10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

☐ 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: 001-35469

VOCERA COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3354663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Vocera Communications, Inc.

525 Race Street

San Jose, CA 95126

(408) 882-5100

(Address and telephone number of principal executive offices)

_____________________________________________

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common Stock, $0.0003 par value	VCRA	New York Stock Exchange

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  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of April 30, 2021
Common Stock, $0.0003 par value per share	34,366,650

VOCERA COMMUNICATIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

INDEX

PART I: FINANCIAL INFORMATION

		Page No.
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
	PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
Signatures

2

PART I: FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

Vocera Communications, Inc.

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Par Amounts)

(Unaudited)

	March 31, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	105,257	$	34,976
Short-term investments	209,861		195,227
Accounts receivable, net of allowance	32,718		45,653
Other receivables	5,552		6,170
Inventories	10,432		10,159
Prepaid expenses and other current assets	6,925		6,317
Total current assets	370,745		298,502
Property and equipment, net	7,395		8,103
Intangible assets, net	11,957		12,788
Goodwill	69,168		69,168
Deferred commissions	12,713		12,293
Other long-term assets	5,890		5,967
Total assets	$	477,868	$	406,821
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	3,774	$	3,127
Accrued payroll and other current liabilities	22,000		23,195
Deferred revenue, current	50,882		54,785
Total current liabilities	76,656		81,107
Deferred revenue, long-term	9,254		9,948
Convertible senior notes, net	234,135		124,376
Other long-term liabilities	10,795		10,374
Total liabilities	330,840		225,805
Stockholders' equity
Preferred stock, $0.0003 par value - 5,000,000 shares authorized as of March 31, 2021 and December 31, 2020; zero shares issued and outstanding	—		—
Common stock, $0.0003 par value - 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 34,137,418 and 32,692,561 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	10		10
Additional paid-in capital	299,176		340,515
Accumulated other comprehensive income	239		473
Accumulated deficit	(152,397)		(159,982)
Total stockholders’ equity	147,028		181,016
Total liabilities and stockholders’ equity	$	477,868	$	406,821

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

3

Vocera Communications, Inc.

Condensed Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three months ended March 31,
	2021		2020
Revenue
Product	$	22,608	$	17,850
Service	26,060		22,823
Total revenue	48,668		40,673
Cost of revenue
Product	6,956		6,364
Service	10,827		10,523
Total cost of revenue	17,783		16,887
Gross profit	30,885		23,786
Operating expenses
Research and development	10,350		9,032
Sales and marketing	17,670		16,963
General and administrative	7,275		6,391
Total operating expenses	35,295		32,386
Loss from operations	(4,410)		(8,600)
Interest income	346		1,120
Interest expense	(777)		(2,274)
Other expense, net	(2,546)		(591)
Loss before income taxes	(7,387)		(10,345)
Provision for income taxes	(246)		(125)
Net loss	$	(7,633)	$	(10,470)
Loss per share
Basic	$	(0.23)	$	(0.33)
Diluted	$	(0.23)	$	(0.33)
Weighted average shares used to compute net loss per share
Basic	33,087		31,738
Diluted	33,087		31,738

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

4

Vocera Communications, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In Thousands)

(Unaudited)

	Three months ended March 31,
	2021		2020
Net loss	$	(7,633)	$	(10,470)
Other comprehensive loss, net:
Change in unrealized loss on investments, net of tax	(234)		(956)
Comprehensive loss	$	(7,867)	$	(11,426)

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

5

Vocera Communications, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(In Thousands, Except Share Amounts)

(Unaudited)

	Common stock			Additional paid-in capital		Accum. other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
	Shares	Amount
Balance at January 1, 2020	31,660,709	$	9	$	313,963	$	179	$	(150,326)	$	163,825
Exercise of stock options	77,909	—		731		—		—		731
RSUs released net of shares withheld for tax settlement	64,161	—		(864)		—		—		(864)
Employee stock-based compensation expense	—	—		5,841		—		—		5,841
Net loss	—	—		—		—		(10,470)		(10,470)
Other comprehensive loss	—	—		—		(956)		—		(956)
Balance at March 31, 2020	31,802,779	9		319,671		(777)		(160,796)		158,107

Balance at January 1, 2021	32,692,561	$	10	$	340,515	$	473	$	(159,982)	$	181,016
Cumulative effect of the adoption of ASU 2020-06	—	—		(32,214)		—		15,218		(16,996)
Exercise of stock options	69,360	—		1,181		—		—		1,181
RSUs released net of shares withheld for tax settlement	97,766	—		(2,185)		—		—		(2,185)
Induced conversion of convertible senior notes	1,277,731	—		477		—		—		477
Issuance of capped call	—	—		(15,460)		—		—		(15,460)
Employee stock-based compensation expense	—	—		6,862		—		—		6,862
Net loss	—	—		—		—		(7,633)		(7,633)
Other comprehensive loss	—	—		—		(234)		—		(234)
Balance at March 31, 2021	34,137,418	$	10	$	299,176	$	239	$	(152,397)	$	147,028

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

6

Vocera Communications, Inc.

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Three months ended March 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(7,633)	$	(10,470)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,006		1,333
Change in lease-related performance obligations	(297)		(346)
Stock-based compensation expense	6,862		5,841
Amortization of debt discount and issuance costs	252		1,735
Non-cash lease expense	589		662
Non-cash impact of induced premium	2,059		—
Other	570		109
Changes in operating assets and liabilities:
Accounts receivable	12,936		16,264
Other receivables	568		(102)
Inventories	(262)		(1,494)
Prepaid expenses and other assets	(447)		(417)
Deferred commissions	(420)		171
Accounts payable	591		(2,826)
Accrued payroll and other liabilities	(1,774)		(17)
Deferred revenue	(4,597)		(4,799)
Net cash provided by operating activities	11,003		5,644
Cash flows from investing activities
Purchase of property and equipment	(409)		(682)
Purchase of short-term investments	(56,585)		(28,009)
Maturities of short-term investments	41,181		28,569
Net cash used in investing activities	(15,813)		(122)
Cash flows from financing activities
Cash from lease-related performance obligations	—		43
Repayment of borrowings	(102,946)		—
Proceeds from issuance of convertible senior notes, net of issuance costs	194,500		—
Payment for purchase of capped calls	(15,460)		—
Proceeds from exercise of stock options	1,181		731
Tax withholdings paid on behalf of employees for net share settlement	(2,184)		(864)
Net cash provided by (used in) financing activities	75,091		(90)
Net increase in cash and cash equivalents	70,281		5,432
Cash and cash equivalents at beginning of period	34,976		25,704
Cash and cash equivalents at end of period	$	105,257	$	31,136
Supplemental disclosure of non-cash investing and financing activities:
Costs related to the convertible senior notes in accounts payable and accrued liabilities	$	625	$	—
Property and equipment in accounts payable and accrued liabilities	$	215	$	390

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

7

Notes to Unaudited Condensed Consolidated Financial Statements

1. The Company and Summary of Significant Accounting Policies

Organization and Business

Vocera Communications, Inc. and its subsidiaries (collectively, the "Company" or "Vocera") is a provider of secure, integrated, intelligent communication and clinical workflow solutions, focused on empowering mobile workers in healthcare, hospitality, retail, energy, education and other mission-critical mobile work environments, in the United States and internationally. The significant majority of the Company's business is generated from sales of its solutions in the healthcare market to help its customers improve quality of care, safety, patient and staff experience and increase operational efficiency.

The Vocera communication and collaboration solution includes: an intelligent enterprise software platform; a lightweight, wearable, voice-controlled communication Badge and Smartbadge; and smartphone applications. The solution enables users to connect instantly with other staff simply by saying the name, function or group name of the desired recipient. It also delivers HIPAA-compliant secure text messages, alerts and alarms directly to a range of smartphones or the Smartbadge both inside and outside the hospital, replacing legacy pagers and in-building wireless phones.

The Company was incorporated in Delaware on February 16, 2000. The Company formed wholly-owned subsidiaries Vocera Communications UK Ltd and Vocera Communications Australia Pty Ltd. in 2005, Vocera Canada, Ltd. in 2010, Vocera Communications India Private Ltd. in 2013, Vocera Communications Middle East FZ LLC in 2014, acquired Extension, LLC in 2016 and EASE Applications, LLC ("EASE") in 2020.

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The year-end condensed consolidated balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or any other future year.

Except for the change in certain accounting policies upon adoption of the accounting standards described below, there have been no material changes to the Company’s significant accounting policies compared to the accounting policies presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, warranty reserves, accounts receivable reserves, inventory reserves, bonuses, goodwill and intangible assets, stock-based compensation expense, provisions for income taxes, contingent consideration and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications had no impact on the previously reported net loss or accumulated deficit.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued new guidance related to the accounting for debt with conversion features. The amendments in this update simplify the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope

8

exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity's financial statements and information about events, conditions and circumstances that can affect how to assess the amount or timing of an entity's future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021 with early adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the guidance beginning January 1, 2021. The adoption of this guidance resulted in an increase of $17.0 million and $15.2 million to convertible senior notes, net and accumulated deficit, respectively, and a reduction to additional paid-in capital of $32.2 million.

In March 2020 and January 2021, the FASB issued new guidance related to Reference Rate Reform. These pronouncements provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are elective and subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This could affect balances of right of use assets, lease liabilities, and notes payables. The amendments in the March update are effective as of March 12, 2020 through December 21, 2022 and the amendments in the January update are effective immediately for all entities. The adoption of these pronouncements did not have a material impact on the Company’s condensed consolidated financial statements.

2.Revenue, Deferred Revenue and Deferred Commissions

Disaggregation of Revenue

A typical sales arrangement involves multiple arrangements, such as sales of the Company’s proprietary communication device ("Vocera Badge"), perpetual software licenses, professional services, cloud-based subscription, and subscription and support services which entitles customers to unspecified upgrades, patch releases and telephone-based support. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how the Company evaluates its financial performance:

	Three months ended March 31,
(in thousands)	2021		2020
Product revenue
Device	$	15,273	$	13,903
Software	7,335		3,947
Total product	22,608		17,850
Service revenue
Subscription and support	20,959		18,069
Professional services and training	5,101		4,754
Total service	26,060		22,823
Total revenue	$	48,668	$	40,673

Contract balances

The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoiced amount and in the period the Company delivers goods or provides services or when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30 days. The balance of accounts receivable, net of allowance for doubtful accounts, as of March 31, 2021 and December 31, 2020 is presented in the accompanying condensed consolidated balance sheets. In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset. As of March 31, 2021 and December 31, 2020, contract assets totaling $4.0 million and $4.2 million, respectively, were included in other receivables in the condensed consolidated balance sheets.

Costs to obtain and fulfill a contract

The Company capitalizes certain incremental contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company determines whether costs should be deferred based on its sales compensation plans, if the commissions are incremental and would not have been incurred absent the execution of the

9

customer contract. Sales commissions for renewals of customer contracts are not commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit, which may exceed the term of the initial contract. Accordingly, amortization of deferred costs is recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation and is included in sales and marketing expense in the consolidated statements of operations. The Company determines its estimated period of benefit, up to five years, by evaluating the expected renewals of its customer contracts, the duration of its relationships with its customers and other factors. Deferred costs are periodically reviewed for impairment. Changes in the balance of total deferred commissions (contract asset) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Commissions Recognized		March 31, 2021
Deferred commissions	$	12,293	$	2,335	$	(1,915)	$	12,713

Of the $12.7 million total deferred commissions balance as of March 31, 2021, the Company expects to recognize approximately 36% as commission expense over the next 12 months and the remainder thereafter.

Deferred revenue

The Company records deferred revenue when cash payments are received in advance of the performance under the contract. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet date. Changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Revenue Recognized		March 31, 2021
Deferred revenue	$	64,733	$	17,917	$	(22,514)	$	60,136

Revenue recognized during the three months ended March 31, 2021 from deferred revenue balances at the beginning of the period was $21.1 million. Revenue recognized during the three months ended March 31, 2020 from deferred revenue balances at the beginning of the period was $18.5 million.

The “contracted but not recognized” performance obligations represent the Company’s deferred revenue and non-cancelable backlog amounts. This balance as of March 31, 2021 was $151.3 million, of which the Company expects to recognize approximately 64% as revenue over the next 12 months and the remainder thereafter.

3.Fair Value of Financial Instruments

The Company’s cash, cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. During the three months ended March 31, 2021, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers out of Level 3.

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company’s Level 2 fixed income securities is obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs, corroborated by observable market data.

In addition to its cash, cash equivalents and short-term investments, the Company measures the fair value of its Convertible Senior Notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the Convertible Senior Notes at March 31, 2021 to be a Level 2 measurement due to limited trading activity of the Convertible Senior Notes. Refer to Note 8 to the condensed consolidated financial statements for further information.

10

The agreement for the acquisition of EASE includes contingent payments to the owners of EASE, payable based on achievement of post-acquisition financial metrics. This contingent consideration is a Level 3 fair value measurement and the valuation of the Company’s contingent consideration obligation was estimated as the present value of total expected contingent consideration payments which are determined using a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements and utilizes assumptions with regard to future sales, probabilities of achieving such future sales, the likelihood and timing of expected payments and a discount rate. Significant increases with respect to assumptions as to future sales and probabilities of achieving such future sales would result in a higher fair value measurement, while an increase in the discount rate would result in a lower fair value measurement. The unobservable inputs in the valuation include revenue volatility of 12%, a risk-free rate of 2.50%, and the amounts are expected to be paid in the second quarters of 2022 and 2023. The fair value adjustment for the contingent consideration of $0.4 million for the three months ended March 31, 2021 was recorded as other expense.

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2021 and December 31, 2020, are summarized as follows (in thousands):

	March 31, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	40,126	$	—	$	—	$	40,126	$	363	$	—	$	—	$	363
Commercial paper	—		47,945		—		47,945		—		21,950		—		21,950
U.S. Treasury securities	—		—		—		—		—		6,000		—		6,000
Corporate debt securities	—		168,919		—		168,919		—		173,277		—		173,277
Total assets measured at fair value	$	40,126	$	216,864	$	—	$	256,990	$	363	$	201,227	$	—	$	201,590
Liabilities
Contingent consideration	$	—	$	—	$	3,333	3,333		$	—	$	—	$	2,959	$	2,959
Total liabilities measured at fair value	$	—	$	—	$	3,333	$	3,333	$	—	$	—	$	2,959	$	2,959

The financial accounts that are not subject to recurring fair value measurement include trade and other receivables, prepaid expenses and other current assets, total current liabilities and deferred revenues, both current and long-term. Due to their short maturities, the carrying amounts of these accounts approximate their fair values.

The table below provides a roll-forward of the fair value of the Company's liabilities that use significant unobservable inputs (Level 3).

	March 31,
	2021
Beginning balance	$	2,959
Fair value adjustment for contingent consideration included in earnings	374
Ending balance	$	3,333

11

4.Cash, Cash Equivalents and Short-Term Investments

The following tables present cash, cash equivalents and short-term investments (in thousands) as of March 31, 2021 and December 31, 2020:

	As of March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	58,128	$	—	$	—	$	58,128
Money market funds	40,126		—		—		40,126
Commercial paper	5,999		—		—		5,999
Corporate debt securities	1,004		—		—		1,004
Total cash and cash equivalents	105,257		—		—		105,257
Short-term investments:
Commercial paper	41,955		1		(10)		41,946
Corporate debt securities	167,666		326		(77)		167,915
Total short-term investments	209,621		327		(87)		209,861
Total cash, cash equivalents and short-term investments	$	314,878	$	327	$	(87)	$	315,118

	As of December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	28,613	$	—	$	—	$	28,613
Money market funds	363		—		—		363
U.S. government agency securities	6,000		—		—		6,000
Total cash and cash equivalents	34,976		—		—		34,976
Short-term investments:
Commercial paper	21,961		—		(11)		21,950
Corporate debt securities	172,768		543		(34)		173,277
Total short-term investments	194,729		543		(45)		195,227
Total cash, cash equivalents and short-term investments	$	229,705	$	543	$	(45)	$	230,203

The Company has determined that no credit losses related to marketable securities were required as of March 31, 2021. The unrealized losses for short-term investments have all been in a continuous unrealized loss position for less than twelve months. The Company’s conclusion is based on the high credit quality of the securities, their short remaining maturity and the Company’s intent and ability to hold such loss securities until maturity.

12

Classification of the cash, cash equivalents and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2021
Cash and cash equivalents (1)	$	105,257	$	—	$	105,257
Short-term investments	163,702		46,159		209,861
Cash, cash equivalents and short-term investments	$	268,959	$	46,159	$	315,118
Balances as of December 31, 2020
Cash and cash equivalents (1)	$	34,976	$	—	$	34,976
Short-term investments	141,582		53,645		195,227
Cash, cash equivalents and short-term investments	$	176,558	$	53,645	$	230,203
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.

5.Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2021		2020
Numerator:
Net loss	$	(7,633)	$	(10,470)
Denominator:
Weighted-average shares used to compute net loss per common share - basic and diluted	33,087		31,738
Net loss per share
Basic and diluted	$	(0.23)	$	(0.33)

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2021	2020
Options to purchase common stock, including ESPP	293	620
Restricted stock units and performance stock units	2,102	1,635
Convertible senior notes (if-converted)	4,591	—

6.Goodwill and Intangible Assets

Goodwill

As of March 31, 2021 and December 31, 2020, the Company had $69.2 million and $69.2 million of goodwill, respectively. As of March 31, 2021, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

13

Intangible Assets

The fair values for acquired intangible assets were determined by management with consideration of, in part, valuations performed by independent valuation specialists. Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This assumption results in amortization that is higher in earlier periods of the useful life. The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2021						December 31, 2020
(in thousands)	Weighted Average Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	3.9	$	12,360	$	10,487	$	1,873	$	12,360	$	10,255	$	2,105
Customer relationships	8.0	16,350		7,577		8,773		16,350		7,143		9,207
Backlog	3.4	2,240		1,453		787		2,240		1,343		897
Trademarks	3.0	1,770		1,246		524		1,770		1,191		579
Intangible assets, net book value		$	32,720	$	20,763	$	11,957	$	32,720	$	19,932	$	12,788

Amortization expense was $0.8 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization of acquired intangible assets is reflected in the cost of revenue for developed technology and backlog and in operating expenses for the other intangible assets. The estimated future amortization of existing acquired intangible assets as of March 31, 2021 was as follows:

(in thousands)	Future amortization
2021 (remaining nine months)	$	2,518
2022	2,965
2023	2,445
2024	1,564
2025	679
Thereafter	1,786
Future amortization expense	$	11,957

14

7.Balance Sheet Components

Inventories

(in thousands)	March 31, 2021		December 31, 2020
Raw materials	$	471	$	462
Finished goods	9,961		9,697
Total inventories	$	10,432	$	10,159

Property and equipment, net

(in thousands)	March 31, 2021		December 31, 2020
Computer equipment and software	$	15,649	$	15,912
Furniture, fixtures and equipment	2,754		2,570
Leasehold improvements	5,751		5,306
Manufacturing tools and equipment	2,628		2,506
Construction in process	106		629
Property and equipment, at cost	26,888		26,923
Less: Accumulated depreciation	(19,493)		(18,820)
Property and equipment, net	$	7,395	$	8,103

Depreciation and amortization expense for property and equipment was $1.2 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

Net investment in sales-type leases

The Company has sales-type leases with terms of 3 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of the Company’s net investment in sales-type leases are as follows:

(in thousands)	March 31, 2021		December 31, 2020
Minimum payments to be received on sales-type leases	$	1,246	$	1,440
Less: Unearned interest income and executory revenue portion	(608)		(731)
Net investment in sales-type leases	638		709
Less: Current portion	(360)		(360)
Non-current net investment in sales-type leases	$	278	$	349

Sales-type lease activity recognized in the condensed consolidated statement of operations are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Lease revenue	$	419	$	435
Less: Cost of lease shipments	(8)		(10)
Gross profit	$	411	$	425
Interest income (expense), net on lease receivable	$	1	$	(6)
Initial direct cost incurred	$	17	$	23

There were no allowances for doubtful accounts on these leases as of March 31, 2021 and December 31, 2020. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-type

15

leases are reported as components of the condensed consolidated balance sheet captions “other receivables” and “other long-term assets,” respectively.

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2021 were as follows:

(in thousands)	Future lease payments
2021	$	546
2022	505
2023	167
2024	28
Total	$	1,246

Accrued payroll and other current liabilities

(in thousands)	March 31, 2021		December 31, 2020
Payroll and related expenses	$	7,237	$	9,043
Accrued payables	2,708		3,160
Operating lease liabilities, current portion	2,732		2,529
Lease financing, current portion	1,066		1,034
Product warranty	462		453
Customer prepayments	4,636		4,292
Sales and use tax payable	678		476
Other Tax Payable	1,064		852
Other	1,417		1,356
Total accrued payroll and other current liabilities	$	22,000	$	23,195

The changes in the Company’s product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Warranty balance at the beginning of the period	$	453	$	420
Warranty expense accrued for shipments during the period	70		108
Changes in estimate related to pre-existing warranties	(32)		(31)
Warranty settlements made	(29)		(57)
Total product warranty	$	462	$	440

Leases

The Company has operating leases for office space at its headquarters and subsidiaries under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. Effective January 1, 2019 the Company adopted Accounting Standards Update 2016-02, Leases ("Topic 842"), using the modified retrospective approach. The Company determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component. The Company’s leases have remaining lease terms of approximately three months to approximately five years. Operating lease cost, including short-term operating leases was $0.7 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

16

Supplemental balance sheet information related to leases was as follows:

(in thousands)	March 31, 2021
Other long-term assets	$	4,099
Accrued payroll and other current liabilities	2,732
Other long-term liabilities	2,086
Total operating lease liabilities	$	4,818

Other information related to leases was as follows:

	Three months ended March 31,
(in thousands)	2021			2020
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities	$	761		$	712
Right-of-use assets obtained in exchange for lease obligations	$	673		$	—
Weighted average remaining lease term	2.56 years			2.39 years
Weighted average discount rate	8		%	8		%

Maturities of lease liabilities as of March 31, 2021 are as follows:

(in thousands)	Operating leases
2021 (remaining nine months)	$	2,207
2022	1,638
2023	701
2024	523
2025	175
2026	74
Total maturities of lease liabilities	5,318
Less imputed interest	(500)
Total	$	4,818

8.Convertible Senior Notes

Convertible Senior Notes due 2026

In March 2021, the Company issued $200.0 million aggregate principal amount of its 0.50% Convertible Senior Notes, due 2026 (the “2026 Notes”). The 2026 Notes are unsecured, unsubordinated obligations of the Company and bear interest at a fixed rate of 0.50% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. The 2026 Notes mature on September 15, 2026, unless converted, redeemed or repurchased in accordance with their terms prior to such date. The Company granted the initial purchasers an overallotment option under the purchase agreement to purchase up to an additional $30.0 million aggregate principal amount of the 2026 Notes to cover overallotments within a 30-day period. The overallotment option was not exercised prior to March 31, 2021. The purchasers partially exercised the overallotment option in April 2021 and the Company issued an additional $24.5 million of the 2026 Notes. The Company may not redeem the 2026 Notes prior to March 20, 2024. The Company may redeem for cash all or any portion of the 2026 Notes (subject to the partial redemption limitation (as defined in the Indenture)), at its option, on or after March 20, 2024 if the last reported sale price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

17

The 2026 Notes are convertible into cash, shares of Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, at an initial conversion rate of 16.6272 shares of common stock per $1,000 principal amount of the 2026 Notes, which is equal to an initial conversion price of approximately $60.14 per share of common stock. The 2026 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2026, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the 2026 Notes on each applicable trading day

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of that ten day consecutive trading day period was less than 98% of the product of the last reported sale price of common stock and the conversion rate of the 2026 Notes on such trading day;

(3) if the Company calls any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second scheduled trading day prior to the applicable redemption date; or

(4) upon the occurrence of specified corporate events.

On or after June 15, 2026, holders of the 2026 Notes may convert all or any portion of their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. If a fundamental change occurs (as set forth in the indenture governing the 2026 Notes), each holder of the 2026 Note shall have the right, at such holder’s option, to require the Company to repurchase for cash all of such their Notes, or any portion of the principal amount, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. During the three months ended March 31, 2021, the conditions allowing holders of the 2026 Notes to convert have not been met and there were no changes to the initial conversion price of the 2026 Notes. The 2026 Notes are not convertible during the three months ended March 31, 2021 and are classified as long-term debt.

In accounting for the 2026 Notes after adoption of ASU 2020-06, the 2026 Notes are accounted for as a single liability. The carrying amount of the liability component for 2026 Notes is $193.9 million as of March 31, 2021, with principal of $200.0 million, net of debt issuance cost of $6.1 million. The costs related to the 2026 Notes are being amortized to interest expense over the contractual term of the 2026 Notes at an effective interest rate of 1.06%.

The 2026 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021
Liability:
Principal	$	200,000
Unamortized issuance costs	(6,061)
Net carrying amount	$	193,939

(in thousands)	March 31, 2021
Contractual interest expense	$	61
Amortization of issuance costs	64
Total interest expense	$	125

2026 Capped Calls

In connection with the pricing of the 2026 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls”). The 2026 Capped Calls have an initial strike price of $60.14 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Notes. The 2026 Capped Calls have initial cap prices of $77.96 per share, subject to certain adjustments. Conditions that cause adjustments to the initial strike price of the 2026 Capped Calls mirror conditions that result in corresponding adjustments for the 2026 Notes. The 2026 Capped Calls

18

are generally intended to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the 2026 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the 2026 Capped Calls are separate transactions, and not part of the terms of the 2026 Notes. As these transactions meet certain accounting criteria, the 2026 Capped Calls are recorded in stockholders' equity at an amount of $15.5 million and are not accounted for as derivatives. In connection with the partial exercise of the overallotment option and the issuance by the Company of $24.5 million of 2026 Notes on April 5, 2021, the Company entered into $1.9 million of additional privately negotiated capped calls.

Convertible Senior Notes due 2023

In May 2018, the Company issued $143.75 million aggregate principal amount of 1.50% Convertible Senior Notes due May 15, 2023 (the “2023 Notes”), including $18.75 million aggregate principal amount of such notes pursuant to the exercise in full of options granted to the initial purchasers. The 2023 Notes are unsecured, unsubordinated obligations and bear interest at a fixed rate of 1.50% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2018. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, were approximately $138.9 million.

The Company used part of the net proceeds from the issuance of the 2026 Notes to retire $102.9 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions for consideration of $102.9 million in cash and 1,277,731 shares of the Company’s common stock (the "2023 Note Repurchase Transactions"). The Company separately settled the accrued interest of approximately $0.5 million associated with the retired 2023 Notes in cash.

Out of the common stock issued, the Company provided additional issuance of 46,216 shares of the Company’s common stock not provided for under the original conversion terms of the 2023 Notes to induce the holders of the 2023 Notes to agree to the retirement. The Company used cash to settle the principal of the retired 2023 Notes and issued common stock to settle the conversion spread.

The 2023 Note Repurchase Transactions met the requirements to be accounted for as an induced conversion. Under the induced conversion guidance, the total fair value of the additional cash and common stock issued to induce conversion is recognized as an inducement expense. The remaining cash and common stock consideration issued under the original terms of the 2023 Notes are accounted for under the general conversion accounting guidance. The 2023 Note Repurchase Transactions resulted in a $2.1 million inducement loss equal to the fair value of the additional common stock issued for inducement and the difference of approximately $1.6 million between the carrying amount of the 2023 Notes retired, including unamortized debt issuance cost of $1.6 million, and the cash consideration paid and the par amount of the common stock issued was recorded in additional paid-in capital.

Each $1,000 principal amount of the remaining 2023 Notes is initially convertible into 31.0073 shares of the Company’s common stock (the “2023 Notes Conversion Option”), which is equivalent to an initial conversion price of approximately $32.25 per share, subject to adjustment upon the occurrence of specified events. The 2023 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding February 15, 2023, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the 2023 Notes on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of that ten day consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the 2023 Notes on such trading day; or

(3) upon the occurrence of specified corporate events (as set forth in the indenture governing the 2023 Notes).

On or after February 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2023 Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will 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, at the Company’s election. If certain specified fundamental changes occur (as set forth in the indenture governing the 2023 Notes) prior to the maturity date, holders of the 2023 Notes may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In

19

addition, if specific corporate events occur prior to the applicable maturity date, the Company will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event in certain circumstances. During the three months ended March 31, 2021, the conditions allowing holders of the 2023 Notes to convert have not been met and there were no changes to the initial conversion price of the 2023 Notes. The 2023 Notes are not convertible during the three months ended March 31, 2021 and are classified as long-term debt.

Prior to the adoption of the ASU 2020-06 on January 1, 2021 and in accounting for the issuance of the 2023 Notes, the 2023 Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amount of the equity component representing the 2023 Conversion Option was $33.4 million and was determined by deducting the fair value of the liability components from the par value of the 2023 Notes. The equity component was recorded in additional paid-in-capital and are not re-measured as long as they continue to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) was amortized to interest expense over the contractual term of the 2023 Notes at an effective interest rate of 7.6%.

Prior to the adoption of the ASU 2020-06 on January 1, 2021 and in accounting for the debt issuance costs of $4.9 million related to the 2023 Notes, the Company allocated the total amount incurred to the liability and equity components of the 2023 Notes based on their relative values. Issuance costs attributable to the liability component were $3.8 million and were amortized to interest expense using the effective interest method over the contractual term of the 2023 Notes. Issuance costs attributable to the equity components were netted with the equity component in additional paid-in-capital.

The Company elected to early adopt ASU 2020-06 as of January 1, 2021 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted.

In accounting for the 2023 Notes after adoption of ASU 2020-06, the 2023 Notes are accounted for as a single liability. The carrying amount of the liability component for 2023 Notes is $40.2 million as of March 31, 2021, with principal of $40.8 million, net of debt issuance cost of $0.6 million. The issuance costs related to the 2023 Notes are being amortized to interest expense over the contractual term of the 2023 Notes at an effective interest rate 2.19%.

The 2023 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021		December 31, 2020
Liability:
Principal	$	40,804	$	143,750
Unamortized debt discount	—		(17,411)
Unamortized issuance costs	(608)		(1,963)
Net carrying amount	$	40,196	$	124,376
Stockholders’ equity:
Debt discount for conversion option	$	—	$	33,350
Issuance costs	—		(1,136)
Net carrying amount	$	—	$	32,214

	Three months ended March 31,
(in thousands)	2021		2020
Contractual interest expense	$	464	$	539
Amortization of debt discount	—		1,559
Amortization of issuance costs	188		176
Total interest expense	$	652	$	2,274

The total estimated fair value of the 2023 and 2026 Notes (“the Notes”) as of March 31, 2021 was approximately $242.9 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market

20

interest rates. Based on the closing price of the Company’s common stock of $38.46 on March 31, 2021, the if-converted value of the Notes of $176.6 million was less than their principal amount.     

2023 Capped Calls

In connection with the pricing of the 2023 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties, the “2023 Capped Calls.” The 2023 Capped Calls entered into with the 2023 Notes are still outstanding and each have an initial strike price of approximately $32.25 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2023 Notes. The 2023 Capped Calls have initial cap prices of $38.94 per share, subject to certain adjustments. The 2023 Capped Calls cover, subject to anti-dilution adjustments, approximately 4.5 million shares of the Company’s common stock. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments for the 2023 Notes. The 2023 Capped Calls are generally intended to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the 2023 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the 2023 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes. As these transactions meet certain accounting criteria, the 2023 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $8.9 million incurred in connection with the 2023 Capped Calls was recorded as a reduction to additional paid-in capital. The 2023 Capped Calls were not impacted by the 2023 Note Repurchase Transactions and continue to remain outstanding.

The net impact to the Company’s stockholders' equity, included in additional paid-in capital, of the above components of the 2023 Notes is as follows:

(in thousands)	March 31, 2021
Conversion option	$	33,350
Purchase of capped calls	(8,907)
Issuance costs	(1,136)
Total	$	23,307

Impact on Earnings Per Share

Prior to the adoption of ASU 2020-06, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread of its 2023 Notes for the three months ended March 31, 2020. Under the treasury stock method, in periods when the Company reports net income, the Company is required to include the effect of additional shares that may be issued under the 2023 Notes when the price of its’ common stock exceeds the conversion price. The conversion spread on the 2023 convertible senior notes had an anti-dilutive impact during the three months ended March 31, 2020, since the average market price of the Company’s common stock during the period exceeded the initial conversion price per share for the 2023 Notes and the Company was in a net loss position.

After the adoption of ASU 2020-06, the Company uses the if-converted method for calculating any potential dilutive effect of its 2023 Notes and 2026 Notes for the three months ended March 31, 2021. Under this method, diluted earnings per share would generally be calculated assuming that all the 2023 and 2026 Notes were converted solely into 4.6 million shares of common stock at the beginning of the reporting period, unless the result would be antidilutive. The potential shares of common stock issuable upon the conversion of the 2023 and 2026 Notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive as of March 31, 2021.

9.Commitments and Contingencies

Non-cancelable Material Commitments

The Company is required to purchase unused, non-cancelable, non-returnable raw material inventory that was purchased by its contract manufacturers based on committed finished goods orders from the Company, certain long lead-time raw materials based on the Company’s forecast and current work-in-progress materials. As of March 31, 2021 and December 31, 2020, approximately $6.0 million and $6.1 million, respectively, of such inventory was purchased and held by the third-party manufacturers which was subject to these purchase guarantees.

21

Indemnifications

The Company undertakes, in the ordinary course of business, to (i) defend customers and other parties from certain third-party claims associated with allegations of trade secret misappropriation, infringement of copyright, patent or other intellectual property rights, tortious damage to persons or property or breaches of certain Company obligations relating to confidentiality (e.g., safeguarding protected health information) and (ii) indemnify and hold harmless such parties from certain resulting damages, costs and other liabilities. The term of these undertakings may be perpetual and the maximum potential liability of the Company under certain of these undertakings is not determinable. Based on its historical experience, the Company believes the liability associated with these undertakings is minimal.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The Company currently has directors and officers insurance. As there has been no significant history of losses, no expense accrual has been made.

Litigation

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses from existing matters that are probable or reasonably possible of being incurred as a result of these matters would not be material to the financial statements as a whole.

10.Stock-based Compensation and Awards

Valuation Assumptions

Compensation expense for all share-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), is measured based on the estimated fair value of the award on the grant date over the related vesting or performance periods.

We estimate the fair value of our stock-based awards as follows:

Restricted Stock Units. The fair value of restricted stock units is determined based on the quoted market price of our common stock on the date of grant.

Performance Stock Units. Performance stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “performance stock units”). The fair value of our performance stock units is estimated using a Monte-Carlo simulation model which is a probabilistic approach for calculating the fair value of the awards. The Monte-Carlo simulation is a statistical technique used, in this instance, to simulate future stock prices of the Company relative to constituents in the S&P 600 Health Care Equipment and Services Index. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.

Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2012 Employee Stock Purchase Plan (ESPP), respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.

22

Stock Option Activity

A summary of the stock option activity for the three months ended March 31, 2021 is presented below:

	Options Outstanding
	Number of options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
				(in years)	(in thousands)
Outstanding at December 31, 2020	299,031	$	15.58	2.68	$	7,761
Options exercised	(69,360)	17.03
Outstanding at March 31, 2021	229,671	$	15.14	2.40	$	5,357

At March 31, 2021, there was no unrecognized compensation cost related to options. As of March 31, 2021, there were 784,577 shares that remained available for future issuance of options, restricted stock units (“RSUs”) or other equity awards under the 2012 Equity Incentive Plan.

Employee Stock Purchase Plan

In March 2012, the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”) was approved. No shares of common stock were purchased during the three months ended March 31, 2021 and 2020. As of March 31, 2021, there were 1,275,951 shares available for future issuance under the ESPP.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of periodic ESPP offerings on their offer date. The following assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2021	2020
Expected term (in years)	0.50	0.50
Volatility	55.0%	50.0%
Risk-free interest rate	0.12%	1.59%
Dividend yield	0%	0%

Restricted Stock Units and Performance Stock Units

The Company issues RSUs and PSUs as part of its compensation plans. A summary of RSU and PSU activity for the three months ended March 31, 2021 is presented below:

	Restricted Stock Units and Performance Stock Units
	Number of shares	Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2020	2,140,763	$	25.16
Granted	156,747	42.53
Vested	(147,796)	28.73
Forfeited	(47,272)	26.72
Outstanding at March 31, 2021	2,102,442	$	26.17

At March 31, 2021, there was $35.6 million of unrecognized compensation cost related to RSUs and PSUs, which is expected to be recognized over a weighted-average period of 1.71 years.

During the second quarter of fiscal year 2020 the Company granted 145,877 PSUs to certain executives under the 2012 Equity Incentive Plan (the “2012 Plan”). PSUs are contingent on the achievement of our comparative market-based returns. On the date of grant, the fair value of the total shareholder return (TSR) component of the PSUs is estimated using a Monte Carlo

23

valuation model. The PSUs will vest over a three-year performance period. The number of shares the PSU holder receives is based on the extent to which the corresponding market conditions have been achieved. For awards subject to service and market conditions, the number of shares of our stock issued pursuant to the award can range from 0% to 200% of the target amount. Compensation expense for awards with performance-based and service-based conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. The expense for performance-based awards is evaluated each quarter based on the achievement of the performance conditions. These grants were reduced from shares of common stock reserved for issuance under stock option plans as if 200% of the target amount were achieved. The assumptions used to determine the fair value are level 3 fair value measurements which include unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The assumptions used in the Monte Carlo valuation model to value the PSUs were as follows:

	Grant Date June 1, 2020
Grant date fair value per share	$	30.70
Expected term (in years)	3
Volatility	42.68		%
Risk-free interest rate	0.20		%
Dividend yield	—		%

Allocation of Stock-Based Compensation Expense

The following table presents the allocation of stock-based compensation expense:

	Three months ended March 31,
(in thousands)	2021		2020
Cost of revenue	$	1,084	$	973
Research and development	1,000		966
Sales and marketing	2,325		1,860
General and administrative	2,453		2,042
Total stock-based compensation	$	6,862	$	5,841

11.Income Taxes

The Company recorded a $0.2 million and $0.1 million provision for income taxes for the three months ended March 31, 2021 and 2020, respectively. The provision for income taxes for the three months ended March 31, 2021 was primarily due to foreign income and withholding taxes. The expense for the three months ended March 31, 2020 was primarily due to the accretion of deferred tax liability associated with indefinite lived intangibles, taxes on international operations, and state income taxes.

As of March 31, 2021, the Company has provided a valuation allowance against certain federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

On March 11, 2021 the American Rescue Plan Act of 2021 (the “Act”) was enacted and signed into law. The Act contains several tax provisions, including expansion of employment tax credits. The Company is currently evaluating the impact of the Act on its consolidated financial statements, but does not expect the tax provisions will result in a material impact to the Company’s tax position.

12.Subsequent Events

On May 4, 2021, the Company acquired all of the outstanding equity interest of PatientSafe Solutions for approximately $35 million in cash. PatientSafe Solutions consolidates secure messages, voice calls, alerts, and nurse call notifications with data from the electronic medical record to enable care teams to quickly manage mission-critical workflows in one mobile smartphone application.

24

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings, including our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021. These discussions contain forward-looking statements reflecting our current expectations that involve risks and uncertainties which are subject to safe harbors under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements include, but are not limited to, statements concerning our plans, objectives, expectations and intentions, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management, and the expected impact of the COVID-19 pandemic on our operations. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements.

Business Overview

We are a provider of secure, integrated, intelligent communication and clinical workflow solutions, focused on empowering mobile workers in healthcare, hospitality, retail, energy, education and other mission-critical mobile work environments, in the United States and internationally. The significant majority of our business is generated from sales of our solutions in the healthcare market to help our customers enhance quality of care, safety, patient and staff experience and improve operational efficiency.

We primarily sell products, software subscriptions and support, and professional services directly to end users. Total revenue increased $8.0 million from $40.7 million for the three months ended March 31, 2020 to $48.7 million for the three months ended March 31, 2021. Our total deferred revenue and backlog was $169.3 million as of March 31, 2021 compared to $125.0 million as of March 31, 2020. For the three months ended March 31, 2021, we recorded a net loss of $7.6 million compared to a net loss of $10.5 million for the three months ended March 31, 2020.

Our diverse customer base ranges from large hospital systems to small local hospitals, as well as other healthcare facilities and customers in non-healthcare markets. We do not rely on any one customer for a substantial portion of our revenue. While we have international customers in other English-speaking countries such as Canada, the United Kingdom, Australia, New Zealand and parts of the Middle East, most of our customers are located in the United States. International customers represented 11.8%, 10.7% and 8.7% of our revenue in the three months ended March 31, 2021, and the years ended December 31, 2020 and 2019, respectively. We believe certain international markets represent attractive growth opportunities. We are exploring plans to expand our presence in other English-speaking markets and enter non-English speaking markets.

We outsource the manufacturing of our hardware products. Our outsourced manufacturing model allows us to scale our business without the significant capital investment and on-going expenses required to establish and maintain manufacturing operations. We work closely with our contract manufacturers, including Sercomm and SMTC Corporation, and key suppliers to manage the procurement, quality and cost of components. We seek to maintain an optimal level of finished goods inventory to meet our forecast for sales and unanticipated shifts in sales volume and mix.

COVID-19 Pandemic

The outbreak of the novel coronavirus, SARS-CoV-2, or COVID-19, has evolved into a global pandemic and public health emergency. Many federal, state and local governments and private entities have mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. Since our last filing, COVID-19 infections have continued and are increasing in many geographies of the world. Although there is an increase in vaccinations, infection rates could continue to increase. The COVID-19 pandemic has affected our business in several ways, including the following:

•We have taken measures to protect the health and safety of our employees, primarily by shifting the majority of our employees to remote work.

25

•Our access to our healthcare customers’ locations for sales and implementation activities remains limited in some cases. The sales cycle and implementation timeline for broader strategic deals in some cases has been elongated as they shifted their primary focus to preparing for and responding to the pandemic.

•We have experienced some delays in receiving parts due to supplier and shipping issues.

Overall, the outbreak did not have a material impact on our operating results or business in the three months ended March 31, 2021. While future impacts cannot be predicted at this time, the shift in hospital resources, attention to treatment of COVID-19 patients and declines in hospital revenues may result in reduced demand for our products and solutions, longer sales cycles and/or delays of customer implementations, which could negatively impact our financial condition.

We have generated operating cash flows in the past and our $315.1 million in cash and short-term investments provides us with ample liquidity to meet our current needs. However, given the dynamic nature of this situation, we cannot accurately estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows.

Convertible Senior Notes

In March 2021, we issued $200.0 million aggregate principal amount of 0.50% Convertible Senior Notes, due 2026 (the “2026 Notes”). We used part of the net proceeds from the issuance of the 2026 Notes to retire approximately $102.9 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions for consideration of $102.9 million in cash and 1,277,731 shares of common stock (the "2023 Note Repurchase Transactions"). We separately settled the accrued interest of approximately $0.5 million associated with the retired 2023 Notes in cash.

In connection with the 2026 Notes, we granted to the initial purchasers an overallotment option under the purchase agreement to purchase up to an additional $30.0 million aggregate principal amount of the 2026 Notes to cover overallotments within a 30-day period. The overallotment option was not exercised prior to March 31, 2021 and therefore we did not recognize the overallotment option as of March 31, 2021. The purchasers partially exercised the overallotment option on April 5, 2021 and we issued an additional $24.5 million of the 2026 Notes.

In connection with the pricing of the 2026 Notes, we entered into privately negotiated capped call transactions with certain counterparties, the “2026 Capped Calls”. The 2026 Capped Calls have an initial strike price of approximately $60.14 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Notes. The 2026 Capped Calls have initial cap prices of $77.96 per share, subject to certain adjustments. We used proceeds of $15.5 million to purchase the Capped Calls, which were recorded as a reduction to additional paid-in capital. Additionally, in connection with the partial exercise of the overallotment option and the issuance by us of $24.5 million of 2026 Notes, on April 5, 2021, we entered into $1.9 million of additional privately negotiated capped calls. The 2023 Capped Calls were not impacted by the 2023 Note Repurchase Transactions and continue to remain outstanding. For further discussion on the Capped Calls, please refer to Note 8 in the notes to the condensed consolidated financial statements.

We expect to use the remaining net proceeds for general corporate purposes, which may include funding research and development, increasing working capital, acquisitions or investments in complementary businesses, products or technologies and capital expenditures.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2020, except as disclosed in Note 1 to the condensed consolidated financial statements “Recently Adopted Accounting Pronouncements”.

26

Results of Operations

The following table presents our results of operations for the periods indicated. The period-to-period comparisons of results are not necessarily indicative of results for future periods.

	Three months ended March 31,
Consolidated statement of operations data:	2021				2020
	(unaudited)
(in thousands)	Amount		% Revenue		Amount		% Revenue
Revenue
Product	$	22,608	46.5	%	$	17,850	43.9	%
Service	26,060		53.5		22,823		56.1
Total revenue	48,668		100.0		40,673		100.0
Cost of revenue
Product	6,956		14.3		6,364		15.6
Service	10,827		22.2		10,523		25.9
Total cost of revenue	17,783		36.5		16,887		41.5
Gross profit	30,885		63.5		23,786		58.5
Operating expenses:
Research and development	10,350		21.3		9,032		22.2
Sales and marketing	17,670		36.3		16,963		41.7
General and administrative	7,275		14.9		6,391		15.7
Total operating expenses	35,295		72.5		32,386		79.6
Loss from operations	(4,410)		(9.0)		(8,600)		(21.1)
Interest income	346		0.7		1,120		2.8
Interest expense	(777)		(1.6)		(2,274)		(5.6)
Other expense, net	(2,546)		(5.3)		(591)		(1.5)
Loss before income taxes	(7,387)		(15.2)		(10,345)		(25.4)
Provision for income taxes	(246)		(0.5)		(125)		(0.3)
Net loss	$	(7,633)	(15.7)	%	$	(10,470)	(25.7)	%

Revenue:

	Three months ended March 31,
	2021		2020		Change
(in thousands)	Amount		Amount		Amount		%
Product revenue
Device	$	15,273	$	13,903	$	1,370	9.9	%
Software	7,335		3,947		3,388		85.8
Total product	22,608		17,850		4,758		26.7
Service revenue
Subscription and support	20,959		18,069		2,890		16.0
Professional services and training	5,101		4,754		347		7.3
Total service	26,060		22,823		3,237		14.2
Total revenue	$	48,668	$	40,673	$	7,995	19.7	%

27

Three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Total revenue increased $8.0 million, or 19.7%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Product revenue increased $4.8 million, or 26.7%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Device revenue increased $1.4 million, or 9.9%, and software revenue increased $3.4 million, or 85.8% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in device revenue was driven primarily by increased unit volume of Badges and related accessories. The increase in software revenue was mainly a result of an increase in the number of software licenses delivered to our customers.

Service revenue increased $3.2 million, or 14.2%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Subscription and support revenue increased $2.9 million, or 16.0%, and professional services and training revenue increased $0.3 million, or 7.3%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in subscription and support revenue was primarily the result of having a larger customer base purchasing software maintenance contracts and subscription revenue related to the acquisition of EASE. The increase in professional services and training revenue was due to an increase in implementation services for our solutions.

Cost of revenue:

	Three months ended March 31,
	2021			2020			Change
(in thousands)	Amount			Amount			Amount			%
Cost of revenue
Product	$	6,956		$	6,364		$	592		9.3	%
Service	10,827			10,523			304			2.9
Total cost of revenue	$	17,783		$	16,887		$	896		5.3	%
Gross margin
Product	69.2		%	64.3		%	4.9		%
Service	58.5		%	53.9		%	4.6		%
Total gross margin	63.5		%	58.5		%	5.0		%

Three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Cost of product revenue increased $0.6 million, or 9.3%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This was primarily driven by an increase in the number of Badges and related accessories sold. For the same comparative periods, product gross margin increased primarily as a result of a higher proportion of software revenue versus device revenue.

Cost of service revenue increased $0.3 million, or 2.9%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Cost of service revenue increased due to higher compensation and benefits as a result of increased headcount, partially offset by less travel. For the same comparative periods, service gross margin as a percentage of service revenue increased primarily as a result of an increase in subscription and support revenue.

28

Operating expenses:

	Three months ended March 31,
	2021		2020		Change
(in thousands)	Amount		Amount		Amount		%
Operating expenses
Research and development	$	10,350	$	9,032	$	1,318	14.6	%
Sales and marketing	17,670		16,963		707		4.2
General and administrative	7,275		6,391		884		13.8
Total operating expenses	$	35,295	$	32,386	$	2,909	9.0	%

Three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Research and development expense. Research and development expense increased $1.3 million, or 14.6%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This was primarily due to an increase of $0.9 million in compensation and benefits associated with increased headcount, an increase of $0.3 million in outside contractors and an increase of $0.2 million in research and development equipment, partially offset by a decrease of $0.1 million in travel expense.

Sales and marketing expense. Sales and marketing expense increased $0.7 million, or 4.2%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This was primarily due to an increase of $1.2 million in compensation and benefits associated with increased headcount, $0.2 million increase in amortization related to the acquisition of EASE, partially offset by a decrease of $0.6 million in travel expense and a decrease of $0.3 million due shift in marketing focus from live trade shows participation to digital advertising and virtual trade shows.

General and administrative expense. General and administrative expense increased $0.9 million, or 13.8%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This was primarily due to an increase in compensation, benefits and hiring costs of $0.6 million as a result of achievement of performance related compensation targets, and an increase of $0.5 million in outside services. These increases were offset by a decrease in travel and entertainment costs of $0.2 million.

Interest Income and Other Expense, Net:

	Three months ended March 31,
(in thousands)	2021		2020		Change
Interest income	$	346	$	1,120	$	(774)
Interest expense	(777)		(2,274)		1,497
Other expense, net	(2,546)		(591)		(1,955)

Three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Interest income. Interest income decreased $0.8 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This decrease was due to earning a lower rate of return on our investments.

Interest expense. For the three months ended March 31, 2021 we had interest expense of $0.8 million resulting from the amortization of debt issuance costs and the contractual interest incurred on the issuance of the Notes. This decrease of $1.5 million from March 31, 2020 was primarily due the impact of the adoption of ASU 2020-06 Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which eliminates the debt discount and amortization. The amortization of the debt discount was previously accounted for as part of interest expense and represented $1.6 million of the total interest expense for the three months ended March 31, 2020.

Other expense, net. The change in other expense in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to the $2.1 million inducement loss resulting from the repurchase of the 2023 Notes. Please refer to Note 8 in the notes to the condensed consolidated financial statements for further information.

29

Liquidity and Capital Resources

As of March 31, 2021, we had cash and cash equivalents and short-term investments of $315.1 million.

In March 2021, we issued $200.0 million aggregate principal amount of 0.50% Convertible Senior Notes and we used part of the net proceeds from the issuance of the 2026 Notes to retire approximately $102.9 million aggregate principal amount of the 2023 Notes. For additional information, see Note 8 of Notes to Consolidated Financial Statements.

We believe that our existing sources of liquidity will satisfy our working capital and capital requirements for at least the next twelve months and the foreseeable future.

	Three months ended March 31,
(in thousands)	2021		2020
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	11,003	$	5,644
Net cash used in investing activities	(15,813)		(122)
Net cash provided by (used in) financing activities	75,091		(90)
Net increase in cash and cash equivalents	$	70,281	$	5,432

Operating activities

Cash provided by operating activities was $11.0 million for the three months ended March 31, 2021. The change was the result of a net loss of $7.6 million and a decrease in lease-related performance liabilities of $0.3 million, offset by non-cash items such as stock-based compensation of $6.9 million, non-cash lease expense of $0.6 million, amortization of debt issuance costs of $0.3 million, amortization of $2.0 million for property and equipment and acquired intangible assets and inducement loss of $2.1 million resulting from the repurchase of our 2023 Notes as well as $0.6 million of other items driven by the accretion of investments. With respect to changes in assets and liabilities, we experienced a decrease in accounts receivable of $12.9 million, a decrease of $0.6 million in other receivables, an increase of $0.3 million in inventories, an increase of $0.4 million in prepaid expenses and other assets, an increase in deferred commissions of $0.4 million, an increase of $0.6 million in accounts payable, a decrease of $1.8 million in accrued payroll and other liabilities and a $4.6 million decrease in deferred revenue.

Cash provided by operating activities was $5.6 million for the three months ended March 31, 2020. The change was the result of a net loss of $10.5 million, offset by non-cash items such as stock-based compensation of $5.8 million, amortization of debt discount and issuance costs of $1.7 million, an increase in lease-related performance liabilities of $0.3 million and depreciation and amortization of $1.3 million for property and equipment and acquired intangible assets. With respect to changes in assets and liabilities, we experienced a decrease in accounts receivable of $16.3 million, an increase of $0.1 million in other receivables, an increase of $1.5 million in inventories, an increase of $0.4 million in prepaid expenses and other assets, a decrease in deferred commissions of $0.2 million, a decrease of $2.8 million in accounts payable and a $4.8 million decrease in deferred revenue.

Investing activities

Cash used in investing activities was $15.8 million for the three months ended March 31, 2021, due to $56.6 million in purchases of short-term investments offset by $41.2 million of short-term investment maturities. An additional $0.4 million of cash was used for the purchase of property and equipment and leasehold improvements.

Cash used in investing activities was $0.1 million for the three months ended March 31, 2020, due to $28.6 million of short-term investment maturities, offset by $28.0 million for purchases of short-term investments. An additional $0.7 million of cash was used for the purchase of property and equipment and leasehold improvements.

Financing activities

Cash provided by financing activities was $75.1 million for the three months ended March 31, 2021, attributable to $194.5 million of net proceeds from convertible senior notes and $1.2 million of proceeds from stock option exercises, offset by $102.9 million related to the repayment of a portion of our 2023 Notes, a $15.5 million payment for the purchase of capped calls related to our 2026 Notes and $2.2 million cash paid for employee taxes collected via net share settlement.

Cash used in financing activities was $0.1 million for the three months ended March 31, 2020, attributable to $0.7 million of proceeds from stock option exercises offset by $0.9 million cash paid for employee taxes collected via net share settlement.

30

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. To achieve this objective, historically we have invested in money market funds. With the proceeds from our two public offerings in 2012 and the issuance of our convertible senior notes in 2018 and 2021, we have invested in a broader portfolio of high credit quality short-term securities. To minimize the exposure due to an adverse shift in interest rates, we maintain an average portfolio duration of one year or less.

Our primary exposure to market risk is interest income and expense sensitivity, which is affected by changes in the general level of the interest rates in the United States. However, because of the short-term nature of our interest-bearing securities, a 10% change in market interest rates would not be expected to have a material impact on our consolidated financial condition or results of operations.

Historically our operations have consisted of research and development and sales activities in the United States. As a result, our financial results have not been materially affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We are developing plans to expand our international presence. Accordingly, we expect that our exposure to changes in foreign currency exchange rates and economic conditions may increase in future periods.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to management, including principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

As of March 31, 2021, we carried out an evaluation under the supervision of, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting which occurred during the period covered by this Quarterly Report on Form 10-Q which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

31

PART II: OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, we may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business.

Item 1A.    Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information set forth in this Quarterly Report on Form 10-Q. Our business, financial condition, results of operations or future prospects could be materially and adversely harmed if any of the following risks, or other risks or uncertainties that are not yet identified or that we currently believe are immaterial, actually occur. The trading price of our common stock could decline due to any of these risks or uncertainties, and, as a result, you may lose all or part of your investment.

Summary of Risk Factors

Our business is subject to a number of risks and uncertainties, including those risks discussed at-length below. These risks include, among others, the following:

•We have incurred significant losses in the past and will likely experience losses in the future.

•We depend on sales in the healthcare market for the majority of our revenue, and a decrease in sales in the healthcare market would harm our business.

•Our sales cycle can be lengthy and unpredictable, which may cause our revenue and operating results to fluctuate significantly.

•If we fail to offer high-quality products and services, our operating results and our ability to sell these in the future will be harmed.

•We depend on some sole source and limited source suppliers, and if we are unable to source our components from them, our business and operating results could be harmed.

•Because we depend on contract manufacturers and original design manufacturers, our operations could be harmed and we could lose sales if we encounter problems with these manufacturers.

•If we fail to forecast our manufacturing requirements accurately or fail to properly manage our inventory with our contract manufacturers, we could incur additional costs or experience manufacturing delays that could impact the timing of our revenue recognition and adversely affect our operating results.

•The COVID-19 outbreak has had a material impact on the U.S. and global economies and could have a material adverse impact on our employees, suppliers, manufacturing and customers, which could adversely and materially impact our business, financial condition and results of operations.

•Our business has gone through cycles of expansion, relative stability and contraction, and if we are not able to manage such cycles effectively, our operating results may suffer.

•Our revenue and operating results have fluctuated, and are likely to continue to fluctuate, making our quarterly results difficult to predict, which may cause us to miss analyst expectations and may cause the price of our common stock to decline.

•Developments in the healthcare industry and governing regulations have negatively affected and may continue to negatively affect our business.

•If we fail to increase market awareness of our brand and solutions, and expand our sales and marketing operations, our business could be harmed.

•Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results.

•Our efforts to sell our solutions in non-healthcare markets may not be successful.

•Our international operations subject us, and may increasingly subject us in the future, to operational, financial, economic and political risks abroad.

•If we are unable to protect our intellectual property rights, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights.

•We have indebtedness in the form of convertible senior notes. The provisions of indenture for the 2023 notes and 2026 notes (the Notes), accounting method for the Notes and capped call transaction entered into related to the Notes could have a material effect on our operating results, value of the Notes and our common stock or may deter or prevent a business combination.

32

Risks related to our business and industry

We have incurred significant losses in the past and will likely experience losses in the future.

We have incurred significant losses in the past and reported a net loss of $7.6 million for the three months ended March 31, 2021. As of March 31, 2021, we had an accumulated deficit of $152.4 million. If we cannot make consistent progress toward future profitability, our business and our stock price may be adversely affected.

Our ability to be profitable in the future depends upon continued demand for our solutions from existing and new customers. Further adoption of our solutions depends upon our ability to improve quality of care, enhance patient and staff satisfaction, increase hospital efficiency and productivity, and bring value to customers outside of healthcare. In addition, our profitability will be affected by, among other things, our ability to execute on our business strategy, the timing and size of orders, the pricing and costs of our solutions, competitive offerings, macroeconomic conditions affecting the health care industry and the extent to which we invest in sales and marketing, research and development and general and administrative resources.

We depend on sales in the healthcare market for the majority of our revenue, and a decrease in sales in the healthcare market would harm our business.

To date, substantially all of our revenue has been derived from sales to the healthcare market and, in particular, hospitals. Sales to the healthcare market accounted for 98%, 98% and 96% of our revenue for the three months ended March 31, 2021 and the years ended December 31, 2020 and 2019, respectively. We anticipate that sales to the healthcare market will represent a significant portion of our revenue for the foreseeable future.

Most of our solutions require a substantial upfront investment by new customers. The cost of the initial deployment depends on the number of users and departments involved, the size and age of the hospital and the condition of the existing wireless infrastructure, if any, within the hospital. Even if hospital personnel determine that our solutions provide compelling benefits over their existing communications methods, their hospitals may not have, or may not be willing to spend, the resources necessary to install and maintain wireless infrastructure to initially deploy and support our solutions or expand our solutions to other departments or users. Hospitals face significant budget constraints from the COVID-19 pandemic, as they have had to postpone elective procedures that provide a significant portion of their revenue. Hospital budgets are also constrained by unpredictable patient population trends and commercial reimbursements, and increasing demands from, and competition for, patients. In addition, both governmental and commercial hospitals are experiencing lower Medicare reimbursement rates and higher compliance demands, which add to these budget pressures. Also as part of the tax reform law that came into effect in December 2017, the tax penalty for violating the individual health insurance mandate under the Patient Protection and Affordable Care Act of 2010 (ACA) was set to zero effective in 2019, essentially repealing it. In November 2020, the United States Supreme Court held oral arguments on the Fifth Circuit U.S. Court of Appeals decision that held that the individual mandate is unconstitutional. It is uncertain how the United States Supreme Court will rule on this case or how healthcare measures of any new administration will impact the ACA and our business. It is uncertain if there will be changes to the ACA with any new administration, but there have been attempts in the past to repeal or amend the ACA, as well as continue to undertake other healthcare reforms. As a consequence of these regulatory and other factors, hospitals may delay or reduce their spending, which may cause slowdowns and deferral of orders for our solutions, or customers may choose other less expensive solutions, both of which could negatively impact our sales. We might not be able to sustain or increase our revenue from sales of our solutions, or achieve the growth rates that we envision, if hospitals continue to face significant budgetary constraints and reduce their spending on communications systems.

Our sales cycle can be lengthy and unpredictable, which may cause our revenue and operating results to fluctuate significantly.

Our sales cycles can be lengthy and unpredictable. Our sales efforts involve educating our customers about the use and benefits of our solutions, including the technical capabilities of our solutions and the potential cost savings and productivity gains achievable by deploying them. Customers typically undertake a significant evaluation process, which frequently involves not only our solutions but also their existing communications methods and those of our competitors and can result in a lengthy sales cycle that sometimes exceeds twelve months. We spend substantial time, effort and money in our sales efforts without any assurance that our efforts will produce sales. Similarly, our increasing dependence on larger, hospital-wide deployments may increase fluctuations in our revenue and operating results because the failure to complete a significant sale, or the loss of a large customer, will have a greater impact on those results. In addition, purchases of our solutions are frequently subject to budget constraints and shifts, multiple approvals, and unplanned administrative, processing and other delays. We have experienced and may continue to experience elongated sales cycles due to ongoing uncertainty caused by the COVID-19 pandemic, as well as past and future healthcare reform legislation, the impact of shifting federal government budgets, changes to Medicare and Medicaid reimbursement and potential future statutes and rulemaking.

33

If we fail to offer high-quality products and services, our operating results and our ability to sell these in the future will be harmed.

Our ability to sell our solutions depends on our ability to offer high-quality product and services. Our solutions incorporate complex technology, are deployed in a variety of complex hospital environments and must interoperate with many different types of devices and hospital systems. While we test the components of our solutions for defects and errors prior to release, we or our customers may not discover a defect or error until after we have deployed our solution, integrated it into the hospital environment and our customer has commenced general use of the solution. In addition, our solutions in some cases are integrated with hardware and software offered by “middleware” vendors to interoperate with nurse call systems, device alarms and other hospital systems. Our software may be partnered with third party software to provide for potential joint solutions with such third party. Our software may also be deployed on third party devices, including devices we resell, which creates additional complexity because we share control of the customer experience. If we cannot successfully integrate our solutions with these vendors as needed or if any hardware or software of these vendors contains any defect or error, then our solutions may not perform as designed, or may exhibit a defect or error.

Our professional services team assists our customers with their wireless infrastructure assessment, clinical workflow design, communication solution configuration, clinical integration, training and project management during the pre-deployment and deployment stages. Once our solutions are deployed within a customer’s facility, the customer typically depends on our technical support team to help resolve technical issues, assist in optimizing the use of our solutions and facilitate adoption of new functionality. If we do not effectively assist our customers in deploying our solutions, succeed in helping our customers quickly resolve technical and other post-deployment issues, or provide effective ongoing support services, our ability to expand the use of our solutions with existing customers and to sell our solutions to new customers will be harmed. If deployment of our solutions is deemed unsatisfactory, we may incur significant costs to attain and sustain customer satisfaction or, in extreme cases, our customers may choose not to deploy our solutions. As we hire new services and support personnel, we may inadvertently hire underperforming people who will have to be replaced, or fail to effectively train such employees, leading in some instances to slower growth, additional costs and poor customer relations. In addition, the failure of channel partners to provide high-quality services and support in markets outside the United States could also harm sales of our solutions.

Any defects or errors in, or which are attributed to our solutions, or to products or services we resell, could result in:

•delayed market acceptance of our affected solutions;

•loss of revenue or delay in revenue recognition;

•loss of customers or inability to attract new customers;

•diversion of engineering or other resources for remedying the defect or error;

•damage to our brand and reputation;

•delay in delivery of information;

•increased service and warranty costs, including potential replacement costs for product recalls or returns; and

•legal actions by our customers and hospital patients, including product liability claims.

If any of these occur, our operating results and reputation could be harmed.

As we continue to pursue opportunities for larger deals that have greater technical complexity, including deals that require more complex integrations with our customer’s workflows, we may experience a longer time period for our solutions to deploy and as a result, our revenue recognition for these deals may be delayed. These complex deployments may also be delayed as our customers focus on responding to the COVID-19 pandemic. Additionally, as we enter agreements with new and existing customers for larger and more complex deals across multiple sites, we have been, and may continue to be, required to agree to customer acceptance and cancellation clauses. With acceptance clauses, delays may occur in obtaining customer acceptance regardless of the quality of our products and services, and may cause us to defer revenue recognition where such acceptance provisions are substantive in nature, or they may require us to incur additional professional services or other costs in an effort to obtain such customer acceptance. Cancellation clauses may result in a customer canceling an order for our hardware, software and services, which could impact our revenue.

We depend on some sole source and limited source suppliers, and if we are unable to source our components from them, our business and operating results could be harmed.

We depend on sole and limited source suppliers for several hardware components of our solutions, including our batteries and integrated circuits. We purchase inventory generally through individual purchase orders. Any of these suppliers could cease production of our components, cease to provide the necessary levels of support for our use of their components, experience capacity constraints, material shortages, work stoppages, epidemics or contagious diseases, such as the coronavirus outbreak, that negatively impact them and their suppliers, financial difficulties, cost increases or other reductions or disruptions in output, cease operations or be acquired by or enter into exclusive arrangements with, a competitor. For example, we have experienced

34

periodic delays in deliveries from our suppliers as a result of the COVID-19 pandemic. These suppliers typically rely on purchase orders rather than long-term contracts with their suppliers, and as a result, the supplier may not be able to secure sufficient materials at reasonable prices or of acceptable quality to build our components in a timely manner. Any of these circumstances could cause interruptions or delays in the delivery of our solutions to our customers, and this may force us to seek components from alternative sources, which may not have the required specifications, or be available in time to meet demand or on commercially reasonable terms, if at all. Any of these circumstances may also force us to redesign our solutions to incorporate a component from an alternative source if a component becomes unavailable.

Our solutions incorporate multiple software components obtained from licensors on a non-exclusive basis, such as voice recognition software, software supporting the runtime execution of our software platform, and database and reporting software. Our license agreements can be terminated for cause. In many cases, these license agreements specify a limited term and are only renewable beyond that term with the consent of the licensor. If a licensor terminates a license agreement for cause, objects to its renewal or conditions renewal on modified terms and conditions, we may be unable to obtain licenses for equivalent software components on reasonable terms and conditions, including licensing fees, warranties or protection from infringement claims. Some licensors may discontinue licensing their software to us or support of the software version used in our solutions. In such circumstances, we may need to redesign our solutions with substantial cost and time investments to incorporate alternative software components or be subject to higher royalty costs. Any of these circumstances could adversely affect the cost and availability of our solutions.

Third-party licensors generally require us to incorporate specific license terms and conditions in our agreements with our customers. If we are alleged to have failed to incorporate these license terms and conditions, we may be subject to claims by these licensors, incur significant legal costs defending ourselves against such claims and, if such claims are successful, be subject to termination of licenses, monetary damages, or an injunction against the continued distribution of one or more of our solutions.

Because we depend on contract manufacturers and original design manufacturers, our operations could be harmed and we could lose sales if we encounter problems with these manufacturers.

We do not have internal manufacturing capabilities and rely upon two contract manufacturers, Sercomm and SMTC, to make our wearable devices. We have entered into manufacturing agreements with Sercomm and SMTC that are terminable by either party with advance notice and may also be terminated for a material uncured breach. We expect to enter into additional contract manufacturing agreements as we expand our business. We also rely on original design manufacturers (ODMs) to produce accessories, including batteries, chargers and attachments. Any of these suppliers could cease production of our components, cease to provide the necessary levels of support for our use of their components, experience capacity constraints, material shortages, work stoppages, epidemics or contagious diseases that negatively impact them and their suppliers, financial difficulties, cost increases or other reductions or disruptions in output, cease operations or be acquired by, or enter into exclusive arrangements with, a competitor. If Sercomm, SMTC, or another contract manufacturer or an ODM is unable or unwilling to continue manufacturing components of our solutions in the volumes and timeframes that we require, fails to meet our quality specifications or significantly increases its prices, we may not be able to deliver our solutions to our customers with the quantities, quality and performance that they expect in a timely manner. As a result, we could lose sales and our operating results could be harmed.

Sercomm, SMTC, other contract manufacturers or ODMs may experience problems that could impact the quantity and quality of hardware components of our solution, including disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, component or material shortages and cost increases. The majority of the hardware components of our solution are manufactured in Asia or Mexico, and adverse changes in political or economic circumstances, or health related issues such as epidemics or contagious diseases, in those locations could also disrupt our supply and quality of components of our solutions. In addition, U.S. government officials have imposed changes in trade, tariffs, fiscal and tax policies and may do so in the future, and any such changes in the U.S. or in other countries from which we source components of our products could adversely affect our business.

Companies occasionally encounter unexpected difficulties in ramping up production of new products, and we may experience such difficulties with future generations of our products. Sercomm, SMTC, other contract manufacturers and our ODMs also manufacture products for other companies. Generally, our orders represent a relatively small percentage of the overall orders received by Sercomm, SMTC, other contract manufacturers and these ODMs from their customers; therefore, fulfilling our orders may not be a priority in the event Sercomm, SMTC, other contract manufacturers or an ODM is constrained in its ability to fulfill all of its customer obligations. In addition, if Sercomm, SMTC, other contract manufacturers or an ODM is unable or unwilling to continue manufacturing components of our solutions, we may have to identify one or more alternative manufacturers. The process of identifying and qualifying a new contract manufacturer or ODM can be time consuming, and we may not be able to substitute suitable alternative manufacturers in a timely manner or at an acceptable cost. Additionally,

35

transitioning to a new manufacturer may cause us to incur additional costs and delays if the new manufacturer has difficulty manufacturing components of our solutions to our specifications or quality standards.

If we fail to forecast our manufacturing requirements accurately or fail to properly manage our inventory with our contract manufacturer, we could incur additional costs or experience manufacturing delays that could impact the timing of our revenue recognition and adversely affect our operating results.

We place orders with our contract manufacturers, including Sercomm and SMTC, and we and our contract manufacturers place orders with suppliers based on forecasts of customer demand. Because of our international low-cost sourcing strategy, our lead times are long and cause substantially more risk to forecasting accuracy than would result were lead times shorter. Our forecasts are based on multiple assumptions, each of which may introduce errors into our estimates affecting our ability to meet our customers’ demands for our solutions. We also may face additional forecasting challenges due to new product introductions, product transitions in the components of our solutions, or to our suppliers discontinuing production of materials and subcomponents required for our solutions. If demand for our solutions increases significantly, we may not be able to meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs in order to source additional materials and subcomponents to produce components of our solutions or to expedite the manufacture and delivery of additional inventory. If we underestimate customer demand, we and our contract manufacturer may have inadequate materials and subcomponents on hand to produce components of our solutions, which could result in manufacturing interruptions, shipment delays, deferral or loss of revenue, and damage to our customer relationships. Conversely, if we overestimate customer demand, we and our contract manufacturers may purchase more inventory than required for actual customer orders, resulting in excess or obsolete inventory, thereby increasing our costs and harming our operating results.

If we fail to successfully develop and introduce new solutions and features to existing solutions, our revenue, operating results and reputation could suffer.

Our success depends, in part, upon our ability to develop and introduce new solutions and to add features to existing solutions that meet existing and new customer requirements. We may not be able to develop and introduce new solutions or features on a timely basis or in response to customers’ changing requirements. Similarly, our new solutions and features may not sufficiently differentiate us from competing solutions such that customers can justify deploying our solutions. We expect to incur costs associated with the development and introduction of new solutions before the anticipated benefits or the returns are realized, if at all. We may experience technical problems and additional costs as we introduce new features to our software platform, deploy future models of our wireless badges, or deploy new smartphone apps, which can require customers to perform software upgrades to their systems, and integrate new solutions with existing customer clinical systems and workflows. In addition, we may face technical difficulties as we expand into non-English speaking countries and incorporate non-English speech recognition capabilities into our solutions. We also may incur substantial costs or delays in the manufacture of any additional new products or models as we seek to optimize production methods and processes at our contract manufacturers. In addition, we expect that we may at least initially achieve lower gross margins on new models, while endeavoring to reduce manufacturing costs over time. If any of these problems were to arise, our revenue, operating results and reputation could suffer.

The COVID-19 outbreak has had a material impact on the U.S. and global economies and could have a material adverse impact on our employees, suppliers, manufacturing and customers, which could adversely and materially impact our business, financial condition and results of operations.

The outbreak of the novel coronavirus, SARS-CoV-2 (COVID-19) is a global pandemic and both a public health and economic emergency. Many federal, state and local governments and private entities have mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. As the COVID-19 pandemic is complex and rapidly evolving, our business may be negatively affected for a prolonged period of time. At this point, we cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact on our business, results of operations, financial position and cash flows.

The pandemic has affected, and may continue to adversely affect, our customers’ operations, our employees and our employee productivity. It may impact the ability of our customers, subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in payment defaults, collection costs and/or delays or disruptions in performance. In particular, hospitals and healthcare facilities have prioritized the care and treatment of COVID-19 patients and may have restricted access for most visitors and reduced spending unrelated to COVID-19. These customers have also had to suspend elective procedures in some cases, which generate a majority of their profits, adding to their financial difficulties. While some elective procedures have resumed, it is uncertain whether consumers will seek those procedures due to concerns

36

about COVID-19, and it is also uncertain if elective procedures will be suspended again if cases increase. In response, some have furloughed staff, including those we ordinarily work with to sell and implement our offerings.

Outside of healthcare, some of our clients in the hospitality and retail industries have suspended or modified operations until stay-at-home orders are lifted, and potentially beyond. Even once lifted, as with healthcare, it is uncertain whether consumers will return to those establishments and how successful these businesses will be. As a result, we have experienced delays in planned deployments and changes in customer demand, and could experience additional delays, discounts, customer payment issues, bad debt, potential terminations and unpredictability as our customers continue to respond to the challenges of treating and containing the COVID-19 pandemic.

We have also experienced some disruptions in our supply chain and our manufacturers have similarly experienced disruptions in their supply chains. To the extent our suppliers prioritize the manufacturing of other products or experience facility or business disruptions due to sick employees, stay-at-home orders, supply chain disruptions or otherwise, we may be unable to maintain a sufficient supply of our products to meet demand. Additionally, our employees, in many cases, are working remotely and using various technologies to perform their functions, which may create security risks, inefficiencies and reduced productivity, and reduce the effectiveness of our sales team.

These effects on our business, and the direct effect of the virus and the disruption on our employees and operations, may negatively impact our revenue, profit margins and liquidity. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital.

The COVID-19 pandemic has also caused us to modify our business practices including employee travel, customer visits, employee work locations, and cancellation of physical participation in meetings, events and conferences which are important to support our sales approach, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. A prolonged disruption or any further unforeseen delay in our operations or within any of our business activities could result in reduced revenue. We could also be adversely affected if government authorities impose additional restrictions or extend the length of restrictions on public gatherings, human interactions, mandatory closures, seek voluntary closures, restrict hours of operations or impose curfews, restrict the import or export of products or if suppliers issue mass recalls of products. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light as the coronavirus pandemic and associated protective or preventative measures develop, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

Our business has gone through cycles of expansion, relative stability and contraction, and if we are not able to manage such cycles effectively, our operating results may suffer.

We have experienced periods of expansion, relative stability and contraction in our revenues and operations in the past. Such fluctuations have placed, and may continue to place, strains on our management systems, infrastructure and other resources. Especially during growth periods, we hire additional direct sales, professional services and marketing personnel domestically and internationally, acquire complementary businesses, technologies or assets, and increase our investment in research and development. Our future operating results depend to a large extent on our ability to successfully implement such plans and manage such investments. To do so successfully we must, among other things:

•manage our expenses in line with our operating plans and current business environment;

•maintain and enhance our operational, financial and management controls, reporting systems and procedures;

•integrate acquired businesses, technologies or assets;

•manage operations in multiple locations and time zones; and

•develop and deliver new solutions and enhancements to existing solutions efficiently and reliably.

We expect to incur costs associated with the investments made to support our business strategy before the anticipated benefits or the returns are realized, if any. If we are unable to grow our business or manage our future growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or enhancements to existing solutions. We may also fail to satisfy customer requirements, maintain quality, execute our business plan or respond to competitive pressures, which could result in lower revenue and a decline in the share price of our common stock.

37

Our revenue and operating results have fluctuated, and are likely to continue to fluctuate, making our quarterly results difficult to predict, which may cause us to miss analyst expectations and may cause the price of our common stock to decline.

Our operating results have been and may continue to be difficult to predict, even in the near term, and are likely to fluctuate as a result of a variety of factors, many of which are outside of our control.

Comparisons of our revenue and operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. Each of the following factors, among others, could cause our operating results to fluctuate from quarter to quarter:

•the ongoing impact of the COVID-19 pandemic;

•the financial health of our healthcare customers and budgetary constraints on their ability to upgrade their communications, particularly in light of the pandemic;

•the availability of government funding for healthcare facilities operated by the United States federal, state and local governments;

•changes in customer purchasing patterns or sales cycles;

•market acceptance of our Smartbadge and its impact on orders for our existing Badge and related software;

•changes in the regulatory environment affecting our healthcare customers, including impediments to their ability to obtain reimbursement for their services;

•our ability to expand and improve our sales and marketing operations;

•our ability to successfully integrate acquired businesses, technologies or assets;

•the announcement of new significant contracts or relationships;

•the procurement and deployment cycles of our healthcare customers and the length of our sales cycles;

•changes in how healthcare operating and capital budgets are administered within the enterprise;

•changes in customer deployment timelines;

•variations in the amount of orders booked in a prior quarter but not delivered until later quarters;

•our mix of solutions and the varying revenue recognition rules that apply;

•pricing, including discounts by us or our competitors;

•our ability to expand into non-healthcare markets;

•our ability to develop significant new reseller relationships and maintain existing reseller relationships;

•the financial health of our resellers;

•our ability to successfully deploy our solutions in a timely manner;

•our ability to sell and integrate third-party products and services, and our customer’s satisfaction with those third-party products and services;

•our ability to forecast demand and manage lead times for the manufacture of our solutions;

•our ability to develop and introduce new solutions and features to existing solutions that achieve market acceptance;

•the announcement of a new product, which may cause sales cycles to lengthen;

•federal government shutdowns;

•occurrence of health epidemics or contagious diseases and potential effects on our business and manufacturing operations;

•fluctuations in foreign currencies in the international markets in which we operate; and

•future accounting pronouncements and changes in accounting policies.

We primarily compete in the rapidly evolving and competitive healthcare market, and if we fail to effectively respond to competitive pressures, our business and operating results could be harmed.

Our prospective customers primarily use legacy communication solutions such as wired and wireless phones, pagers and overhead intercoms. We believe that our system is superior to these legacy methods. Manufacturers and distributors of product categories such as cellular phones, pagers, mobile radios and in-building wireless telephones continue to sell their products to hospitals. In addition, the growing proliferation of smartphones and related applications, including cloud-based applications, represents another category of competitive offerings. Furthermore, our clinical integrations and middleware solutions compete with a variety of companies that offer clinical integration technology.  Similarly we may face a different set of competitors in our patient and family engagement solutions.

We believe currently there is no directly comparable single competitor that provides a solution for the healthcare market as richly-featured as ours, but we could face such competition in the future. Potential competitors in the healthcare or communications markets include large, multinational companies with significantly more resources to dedicate to product development and sales and marketing. These companies, which may include electronic health record vendors or other large software and healthcare IT companies, may have existing relationships within the hospital, which may enhance their ability to gain a foothold in our market. For example, some of the electronic health record vendors offer secure text messaging as an

38

additional service and have said they plan to expand these offerings to complete more directly with us. Some customers may prefer to purchase a more highly integrated or bundled solution from a single provider or an existing supplier rather than a new supplier, regardless of performance or features. Accordingly, if we fail to effectively respond to competitive pressures, we could experience pricing pressure, reduced profit margins, higher sales and marketing expenses, lower revenue and the loss of market share, any of which would harm our business, operating results or financial condition.

If we do not achieve the anticipated strategic or financial benefits from our acquisitions or if we cannot successfully integrate them, our business and operating results could be harmed.

We have acquired, and in the future may acquire, complementary businesses, technologies or assets that we believe to be strategic. For example, in the prior fiscal year we acquired EASE Applications, LLC (EASE) a cloud-based communication platform and mobile application, to help enhance our care team communication with patients and families. We may not achieve the anticipated strategic or financial benefits, or be successful in integrating EASE or any acquired businesses, technologies or assets. If we cannot effectively integrate the acquired business and products into our business, we may not achieve market acceptance for, or derive significant revenue from, these new solutions.

Integrating newly acquired businesses, technologies and assets could strain our resources, could be expensive and time consuming, and might not be successful. Our recent acquisitions expose us, and we will be further exposed, if we acquire or invest in additional businesses, technologies or assets, to a number of risks, including that we may:

•experience technical issues as we integrate acquired businesses, technologies or assets into our existing solutions;

•encounter difficulties leveraging our existing sales and marketing organizations, and direct sales channels, to increase our revenue from acquired businesses, technologies or assets;

•find that the acquisition does not further our business strategy, we overpaid for the acquisition or the economic conditions underlying our acquisition decision have changed;

•have difficulty retaining key personnel of acquired businesses;

•suffer disruption to our ongoing business and diversion of our management’s attention as a result of transition or integration issues and the challenges of managing geographically or culturally diverse enterprises;

•experience unforeseen and significant problems or liabilities associated with quality, technology and legal contingencies relating to the acquisition, such as intellectual property or employment matters; and

•incur substantial costs to integrate the acquired business.

If we were to proceed with one or more additional significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash. To the extent we issue shares of capital stock or other rights to purchase capital stock, including options and warrants, the ownership of existing stockholders would be diluted. In addition, acquisitions may result in the incurrence of debt, contingent liabilities, large write-offs, or other unanticipated costs, events or circumstances, any of which could harm our operating results.

In addition, from time to time we may enter into negotiations for acquisitions that are not ultimately consummated. These negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs.

We could be required to record adjustments to our recorded asset balance for intangible assets, including goodwill, that could significantly impact our operating results.

Our balance sheet includes significant intangible assets, including goodwill and other acquired intangible assets. The determination of related estimated useful lives and whether these assets have been impaired involves significant judgment and is subject to certain factors and events over which we have no control. The introduction of new competitive products or services into our markets could impair the value of our intangible assets if they create market conditions that adversely affect the competitiveness of our products and services. Further, declines in our market capitalization may be an indicator that our intangible assets or goodwill carrying values exceed their fair values, which could lead to potential impairment charges that could impact our operating results.

Developments in the healthcare industry and governing regulations have negatively affected and may continue to negatively affect our business.

Substantially all of our revenue is derived from customers in the healthcare industry, in particular, hospitals. The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory and other influences. Developments generally affecting the healthcare industry, including new regulations or new interpretations of existing regulations, could adversely affect spending on information technology and capital equipment by reducing funding, changing healthcare pricing or delivery or creating impediments for obtaining healthcare reimbursements, which together with declining admission trends,

39

could cause our sales to decline and negatively impact our business. For example, the margins of our hospital customers are modest, and potential decreases in reimbursement for healthcare costs may reduce the overall solvency of our customers or cause further deterioration in their financial or business condition.

In the past bills were signed into law that impact the U.S. healthcare system, including the ACA. Uncertainty surrounding the status of the ACA and its regulations may impact the spending of our healthcare customers, and we cannot predict the effect on our business of any new legislation and regulations that may be adopted if the ACA is significantly changed or repealed or of additional regulations.

Federal budget activities also impact our customers. Our customers include healthcare facilities run by the Department of Defense and the U.S. Department of Veterans Affairs. During the three months ended March 31, 2021, and years ended December 31, 2020 and 2019, we generated approximately 17%, 18% and 17%, respectively, of our revenue from these customers. Our reseller to the Department of Defense and the U.S. Department of Veterans Affairs represented 25% and 33% of our accounts receivable as of March 31, 2021 and December 31, 2020, respectively. These customers have been and may continue to be impacted by budgetary and legislative actions.

In the past certain departments of the U.S. federal government temporarily stopped operating as a result of failure by the legislative and executive branches of the government to pass bills to keep them operating. There is a risk that the government could be shut down again. Any past or future shutdown may impact our US government customers’ spending decisions, as well as those of our non-US government customers. Any reduction or delay in our customers’, or potential customers’ spending decisions may result in a delay, or reduction, to our revenue.

In addition, many state governments are changing or expanding their healthcare laws, adding additional complexity to understanding the potential impacts.

We are unable to predict the full impact of these new and changing rules on our hospital customers and others in the healthcare industry. Impacts of these rules have affected and could continue to affect materially our customers’ ability to budget for or purchase our products. The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. We cannot provide assurance that the markets for our solutions will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets.

If we fail to increase market awareness of our brand and solutions, and expand our sales and marketing operations, our business could be harmed.

We intend to continue to add personnel and resources in sales and marketing as we focus on expanding awareness of our brand and solutions and capitalize on sales opportunities with new and existing customers. Our efforts to improve sales of our solutions will result in an increase in our sales and marketing expense and general and administrative expense, and these efforts may not be successful. Some newly hired sales and marketing personnel may subsequently be determined to be unproductive and have to be replaced, resulting in operational and sales delays and incremental costs. If we are unable to significantly increase the awareness of our brand and solutions or effectively manage the costs associated with these efforts, our business, financial condition and operating results could be harmed.

Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results.

We rely on information technology and telephone networks and systems, including the Internet, to process and transmit sensitive electronic information and to manage or support a variety of business processes and activities, including sales, billing, customer service, procurement and our supply chain. We use enterprise information technology systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements. In the ordinary course of our business, we also collect, store, process, use and transmit large amounts of confidential information, including intellectual property, protected health information, proprietary business information and personal information. Our information technology systems, some of which are managed by third-parties, may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Most of our workforce is currently working remotely as a result of the COVID-19 pandemic, which also increases risks related to information security. Although we have developed systems and processes that are designed to protect confidential information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach, such measures cannot provide absolute security. The risk of a security breach or disruption or data loss, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of

40

attempted attacks and intrusions from around the world have increased. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. Although we maintain cybersecurity insurance, if our systems are breached or suffer severe damage, disruption or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may significantly suffer and we may be subject to litigation, government enforcement actions or potential liability beyond our insurance coverage. In addition, such a breach may require notification to governmental agencies, the media and/or affected individuals pursuant to various federal, state (including regulations promulgated by the Federal Trade Commission and state breach notification laws) and international privacy (including GDPR) and security laws, if applicable, including HIPAA or HITECH and its implementing rules and regulations. Security breaches could also cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, adversely impact customer relationships, damage our reputation and divert attention of management and key information technology resources.

During fiscal year 2020, one of our vendors, SolarWinds, was the victim of a cyberattack that inserted a vulnerability in their platform. We use SolarWinds services for our internal corporate network so this introduced a potential vulnerability in our internal systems. We have removed the vulnerable software from our network and have not found any indication that the vulnerability was exploited. There are still uncertainties about the full scope of this cyberattack and we may learn of other vulnerabilities and potential network intrusions by third parties.

If hospitals do not have and are not willing to install, upgrade and maintain the wireless and other information technology infrastructure required to effectively operate our solutions, then they may experience technical problems or not purchase our solutions at all.

The effectiveness of our solutions depends upon the quality and compatibility of the communications environment that our healthcare customers maintain. Our solutions require voice-grade wireless (Wi-Fi) installed through large enterprise environments, which can vary from hospital to hospital and from department to department within a hospital. Many hospitals have not installed a voice-grade wireless infrastructure. If potential customers do not have a wireless network that can properly and fully interoperate with our solutions, then such a network must be installed, or an existing Wi-Fi network must be upgraded or modified, for example, by adding access points in stairwells, for our solutions to be fully functional. The additional costs of installing or upgrading a Wi-Fi network may dissuade potential customers from installing our solutions. Furthermore, if changes to a customer’s physical or information technology environment cause integration issues or degrade the effectiveness of our solutions, or if the customer fails to upgrade or maintain its environment as may be required for software deployments, releases and updates, the customer may not be able to fully utilize our solutions or may experience technical problems, or these changes may impact the performance of other wireless equipment being used. If such circumstances arise, prospective customers may not purchase or existing customers may not expand their use of or deploy upgraded versions of our solutions, thereby harming our business and operating results.

If we fail to achieve and maintain certification for certain U.S. federal standards, our sales to U.S. government customers will suffer.

We believe that a significant opportunity exists to continue to sell our products to healthcare facilities in the Veterans Administration and Department of Defense (DoD). These customers require independent certification of compliance with specific requirements relating to encryption, security, interoperability and scalability, including Federal Information Processing Standard (FIPS) 140-2 and, as to DoD, certification by its Joint Interoperability and Test Command and under its Information Assurance Certification and Accreditation Process. We have received certification under certain of these standards for military-specific configurations of our solution incorporating our Badge, but we do not have these certifications for our new Smartbadge. We continue to carry out further compliance activities and recertifications, as required. A failure on our part to achieve and maintain compliance and to respond to new threats and vulnerabilities, both as to current products and as to new product versions, could adversely impact our revenue.

Our efforts to sell our solutions in non-healthcare markets may not be successful.

In recent years, we have actively engaged in sales efforts to customers outside the healthcare markets, including hospitality, retail, energy, education and other mobile work environments. We may not be successful in further penetrating the non-healthcare markets upon which we are initially focusing, or other new markets. To date, our solutions have been selected by over 400 customers in non-healthcare markets. Total revenue from non-healthcare customers accounted for 2%, 2% and 4% of our revenue for the three months ended March 31, 2021 and the years ended December 31, 2020 and 2019, respectively. If we cannot maintain these customers by providing solutions that meet their requirements, if we cannot successfully expand our solutions in non-healthcare markets, or if adoption of our solutions remains slow, we may not obtain significant revenue from

41

these markets. We may experience challenges as we expand in non-healthcare markets, including pricing pressure on our solutions, budget constraints due to the COVID-19 pandemic and technical issues as we adapt our solutions for the requirements of new markets. For example, some of our hospitality and retail customers have been significantly impacted by the COVID-19 pandemic and they have been forced to close locations and face significant revenue declines. Our solutions also may not contain the functionality required by these non-healthcare markets or may be too expensive or may not sufficiently differentiate us from competing solutions such that customers can justify deploying our solutions.

We generally recognize revenue from maintenance and support contracts and subscription arrangements over the contract term, and changes in sales may not be immediately reflected in our operating results.

We generally recognize revenue from our customer subscription and support contracts, extended warranty contracts and subscription arrangements ratably over the contract term, which is typically 12 months, in some cases subject to an early termination right. Revenue from our subscription and support contracts accounted for 43%, 40% and 38% of our revenue for the three months ended March 31, 2021 and years ended December 31, 2020 and 2019, respectively. A portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscription and support contracts entered into during previous quarters. Consequently, a decline in new or renewed subscription and support, extended warranty contracts or subscription agreements by our customers in any one quarter may not be immediately reflected in our revenue for that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services and potential changes in our rate of renewals may not be fully reflected in our operating results until future periods.

Our success depends upon our ability to attract, integrate and retain key personnel, and our failure to do so could harm our ability to grow our business.

Our success depends, in part, on the continuing services of our senior management and other key personnel, and our ability to continue to attract, integrate and retain highly skilled personnel, particularly in engineering, sales and marketing. Competition for highly skilled personnel is intense, particularly in the technology field. If we fail to create work environments viewed as attractive and integrate and retain key personnel our ability to grow our business could be harmed.

The members of our senior management and other key personnel are at-will employees and may terminate their employment at any time without notice. If one or more members of our senior management terminate their employment, we may not be able to find qualified individuals to replace them on a timely basis or at all, and our senior management may need to divert their attention from other aspects of our business. Former employees may also become employees of a competitor. We may also have to pay additional compensation to attract and retain key personnel. We also anticipate hiring additional engineering, marketing and sales, and services personnel to grow our business. Often, significant amounts of time and resources are required to train these personnel. We may incur significant costs to attract, integrate and retain them, and we may lose them to a competitor or another company before we realize the benefit of our investments in them.

Our international operations subject us, and may increasingly subject us in the future, to operational, financial, economic and political risks abroad.

Although we derive a relatively small portion of our revenue from customers outside the United States, we believe that non-U.S. customers could represent an increasing share of our revenue in the future. For the three months ended March 31, 2021 and years ended December 31, 2020 and 2019, we generated 11.8%, 10.7% and 8.7% of our revenue, respectively, from customers outside of the United States, including Canada, the United Kingdom, Australia, New Zealand and Middle Eastern countries including the United Arab Emirates, Saudi Arabia and Qatar. We also operate an innovation center in India and a sales office in Dubai, United Arab Emirates. Accordingly, we are subject to risks and challenges that we would not otherwise face if we conducted our business solely in the United States, including:

•challenges incorporating non-English speech recognition capabilities into our solutions if we expand into non-English speaking markets;

•difficulties integrating our solutions with wireless infrastructures with which we do not have experience;

•difficulties integrating local dialing plans and applicable PBX standards;

•challenges associated with delivering support, training and documentation in several languages;

•difficulties in staffing and managing personnel and resellers;

•the need to comply with a wide variety of foreign laws and regulations, including increasingly stringent data privacy regulations, requirements for export controls for encryption technology, employment laws, changes in tax laws and tax audits by government agencies;

•political and economic instability in, or foreign conflicts that involve or affect, the countries of our customers;

42

•the impacts associated with epidemics or contagious diseases;

•adverse effects on us directly, or on our customers and suppliers, of changes in trade, fiscal or tax policies, including the imposition of tariffs;

•difficulties in collecting accounts receivable and longer accounts receivable payment cycles;

•exposure to competitors who are more familiar with local markets;

•risks associated with the Foreign Corrupt Practices Act and local anti-bribery law compliance;

•difficulties associated with resolving contract disputes in foreign countries with varied legal systems;

•limited or unfavorable intellectual property protection in some countries; and

•currency exchange rate fluctuations, which could affect the price of our solutions relative to locally produced solutions.

Any of these factors could harm our existing international business, impair our ability to expand into international markets or harm our operating results.

We face potential liability related to the privacy and security of personal information collected through our solutions.

In connection with our healthcare business, we handle and have access to “Protected Health Information” (PHI) subject in the United States to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) as amended and supplemented by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) , regulations issued pursuant to these statutes, state privacy and security laws and regulations, and associated contractual obligations as a “business associate” of healthcare providers. These statutes, regulations and contractual obligations impose numerous requirements regarding the use and disclosure of PHI with which we must comply. Among other things, HITECH made certain aspects of HIPAA’s rules, notably the “HIPAA Security Rule,” directly applicable to business associates, independent contractors or agents of covered entities that create, receive, maintain or transmit PHI in connection with providing a function on behalf of, or a service to, a covered entity (e.g., health care communication solutions). HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal court to enforce the federal HIPAA regulation and seek attorney’s fees and costs associated with pursuing federal civil actions. The U.S. Department of Health & Human Services Office for Civil Rights (OCR) has increased its focus on compliance and continues to train state attorneys general for enforcement purposes. The OCR has recently increased both its efforts to audit HIPAA compliance and its level of enforcement, with one recent penalty exceeding $16 million. Our failure to accurately anticipate the application or interpretation of these statutes, regulations and contractual obligations as we develop our solutions, a failure by us to comply with their requirements (e.g., evolving encryption and security requirements) or an allegation that defects in our products have resulted in noncompliance by our customers could create material civil and/or criminal liability for us, resulting in adverse publicity and negatively affecting our business.

In addition, the use and disclosure of personal health information is subject to laws and regulations in other jurisdictions in which we do business or expect to do business in the future. Any developments stemming from enactment or modification of these laws and regulations, or the failure by us to comply with their requirements or to accurately anticipate the application or interpretation of these laws could create material liability to us, result in adverse publicity and negatively affect our business.

For example, in May 2016, the EU formally adopted the General Data Protection Regulation (GDPR), which became effective in May 2018. The GDPR greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal information, including, for example, requirements to establish a legal basis for processing, higher standards for obtaining consent from individuals to process their personal information, more robust disclosures to individuals and a strengthened individual data rights regime, requirements to implement safeguards to protect the security and confidentiality of personal information that requires the adoption of administrative, physical and technical safeguards, shortened timelines for data breach notifications to appropriate data protection authorities or data subjects, limitations on retention and secondary use of information, increased requirements pertaining to health data and additional requirements that we impose certain contractual obligations on third-party processors in connection with the processing of the personal information. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states governing the processing of personal information, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal information. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal information relates, the transfer of personal information out of the European Economic Area, security breach notifications and the security and confidentiality of personal information. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater, and other administrative penalties. Additionally, the United Kingdom (UK) implemented the Data Protection Act effective in May 2018 and statutorily amended in 2019, that substantially implements the GDPR and

43

contains provisions, including UK-specific derogations, for how GDPR is applied in the UK. Since the beginning of 2021 (when the transitional period following Brexit expired), we also have to continue to comply with the GDPR and the Data Protection Act, with each regime having the ability to fine up to the greater of €20 million (£17 million) or 4% of global turnover. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to our business operations may limit the use and adoption of our services and reduce overall demand for them. Changes in these legislations may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources for compliance programs, could impact strategies and availability of previously useful data, and could result in increased compliance costs and/or changes in business practices and policies.

Any legislation or regulation in the area of privacy and security of personal information could affect the way we operate our services and could harm our business. For example, the GDPR imposes strict rules on the transfer of personal information out of the EU to the United States. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. In addition, these rules are consistently under scrutiny. For example, on July 16, 2020, the Court of Justice of the European Union (the Court of Justice) invalidated the European Union-United States (EU-U.S.) Privacy Shield on the grounds that the EU-U.S. Privacy Shield failed to offer adequate protections to EU personal information transferred to the United States. While the Court of Justice upheld the use of other data transfer mechanisms, such as the Standard Contractual Clauses, the decision has led to some uncertainty regarding the use of such mechanisms for data transfers to the United States, and the court made clear that reliance on Standard Contractual Clauses alone may not necessarily be sufficient in all circumstances. The use of Standard Contractual Clauses for the transfer of personal information specifically to the United States also remains under review by a number of European data protection supervisory authorities. For example, German and Irish supervisory authorities have indicated that the Standard Contractual Clauses alone provide inadequate protection for EU-U.S. data transfers. Use of the data transfer mechanisms must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals. The European Data Protection Board (the EDPB) issued additional guidance regarding the Court of Justice’s decision on November 11, 2020 which imposes higher burdens on the use of data transfer mechanisms, such as the Standard Contractual Clauses, for cross-border data transfers.

To comply with this guidance, we may need to implement additional safeguards to further enhance the security of data transferred out of the EU, which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business. Further, the European Commission published new versions of the Standard Contractual Clauses for comment. While the comment period ended in December 2020, the European Commission is expected to finalize and implement the new Standard Contractual Clauses in early 2021. Additionally, other countries (e.g., Australia and Japan) have adopted certain legal requirements for cross-border transfers of personal information. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. Further, since the transition period for Brexit ended December 31, 2020, there remains some uncertainty regarding cross-border data transfers from the EU to the United Kingdom. The EU is expected to either issue an adequacy decision for such transfers in early 2021, or an adequacy mechanism such as the Standard Contractual Clauses will be required for transfer of personal information from the EU to the United Kingdom. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may prevent us from selling our solutions or increase the costs associated with selling our solutions and may affect our ability to invest in or jointly develop solutions in the United States and in foreign jurisdictions. If we are required to implement additional measures to transfer data from the EU, this could increase our compliance costs, and could adversely affect our business, financial condition and results of operations. Further, we cannot guarantee that our privacy and security policies and practices will be found sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information.

In the U.S., California enacted the California Consumer Privacy Act (CCPA) on June 28, 2018, which took effect on January 1, 2020, and became enforceable by the California Attorney General on July 1, 2020, along with related regulations which came into force on August 14, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers about their data collection, use and sharing practices and provide such consumers new data protection and privacy rights, including the ability to opt out of certain sales of personal information, right to request correction, access, and deletion of their personal information, the right to opt out of certain personal information sharing, and the right to receive detailed information about how their personal information is processed. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Although the CCPA includes limited exceptions from its prescriptions, including exceptions for PHI collected by covered entities or business associates subject to HIPAA, among others, the CCPA may regulate or impact our processing of personal information depending on the context. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., and, indeed, a number of state legislatures are considering privacy and/or data protection laws, which could increase our potential liability and adversely affect our business. Additionally, California voters recently approved the California Privacy Rights Act (CPRA). The CPRA significantly modifies the CCPA and will impose additional data protection obligations on

44

companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. While the CPRA will not take effect until January 2023, it will establish a California privacy regulator before that date. The CCPA and the CPRA may significantly impact our business activities and require substantial compliance costs that adversely affect business, operating results, prospects and financial condition. The interplay of federal and state laws (e.g., in addition to California, Massachusetts and Nevada have adopted laws requiring the implementation of certain security measures to protect personal information, and all 50 states and the District of Columbia, Puerto Rico and Guam, have adopted breach notification laws) may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our customers and potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory focus on privacy, security and data use issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to products and services could intensify.

If our efforts to protect the security of information collected by our customers are unsuccessful, we could become subject to costly government enforcement actions and private litigation, and our sales and reputation could suffer.

The nature of our business involves the receipt and storage of information about our customers, including personal information and PHI. We have implemented programs to detect and alert us to data security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. Companies are increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to malfeasance by employees, consultants or other service providers to state-sponsored attacks. Cyber threats may be generic, or they may be custom crafted against our information systems. In recent times, cyber-attacks have become more prevalent and much harder to detect and defend against. Our network and storage applications may be vulnerable to cyber-attack, malicious intrusion, malfeasance, loss of data privacy or other significant disruption and may be subject to unauthorized access by hackers, employees, consultants or other service providers. In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud, trickery or other forms of deceiving our employees, contractors and temporary staff. If we experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation, as well as potentially incur significant costs and diversion of resources to comply with our contractual obligations to notify our customers of such security breaches, particularly with respect to any protected health information affected. Moreover, if a computer security breach affects our systems or results in the unauthorized access, use or disclosure of personal information, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, the media and/or affected individuals pursuant to various federal, state and international privacy and security laws, if applicable, including HIPAA or HITECH and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission and state breach notification laws. We would also be exposed to a risk of loss or litigation and potential liability under laws, regulations and contracts that protect the privacy and security of personal information. For example, as stated above, the CCPA imposes a private right of action for security breaches that could lead to some form of remedy including regulatory scrutiny, fines, private right of action settlements, and other consequences. The financial exposure from the events referenced above could either not be insured against or not be fully covered through any insurance that we may maintain, and there can be no assurance that the limitations of liability in any of our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages as a result of the events referenced above. Any of the foregoing could have a material adverse effect on our business, reputation, results of operations, financial condition and prospects. In addition, our customers could lose confidence in our ability to protect their information, which could cause them to discontinue using our products or purchasing from us altogether.

The failure of our equipment lease customers to pay us under leasing agreements with them that we do not sell to third party lease finance companies could harm our revenue and operating results.

In 2012, we began offering our solutions to our customers through multi-year equipment lease agreements. We sell the bulk of these leases, including the related accounts receivables, to third party lease finance companies on a non-recourse basis. We retain unsold leases in-house, which exposes us to the creditworthiness of such lease customers over the lease term. For the leases that we retain in-house, our ability to collect payments from a customer or to recognize revenue for the sale could be impaired if the customer fails to meet its obligations to us such as in the case of its bankruptcy filing or deterioration in its financial position, or has other creditworthiness issues, any of which could harm our revenue and operating results.

45

Our use of open source and non-commercial software components could impose risks and limitations on our ability to commercialize our solutions.

Our solutions contain software modules licensed under open source and other types of non-commercial licenses, including the GNU Public License, the Apache License and others. We also may incorporate open source and other licensed software into our solutions in the future. Use and distribution of such software may entail greater risks than use of third-party commercial software, as licenses of these types generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some of these licenses require the release of our proprietary source code to the public if we combine our proprietary software with open source software in certain manners. This could allow competitors to create similar products with lower development effort and time and ultimately result in a loss of sales for us.

The terms of many open source and other non-commercial licenses have not been judicially interpreted, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. In such event, in order to continue offering our solutions, we could be required to seek licenses from alternative licensors, which may not be available on a commercially reasonable basis or at all, to re-engineer our solutions or to discontinue the sale of our solutions in the event we cannot obtain a license or re-engineer our solutions on a timely basis, any of which could harm our business and operating results. In addition, if an owner of licensed software were to allege that we had not complied with the conditions of the corresponding license agreement, we could incur significant legal costs defending ourselves against such allegations. In the event such claims were successful, we could be subject to significant damages, be required to disclose our source code, or be enjoined from the distribution of our solutions.

Claims of intellectual property infringement could harm our business.

Vigorous protection and pursuit of intellectual property rights has resulted in protracted and expensive litigation for many companies in our industry. Although claims of this kind have not materially affected our business to date, there can be no assurance of the absence of such claims in the future. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could harm our business and operating results.

Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. In addition, we currently have a limited portfolio of issued patents compared to many other industry participants, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties. Further, litigation may involve patent holding companies or other adverse patent owners who have no relevant products and against whom our potential patents may provide little or no deterrence.

Many potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain solutions or performing certain services. We might also be required to seek a license and pay royalties for the use of such intellectual property, which may not be available on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful.

If we are unable to protect our intellectual property rights, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights.

Our success depends, in part, on our ability to protect our proprietary technology. We protect our proprietary technology through patent, copyright, trade secret and trademark laws in the United States and similar laws in other countries. We also protect our proprietary technology through licensing agreements, nondisclosure agreements and other contractual provisions. These protections may not be available in all cases or may be inadequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or solutions in an unauthorized manner. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. Our competitors may independently develop technologies that are substantially equivalent, or superior, to our technology or design around our proprietary rights. In each case, our ability to compete could be significantly impaired.

46

To prevent unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for infringement or misappropriation of our proprietary rights. Any such action could result in significant costs and diversion of our resources and management’s attention, and there can be no assurance that we will be successful in such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than us. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating our intellectual property. While we plan to continue to protect our intellectual property with, among other things, patent protection, there can be no assurance that:

•current or future U.S. or foreign patent applications will be approved;

•our issued patents will protect our intellectual property and not be held invalid or unenforceable if challenged by third parties;

•we will succeed in protecting our technology adequately in all key jurisdictions in which we develop technology, or we or our competitors operate; or

•others will not independently develop similar or competing products or methods or design around any patents that may be issued to us.

Our failure to obtain patents with claims of a scope necessary to cover our technology, or the invalidation of our patents, or our inability to protect any of our intellectual property, may weaken our competitive position and harm our business and operating results. We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may harm our business, operating results and financial condition.

Product liability or other liability claims could cause us to incur significant costs, adversely affect the sales of our solutions and harm our reputation.

Our solutions are utilized by healthcare professionals and others in the course of providing patient care. As a result, patients, family members, physicians, nurses or others may allege we are responsible for harm to patients or healthcare professionals due to defects in, the malfunction of, the characteristics of, or the operation of, our solutions. Any such allegations could harm our reputation and ability to sell our solutions.

Our solutions utilize lithium-ion batteries and electronic components that may overheat or otherwise malfunction as a result of physical or environmental damage. Components of our solutions emit radio frequency (RF) emissions which have been alleged, in connection with cellular phones, to have adverse health consequences. Magnets in our Badges may emit electromagnetic radiation and may be alleged to interfere with implanted medical or other devices. While these components of our solutions comply with applicable guidelines, some may allege that these components of our solutions cause adverse health consequences. Also, applicable guidelines may change making these components of our solutions non-compliant. Any such allegations or non-compliance, or any regulatory developments, could negatively impact the sales of our solutions, require costly modifications to our solutions, and harm our reputation.

Although our customer agreements contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our potential liability, we could be required to spend significant amounts of management time and resources to defend ourselves against product liability, tort, warranty or other claims. If any such claims were to prevail, we could be forced to pay damages, comply with injunctions or stop distributing our solutions. Even if potential claims do not result in liability to us, investigating and defending against these claims could be expensive and time consuming and could divert management’s attention away from our business. We maintain general liability insurance coverage, including coverage for errors and omissions; however, this coverage may not be sufficient to cover large claims against us or otherwise continue to be available on acceptable terms. Further, the insurer could attempt to disclaim coverage as to any particular claim.

We may require additional capital to support our business growth, and such capital may not be available.

We intend to continue to make investments to support business growth and may require additional funds to respond to business challenges, which include the need to develop new solutions or enhance existing solutions, enhance our operating infrastructure, expand our sales and marketing capabilities, expand into non-healthcare markets, and acquire complementary businesses, technologies or assets. Accordingly, we may need to engage in additional equity or debt financing to secure funds. Equity and debt financing, however, might not be available when needed or, if available, might not be available on terms satisfactory to us. If we raise additional funds through equity financing, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we are unable to obtain adequate financing or financing on terms satisfactory to us in the future, our ability to continue to support our business

47

growth and to respond to business challenges could be significantly limited as we may have to delay, reduce the scope of or eliminate some or all of our initiatives, which could harm our operating results.

Some of our solutions are, and others could become, subject to regulation by the U.S. Food and Drug Administration or similar foreign agencies, which could increase our operating costs.

We provide certain products that are, and others that may become, subject to regulation by the Food and Drug Administration (FDA) and similar agencies in other countries, or the jurisdiction of these agencies could be expanded in the future to include our solutions. The FDA regulates certain products, including software-based products, as “medical devices” based, in part, on the intended use of the product and the risk the device poses to the patient should the device fail to perform properly. For example, the clinical alert notification solution we acquired as part of our acquisition of Extension Healthcare and the clinical communications product we acquired from mVisum are regulated by the FDA as Class II medical devices. Although we have concluded that our wireless Badge is a general-purpose communications device not subject to FDA regulation, the FDA could disagree with our conclusion, or changes in our solutions or the FDA’s evolving regulation could lead to FDA regulation of our solutions. Canada and many other countries in which we sell or may sell our solutions could also have similar regulations applicable to our solutions, some of which may be subject to change or interpretation. We may incur substantial operating costs if we are required to register our solutions or components of our solutions as regulated medical devices under U.S. or foreign regulations, obtain premarket approval from the FDA or foreign regulatory agencies, and satisfy the extensive reporting requirements. In addition, failure to comply with these regulations could result in enforcement actions and monetary penalties.

Environmental and social (E&S) regulations, policies and provisions, as well as customer demand, may make our supply chain more complex and may adversely affect our relationships with customers.

There is an increasing focus on the governance of environmental and social risks in our industry. A number of our customers have adopted, or may adopt, procurement policies that include E&S provisions that their suppliers must comply with, or they may seek to include such provisions in their procurement terms and conditions. An increasing number of participants in the industry are also joining voluntary E&S initiatives, such as the Responsible Business Alliance. These E&S provisions and initiatives are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain and our outsourced manufacturing. If we are unable to comply or are unable to cause our suppliers or contract manufacturers to comply, with such policies or provisions, a customer may stop purchasing products from us, and may take legal action against us, which could harm our reputation, revenue and results of operations.

In addition, as part of their E&S programs, an increasing number of customers are seeking to source products that do not contain minerals sourced from areas where proceeds from the sale of such minerals are likely to be used to fund armed conflict, such as in the Democratic Republic of the Congo. This could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of our equipment. Since our supply chain is complex, we are not currently able to definitively ascertain the origins of all of the minerals and metals used in our products. As a result, we may face difficulties in satisfying these customers’ demands, which may harm our sales and operating results.

Risks Related to our Notes

We have indebtedness in the form of convertible senior notes.

As a result of the Notes offerings, we incurred $240.8 million principal amount of indebtedness, the principal amount of which we may be required to pay at maturity in 2023 and 2026. Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a “fundamental change” (as defined in the indenture governing the Notes) at a purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any. In addition, the indenture for the Notes provides that we are required to repay amounts due under the indenture in the event that there is an event of default for the Notes that results in the principal, premium, if any, and interest, if any, becoming due prior to maturity date of the Notes. There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all. In addition, this indebtedness could, among other things:

•heighten our vulnerability to adverse general economic conditions and heightened competitive pressures;

•require us to dedicate a larger portion of our cash flow from operations to interest payments, limiting the availability of cash for other purposes;

•limit our flexibility in planning for, or reacting to, changes in our business and industry; and

•impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.

48

In addition, our ability to purchase the Notes or repay prior to maturity any accelerated amounts under the Notes upon an event of default or pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our indebtedness outstanding at the time. Our failure to repurchase Notes at a time when the repurchase is required by the indenture (whether upon a fundamental change or otherwise under the indenture) or pay cash payable on future conversions of the Notes (unless we elect to deliver solely shares of our common stock to settle such conversion) as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing any future indebtedness. If the repayment of any related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness, repurchase the Notes or make cash payments upon conversions thereof.

Although the Notes are referred to as convertible senior notes, they are effectively subordinated to any of our secured debt and any liabilities of our subsidiaries.

The Notes will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment to all of our existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries. In the event of our bankruptcy, liquidation, reorganization, or other winding up, our assets that secure debt ranking senior or equal in right of payment to the Notes will be available to pay obligations on the Notes only after the secured debt has been repaid in full from these assets, and the assets of our subsidiaries will be available to pay obligations on the Notes only after all claims senior to the Notes have been repaid in full. There may not be sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. The indenture governing the Notes will not prohibit us from incurring additional senior debt or secured debt, nor will it prohibit any of our current or future subsidiaries from incurring additional liabilities.

Servicing our debt requires, and will require, a significant amount of cash. We may not have sufficient cash flow to make payments on our debt, which could adversely affect our business, financial condition and results of operations.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness,

including the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including the notes or otherwise.

In addition, our significant indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:

•make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation;

•limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•place us at a disadvantage compared to our competitors who have less debt; and

•limit our ability to borrow additional amounts for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and technologies.

Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

Recent and future regulatory actions and other events may adversely affect the trading price and liquidity of the Notes.

We expect that many investors in, and purchasers of, the notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the notes. Investors would typically implement such a strategy by selling short the common stock underlying the notes and dynamically adjusting their short position while continuing to hold the notes. Investors may also implement this type of strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock.

49

The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our common stock). Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a “Limit Up-Limit Down” program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts the ability of the holders the Notes to effect short sales of our common stock, borrow our common stock, or enter into swaps on our common stock could adversely affect the trading price and the liquidity of the Notes.

Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the Notes.

We expect that the trading price of the Notes will be significantly affected by the market price of our common stock. The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. The market price of our common stock could fluctuate significantly for many reasons. A decrease in the market price of our common stock would likely adversely impact the trading price of the notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our common stock. This trading activity could, in turn, affect the trading price of the Notes.

We may still incur substantially more debt or take other actions which would intensify the risks discussed above.

We and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. We will not be restricted under the terms of the indentures governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt, or taking a number of other actions that are not limited by the terms of the indentures governing the Notes that could have the effect of diminishing our ability to make payments on our debt, including the Notes, when due.

We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Holders of the Notes will have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted.

In addition, our ability to repurchase Notes or to pay cash upon conversions of Notes may be limited by law, regulatory authority, or any agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture or to pay any cash upon conversions of Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversions of notes.

Redemption may adversely affect a holder’s return on the 2026 Notes.

We may not redeem the 2026 Notes prior to March 20, 2024. We may redeem for cash all or any portion of the 2026 Notes (subject to the partial redemption limitation (as defined in the indenture governing the notes)), at our option, on or after March 20, 2024 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. As a result, we may choose to redeem some or all of the 2026 Notes, including at times when prevailing interest rates are relatively low. As a result, you may not be able to reinvest the proceeds you receive

50

from the redemption in a comparable security at an effective interest rate as high as the interest rate on your 2026 Notes being redeemed. In addition, a redemption of less than all of the outstanding 2026 Notes will likely harm the liquidity of the market for the unredeemed 2026 Notes following the redemption. Accordingly, if your 2026 Notes are not redeemed in a partial redemption, then you may be unable to sell your 2026 Notes at the times you desire or at favorable prices, if at all, and the trading price of your 2026 Notes may decline.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders of Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Changes in the accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

The accounting method for reflecting the Notes on our balance sheet, accruing amortized interest expense for the Notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition. For the fiscal year beginning January 1, 2021, we have elected to early adopt new accounting guidance that was recently released that simplifies the accounting for convertible debt that may be settled in cash (ASU 2020-06), amending Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20). As a result, we expect to record the convertible debt securities (including the Notes) entirely as a liability on our balance sheet, net of issuance costs incurred, with interest expense reflecting the cash coupon plus the amortization of the capitalized issuance costs. Additionally, the new guidance modifies the treatment of convertible debt securities that may be settled in cash or shares by requiring the use of the “if-converted” method. Under that method, diluted earnings per share would generally be calculated assuming that all the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be antidilutive. In addition, in the future, we may, in our sole discretion, irrevocably elect to settle the conversion value of the Notes in cash up to the principal amount being converted. Following such an irrevocable election, if the conversion value of the Notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share by assuming that all of the Notes were converted at the beginning of the reporting period and that we issued shares of our common stock to settle the excess, unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share. Furthermore, if any of the conditions to the convertibility of the Notes are satisfied, then, under certain conditions, we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital.

Future sales of our common stock or equity-linked securities in the public market could lower the market price for our common stock and adversely impact the trading price of the Notes.

In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital. In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options and upon conversion of the Notes. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of our common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of the Notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.

Holders of Notes will not be entitled to any rights with respect to our common stock, but they will be subject to all changes affecting our common stock to the extent satisfaction of our conversion obligation includes shares of our common stock.

Holders of Notes will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock) prior to the conversion date relating to such Notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and

51

deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), but holders of Notes will be subject to all changes affecting our common stock. For example, if an amendment is proposed to our restated certificate of incorporation or restated bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date related to a holder’s conversion of its Notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), such holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes affecting our common stock.

The conditional conversion feature of the Notes could result in holders of our Notes receiving less than the value of our common stock into which the Notes would otherwise be convertible.

Prior to the close of business on the business day immediately preceding June 15, 2026, a holder may convert 2026 Notes only if specified conditions are met. If the specific conditions for conversion are not met, a holder will not be able to convert 2026 Notes, and a holder may not be able to receive the value of the cash, common stock or a combination of cash and common stock, as applicable, into which the 2026 Notes would otherwise be convertible.

Upon conversion of the Notes, our note holders may receive less valuable consideration than expected because the value of our common stock may decline after the exercise of conversion rights but before we settle our conversion obligation.

Under the Notes, a converting holder will be exposed to fluctuations in the value of our common stock during the period from the date such holder surrenders Notes for conversion until the date we settle our conversion obligation. For example, upon conversion of the 2026 Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to satisfy our conversion obligation in cash or a combination of cash and shares of our common stock, the amount of consideration that our note holders will receive upon conversion of their 2026 Notes will be determined by reference to the volume weighted average prices of our common stock for each trading day in a 40 trading day observation period. This period would be: (i), subject to clause (ii), if the relevant conversion date occurs prior to June 15, 2026, the 40 consecutive trading days beginning on, and including, the second trading day immediately succeeding such conversion date; (ii) with respect to any 2026 Notes called for redemption (or deemed called for redemption) and prior to the relevant redemption date, the 40 consecutive trading days beginning on, and including the 41st scheduled trading day immediately preceding such redemption date; and (iii) subject to clause (ii) if the relevant conversion date occurs on or after June 15, 2026, the 40 consecutive trading days beginning on, and including, the 41st scheduled trading day immediately preceding the maturity date. Accordingly, if the price of our common stock decreases during this period, the amount and/or value of consideration a note holder receives will be adversely affected. In addition, if the market price of our common stock at the end of such period is below the average of the daily volume weighted average prices of our common stock during such period, the value of any shares of our common stock that a note holder will receive in satisfaction of our conversion obligation will be less than the value used to determine the number of shares that the note holder will receive. If we elect to satisfy our conversion obligation solely in shares of our common stock upon conversion of the 2026 Notes, we will be required to deliver the shares of our common stock, together with cash for any fractional share, on the second business day following the relevant conversion date. Accordingly, if the price of our common stock decreases during this period, the value of the shares that a note holder receives will be adversely affected and would be less than the conversion value of the 2026 Notes on the conversion date.

The Notes are not protected by restrictive covenants.

The indentures governing the Notes will not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The indentures will not contain any covenants or other provisions to afford protection to holders of the Notes in the event of a fundamental change or other corporate transaction involving us except to the extent described in the indentures governing the Notes.

The increase in the conversion rate for Notes converted in connection with a make-whole fundamental change or a notice of redemption may not adequately compensate note holders for any lost value of their Notes as a result of such transaction or redemption.

If a make-whole fundamental change occurs prior to the maturity date or if we deliver a notice of redemption, we will, under certain circumstances, increase the conversion rate by a number of additional shares of our common stock for Notes converted

52

in connection with such make-whole fundamental change or Notes called (or deemed called) for redemption that are converted during the related redemption period. The increase in the conversion rate will be determined based on the date on which the make-whole fundamental change occurs or the date we deliver the notice of redemption, as the case may be, and the price paid (or deemed to be paid) per share of our common stock in the make-whole fundamental change or determined with respect to the notice of redemption, as the case may be. The increase in the conversion rate for Notes converted in connection with a make-whole fundamental change or called (or deemed called) for redemption that are converted during the related redemption period may not adequately compensate a note holder for any lost value of the Notes as a result of such transaction or redemption. Furthermore, if we call only a portion of the outstanding Notes for redemption, only those Notes called (or deemed called) for redemption will become convertible as a result of such call for redemption and only the conversion rate of Notes converted in connection with such notice of redemption will be increased. Accordingly, Notes not called for redemption will not become convertible if not otherwise convertible at such time and will remain outstanding, and may have reduced liquidity and a resulting reduced trading price.

In addition for the 2026 Notes, if the price per share of our common stock is greater than $325.00 per share or less than $44.55 per share (in each case, subject to adjustment), no additional shares will be added to the conversion rate. Moreover, in no event will the conversion rate per $1,000 principal amount of 2026 Notes as a result of this adjustment exceed 22.4466 shares of common stock, subject to adjustment. The 2023 Notes contain substantially similar conversion features.

Our obligation to increase the conversion rate for Notes converted in connection with a make-whole fundamental change or Notes called (or deemed called) for redemption that are converted during the related redemption period could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

The conversion rate of the Notes may not be adjusted for all dilutive events.

The conversion rate of the Notes is subject to adjustment for certain events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends, and certain issuer tender or exchange offers. However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of our common stock for cash, that may adversely affect the trading price of the Notes or our common stock. An event that adversely affects the value of the Notes may occur, and that event may not result in an adjustment to the conversion rate.

Provisions in the indenture for the Notes may deter or prevent a business combination that may be favorable to our security holders.

If a fundamental change occurs prior to the maturity date, holders of the Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes. In addition, if a make-whole fundamental change occurs prior the maturity date, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Furthermore, the indentures for the Notes will prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to our security holders.

Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes.

Upon the occurrence of a fundamental change, our note holders have the right to require us to repurchase all or a portion of their Notes. However, the fundamental change provisions will not afford protection to holders of notes in the event of other transactions that could adversely affect the Notes. For example, a significant change in the composition of our board of directors or transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to offer to repurchase the Notes. In the event of any such transaction, the holders would not have the right to require us to repurchase the Notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of Notes.

53

We have not registered, and are not required to register, the Notes or the common stock issuable upon

conversion of the Notes, if any, which will limit our note holders’ ability to resell them.

The Notes and the shares of common stock issuable upon conversion of the Notes, if any, have not been, and are not required to be, registered under the Securities Act or any state securities laws. Unless the Notes and any shares of common stock issuable upon conversion of the Notes, if any, have been registered, the Notes and such shares may not be transferred or resold except in a transaction exempt from or not subject to the registration requirements of the Securities Act and applicable state securities laws. We do not intend to file a registration statement for the resale of the notes and the common stock, if any, into which the notes are convertible.

We cannot assure you that an active trading market will develop for the Notes.

We do not intend to apply to list the Notes on any securities exchange or to arrange for quotation on any automated dealer quotation system. The liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, an active trading market may not develop for the Notes. If an active trading market does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. In that case note holders may not be able to sell their Notes at a particular time or may not be able to sell their Notes at a favorable price.

Any adverse rating of the Notes may cause their trading price to fall.

We do not intend to seek a rating on the Notes. However, if a rating service were to rate the Notes and if such rating service were to lower its rating on the Notes below the rating initially assigned to the Notes or otherwise announces its intention to put the Notes on credit watch, the trading price of the Notes could decline.

Note holders may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the Notes even though they do not receive a corresponding cash distribution.

The conversion rate of the Notes is subject to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, note holders may be deemed to have received a dividend subject to U.S. federal income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases a note holder’s proportionate interest in us could be treated as a deemed taxable dividend to the holder. If a make-whole fundamental change occurs prior to the maturity date or if we deliver a notice of redemption, we will, under some circumstances, increase the conversion rate for Notes converted in connection with the make-whole fundamental change or called (or deemed called) for redemption that are converted during the related redemption period. Such increase may also be treated as a distribution subject to U.S. federal income tax as a dividend. If a note holder is a non-U.S. holder, any deemed dividend would generally be subject to U.S. federal withholding tax, which may be set off against subsequent payments on the Notes or other amounts received by the holder.

Because the Notes will initially be held in book-entry form, holders must rely on The Depository Trust Company (DTC) procedures to receive communications relating to the Notes and exercise their rights and remedies.

We have issued the Notes in the form of one or more global notes registered in the name of Cede & Co., as nominee of DTC. Beneficial interests in global notes will be shown on, and transfers of global notes will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue certificated notes.

Accordingly, if a note holder owns a beneficial interest in a global note, then it will not be considered an owner or holder of the Notes. Instead, DTC or its nominee will be the sole holder of the Notes. Unlike persons who have certificated notes registered in their names, owners of beneficial interests in global notes will not have the direct right to act on our solicitations for consents or requests for waivers or other actions from holders. Instead, those beneficial owners will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for the granting of these proxies may not be sufficient to enable owners of beneficial interests in global notes to vote on any requested actions on a timely basis. In addition, notices and other communications relating to the Notes will be sent to DTC. We expect DTC to forward any such communications to DTC participants, which in turn would forward such communications to indirect DTC participants. However, we can make no assurances that note holders will timely receive any such communications.

54

The capped call transactions may affect the value of the Notes and our common stock.

In connection with the issuance of the Notes, we entered into capped call transactions with certain financial institutions (the option counterparties). The capped call transactions are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes, with such reduction and/or offset subject to a cap. In connection with establishing their initial hedges of the capped call transactions, the option counterparties and/or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock. This activity could have increased (or reduced the size of any decrease in) the market price of our common stock or the Notes at that time. In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions (and are likely to do so during any observation period related to a conversion of notes or following any repurchase of notes by us on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the price of our common stock or the Notes. The potential effect, if any, of these transactions and activities on the price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

Risks related to our common stock

We have never paid cash dividends on our capital stock, and we do not anticipate paying any dividends in the foreseeable future.

We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

Our charter documents and Delaware law could discourage, delay or prevent a change of control of our company or change in our management that stockholders consider favorable and cause our stock price to decline.

Certain provisions of our restated certificate of incorporation and restated bylaws and Delaware law could discourage, delay or prevent a change of control of our company or change in our management that the stockholders of our company consider favorable. These provisions:

•authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

•prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of stockholders;

•establish advance notice procedures for nominating candidates to our board of directors or proposing matters that can be acted upon by stockholders at stockholder meetings;

•limit the ability of our stockholders to call special meetings of stockholders;

•prohibit stockholders from cumulating their votes for the election of directors;

•permit newly created directorships resulting from an increase in the authorized number of directors or vacancies on our board of directors to be filled only by majority vote of our remaining directors, even if less than a quorum is then in office;

•provide that our board of directors is expressly authorized to make, alter or repeal our bylaws;

•establish a classified board of directors so that not all members of our board are elected at one time;

•provide that our directors may be removed only for “cause” and only with the approval of the holders of at least 66 2/3rds percent of our outstanding stock; and

•require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws.

Section 203 of the Delaware General Corporation Law may also discourage, delay or prevent a change of control of our company.

55

The exclusive forum provision in our amended and restated bylaws may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. In April 2020, we amended and restated our restated bylaws to provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (a Federal Forum Provision). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal courts or other state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision generally means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. While neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

General risk factors

The market price of our common stock has been, and may continue to be, volatile, and your investment in our stock could suffer a decline in value.

There has been significant volatility in the market price and trading volume of equity securities, which is often unrelated or disproportionate to the financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. The market price of our common stock could fluctuate significantly in response to the factors described in this “Risk Factors” section and elsewhere in this Form 10-Q and other factors, many of which are beyond our control, including:

•actual or anticipated variation in anticipated operating results of us or our competitors;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•announcements by us or our competitors of new solutions, new or terminated significant contracts, commercial relationships or capital commitments;

•changes in the regulatory environment affecting our healthcare customers, including impediments to their ability to obtain reimbursement for their services, and other actual or anticipated legal or regulatory developments in the United States or foreign countries;

•actual or anticipated developments in our competitors’ businesses or the competitive landscape generally;

•failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•developments or disputes concerning our intellectual property or other proprietary rights;

•commencement of, or our involvement in, litigation;

•announced or completed acquisitions of businesses, technologies or assets by us or our competitor;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•price and volume fluctuations attributable to inconsistent trading volume levels of our common stock;

•our decision to seek additional equity or debt financing;

•our public float relative to the total number of shares of our common stock that are issued and outstanding;

•price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

•rumors and market speculation involving us or other companies in our industry;

•the dissemination of adverse or misleading reports or opinions about our business;

•any major change in our management;

56

•unfavorable economic conditions and slow or negative growth of our markets; and

•other events or factors, including those resulting from war, incidents of terrorism or health epidemics or contagious diseases.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions or terrorism.

Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity, and many critical components of our solutions are sourced in Asia and Mexico, regions known to suffer natural disasters and epidemics or contagious diseases. A significant natural disaster, such as an earthquake, fire or a flood, or epidemic or contagious disease, occurring at our headquarters, our other facilities or where our contract manufacturer or its suppliers are located, could harm our business, operating results and financial condition. In addition, acts of terrorism could cause disruptions in our business, the businesses of our customers and suppliers, or the economy as a whole. We also rely on information technology systems to communicate among our workforce located worldwide, and in particular, our senior management, general and administrative, and research and development activities that are coordinated with our corporate headquarters in the San Francisco Bay Area. Any disruption to our internal communications, whether caused by a natural disaster, an epidemic or contagious disease, or by man-made problems, such as power disruptions, in the San Francisco Bay Area, Asia or Mexico could delay our research and development efforts, cause delays or cancellations of customer orders or delay deployment of our solutions, which could harm our business, operating results and financial condition.

If we do not maintain effective internal control over financial reporting or disclosure controls and procedures in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and disclosure controls and procedures quarterly. In particular, we must obtain confidence in our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. To the extent we find a material weakness or other deficiency in our internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

Multiple negative consequences could ensue if a material weakness in our internal control over financial reporting is identified in the future, or we are not able to comply with the requirements of Section 404 in a timely manner, or we do not maintain effective controls. For example, our reported financial results could be materially misstated or could be restated, we could receive an adverse opinion regarding our controls from our independent registered public accounting firm, or we could be subject to investigations or sanctions by regulatory authorities. All of these outcomes would require additional financial and management resources, and the market price of our stock could decline.

We will continue to incur substantial costs as a result of operating as a public company and our management devotes substantial time to public company compliance obligations.

As a public company, we incur substantial legal, accounting and other expenses. The Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules subsequently implemented by the SEC and our stock exchange, impose various requirements on public companies, including certain corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance requirements. Moreover, these rules and regulations, along with compliance with accounting principles and regulatory interpretations of such principles, as amended by the JOBS Act, have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time-consuming and costly.

We face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

We have in the past been, and may in the future become, subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. Regardless of the outcome, these matters or future litigation may require significant attention from management and could result in significant

57

legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.

If securities or industry analysts issue an adverse or misleading opinion regarding our stock or do not publish research or reports about our business, our stock price could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. The price of our common stock could decline if one or more analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If one or more analysts cease coverage of our company or fail to regularly publish reports about our company, we could lose visibility in the financial market, which in turn could cause our stock price to decline. Further, securities or industry analysts may elect not to provide research coverage of our common stock and such lack of research coverage may adversely affect the market price of our common stock.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.

58

Item 6.    Exhibits

Exhibit Index Number	Exhibit title
4.1	Indenture dated March 12, 2021 between Vocera Communications, Inc. and U.S. Bank, National Association (including form of Global Note) (incorporated by reference to Exhibit 4.1 on our Current Report on Form 8-K filed with the SEC on March 12, 2021 (File No. 001-35469)).
10.1	Form of Capped Call Transaction Confirmation (incorporated by reference to Exhibit 99.1 on our Current Report on Form 8-K filed with the SEC on March 12, 2021 (File No. 001-35469)).
31.01	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01+	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Schema Linkbase Document
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document
104	Cover Page Interactive Data File - (formatted in Inline XBRL and contained in Exhibit 101).

+ This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

59

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.

		VOCERA COMMUNICATIONS, INC.
Date: May 5, 2021	By:	/S/    Brent D. Lang
		Brent D. Lang Chief Executive Officer
Date: May 5, 2021	By:	/S/    Justin R. Spencer
		Justin R. Spencer Chief Financial Officer
		(Principal Financial Officer)

60

EX-31.01

EXHIBIT 31.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brent D. Lang, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vocera Communications, 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(s) 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 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 purposes in accordance with generally accepted accounting principles;

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(s) 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 the 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.

Date: May 5, 2021	/s/ Brent D. Lang
	Brent D. Lang
	Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Justin R.Spencer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vocera Communications, 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(s) 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 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 purposes in accordance with generally accepted accounting principles;

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(s) 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 the 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.

Date: May 5, 2021	/s/ Justin R. Spencer
	Justin R. Spencer
	Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Brent D. Lang, Chief Executive Officer of Vocera Communications, Inc. (the “Company”), and Justin R. Spencer, Chief Financial Officer of the Company, each hereby certifies that, to his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, to which this Certification is attached as Exhibit 32.01 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

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

In Witness Whereof, the undersigned have set their hands hereto as of the 5th day of May 2021.

/s/ Brent D. Lang	/s/ Justin R. Spencer
Brent D. Lang	Justin R. Spencer
Chief Executive Officer	Chief Financial Officer

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2021	Apr. 30, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-35469
Entity Registrant Name	VOCERA COMMUNICATIONS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3354663
Entity Address, Address Line One	525 Race Street
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95126
City Area Code	408
Local Phone Number	882-5100
Title of 12(b) Security	Common Stock, $0.0003 par value
Trading Symbol	VCRA
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		34,366,650
Entity Central Index Key	0001129260
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 105,257	$ 34,976
Short-term investments	209,861	195,227
Accounts receivable, net of allowance	32,718	45,653
Other receivables	5,552	6,170
Inventories	10,432	10,159
Prepaid expenses and other current assets	6,925	6,317
Total current assets	370,745	298,502
Property and equipment, net	7,395	8,103
Intangible assets, net	11,957	12,788
Goodwill	69,168	69,168
Deferred commissions	12,713	12,293
Other long-term assets	5,890	5,967
Total assets	477,868	406,821
Current liabilities
Accounts payable	3,774	3,127
Accrued payroll and other current liabilities	22,000	23,195
Deferred revenue, current	50,882	54,785
Total current liabilities	76,656	81,107
Deferred revenue, long-term	9,254	9,948
Convertible senior notes, net	234,135	124,376
Other long-term liabilities	10,795	10,374
Total liabilities	330,840	225,805
Stockholders' equity
Preferred stock, $0.0003 par value - 5,000,000 shares authorized as of March 31, 2021 and December 31, 2020; zero shares issued and outstanding	0	0
Common stock, $0.0003 par value - 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 34,137,418 and 32,692,561 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	10	10
Additional paid-in capital	299,176	340,515
Accumulated other comprehensive income	239	473
Accumulated deficit	(152,397)	(159,982)
Total stockholders’ equity	147,028	181,016
Total liabilities and stockholders’ equity	$ 477,868	$ 406,821

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock par value (in dollars per share)	$ 0.0003	$ 0.0003
Preferred stock shares authorized (in shares)	5,000,000	5,000,000
Preferred stock shares issued (in shares)	0	0
Preferred stock shares outstanding (in shares)	0	0
Common stock par value (in dollars per share)	$ 0.0003	$ 0.0003
Common stock shares authorized (in shares)	100,000,000	100,000,000
Common stock shares issued (in shares)	34,137,418	32,692,561
Common stock shares outstanding (in shares)	34,137,418	32,692,561

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue
Total revenue	$ 48,668	$ 40,673
Cost of revenue
Total cost of revenue	17,783	16,887
Gross profit	30,885	23,786
Operating expenses
Research and development	10,350	9,032
Sales and marketing	17,670	16,963
General and administrative	7,275	6,391
Total operating expenses	35,295	32,386
Loss from operations	(4,410)	(8,600)
Interest income	346	1,120
Interest expense	(777)	(2,274)
Other expense, net	(2,546)	(591)
Loss before income taxes	(7,387)	(10,345)
Provision for income taxes	(246)	(125)
Net loss	$ (7,633)	$ (10,470)
Loss per share
Basic (in dollars per share)	$ (0.23)	$ (0.33)
Diluted (in dollars per share)	$ (0.23)	$ (0.33)
Weighted average shares used to compute net loss per share
Weighted-average shares used to compute net income (loss) per common share - basic (in shares)	33,087	31,738
Weighted-average shares used to compute net income (loss) per common share - diluted (in shares)	33,087	31,738
Product
Revenue
Total revenue	$ 22,608	$ 17,850
Cost of revenue
Total cost of revenue	6,956	6,364
Service
Revenue
Total revenue	26,060	22,823
Cost of revenue
Total cost of revenue	$ 10,827	$ 10,523

XML

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement of Comprehensive Income [Abstract]
Net loss	$ (7,633)	$ (10,470)
Other comprehensive loss, net:
Change in unrealized loss on investments, net of tax	(234)	(956)
Comprehensive loss	$ (7,867)	$ (11,426)

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative effect	Common stock	Additional paid-in capital	Additional paid-in capital Cumulative effect	Accum. other comprehensive income (loss)	Accumulated deficit	Accumulated deficit Cumulative effect
Balance (shares) at Dec. 31, 2019			31,660,709
Balance at Dec. 31, 2019	$ 163,825		$ 9	$ 313,963		$ 179	$ (150,326)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (shares)			77,909
Exercise of stock options	731			731
RSUs released net of shares withheld for tax settlement (shares)			64,161
RSUs released net of shares withheld for tax settlement	(864)			(864)
Employee stock-based compensation expense	5,841			5,841
Net loss	(10,470)						(10,470)
Other comprehensive loss	(956)					(956)
Balance (shares) at Mar. 31, 2020			31,802,779
Balance at Mar. 31, 2020	158,107		$ 9	319,671		(777)	(160,796)
Balance (shares) at Dec. 31, 2019			31,660,709
Balance at Dec. 31, 2019	163,825		$ 9	313,963		179	(150,326)
Balance (shares) at Dec. 31, 2020			32,692,561
Balance at Dec. 31, 2020	$ 181,016	$ (16,996)	$ 10	340,515	$ (32,214)	473	(159,982)	$ 15,218
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible List]	vcra:AccountingStandardsUpdate2020-06
Exercise of stock options (shares)			69,360
Exercise of stock options	$ 1,181			1,181
RSUs released net of shares withheld for tax settlement (shares)			97,766
RSUs released net of shares withheld for tax settlement	(2,185)			(2,185)
Induced conversion of convertible senior notes (shares)			1,277,731
Induced conversion of convertible senior notes	477			477
Issuance of capped call	(15,460)			(15,460)
Employee stock-based compensation expense	6,862			6,862
Net loss	(7,633)						(7,633)
Other comprehensive loss	(234)					(234)
Balance (shares) at Mar. 31, 2021			34,137,418
Balance at Mar. 31, 2021	$ 147,028		$ 10	$ 299,176		$ 239	$ (152,397)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities
Net loss	$ (7,633)	$ (10,470)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,006	1,333
Change in lease-related performance obligations	(297)	(346)
Stock-based compensation expense	6,862	5,841
Amortization of debt discount and issuance costs	252	1,735
Non-cash lease expense	589	662
Non-cash impact of induced premium	2,059	0
Other	570	109
Changes in operating assets and liabilities:
Accounts receivable	12,936	16,264
Other receivables	568	(102)
Inventories	(262)	(1,494)
Prepaid expenses and other assets	(447)	(417)
Deferred commissions	(420)	171
Accounts payable	591	(2,826)
Accrued payroll and other liabilities	(1,774)	(17)
Deferred revenue	(4,597)	(4,799)
Net cash provided by operating activities	11,003	5,644
Cash flows from investing activities
Purchase of property and equipment	(409)	(682)
Purchase of short-term investments	(56,585)	(28,009)
Maturities of short-term investments	41,181	28,569
Net cash used in investing activities	(15,813)	(122)
Cash flows from financing activities
Cash from lease-related performance obligations	0	43
Repayment of borrowings	(102,946)	0
Proceeds from issuance of convertible senior notes, net of issuance costs	194,500	0
Payment for purchase of capped calls	(15,460)	0
Proceeds from exercise of stock options	1,181	731
Tax withholdings paid on behalf of employees for net share settlement	(2,184)	(864)
Net cash provided by (used in) financing activities	75,091	(90)
Net increase in cash and cash equivalents	70,281	5,432
Cash and cash equivalents at beginning of period	34,976	25,704
Cash and cash equivalents at end of period	105,257	31,136
Supplemental disclosure of non-cash investing and financing activities:
Costs related to the convertible senior notes in accounts payable and accrued liabilities	625	0
Property and equipment in accounts payable and accrued liabilities	$ 215	$ 390

XML

The Company and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

The Company and Summary of Significant Accounting Policies

The Company and Summary of Significant Accounting Policies

Organization and Business

Vocera Communications, Inc. and its subsidiaries (collectively, the "Company" or "Vocera") is a provider of secure, integrated, intelligent communication and clinical workflow solutions, focused on empowering mobile workers in healthcare, hospitality, retail, energy, education and other mission-critical mobile work environments, in the United States and internationally. The significant majority of the Company's business is generated from sales of its solutions in the healthcare market to help its customers improve quality of care, safety, patient and staff experience and increase operational efficiency.

The Vocera communication and collaboration solution includes: an intelligent enterprise software platform; a lightweight, wearable, voice-controlled communication Badge and Smartbadge; and smartphone applications. The solution enables users to connect instantly with other staff simply by saying the name, function or group name of the desired recipient. It also delivers HIPAA-compliant secure text messages, alerts and alarms directly to a range of smartphones or the Smartbadge both inside and outside the hospital, replacing legacy pagers and in-building wireless phones.

The Company was incorporated in Delaware on February 16, 2000. The Company formed wholly-owned subsidiaries Vocera Communications UK Ltd and Vocera Communications Australia Pty Ltd. in 2005, Vocera Canada, Ltd. in 2010, Vocera Communications India Private Ltd. in 2013, Vocera Communications Middle East FZ LLC in 2014, acquired Extension, LLC in 2016 and EASE Applications, LLC ("EASE") in 2020.

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The year-end condensed consolidated balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or any other future year.

Except for the change in certain accounting policies upon adoption of the accounting standards described below, there have been no material changes to the Company’s significant accounting policies compared to the accounting policies presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, warranty reserves, accounts receivable reserves, inventory reserves, bonuses, goodwill and intangible assets, stock-based compensation expense, provisions for income taxes, contingent consideration and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications had no impact on the previously reported net loss or accumulated deficit.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued new guidance related to the accounting for debt with conversion features. The amendments in this update simplify the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope

exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity's financial statements and information about events, conditions and circumstances that can affect how to assess the amount or timing of an entity's future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021 with early adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the guidance beginning January 1, 2021. The adoption of this guidance resulted in an increase of $17.0 million and $15.2 million to convertible senior notes, net and accumulated deficit, respectively, and a reduction to additional paid-in capital of $32.2 million.

In March 2020 and January 2021, the FASB issued new guidance related to Reference Rate Reform. These pronouncements provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are elective and subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This could affect balances of right of use assets, lease liabilities, and notes payables. The amendments in the March update are effective as of March 12, 2020 through December 21, 2022 and the amendments in the January update are effective immediately for all entities. The adoption of these pronouncements did not have a material impact on the Company’s condensed consolidated financial statements.

XML

Revenue, Deferred Revenue and Deferred Commissions

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue, Deferred Revenue and Deferred Commissions

Revenue, Deferred Revenue and Deferred Commissions

Disaggregation of Revenue

A typical sales arrangement involves multiple arrangements, such as sales of the Company’s proprietary communication device ("Vocera Badge"), perpetual software licenses, professional services, cloud-based subscription, and subscription and support services which entitles customers to unspecified upgrades, patch releases and telephone-based support. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how the Company evaluates its financial performance:

	Three months ended March 31,
(in thousands)	2021		2020
Product revenue
Device	$	15,273	$	13,903
Software	7,335		3,947
Total product	22,608		17,850
Service revenue
Subscription and support	20,959		18,069
Professional services and training	5,101		4,754
Total service	26,060		22,823
Total revenue	$	48,668	$	40,673

Contract balances

The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoiced amount and in the period the Company delivers goods or provides services or when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30 days. The balance of accounts receivable, net of allowance for doubtful accounts, as of March 31, 2021 and December 31, 2020 is presented in the accompanying condensed consolidated balance sheets. In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset. As of March 31, 2021 and December 31, 2020, contract assets totaling $4.0 million and $4.2 million, respectively, were included in other receivables in the condensed consolidated balance sheets.

Costs to obtain and fulfill a contract

The Company capitalizes certain incremental contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company determines whether costs should be deferred based on its sales compensation plans, if the commissions are incremental and would not have been incurred absent the execution of the

customer contract. Sales commissions for renewals of customer contracts are not commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit, which may exceed the term of the initial contract. Accordingly, amortization of deferred costs is recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation and is included in sales and marketing expense in the consolidated statements of operations. The Company determines its estimated period of benefit, up to five years, by evaluating the expected renewals of its customer contracts, the duration of its relationships with its customers and other factors. Deferred costs are periodically reviewed for impairment. Changes in the balance of total deferred commissions (contract asset) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Commissions Recognized		March 31, 2021
Deferred commissions	$	12,293	$	2,335	$	(1,915)	$	12,713

Of the $12.7 million total deferred commissions balance as of March 31, 2021, the Company expects to recognize approximately 36% as commission expense over the next 12 months and the remainder thereafter.

Deferred revenue

The Company records deferred revenue when cash payments are received in advance of the performance under the contract. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet date. Changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Revenue Recognized		March 31, 2021
Deferred revenue	$	64,733	$	17,917	$	(22,514)	$	60,136

Revenue recognized during the three months ended March 31, 2021 from deferred revenue balances at the beginning of the period was $21.1 million. Revenue recognized during the three months ended March 31, 2020 from deferred revenue balances at the beginning of the period was $18.5 million.

The “contracted but not recognized” performance obligations represent the Company’s deferred revenue and non-cancelable backlog amounts. This balance as of March 31, 2021 was $151.3 million, of which the Company expects to recognize approximately 64% as revenue over the next 12 months and the remainder thereafter.

XML

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s cash, cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. During the three months ended March 31, 2021, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers out of Level 3.

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company’s Level 2 fixed income securities is obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs, corroborated by observable market data.

In addition to its cash, cash equivalents and short-term investments, the Company measures the fair value of its Convertible Senior Notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the Convertible Senior Notes at March 31, 2021 to be a Level 2 measurement due to limited trading activity of the Convertible Senior Notes. Refer to Note 8 to the condensed consolidated financial statements for further information.

The agreement for the acquisition of EASE includes contingent payments to the owners of EASE, payable based on achievement of post-acquisition financial metrics. This contingent consideration is a Level 3 fair value measurement and the valuation of the Company’s contingent consideration obligation was estimated as the present value of total expected contingent consideration payments which are determined using a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements and utilizes assumptions with regard to future sales, probabilities of achieving such future sales, the likelihood and timing of expected payments and a discount rate. Significant increases with respect to assumptions as to future sales and probabilities of achieving such future sales would result in a higher fair value measurement, while an increase in the discount rate would result in a lower fair value measurement. The unobservable inputs in the valuation include revenue volatility of 12%, a risk-free rate of 2.50%, and the amounts are expected to be paid in the second quarters of 2022 and 2023. The fair value adjustment for the contingent consideration of $0.4 million for the three months ended March 31, 2021 was recorded as other expense.

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2021 and December 31, 2020, are summarized as follows (in thousands):

	March 31, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	40,126	$	—	$	—	$	40,126	$	363	$	—	$	—	$	363
Commercial paper	—		47,945		—		47,945		—		21,950		—		21,950
U.S. Treasury securities	—		—		—		—		—		6,000		—		6,000
Corporate debt securities	—		168,919		—		168,919		—		173,277		—		173,277
Total assets measured at fair value	$	40,126	$	216,864	$	—	$	256,990	$	363	$	201,227	$	—	$	201,590
Liabilities
Contingent consideration	$	—	$	—	$	3,333	3,333		$	—	$	—	$	2,959	$	2,959
Total liabilities measured at fair value	$	—	$	—	$	3,333	$	3,333	$	—	$	—	$	2,959	$	2,959

The financial accounts that are not subject to recurring fair value measurement include trade and other receivables, prepaid expenses and other current assets, total current liabilities and deferred revenues, both current and long-term. Due to their short maturities, the carrying amounts of these accounts approximate their fair values.

The table below provides a roll-forward of the fair value of the Company's liabilities that use significant unobservable inputs (Level 3).

	March 31,
	2021
Beginning balance	$	2,959
Fair value adjustment for contingent consideration included in earnings	374
Ending balance	$	3,333

XML

Cash, Cash Equivalents and Short-Term Investments

3 Months Ended

Mar. 31, 2021

Cash and Cash Equivalents [Abstract]

Cash, Cash Equivalents and Short-Term Investments

Cash, Cash Equivalents and Short-Term Investments

The following tables present cash, cash equivalents and short-term investments (in thousands) as of March 31, 2021 and December 31, 2020:

	As of March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	58,128	$	—	$	—	$	58,128
Money market funds	40,126		—		—		40,126
Commercial paper	5,999		—		—		5,999
Corporate debt securities	1,004		—		—		1,004
Total cash and cash equivalents	105,257		—		—		105,257
Short-term investments:
Commercial paper	41,955		1		(10)		41,946
Corporate debt securities	167,666		326		(77)		167,915
Total short-term investments	209,621		327		(87)		209,861
Total cash, cash equivalents and short-term investments	$	314,878	$	327	$	(87)	$	315,118

	As of December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	28,613	$	—	$	—	$	28,613
Money market funds	363		—		—		363
U.S. government agency securities	6,000		—		—		6,000
Total cash and cash equivalents	34,976		—		—		34,976
Short-term investments:
Commercial paper	21,961		—		(11)		21,950
Corporate debt securities	172,768		543		(34)		173,277
Total short-term investments	194,729		543		(45)		195,227
Total cash, cash equivalents and short-term investments	$	229,705	$	543	$	(45)	$	230,203

The Company has determined that no credit losses related to marketable securities were required as of March 31, 2021. The unrealized losses for short-term investments have all been in a continuous unrealized loss position for less than twelve months. The Company’s conclusion is based on the high credit quality of the securities, their short remaining maturity and the Company’s intent and ability to hold such loss securities until maturity.

Classification of the cash, cash equivalents and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2021
Cash and cash equivalents (1)	$	105,257	$	—	$	105,257
Short-term investments	163,702		46,159		209,861
Cash, cash equivalents and short-term investments	$	268,959	$	46,159	$	315,118
Balances as of December 31, 2020
Cash and cash equivalents (1)	$	34,976	$	—	$	34,976
Short-term investments	141,582		53,645		195,227
Cash, cash equivalents and short-term investments	$	176,558	$	53,645	$	230,203
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.

XML

Net Loss Per Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2021		2020
Numerator:
Net loss	$	(7,633)	$	(10,470)
Denominator:
Weighted-average shares used to compute net loss per common share - basic and diluted	33,087		31,738
Net loss per share
Basic and diluted	$	(0.23)	$	(0.33)

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2021	2020
Options to purchase common stock, including ESPP	293	620
Restricted stock units and performance stock units	2,102	1,635
Convertible senior notes (if-converted)	4,591	—

XML

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill

As of March 31, 2021 and December 31, 2020, the Company had $69.2 million and $69.2 million of goodwill, respectively. As of March 31, 2021, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

Intangible Assets

The fair values for acquired intangible assets were determined by management with consideration of, in part, valuations performed by independent valuation specialists. Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This assumption results in amortization that is higher in earlier periods of the useful life. The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2021						December 31, 2020
(in thousands)	Weighted Average Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	3.9	$	12,360	$	10,487	$	1,873	$	12,360	$	10,255	$	2,105
Customer relationships	8.0	16,350		7,577		8,773		16,350		7,143		9,207
Backlog	3.4	2,240		1,453		787		2,240		1,343		897
Trademarks	3.0	1,770		1,246		524		1,770		1,191		579
Intangible assets, net book value		$	32,720	$	20,763	$	11,957	$	32,720	$	19,932	$	12,788

Amortization expense was $0.8 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization of acquired intangible assets is reflected in the cost of revenue for developed technology and backlog and in operating expenses for the other intangible assets. The estimated future amortization of existing acquired intangible assets as of March 31, 2021 was as follows:

(in thousands)	Future amortization
2021 (remaining nine months)	$	2,518
2022	2,965
2023	2,445
2024	1,564
2025	679
Thereafter	1,786
Future amortization expense	$	11,957

XML

Balance Sheet Components

3 Months Ended

Mar. 31, 2021

Balance Sheet Components [Abstract]

Balance Sheet Components

Balance Sheet Components

Inventories

(in thousands)	March 31, 2021		December 31, 2020
Raw materials	$	471	$	462
Finished goods	9,961		9,697
Total inventories	$	10,432	$	10,159

Property and equipment, net

(in thousands)	March 31, 2021		December 31, 2020
Computer equipment and software	$	15,649	$	15,912
Furniture, fixtures and equipment	2,754		2,570
Leasehold improvements	5,751		5,306
Manufacturing tools and equipment	2,628		2,506
Construction in process	106		629
Property and equipment, at cost	26,888		26,923
Less: Accumulated depreciation	(19,493)		(18,820)
Property and equipment, net	$	7,395	$	8,103

Depreciation and amortization expense for property and equipment was $1.2 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

Net investment in sales-type leases

The Company has sales-type leases with terms of 3 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of the Company’s net investment in sales-type leases are as follows:

(in thousands)	March 31, 2021		December 31, 2020
Minimum payments to be received on sales-type leases	$	1,246	$	1,440
Less: Unearned interest income and executory revenue portion	(608)		(731)
Net investment in sales-type leases	638		709
Less: Current portion	(360)		(360)
Non-current net investment in sales-type leases	$	278	$	349

Sales-type lease activity recognized in the condensed consolidated statement of operations are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Lease revenue	$	419	$	435
Less: Cost of lease shipments	(8)		(10)
Gross profit	$	411	$	425
Interest income (expense), net on lease receivable	$	1	$	(6)
Initial direct cost incurred	$	17	$	23

There were no allowances for doubtful accounts on these leases as of March 31, 2021 and December 31, 2020. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-type

leases are reported as components of the condensed consolidated balance sheet captions “other receivables” and “other long-term assets,” respectively.

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2021 were as follows:

(in thousands)	Future lease payments
2021	$	546
2022	505
2023	167
2024	28
Total	$	1,246

Accrued payroll and other current liabilities

(in thousands)	March 31, 2021		December 31, 2020
Payroll and related expenses	$	7,237	$	9,043
Accrued payables	2,708		3,160
Operating lease liabilities, current portion	2,732		2,529
Lease financing, current portion	1,066		1,034
Product warranty	462		453
Customer prepayments	4,636		4,292
Sales and use tax payable	678		476
Other Tax Payable	1,064		852
Other	1,417		1,356
Total accrued payroll and other current liabilities	$	22,000	$	23,195

The changes in the Company’s product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Warranty balance at the beginning of the period	$	453	$	420
Warranty expense accrued for shipments during the period	70		108
Changes in estimate related to pre-existing warranties	(32)		(31)
Warranty settlements made	(29)		(57)
Total product warranty	$	462	$	440

Leases

The Company has operating leases for office space at its headquarters and subsidiaries under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. Effective January 1, 2019 the Company adopted Accounting Standards Update 2016-02, Leases ("Topic 842"), using the modified retrospective approach. The Company determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component. The Company’s leases have remaining lease terms of approximately three months to approximately five years. Operating lease cost, including short-term operating leases was $0.7 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

Supplemental balance sheet information related to leases was as follows:

(in thousands)	March 31, 2021
Other long-term assets	$	4,099
Accrued payroll and other current liabilities	2,732
Other long-term liabilities	2,086
Total operating lease liabilities	$	4,818

Other information related to leases was as follows:

	Three months ended March 31,
(in thousands)	2021			2020
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities	$	761		$	712
Right-of-use assets obtained in exchange for lease obligations	$	673		$	—
Weighted average remaining lease term	2.56 years			2.39 years
Weighted average discount rate	8		%	8		%

Maturities of lease liabilities as of March 31, 2021 are as follows:

(in thousands)	Operating leases
2021 (remaining nine months)	$	2,207
2022	1,638
2023	701
2024	523
2025	175
2026	74
Total maturities of lease liabilities	5,318
Less imputed interest	(500)
Total	$	4,818

XML

Convertible Senior Notes

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Convertible Senior Notes

Convertible Senior Notes

Convertible Senior Notes due 2026

In March 2021, the Company issued $200.0 million aggregate principal amount of its 0.50% Convertible Senior Notes, due 2026 (the “2026 Notes”). The 2026 Notes are unsecured, unsubordinated obligations of the Company and bear interest at a fixed rate of 0.50% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. The 2026 Notes mature on September 15, 2026, unless converted, redeemed or repurchased in accordance with their terms prior to such date. The Company granted the initial purchasers an overallotment option under the purchase agreement to purchase up to an additional $30.0 million aggregate principal amount of the 2026 Notes to cover overallotments within a 30-day period. The overallotment option was not exercised prior to March 31, 2021. The purchasers partially exercised the overallotment option in April 2021 and the Company issued an additional $24.5 million of the 2026 Notes. The Company may not redeem the 2026 Notes prior to March 20, 2024. The Company may redeem for cash all or any portion of the 2026 Notes (subject to the partial redemption limitation (as defined in the Indenture)), at its option, on or after March 20, 2024 if the last reported sale price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The 2026 Notes are convertible into cash, shares of Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, at an initial conversion rate of 16.6272 shares of common stock per $1,000 principal amount of the 2026 Notes, which is equal to an initial conversion price of approximately $60.14 per share of common stock. The 2026 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2026, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the 2026 Notes on each applicable trading day

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of that ten day consecutive trading day period was less than 98% of the product of the last reported sale price of common stock and the conversion rate of the 2026 Notes on such trading day;

(3) if the Company calls any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second scheduled trading day prior to the applicable redemption date; or

(4) upon the occurrence of specified corporate events.

On or after June 15, 2026, holders of the 2026 Notes may convert all or any portion of their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. If a fundamental change occurs (as set forth in the indenture governing the 2026 Notes), each holder of the 2026 Note shall have the right, at such holder’s option, to require the Company to repurchase for cash all of such their Notes, or any portion of the principal amount, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. During the three months ended March 31, 2021, the conditions allowing holders of the 2026 Notes to convert have not been met and there were no changes to the initial conversion price of the 2026 Notes. The 2026 Notes are not convertible during the three months ended March 31, 2021 and are classified as long-term debt.

In accounting for the 2026 Notes after adoption of ASU 2020-06, the 2026 Notes are accounted for as a single liability. The carrying amount of the liability component for 2026 Notes is $193.9 million as of March 31, 2021, with principal of $200.0 million, net of debt issuance cost of $6.1 million. The costs related to the 2026 Notes are being amortized to interest expense over the contractual term of the 2026 Notes at an effective interest rate of 1.06%.

The 2026 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021
Liability:
Principal	$	200,000
Unamortized issuance costs	(6,061)
Net carrying amount	$	193,939

(in thousands)	March 31, 2021
Contractual interest expense	$	61
Amortization of issuance costs	64
Total interest expense	$	125

2026 Capped Calls

In connection with the pricing of the 2026 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls”). The 2026 Capped Calls have an initial strike price of $60.14 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Notes. The 2026 Capped Calls have initial cap prices of $77.96 per share, subject to certain adjustments. Conditions that cause adjustments to the initial strike price of the 2026 Capped Calls mirror conditions that result in corresponding adjustments for the 2026 Notes. The 2026 Capped Calls

are generally intended to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the 2026 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the 2026 Capped Calls are separate transactions, and not part of the terms of the 2026 Notes. As these transactions meet certain accounting criteria, the 2026 Capped Calls are recorded in stockholders' equity at an amount of $15.5 million and are not accounted for as derivatives. In connection with the partial exercise of the overallotment option and the issuance by the Company of $24.5 million of 2026 Notes on April 5, 2021, the Company entered into $1.9 million of additional privately negotiated capped calls.

Convertible Senior Notes due 2023

In May 2018, the Company issued $143.75 million aggregate principal amount of 1.50% Convertible Senior Notes due May 15, 2023 (the “2023 Notes”), including $18.75 million aggregate principal amount of such notes pursuant to the exercise in full of options granted to the initial purchasers. The 2023 Notes are unsecured, unsubordinated obligations and bear interest at a fixed rate of 1.50% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2018. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, were approximately $138.9 million.

The Company used part of the net proceeds from the issuance of the 2026 Notes to retire $102.9 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions for consideration of $102.9 million in cash and 1,277,731 shares of the Company’s common stock (the "2023 Note Repurchase Transactions"). The Company separately settled the accrued interest of approximately $0.5 million associated with the retired 2023 Notes in cash.

Out of the common stock issued, the Company provided additional issuance of 46,216 shares of the Company’s common stock not provided for under the original conversion terms of the 2023 Notes to induce the holders of the 2023 Notes to agree to the retirement. The Company used cash to settle the principal of the retired 2023 Notes and issued common stock to settle the conversion spread.

The 2023 Note Repurchase Transactions met the requirements to be accounted for as an induced conversion. Under the induced conversion guidance, the total fair value of the additional cash and common stock issued to induce conversion is recognized as an inducement expense. The remaining cash and common stock consideration issued under the original terms of the 2023 Notes are accounted for under the general conversion accounting guidance. The 2023 Note Repurchase Transactions resulted in a $2.1 million inducement loss equal to the fair value of the additional common stock issued for inducement and the difference of approximately $1.6 million between the carrying amount of the 2023 Notes retired, including unamortized debt issuance cost of $1.6 million, and the cash consideration paid and the par amount of the common stock issued was recorded in additional paid-in capital.

Each $1,000 principal amount of the remaining 2023 Notes is initially convertible into 31.0073 shares of the Company’s common stock (the “2023 Notes Conversion Option”), which is equivalent to an initial conversion price of approximately $32.25 per share, subject to adjustment upon the occurrence of specified events. The 2023 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding February 15, 2023, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the 2023 Notes on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of that ten day consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the 2023 Notes on such trading day; or

(3) upon the occurrence of specified corporate events (as set forth in the indenture governing the 2023 Notes).

On or after February 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2023 Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will 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, at the Company’s election. If certain specified fundamental changes occur (as set forth in the indenture governing the 2023 Notes) prior to the maturity date, holders of the 2023 Notes may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In

addition, if specific corporate events occur prior to the applicable maturity date, the Company will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event in certain circumstances. During the three months ended March 31, 2021, the conditions allowing holders of the 2023 Notes to convert have not been met and there were no changes to the initial conversion price of the 2023 Notes. The 2023 Notes are not convertible during the three months ended March 31, 2021 and are classified as long-term debt.

Prior to the adoption of the ASU 2020-06 on January 1, 2021 and in accounting for the issuance of the 2023 Notes, the 2023 Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amount of the equity component representing the 2023 Conversion Option was $33.4 million and was determined by deducting the fair value of the liability components from the par value of the 2023 Notes. The equity component was recorded in additional paid-in-capital and are not re-measured as long as they continue to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) was amortized to interest expense over the contractual term of the 2023 Notes at an effective interest rate of 7.6%.

Prior to the adoption of the ASU 2020-06 on January 1, 2021 and in accounting for the debt issuance costs of $4.9 million related to the 2023 Notes, the Company allocated the total amount incurred to the liability and equity components of the 2023 Notes based on their relative values. Issuance costs attributable to the liability component were $3.8 million and were amortized to interest expense using the effective interest method over the contractual term of the 2023 Notes. Issuance costs attributable to the equity components were netted with the equity component in additional paid-in-capital.

The Company elected to early adopt ASU 2020-06 as of January 1, 2021 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted.

In accounting for the 2023 Notes after adoption of ASU 2020-06, the 2023 Notes are accounted for as a single liability. The carrying amount of the liability component for 2023 Notes is $40.2 million as of March 31, 2021, with principal of $40.8 million, net of debt issuance cost of $0.6 million. The issuance costs related to the 2023 Notes are being amortized to interest expense over the contractual term of the 2023 Notes at an effective interest rate 2.19%.

The 2023 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021		December 31, 2020
Liability:
Principal	$	40,804	$	143,750
Unamortized debt discount	—		(17,411)
Unamortized issuance costs	(608)		(1,963)
Net carrying amount	$	40,196	$	124,376
Stockholders’ equity:
Debt discount for conversion option	$	—	$	33,350
Issuance costs	—		(1,136)
Net carrying amount	$	—	$	32,214

	Three months ended March 31,
(in thousands)	2021		2020
Contractual interest expense	$	464	$	539
Amortization of debt discount	—		1,559
Amortization of issuance costs	188		176
Total interest expense	$	652	$	2,274

The total estimated fair value of the 2023 and 2026 Notes (“the Notes”) as of March 31, 2021 was approximately $242.9 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market

interest rates. Based on the closing price of the Company’s common stock of $38.46 on March 31, 2021, the if-converted value of the Notes of $176.6 million was less than their principal amount.     

2023 Capped Calls

In connection with the pricing of the 2023 Notes, the Company entered into privately negotiated capped call transactions with certain counterparties, the “2023 Capped Calls.” The 2023 Capped Calls entered into with the 2023 Notes are still outstanding and each have an initial strike price of approximately $32.25 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2023 Notes. The 2023 Capped Calls have initial cap prices of $38.94 per share, subject to certain adjustments. The 2023 Capped Calls cover, subject to anti-dilution adjustments, approximately 4.5 million shares of the Company’s common stock. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments for the 2023 Notes. The 2023 Capped Calls are generally intended to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the 2023 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the 2023 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes. As these transactions meet certain accounting criteria, the 2023 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $8.9 million incurred in connection with the 2023 Capped Calls was recorded as a reduction to additional paid-in capital. The 2023 Capped Calls were not impacted by the 2023 Note Repurchase Transactions and continue to remain outstanding.

The net impact to the Company’s stockholders' equity, included in additional paid-in capital, of the above components of the 2023 Notes is as follows:

(in thousands)	March 31, 2021
Conversion option	$	33,350
Purchase of capped calls	(8,907)
Issuance costs	(1,136)
Total	$	23,307

Impact on Earnings Per Share

Prior to the adoption of ASU 2020-06, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread of its 2023 Notes for the three months ended March 31, 2020. Under the treasury stock method, in periods when the Company reports net income, the Company is required to include the effect of additional shares that may be issued under the 2023 Notes when the price of its’ common stock exceeds the conversion price. The conversion spread on the 2023 convertible senior notes had an anti-dilutive impact during the three months ended March 31, 2020, since the average market price of the Company’s common stock during the period exceeded the initial conversion price per share for the 2023 Notes and the Company was in a net loss position.

After the adoption of ASU 2020-06, the Company uses the if-converted method for calculating any potential dilutive effect of its 2023 Notes and 2026 Notes for the three months ended March 31, 2021. Under this method, diluted earnings per share would generally be calculated assuming that all the 2023 and 2026 Notes were converted solely into 4.6 million shares of common stock at the beginning of the reporting period, unless the result would be antidilutive. The potential shares of common stock issuable upon the conversion of the 2023 and 2026 Notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive as of March 31, 2021.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Non-cancelable Material Commitments

The Company is required to purchase unused, non-cancelable, non-returnable raw material inventory that was purchased by its contract manufacturers based on committed finished goods orders from the Company, certain long lead-time raw materials based on the Company’s forecast and current work-in-progress materials. As of March 31, 2021 and December 31, 2020, approximately $6.0 million and $6.1 million, respectively, of such inventory was purchased and held by the third-party manufacturers which was subject to these purchase guarantees.

Indemnifications

The Company undertakes, in the ordinary course of business, to (i) defend customers and other parties from certain third-party claims associated with allegations of trade secret misappropriation, infringement of copyright, patent or other intellectual property rights, tortious damage to persons or property or breaches of certain Company obligations relating to confidentiality (e.g., safeguarding protected health information) and (ii) indemnify and hold harmless such parties from certain resulting damages, costs and other liabilities. The term of these undertakings may be perpetual and the maximum potential liability of the Company under certain of these undertakings is not determinable. Based on its historical experience, the Company believes the liability associated with these undertakings is minimal.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The Company currently has directors and officers insurance. As there has been no significant history of losses, no expense accrual has been made.

Litigation

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management expects that any losses from existing matters that are probable or reasonably possible of being incurred as a result of these matters would not be material to the financial statements as a whole.

XML

Stock-based Compensation and Awards

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-based Compensation and Award

Stock-based Compensation and Awards

Valuation Assumptions

Compensation expense for all share-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), is measured based on the estimated fair value of the award on the grant date over the related vesting or performance periods.

We estimate the fair value of our stock-based awards as follows:

Restricted Stock Units. The fair value of restricted stock units is determined based on the quoted market price of our common stock on the date of grant.

Performance Stock Units. Performance stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “performance stock units”). The fair value of our performance stock units is estimated using a Monte-Carlo simulation model which is a probabilistic approach for calculating the fair value of the awards. The Monte-Carlo simulation is a statistical technique used, in this instance, to simulate future stock prices of the Company relative to constituents in the S&P 600 Health Care Equipment and Services Index. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.

Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2012 Employee Stock Purchase Plan (ESPP), respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.

Stock Option Activity

A summary of the stock option activity for the three months ended March 31, 2021 is presented below:

	Options Outstanding
	Number of options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
				(in years)	(in thousands)
Outstanding at December 31, 2020	299,031	$	15.58	2.68	$	7,761
Options exercised	(69,360)	17.03
Outstanding at March 31, 2021	229,671	$	15.14	2.40	$	5,357

At March 31, 2021, there was no unrecognized compensation cost related to options. As of March 31, 2021, there were 784,577 shares that remained available for future issuance of options, restricted stock units (“RSUs”) or other equity awards under the 2012 Equity Incentive Plan.

Employee Stock Purchase Plan

In March 2012, the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”) was approved. No shares of common stock were purchased during the three months ended March 31, 2021 and 2020. As of March 31, 2021, there were 1,275,951 shares available for future issuance under the ESPP.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of periodic ESPP offerings on their offer date. The following assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2021	2020
Expected term (in years)	0.50	0.50
Volatility	55.0%	50.0%
Risk-free interest rate	0.12%	1.59%
Dividend yield	0%	0%

Restricted Stock Units and Performance Stock Units

The Company issues RSUs and PSUs as part of its compensation plans. A summary of RSU and PSU activity for the three months ended March 31, 2021 is presented below:

	Restricted Stock Units and Performance Stock Units
	Number of shares	Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2020	2,140,763	$	25.16
Granted	156,747	42.53
Vested	(147,796)	28.73
Forfeited	(47,272)	26.72
Outstanding at March 31, 2021	2,102,442	$	26.17

At March 31, 2021, there was $35.6 million of unrecognized compensation cost related to RSUs and PSUs, which is expected to be recognized over a weighted-average period of 1.71 years.

During the second quarter of fiscal year 2020 the Company granted 145,877 PSUs to certain executives under the 2012 Equity Incentive Plan (the “2012 Plan”). PSUs are contingent on the achievement of our comparative market-based returns. On the date of grant, the fair value of the total shareholder return (TSR) component of the PSUs is estimated using a Monte Carlo

valuation model. The PSUs will vest over a three-year performance period. The number of shares the PSU holder receives is based on the extent to which the corresponding market conditions have been achieved. For awards subject to service and market conditions, the number of shares of our stock issued pursuant to the award can range from 0% to 200% of the target amount. Compensation expense for awards with performance-based and service-based conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. The expense for performance-based awards is evaluated each quarter based on the achievement of the performance conditions. These grants were reduced from shares of common stock reserved for issuance under stock option plans as if 200% of the target amount were achieved. The assumptions used to determine the fair value are level 3 fair value measurements which include unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The assumptions used in the Monte Carlo valuation model to value the PSUs were as follows:

	Grant Date June 1, 2020
Grant date fair value per share	$	30.70
Expected term (in years)	3
Volatility	42.68		%
Risk-free interest rate	0.20		%
Dividend yield	—		%

Allocation of Stock-Based Compensation Expense

The following table presents the allocation of stock-based compensation expense:

	Three months ended March 31,
(in thousands)	2021		2020
Cost of revenue	$	1,084	$	973
Research and development	1,000		966
Sales and marketing	2,325		1,860
General and administrative	2,453		2,042
Total stock-based compensation	$	6,862	$	5,841

XML

Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recorded a $0.2 million and $0.1 million provision for income taxes for the three months ended March 31, 2021 and 2020, respectively. The provision for income taxes for the three months ended March 31, 2021 was primarily due to foreign income and withholding taxes. The expense for the three months ended March 31, 2020 was primarily due to the accretion of deferred tax liability associated with indefinite lived intangibles, taxes on international operations, and state income taxes.

As of March 31, 2021, the Company has provided a valuation allowance against certain federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

On March 11, 2021 the American Rescue Plan Act of 2021 (the “Act”) was enacted and signed into law. The Act contains several tax provisions, including expansion of employment tax credits. The Company is currently evaluating the impact of the Act on its consolidated financial statements, but does not expect the tax provisions will result in a material impact to the Company’s tax position.

XML

Subsequent Events	3 Months Ended
	Mar. 31, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsOn May 4, 2021, the Company acquired all of the outstanding equity interest of PatientSafe Solutions for approximately $35 million in cash. PatientSafe Solutions consolidates secure messages, voice calls, alerts, and nurse call notifications with data from the electronic medical record to enable care teams to quickly manage mission-critical workflows in one mobile smartphone application.

XML

The Company and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The year-end condensed consolidated balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or any other future year.

Except for the change in certain accounting policies upon adoption of the accounting standards described below, there have been no material changes to the Company’s significant accounting policies compared to the accounting policies presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, warranty reserves, accounts receivable reserves, inventory reserves, bonuses, goodwill and intangible assets, stock-based compensation expense, provisions for income taxes, contingent consideration and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications had no impact on the previously reported net loss or accumulated deficit.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued new guidance related to the accounting for debt with conversion features. The amendments in this update simplify the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope

exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity's financial statements and information about events, conditions and circumstances that can affect how to assess the amount or timing of an entity's future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021 with early adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the guidance beginning January 1, 2021. The adoption of this guidance resulted in an increase of $17.0 million and $15.2 million to convertible senior notes, net and accumulated deficit, respectively, and a reduction to additional paid-in capital of $32.2 million.

In March 2020 and January 2021, the FASB issued new guidance related to Reference Rate Reform. These pronouncements provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are elective and subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This could affect balances of right of use assets, lease liabilities, and notes payables. The amendments in the March update are effective as of March 12, 2020 through December 21, 2022 and the amendments in the January update are effective immediately for all entities. The adoption of these pronouncements did not have a material impact on the Company’s condensed consolidated financial statements.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s cash, cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. During the three months ended March 31, 2021, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers out of Level 3.

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company’s Level 2 fixed income securities is obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs, corroborated by observable market data.

In addition to its cash, cash equivalents and short-term investments, the Company measures the fair value of its Convertible Senior Notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the Convertible Senior Notes at March 31, 2021 to be a Level 2 measurement due to limited trading activity of the Convertible Senior Notes. Refer to Note 8 to the condensed consolidated financial statements for further information.

The agreement for the acquisition of EASE includes contingent payments to the owners of EASE, payable based on achievement of post-acquisition financial metrics. This contingent consideration is a Level 3 fair value measurement and the valuation of the Company’s contingent consideration obligation was estimated as the present value of total expected contingent consideration payments which are determined using a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements and utilizes assumptions with regard to future sales, probabilities of achieving such future sales, the likelihood and timing of expected payments and a discount rate. Significant increases with respect to assumptions as to future sales and probabilities of achieving such future sales would result in a higher fair value measurement, while an increase in the discount rate would result in a lower fair value measurement. The unobservable inputs in the valuation include revenue volatility of 12%, a risk-free rate of 2.50%, and the amounts are expected to be paid in the second quarters of 2022 and 2023. The fair value adjustment for the contingent consideration of $0.4 million for the three months ended March 31, 2021 was recorded as other expense.

Goodwill and Intangible Assets

Goodwill

As of March 31, 2021 and December 31, 2020, the Company had $69.2 million and $69.2 million of goodwill, respectively. As of March 31, 2021, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

Intangible Assets

The fair values for acquired intangible assets were determined by management with consideration of, in part, valuations performed by independent valuation specialists. Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This assumption results in amortization that is higher in earlier periods of the useful life. The estimated useful lives and carrying value of acquired intangible assets are as follows:

Non-cancelable Material Commitments

Non-cancelable Material CommitmentsThe Company is required to purchase unused, non-cancelable, non-returnable raw material inventory that was purchased by its contract manufacturers based on committed finished goods orders from the Company, certain long lead-time raw materials based on the Company’s forecast and current work-in-progress materials.

XML

Revenue, Deferred Revenue and Deferred Commissions (Tables)

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Disaggregation of Revenue

A typical sales arrangement involves multiple arrangements, such as sales of the Company’s proprietary communication device ("Vocera Badge"), perpetual software licenses, professional services, cloud-based subscription, and subscription and support services which entitles customers to unspecified upgrades, patch releases and telephone-based support. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how the Company evaluates its financial performance:

	Three months ended March 31,
(in thousands)	2021		2020
Product revenue
Device	$	15,273	$	13,903
Software	7,335		3,947
Total product	22,608		17,850
Service revenue
Subscription and support	20,959		18,069
Professional services and training	5,101		4,754
Total service	26,060		22,823
Total revenue	$	48,668	$	40,673

Deferred Commissions and Revenue

Changes in the balance of total deferred commissions (contract asset) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Commissions Recognized		March 31, 2021
Deferred commissions	$	12,293	$	2,335	$	(1,915)	$	12,713

Changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2021 are as follows:

(in thousands)	December 31, 2020		Additions		Revenue Recognized		March 31, 2021
Deferred revenue	$	64,733	$	17,917	$	(22,514)	$	60,136

XML

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2021 and December 31, 2020, are summarized as follows (in thousands):

	March 31, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	40,126	$	—	$	—	$	40,126	$	363	$	—	$	—	$	363
Commercial paper	—		47,945		—		47,945		—		21,950		—		21,950
U.S. Treasury securities	—		—		—		—		—		6,000		—		6,000
Corporate debt securities	—		168,919		—		168,919		—		173,277		—		173,277
Total assets measured at fair value	$	40,126	$	216,864	$	—	$	256,990	$	363	$	201,227	$	—	$	201,590
Liabilities
Contingent consideration	$	—	$	—	$	3,333	3,333		$	—	$	—	$	2,959	$	2,959
Total liabilities measured at fair value	$	—	$	—	$	3,333	$	3,333	$	—	$	—	$	2,959	$	2,959

Roll-Forward of Fair Value Of Level 3 Liabilities

The table below provides a roll-forward of the fair value of the Company's liabilities that use significant unobservable inputs (Level 3).

	March 31,
	2021
Beginning balance	$	2,959
Fair value adjustment for contingent consideration included in earnings	374
Ending balance	$	3,333

XML

Cash, Cash Equivalents and Short-Term Investments (Tables)

3 Months Ended

Mar. 31, 2021

Cash and Cash Equivalents [Abstract]

Schedule of Cash, Cash Equivalents and Short-Term Investments

The following tables present cash, cash equivalents and short-term investments (in thousands) as of March 31, 2021 and December 31, 2020:

	As of March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	58,128	$	—	$	—	$	58,128
Money market funds	40,126		—		—		40,126
Commercial paper	5,999		—		—		5,999
Corporate debt securities	1,004		—		—		1,004
Total cash and cash equivalents	105,257		—		—		105,257
Short-term investments:
Commercial paper	41,955		1		(10)		41,946
Corporate debt securities	167,666		326		(77)		167,915
Total short-term investments	209,621		327		(87)		209,861
Total cash, cash equivalents and short-term investments	$	314,878	$	327	$	(87)	$	315,118

	As of December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	28,613	$	—	$	—	$	28,613
Money market funds	363		—		—		363
U.S. government agency securities	6,000		—		—		6,000
Total cash and cash equivalents	34,976		—		—		34,976
Short-term investments:
Commercial paper	21,961		—		(11)		21,950
Corporate debt securities	172,768		543		(34)		173,277
Total short-term investments	194,729		543		(45)		195,227
Total cash, cash equivalents and short-term investments	$	229,705	$	543	$	(45)	$	230,203

Classification of Cash, Cash Equivalents and Short-Term Investments by Contractual Maturity

Classification of the cash, cash equivalents and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2021
Cash and cash equivalents (1)	$	105,257	$	—	$	105,257
Short-term investments	163,702		46,159		209,861
Cash, cash equivalents and short-term investments	$	268,959	$	46,159	$	315,118
Balances as of December 31, 2020
Cash and cash equivalents (1)	$	34,976	$	—	$	34,976
Short-term investments	141,582		53,645		195,227
Cash, cash equivalents and short-term investments	$	176,558	$	53,645	$	230,203
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.

XML

Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Schedule Of Basic And Diluted Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2021		2020
Numerator:
Net loss	$	(7,633)	$	(10,470)
Denominator:
Weighted-average shares used to compute net loss per common share - basic and diluted	33,087		31,738
Net loss per share
Basic and diluted	$	(0.23)	$	(0.33)

Schedule Of Antidilutive Securities Excluded From Net Loss Per Share

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2021	2020
Options to purchase common stock, including ESPP	293	620
Restricted stock units and performance stock units	2,102	1,635
Convertible senior notes (if-converted)	4,591	—

XML

Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2021						December 31, 2020
(in thousands)	Weighted Average Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	3.9	$	12,360	$	10,487	$	1,873	$	12,360	$	10,255	$	2,105
Customer relationships	8.0	16,350		7,577		8,773		16,350		7,143		9,207
Backlog	3.4	2,240		1,453		787		2,240		1,343		897
Trademarks	3.0	1,770		1,246		524		1,770		1,191		579
Intangible assets, net book value		$	32,720	$	20,763	$	11,957	$	32,720	$	19,932	$	12,788

Schedule of Estimated Future Amortization of Existing Acquired Intangible Assets

The estimated future amortization of existing acquired intangible assets as of March 31, 2021 was as follows:

(in thousands)	Future amortization
2021 (remaining nine months)	$	2,518
2022	2,965
2023	2,445
2024	1,564
2025	679
Thereafter	1,786
Future amortization expense	$	11,957

XML

Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2021

Balance Sheet Components [Abstract]

Inventories

Inventories

(in thousands)	March 31, 2021		December 31, 2020
Raw materials	$	471	$	462
Finished goods	9,961		9,697
Total inventories	$	10,432	$	10,159

Property and Equipment, net

Property and equipment, net

(in thousands)	March 31, 2021		December 31, 2020
Computer equipment and software	$	15,649	$	15,912
Furniture, fixtures and equipment	2,754		2,570
Leasehold improvements	5,751		5,306
Manufacturing tools and equipment	2,628		2,506
Construction in process	106		629
Property and equipment, at cost	26,888		26,923
Less: Accumulated depreciation	(19,493)		(18,820)
Property and equipment, net	$	7,395	$	8,103

Components of Net Investment in Sales-type Leases

The components of the Company’s net investment in sales-type leases are as follows:

(in thousands)	March 31, 2021		December 31, 2020
Minimum payments to be received on sales-type leases	$	1,246	$	1,440
Less: Unearned interest income and executory revenue portion	(608)		(731)
Net investment in sales-type leases	638		709
Less: Current portion	(360)		(360)
Non-current net investment in sales-type leases	$	278	$	349

Schedule of Sales-type Lease Activity

Sales-type lease activity recognized in the condensed consolidated statement of operations are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Lease revenue	$	419	$	435
Less: Cost of lease shipments	(8)		(10)
Gross profit	$	411	$	425
Interest income (expense), net on lease receivable	$	1	$	(6)
Initial direct cost incurred	$	17	$	23

Minimum Payments Expected Under Sales-type Leases

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2021 were as follows:

(in thousands)	Future lease payments
2021	$	546
2022	505
2023	167
2024	28
Total	$	1,246

Schedule of Accrued Payroll And Other Current Liabilities

Accrued payroll and other current liabilities

(in thousands)	March 31, 2021		December 31, 2020
Payroll and related expenses	$	7,237	$	9,043
Accrued payables	2,708		3,160
Operating lease liabilities, current portion	2,732		2,529
Lease financing, current portion	1,066		1,034
Product warranty	462		453
Customer prepayments	4,636		4,292
Sales and use tax payable	678		476
Other Tax Payable	1,064		852
Other	1,417		1,356
Total accrued payroll and other current liabilities	$	22,000	$	23,195

Schedule of Product Warranty Reserve

The changes in the Company’s product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2021		2020
Warranty balance at the beginning of the period	$	453	$	420
Warranty expense accrued for shipments during the period	70		108
Changes in estimate related to pre-existing warranties	(32)		(31)
Warranty settlements made	(29)		(57)
Total product warranty	$	462	$	440

Supplemental Balance Sheet and Other Information

Supplemental balance sheet information related to leases was as follows:

(in thousands)	March 31, 2021
Other long-term assets	$	4,099
Accrued payroll and other current liabilities	2,732
Other long-term liabilities	2,086
Total operating lease liabilities	$	4,818

Other information related to leases was as follows:

	Three months ended March 31,
(in thousands)	2021			2020
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities	$	761		$	712
Right-of-use assets obtained in exchange for lease obligations	$	673		$	—
Weighted average remaining lease term	2.56 years			2.39 years
Weighted average discount rate	8		%	8		%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2021 are as follows:

(in thousands)	Operating leases
2021 (remaining nine months)	$	2,207
2022	1,638
2023	701
2024	523
2025	175
2026	74
Total maturities of lease liabilities	5,318
Less imputed interest	(500)
Total	$	4,818

XML

Convertible Senior Notes (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of Notes

The 2026 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021
Liability:
Principal	$	200,000
Unamortized issuance costs	(6,061)
Net carrying amount	$	193,939

(in thousands)	March 31, 2021
Contractual interest expense	$	61
Amortization of issuance costs	64
Total interest expense	$	125

The 2023 Notes and related interest expense consist of the following:

(in thousands)	March 31, 2021		December 31, 2020
Liability:
Principal	$	40,804	$	143,750
Unamortized debt discount	—		(17,411)
Unamortized issuance costs	(608)		(1,963)
Net carrying amount	$	40,196	$	124,376
Stockholders’ equity:
Debt discount for conversion option	$	—	$	33,350
Issuance costs	—		(1,136)
Net carrying amount	$	—	$	32,214

	Three months ended March 31,
(in thousands)	2021		2020
Contractual interest expense	$	464	$	539
Amortization of debt discount	—		1,559
Amortization of issuance costs	188		176
Total interest expense	$	652	$	2,274

Schedule of Interest Expense Related to the Notes

The net impact to the Company’s stockholders' equity, included in additional paid-in capital, of the above components of the 2023 Notes is as follows:

(in thousands)	March 31, 2021
Conversion option	$	33,350
Purchase of capped calls	(8,907)
Issuance costs	(1,136)
Total	$	23,307

XML

Stock-based Compensation and Awards (Tables)

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Summary Of Stock Option Activity

A summary of the stock option activity for the three months ended March 31, 2021 is presented below:

	Options Outstanding
	Number of options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
				(in years)	(in thousands)
Outstanding at December 31, 2020	299,031	$	15.58	2.68	$	7,761
Options exercised	(69,360)	17.03
Outstanding at March 31, 2021	229,671	$	15.14	2.40	$	5,357

ESPP Valuation Assumptions

The following assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2021	2020
Expected term (in years)	0.50	0.50
Volatility	55.0%	50.0%
Risk-free interest rate	0.12%	1.59%
Dividend yield	0%	0%

Summary of RSU and PSU Activity

A summary of RSU and PSU activity for the three months ended March 31, 2021 is presented below:

	Restricted Stock Units and Performance Stock Units
	Number of shares	Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2020	2,140,763	$	25.16
Granted	156,747	42.53
Vested	(147,796)	28.73
Forfeited	(47,272)	26.72
Outstanding at March 31, 2021	2,102,442	$	26.17

PSU Valuation Assumptions

The assumptions used in the Monte Carlo valuation model to value the PSUs were as follows:

	Grant Date June 1, 2020
Grant date fair value per share	$	30.70
Expected term (in years)	3
Volatility	42.68		%
Risk-free interest rate	0.20		%
Dividend yield	—		%

Allocation of Stock-based Compensation Expense

The following table presents the allocation of stock-based compensation expense:

	Three months ended March 31,
(in thousands)	2021		2020
Cost of revenue	$	1,084	$	973
Research and development	1,000		966
Sales and marketing	2,325		1,860
General and administrative	2,453		2,042
Total stock-based compensation	$	6,862	$	5,841

XML

The Company and Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Jan. 01, 2021	Dec. 31, 2020
Change in Accounting Estimate [Line Items]
Convertible senior notes, net	$ 234,135		$ 124,376
Accumulated deficit	(152,397)		(159,982)
Additional paid-in capital	$ 299,176		$ 340,515
Cumulative effect
Change in Accounting Estimate [Line Items]
Convertible senior notes, net		$ 17,000
Accumulated deficit		15,200
Additional paid-in capital		$ 32,200

XML

Revenue, Deferred Revenue and Deferred Commissions - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	$ 48,668	$ 40,673
Product revenue
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	22,608	17,850
Product revenue | Device
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	15,273	13,903
Product revenue | Software
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	7,335	3,947
Service revenue
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	26,060	22,823
Service revenue | Subscription and support
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	20,959	18,069
Service revenue | Professional services and training
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenue	$ 5,101	$ 4,754

XML

Revenue, Deferred Revenue and Deferred Commissions - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Payment terms on invoiced amounts	30 days
Contract assets	$ 4,000		$ 4,200
Estimated period of benefit	5 years
Deferred commissions	$ 12,713		$ 12,293
Percentage of deferred commissions to be recognized as commission expense in the next 12 months	36.00%
Revenue recognized pertaining to amounts deferred as of Beginning of Period	$ 21,100
Revenue recognized pertaining to amounts deferred as of End of Period		$ 18,500
Deferred revenue and backlog	$ 151,300
Percentage of deferred revenue to be recognized over the next 12 months	64.00%

XML

Revenue, Deferred Revenue and Deferred Commissions - Significant Changes in Deferred Commissions (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Change in Contract with Customer, Asset [Roll Forward]
Beginning balance	$ 12,293
Additions	2,335
Commissions Recognized	(1,915)
Ending balance	$ 12,713

XML

Revenue, Deferred Revenue and Deferred Commissions - Significant Changes in Deferred Revenue (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Change in Contract with Customer, Liability [Roll Forward]
Beginning balance	$ 64,733
Additions	17,917
Revenue Recognized	(22,514)
Ending balance	$ 60,136

XML

Fair Value of Financial Instruments - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration fair value adjustment	$ 0.4
Revenue volatility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liability, unobservable inputs	0.12
Risk free interest rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liability, unobservable inputs	0.0250

XML

Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Assets
Cash and cash equivalents	$ 105,257	$ 34,976
Short-term investments	209,861	195,227
Corporate debt securities
Assets
Short-term investments	167,915	173,277
Money market funds
Assets
Cash and cash equivalents	40,126	363
Recurring
Assets
Total assets measured at fair value	256,990	201,590
Liabilities
Contingent consideration	3,333	2,959
Total liabilities measured at fair value	3,333	2,959
Recurring | Level 1
Assets
Total assets measured at fair value	40,126	363
Liabilities
Contingent consideration	0	0
Total liabilities measured at fair value	0	0
Recurring | Level 2
Assets
Total assets measured at fair value	216,864	201,227
Liabilities
Contingent consideration	0	0
Total liabilities measured at fair value	0	0
Recurring | Level 3
Assets
Total assets measured at fair value	0		$ 0
Liabilities
Contingent consideration	3,333	2,959
Total liabilities measured at fair value	3,333	2,959
Recurring | Commercial paper
Assets
Short-term investments	47,945	21,950
Recurring | Commercial paper | Level 1
Assets
Short-term investments	0	0
Recurring | Commercial paper | Level 2
Assets
Short-term investments	47,945	21,950
Recurring | Commercial paper | Level 3
Assets
Short-term investments	0		0
Recurring | U.S. Treasury securities
Assets
Short-term investments	0	6,000
Recurring | U.S. Treasury securities | Level 1
Assets
Short-term investments	0	0
Recurring | U.S. Treasury securities | Level 2
Assets
Short-term investments	0	6,000
Recurring | U.S. Treasury securities | Level 3
Assets
Short-term investments	0		0
Recurring | Corporate debt securities
Assets
Short-term investments	168,919	173,277
Recurring | Corporate debt securities | Level 1
Assets
Short-term investments	0	0
Recurring | Corporate debt securities | Level 2
Assets
Short-term investments	168,919	173,277
Recurring | Corporate debt securities | Level 3
Assets
Short-term investments	0		0
Recurring | Money market funds
Assets
Cash and cash equivalents	40,126	363
Recurring | Money market funds | Level 1
Assets
Cash and cash equivalents	40,126	363
Recurring | Money market funds | Level 2
Assets
Cash and cash equivalents	0	$ 0
Recurring | Money market funds | Level 3
Assets
Cash and cash equivalents	$ 0		$ 0

XML

Fair Value of Financial Instruments - Unobservable Input Reconciliation (Details) - Recurring - Level 3 $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 2,959
Fair value adjustment for contingent consideration included in earnings	374
Ending balance	$ 3,333

XML

Cash, Cash Equivalents and Short-Term Investments - Schedule of Cash, Cash Equivalents and Short-Term Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Cash and cash equivalents:
Amortized Cost	$ 105,257	$ 34,976
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair value	105,257	34,976
Short-term investments:
Amortized Cost	209,621	194,729
Unrealized Gains	327	543
Unrealized Losses	(87)	(45)
Fair value	209,861	195,227
Total cash, cash equivalents and short-term investments
Amortized Cost	314,878	229,705
Unrealized Gains	327	543
Unrealized Losses	(87)	(45)
Fair value	315,118	230,203
Commercial paper
Short-term investments:
Amortized Cost	41,955	21,961
Unrealized Gains	1	0
Unrealized Losses	(10)	(11)
Fair value	41,946	21,950
Corporate debt securities
Short-term investments:
Amortized Cost	167,666	172,768
Unrealized Gains	326	543
Unrealized Losses	(77)	(34)
Fair value	167,915	173,277
Demand deposits and other cash
Cash and cash equivalents:
Amortized Cost	58,128	28,613
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair value	58,128	28,613
Money market funds
Cash and cash equivalents:
Amortized Cost	40,126	363
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair value	40,126	363
Commercial paper
Cash and cash equivalents:
Amortized Cost	5,999
Unrealized Gains	0
Unrealized Losses	0
Fair value	5,999
Corporate debt securities
Cash and cash equivalents:
Amortized Cost	1,004
Unrealized Gains	0
Unrealized Losses	0
Fair value	$ 1,004
U.S. government agency securities
Cash and cash equivalents:
Amortized Cost		6,000
Unrealized Gains		0
Unrealized Losses		0
Fair value		$ 6,000

XML

Cash, Cash Equivalents and Short-Term Investments - Classification of Cash, Cash Equivalents and Short-Term Investments by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Cash and cash equivalents	$ 105,257	$ 34,976
Short-term investments	209,861	195,227
Cash, cash equivalents and short-term investments	315,118	230,203
One year or shorter
Debt Securities, Available-for-sale [Line Items]
Cash and cash equivalents	105,257	34,976
Short-term investments	163,702	141,582
Cash, cash equivalents and short-term investments	268,959	176,558
Between 1 and 2 years
Debt Securities, Available-for-sale [Line Items]
Cash and cash equivalents	0	0
Short-term investments	46,159	53,645
Cash, cash equivalents and short-term investments	$ 46,159	$ 53,645

XML

Net Loss Per Share - Computation of Basic and Diluted Net income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Numerator:
Net loss	$ (7,633)	$ (10,470)
Denominator:
Weighted-average shares used to compute net income (loss) per common share - basic (in shares)	33,087	31,738
Weighted-average shares used to compute net income (loss) per common share - diluted (in shares)	33,087	31,738
Net loss per share
Basic (in dollars per share)	$ (0.23)	$ (0.33)
Diluted (in dollars per share)	$ (0.23)	$ (0.33)

XML

Net Loss Per Share - Antidilutive Securities Excluded From Computation Of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Employee stock options, including ESPP
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	293	620
Restricted stock units and performance based restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	2,102	1,635
Convertible senior notes (if-converted)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	4,591	0	4,600

XML

Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 69,168		$ 69,168
Amortization expense	$ 800	$ 300

XML

Goodwill and Intangible Assets - Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 32,720	$ 32,720
Accumulated Amortization	20,763	19,932
Net Carrying Amount	$ 11,957	12,788
Developed technology
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life (years)	3 years 10 months 24 days
Gross Carrying Amount	$ 12,360	12,360
Accumulated Amortization	10,487	10,255
Net Carrying Amount	$ 1,873	2,105
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life (years)	8 years
Gross Carrying Amount	$ 16,350	16,350
Accumulated Amortization	7,577	7,143
Net Carrying Amount	$ 8,773	9,207
Backlog
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life (years)	3 years 4 months 24 days
Gross Carrying Amount	$ 2,240	2,240
Accumulated Amortization	1,453	1,343
Net Carrying Amount	$ 787	897
Trademarks
Finite-Lived Intangible Assets [Line Items]
Weighted Average Useful Life (years)	3 years
Gross Carrying Amount	$ 1,770	1,770
Accumulated Amortization	1,246	1,191
Net Carrying Amount	$ 524	$ 579

XML

Goodwill and Intangible Assets - Future Amortization Schedule (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
2021 (remaining nine months)	$ 2,518
2022	2,965
2023	2,445
2024	1,564
2025	679
Thereafter	1,786
Net Carrying Amount	$ 11,957	$ 12,788

XML

Balance Sheet Components - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Balance Sheet Components [Abstract]
Raw materials	$ 471	$ 462
Finished goods	9,961	9,697
Total inventories	$ 10,432	$ 10,159

XML

Balance Sheet Components - Property and Equipment, net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 26,888		$ 26,923
Less: Accumulated depreciation	(19,493)		(18,820)
Property and equipment, net	7,395		8,103
Depreciation	1,200	$ 1,000
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	15,649		15,912
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	2,754		2,570
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	5,751		5,306
Manufacturing tools and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	2,628		2,506
Construction in process
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 106		$ 629

XML

Balance Sheet Components - Investment in Sales Type Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Schedule of Sales-type and Direct Financing Leases [Line Items]
Total	$ 1,246	$ 1,440
Less: Unearned interest income and executory revenue portion	(608)	(731)
Net investment in sales-type leases	638	709
Less: Current portion	(360)	(360)
Non-current net investment in sales-type leases	$ 278	$ 349
Minimum
Schedule of Sales-type and Direct Financing Leases [Line Items]
Lease term	3 years
Maximum
Schedule of Sales-type and Direct Financing Leases [Line Items]
Lease term	4 years

XML

Balance Sheet Components - Sales Type Lease Activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Balance Sheet Components [Abstract]
Lease revenue	$ 419	$ 435
Less: Cost of lease shipments	(8)	(10)
Gross profit	411	425
Interest income (expense), net on lease receivable	1	(6)
Initial direct cost incurred	$ 17	$ 23

XML

Balance Sheet Components - Future Payments- Sales Type Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Balance Sheet Components [Abstract]
2021	$ 546
2022	505
2023	167
2024	28
Total	$ 1,246	$ 1,440

XML

Balance Sheet Components - Schedule Of Accrued Payroll And Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Balance Sheet Components [Abstract]
Payroll and related expenses	$ 7,237	$ 9,043
Accrued payables	2,708	3,160
Accrued payroll and other current liabilities	2,732	2,529
Lease financing, current portion	1,066	1,034
Product warranty	462	453
Customer prepayments	4,636	4,292
Sales and use tax payable	678	476
Other Tax Payable	1,064	852
Other	1,417	1,356
Total accrued payroll and other current liabilities	$ 22,000	$ 23,195
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	VCRA:AccruedPayrollAndOtherAccruals

XML

Balance Sheet Components - Schedule of Product Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Warranty balance at the beginning of the period	$ 453	$ 420
Warranty expense accrued for shipments during the period	70	108
Changes in estimate related to pre-existing warranties	(32)	(31)
Warranty settlements made	(29)	(57)
Total product warranty	$ 462	$ 440

XML

Balance Sheet Components - Leases (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Lessee, Lease, Description [Line Items]
Other long-term assets	$ 0.7	$ 0.7
Minimum
Lessee, Lease, Description [Line Items]
Operating lease remaining term (years)	3 months
Maximum
Lessee, Lease, Description [Line Items]
Operating lease remaining term (years)	5 years

XML

Balance Sheet Components - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Balance Sheet Components [Abstract]
Other long-term assets	$ 4,099
Accrued payroll and other current liabilities	2,732	$ 2,529
Other long-term liabilities	2,086
Total operating lease liabilities	$ 4,818
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other long-term assets
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other long-term liabilities

XML

Balance Sheet Components - Other Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Balance Sheet Components [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 761	$ 712
Right-of-use assets obtained in exchange for lease obligations	$ 673	$ 0
Weighted average remaining lease term	2 years 6 months 21 days	2 years 4 months 20 days
Weighted average discount rate	8.00%	8.00%

XML

Balance Sheet Components - Maturities of Leases (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Balance Sheet Components [Abstract]
2021 (remaining nine months)	$ 2,207
2022	1,638
2023	701
2024	523
2025	175
2026	74
Total maturities of lease liabilities	5,318
Less imputed interest	(500)
Total operating lease liabilities	$ 4,818

XML

Convertible Senior Notes - Convertible Senior Notes due 2026 (Details) - Convertible Debt - Convertible Senior Notes, due 2026	1 Months Ended
	Mar. 31, 2021 USD ($) day $ / shares	May 31, 2018	Apr. 30, 2021 USD ($)
Debt Instrument [Line Items]
Principal | $	$ 200,000,000.0
Stated interest rate	0.50%
Overallotment option | $	$ 30,000,000.0
Overallotments period	30 days
Percent of conversion price triggering conversion feature	130.00%
Convertible debt, threshold trading days | day	20
Convertible debt, threshold consecutive trading days | day	30
Redemption price percentage	100.00%
Conversion ratio		0.0166272
Conversion rate (shares of common stock per $1,000 principal amount of notes) | $	$ 1,000
Convertible debt, conversion price (in dollars per share) | $ / shares	$ 60.14
Carrying amount of debt | $	$ 193,900,000
Debt issuance costs | $	$ 6,100,000
Effective interest rate	1.06%
Conversion option one
Debt Instrument [Line Items]
Percent of conversion price triggering conversion feature	130.00%
Convertible debt, threshold trading days | day	20
Convertible debt, threshold consecutive trading days | day	30
Conversion option two
Debt Instrument [Line Items]
Percent of conversion price triggering conversion feature	98.00%
Convertible debt, threshold trading days | day	5
Convertible debt, threshold consecutive trading days | day	10
Conversion option three
Debt Instrument [Line Items]
Redemption price percentage	100.00%
Subsequent event
Debt Instrument [Line Items]
Overallotment option exercised | $			$ 24,500,000

XML

Convertible Senior Notes - 2026 Notes And Related Interest Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Liability:
Convertible senior notes, net	$ 234,135,000	$ 124,376,000
Convertible Senior Notes, due 2026 | Convertible Debt
Liability:
Principal	200,000,000.0
Unamortized issuance costs	(6,061,000)
Convertible senior notes, net	193,939,000
Interest Expense [Abstract]
Contractual interest expense	61,000
Amortization of issuance costs	64,000
Total interest expense	$ 125,000

XML

Convertible Senior Notes - 2026 Capped Calls (Details) - USD ($) $ / shares in Units, $ in Thousands	Apr. 30, 2021	Apr. 05, 2021	Mar. 31, 2021	Dec. 31, 2020	May 31, 2018
Debt Instrument [Line Items]
Capped Calls, initial strike price (in dollars per share)			$ 60.14		$ 32.25
Capped Calls, initial cap price (in dollars per share)			$ 77.96		$ 38.94
Subsequent event
Debt Instrument [Line Items]
Additional privately negotiated capped calls		$ 1,900
Convertible Senior Notes Due 2026 At 0.50%, Option Portion | Convertible Debt
Debt Instrument [Line Items]
Conversion option			$ 15,500
Convertible Senior Notes, due 2026 | Convertible Debt | Subsequent event
Debt Instrument [Line Items]
Overallotment option exercised	$ 24,500
Convertible Senior Notes, due 2023 | Convertible Debt
Debt Instrument [Line Items]
Conversion option			$ 0	$ 33,350
Convertible Senior Notes, due 2023 | Convertible Debt | Subsequent event
Debt Instrument [Line Items]
Overallotment option exercised		$ 24,500

XML

Convertible Senior Notes - Convertible Senior Notes due 2023 (Details)		1 Months Ended	3 Months Ended
	Dec. 31, 2020 USD ($)	May 31, 2018 USD ($) day $ / shares	Mar. 31, 2021 USD ($) $ / shares shares	Jan. 01, 2021 USD ($)
Debt Instrument [Line Items]
Convertible senior notes, net	$ 124,376,000		$ 234,135,000
Stock price | $ / shares			$ 38.46
Convertible Senior Notes, due 2023 | Convertible Debt
Debt Instrument [Line Items]
Principal	143,750,000	$ 143,750,000	$ 40,804,000
Stated interest rate		1.50%
Proceeds from issuance of convertible senior notes, net of issuance costs		$ 138,900,000
Aggregate principal amount retired in conversion			102,900,000
Transaction for consideration in cash			$ 102,900,000
Converted instrument, shares issued | shares			1,277,731
Accrued interest			$ 500,000
Inducement loss			2,100,000
Loss on extinguishment of debt			1,600,000
Write off of unamortized debt issuance cost			1,600,000
Denominator in calculation of trading price		$ 1,000
Conversion ratio		0.0310073
Convertible debt, conversion price (in dollars per share) | $ / shares		$ 32.25
Conversion option	33,350,000		0
Debt issuance costs	$ 4,900,000		600,000
Debt discount effective interest rate	7.60%
Issuance costs	$ 1,136,000		0	$ 3,800,000
Convertible senior notes, net	$ 124,376,000		$ 40,196,000
Effective interest rate			2.19%
Convertible Senior Notes, due 2023 | Convertible Debt | Conversion option one
Debt Instrument [Line Items]
Convertible debt, threshold trading days | day		20
Convertible debt, threshold consecutive trading days | day		30
Percent of conversion price triggering conversion feature		130.00%
Convertible Senior Notes, due 2023 | Convertible Debt | Conversion option two
Debt Instrument [Line Items]
Denominator in calculation of trading price		$ 1,000
Convertible debt, threshold trading days | day		5
Convertible debt, threshold consecutive trading days | day		10
Percent of conversion price triggering conversion feature		98.00%
Convertible Senior Notes, due 2023 | Convertible Debt | Conversion option three
Debt Instrument [Line Items]
Redemption price percentage		100.00%
Convertible Senior Notes, inducement, due 2023 | Convertible Debt
Debt Instrument [Line Items]
Additional issuance (in shares) | shares			46,216
Convertible Senior Notes At 1.50%, Option Portion | Convertible Debt
Debt Instrument [Line Items]
Principal		$ 18,750,000
Conversion option			$ 33,350,000
The Notes | Convertible Debt
Debt Instrument [Line Items]
Estimated fair value of the Notes			242,900,000
Denominator in closing price calculation			100
If-converted value of the Notes			$ 176,600,000

XML

Convertible Senior Notes - 2023 Notes and Related Interest Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Jan. 01, 2021	Dec. 31, 2020	May 31, 2018
Debt Instrument [Line Items]
Convertible senior notes, net	$ 234,135,000			$ 124,376,000
Convertible Senior Notes, due 2023 | Convertible Debt
Debt Instrument [Line Items]
Principal	40,804,000			143,750,000	$ 143,750,000
Unamortized issuance costs	0			(17,411,000)
Unamortized issuance costs	(608,000)			(1,963,000)
Convertible senior notes, net	40,196,000			124,376,000
Conversion option	0			33,350,000
Issuance costs	0		$ (3,800,000)	(1,136,000)
Net carrying amount	0			$ 32,214,000
Contractual interest expense	464,000	$ 539,000
Amortization of debt discount	0	1,559,000
Amortization of issuance costs	188,000	176,000
Total interest expense	652,000	$ 2,274,000
Convertible Senior Notes, due 2026 | Convertible Debt
Debt Instrument [Line Items]
Principal	200,000,000.0
Unamortized issuance costs	(6,061,000)
Convertible senior notes, net	193,939,000
Contractual interest expense	61,000
Amortization of issuance costs	64,000
Total interest expense	$ 125,000

XML

Convertible Senior Notes - 2023 Capped Calls (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	1 Months Ended	3 Months Ended
	May 31, 2018	Mar. 31, 2021
Debt Disclosure [Abstract]
Capped Calls, initial strike price (in dollars per share)	$ 32.25	$ 60.14
Capped Calls, initial cap price (in dollars per share)	$ 38.94	$ 77.96
Capped Calls, number of shares covered	4.5
Payment for purchase of capped calls	$ 8,900	$ 8,907

XML

Convertible Senior Notes - Net Impact To The Company’s Stockholders' Equity (Details) - USD ($) shares in Thousands, $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	May 31, 2018	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Debt Instrument [Line Items]
Payment for purchase of capped calls	$ (8,900)	$ (8,907)
Issuance costs		$ (1,136)
2023 and 2026 Notes
Debt Instrument [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		4,591	0	4,600
Convertible Senior Notes At 1.50%, Option Portion | Convertible Debt
Debt Instrument [Line Items]
Conversion option		$ 33,350
Total		$ 23,307

XML

Commitments and Contingencies (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Inventories
Unrecorded Unconditional Purchase Obligation [Line Items]
Purchase obligation	$ 6.0	$ 6.1

XML

Stock-based Compensation and Awards - Stock Option Activity (Details) - Option - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Number of options
Beginning balance (in shares)	299,031
Options exercised (in shares)	(69,360)
Ending balance (in shares)	229,671	299,031
Weighted average exercise price
Beginning balance (in dollars per share)	$ 15.58
Options exercises (in dollars per share)	17.03
Ending balance (in dollars per share)	$ 15.14	$ 15.58
Weighted average remaining contractual term (in years)	2 years 4 months 24 days	2 years 8 months 4 days
Aggregate intrinsic value	$ 5,357	$ 7,761

XML

Stock-based Compensation and Awards - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020
Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 0
ESPP | 2012 ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock purchased (in shares)	0		0
Shares available for future issuance (in shares)	1,275,951
Restricted Stock Units and Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 35,600,000
Weighted-average recognition period (in years)	1 year 8 months 15 days
Granted (in shares)	156,747
Restricted Stock Units and Performance Stock Units | 2012 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)		145,877
Vesting period	3 years
Restricted Stock Units and Performance Stock Units | Minimum | 2012 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued, percentage of target	0.00%
Restricted Stock Units and Performance Stock Units | Maximum | 2012 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued, percentage of target	200.00%
Options, RSUs and other options | 2012 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant	784,577

XML

Stock-based Compensation and Awards - ESPP Valuation Assumptions (Details) - 2012 ESPP - ESPP	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Equity B-S-M Fair Value Assumptions
Expected term (in years)	6 months	6 months
Volatility	55.00%	50.00%
Risk-free interest rate	0.12%	1.59%
Dividend yield	0.00%	0.00%

XML

Stock-based Compensation and Awards - Summary of Restricted Stock Activity (Details) - Restricted Stock Units and Performance Stock Units	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Number of Shares:
Beginning balance (in shares) | shares	2,140,763
Granted (in shares) | shares	156,747
Vested (in shares) | shares	(147,796)
Forfeited (in shares) | shares	(47,272)
Ending balance (in shares) | shares	2,102,442
Weighted Average Grant Date Fair Value per Share (in dollars per share):
Beginning balance (in dollars per share) | $ / shares	$ 25.16
Grant (in dollars per share) | $ / shares	42.53
Vested (in dollars per share) | $ / shares	28.73
Forfeited (in dollars per share) | $ / shares	26.72
Ending balance (in dollars per share) | $ / shares	$ 26.17

XML

Stock-based Compensation and Awards - Stock-based Compensation and Awards PSU Valuation Assumptions (Details) - Phantom Share Units (PSUs)	Jun. 01, 2020 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share (in dollars per share)	$ 30.70
Expected term (in years)	3 years
Volatility	42.68%
Risk-free interest rate	0.20%
Dividend yield	0.00%

XML

Stock-based Compensation and Awards - Share-based Compensation Allocated to Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 6,862	$ 5,841
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1,084	973
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1,000	966
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	2,325	1,860
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 2,453	$ 2,042

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 246	$ 125

XML

Subsequent Event (Details) $ in Millions	May 04, 2021 USD ($)
Subsequent event | PatientSafe Solutions
Subsequent Event [Line Items]
Payments to acquire businesses	$ 35