realization of tax assets and estimates of tax liabilities; (v) likelihood of payment and value of contingent liabilities; and (vi) potential outcome of litigation. Such estimates are based on management's judgment which takes into account historical experience and various assumptions. Nonetheless, actual results may differ from management's estimates.

For a complete summary of our significant accounting policies, please refer to Note 2, "Use of Estimates and Summary of Significant Accounting Policies", in Part II, Item 8, of our 2014 Annual Report on Form 10-K for the year ended December 31, 2014, filed March 2, 2015. There have been no material changes to our significant accounting policies during the three months endedMarch 31, 2015.

3. Balance Sheet Account Detail

(a) Property and Equipment

Property and equipment consisted of the following:

	March 31, 2015			December 31, 2014
Production equipment, molds, and office furniture	$	13,560		$	12,943
Computer hardware and software	6,504			6,457
Leasehold improvements	16,251			15,729
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	1,188			2,564
Property and equipment, at cost	$	37,503		$	37,693
Accumulated depreciation	(12,174		)	(11,997		)
Property and equipment, net	$	25,329		$	25,696

Depreciation expense for property and equipment for the three months endedMarch 31, 2015 and 2014 was $1.1 million, and $0.5 million, respectively.

(b) Inventories

Inventories consisted of the following:

5

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

	March 31, 2015		December 31, 2014
Raw materials	$	8,161	$	6,728
Work-in-process	7,372		5,946
Finished goods	19,610		18,651
Total Inventories	$	35,143	$	31,325

(c) Goodwill and Intangible Assets

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	March 31, 2015			December 31, 2014
Goodwill (1)	$	28,673		$	28,866
Intangible assets:
Indefinite lived intangibles
Trademarks and trade names	$	2,708		$	2,708
Finite lived intangibles
Developed technology (2)	$	40,100		$	40,100
Accumulated amortization	(382		)	(285		)
Developed technology, net	$	39,718		$	39,815
License	$	100		$	100
Accumulated amortization	(78		)	(71		)
License, net	$	22		$	29
Customer relationships (1)	$	429		$	480
Accumulated amortization (1)	(393		)	(400		)
Customer relationships, net	$	36		$	80
Acquired Shonin approval (3)	$	1,000		$	1,000
Accumulated amortization	(417		)	(167		)
Acquired Shonin approval, net	$	583		$	833
Intangible assets (excluding goodwill), net	$	43,067		$	43,465

(1) Difference in the value between these dates is solely due to a foreign currency translation adjustment.

(2) Was reclassified in the first quarter of 2013 from in-process research and development to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix EVAS System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

(3) Regulatory approval for Intuitrak in Japan acquired through an amendment with a distributor in the fourth quarter of 2014.

Amortization expense for intangible assets for the three months endedMarch 31, 2015, and 2014 was $0.4 million, and $0.1 million respectively.

6

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

Remainder of 2015	$	931
2016	948
2017	2,210
2018	3,689
2019	4,744
2020	5,409
2021 & Thereafter	22,428
Total	$	40,359

(d) Marketable securities

Investments in held-to-maturity marketable securities consist of the following at March 31, 2015 and December 31, 2014:

	March 31, 2015
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	1,473	$	—	$	—		$	1,473
Agency bonds	3,000		—		(1		)	2,999
Corporate bonds	5,669		—		(2		)	5,667
Commercial paper	40,281		7		—			40,288
Government securities	3,044		—		—			3,044
Total	$	53,467	$	7	$	(3	)	$	53,471
	December 31, 2014
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	3,633	$	—	$	—		$	3,633
Corporate bonds	15,707		—		(8		)	15,699
Commercial paper	40,531		5		—			40,536
Total	$	59,871	$	5	$	(8	)	$	59,868

At March 31, 2015, the Company’s investments included 8 held-to-maturity debt securities in unrealized loss positions with a total unrealized loss of approximately $3,000 and a total fair market value of approximately $11.2 million. All investments with gross unrealized losses have been in unrealized loss positions for less than 12 months. The unrealized losses were caused by interest rate fluctuations. There was no change in the credit risk of the securities. The Company does not intend to sell the securities and it is not likely that the Company will be required to sell the securities before the expected recovery of their amortized cost bases. There were no realized gains or losses on the investments for the three months endedMarch 31, 2015. Investments of held-to-maturity all mature within less than 12 months with an average maturity of 4 months.

7

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

(e) Fair Value Measurements

The following fair value hierarchy table presents information about each major category of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014:

	Fair value measurement at reporting date using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At March 31, 2015
Cash and cash equivalents	$	20,183	$	—	$	—	$	20,183
Contingently issuable common stock	$	—	$	—	$	14,700	$	14,700
At December 31, 2014
Cash and cash equivalents	$	26,798	$	—	$	—	$	26,798
Contingently issuable common stock	$	—	$	—	$	14,600	$	14,600

There were no re-measurements to fair value during the three months ended March 31, 2015 of financial assets and liabilities that are not measured at fair value on a recurring basis. There were no transfers between Level 1, Level 2, or Level 3 securities during the three months ended March 31, 2015.

(f) Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We measure the fair value of our Senior Notes carried at amortized cost quarterly for disclosure purposes. The estimated fair value of the Senior Notes is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. Based on the market prices, the fair value of our long-term debt was $87.8 million as of March 31, 2015 and $84.5 million as of December 31, 2014.

We measure the fair value of our held-to-maturity marketable securities carried at amortized cost quarterly for disclosure purposes. The fair value of marketable securities is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar instruments.

4. Stock-Based Compensation

The Company classifies stock-based compensation expense in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), based on the department to which the recipient belongs. Stock-based compensation expense included in cost of goods sold and operating expenses during the three months endedMarch 31, 2015 and 2014, was as follows:

	Three Months Ended
	March 31,
	2015		2014
Cost of goods sold	$	248	$	208
Operating expenses:
Research and development	228		161
Clinical and regulatory affairs	185		(103		)
Marketing and sales	749		538
General and administrative	801		809
Total operating expenses	$	1,963	$	1,405
Total	$	2,211	$	1,613

8

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

5. Net Income (Loss) Per Share

Basic net income (loss) per share was calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the three months ended March 31, 2015 and 2014. Diluted net income per share for the three months ended March 31, 2014, was calculated by adjusting outstanding shares for the dilutive effects of outstanding, but unexercised, stock options and unvested restricted stock, as calculated under the treasury stock method.

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	(11,213	)	$	5,295
Weighted average shares- basic	67,263			63,405
Weighted average shares- diluted	67,263			66,017
Net income (loss) per share- basic	$	(0.17	)	$	0.08
Net income (loss) per share- diluted	$	(0.17	)	$	0.08

The following outstanding Company securities were included in the above calculations of net income per share because their impact was dilutive:

	Three Months Ended
	March 31,
	2015	2014
Common stock options	—	2,027
Restricted stock awards	—	152
Restricted stock units	—	433
Total	—	2,612

The following outstanding Company securities, using the treasury stock method, were excluded from the above calculations of net income loss per share because their impact would have been anti-dilutive:

	Three Months Ended
	March 31,
	2015	2014
Common stock options	1,813	1,153
Restricted stock awards	135	—
Restricted stock units	234	—
Total	2,182	1,153

As discussed in Note 6, in December 2013, the Company issued $86.3 million aggregate principal amount of 2.25% convertible senior notes due 2018 (the “Notes”) in an underwritten public offering. Upon any conversion, the Notes may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of the Notes is excluded from the calculation of diluted income (loss) per share because the impact of these securities would be anti-dilutive. The potential dilutive effect of these securities is shown in the chart below:

	Three Months Ended
	March 31,
	2015	2014
Conversion of the Notes	3,588	3,588

The effect of the contingently issuable common stock is excluded from the calculation of basic net income (loss) per share until all necessary conditions for issuance have been satisfied. Refer to Note 9 of the Notes to the Condensed Consolidated Financial Statements for further discussion.

9

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

6. Credit Facilities

2.25% Convertible Senior Notes

On December 10, 2013, the Company issued $86.3 million aggregate principal amount 2.25% Convertible Senior Notes (the “Notes”). The Notes mature on December 15, 2018 unless earlier repurchased by the Company or converted. The Company received net proceeds from the sale of the Notes of approximately $82.6 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. Interest is payable on the Notes on June 15 and December 15 of each year, beginning June 15, 2014.

The Notes are governed by the terms of a base indenture (the “Base Indenture”), as supplemented by the first supplemental indenture relating to the Notes (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”), between the Company and Wells Fargo Bank, National Association (the “Trustee”), each of which were entered into on December 10, 2013.

The Notes are senior unsecured obligations and are: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries.

The Company may not redeem the Notes prior to December 15, 2016. On or after December 15, 2016, the Company may redeem for cash all or any portion of the Notes, at its option, but only if the closing sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the second trading day immediately preceding the date on which the Company provides notice of redemption, exceeds 130% of the conversion price on each applicable trading day. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

Holders may convert their Notes at any time prior to the close of business on the business day immediately preceding September 15, 2018 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2014, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Notes in effect on each applicable trading day; (2) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) if the Company calls all or any portion of the notes for redemption, at any time prior to the close of business on the second scheduled trading day prior to the redemption date; or (4) upon the occurrence of specified corporate events. On or after September 15, 2018 until the close of business on the second scheduled trading day immediately preceding the stated maturity date, holders may surrender their Notes for conversion at any time, regardless of the foregoing circumstances.

Upon conversion, the Company will, at its election, pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock.

The initial conversion rate will be 41.6051 shares of the Company’s common stock for each $1,000 principal amount of Notes, which represents an initial conversion price of approximately $24.04 per share. Following certain corporate transactions that occur on or prior to the stated maturity date or the Company’s delivery of a notice of redemption, the Company will increase the conversion rate for a holder that elects to convert its Notes in connection with such a corporate transaction.

If a fundamental change (as defined in the Indenture) occurs prior to the stated maturity date, holders may require the Company to purchase for cash all or any portion of their Notes at a fundamental change purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.

The Indenture contains customary terms and covenants and events of default with respect to the Notes. If an event of default (as defined in the Indenture) occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the principal amount of the Notes to be due and payable immediately by notice to

10

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

the Company (with a copy to the Trustee). If an event of default arising out of certain events of bankruptcy, insolvency or reorganization involving the Company or a significant subsidiary (as set forth in the Indenture) occurs with respect to us, the principal amount of the Notes and accrued and unpaid interest, if any, will automatically become immediately due and payable.

The Company was not required to separate the conversion option in the Notes under ASC 815, "Derivatives and Hedging", and has the ability to settle the Notes in cash, common stock or a combination of cash and common stock, at its option. In accordance with cash conversion guidance contained in ASC 470-20, "Debt with Conversion and Other Options", the Company accounted for the Notes by allocating the issuance proceeds between the liability and the equity component. The equity component is classified in stockholders’ equity and the resulting discount on the liability component is accreted such that interest expense equals the Company’s nonconvertible debt borrowing rate. The separation was performed by first determining the fair value of a similar debt that does not have an associated equity component. That amount was then deducted from the initial proceeds of the Notes as a whole to arrive at a residual amount, which was allocated to the conversion feature that is classified as equity. The initial fair value of the indebtedness was $66.9 million resulting in a $19.3 million allocation to the embedded conversion option. The embedded conversion option was recorded in stockholders’ equity and as debt discount, to be subsequently accreted to interest expense over the term of the Notes. Underwriting discounts and commissions and offering expenses totaled $3.7 million and were allocated between the liability and the equity component in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. As a result, $2.9 million attributable to the indebtedness was recorded as deferred financing costs in other assets, to be subsequently amortized as interest expense over the term of the Notes, and $0.8 million attributable to the equity component was recorded a a reduction to additional paid-in-capital in stockholders’ equity.

As of March 31, 2015, the Company had outstanding borrowings of $71.3 million, and deferred financing costs of $2.3 million, related to the Notes. There are no principal payments due during the term. Annual interest expense on these notes will range from $5.7 million to $6.9 million through maturity.

Capped Call Transactions

On December 10, 2013, in connection with the pricing of the Notes and the exercise in full of their overallotment option by the underwriters, the Company entered into privately-negotiated capped call transactions (the “Capped Call Transactions”) with Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Capped Call Transactions initial conversion rate and number of options substantially corresponds to each $1,000 principal amount of Notes. The Company used approximately $7.4 million of the net proceeds from the Notes offering to pay for the cost of the Capped Call Transactions.

The Capped Call Transactions are separate transactions entered into by the Company with Bank of America, N.A., are not part of the terms of the Notes and will not change the holders’ rights under the Notes. The Capped Call Transactions have anti-dilution adjustments substantially similar to those applicable to the Notes. The Capped Call Transactions are derivative instruments that are recorded within stockholders’ equity because they meet an exemption from mark-to-market derivative accounting.

The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset potential cash payments that the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions, which initially corresponds to the $24.04 conversion price of the Notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the initial cap price of $29.02, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The Company will not be required to make any cash payments to Bank of America, N.A. or any of its affiliates upon the exercise of the options that are a part of the Capped Call Transactions, but will be entitled to receive from Bank of America, N.A. (or an affiliate thereof) a number of shares of the Company’s common stock and/or an amount of cash generally based on the amount by which the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions during the relevant valuation period under the Capped Call Transactions. However, if the market price of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions during such valuation period under the Capped Call Transactions, the number of shares of common stock and/or the amount of cash the Company expects to receive upon

11

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

exercise of the Capped Call Transactions will be capped based on the amount by which the cap price exceeds the strike price of the Capped Call Transactions.

For any conversions of Notes prior to the close of business on the 55th scheduled trading day immediately preceding the stated maturity date of the Notes, including without limitation upon an acquisition of the Company or similar business combination, a corresponding portion of the Capped Call Transactions will be terminated. Upon such termination, the portion of the Capped Call Transactions being terminated will be settled at fair value (subject to certain limitations), as determined by Bank of America, N.A., in its capacity as calculation agent under the Capped Call Transactions, which the Company expects to receive from Bank of America, N.A., and no payments will be due Bank of America, N.A. The capped call expires on December 13, 2018.

Wells Fargo line of credit

In October 2009, the Company entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on February 3, 2015, whereby the Company may borrow up to $20.0 million, subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on November 15, 2015. A sub-feature in the line of credit allows for the issuance of up to $7.5 million in letters of credit. As of March 31, 2015, the Company had no outstanding letters of credit issued. The Wells Credit Facility is collateralized by all of the Company's assets, except its intellectual property.

The Wells Credit Facility contains financial covenants requiring the Company to (i) maintain a minimum current ratio of 2.0, equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not to exceed pre-tax net loss (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $13.5 million for the three months ended March 31, 2015; $23.0 million for the six months ended June 30, 2015; and $35.0 million for the nine months ended September 30, 2015; (the "Net Loss Covenant").  The Wells Credit Facility also includes negative covenants limiting capital expenditures in 2015 to an aggregate of $6.0 million as well as limiting operating lease expenses to $3.0 million in any calendar year. The Company was in compliance with the financial covenants as of and for the three months ended March 31, 2015.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If the Company encounters difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness. No borrowings were outstanding at March 31, 2015.

7. Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Three Months Ended
	March 31,
	2015			2014
United States	$	25,134	68.5%	$	23,988	72.1%
Europe	$	7,246	19.8%	$	6,585	19.8%
Rest of World ("ROW"):
Latin America	$	2,039	5.6%	$	918	2.8%
Asia/Pacific	2,252		6.1%	1,773		5.3%
Total ROW	$	4,291	11.7%	$	2,691	8.1%
Revenue	$	36,671	100.0%	$	33,264	100.0%

12

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

8. Commitments and Contingencies

(a) Leases

The Company leases its administrative, research, and manufacturing facilities located in Irvine, California and an administrative office located in Rosmalen, The Netherlands. These facility lease agreements require the Company to pay operating costs, including property taxes, insurance, and maintenance. In addition, the Company has certain equipment under long-term agreements that are accounted for as operating leases.

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of March 31, 2015:

Remainder of 2015	$	1,909
2016	2,363
2017	2,331
2018	2,258
2019	2,296
2020	2,388
2021 and thereafter	22,884
Total	$	36,429

Facilities rent expense for the three months endedMarch 31, 2015 and 2014 were $0.6 million and $0.7 million, respectively.

On June 12, 2013, the Company entered into a lease agreement for two adjacent office, research and development, and manufacturing facilities in Irvine, California.  The premises consist of approximately 129,000 combined square feet. The lease has a 15-year term beginning January 1, 2014 and provides for one optional five year extension. The initial base rent under the lease is $1.9 million per year, payable in monthly installments, and escalates by 3% per year for years 2015 through 2019, and 4% per year for years 2020 and beyond.  The Company received a rent abatement for the first nine months of the lease. These premises replaced the Company's existing Irvine facilities. The terms of this lease agreement provide for $6.8 million of landlord-funded improvements (and certain other allowances) to this facility, in order to best suit the Company's requirements.

The Company leased two adjacent facilities aggregating approximately 57,000 square feet in Irvine, California, under separate lease agreements where manufacturing was held. The Company exited one of these leases in December 2014 and the other lease in April 2015. The Company also leases an administrative office of approximately 2,900 square feet in Rosmalen, The Netherlands, with lease expiration in December 2015 and renewal at its option.

(b) Employment Agreements and Retention Plan

On February 1, 2014, the Company entered into new employment agreements with certain of its executive officers under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, death or disability or termination by the employee for good reason (collectively, an “Involuntary Termination”) prior to, upon or following a change in control of the Company. The severance payment will generally be in a range of six to eighteen months of the employee’s then current salary for an Involuntary Termination prior to a change in control of the Company, and will generally be in a range of eighteen to twenty-four months of the employee’s then current salary for an Involuntary Termination upon or following a change in control of the Company.

(c) Legal Matters

We are from time to time involved in various claims and legal proceedings of a nature we believe are normal and incidental to a medical device business. These matters may include product liability, intellectual property, employment, and other general claims. Such cases and claims may raise complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes available.

13

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

LifePort Sciences LLC v. Endologix, Inc.

On December 28, 2012, LifePort Sciences, LLC ("LifePort") filed a complaint against us in the U.S. District Court, District of Delaware, alleging that certain of our products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of our products and injunctive relief. We do not believe that we infringe on any of these patents and we intend to vigorously defend against this matter. The case is currently scheduled for trial in April 2016. We do believe, however, that the outcome will not have a material adverse effect on our financial position, results of operations, or cash flow. However, in order to avoid further legal costs and diversion of management resources, it is reasonably possible that we may reach a settlement with LifePort, which could result in a liability. However, we cannot presently estimate the amount, or range, of reasonably possible losses due to the nature of this potential litigation settlement.

9. Contingently Issuable Common Stock

On October 27, 2010, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Nepal Acquisition Corporation, a wholly-owned subsidiary of the Company (“Merger Sub”), Nellix, Inc., certain of Nellix’s stockholders named therein and Essex Woodlands Health Ventures, Inc., as representative of the former Nellix stockholders. On December 10, 2010 (the “Nellix Closing Date”), the Company completed the merger (the “Merger”) of Merger Sub with and into Nellix Inc., a pre-revenue, AAA medical device company pursuant to the terms of the Merger Agreement. The purchase price consisted of 3.2 million shares of the Company's common stock, issuable to the former Nellix stockholders as of the Nellix Closing Date, then representing a value of $19.4 million. Additional payments, solely in the form of shares of the Company's common stock (the “Contingent Payment”), will be made upon the achievement of a revenue milestone and a regulatory approval milestone (collectively, the “Nellix Milestones”).

The ultimate value of the Contingent Payment will be determined on the date that each Nellix Milestone is achieved. The number of issuable shares will be established using an applicable per share price, which is subject to a ceiling and/or floor, resulting at the closing of the merger in a potential maximum of 10.2 million shares issuable upon the achievement of the Nellix Milestones. As of the Closing Date, the fair value of the Contingent Payment was estimated to be $28.2 million.

The Merger Agreement provides that, in addition to the shares of common stock of the Company (the “Common Stock”) issued to the former Nellix stockholders at the closing of the Merger, the former Nellix stockholders are entitled to receive shares of the Common Stock if the Company’s sales of one of Nellix’s products (the “Nellix Product”) outside of the United States exceed $10.0 million within a certain time period following the Company’s receipt of CE mark approval for the Nellix Product (the “OUS Milestone”). The aggregate dollar value of the shares of the Common Stock to be issued upon achievement of the OUS Milestone ranged from a high of $24.0 million or 6.9 million shares to a low of $10.0 million or 1.3 million shares. The price per share of the Common Stock to be issued upon achievement of the OUS Milestone was subject to a floor of $3.50 per share and a ceiling of $7.50 per share.

On June 17, 2014, the Company announced its achievement of the OUS Milestone and the issuance of an aggregate of 2.7 million unregistered shares of the Common Stock (the “OUS Milestone Shares”), plus an amount of cash in lieu of fractional shares, to the former Nellix stockholders. The Company offered and sold the OUS Milestone Shares in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended (the “Securities Act”). The former Nellix stockholders previously gave representations to the Company regarding their investment intent, experience, financial sophistication, access to information regarding the Company and certain other matters to support the Company’s reasonable belief that it could rely upon the foregoing exemptions from registration pursuant to Section 4(2) of the Securities Act. No underwriting discounts or commissions were or will be paid in conjunction with the issuance of the OUS Milestone Shares. The Company previously filed a Registration Statement on Form S-3 (Registration No. 333-171639) (the “Form S-3”) for the purpose of registering for resale shares of the Common Stock issued or issuable pursuant to the Merger Agreement, including the OUS Milestone Shares. The Securities and Exchange Commission declared the Form S-3 effective on January 18, 2011.

If the Company receives approval from the FDA to sell the Nellix Product in the United States (the “PMA Milestone”), the Company will issue additional shares of the Common Stock to the former stockholders of Nellix. The dollar value of the shares of the Common Stock to be issued upon achievement of the PMA Milestone will be equal to $15.0 million (less the dollar value of certain cash payments and other deductions). The price per share of the shares of the Common Stock to be issued upon achievement of the PMA Milestone is subject to a stock price floor of $4.50 per share, but not subject to a stock price ceiling.

14

ENDOLOGIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

(Unaudited)

As of March 31, 2015 the Company's stock price last closed at $17.07 per share. Thus, had the PMA Milestone been achieved on March 31, 2015 the Contingent Payment would have comprised 1.0 million shares (based on the 30-day average closing stock price ending 5 days prior to the announcement), representing a value of $17.1 million.

The value of the Contingent Payment is derived using a discounted income approach model, with a range of probabilities and assumptions related to the timing and likelihood of achievement of the PMA Milestone (which include Level 3 inputs - see Note 3(e) and the Company's stock price (Level 1 input) as of the balance sheet date). These varying probabilities and assumptions and changes in the Company's stock price have required fair value adjustments of the Contingent Payment in periods subsequent to the Nellix Closing Date.

The Contingent Payment fair value will continue to be evaluated on a quarterly basis until milestone achievement occurs, or until the expiration of the "earn-out period," as defined within the Nellix purchase agreement. Adjustments to the fair value of the Contingent Payment are recognized within other income (expense) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2014	$	14,600
Fair Value Adjustment of Contingent Payment for the three months ended March 31, 2015	100
March 31, 2015	$	14,700

10. Income Tax Expense

The Company applied an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods. The Company recorded a expense for income taxes of $0.1 million for the three months endedMarch 31, 2015. The Company's ETR was (0.8)% for the three months endedMarch 31, 2015.  The Company's ETR for the three months endedMarch 31, 2015 differs from the U.S. federal statutory tax rate of 34% primarily as a result of nondeductible expenses (including the Nellix Contingent Payment), state income taxes, foreign income taxes, and the impact of a full valuation allowance on its deferred tax assets.

The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the U.S. and certain foreign jurisdictions. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against substantially all deferred tax assets. If/when the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period(s) such determination is made.

15

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Concerning Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the use of forward-looking terminology such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology, or by discussions of strategies, opportunities, plans or intentions. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements. We have based these forward-looking statements largely on our current expectations based on information currently available to us and projections about future events and trends affecting the financial condition of our business. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward- looking statements. Actual results could differ materially from those projected in forward-looking statements as a result of the following factors, among others:

• continued market acceptance of our products;

• quality problems with our products;

• consolidation in the health care industry;

• the success of our clinical trials relating to products under development;

• our ability to maintain strong relationships with certain key physicians;

• continued growth in the number of patients qualifying for treatment of abdominal aortic aneurysms through our products;

• our ability to effectively compete with the products offered by our competitors;

• the level and availability of third party payor reimbursement for our products;

• our ability to successfully commercialize products which incorporate the technology obtained in our acquisition of Nellix, Inc. (“Nellix”);     

• our ability to effectively develop new or complementary technologies;

• our ability to manufacture our endovascular systems to meet demand;

• changes to our international operations including currency exchange rate fluctuations;

• our ability to effectively manage our business and keep pace with our anticipated growth;

• our ability to develop and retain a direct sales force in the United States and select European countries;

• the nature of and any changes to legislative, regulatory and other legal requirements that apply to us, our products, our suppliers and our competitors;     

• the timing of and our ability to obtain and maintain any required regulatory clearances and approvals;

• our ability to protect our intellectual property rights and proprietary technologies;

• our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;

• product liability claims and litigation expenses; reputational damage to our products caused by mis-use or off-label use or government or voluntary product recalls;

• reputational damage to our products caused by mis-use or off-label use or government or voluntary product recalls;

• our utilization of a single source supplier for specialized components of our product lines;

• our ability to attract, retain, and motivate qualified personnel;

• our ability to make future acquisitions and successfully integrate any such future-acquired businesses;

• our ability to maintain adequate liquidity to fund our operational needs and research and developments expenses; and

• general macroeconomic and world-wide business conditions.

Our actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied from such forward-looking statements. Important factors that could cause our actual results, performance or achievements to differ materially from our expectations are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 2, 2015, including but not limited to those factors discussed in “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Consolidated Financial Statements” and “Notes to Consolidated Financial Statements.” All subsequent written and oral forward-looking statements attributable to us or by persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We expressly disclaim any intent or obligation to update information contained in any forward-looking statement after the date thereof to conform such

16

information to actual results or to changes in our opinions or expectations. 

Our forward-looking statements speak only as of the date each such statement is made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules and regulations of the SEC and The NASDAQ Stock Market, LLC.

Overview

Our Business

Our corporate headquarters and manufacturing facility is located in Irvine, California. We develop, manufacture, market, and sell innovative medical devices for the treatment of aortic disorders. Our principal products are intended for the treatment of abdominal aortic aneurysms ("AAA"). Our AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), our innovative solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens.

We sell our products through (i) our direct U.S. and European sales forces and (ii) third-party international distributors and agents in other parts of the world.

See Item 1. of our Annual Report on Form 10-K for the year ended December 31, 2014, entitled "Business," for a discussion of:

• Market Overview and Opportunity

• Our Products

• Manufacturing and Supply

• Marketing and Sales

• Competition

• Product Developments and Clinical Trials

Endologix®, AFX® and Nellix® are registered trademarks of Endologix, Inc., and Intuitrak™, VELA™ and the respective product logos are trademarks of Endologix, Inc.

Recent Highlights of Our Product Development Initiatives, Clinical Trials and Regulatory Approvals

Nellix

On December 10, 2010, we completed our acquisition of Nellix. Using the technology we acquired in the Nellix acquisition, we developed the Nellix EVAS System, a next-generation device, to treat infrarenal AAA. We have the following trials in process to build independent and collective clinical and economic evidence of clinical safety and effectiveness:

• EVAS FORWARD IDE - Pivotal clinical trial to evaluate the safety and effectiveness of the Nellix EVAS System. The study is a prospective single arm registry which enrolled 179 patients at centers in the U.S. and Europe. In November 2014, we completed enrollment in the EVAS FORWARD IDE. The patients in this study will be followed for one-year, after which we will submit the final module of the PMA to the FDA. FDA approval is anticipated by the end of 2016.

• EVAS FORWARD Global Registry - This study is designed to provide real world clinical results to demonstrate the effectiveness and broad applicability of the Nellix EVAS System. This registry is designed to include 300 patients enrolled in up to 30 international centers. The first patient in the registry was treated in October 2013. The study utilizes an independent core lab and includes follow-up to five years. In September 2014, we announced completion of patient enrollment in the Nellix EVAS FORWARD global registry.

AFX

In February 2014, we launched a new proximal extension in the U.S., VELA, designed to be used in conjunction with our AFX bifurcated device. VELA features a circumferential graft line marker and controlled delivery system that enable predictable deployment and final positional adjustments. We began a commercial introduction of VELA in Europe in January 2015.

In September 2014, we announced a new clinical study called LEOPARD (Looking at EVAR Outcomes by Primary Analysis of Randomized Data). The study will provide a real-world comparison of the AFX system versus other commercially available EVAR devices. The LEOPARD study is designed to randomize and enroll up to 800 patients at 80 leading centers throughout the United States and commenced in the first quarter of 2015. The centers will be a mix of our current and new customers, with each investigator selecting one competitive device to randomize against AFX. The LEOPARD study is being led by an independent

17

steering committee of leading physicians who will be involved with the study and responsible for presenting the results over the five-year follow-up period.

Characteristics of Our Revenue and Expenses

Revenue

Revenue is derived from sales of our EVAR and EVAS products (including extensions and accessories) to hospitals upon completion of AAA repair procedure, or from sales to distributors upon title transfer (which is typically at shipment), provided our other revenue recognition criteria have been met.

Cost of Goods Sold

Cost of goods sold includes compensation (including stock-based compensation) and benefits of production personnel and production support personnel. Cost of goods sold also includes depreciation expense for production equipment, production materials and supplies expense, allocated facilities-related expenses, and certain direct costs such as shipping.

Research and Development

Research and development expenses consist of compensation (including stock-based compensation) and benefits for research and development personnel, materials and supplies, research and development consultants, outsourced and licensed research and development costs, and allocated facilities-related costs. Our research and development activities primarily relate to the development and testing of new devices and methods to treat aortic disorders.

Clinical and Regulatory

Clinical and regulatory expenses consist of compensation (including stock-based compensation) and benefits for clinical and regulatory personnel, regulatory and clinical payments related to studies, regulatory costs related to registration and approval activities, and allocated facilities-related costs. Our clinical and regulatory activities primarily relate to gaining regulatory approval for the commercialization of our devices.

Marketing and Sales

Marketing and Sales expenses primarily consist of compensation (including stock-based compensation) and benefits for our sales force, clinical specialist, internal sales support functions, and marketing personnel. It also includes costs attributable to marketing our products to our customers and prospective customers.

General and Administrative

General and administrative expenses primarily include compensation (including stock-based compensation) and benefits for personnel that support our general operations such as information technology, executive management, financial accounting, and human resources. General and administrative expenses also include bad debt expense, patent and legal fees, financial audit fees, insurance, recruiting fees, other professional services, the federal Medical Device Excise Tax, and allocated facilities-related expenses.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. While management believes these estimates are reasonable and consistent, they are by their very nature, estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. Our Audit Committee periodically reviews our significant accounting policies.

For a description of our critical accounting policies and estimates, please refer to the “Critical Accounting Policies and Estimates” section in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no material changes in any of our critical accounting policies and estimates during the three months ended March 31, 2015.

18

Results of Operations

Operations Overview - Three Months Ended March 31, 2015 versus 2014

The following table presents our results of continuing operations and the related percentage of the period's revenue (in thousands):

	Three Months Ended March 31,
	2015				2014
Revenue	$	36,671		100.0%	$	33,264		100.0%
Cost of goods sold	9,765			26.6%	8,969			27.0%
Gross profit	26,906			73.4%	24,295			73.0%
Operating expenses:
Research and development	6,231			17.0%	4,105			12.4%
Clinical and regulatory affairs	3,450			9.4%	2,200			6.6%
Marketing and sales	19,599			53.4%	16,143			48.5%
General and administrative	7,289			19.9%	7,163			21.5%
Total operating expenses	36,569			99.7%	29,611			89.0%
Loss from operations	(9,663		)	(26.4)%	(5,316		)	(16.0)%
Total other income (expense)	(1,458		)	(4.0)%	10,827			32.5%
Net income (loss) before income tax expense	(11,121		)	(30.3)%	5,511			16.5%
Income tax expense	(92		)	(0.3)%	(216		)	(0.6)%
Net income (loss)	$	(11,213	)	(30.6)%	$	5,295		15.9%

Comparison of the Three Months EndedMarch 31, 2015 versus 2014

Revenue

	Three Months Ended March 31,
	2015		2014		Variance		Percent Change
	(in thousands)
Revenue	$	36,671	$	33,264	$	3,407	10.2%

Our 10.2% revenue increase of $3.4 million over the prior year period primarily resulted from:

(i) a $0.7 million increase in European sales volume due to strong direct sales growth related to Nellix;

(ii) a $1.1 million increase in U.S. sales procedures due to continued physician adoption of AFX;

(iii) a $1.6 million increase in ROW sales driven by Latin America and Japan.

Our 2015 revenue includes an unfavorable foreign currency impact of $1.4 million when compared to 2014.

19

Cost of Goods Sold, Gross Profit, and Gross Margin

	Three Months Ended March 31,
	2015		2014		Variance		Percent Change
	(in thousands)
Cost of goods sold	$	9,765	$	8,969	$	796	8.9	%
Gross profit	26,906		24,295		2,611		10.7	%
Gross margin percentage (gross profit as a percent of revenue)	73.4%		73.0%

The $0.8 million increase in cost of goods sold was primarily driven by our revenue increase of $3.4 million.

Gross margin for the three months endedMarch 31, 2015 increased 73.4% from 73.0% for the three months endedMarch 31, 2014. The increase is largely due to operating efficiencies caused by increased production volume.

Operating Expenses

	Three Months Ended March 31,
	2015		2014		Variance		Percent Change
	(in thousands)
Research and development	$	6,231	$	4,105	$	2,126	51.8%
Clinical and regulatory affairs	3,450		2,200		1,250		56.8%
Marketing and sales	19,599		16,143		3,456		21.4%
General and administrative	7,289		7,163		126		1.8%

Research and Development. The $2.1 million increase in research and development expenses was attributable to increased personnel, facility costs and continued product development investments related to Nellix and AFX.

Clinical and Regulatory Affairs. The $1.3 million increase in clinical and regulatory affairs was primarily driven by increased personnel and costs related to the support of our ongoing clinical trials.

Marketing and Sales. The $3.5 million increase in marketing and sales expenses was driven by costs related to continued growth and development of our worldwide direct sales force and global marketing organization. Our 2015 marketing and sales expenses include a favorable foreign currency impact of $1.0 million when compared to 2014.

General and Administrative. The $0.1 million increase in general and administrative expenses was driven by increased investment in information technology projects to support the business growth.

Other income (expense), net

	Three Months Ended March 31,
	2015			2014		Variance			Percent Change
	(in thousands)
Other income (expense), net	$	(1,458	)	$	10,827	$	(12,285	)	(113.5)%

Other Income (Expense), Net. Other expense for the three months endedMarch 31, 2015 includes $0.1 millionnet currency remeasurement of certain assets and liabilities that were not transacted in the functional currency of the corresponding operating entity, along with interest expense associated with our convertible notes of $1.5 million. Other Income for the three months ended March 31, 2014 includes a non-cash benefit of $11.8 million, which reflects a decrease in the fair value of the Nellix contingent consideration, which was almost entirely related to the decrease in Endologix's stock price during the quarter (see Note 9). Partially offsetting this fair value adjustment is interest expense associated with our convertible notes.

20

Provision for Income Taxes

	Three Months Ended March 31,
	2015			2014			Variance		Percent Change
	(in thousands)
Income tax benefit (expense)	$	(92	)	$	(216	)	$	124	>100%

Our income tax benefit was $0.1 million and our effective tax rate was (0.8)% for the three months ended March 31, 2015 due to our tax positions in various jurisdictions. During the three months endedMarch 31, 2015 and 2014, we had operating legal entities in the U.S., Italy, New Zealand, and the Netherlands (including registered sales branches in certain countries in Europe). During the three months endedMarch 31, 2015, we also had an operating entity in Switzerland. We have certain minimum tax liabilities attributable to our operations in these countries and in the U.S.

Liquidity and Capital Resources

The chart provided below summarizes selected liquidity data and metrics as of March 31, 2015, December 31, 2014, and March 31, 2014:

	March 31, 2015		December 31, 2014		March 31, 2014
	(in thousands, except financial metrics data)
Cash and cash equivalents	$	20,183	$	26,798	$	42,179
Marketable securities	$	53,467	$	59,871	$	77,418
Accounts receivable, net	$	26,672	$	26,113	$	25,448
Total current assets	$	138,414	$	147,767	$	172,308
Total current liabilities	$	27,449	$	29,624	$	60,059
Working capital surplus (a)	$	110,965	$	118,143	$	112,249
Current ratio (b)	5.0		5.0		2.9
Days sales outstanding ("DSO") (c)	66		62		69
Inventory turnover (d)	1.2		1.6		1.6

(a) total current assets minus total current liabilities as of the corresponding balance sheet date.

(b) total current assets divided by total current liabilities as of the corresponding balance sheet date.

(c) net accounts receivable at period end dividedby revenue for the current period multiplied by the number of days in the period.

(d) cost of goods sold divided by the average inventory balance for the corresponding period.

Operating Activities

Cash used in operating activities was $11.7 million for the three months ended March 31, 2015 as compared to cash used in operating activities of $3.0 million in the prior year period. The increase in cash usage was primarily due to (i) funding the net loss of $11.2 million and (ii) inventory purchases of $4.6 million. These increases were partially offset by non-cash stock-based compensation of $2.2 million, depreciation and amortization of $1.5 million and non-cash accretion of interest on convertible note of $0.9 million. Cash used in operating activities for the three months ended March 31, 2014 was $3.0 million and consisted of (i) a change in the fair value of the Nellix contingent consideration of $11.8 million; (ii) inventory purchases of $4.4 million; offset by a decrease in accounts payable of $4.0 million.

During the three months ended March 31, 2015, and 2014 our cash collections from customers totaled $35.8 million and $33.2 million, respectively, representing 97.5% and 99.7% of reported revenue for the same periods.

Investing Activities

Cash provided by investing activities for the three months ended March 31, 2015 was $4.2 million, as compared to cash used in investing activities of $49.6 million in the prior year period. The cash used in investing activities primarily consisted of $2.2 million used for machinery and equipment purchases and $28.1 million used to purchase marketable debt securities; offset by $34.4 million in maturities of marketable securities. For the three months ended March 31, 2014, cash used in investing was $49.6

21

million and consisted of $3.5 million used for machinery and equipment purchases and $53.0 million used to purchase marketable debt securities; offset by $6.9 million in maturities of marketable securities.

Financing Activities

Cash provided by financing activities was $1.6 million for the three months ended March 31, 2015, as compared to cash used in financing activities of $0.4 million in the prior year period. Cash provided by financing activities consisted of $1.6 million from the exercise of stock options. For the three months ended March 31, 2014 cash used in financing activities was $0.4 million and consisted of $0.6 million used in minimum tax withholding paid on behalf of employees for restricted stock units; offset by proceeds of $0.2 million from the exercise of stock options.

Credit Arrangements

See Note 6 of the Notes to the Condensed Consolidated Financial Statements. We were in compliance with all debt covenants as of March 31, 2015.

Future Capital Requirements

We believe that the future growth of our business will depend upon our ability to successfully develop new technologies for the treatment of aortic disorders and successfully bring these technologies to market. We expect to incur significant expenditures in completing product development and clinical trials for the Nellix System.

The timing and amount of our future capital requirements will depend on many factors, including:

• the need for working capital to support our sales growth;

• the need for additional capital to fund future development programs;

• the need for additional capital to fund our sales force expansion;

• the need for additional capital to fund strategic acquisitions;

• our requirements for additional facility space or manufacturing capacity;

• our requirements for additional information technology infrastructure and systems; and

• adverse outcomes from potential litigation and the cost to defend such litigation.

We believe that our world-wide cash resources are adequate to operate our business. We presently have several operating subsidiaries and branches outside of the U.S. As of March 31, 2015, these subsidiaries and branches hold an aggregate $6.6 million in foreign bank accounts to fund their local operations. A portion of these balances related to undistributed earnings, and are deemed by management to be permanently reinvested in the corresponding country in which our subsidiary operates. Management has no present or planned intention to repatriate foreign earnings into the U.S. However, in the event that we required additional funds in the U.S. and had to repatriate any foreign earnings to meet those needs, we would then need to accrue, and ultimately pay, incremental income tax expenses on such “deemed dividend,” unless we then had sufficient net operating losses to offset this potential tax liability.

In the event we require additional financing in the future, it may not be available on commercially reasonable terms, if at all. Even if we are able to obtain financing, it may cause substantial dilution (in the case of an equity financing), or may contain burdensome restrictions on the operation of our business (in the case of debt financing). If we are not able to obtain required financing, we may need to curtail our operations and/or our planned product development.

22

Contractual Obligations

Contractual obligation payments by year with initial terms in excess of one year were as follows as of March 31, 2015 (in thousands):

	Payments due by period
Contractual Obligations	Total		Remainder of 2015		2016		2017		2018		2019		2020		2021 and thereafter
Long-term debt obligations	$	86,250			$	—	$	—	$	86,250	$	—	$	—	$	—
Interest on debt obligations	7,764		1,941		1,941		1,941		1,941		—		—		—
Operating lease obligations	36,429		1,909		2,363		2,331		2,258		2,296		2,388		22,884
Total	$	130,443	$	3,850	$	4,304	$	4,272	$	90,449	$	2,296	$	2,388	$	22,884

Refer to Note 6 of the Notes to the Condensed Consolidated Financial Statements for a discussion of long-term debt obligations and Note 8 of the Notes to the Condensed Consolidated Financial Statements for a discussion of operating lease obligations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (except for operating leases) that provide financing, liquidity, market or credit risk support, or involve derivatives. In addition, we have no arrangements that may expose us to liability that are not expressly reflected in the accompanying Consolidated Financial Statements.

As of March 31, 2015, we did not have any relationships with unconsolidated entities or financial partnerships, often referred to as "structured finance" or "special purpose entities," established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not subject to any material financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not believe that we currently have material exposure to interest rate or foreign currency transaction risks.

Interest Rate and Market Risk. We have investments in U.S. Government and agency securities, corporate bonds and other debt securities. As a result, we are exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines. A hypothetical 100 basis point decrease in interest rates would result in an approximate $46,717 increase in the fair value of our investments as of March 31, 2015. We believe, however, that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is limited. We intend to hold the majority of our investments to maturity, in accordance with our business plans.

We do not use derivative financial instruments in our investment portfolio. We are averse to principal loss and try to ensure the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high credit quality securities and by positioning our portfolio to appropriately respond to a significant reduction in the credit rating of any investment issuer or guarantor.

We are also exposed to market risk for changes in interest rates on the Wells Credit Facility. All outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. As of March 31, 2015, we had no amounts outstanding under the Wells Credit Facility. However, if we draw down the Wells Credit Facility, we may be exposed to market risk due to changes in the rate at which interest accrues.

Our Senior Notes bear fixed interest rates, and therefore, would not be subject to interest rate risk. The capped call transactions are derivative instruments that qualify for classification within stockholders’ equity because they meet an exemption from mark-to-market derivative accounting. The settlement amounts for the capped call transactions are each determined based upon the difference between a strike price and a traded price of the Company’s common stock.

23

Foreign Currency Transaction Risk. While a majority of our business is denominated in the U.S. dollar, a portion of our revenue and expenses are denominated in foreign currencies. Fluctuations in the rate of exchange between the U.S. dollar and the Euro or the British Pound Sterling may affect our results of operations and the period-to-period comparisons of our operating results. Foreign currency transaction gains and losses are caused by transactions denominated in a currency other than the functional currency and must be remeasured at each balance sheet date or upon settlement. Foreign currency transaction realized and unrealized gains and losses resulted in approximately $0.1 million of loss as of March 31, 2015, primarily related to intercompany payables and receivables associated with our European operations. We expect to reduce our exposure through future settlements.

Item 4. CONTROLS AND PROCEDURES.

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the first quarter of 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

24

Part II. Other Information

Item 1. LEGAL PROCEEDINGS.

Refer to Note 8 of the Notes to the Condensed Consolidated Financial Statements for discussion of legal proceedings.

Item 6. EXHIBIT INDEX.

The following exhibits are filed or furnished herewith:

Exhibit 31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
Exhibit 31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
Exhibit 32.1	(1)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
Exhibit 32.2	(1)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
Exhibit 101.INS		XBRL Instance Document
Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Lin Base Document
Exhibit 101.DEF		XBRL Taxonomy Extension Definition Link Base Document
Exhibit 101.LAB		XBRL Taxonomy Extension Label Link Base Document
Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Link Base Document

(1) Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENDOLOGIX, INC.
April 29, 2015	/s/ John McDermott
	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
April 29, 2015	/s/ Shelley B. Thunen
	Chief Financial Officer (Principal Financial and Accounting Officer)

26

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, John McDermott, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Endologix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

April 29, 2015	By:	/s/ John McDermott
		John McDermott
		Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Shelley B. Thunen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Endologix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

April 29, 2015	By:	/s/ Shelley B. Thunen
		Shelley B. Thunen
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, John McDermott, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 that:

(1) The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 29, 2015	By:	/s/ John McDermott
		John McDermott
		Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

This certification accompanies the Quarterly Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Shelley B. Thunen, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 that:

(1) The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 29, 2015	By:	/s/ Shelley B. Thunen
		Shelley B. Thunen
		Chief Financial Officer (Principal Financial and Accounting Officer)

This certification accompanies the Quarterly Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

XML

Revenue by Geographic Region (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Schedule of Revenue by Geographic Region [Line Items]
Revenue	$ 36,671	$ 33,264
Geographic Concentration Risk | Sales
Schedule of Revenue by Geographic Region [Line Items]
Revenue	36,671	33,264
Concentration risk percentage	100.00%	100.00%
Geographic Concentration Risk | Sales | United States | Direct
Schedule of Revenue by Geographic Region [Line Items]
Revenue	25,134	23,988
Concentration risk percentage	68.50%	72.10%
Geographic Concentration Risk | Sales | Europe
Schedule of Revenue by Geographic Region [Line Items]
Revenue	7,246	6,585
Concentration risk percentage	19.80%	19.80%
Geographic Concentration Risk | Sales | Latin America | Distributor
Schedule of Revenue by Geographic Region [Line Items]
Revenue	2,039	918
Concentration risk percentage	5.60%	2.80%
Geographic Concentration Risk | Sales | Asia/Pacific | Distributor
Schedule of Revenue by Geographic Region [Line Items]
Revenue	2,252	1,773
Concentration risk percentage	6.10%	5.30%
Geographic Concentration Risk | Sales | Total ROW | Distributor
Schedule of Revenue by Geographic Region [Line Items]
Revenue	$ 4,291	$ 2,691
Concentration risk percentage	11.70%	8.10%

XML

Balance Sheet Account Detail (Inventories) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Balance Sheet Related Disclosures [Abstract]
Raw materials	$ 8,161	$ 6,728
Work-in-process	7,372	5,946
Finished goods	19,610	18,651
Inventories	$ 35,143	$ 31,325

XML

Stock-Based Compensation

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company classifies stock-based compensation expense in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), based on the department to which the recipient belongs. Stock-based compensation expense included in cost of goods sold and operating expenses during the three months endedMarch 31, 2015 and 2014, was as follows:

	Three Months Ended
	March 31,
	2015		2014
Cost of goods sold	$	248	$	208
Operating expenses:
Research and development	228		161
Clinical and regulatory affairs	185		(103		)
Marketing and sales	749		538
General and administrative	801		809
Total operating expenses	$	1,963	$	1,405
Total	$	2,211	$	1,613

XML

Balance Sheet Account Detail (Fair Value Measurements) (Details) (Fair Value, Measurements, Recurring, USD $)	Mar. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 20,183,000	$ 26,798,000
Contingently issuable common stock	14,700,000	14,600,000
Quoted prices in active markets for identical assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	20,183,000	26,798,000
Contingently issuable common stock	0	0
Significant other observable inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Contingently issuable common stock	0	0
Fair value of long-term debt	87,800,000	84,500,000
Significant unobservable inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Contingently issuable common stock	$ 14,700,000	$ 14,600,000

XML

Balance Sheet Account Detail (Held to Maturity Marketable Securities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 53,467	$ 59,871
Gross Unrealized Gain	7	5
Gross Unrealized Loss	3	8
Fair Value	53,471	59,868
Asset backed securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	1,473	3,633
Gross Unrealized Gain	0	0
Gross Unrealized Loss	0	0
Fair Value	1,473	3,633
Agency bonds
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	3,000
Gross Unrealized Gain	0
Gross Unrealized Loss	1
Fair Value	2,999
Corporate bonds
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	5,669	15,707
Gross Unrealized Gain	0	0
Gross Unrealized Loss	2	8
Fair Value	5,667	15,699
Commercial paper
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	40,281	40,531
Gross Unrealized Gain	7	5
Gross Unrealized Loss	0	0
Fair Value	40,288	40,536
Government securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	3,044
Gross Unrealized Gain	0
Gross Unrealized Loss	0
Fair Value	3,044
Corporate debt securities
Schedule of Held-to-maturity Securities [Line Items]
Gross Unrealized Loss	3
Fair Value	$ 11,200
Held-to-maturity debt securities held	8

XML

Stock-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 2,211	$ 1,613
Cost of goods sold
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	248	208
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	228	161
Clinical and regulatory affairs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	185	(103)
Marketing and sales
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	749	538
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	801	809
Total operating expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 1,963	$ 1,405

XML

Net Income (Loss) Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Dec. 10, 2013
Earnings Per Share, Basic and Diluted [Abstract]
Net loss	$ (11,213)	$ 5,295
Weighted average shares- basic	67,263,000	63,405,000
Weighted average shares- diluted	67,263,000	66,017,000
Net income (loss) per share-basic (in dollars per share)	$ (0.17)	$ 0.08
Net income (loss) per share-diluted (in dollars per share)	$ (0.17)	$ 0.08
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract]
Shares included in the Calculation of Earnings Per Share Because Their Impact was Dilutive	0	2,612,000
Securities Excluded from Calculations of Earnings Per Share Because Impact Would Have Been Anti-Dilutive [Abstract]
Outstanding securities used in calculations	2,182,000	1,153,000
Convertible notes	71,270		70,407
Potential Dilutive Effect of Securities [Abstract]
Conversion of the Notes	3,588,000	3,588,000
Convertible Debt
Securities Excluded from Calculations of Earnings Per Share Because Impact Would Have Been Anti-Dilutive [Abstract]
Convertible notes				$ 86,300
Stated interest rate			2.25%
Common stock options
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract]
Shares included in the Calculation of Earnings Per Share Because Their Impact was Dilutive	0	2,027,000
Securities Excluded from Calculations of Earnings Per Share Because Impact Would Have Been Anti-Dilutive [Abstract]
Outstanding securities used in calculations	1,813,000	1,153,000
Restricted Stock
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract]
Shares included in the Calculation of Earnings Per Share Because Their Impact was Dilutive	0	152,000
Securities Excluded from Calculations of Earnings Per Share Because Impact Would Have Been Anti-Dilutive [Abstract]
Outstanding securities used in calculations	135,000	0
Restricted stock units
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract]
Shares included in the Calculation of Earnings Per Share Because Their Impact was Dilutive	0	433,000
Securities Excluded from Calculations of Earnings Per Share Because Impact Would Have Been Anti-Dilutive [Abstract]
Outstanding securities used in calculations	234,000	0

XML

Balance Sheet Account Detail

3 Months Ended

Mar. 31, 2015

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Account Detail

Balance Sheet Account Detail

(a) Property and Equipment

Property and equipment consisted of the following:

	March 31, 2015			December 31, 2014
Production equipment, molds, and office furniture	$	13,560		$	12,943
Computer hardware and software	6,504			6,457
Leasehold improvements	16,251			15,729
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	1,188			2,564
Property and equipment, at cost	$	37,503		$	37,693
Accumulated depreciation	(12,174		)	(11,997		)
Property and equipment, net	$	25,329		$	25,696

Depreciation expense for property and equipment for the three months endedMarch 31, 2015 and 2014 was $1.1 million, and $0.5 million, respectively.

(b) Inventories

Inventories consisted of the following:

	March 31, 2015		December 31, 2014
Raw materials	$	8,161	$	6,728
Work-in-process	7,372		5,946
Finished goods	19,610		18,651
Total Inventories	$	35,143	$	31,325

(c) Goodwill and Intangible Assets

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	March 31, 2015			December 31, 2014
Goodwill (1)	$	28,673		$	28,866
Intangible assets:
Indefinite lived intangibles
Trademarks and trade names	$	2,708		$	2,708
Finite lived intangibles
Developed technology (2)	$	40,100		$	40,100
Accumulated amortization	(382		)	(285		)
Developed technology, net	$	39,718		$	39,815
License	$	100		$	100
Accumulated amortization	(78		)	(71		)
License, net	$	22		$	29
Customer relationships (1)	$	429		$	480
Accumulated amortization (1)	(393		)	(400		)
Customer relationships, net	$	36		$	80
Acquired Shonin approval (3)	$	1,000		$	1,000
Accumulated amortization	(417		)	(167		)
Acquired Shonin approval, net	$	583		$	833
Intangible assets (excluding goodwill), net	$	43,067		$	43,465

(1) Difference in the value between these dates is solely due to a foreign currency translation adjustment.

(2) Was reclassified in the first quarter of 2013 from in-process research and development to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix EVAS System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

(3) Regulatory approval for Intuitrak in Japan acquired through an amendment with a distributor in the fourth quarter of 2014.

Amortization expense for intangible assets for the three months endedMarch 31, 2015, and 2014 was $0.4 million, and $0.1 million respectively.

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

Remainder of 2015	$	931
2016	948
2017	2,210
2018	3,689
2019	4,744
2020	5,409
2021 & Thereafter	22,428
Total	$	40,359

(d) Marketable securities

Investments in held-to-maturity marketable securities consist of the following at March 31, 2015 and December 31, 2014:

	March 31, 2015
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	1,473	$	—	$	—		$	1,473
Agency bonds	3,000		—		(1		)	2,999
Corporate bonds	5,669		—		(2		)	5,667
Commercial paper	40,281		7		—			40,288
Government securities	3,044		—		—			3,044
Total	$	53,467	$	7	$	(3	)	$	53,471
	December 31, 2014
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	3,633	$	—	$	—		$	3,633
Corporate bonds	15,707		—		(8		)	15,699
Commercial paper	40,531		5		—			40,536
Total	$	59,871	$	5	$	(8	)	$	59,868

At March 31, 2015, the Company’s investments included 8 held-to-maturity debt securities in unrealized loss positions with a total unrealized loss of approximately $3,000 and a total fair market value of approximately $11.2 million. All investments with gross unrealized losses have been in unrealized loss positions for less than 12 months. The unrealized losses were caused by interest rate fluctuations. There was no change in the credit risk of the securities. The Company does not intend to sell the securities and it is not likely that the Company will be required to sell the securities before the expected recovery of their amortized cost bases. There were no realized gains or losses on the investments for the three months endedMarch 31, 2015. Investments of held-to-maturity all mature within less than 12 months with an average maturity of 4 months.

(e) Fair Value Measurements

The following fair value hierarchy table presents information about each major category of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014:

	Fair value measurement at reporting date using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At March 31, 2015
Cash and cash equivalents	$	20,183	$	—	$	—	$	20,183
Contingently issuable common stock	$	—	$	—	$	14,700	$	14,700
At December 31, 2014
Cash and cash equivalents	$	26,798	$	—	$	—	$	26,798
Contingently issuable common stock	$	—	$	—	$	14,600	$	14,600

There were no re-measurements to fair value during the three months ended March 31, 2015 of financial assets and liabilities that are not measured at fair value on a recurring basis. There were no transfers between Level 1, Level 2, or Level 3 securities during the three months ended March 31, 2015.

(f) Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We measure the fair value of our Senior Notes carried at amortized cost quarterly for disclosure purposes. The estimated fair value of the Senior Notes is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. Based on the market prices, the fair value of our long-term debt was $87.8 million as of March 31, 2015 and $84.5 million as of December 31, 2014.

We measure the fair value of our held-to-maturity marketable securities carried at amortized cost quarterly for disclosure purposes. The fair value of marketable securities is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar instruments.

XML

Credit Facilities (Details) (USD $)	0 Months Ended		12 Months Ended	3 Months Ended	12 Months Ended
	Dec. 10, 2013	Dec. 03, 2013	Dec. 31, 2013	Mar. 31, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Convertible notes				$ 71,270,000	$ 70,407,000
Deferred Finance Costs, Noncurrent, Net				2,300,000
Payments of Derivative Issuance Costs	7,400,000
Revolving Credit Facility | Wells Fargo Bank
Line of Credit Facility [Line Items]
Aggregate maximum borrowing capacity		20,000,000
Debt Covenant, Minimum Current Ratio		2.0
Revolving Credit Facility | Wells Fargo Bank | Debt Instrument, Measurement Period One
Line of Credit Facility [Line Items]
Debt Covenant, Maximum Operating Loss		13,500,000
Revolving Credit Facility | Wells Fargo Bank | Debt Instrument, Measurement Period Two
Line of Credit Facility [Line Items]
Debt Covenant, Maximum Operating Loss		23,000,000
Revolving Credit Facility | Wells Fargo Bank | Debt Instrument, Measurement Period Three
Line of Credit Facility [Line Items]
Debt Covenant, Maximum Operating Loss		35,000,000
Debt Covenant, Maximum Annual Capital Expenditures			6,000,000
Revolving Credit Facility | Wells Fargo Bank | Debt Instrument, Measurement Period Four
Line of Credit Facility [Line Items]
Debt Covenant, Maximum Annual Capital Expenditures				3,000,000
Letter of Credit | Wells Fargo Bank
Line of Credit Facility [Line Items]
Aggregate maximum borrowing capacity		7,500,000.0
Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Debt Instrument, Face Amount	86,300,000
Stated interest rate	2.25%
Proceeds from Convertible Debt	82,600,000
Stock Issued During Period, Shares, Conversion of Convertible Securities	41.6051
Redemption Price, Percentage	100.00%
Debt Default, Violation Or Event Of Default, Declaration By Note Holders, Percentage	25.00%
Fair Value Disclosure	66,900,000
Beneficial Conversion Feature	19,300,000
Unamortized Discount	3,700,000
Debt Instrument, Convertible, Conversion Price	$ 24.04
Derivative, Cap Price	29.02
Debt Instrument, Redemption, Period One | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Threshold Trading Days	20
Threshold Consecutive Trading Days	30 days
Threshold Percentage of Stock Price Trigger	130.00%
Redemption Price, Percentage	100.00%
Debt Instrument, Redemption, Period Two | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Threshold Trading Days	20
Threshold Consecutive Trading Days	30 days
Threshold Percentage of Stock Price Trigger	98.00%
Threshold Business Days	5
Threshold Consecutive Business Days	5 years
Other Assets | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Unamortized Discount	2,900,000
Additional Paid-in Capital | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Unamortized Discount	800,000
Minimum | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Debt Instrument, Periodic Payment, Interest					5,700,000
Maximum | Convertible Senior Notes Issued December, 2013 | Convertible Debt
Line of Credit Facility [Line Items]
Debt Instrument, Periodic Payment, Interest					$ 6,900,000

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 20,183		$ 26,798
Marketable securities	53,467		59,871
Accounts receivable, net allowance for doubtful accounts of $182 and $185, respectively.	26,672		26,113
Other receivables	448		498
Inventories	35,143		31,325
Prepaid expenses and other current assets	2,501		3,162
Total current assets	138,414		147,767
Property and equipment, net	25,329		25,696
Goodwill	28,673	[1]	28,866	[1]
Intangibles, net	43,067		43,465
Deposits and other assets	2,282		2,415
Total assets	237,765		248,209
Current liabilities:
Accounts payable	11,130		11,027
Accrued payroll	10,916		13,337
Accrued expenses and other current liabilities	5,403		5,260
Total current liabilities	27,449		29,624
Deferred income tax	879		879
Deferred rent	8,047		8,060
Other liabilities	419		489
Contingently issuable common stock	14,700		14,600
Convertible notes	71,270		70,407
Total liabilities	122,764		124,059
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.	0		0
Common stock, $0.001 par value; 100,000,000 shares authorized. 67,579,721 and 67,321,769 shares issued, respectively. 67,415,229 and 67,159,511 shares outstanding, respectively.	67		67
Treasury stock, at cost, 164,492 and 162,258 shares, respectively.	(2,363)		(2,328)
Additional paid-in capital	376,492		372,639
Accumulated deficit	(259,713)		(248,500)
Accumulated other comprehensive income	518		2,272
Total stockholders’ equity	115,001		124,150
Total liabilities and stockholders’ equity	$ 237,765		$ 248,209

[1] Difference in the value between these dates is solely due to a foreign currency translation adjustment.

XML

Description of Business, Basis of Presentation, and Operating Segment

3 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business, Basis of Presentation, and Operating Segment

Description of Business, Basis of Presentation, and Operating Segment

(a) Description of Business

Endologix, Inc. (the "Company") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. The Company develops, manufactures, markets, and sells innovative medical devices for the treatment of aortic disorders. The Company's products are intended for the treatment of abdominal aortic aneurysms ("AAA"). The Company's AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), the Company's innovative solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens. The Company's current EVAR products include the Endologix AFX Endovascular AAA System (“AFX”), the VELA Proximal Endograft (“VELA”) and the Endologix Intuitrak Endovascular AAA System (“Intuitrak”). The Company's current EVAS product is the Nellix Endovascular Aneurysm Sealing System (“Nellix EVAS System”). Sales of the Company's EVAR and EVAS platforms (including extensions and accessories) to hospitals in the U.S. and Europe, and to third-party international distributors, provide the sole source of the Company's reported revenue.

The Company's EVAR products consist of (i) a cobalt chromium alloy stent covered by polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (“Stent Graft”) and (ii) an accompanying delivery system. Once fixed in its proper position within the abdominal aorta, the Company's EVAR device provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel wall, which greatly reduces the potential for the AAA to rupture.

The Company's EVAS product consists of (i) bilateral covered stents with endobags, (ii) a biocompatible polymer injected into the endobags to seal the aneurysm and (iii) a delivery system and polymer dispenser. The Company's EVAS product seals the entire aneurysm sac effectively excluding the aneurysm sac reducing the likelihood of future aneurysm rupture. Additionally, it has the potential to reduce post procedural re-interventions.

(b)Basis of Presentation

The accompanying Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. For the three months endedMarch 31, 2015 and 2014, there were no related party transactions.

The interim financial data as of March 31, 2015 is unaudited and is not necessarily indicative of the results for a full year. In the opinion of the Company's management, the interim data includes normal and recurring adjustments necessary for a fair presentation of the Company's financial results for the three months endedMarch 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements.

The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 2, 2015.

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU ") No. 2014-09, "Revenue from Contracts with Customers", which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. On April 1, 2015 the FASB agreed to propose a one-year deferral of the revenue recognition standard's effective date for all entities. Early application would be permitted, but not before the original effective date. The option to use either a retrospective or cumulative-effective transition method would not change. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

On April 7, 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The ASU is effective for the Company on January 1, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-03 will have on its consolidated financial statements and related disclosures.

(c) Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of EVAR and EVAS product for the treatment of aortic disorders. For the three months endedMarch 31, 2015, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

XML

Contingently Issuable Common Stock (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	3 Months Ended		0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 10, 2010	Jun. 17, 2014	Jun. 16, 2014
Fair Value of Contingently Issuable Common Stock [Roll Forward]
December 31, 2014	$ 14,600,000
Fair Value Adjustment of Contingent Payment for the three months ended March 31, 2015	100,000	(11,800,000)
March 31, 2015	14,700,000
Nelix Milestones
Business Acquisition [Line Items]
Number of shares contingently issuable			10.2
Estimated fair value of Contingent payment			28,200,000
OUS Milestone
Business Acquisition [Line Items]
Purchase price common shares				2.7
OUS Milestone | Common Stock
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Range of Outcomes, Contingent Consideration, Liability, Value, Low	10,000,000
Business Combination, Contingent Consideration Arrangements, Change in Range of Outcomes, Contingent Consideration, Liability, Shares, Low	1.3
Business Combination, Contingent Consideration Arrangements, Change in Range of Outcomes, Contingent Consideration, Liability, Value, High	24,000,000
Business Combination, Contingent Consideration Arrangements, Change in Range of Outcomes, Contingent Consideration, Liability, Shares, High	6.9
OUS Milestone | Common Stock | Minimum
Business Acquisition [Line Items]
Business Acquisition, Share Price					$ 3.50
OUS Milestone | Common Stock | Maximum
Business Acquisition [Line Items]
Business Acquisition, Share Price					$ 7.50
PMA Milestone
Business Acquisition [Line Items]
Common shares value			15,000,000
Number of shares contingently issuable	1.0
Closing stock price	$ 17.07
Contingent consideration, at fair value hypothetical value	17,100,000
PMA Milestone | Maximum
Business Acquisition [Line Items]
Business Acquisition, Share Price			$ 4.50
Nellix
Business Acquisition [Line Items]
Purchase price common shares			3.2
Common shares value			$ 19,400,000

XML

Contingently Issuable Common Stock (Tables)

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Schedule of Business Acquisitions by Acquisition, Fair Value of Contingent Consideration

Adjustments to the fair value of the Contingent Payment are recognized within other income (expense) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2014	$	14,600
Fair Value Adjustment of Contingent Payment for the three months ended March 31, 2015	100
March 31, 2015	$	14,700

XML

Income Tax Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Current Income Tax Expense (Benefit), Continuing Operations [Abstract]
Income tax expense	$ 92	$ 216
Effective income tax rate	(0.80%)
Federal statutory income tax rate	34.00%

XML

Balance Sheet Account Detail (Property and Equipment) (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 37,503,000		$ 37,693,000
Accumulated depreciation	(12,174,000)		(11,997,000)
Property and equipment, net	25,329,000		25,696,000
Depreciation expense	1,100,000	500,000
Production equipment, molds, and office furniture
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	13,560,000		12,943,000
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	6,504,000		6,457,000
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	16,251,000		15,729,000
Construction in progress (software and related implementation, production equipment, and leasehold improvements)
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 1,188,000		$ 2,564,000

XML

Use of Estimates and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Use of Estimates and Summary of Significant Accounting Policies

Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to (i) collectibility of customer accounts; (ii) whether the cost of inventories can be recovered; (iii) the value of goodwill and intangible assets; (iv) realization of tax assets and estimates of tax liabilities; (v) likelihood of payment and value of contingent liabilities; and (vi) potential outcome of litigation. Such estimates are based on management's judgment which takes into account historical experience and various assumptions. Nonetheless, actual results may differ from management's estimates.

For a complete summary of our significant accounting policies, please refer to Note 2, "Use of Estimates and Summary of Significant Accounting Policies", in Part II, Item 8, of our 2014 Annual Report on Form 10-K for the year ended December 31, 2014, filed March 2, 2015. There have been no material changes to our significant accounting policies during the three months endedMarch 31, 2015.

XML

Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Allowance for doubtful accounts	$ 182	$ 185
Common stock, par value (per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	67,579,721	67,321,769
Common stock, shares outstanding	67,415,229	67,159,511
Treasury stock, shares	164,492,000	162,258,000
Convertible Preferred Stock
Convertible preferred stock, par value (per share)	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized	5,000,000	5,000,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0

XML

Balance Sheet Account Detail (Tables)

3 Months Ended

Mar. 31, 2015

Balance Sheet Related Disclosures [Abstract]

Property and Equipment

Property and equipment consisted of the following:

	March 31, 2015			December 31, 2014
Production equipment, molds, and office furniture	$	13,560		$	12,943
Computer hardware and software	6,504			6,457
Leasehold improvements	16,251			15,729
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	1,188			2,564
Property and equipment, at cost	$	37,503		$	37,693
Accumulated depreciation	(12,174		)	(11,997		)
Property and equipment, net	$	25,329		$	25,696

Schedule of Inventories

Inventories consisted of the following:

	March 31, 2015		December 31, 2014
Raw materials	$	8,161	$	6,728
Work-in-process	7,372		5,946
Finished goods	19,610		18,651
Total Inventories	$	35,143	$	31,325

Schedule of Intangible Assets and Goodwill

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	March 31, 2015			December 31, 2014
Goodwill (1)	$	28,673		$	28,866
Intangible assets:
Indefinite lived intangibles
Trademarks and trade names	$	2,708		$	2,708
Finite lived intangibles
Developed technology (2)	$	40,100		$	40,100
Accumulated amortization	(382		)	(285		)
Developed technology, net	$	39,718		$	39,815
License	$	100		$	100
Accumulated amortization	(78		)	(71		)
License, net	$	22		$	29
Customer relationships (1)	$	429		$	480
Accumulated amortization (1)	(393		)	(400		)
Customer relationships, net	$	36		$	80
Acquired Shonin approval (3)	$	1,000		$	1,000
Accumulated amortization	(417		)	(167		)
Acquired Shonin approval, net	$	583		$	833
Intangible assets (excluding goodwill), net	$	43,067		$	43,465

(1) Difference in the value between these dates is solely due to a foreign currency translation adjustment.

(2) Was reclassified in the first quarter of 2013 from in-process research and development to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix EVAS System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

(3) Regulatory approval for Intuitrak in Japan acquired through an amendment with a distributor in the fourth quarter of 2014.

Schedule of Expected Amortization Expense

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

Remainder of 2015	$	931
2016	948
2017	2,210
2018	3,689
2019	4,744
2020	5,409
2021 & Thereafter	22,428
Total	$	40,359

Marketable Securities

Investments in held-to-maturity marketable securities consist of the following at March 31, 2015 and December 31, 2014:

	March 31, 2015
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	1,473	$	—	$	—		$	1,473
Agency bonds	3,000		—		(1		)	2,999
Corporate bonds	5,669		—		(2		)	5,667
Commercial paper	40,281		7		—			40,288
Government securities	3,044		—		—			3,044
Total	$	53,467	$	7	$	(3	)	$	53,471
	December 31, 2014
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Asset backed securities	$	3,633	$	—	$	—		$	3,633
Corporate bonds	15,707		—		(8		)	15,699
Commercial paper	40,531		5		—			40,536
Total	$	59,871	$	5	$	(8	)	$	59,868

Fair Value Measurements, Recurring and Nonrecurring

The following fair value hierarchy table presents information about each major category of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014:

	Fair value measurement at reporting date using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At March 31, 2015
Cash and cash equivalents	$	20,183	$	—	$	—	$	20,183
Contingently issuable common stock	$	—	$	—	$	14,700	$	14,700
At December 31, 2014
Cash and cash equivalents	$	26,798	$	—	$	—	$	26,798
Contingently issuable common stock	$	—	$	—	$	14,600	$	14,600

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Oct. 29, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	ENDOLOGIX INC /DE/
Entity Central Index Key	0001013606
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		67,418,357
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Stock-based compensation expense included in cost of goods sold and operating expenses during the three months endedMarch 31, 2015 and 2014, was as follows:

	Three Months Ended
	March 31,
	2015		2014
Cost of goods sold	$	248	$	208
Operating expenses:
Research and development	228		161
Clinical and regulatory affairs	185		(103		)
Marketing and sales	749		538
General and administrative	801		809
Total operating expenses	$	1,963	$	1,405
Total	$	2,211	$	1,613

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Revenue	$ 36,671	$ 33,264
Cost of goods sold	9,765	8,969
Gross profit	26,906	24,295
Operating expenses:
Research and development	6,231	4,105
Clinical and regulatory affairs	3,450	2,200
Marketing and sales	19,599	16,143
General and administrative	7,289	7,163
Total operating expenses	36,569	29,611
Loss from operations	(9,663)	(5,316)
Other income (expense):
Interest income	45	59
Interest expense	(1,462)	(1,390)
Other income (expense), net	59	358
Change in fair value of contingent consideration related to acquisition	(100)	11,800
Total other income (expense)	(1,458)	10,827
Net income (loss) before income tax expense	(11,121)	5,511
Income tax expense	(92)	(216)
Net income (loss)	(11,213)	5,295
Other comprehensive loss- foreign currency translation	(1,754)	(46)
Comprehensive income (loss)	$ (12,967)	$ 5,249
Basic net income (loss) per share	$ (0.17)	$ 0.08
Diluted net income (loss) per share	$ (0.17)	$ 0.08
Shares used in computing basic net income (loss) per share	67,263,000	63,405,000
Shares used in computing diluted net income (loss) per share	67,263,000	66,017,000

XML

Revenue by Geographic Region

3 Months Ended

Mar. 31, 2015

Geographic Areas, Revenues from External Customers [Abstract]

Revenue by Geographic Region

Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Three Months Ended
	March 31,
	2015			2014
United States	$	25,134	68.5%	$	23,988	72.1%
Europe	$	7,246	19.8%	$	6,585	19.8%
Rest of World ("ROW"):
Latin America	$	2,039	5.6%	$	918	2.8%
Asia/Pacific	2,252		6.1%	1,773		5.3%
Total ROW	$	4,291	11.7%	$	2,691	8.1%
Revenue	$	36,671	100.0%	$	33,264	100.0%

XML

Credit Facilities

3 Months Ended

Mar. 31, 2015

Line of Credit Facility [Abstract]

Credit Facilities

Credit Facilities

2.25% Convertible Senior Notes

On December 10, 2013, the Company issued $86.3 million aggregate principal amount 2.25% Convertible Senior Notes (the “Notes”). The Notes mature on December 15, 2018 unless earlier repurchased by the Company or converted. The Company received net proceeds from the sale of the Notes of approximately $82.6 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. Interest is payable on the Notes on June 15 and December 15 of each year, beginning June 15, 2014.

The Notes are governed by the terms of a base indenture (the “Base Indenture”), as supplemented by the first supplemental indenture relating to the Notes (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”), between the Company and Wells Fargo Bank, National Association (the “Trustee”), each of which were entered into on December 10, 2013.

The Notes are senior unsecured obligations and are: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries.

The Company may not redeem the Notes prior to December 15, 2016. On or after December 15, 2016, the Company may redeem for cash all or any portion of the Notes, at its option, but only if the closing sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the second trading day immediately preceding the date on which the Company provides notice of redemption, exceeds 130% of the conversion price on each applicable trading day. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

Holders may convert their Notes at any time prior to the close of business on the business day immediately preceding September 15, 2018 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2014, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Notes in effect on each applicable trading day; (2) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) if the Company calls all or any portion of the notes for redemption, at any time prior to the close of business on the second scheduled trading day prior to the redemption date; or (4) upon the occurrence of specified corporate events. On or after September 15, 2018 until the close of business on the second scheduled trading day immediately preceding the stated maturity date, holders may surrender their Notes for conversion at any time, regardless of the foregoing circumstances.

Upon conversion, the Company will, at its election, pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock.

The initial conversion rate will be 41.6051 shares of the Company’s common stock for each $1,000 principal amount of Notes, which represents an initial conversion price of approximately $24.04 per share. Following certain corporate transactions that occur on or prior to the stated maturity date or the Company’s delivery of a notice of redemption, the Company will increase the conversion rate for a holder that elects to convert its Notes in connection with such a corporate transaction.

If a fundamental change (as defined in the Indenture) occurs prior to the stated maturity date, holders may require the Company to purchase for cash all or any portion of their Notes at a fundamental change purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.

The Indenture contains customary terms and covenants and events of default with respect to the Notes. If an event of default (as defined in the Indenture) occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the principal amount of the Notes to be due and payable immediately by notice to the Company (with a copy to the Trustee). If an event of default arising out of certain events of bankruptcy, insolvency or reorganization involving the Company or a significant subsidiary (as set forth in the Indenture) occurs with respect to us, the principal amount of the Notes and accrued and unpaid interest, if any, will automatically become immediately due and payable.

The Company was not required to separate the conversion option in the Notes under ASC 815, "Derivatives and Hedging", and has the ability to settle the Notes in cash, common stock or a combination of cash and common stock, at its option. In accordance with cash conversion guidance contained in ASC 470-20, "Debt with Conversion and Other Options", the Company accounted for the Notes by allocating the issuance proceeds between the liability and the equity component. The equity component is classified in stockholders’ equity and the resulting discount on the liability component is accreted such that interest expense equals the Company’s nonconvertible debt borrowing rate. The separation was performed by first determining the fair value of a similar debt that does not have an associated equity component. That amount was then deducted from the initial proceeds of the Notes as a whole to arrive at a residual amount, which was allocated to the conversion feature that is classified as equity. The initial fair value of the indebtedness was $66.9 million resulting in a $19.3 million allocation to the embedded conversion option. The embedded conversion option was recorded in stockholders’ equity and as debt discount, to be subsequently accreted to interest expense over the term of the Notes. Underwriting discounts and commissions and offering expenses totaled $3.7 million and were allocated between the liability and the equity component in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. As a result, $2.9 million attributable to the indebtedness was recorded as deferred financing costs in other assets, to be subsequently amortized as interest expense over the term of the Notes, and $0.8 million attributable to the equity component was recorded a a reduction to additional paid-in-capital in stockholders’ equity.

As of March 31, 2015, the Company had outstanding borrowings of $71.3 million, and deferred financing costs of $2.3 million, related to the Notes. There are no principal payments due during the term. Annual interest expense on these notes will range from $5.7 million to $6.9 million through maturity.

Capped Call Transactions

On December 10, 2013, in connection with the pricing of the Notes and the exercise in full of their overallotment option by the underwriters, the Company entered into privately-negotiated capped call transactions (the “Capped Call Transactions”) with Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Capped Call Transactions initial conversion rate and number of options substantially corresponds to each $1,000 principal amount of Notes. The Company used approximately $7.4 million of the net proceeds from the Notes offering to pay for the cost of the Capped Call Transactions.

The Capped Call Transactions are separate transactions entered into by the Company with Bank of America, N.A., are not part of the terms of the Notes and will not change the holders’ rights under the Notes. The Capped Call Transactions have anti-dilution adjustments substantially similar to those applicable to the Notes. The Capped Call Transactions are derivative instruments that are recorded within stockholders’ equity because they meet an exemption from mark-to-market derivative accounting.

The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset potential cash payments that the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions, which initially corresponds to the $24.04 conversion price of the Notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the initial cap price of $29.02, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The Company will not be required to make any cash payments to Bank of America, N.A. or any of its affiliates upon the exercise of the options that are a part of the Capped Call Transactions, but will be entitled to receive from Bank of America, N.A. (or an affiliate thereof) a number of shares of the Company’s common stock and/or an amount of cash generally based on the amount by which the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions during the relevant valuation period under the Capped Call Transactions. However, if the market price of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions during such valuation period under the Capped Call Transactions, the number of shares of common stock and/or the amount of cash the Company expects to receive upon exercise of the Capped Call Transactions will be capped based on the amount by which the cap price exceeds the strike price of the Capped Call Transactions.

For any conversions of Notes prior to the close of business on the 55th scheduled trading day immediately preceding the stated maturity date of the Notes, including without limitation upon an acquisition of the Company or similar business combination, a corresponding portion of the Capped Call Transactions will be terminated. Upon such termination, the portion of the Capped Call Transactions being terminated will be settled at fair value (subject to certain limitations), as determined by Bank of America, N.A., in its capacity as calculation agent under the Capped Call Transactions, which the Company expects to receive from Bank of America, N.A., and no payments will be due Bank of America, N.A. The capped call expires on December 13, 2018.

Wells Fargo line of credit

In October 2009, the Company entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on February 3, 2015, whereby the Company may borrow up to $20.0 million, subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on November 15, 2015. A sub-feature in the line of credit allows for the issuance of up to $7.5 million in letters of credit. As of March 31, 2015, the Company had no outstanding letters of credit issued. The Wells Credit Facility is collateralized by all of the Company's assets, except its intellectual property.

The Wells Credit Facility contains financial covenants requiring the Company to (i) maintain a minimum current ratio of 2.0, equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not to exceed pre-tax net loss (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $13.5 million for the three months ended March 31, 2015; $23.0 million for the six months ended June 30, 2015; and $35.0 million for the nine months ended September 30, 2015; (the "Net Loss Covenant").  The Wells Credit Facility also includes negative covenants limiting capital expenditures in 2015 to an aggregate of $6.0 million as well as limiting operating lease expenses to $3.0 million in any calendar year. The Company was in compliance with the financial covenants as of and for the three months ended March 31, 2015.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If the Company encounters difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness. No borrowings were outstanding at March 31, 2015.

XML

Description of Business, Basis of Presentation, and Operating Segment (Details)	3 Months Ended
	Mar. 31, 2015 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments	1
Number of reportable segments	1

XML

Net Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	(11,213	)	$	5,295
Weighted average shares- basic	67,263			63,405
Weighted average shares- diluted	67,263			66,017
Net income (loss) per share- basic	$	(0.17	)	$	0.08
Net income (loss) per share- diluted	$	(0.17	)	$	0.08

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding Company securities, using the treasury stock method, were excluded from the above calculations of net income loss per share because their impact would have been anti-dilutive:

	Three Months Ended
	March 31,
	2015	2014
Common stock options	1,813	1,153
Restricted stock awards	135	—
Restricted stock units	234	—
Total	2,182	1,153

As discussed in Note 6, in December 2013, the Company issued $86.3 million aggregate principal amount of 2.25% convertible senior notes due 2018 (the “Notes”) in an underwritten public offering. Upon any conversion, the Notes may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of the Notes is excluded from the calculation of diluted income (loss) per share because the impact of these securities would be anti-dilutive. The potential dilutive effect of these securities is shown in the chart below:

	Three Months Ended
	March 31,
	2015	2014
Conversion of the Notes	3,588	3,588

XML

Income Tax Expense

3 Months Ended

Mar. 31, 2015

Current Income Tax Expense (Benefit), Continuing Operations [Abstract]

Income Tax Expense

Income Tax Expense

The Company applied an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods. The Company recorded a expense for income taxes of $0.1 million for the three months endedMarch 31, 2015. The Company's ETR was (0.8)% for the three months endedMarch 31, 2015.  The Company's ETR for the three months endedMarch 31, 2015 differs from the U.S. federal statutory tax rate of 34% primarily as a result of nondeductible expenses (including the Nellix Contingent Payment), state income taxes, foreign income taxes, and the impact of a full valuation allowance on its deferred tax assets.

The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the U.S. and certain foreign jurisdictions. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against substantially all deferred tax assets. If/when the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period(s) such determination is made.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

(a) Leases

The Company leases its administrative, research, and manufacturing facilities located in Irvine, California and an administrative office located in Rosmalen, The Netherlands. These facility lease agreements require the Company to pay operating costs, including property taxes, insurance, and maintenance. In addition, the Company has certain equipment under long-term agreements that are accounted for as operating leases.

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of March 31, 2015:

Remainder of 2015	$	1,909
2016	2,363
2017	2,331
2018	2,258
2019	2,296
2020	2,388
2021 and thereafter	22,884
Total	$	36,429

Facilities rent expense for the three months endedMarch 31, 2015 and 2014 were $0.6 million and $0.7 million, respectively.

On June 12, 2013, the Company entered into a lease agreement for two adjacent office, research and development, and manufacturing facilities in Irvine, California.  The premises consist of approximately 129,000 combined square feet. The lease has a 15-year term beginning January 1, 2014 and provides for one optional five year extension. The initial base rent under the lease is $1.9 million per year, payable in monthly installments, and escalates by 3% per year for years 2015 through 2019, and 4% per year for years 2020 and beyond.  The Company received a rent abatement for the first nine months of the lease. These premises replaced the Company's existing Irvine facilities. The terms of this lease agreement provide for $6.8 million of landlord-funded improvements (and certain other allowances) to this facility, in order to best suit the Company's requirements.

The Company leased two adjacent facilities aggregating approximately 57,000 square feet in Irvine, California, under separate lease agreements where manufacturing was held. The Company exited one of these leases in December 2014 and the other lease in April 2015. The Company also leases an administrative office of approximately 2,900 square feet in Rosmalen, The Netherlands, with lease expiration in December 2015 and renewal at its option.

(b) Employment Agreements and Retention Plan

On February 1, 2014, the Company entered into new employment agreements with certain of its executive officers under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, death or disability or termination by the employee for good reason (collectively, an “Involuntary Termination”) prior to, upon or following a change in control of the Company. The severance payment will generally be in a range of six to eighteen months of the employee’s then current salary for an Involuntary Termination prior to a change in control of the Company, and will generally be in a range of eighteen to twenty-four months of the employee’s then current salary for an Involuntary Termination upon or following a change in control of the Company.

(c) Legal Matters

We are from time to time involved in various claims and legal proceedings of a nature we believe are normal and incidental to a medical device business. These matters may include product liability, intellectual property, employment, and other general claims. Such cases and claims may raise complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes available.

LifePort Sciences LLC v. Endologix, Inc.

On December 28, 2012, LifePort Sciences, LLC ("LifePort") filed a complaint against us in the U.S. District Court, District of Delaware, alleging that certain of our products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of our products and injunctive relief. We do not believe that we infringe on any of these patents and we intend to vigorously defend against this matter. The case is currently scheduled for trial in April 2016. We do believe, however, that the outcome will not have a material adverse effect on our financial position, results of operations, or cash flow. However, in order to avoid further legal costs and diversion of management resources, it is reasonably possible that we may reach a settlement with LifePort, which could result in a liability. However, we cannot presently estimate the amount, or range, of reasonably possible losses due to the nature of this potential litigation settlement.

XML

Contingently Issuable Common Stock

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Contingently Issuable Common Stock

Contingently Issuable Common Stock

On October 27, 2010, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Nepal Acquisition Corporation, a wholly-owned subsidiary of the Company (“Merger Sub”), Nellix, Inc., certain of Nellix’s stockholders named therein and Essex Woodlands Health Ventures, Inc., as representative of the former Nellix stockholders. On December 10, 2010 (the “Nellix Closing Date”), the Company completed the merger (the “Merger”) of Merger Sub with and into Nellix Inc., a pre-revenue, AAA medical device company pursuant to the terms of the Merger Agreement. The purchase price consisted of 3.2 million shares of the Company's common stock, issuable to the former Nellix stockholders as of the Nellix Closing Date, then representing a value of $19.4 million. Additional payments, solely in the form of shares of the Company's common stock (the “Contingent Payment”), will be made upon the achievement of a revenue milestone and a regulatory approval milestone (collectively, the “Nellix Milestones”).

The ultimate value of the Contingent Payment will be determined on the date that each Nellix Milestone is achieved. The number of issuable shares will be established using an applicable per share price, which is subject to a ceiling and/or floor, resulting at the closing of the merger in a potential maximum of 10.2 million shares issuable upon the achievement of the Nellix Milestones. As of the Closing Date, the fair value of the Contingent Payment was estimated to be $28.2 million.

The Merger Agreement provides that, in addition to the shares of common stock of the Company (the “Common Stock”) issued to the former Nellix stockholders at the closing of the Merger, the former Nellix stockholders are entitled to receive shares of the Common Stock if the Company’s sales of one of Nellix’s products (the “Nellix Product”) outside of the United States exceed $10.0 million within a certain time period following the Company’s receipt of CE mark approval for the Nellix Product (the “OUS Milestone”). The aggregate dollar value of the shares of the Common Stock to be issued upon achievement of the OUS Milestone ranged from a high of $24.0 million or 6.9 million shares to a low of $10.0 million or 1.3 million shares. The price per share of the Common Stock to be issued upon achievement of the OUS Milestone was subject to a floor of $3.50 per share and a ceiling of $7.50 per share.

On June 17, 2014, the Company announced its achievement of the OUS Milestone and the issuance of an aggregate of 2.7 million unregistered shares of the Common Stock (the “OUS Milestone Shares”), plus an amount of cash in lieu of fractional shares, to the former Nellix stockholders. The Company offered and sold the OUS Milestone Shares in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended (the “Securities Act”). The former Nellix stockholders previously gave representations to the Company regarding their investment intent, experience, financial sophistication, access to information regarding the Company and certain other matters to support the Company’s reasonable belief that it could rely upon the foregoing exemptions from registration pursuant to Section 4(2) of the Securities Act. No underwriting discounts or commissions were or will be paid in conjunction with the issuance of the OUS Milestone Shares. The Company previously filed a Registration Statement on Form S-3 (Registration No. 333-171639) (the “Form S-3”) for the purpose of registering for resale shares of the Common Stock issued or issuable pursuant to the Merger Agreement, including the OUS Milestone Shares. The Securities and Exchange Commission declared the Form S-3 effective on January 18, 2011.

If the Company receives approval from the FDA to sell the Nellix Product in the United States (the “PMA Milestone”), the Company will issue additional shares of the Common Stock to the former stockholders of Nellix. The dollar value of the shares of the Common Stock to be issued upon achievement of the PMA Milestone will be equal to $15.0 million (less the dollar value of certain cash payments and other deductions). The price per share of the shares of the Common Stock to be issued upon achievement of the PMA Milestone is subject to a stock price floor of $4.50 per share, but not subject to a stock price ceiling.

As of March 31, 2015 the Company's stock price last closed at $17.07 per share. Thus, had the PMA Milestone been achieved on March 31, 2015 the Contingent Payment would have comprised 1.0 million shares (based on the 30-day average closing stock price ending 5 days prior to the announcement), representing a value of $17.1 million.

The value of the Contingent Payment is derived using a discounted income approach model, with a range of probabilities and assumptions related to the timing and likelihood of achievement of the PMA Milestone (which include Level 3 inputs - see Note 3(e) and the Company's stock price (Level 1 input) as of the balance sheet date). These varying probabilities and assumptions and changes in the Company's stock price have required fair value adjustments of the Contingent Payment in periods subsequent to the Nellix Closing Date.

The Contingent Payment fair value will continue to be evaluated on a quarterly basis until milestone achievement occurs, or until the expiration of the "earn-out period," as defined within the Nellix purchase agreement. Adjustments to the fair value of the Contingent Payment are recognized within other income (expense) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2014	$	14,600
Fair Value Adjustment of Contingent Payment for the three months ended March 31, 2015	100
March 31, 2015	$	14,700

XML

Description of Business, Basis of Presentation, and Operating Segment (Policies)

3 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. For the three months endedMarch 31, 2015 and 2014, there were no related party transactions.

The interim financial data as of March 31, 2015 is unaudited and is not necessarily indicative of the results for a full year. In the opinion of the Company's management, the interim data includes normal and recurring adjustments necessary for a fair presentation of the Company's financial results for the three months endedMarch 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements.

The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 2, 2015.

Operating segment

Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of EVAR and EVAS product for the treatment of aortic disorders. For the three months endedMarch 31, 2015, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

XML

Commitments and Contingencies (Details) (USD $)	0 Months Ended	1 Months Ended		3 Months Ended
	Jun. 12, 2013 option sqft facility	Dec. 31, 2014 lease	Jun. 30, 2013 letters_of_credit	Mar. 31, 2015	Mar. 31, 2014
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Remainder of 2015				$ 1,909,000
2016				2,363,000
2017				2,331,000
2018				2,258,000
2019				2,296,000
2020				2,388,000
2021 and thereafter				22,884,000
Total				36,429,000
Rent expense				600,000	700,000
Number of facilities	2
Aggregate square feet	129,000
Term of contract	15 years
Number of renewal options	1
Renewal term	5 years
Initial base rent	1,900,000
LandLord-funded improvements	$ 6,800,000
Number of letters of credit			2
Number of leases exited		1
Operating Leases, Future Minimum Payments Due, Base Rent Increases [Abstract]
2015	3.00%
2016	3.00%
2017	3.00%
2018	3.00%
2019	3.00%
2020 and beyond	4.00%
Manufacturing Facility
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Aggregate square feet	57,000
Building
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Aggregate square feet	2,900

XML

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of March 31, 2015:

Remainder of 2015	$	1,909
2016	2,363
2017	2,331
2018	2,258
2019	2,296
2020	2,388
2021 and thereafter	22,884
Total	$	36,429

XML

Balance Sheet Account Detail (Goodwill and Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Goodwill	$ 28,673	[1]	$ 28,866	[1]
Total	40,359
Intangible assets (excluding goodwill), net	43,067		43,465
Developed technology
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	40,100	[2]	40,100	[2]
Accumulated amortization	(382)		(285)
Total	39,718		39,815
License
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	100		100
Accumulated amortization	(78)		(71)
Total	22		29
Customer relationships
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	429	[1]	480	[1]
Accumulated amortization	(393)		(400)
Total	36		80
Acquired Shonin approval
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	1,000	[3]	1,000	[3]
Accumulated amortization	(417)		(167)
Total	583		833
Trademarks and trade names
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Indefinite lived intangibles	$ 2,708		$ 2,708

[1] Difference in the value between these dates is solely due to a foreign currency translation adjustment.

[2] Was reclassified in the first quarter of 2013 from in-process research and development to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix EVAS System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

[3] Regulatory approval for Intuitrak in Japan acquired through an amendment with a distributor in the fourth quarter of 2014.

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income (loss)	$ (11,213)	$ 5,295
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	1,489	602
Stock-based compensation	2,211	1,613
Change in fair value of contingent consideration related to acquisition	100	(11,800)
Accretion of interest on convertible note	863	800
Amortization of deferred financing costs	113	97
Non-cash foreign exchange loss (gain)	111	(367)
Changes in operating assets and liabilities:
Accounts receivable and other receivables	48	(254)
Inventories	(4,637)	(4,360)
Prepaid expenses and other current assets	681	(147)
Accounts payable	859	4,005
Accrued payroll	(2,482)	(1,654)
Accrued expenses and other liabilities	130	3,190
Net cash used in operating activities	(11,727)	(2,980)
Cash flows from investing activities:
Purchases of marketable securities	(28,059)	(53,023)
Maturities of marketable securities	34,430	6,918
Purchases of property and equipment	(2,174)	(3,491)
Net cash provided by (used in) investing activities	4,197	(49,596)
Cash flows from financing activities:
Proceeds from exercise of stock options	1,642	246
Minimum tax withholding paid on behalf of employees for restricted stock units	(35)	(644)
Net cash provided by (used in) financing activities	1,607	(398)
Effect of exchange rate changes on cash and cash equivalents	(692)	1
Net decrease in cash and cash equivalents	(6,615)	(52,973)
Cash and cash equivalents, beginning of period	26,798	95,152
Cash and cash equivalents, end of period	20,183	42,179
Supplemental disclosure of cash flow information:
Cash paid for income taxes	35	129
Non-cash investing and financing activities:
Landlord funded leasehold improvements	0	2,425
Acquisition of property and equipment included in accounts payable	$ 1,254	$ 0

XML

Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Basic net income (loss) per share was calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the three months ended March 31, 2015 and 2014. Diluted net income per share for the three months ended March 31, 2014, was calculated by adjusting outstanding shares for the dilutive effects of outstanding, but unexercised, stock options and unvested restricted stock, as calculated under the treasury stock method.

	Three Months Ended
	March 31,
	2015			2014
Net income (loss)	$	(11,213	)	$	5,295
Weighted average shares- basic	67,263			63,405
Weighted average shares- diluted	67,263			66,017
Net income (loss) per share- basic	$	(0.17	)	$	0.08
Net income (loss) per share- diluted	$	(0.17	)	$	0.08

The following outstanding Company securities were included in the above calculations of net income per share because their impact was dilutive:

	Three Months Ended
	March 31,
	2015	2014
Common stock options	—	2,027
Restricted stock awards	—	152
Restricted stock units	—	433
Total	—	2,612

The following outstanding Company securities, using the treasury stock method, were excluded from the above calculations of net income loss per share because their impact would have been anti-dilutive:

	Three Months Ended
	March 31,
	2015	2014
Common stock options	1,813	1,153
Restricted stock awards	135	—
Restricted stock units	234	—
Total	2,182	1,153

As discussed in Note 6, in December 2013, the Company issued $86.3 million aggregate principal amount of 2.25% convertible senior notes due 2018 (the “Notes”) in an underwritten public offering. Upon any conversion, the Notes may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of the Notes is excluded from the calculation of diluted income (loss) per share because the impact of these securities would be anti-dilutive. The potential dilutive effect of these securities is shown in the chart below:

	Three Months Ended
	March 31,
	2015	2014
Conversion of the Notes	3,588	3,588

The effect of the contingently issuable common stock is excluded from the calculation of basic net income (loss) per share until all necessary conditions for issuance have been satisfied. Refer to Note 9 of the Notes to the Condensed Consolidated Financial Statements for further discussion.

XML

Balance Sheet Account Detail (Amortization) (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Balance Sheet Related Disclosures [Abstract]
Amortization expense	$ 400,000	$ 100,000
Remainder of 2015	931,000
2016	948,000
2017	2,210,000
2018	3,689,000
2019	4,744,000
2020	5,409,000
2021 & Thereafter	22,428,000
Total	$ 40,359,000

XML

Revenue by Geographic Region (Tables)

3 Months Ended

Mar. 31, 2015

Geographic Areas, Revenues from External Customers [Abstract]

Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Three Months Ended
	March 31,
	2015			2014
United States	$	25,134	68.5%	$	23,988	72.1%
Europe	$	7,246	19.8%	$	6,585	19.8%
Rest of World ("ROW"):
Latin America	$	2,039	5.6%	$	918	2.8%
Asia/Pacific	2,252		6.1%	1,773		5.3%
Total ROW	$	4,291	11.7%	$	2,691	8.1%
Revenue	$	36,671	100.0%	$	33,264	100.0%