UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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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.
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).
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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
As of October 25, 2022, there were
Nevro Corp.
TABLE OF CONTENTS
2
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Nevro Corp.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share data)
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September 30, |
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December 31, |
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2022 |
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2021 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Other assets |
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Restricted cash |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Nevro Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses |
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Research and development |
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Sales, general and administrative |
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Certain litigation charges (credits) |
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Total operating expenses |
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Income (Loss) from operations |
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Interest income |
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Interest expense |
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Other income (expense), net |
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Income (Loss) before income taxes |
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Provision for income taxes |
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Net income (loss) |
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Other comprehensive loss: |
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Changes in foreign currency translation adjustment |
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Changes in unrealized gains on short-term investments, net |
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( |
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( |
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Net change in other comprehensive loss |
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( |
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( |
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( |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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Net income (loss) per common share |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares used to compute |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Nevro Corp.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share data)
For the three and nine months ended September 30, 2022
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Additional |
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Accumulated |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Other Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Adjustments from adoption of |
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— |
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— |
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( |
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— |
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( |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
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— |
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( |
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— |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Change in other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at March 31, 2022 |
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( |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Issuance of common stock under employee stock purchase plan |
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— |
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— |
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— |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at June 30, 2022 |
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( |
) |
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( |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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For the three and nine months ended September 30, 2021
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Additional |
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Accumulated |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Other Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Change in other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at March 31, 2021 |
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( |
) |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
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Issuance of common stock under employee stock purchase plan |
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— |
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— |
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— |
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Issuance of common stock from conversion of convertible senior notes due 2021 |
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( |
) |
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— |
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— |
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— |
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Exercise of bond hedge for convertible senior notes due 2021 |
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( |
) |
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( |
) |
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— |
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— |
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— |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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Balances at June 30, 2021 |
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( |
) |
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Exercise of common stock options |
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— |
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— |
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— |
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Issuance of common stock upon release of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax obligations |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at September 30, 2021 |
|
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Nevro Corp.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2022 |
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|
2021 |
|
||
Cash flows from operating activities |
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Net income (loss) |
|
$ |
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$ |
( |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization |
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Amortization of operating lease assets |
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Stock-based compensation expense |
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|
||
Amortization of premium (accretion of discount) on short-term investments |
|
|
|
|
|
|
||
Provision for doubtful accounts |
|
|
|
|
|
( |
) |
|
Write-down of inventory |
|
|
|
|
|
|
||
Amortization of debt discount and issuance costs |
|
|
|
|
|
|
||
Unrealized (gains) losses on foreign currency transactions |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued liabilities |
|
|
( |
) |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
Proceeds from maturity of short-term investments |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
|
|
|
|
|
||
Cash flows from financing activities |
|
|
|
|
|
|
||
Repayment of convertible notes |
|
|
— |
|
|
|
( |
) |
Minimum tax withholding paid on behalf of employees for net share settlement |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common stock to employees |
|
|
|
|
|
|
||
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Significant non-cash transactions |
|
|
|
|
|
|
||
Purchases of property and equipment in accounts payable |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Nevro Corp.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, and the related interim information contained within the notes to the financial statements, are unaudited. The unaudited interim condensed consolidated financial statements (the condensed consolidated financial statements) have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information and on the same basis as the audited financial statements included on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the Annual Report) filed with the Securities and Exchange Commission (SEC) on February 23, 2022. The condensed consolidated financial statements are prepared in U.S. dollars and include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and the consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021. All such adjustments are of a normal and recurring nature. The interim financial data as of September 30, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future period.
The consolidated balance sheet as of December 31, 2021 was derived from the audited financials as of that date. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Annual Report.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by the management. Actual results may differ from those estimates under different assumptions or conditions.
The COVID-19 pandemic has negatively impacted, and may continue to negatively impact the Company’s operations and revenues and overall financial condition. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets which could impact the Company’s estimates and assumptions. Changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing the net loss by the weighted average number of common shares and potentially dilutive common stock equivalents outstanding for the period, if inclusion of these is dilutive. Potentially dilutive common stock equivalents include the common stock options, restricted stock units and performance stock units. Additionally, upon adoption of ASU 2020-06 on January 1, 2022, the Company uses the if-converted method and presumes share settlement for its 2025 Notes when calculating the dilutive effect of these notes. Prior to the adoption, the Company applied the treasury stock method when calculating the potential dilutive effect, if any, of the convertible senior notes which were intended to settle or have settled in cash the principal outstanding. Furthermore, in connection with the offerings of the convertible senior notes, the Company entered into convertible note hedges and warrants. However, the convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. Warrants were considered anti-dilutive to the extent that their strike price were above the Company's average share price during the period.
Certain Litigation Charges (Credits)
The Company records a liability for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required.
7
Payments received from litigation settlements are recorded as litigation credits. The Company records litigation charges (credits) considered to be significant infrequent transactions as Certain litigation charges (credits) in the consolidated statements of operations.
Foreign Currency Translation
Unrealized foreign exchange gains and losses from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the reporting entity are recorded in other income (expense), net. Additionally, realized gains and losses resulting from transactions denominated in currencies other than the local currency are recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net unrealized foreign currency gain (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net realized foreign currency gain (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity. Instead, entities will account for the convertible debt as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The Company
The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06 were as follows (in thousands):
|
|
Balance at |
|
|
Adjustments Due |
|
|
Balance at |
|
|||
|
|
December 31, 2021 |
|
|
to ASU 2020-06 |
|
|
January 1, 2022 |
|
|||
Long term debt |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Additional paid-in capital |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Accumulated deficit |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Significant Accounting Policies
With the exception of the policies and accounting pronouncements above, there have been no other material changes to the Company’s significant accounting policies from its Annual Report.
2. Revenue
The following table presents revenue by geography, based on the billing address of the customer (in thousands):
8
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The United States is the only country that accounts for 10% or more of the revenue during the periods presented:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
United States |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
There were
In July 2021, the Company received FDA approval of its proprietary 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with painful diabetic neuropathy (PDN). For the three and nine months ended September 30, 2022, PDN represented
3. Lease Accounting
The Company has operating leases for office space, a manufacturing facility, warehouse, research and development facilities and equipment. Leases with terms of 12 months or less are not recorded on the balance sheet, as the related lease expenses are recognized on a straight-line basis over the lease term. The Company accounts for lease components (such as fixed payments) separately from non-lease components (such as common area expenses).
The weighted average lease terms and discounts rates are as follows:
|
|
September 30, 2022 |
|
December 31, 2021 |
Operating Lease Term and Discount Rate |
|
|
|
|
Weighted-average remaining lease term |
|
|
||
Weighted-average discount rate |
|
|
As of September 30, 2022, the maturity of lease liabilities are as follows (in thousands):
|
|
Operating Leases |
|
|
2022, remaining months |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
Supplemental lease cost information are as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
9
Supplemental balance sheet information are as follows (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
Operating Leases: |
|
|
|
|
|
|
||
Operating lease assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|||
Long term operating lease liabilities |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information are as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flow from operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See Note 6 for further details of the Company’s lease commitments.
4. Fair Value Measurements
Cash Equivalents and Short-Term Investments
The Company’s cash equivalents are comprised of investments in money market funds that are classified as Level 1 of the fair value hierarchy. The Company’s money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. The Company’s short-term investments are comprised of agency bonds, commercial paper, corporate notes and treasury bonds. All short-term investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.
Balance as of September 30, 2022 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (i) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Agency bonds (ii) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper (ii) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Treasury bonds (ii) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Balance as of December 31, 2021 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (i) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Agency bonds (ii) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper (ii) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate notes (iii) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Treasury bonds (ii) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
10
Convertible Senior Notes
As of September 30, 2022 and December 31, 2021, the fair value of the
5. Balance Sheet Components
Cash and Cash Equivalents
The Company considers all highly-liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include money market funds in the amount of $
Investments
The fair value of the Company’s cash equivalents and short-term investments approximates their respective carrying amounts due to their short-term maturity.
|
|
September 30, 2022 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Aggregate |
|
||||
Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Treasury bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Aggregate |
|
||||
Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency bonds |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate notes |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Treasury bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Realized gains or losses and other-than-temporary impairments, if any, on available-for-sale securities are reported in other income (expense), net as incurred. The cost of securities sold is determined based on the specific identification method. The amount of realized gains and realized losses on investments recorded for the periods presented has not been material.
The contractual maturities of the Company’s investment securities as of September 30, 2022 were as follows (in thousands):
|
|
Amortized Cost |
|
|
Fair Value |
|
||
Amounts maturing within one year |
|
$ |
|
|
$ |
|
||
Amounts maturing after one year through five years |
|
|
|
|
|
|
||
Total investment securities |
|
$ |
|
|
$ |
|
||
11
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the standard cost method which approximates the first-in, first-out basis. Net realizable value is determined as the prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company regularly reviews inventory quantities compared to forecasted sales to record a provision for excess and obsolete inventory when appropriate. Inventory write-downs are recorded for excess and obsolete inventory. The Company estimates forecasted sales by considering product acceptance in the marketplace, customer demand, historical sales, product obsolescence and technological innovations.
The Company’s policy is to write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected lower of cost or net realizable value, and inventory in excess of expected requirements. The estimate of excess quantities is judgmental and primarily dependent on the Company’s estimates of future demand for a particular product. If the estimate of future demand is inaccurate based on actual sales, the Company may increase the write-down for excess inventory for that component and record a charge to inventory impairment in the accompanying consolidated statements of operations and comprehensive loss. The Company periodically evaluates the carrying value of inventory on hand for potential excess amount over demand using the same lower of cost or net realizable value approach as that has been used to value the inventory. The Company also periodically evaluates inventory quantities in consideration of actual loss experience. As a result of these evaluations, the Company recognized total write-downs of $
Property and Equipment, Net (in thousands)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Laboratory and manufacturing equipment |
|
$ |
|
|
$ |
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
The Company recognized depreciation and amortization expense on property and equipment as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Depreciation and amortization expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
Accrued Liabilities (in thousands)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Accrued payroll and related expenses |
|
$ |
|
|
$ |
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Accrued taxes |
|
|
|
|
|
|
||
Accrued clinical and research expenses |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Accrued warranty |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
6. Commitments and Contingencies
Operating Leases
In
The Company entered into a separate non-cancellable facility lease for warehouse space beginning on
In
See Note 3 for further discussion on Lease Accounting.
Warranty Obligations
The Company provides a
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for warranty |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Utilization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities related to, for example, employment matters and patent issues. The Company accrues a liability for such matters when it is probable
13
that future expenditures will be made and such expenditures can be reasonably estimated. When determining the estimated loss or range of loss, significant judgement is required.
The Company accrued a loss contingency of $
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.
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 maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that reduces the Company’s exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
Legal Matters
Boston Scientific Litigations
California Litigation Related to High Frequency
On November 28, 2016, the Company filed a lawsuit for patent infringement against Boston Scientific Corporation and Boston Scientific Neuromodulation Corporation (collectively, Boston Scientific). The lawsuit, filed in the U.S. District Court for the Northern District of California (the California Court), asserted that Boston Scientific was infringing, or would soon begin infringing, seven of the Company’s patents covering inventions relating to the Senza system and 10 kHz Therapy. Shortly after the Company filed this lawsuit in 2016, Boston Scientific cancelled its original launch plan and modified its SCS system to avoid infringing the asserted patents. On July 24, 2018, the California Court issued an order on claim construction and summary judgment. In the order, the California Court ruled that the Company’s asserted method claims were patent eligible and not invalid as indefinite. Collectively, the asserted method claims cover methods for delivering SCS therapy at frequencies between 1.5 kHz and 100 kHz.
The California Court, however, found that Boston Scientific was not currently infringing the six upheld method claims because Boston Scientific cancelled its original launch plans and ultimately never practiced the asserted method claims in the United States. Specifically, the California Court found that Boston Scientific's sale of the Spectra WaveWriter systems for commercial use in the United States did not infringe the upheld method claims because Boston Scientific modified the Spectra WaveWriter systems to prevent them from being programmed to generate signals above 1.2 kHz. The California Court also found that the Company’s asserted system claims were invalid as indefinite. As discussed below, the California Court’s finding of invalidity was overturned by the U.S. Court of Appeals for the Federal Circuit (the Federal Circuit).
On July 31, 2018, the parties entered into an agreement to dismiss the Company’s declaratory judgment claims, without prejudice, so that the Company and Boston Scientific could each appeal portions of the California Court’s July 24th ruling to the Federal Circuit. On April 9, 2020, the Federal Circuit returned its ruling, which vacated and remanded the California Court’s judgment of invalidity. As a result of the Federal Circuit’s ruling, the system claims invalidated by the California Court were reinstated, and thus all of the Company’s asserted claims remain valid and enforceable. On December 14, 2020, the parties agreed to the final dismissal of all remaining claims before the California Court based on Boston Scientific’s assertion to the court that it did not have any current plans to commercially launch a high frequency SCS system in the United States. The California Court entered the agreed upon dismissal on December 16, 2020.
14
Delaware Litigations Unrelated to High Frequency
On December 9, 2016, Boston Scientific filed a patent infringement lawsuit alleging the Company’s manufacture, use and sale of the Senza system infringes
In relation to the Delaware I litigation, the Company filed petitions for inter partes review at the U.S. Patent and Trademark Office (USPTO), which resulted in the invalidation of all of the asserted claims of Boston Scientific’s U.S. Patent Nos. 7,587,241 and 6,895,280, in February 2019. The invalidity rulings by the Patent Trial and Appeal Board (PTAB) at the USPTO were later affirmed by the Federal Circuit on May 18, 2020 and May 29, 2020, respectively. In relation to the Delaware II litigation, the Company filed seven petitions for inter partes review at the PTAB against seven of the nine patents asserted by Boston Scientific. As a result of those petitions, in January 2021, the PTAB invalidated all but two of the challenged Boston Scientific claims across the seven inter partes reviews. The invalidity rulings by the PTAB were later affirmed by the Federal Circuit on March 10, 2022, and March 18, 2022, respectively.
Through various orders from the court, portions of Boston Scientific’s Delaware I case were dismissed, and portions of Boston Scientific’s Delaware II case were stayed for future litigation. The stay of the Delaware II litigation was lifted in April 2022, and the case was expected to proceed to a trial in 2023.
In relation to the Delaware I case, of the ten patents originally asserted on December 9, 2016, Boston Scientific proceeded to trial with four patents directed to SCS leads and lead manufacturing techniques. On November 1, 2021, a Delaware jury found that the Company infringed Boston Scientific’s patents U.S. 7,891,085 (the ‘085 patent) and U.S. 8,019,439, and that the Company did not infringe Boston Scientific’s patents U.S. 8,646,172 and U.S. 8,650,747. With regard to the ‘085 patent, the jury found that the infringement was willful, though the infringement of the ‘085 patent was only directed to a limited number of SCS leads that the Company sold internationally between 2012 and 2014. Boston Scientific does not assert that the Company continues to infringe the ‘085 patent. The Delaware jury awarded Boston Scientific $
In relation to the Delaware II litigation, the Company also filed counterclaims against Boston Scientific, alleging patent infringement of five Nevro patents. In March 2021, on the basis of Boston Scientific’s petition, the PTAB initiated inter partes reviews of two of Nevro’s five counterclaim patents. The two instituted inter partes reviews were directed to Nevro’s U.S. Patent Nos. 10,076,665 and 9,002,460. On March 14, 2022, the PTAB upheld claim 8 of Nevro’s U.S. Patent No. 10,076,665, but invalidated the rest of the challenged claims, and the PTAB invalidated all of the challenged claims of Nevro’s U.S. Patent No. 9,002,460. The Company expected litigation to proceed for the remaining three counterclaim patents, and for a trial to be held for the three counterclaim patents in 2023.
On February 23, 2021, the Company filed a patent infringement lawsuit against Boston Scientific alleging that its January 2021 launch of the WaveWriter Alpha™ SCS System infringes five of the Company’s patents covering spinal cord stimulation technology related to delivering paresthesia-free therapy at frequencies below 1,200 Hz. The lawsuit, filed in the U.S. District Court for the District of Delaware (the Delaware III litigation), sought unspecified damages and attorney’s fees, as well as preliminary and/or permanent injunctive relief against further infringement. The Company expected a trial for the Delaware III litigation would be held in October 2023. With regard to the Delaware III litigation, Boston Scientific filed inter partes review petitions against three of the five asserted patents; specifically, U.S. Patent Nos. 8,829,209; 10,576,286; and 10,556,112. The PTAB’s institution decisions for these inter partes reviews was expected in August 2022.
On August 1, 2022, the Company issued a press release and a Form 8-K relating to its agreement with Boston Scientific to settle their ongoing intellectual property litigations. Pursuant to the parties’ settlement, Nevro received a net payment from Boston Scientific of $
15
The settlement gives Boston Scientific the freedom to operate using the features and capabilities embodied in its current line of products for frequencies below 1,500 Hz, and gives the Company the freedom to operate using the features and capabilities embodied in its current line of products. The settlement concluded all of the existing litigations between Nevro and Boston Scientific.
Stimwave Litigation
On February 14, 2019, the Company filed a lawsuit for patent infringement against Stimwave Technologies, Inc. (Stimwave) in the Delaware Court asserting that Stimwave was infringing the Company’s patents covering inventions related to its 10 kHz Therapy and the Senza system, as well as a claim for false advertising under the Lanham Action Section 43(a), 15 U.S.C. § 1125(a). In relation to this lawsuit, on July 24, 2019, the Delaware Court granted the Company’s motion for preliminary injunction, and issued an order barring Stimwave, and all affiliated persons and entities, from infringing patent claims covering frequencies between 3 kHz and 10 kHz. On February 27, 2020, the Company and Stimwave entered into a Settlement Agreement, in which Stimwave agreed to cease commercialization of all high frequency spinal cord stimulation systems worldwide. Stimwave also agreed to entry of a permanent injunction in the Delaware Court, under which Stimwave’s products will not deliver spinal cord stimulation therapy that includes pulse frequencies between 1,500 Hz and 100,000 Hz. The permanent injunction was filed with the Delaware Court and entered on March 2, 2020. After the Delaware Court entered the permanent injunction, the case (including Stimwave’s appeal of the preliminary injunction order) were dismissed. As part of the permanent injunction filing, Stimwave acknowledged the validity of the patents Nevro asserted in the litigation. Per the Company’s request, the permanent injunction order does not enjoin Stimwave from providing follow-up care and programming for any patients who were already programmed with high frequency therapy in the United States prior to March 6, 2020, and in the rest of the world prior to April 30, 2020.
Nalu Litigation
On February 28, 2020, the Company filed a lawsuit in the Delaware Court for patent infringement against Nalu Medical, Inc. (Nalu) asserting that Nalu is infringing the Company’s patents covering inventions related to its 10 kHz Therapy and the Senza system. The Company’s patent infringement assertions were based, in part, on Nalu imbedding a high frequency SCS therapy in a version of its “PSP” waveform. During the litigation, Nalu modified its PSP waveform so that it no longer included an imbedded high frequency signal. As a result, on December 21, 2021, the Company announced that it had reached a favorable settlement agreement with Nalu to terminate the litigation.
The Company is and may from time to time continue to be involved in various legal proceedings to defend its intellectual property, including several pending European patent oppositions at the European Patent Office (EPO) initiated by the Company’s competitors Medtronic and Boston Scientific, an entitlement action filed by Boston Scientific in Germany, and an invalidity proceeding in China. In addition, the Company is and may from time to time also be involved in various legal proceedings of a character normally incident to the ordinary course of business, such as employment matters, product liability matters, and professional liability matters, which the Company does not deem to be material to its business and condensed consolidated financial statements at this stage.
Flathead Partners Litigation/Arbitration
On July 15, 2022, the Company filed a lawsuit in the U.S. District Court for the Northern District of California for breach of contract against Flathead Partners, LLC, the Mayo Foundation for Medical Education and Research, and Mayo Clinic Ventures (herein referred to as “Flathead Partners”). The Company’s suit alleged that Flathead Partners breached the 2006 license agreement between the Company and the Mayo Clinic (referred to in the Company’s 10-K filing as the “Mayo License”), when Flathead Partners unilaterally asserted control of pending U.S. Patent Application 16/286,389 (the “’389 Application”), which is subject to the Mayo License. The suit sought to enjoin the Flathead Partners from taking any action at the U.S. Patent Office with respect to the ‘389 Application, and to thereafter engage in an arbitration as called for in the Mayo License. On July 27, 2022, the Flathead Partners agreed to enter into an arbitration to determine which party shall have control of prosecution of the ‘389 Application, and whether there are ongoing royalty obligations under the Mayo License. Therefore, Nevro dismissed the lawsuit in the Northern District of California. The parties have since been engaged in an arbitration, the details of which are subject to the confidentiality provisions outlined in the Mayo License.
7. Debt
2021 Notes and Convertible Note Hedge and Warrant Transactions
On June 1, 2021, the Company's
16
exercised its option under the bond hedge and received
2025 Notes and Convertible Note Hedge and Warrant Transactions
In April 2020, the Company issued $
Each $
In connection with the offering of the 2025 Notes, the Company entered into convertible note hedge transactions with certain bank counterparties in which the Company has the option to purchase initially (subject to adjustment for certain specified events) a total of approximately
In accounting for the issuance of the convertible senior notes, prior to the adoption of ASU 2020-06, the Company separated the 2025 Notes 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 convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2025 Notes. The equity component was not remeasured as long as it continued to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (debt discount) was amortized to interest expense over the term of the 2025 Notes expense at an effective interest rate of
17
In accounting for the debt issuance costs related to the 2025 Notes, prior to the adoption of ASU 2020-06, the Company allocated the total amount incurred to the liability and equity components of the 2025 Notes based on the same proportion as the accounting for the proceeds from the issuance of the 2025 Notes. Issuance costs attributable to the liability component were to be amortized to interest expense using the effective interest method over the contractual terms of the 2025 Notes. Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity. Upon the adoption of ASU 2020-06 on January 1, 2022, the Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost to be amortized as interest expense over the remaining term of the 2025 Notes, with a cumulative adjustment to retained earnings on the adoption date.
The effective interest rate for the 2025 Notes was
See Note 1 for the cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06.
The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Principal |
|
$ |
|
|
$ |
|
||
Unamortized discount |
|
|
— |
|
|
|
( |
) |
Unamortized issuance cost |
|
|
( |
) |
|
|
( |
) |
Net carrying amount |
|
$ |
|
|
$ |
|
||
The net carrying amount of the equity component of the 2025 Notes was as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Debt discount related to value of conversion option |
|
$ |
— |
|
|
$ |
|
|
Debt issuance cost |
|
|
— |
|
|
|
( |
) |
Net carrying amount |
|
$ |
— |
|
|
$ |
|
|
The following table sets forth the interest expense recognized related to the 2021 Notes and the 2025 Notes (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of debt discount |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The debt discount associated with the equity component of the 2025 Notes was reversed upon the adoption of ASU 2020-06, which resulted in a decrease in the amount of non-cash interest expense to be recognized after the adoption date of January 1, 2022.
8.
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period, if inclusion of these is dilutive. Upon adoption of ASU 2020-06 on January 1, 2022, the Company uses the if-converted method and presumes share settlement for its 2025 Notes when calculating the dilutive effect of these notes. Prior to the adoption, the Company applied the treasury stock method when calculating the potential dilutive effect, if any, of the convertible senior notes which were intended to settle or have settled in cash the principal outstanding. Furthermore, in connection with the offerings of the convertible senior notes, the Company entered into convertible note hedges and warrants. However, the convertible note hedges are not included when calculating potentially dilutive shares since their effect is
18
always anti-dilutive. Warrants were considered anti-dilutive to the extent that their strike price were above the Company's average share price during the period.
The following table presents the reconciliation of net income (loss) used in computing basic and diluted net income (loss) per common share (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) used in basic net income (loss) per |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Plus: |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income (loss) used in diluted net income (loss) per |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
The following table presents the reconciliation of weighted average shares used in computing basic and diluted net income (loss) per common share:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Weighted average shares used to compute basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plus effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based awards from employee equity plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Convertible senior notes |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Weighted average shares used to compute |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The following table presents the net income (loss) per common share - basic and diluted:
|
|
Three Months Ended |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Because the Company has reported a net loss for the three and nine months ended September 30, 2021, the diluted net loss per common share is the same as basic net loss per common share for those periods.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Stock-based awards from employee equity plans |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Convertible senior notes |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Warrants related to the issuance of convertible senior notes |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
9. Employee Benefit Plans
401(k) Plan
In 2007, the Company adopted a 401(k) plan for its employees whereby eligible employees may contribute up to the maximum amount permitted by the Internal Revenue Code. In June 2016, the Company adopted a policy to match a portion of employee contributions for all qualified employees participating in the 401(k) plan. The Company recorded an expense for matching
19
contributions of $
Employee Stock Purchase Plan
The Company’s 2014 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to
There were
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements (the condensed consolidated financial statements) and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (Quarterly Report) and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2021, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the Annual Report) filed with the U.S. Securities and Exchange Commission (SEC) on February 23, 2022.
Special note regarding forward-looking statements
This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, those discussed in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-k as filed on February 23, 2002, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are a global medical device company focused on delivering comprehensive, life-changing solutions that continue to set the standard for enduring patient outcomes in chronic pain treatment. We have developed and commercialized the Senza® spinal cord stimulation (SCS) system, an evidence-based neuromodulation platform for the treatment of chronic pain, with the Senza® Omnia™ platform being our latest addition to the Senza family of products. Our proprietary, paresthesia-free 10 kHz Therapy, delivered by our Senza system, was demonstrated in our SENZA randomized controlled trial (RCT) to be superior to traditional SCS therapy, with 10 kHz Therapy being nearly twice as successful in treating back pain and 1.5 times as successful in treating leg pain when compared to traditional SCS therapy. In addition to the original approval of our therapy in back and leg pain, we received approval of unilateral or bilateral pain, associated with painful diabetic neuropathy (PDN) in July 2021 and we received expanded labeling in non-surgical back pain (NSBP) in January 2022. Our SENZA-RCT study, along with our SENZA-PDN clinical study, SENZA-NSRBP clinical study and European studies, represents what we believe is the most robust body of clinical evidence for any SCS therapy. We believe the superiority of 10 kHz Therapy over traditional SCS therapies will allow us to capitalize on and expand the approximately $2.3 billion global SCS market by treating patients with debilitating chronic pain, including back and leg pain, NSBP and PDN.
We launched Senza commercially in the United States in May 2015, after receiving a label from the U.S. Food and Drug Administration (FDA) supporting the superiority of our 10 kHz Therapy over traditional SCS. The Senza system has been commercially available in certain European markets since November 2010 and in Australia since August 2011. We have experienced significant revenue growth in the United States since commercial launch. Senza is currently reimbursed by all of the major insurance providers. In early 2017, we commenced a controlled commercial launch of our family of surgical leads, marketed as the Surpass surgical lead, and in April 2020 received FDA approval for our reduced-size Surpass-C surgical lead. In January 2018, we received FDA approval of our next generation Senza II SCS system. In the fourth quarter of 2019, we received FDA approval of our next generation product platform, Senza Omnia, which we launched in the United States in the fourth quarter of 2019. Additionally, we received approval to commercially launch Senza Omnia in Europe during the second quarter of 2020 and in Australia in July 2020. In the first quarter of 2021, we received FDA approval for our first Senza Omnia upgrade, Omnia™ Powered by HFX Connect™, and our next generation trial stimulator. In July 2021, we received FDA approval of our 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with PDN. This approval is specific to our unique 10 kHz stimulation, and the Senza system was the first spinal cord stimulation system approved by the FDA with a specific indication to treat certain forms of pain associated with PDN. We received expanded labeling in NSBP in January 2022. In October 2022, we received FDA approval of our latest generation SCS system, Senza HFX iQ™. We plan to initiate a limited release of Senza HFX iQ in the United States in the fourth quarter of 2022, with a broad U.S. market launch planned for early 2023. In addition to the U.S. approval for HFX iQ, Nevro has submitted for approval in Europe.
21
The tables below set forth our revenue from U.S. and international sales the past ten quarters on a quarterly basis and total revenue for each of the past five full fiscal years.
|
|
Q1 2020 |
|
|
Q2 2020 |
|
|
Q3 2020 |
|
|
Q4 2020 |
|
|
Q1 2021 |
|
|
Q2 2021 |
|
|
Q3 2021 |
|
|
Q4 2021 |
|
|
Q1 2022 |
|
|
Q2 2022 |
|
|
Q3 2022 |
|
|||||||||||
Revenue from: |
(in millions) |
|
||||||||||||||||||||||||||||||||||||||||||
U.S. sales |
|
$ |
75.3 |
|
|
$ |
51.0 |
|
|
$ |
90.9 |
|
|
$ |
94.6 |
|
|
$ |
74.7 |
|
|
$ |
85.0 |
|
|
$ |
78.1 |
|
|
$ |
88.4 |
|
|
$ |
73.2 |
|
|
$ |
89.0 |
|
|
$ |
86.1 |
|
International sales |
|
|
12.2 |
|
|
|
5.4 |
|
|
|
17.5 |
|
|
|
15.1 |
|
|
|
13.9 |
|
|
|
17.3 |
|
|
|
15.2 |
|
|
|
14.3 |
|
|
|
14.6 |
|
|
|
15.2 |
|
|
|
14.3 |
|
Total sales revenue |
|
$ |
87.5 |
|
|
$ |
56.4 |
|
|
$ |
108.5 |
|
|
$ |
109.7 |
|
|
$ |
88.6 |
|
|
$ |
102.3 |
|
|
$ |
93.2 |
|
|
$ |
102.8 |
|
|
$ |
87.8 |
|
|
$ |
104.2 |
|
|
$ |
100.5 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
Nine Months Ended |
|
||||||
Revenue from: |
(in millions) |
|
|||||||||||||||||||||
U.S. sales |
$ |
263.5 |
|
|
$ |
321.8 |
|
|
$ |
326.0 |
|
|
$ |
311.9 |
|
|
$ |
326.2 |
|
|
$ |
248.4 |
|
International sales |
|
63.2 |
|
|
|
65.5 |
|
|
|
64.3 |
|
|
|
50.2 |
|
|
|
60.7 |
|
|
|
44.1 |
|
Total sales revenue |
$ |
326.7 |
|
|
$ |
387.3 |
|
|
$ |
390.3 |
|
|
$ |
362.0 |
|
|
$ |
386.9 |
|
|
$ |
292.5 |
|
Since our inception, we have financed our operations primarily through equity and debt financings and borrowings under a debt facility. Our accumulated deficit as of September 30, 2022 was $588.0 million. A significant amount of our capital resources has been used to support the development of our Senza products and our 10 kHz Therapy, and we have also made a significant investment building our U.S. commercial infrastructure and sales force to support our commercialization efforts in the United States. We intend to continue to make significant investments in our U.S. commercial infrastructure, including a sales organization that targets physician specialties involved in PDN treatment decisions, as well as in research and development (R&D) to develop Senza to treat other chronic pain indications, including conducting clinical trials to support our future regulatory submissions. In order to further enhance our R&D efforts, pursue product expansion opportunities or acquire a new business or products that are complementary to our business, we may choose to raise additional funds, which may include future equity and debt financings.
We rely on third-party suppliers for a significant number of the components of our Senza products, and currently for the assembly of these systems. Several of these suppliers are currently single-source suppliers. We have entered into and/or amended several supply agreements in an effort to reinforce our supply chain. We are also required to maintain high levels of inventory, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which may lead to inventory impairment charges. Additionally, as compared to direct manufacturers, our dependence on third-party manufacturers makes us vulnerable to supply shortage problems and exposes us to greater lead times, increasing our risk of inventory obsolescence. In the third quarter of 2020, we made the strategic decision to vertically integrate the assembly of implantable pulse generators (IPGs), peripherals and various other manufacturing related activities to mitigate our reliance on third-party manufacturers and improve our long-term gross margins. We plan on conducting these manufacturing activities in a facility in Costa Rica, for which our lease began in April 2021. The integration process was completed in mid-2022, and we received approval from the FDA for the manufacture of our Senza system in the Costa Rica facility in October 2022. Even with this integration process completed, we expect that we will continue to rely on third-party manufacturers as we ramp our factory and in order to provide key components to support the assembly process. We have incurred and may continue to incur significant capital expenditures and implementation costs to initiate the manufacturing activities in our Costa Rica facility.
COVID-19 Pandemic
We are subject to risks related to the public health crises such as the global pandemic associated with COVID-19. The COVID-19 outbreak has negatively impacted, and continues to negatively impact our operations and revenues and overall financial condition as demand for elective procedures remains unpredictable and the number of Senza trials and permanent system implant procedures has not recovered to pre-pandemic levels. The magnitude of the risks and uncertainties related to the pandemic are unpredictable and could be further aggravated by the spread of new variants of the COVID-19 virus such as the Omicron variant, as well as any variants thereof, which may be more contagious and/or virulent. During the initial stages of the pandemic, the number of Senza systems procedures performed, similar to other elective surgical procedures, decreased significantly as health care organizations globally prioritized the treatment of patients with COVID-19. For example, in the United States in the first half of 2020 and more recently in connection with the spread of the Omicron variants, governmental authorities recommended, and in certain cases required, that elective, specialty and other procedures and appointments, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19. Additionally, overall patient willingness to pursue elective procedures has decreased due to the pandemic. Throughout 2021, the COVID-19 pandemic negatively impacted the global SCS therapy market, which we estimate decreased by approximately 5% to 10%. These challenges may arise again at any time throughout the duration of the pandemic, which is uncertain, and could reduce our revenue while the pandemic continues.
22
Notably, the predictability of trial and permanent implant procedures continues to be challenging to forecast in light of the ongoing pandemic and periodic surges in cases caused by the variants of the virus. Even if the severity of the pandemic subsides, we are unable to predict the timing that demand for Senza system procedures may return to historic levels as prospective patients may decide to delay their procedures. As a result of the spread of more contagious and virulent variants, the COVID-19 pandemic could continue to result in a meaningful delay in patients seeking to have a Senza system trial. Further, we anticipate that the substantial backlog of patients seeking appointments with physicians and surgeries to be performed at hospitals and ambulatory surgery centers relating to a variety of medical conditions will result in patients seeking to have Senza system trials or implant procedures performed having to navigate limited provider capacity, due to, among other reasons, a growing trend of labor shortages with nurses and other healthcare facility staff. We believe these factors may have an adverse effect on the recovery of the global SCS therapy market and, as a result, the amount of time we predict for our sales to recover following the end of the pandemic.
Further, numerous state, local and foreign jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19 and its variant strains, which continue to spread and impact the United States and other countries. For example, multiple times in 2020, the governor of California, where our headquarters are located, issued “shelter-in-place” or “stay at home” orders restricting non-essential activities, travel and business operations for an indefinite period of time, subject to certain exceptions for necessary activities. Such orders or restrictions have resulted in our headquarters closing, work stoppages, slowdowns and delays, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our operations. Other disruptions or potential disruptions include restrictions on our personnel and personnel of partners to travel and access customers for training and case support; delays in approvals or certifications by regulatory authorities and notified bodies; delays in product development efforts; and additional government requirements or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of our Senza systems. For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the Medical Devices Regulation (EU) No 2017/745 (the EU Medical Devices Regulation). While several notified bodies have been designated, the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests with the new regulation as a consequence of which review times have lengthened. This situation could impact our ability to grow our business in the EU and EEA. In addition, even after the lift of “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19, we continue to experience disruptions to our business as a result of patients and customers continuing to be cautious in restarting elective procedures in light of the continued risk posed by the virus.
Global and domestic supply chains and the timely availability of raw materials and products have been and may continue to be materially disrupted by quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from the COVID-19 pandemic. Any manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future activities.
While the continued potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity, including our ability to repay our 2.75% convertible senior convertible notes due 2025 (the 2025 Notes). We expect any further shelter-in-place policies and restrictions on elective surgical procedures worldwide to have a substantial impact on our revenue. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. During the COVID-19 pandemic, our customers, including hospitals, ambulatory surgical centers and physician offices, have experienced financial hardship and some of them may not fully recover. This could lead to some of these customers temporarily or permanently shutting down, filing for bankruptcy or being acquired by larger health systems, leading to reduced procedures and/or additional pricing pressure on our products. The COVID-19 pandemic has also resulted in a significant increase in unemployment in the United States, Europe and Australia, which may continue even after the pandemic. The occurrence of any such events may lead to reduced disposable income and access to health insurance which could adversely affect the number of Senza systems sold after the pandemic has ended.
Important Factors Affecting our Results of Operations
In addition to the impact of COVID-19, we believe that the following factors have impacted, and we expect will continue to impact, our results of operations.
Importance of Physician Awareness and Acceptance of Our Products
We continue to invest in programs to educate physicians who treat chronic back and leg pain about the advantages of Senza. This requires significant commitment by our marketing team and sales organization, and can vary depending upon the physician’s practice specialization, personal preferences and geographic location. Further, we are competing with well-established companies in our industry that have strong existing relationships with many of these physicians. Educating physicians about the advantages of our
23
Senza products, including our latest product, Senza Omnia, and influencing these physicians to use these products to treat chronic pain, is required to grow our revenue.
In July 2021, we received FDA approval of our 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with PDN, and we have initiated a commercial rollout. In order to successfully commercialize our PDN opportunity, we will need to invest in and incur significant costs for this new indication and patient population, including costs to continue to build our sales force, marketing efforts and continuing clinical activities. Our success in the PDN market will be dependent on, among other factors, the perceived efficacy of our therapy for PDN patients, our ability to educate and generate awareness of our therapy for referring physicians, treating physicians and patients, and our ability to obtain sufficient third-party coverage or reimbursement for use of our therapy in PDN patients.
In January 2022, we received FDA approval for expanded labeling for our Senza® SCS System for the management of NSBP. This approval is specific to our proprietary 10 kHz Therapy and we believe differentiates the Senza System as the only SCS system with specific labeling to treat NSBP patients. Our success in the NSBP market will be dependent on, among other factors, the perceived efficacy of our therapy for NSBP patients, our ability to support continued market penetration and market access initiatives to further expand payer coverage of this procedure.
Reimbursement and Coverage Decisions by Third-Party Payors
Healthcare providers in the United States generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to cover and reimburse all or part of the cost of our products and the related implant procedure for patients. The revenue we are able to generate from sales of our products depends in large part on the availability of reimbursement from such payors. While we currently have a favorable National Coverage Determination (NCD) and reimbursement by Medicare for chronic back and leg pain, we have more limited coverage for PDN and NSBP procedures, and decisions of coverage and reimbursement for Senza and the related implant procedure from private health insurance providers can vary. In general, these decisions require that such payors perform analyses to determine if the procedure is medically necessary and if our technology is covered under their existing coverage policies. These payors may deny reimbursement if they determine that the device or procedure was not medically necessary for the patient and used in accordance with the payor’s coverage policy.
A significant component of our commercial efforts includes working with private payors to ensure positive coverage decisions for our products. For our traditional chronic back and leg pain market, we believe that favorable coverage and reimbursement for procedures using our products from Medicare and certain commercial payors, such as Aetna, Cigna, Humana, Blue Cross Blue Shield (BCBS) and Kaiser, have contributed to our increase in revenue to date. Although the largest commercial payors and Medicare cover procedures using Senza, there can be no assurance that all private health insurance plans will cover the therapy. Effective July 1, 2021, Medicare now requires Prior Authorization for certain hospital outpatient procedures, including SCS procedures. While Medicare, through both national and local coverage policies, currently provides coverage for NSBP, most commercial payors still do not explicitly cover NSBP. In January 2022, we announced that UnitedHealthcare will provide coverage for our 10 kHz Therapy for the treatment of PDN for dates of service on or after March 1, 2022. In March 2022, we announced that Noridian, the Medicare Administrative Contractor (MAC) that oversees the majority of the western United States, released an update to their Local Coverage Billing and Coding article for spinal cord stimulators for chronic pain to include two new ICD-10 codes that cover PDN. This change was posted on March 4, 2022 and is retroactive for procedures performed on or after January 1, 2022.
During the second quarter of 2022, a number of coverage updates among BCBS insurers were made to explicitly cover PDN, including BCBS Idaho (effective April 28, 2022); BCBS Hawaii - Hawaii Medical Service Association (effective May 27, 2022); and BCBS Alabama (effective May 29, 2022).
During the third quarter of 2022, a number of coverage updates were made by insurers to explicitly cover PDN. Combined, these updates represent approximately 43.5 million commercially-insured covered lives, with approximately 54% of the addressable US PDN population now covered under a formal policy for PDN:
24
During the third quarter of 2022, Novitas and First Coast, the Medicare Administrative Contractors (MACs) that represent Arkansas, Colorado, Delaware, Florida, Louisiana, Maryland, Mississippi, New Jersey, New Mexico, Oklahoma, Pennsylvania and Texas, published draft Local Coverage Determinations (LCDs) titled, “Nerve Stimulators for Chronic Intractable Pain”, which propose updated coverage criteria for SCS devices with an explicit FDA approval to treat PDN that would include PDN refractory to conventional medical management. The MACs' review of these proposed LCDs is ongoing, and they remain subject to change. Potential finalization dates have not yet been announced. If finalized as proposed, these LCDs would mean that Medicare patients in all 50 states would be eligible for coverage for PDN and would add approximately 17 million covered Medicare lives.
Effective December 1, 2022, UnitedHealthcare updated to its SCS medical coverage policy and added language to indicate SCS devices are not covered for treating chronic intractable back pain without prior spine surgery (NSBP). All other elements of their SCS coverage policy remained as they were before, including their recent decision in January 2022 to cover the use of SCS for PDN.
With respect to both PDN and NSBP, there are many payors that have not yet updated their policies to expressly cover SCS procedures, including in the case of PDN, Cigna and Anthem Blue Cross Blue Shield. A significant number of negative coverage and reimbursement decisions by private insurers may impair our ability or delay our ability to grow our revenue.
We are working to expand payor coverage to include the use of our 10 kHz Therapy for the management of PDN and NSBP. This effort could be costly and could take many years to gain broad acceptance, and there can be no guarantee that it will be successful.
Inventory Buildup and Supply Chain Management
Our products are composed of a substantial number of individual components and, in order to market and sell them effectively, we must maintain high levels of inventory. In particular, since our commercial launch of Senza in the United States, we have continued to add suppliers to fortify our supply chain and we have maintained increased levels of inventory. As a result, a significant amount of our cash used in operations has been associated with maintaining these levels of inventory. There may also be times in which we determine that our inventory does not meet our product requirements. Further, the manufacturing process for our products requires lengthy lead times, during which components may become obsolete. We may also over- or underestimate the quantities of required components, in which case we may expend extra resources or be constrained in the amount of end product that we can produce. These factors subject us to the risk of inventory obsolescence and expiration, which may lead to inventory impairment charges. The sum of the charges for the items listed above were $3.6 million for the nine months ended September 30, 2022 and $2.5 million for the year ended December 31, 2021. Additionally, as we release later generations of products that contain advancements or additional features, the earlier generations may become obsolete, as was the case in the year ended December 31, 2021, when we recorded a charge of $1.8 million.
Investment in Research and Clinical Trials
We intend to continue investing in R&D to help our commercialization efforts around and to expand into new indications and chronic pain conditions, as well as develop product enhancements to improve outcomes and enhance the physician and patient experience. For example, we commenced commercial launches of Surpass, our surgical lead product family in early 2017 and Senza II SCS System in late 2017. Most recently, we launched our next generation product platform, Senza Omnia, in the United States in late 2019, in Europe during the second quarter of 2020 and in Australia in July 2020. In the first quarter of 2021, we received FDA approvals for our first Senza Omnia upgrade and a new trial stimulator. In July 2021, we received FDA approval of our 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with PDN. In January 2022, we received regulatory approval for expanded labeling to include NSBP. In October 2022, we received FDA approval of our latest generation SCS system, HFX iQ™, which we launched on a limited basis in the United States in the fourth quarter of 2022. We are continuing to invest in product improvements to Senza, including enhanced MRI capabilities and next generation IPGs. While R&D and clinical testing are time consuming and costly, we believe expanding into new indications, implementing product improvements and continuing to demonstrate the efficacy, safety and cost effectiveness of the 10 kHz Therapy through clinical data are all critical to increasing the adoption of this therapy. We initiated two randomized controlled trials in 2018, SENZA-PDN and SENZA-NSRBP, which evaluate the 10 kHz Therapy for the treatment of PDN and NSBP, respectively.
25
With regard to the SENZA-PDN study, we presented the three-month data in 2020 and the six-month and 12-month data, including six-month crossover data, in 2021. The Senza-PDN six-month results, 12-month durability results, and 12-month Quality of Life (QoL) results were published in JAMA Neurology (April 2021), Diabetes Care (November 2021) and Mayo Clinic Proceedings: Innovations, Quality & Outcomes (July 2022), respectively. We presented the 18-month results, including the 12-month crossover patient data, for the SENZA-PDN study at the North American Neuromodulation Society (NANS) conference in January 2022 and at the International Neuromodulation Society (INS) conference in May 2022. Additionally, the SENZA-PDN 24-month results, including the 18-month crossover data were presented at the American Diabetes Association (ADA) conference in June 2022.
With regard to the SENZA-NSRBP study, we presented the three-month primary endpoint results and the six-month data in 2021. The SENZA-NSRBP 12-month results, including the six-month crossover patient data were presented at the NANS conference in January 2022 and published online in the Journal of Neurosurgery: Spine (February 2022). Additionally, the SENZA-NSRBP 18-month results, including the 12-month crossover data were presented at the INS conference in May 2022.
Both the SENZA-PDN and SENZA-NSRBP studies are ongoing, and further data will be presented and published in leading journals as the data becomes available.
Significant Investment in U.S. Sales Organization
In 2021, we established a sales organization to support the launch of our PDN indication in the United States. This sales organization targets physician specialties involved in PDN treatment decisions, including primary care physicians, endocrinologists, internal medicine and podiatrists, to create awareness of 10 kHz Therapy to treat PDN patients. We are continuing to make investments in building our U.S. commercial infrastructure and recruiting and training our U.S. sales force. This is a lengthy process that requires recruiting appropriate sales representatives, establishing and, on occasion, refining a commercial infrastructure in the United States and training our sales representatives. Following initial training for Senza, our sales representatives typically require lead time in the field to grow their network of accounts and produce sales results. Successfully recruiting and training a sufficient number of productive sales representatives has been required to achieve growth at the rate we expect.
Access to Hospital Facilities
In the United States, in order for physicians to use our products, the hospital facilities where these physicians treat patients often require us to enter into purchasing contracts directly with the hospital facilities or with the Group Purchasing Organizations of which the hospital facilities are members. This process can be lengthy and time-consuming and requires extensive negotiations and management time. In Europe, we may be required to engage in a contract bidding process in order to sell our products, where the bidding processes are only open at certain periods of time, and we may not be successful in the bidding process.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies are more fully described in Note 1, Summary of Significant Accounting Policies, of Notes to Condensed Consolidated Financial Statements. We adopted ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), on January 1, 2022.
There have been no other significant or material changes in our critical accounting policies during the three months ended September 30, 2022 to the items we disclosed as our critical accounting policies in Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Components of Results of Operations
Revenue
Our revenue is generated primarily from sales to two types of customers: hospitals and outpatient medical facilities, with each being served primarily through a direct sales force. Sales to these entities are billed to, and paid by, the hospitals and outpatient
26
medical facilities as part of their normal payment processes, with payment received by us in the form of an electronic transfer, check or credit card payment. Product sales to third-party distributors are billed to and paid by the distributors as part of their normal payment processes, with payment received by us in the form of an electronic transfer.
U.S. revenue is generally recognized after our sales representatives deliver our product at the point of implantation and upon the completion and authorization of the implant procedure. In response to competitive practices and pressures, we have offered some volume price discounting for larger orders, where products are ordered in advance of an implantation and revenue is recognized when the transfer of control occurs at the time of shipment.
Revenue from sales of our Senza products fluctuate based on the selling price of the system, as the average sales price of a system varies geographically and by the type of system sold, and based on the mix of sales by geography. Our revenue from international sales can also be significantly impacted by fluctuations in foreign currency exchange rates, as our sales are denominated in the local currency in the countries in which we sell our products.
We expect our revenue to fluctuate from quarter to quarter due to a variety of factors, including seasonality. For example, the industry generally experiences lower revenues in the first and third quarters of the year and higher revenues in the fourth quarter. Our revenue has been impacted by these industry trends. Further, the impact of the buying patterns and implant volumes of hospitals and medical facilities, and third-party distributors may vary, and as a result could have an effect on our revenue from quarter to quarter.
Cost of Revenue
We currently utilize contract manufacturers for the production of Senza products. Cost of revenue consists primarily of acquisition costs of the components of Senza, manufacturing overhead, scrap and inventory excess and obsolescence charges, as well as distribution-related expenses, such as logistics and shipping costs, net of costs charged to customers.
We calculate gross margin as revenue less cost of revenue divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, but primarily by our average sales price and the costs to have our products manufactured. While costs are primarily incurred in U.S. dollars, international revenue may be impacted by the appreciation or depreciation of the U.S. dollar, which may impact our overall gross margin. Our gross margin is also affected by our ability to reduce manufacturing costs as a percentage of revenue.
Operating Expenses
Our operating expenses consist of R&D expense, sales, general and administrative (SG&A) expense and certain litigation charges. Personnel costs are the most significant component of operating expenses and consist primarily of salaries, bonus incentives, benefits, stock-based compensation and sales commissions.
Research and Development. R&D costs are expensed as incurred. R&D expense consists primarily of personnel costs, including salary, employee benefits and stock-based compensation expenses for our R&D employees. R&D expense also includes costs associated with product design efforts, development prototypes, testing, clinical trial programs and regulatory activities, contractors and consultants, equipment and software to support our development, facilities and information technology. Our R&D expenses may fluctuate from period to period due to the timing and extent of our R&D and clinical trial expenses.
Sales, General and Administrative. SG&A expense consists primarily of personnel costs, including salary, employee benefits and stock-based compensation expenses for our sales and marketing personnel, including sales commissions, and for administrative personnel that support our general operations, such as information technology, executive management, financial accounting, customer service and human resources personnel. We expense commissions at the time of the sale. SG&A expense also includes costs attributable to marketing, as well as travel, intellectual property and other legal fees, financial audit fees, insurance, fees for other consulting services, depreciation and facilities.
Certain litigation charges (credits). We record a liability for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required. Payments received from litigation settlements are recorded as litigation credits. We record litigation charges (credits) that we consider to be significant infrequent transactions as Certain litigation charges (credits) in our consolidated statements of operations. All other legal expenses are recorded within SG&A expense.
In 2021, we established a sales organization to support the launch of our PDN indication in the U.S. This sales organization targets physician specialties involved in PDN treatment decisions, including primary care physicians, endocrinologists, internal medicine and podiatrists, to create awareness of 10 kHz Therapy to treat PDN patients. We have historically increased marketing
27
spending in order to generate additional sales opportunities. Additionally, we have made substantial investments in our U.S. commercial infrastructure to support our commercialization efforts in the United States.
Since 2019, we have experienced significant legal expenses associated with our intellectual property litigation with Boston Scientific. Additionally, we continue to incur significant expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, including compliance under the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), director and officer insurance premiums and investor relations costs associated with being a public company. Our SG&A expense may fluctuate from period to period due to the seasonality of our revenue, the timing and extent of our SG&A expense, and the direct impact of the COVID-19 pandemic on certain discretionary spend items such as travel and trade shows.
Interest Income and Interest Expense
Interest income consists primarily of interest income earned on our investments and interest expense consists of interest paid on our outstanding debt and the amortization of debt discount and debt issuance costs.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency transaction gains and losses and the gains and losses from the remeasurement of foreign-denominated balances to the U.S. dollar.
Provision for Income Taxes
The provision for income taxes consists primarily of income taxes in foreign jurisdictions in which we conduct business as well as states where we have determined we have state nexus. We maintain a full valuation allowance for all of our U.S. deferred tax assets including net operating loss (NOL) carryforwards and federal and state tax credits.
Allowance for Doubtful Accounts
We make estimates as to the overall collectability of accounts receivable and provide an allowance for accounts receivable considered uncollectible based on current expected credit losses. We specifically analyze accounts receivable based on historical bad debt experience, customer concentrations, customer credit-worthiness, the age of the receivable, current economic trends, and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. We record the adjustment in sales, general and administrative expense.
Consolidated Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
Revenue, Cost of Revenue, Gross Profit and Gross Margin
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|||
Revenue |
|
$ |
100,466 |
|
|
$ |
93,205 |
|
|
$ |
7,261 |
|
Cost of revenue |
|
|
31,164 |
|
|
|
28,575 |
|
|
|
2,589 |
|
Gross profit |
|
$ |
69,302 |
|
|
$ |
64,630 |
|
|
$ |
4,672 |
|
Gross margin |
|
69% |
|
|
69% |
|
|
0% |
|
|||
Revenue. Revenue increased to $100.5 million in the three months ended September 30, 2022 from $93.2 million in the three months ended September 30, 2021, an increase of $7.3 million, or 8%. Revenue in the United States was $86.1 million in the three months ended September 30, 2022, a 10% increase from $78.1 million in the three months ended September 30, 2021. Our trial and permanent implant volumes in the United States increased from prior year. International revenue was $14.3 million in the three months ended September 30, 2022, compared to $15.2 million in the three months ended September 30, 2021. International revenue continued to be impacted by COVID-related issues and adverse currency exchange conditions. For the three months ended September 30, 2022, PDN represented 13% of worldwide permanent implant procedures, which resulted in approximately $13.4 million in revenue.
28
Cost of Revenue, Gross Profit and Gross Margin. Cost of revenue increased to $31.2 million in the three months ended September 30, 2022 from $28.6 million in the three months ended September 30, 2021, an increase of $2.6 million, or 9%. This increase was primarily due to an increase of $1.5 million in the costs of manufactured components and $0.8 million related to costs associated with the manufacturing facility in Costa Rica. Gross profit increased to $69.3 million in the three months ended September 30, 2022 from $64.6 million in the three months ended September 30, 2021, an increase of $4.7 million, or 7%. Gross profit as a percentage of revenue, or gross margin, was flat at 69% for each of the three months ended September 30, 2022 and 2021.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|
|
|||||||||||
|
|
2022 |
|
2021 |
|
|
|
|||||||||
|
|
Amount |
|
|
% of |
|
Amount |
|
|
% of |
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
14,030 |
|
|
14% |
|
$ |
11,553 |
|
|
12% |
|
$ |
2,477 |
|
Sales, general and administrative |
|
|
78,190 |
|
|
78% |
|
|
79,521 |
|
|
85% |
|
|
(1,331 |
) |
Certain litigation charges |
|
|
(105,000 |
) |
|
(105)% |
|
|
20,000 |
|
|
21% |
|
|
(125,000 |
) |
Total operating expenses |
|
$ |
(12,780 |
) |
|
(13)% |
|
$ |
111,074 |
|
|
119% |
|
$ |
(123,854 |
) |
Research and Development Expense. R&D expenses increased to $14.0 million in the three months ended September 30, 2022 from $11.6 million in the three months ended September 30, 2021, an increase of $2.5 million, or 21%. The increase was primarily due to a $2.8 million increase in personnel costs, partially offset by a $0.6 million decrease in outside research and development project costs.
Sales, General and Administrative Expense. SG&A expenses decreased to $78.2 million in the three months ended September 30, 2022 from $79.5 million in the three months ended September 30, 2021, a decrease of $1.3 million, or 2%. The decrease was primarily due to a $5.2 million in general and IP legal expenses, $2.4 million decrease in marketing initiative spend and a $2.0 million decrease in meeting and conference costs. This was partially offset by a $6.6 million increase in personnel costs, $1.2 million increase in travel and entertainment and $0.5 million increase in software license costs.
Certain Litigation Charges (Credits). On August 1, 2022, we announced that we had reached an agreement with Boston Scientific to settle our ongoing intellectual property litigations. Pursuant to the parties’ settlement, we received a payment from Boston Scientific of $85.0 million, and Boston Scientific released the $20.0 million verdict it was awarded by a Delaware jury on November 1, 2021, which we accrued and expensed in the three months ended September 30, 2021. As a result of the settlement agreement in August 2022, we recorded the $85.0 million and the $20.0 million release of the jury award as a credit to certain litigation charges (credits) in the three months ended September 30, 2022.
Interest Income, Interest Expense and Other Income (Expense), Net, and Provision for Income Taxes
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
$ |
1,128 |
|
|
$ |
99 |
|
|
$ |
1,029 |
|
Interest expense |
|
|
(1,608 |
) |
|
|
(3,688 |
) |
|
|
2,080 |
|
Other income (expense), net |
|
|
391 |
|
|
|
30 |
|
|
|
361 |
|
Provision for income taxes |
|
|
485 |
|
|
|
72 |
|
|
|
413 |
|
Interest Income. Interest income increased to $1.1 million in the three months ended September 30, 2022 from $0.1 million in the three months ended September 30, 2021, primarily due to a higher average investment return rates during the three months ended September 30, 2022.
Interest Expense. Interest expense decreased to $1.6 million in the three months ended September 30, 2022 from $3.7 million in the three months ended September 30, 2021. With the adoption of ASU 2020-06 in January 2022, interest expense due to the amortization of debt discounts is reduced as a result of accounting for the 2025 Notes as a single liability measured at its amortized cost.
29
Other Income (Expense), Net. Other income (expense), net was primarily comprised of foreign currency transaction gains and losses, as well as gains and losses from the remeasurement of foreign-currency denominated balances, for which we recorded a gain of $0.5 million in the three months ended September 30, 2022 and a gain of $42,000 in the three months ended September 30, 2021.
Provision for Income Taxes. Income tax expense was $0.5 million in the three months ended September 30, 2022 and $0.1 million in the three months ended September 30, 2021. The income tax expense for both periods was principally comprised of foreign income tax and state income tax. We continued to have NOL carryforwards creating a deferred tax asset. We have a full valuation allowance for all of our U.S. deferred tax assets.
Comparison of the nine months ended September 30, 2022 and 2021
Revenue, Cost of Revenue, Gross Profit and Gross Margin
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|||
Revenue |
|
$ |
292,521 |
|
|
$ |
284,145 |
|
|
$ |
8,376 |
|
Cost of revenue |
|
|
91,393 |
|
|
|
87,235 |
|
|
|
4,158 |
|
Gross profit |
|
$ |
201,128 |
|
|
$ |
196,910 |
|
|
$ |
4,218 |
|
Gross margin |
|
69% |
|
|
69% |
|
|
0% |
|
|||
Revenue. Revenue increased to $292.5 million in the nine months ended September 30, 2022 from $284.1 million in the nine months ended September 30, 2021, an increase of $8.4 million, or 3%. Revenue in the United States was $248.4 million in the nine months ended September 30, 2022, a 4% increase from $237.8 million in the nine months ended September 30, 2021. International revenue was $44.1 million in the nine months ended September 30, 2022, compared to $46.3 million in the nine months ended September 30, 2021. Overall, our trial and permanent implant volumes in the United States increased from prior year, although they continue to be negatively impacted by lingering COVID-related issues such as facility staffing and capacity issues. For the nine months ended September 30, 2022, PDN represented 11% of worldwide permanent implant procedures, which resulted in approximately $30.4 million in revenue.
Cost of Revenue, Gross Profit and Gross Margin. Cost of revenue increased to $91.4 million in the nine months ended September 30, 2022 from $87.2 million in the nine months ended September 30, 2021, an increase of $4.2 million, or 5%. This increase was primarily due to an increase of $2.8 million in the costs of manufactured product components and $2.5 million related to costs associated with initiating the manufacturing facility in Costa Rica, which were offset by a change in overhead credits of $1.4 million. Gross profit increased to $201.1 million in the nine months ended September 30, 2022 from $196.9 million in the nine months ended September 30, 2021, an increase of $4.2 million. Gross profit as a percentage of revenue, or gross margin, was flat at 69% for each of the nine months ended September 30, 2022 and 2021.
Operating Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|||||||||||
|
|
2022 |
|
2021 |
|
|
|
|||||||||
|
|
Amount |
|
|
% of |
|
Amount |
|
|
% of |
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
39,118 |
|
|
13% |
|
$ |
34,956 |
|
|
12% |
|
$ |
4,162 |
|
Sales, general and administrative |
|
|
241,488 |
|
|
83% |
|
|
226,673 |
|
|
80% |
|
|
14,815 |
|
Certain litigation charges |
|
|
(105,000 |
) |
|
(36)% |
|
|
20,000 |
|
|
7% |
|
|
(125,000 |
) |
Total operating expenses |
|
$ |
175,606 |
|
|
60% |
|
$ |
281,629 |
|
|
99% |
|
$ |
(106,023 |
) |
Research and Development Expense. R&D expenses increased to $39.1 million in the nine months ended September 30, 2022 from $35.0 million in the nine months ended September 30, 2021, an increase of $4.2 million, or 12%. The increase was primarily due to $6.2 million in personnel costs and $0.6 million in shared service allocations. These increases were partially offset by a decrease of $2.0 million in research and development project costs, and $1.1 million decrease in clinical trial and regulatory costs.
Sales, General and Administrative Expense. SG&A expenses increased to $241.5 million in the nine months ended September 30, 2022 from $226.7 million in the nine months ended September 30, 2021, an increase of $14.8 million, or 7%. The increase was
30
primarily due to $22.0 million in personnel related costs, $4.1 million in travel and entertainment spend, $1.1 million conferences and meetings and $1.8 million in software licenses. These increases were partially offset by decreases of $9.5 million in legal spend primarily related to IP litigation excluding the certain litigation charges noted below, $4.3 million in marketing initiatives and $1.2 million in shared service allocations.
Certain Litigation Charges (Credits). On August 1, 2022, we announced that we had reached an agreement with Boston Scientific to settle our ongoing intellectual property litigations. Pursuant to the parties’ settlement, we received a payment from Boston Scientific of $85.0 million, and Boston Scientific released the $20.0 million verdict it was awarded by a Delaware jury on November 1, 2021, which we accrued and expensed in the three months ended September 30, 2021. As a result of the settlement agreement in August 2022, we recorded the $85.0 million and the $20.0 million release of the jury award as a credit to certain litigation charges in the three months ended September 30, 2022.
Interest Income, Interest Expense and Other Income (Expense), Net, and Provision for Income Taxes
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
(in thousands) |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
$ |
1,553 |
|
|
$ |
559 |
|
|
$ |
994 |
|
Interest expense |
|
|
(4,819 |
) |
|
|
(15,939 |
) |
|
|
11,120 |
|
Other income (expense), net |
|
|
844 |
|
|
|
(515 |
) |
|
|
1,359 |
|
Provision for income taxes |
|
|
907 |
|
|
|
612 |
|
|
|
295 |
|
Interest Income. Interest income increased to $1.6 million in the nine months ended September 30, 2022 from $0.6 million in the nine months ended September 30, 2021 primarily due to a higher average investment return rates during the nine months ended September 30, 2022.
Interest Expense. Interest expense decreased to $4.8 million in the nine months ended September 30, 2022 from $15.9 million in the nine months ended September 30, 2021, a decrease of $11.1 million. The nine months ended September 30, 2021 included $5.0 million of interest expense and amortization of debt discount and debt issuance costs related to the issuance of the 2021 Notes, which were settled in June 2021, and are no longer outstanding in 2022. Additionally, with the adoption of ASU 2020-06, interest expense due to the amortization of debt discount is reduced by $6.1 million as a result of accounting for the 2025 Notes as a single liability measured at its amortized cost.
Other Income (Expense), Net. Other income (expense), net was primarily comprised of foreign currency transaction gains and losses, as well as gains and losses from the remeasurement of foreign-currency denominated balances, for which we recorded a gain of $0.9 million in the nine months ended September 30, 2022 and a loss of $0.5 million in the nine months ended September 30, 2021.
Provision for Income Taxes. Income tax expense was $0.9 million in the nine months ended September 30, 2022 and $0.6 million in the nine months ended September 30, 2021. The income tax expense for both periods was principally comprised of foreign income tax and state income tax. We continued to have NOL carryforwards creating a deferred tax asset. We have a full valuation allowance for all of our U.S. deferred tax assets.
Liquidity, Capital Resources and Plan of Operations
Since our inception, we have financed our operations through private placements of preferred stock, the issuance of common stock in our IPO in November 2014 and our underwritten public offering in June 2015, borrowings under our credit facility, which we have subsequently repaid, and the June 2016 issuance of the 2021 Notes. In April 2020, we completed a concurrent underwritten public offering of common stock and the 2025 Notes. Our total net proceeds from the April 2020 offerings, after giving effect to the note hedge transactions and warrant transactions and associated offering expense was $313.3 million. On June 1, 2021, our outstanding 2021 Notes matured and we paid $172.5 million to settle the outstanding principal and issued 682,912 shares of common stock to holders who elected to convert the 2021 Notes. As of September 30, 2022, we had cash, cash equivalents and short-term investments of $386.9 million. Based on our current operating plan, we expect that our cash and cash equivalents on hand, together with the anticipated funds from the collection of our receivables, will be sufficient to fund our operations through at least the next 12 months
We expect to incur continued expenditures in the future in support of our commercial infrastructure and sales force. In addition, we intend to continue to make investments in the further development of our Senza product platform and 10 kHz Therapy for the treatment of other chronic pain conditions, including ongoing R&D programs and conducting clinical studies. Further, we expect to
31
expend significant cash resources pursuing and defending our ongoing intellectual property lawsuits. In order to further enhance our R&D efforts, pursue product expansion opportunities or acquire a new business or products that are complementary to our business, we may choose to raise additional funds.
We may continue to seek funds through equity or debt financings, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital in the future could have a negative impact on our financial condition and our ability to pursue our business strategies. Should we choose to raise additional capital, the requirements will depend on many factors, including:
Our success depends, in part, upon our ability to establish a competitive position in the neuromodulation market by securing broad market acceptance of our 10 kHz Therapy and our Senza product platform for the treatment of chronic pain conditions. Any product we develop that achieves regulatory clearance or approval will have to compete for market acceptance and market share. We face significant competition in the United States and internationally, which we believe will intensify as we continue to commercialize in the United States. For example, our major competitors, Medtronic, Boston Scientific and Abbott Laboratories, each have approved and certified neuromodulation systems in at least the United States, Europe and Australia and have been established for several more years than us. In addition to these major competitors, we may also face competition from other emerging competitors and smaller companies with active neuromodulation system development programs that may emerge in the future.
If we are unable to raise, or have access, to sufficient funds when needed, we may be required to delay, reduce, or terminate some or all of our commercial development plans.
The following table sets forth the primary sources and uses of cash for each of the periods presented below:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
(in thousands) |
|
|
|
|
|
|
||
Net cash provided by (used in) |
|
|
|
|
|
|
||
Operating activities |
|
$ |
38,098 |
|
|
$ |
(26,722 |
) |
Investing activities |
|
|
63,832 |
|
|
|
235,947 |
|
Financing activities |
|
|
(3,831 |
) |
|
|
(172,657 |
) |
Effect of exchange rate on cash flows |
|
|
(1,970 |
) |
|
|
(280 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
96,129 |
|
|
$ |
36,288 |
|
32
Cash Provided by (Used in) Operating Activities. Net cash provided by operating activities was $38.1 million in the nine months ended September 30, 2022, compared to net cash used in operations of $26.7 million in the nine months ended September 30, 2021. In the nine months ended September 30, 2022, net cash provided by operating activities was primarily a result of the net income recorded during the period of $22.2 million, adjusted for the recording of non-cash stock-based compensation expense of $42.0 million, depreciation and amortization of $4.7 million, inventory impairment of $3.6 million and amortization of operating lease assets of $3.1 million. These changes were partially offset by decreases in long-term liabilities of $23.7 million as well as increases in inventory of $7.2 million and prepaid and other current assets of $5.9 million. In the nine months ended September 30, 2021, net cash used in operating activities was primarily a result of the net losses recorded during the period of $101.2 million, as well as increases in inventory of $23.2 million and increases in prepaids and other assets of $3.3 million. These changes were partially offset by the recording of non-cash stock-based compensation expense of $32.9 million, non-cash interest expense of $10.8 million, inventory write-down of $3.7 million, depreciation and amortization of $3.5 million and amortization of operating lease assets of $2.8 million. The changes were also offset by increases in other long term liabilities of $16.7 million, decreases in accounts receivable of $15.0 million and increases in accounts payable and accrued liabilities of $13.2 million.
Cash Provided by (Used in) Investing Activities. Investing activities consisted primarily of changes in investment balances, including purchases and maturities of short-term investments. We had net proceeds from the maturity of short-term investments of $69.0 million and $246.6 million in the nine months ended September 30, 2022 and 2021, respectively. We also had purchases of property and equipment of $5.2 million and $10.6 million in the nine months ended September 30, 2022 and 2021, respectively.
Cash Provided by (Used in) Financing Activities. Cash used in financing activities consisted primarily of tax withholdings for net share settlement, net of cash received from the issuance of common stock to employees pursuant to the exercise of employee stock options and our employee stock purchase plan. In the nine months ended September 30, 2022, we had tax withholdings of $8.4 million, offset by proceeds from issuance of common stock of $4.6 million. In the nine months ended September 30, 2021, we had tax withholdings of $6.5 million, offset by proceeds from issuance of common stock of $6.3 million. Additionally, we paid $172.5 million to settle the principal for our 2021 Notes during that period.
Contractual Obligations and Commitments
We have lease obligations primarily consisting of operating leases for our principal offices, our warehouse space and our manufacturing facility, with expiration dates as set forth below.
In March 2015, we entered into a lease agreement for approximately 50,740 square feet of office space located in Redwood City, California for a period beginning in June 2015 and ending in May 2022, with initial annual payments of approximately $2.0 million, increasing to $2.4 million annually in the final year of the lease term. In December 2016, we entered into a first amendment to the lease for an additional approximately 49,980 square feet of office space adjacent to the premises under the original lease (the Expansion Premises) with initial annual payments of $1.2 million, increasing to $2.9 million in the final year of the amended lease term. The lease for the Expansion Premises commenced on June 1, 2018. The first amendment also extends the lease term for the original premises to terminate on the same date as the amended lease, which is May 31, 2025. In April 2017, we entered into a second amendment to the lease for a temporary space of approximately 8,171 square feet for a period beginning in May 2017, and which ended on June 1, 2018, the Commencement Date of the Expansion Premises. See Note 6, Commitments and Contingencies, of Notes to Condensed Consolidated Financial Statements for additional information.
In February 2017, we entered into a separate non-cancellable facility lease for warehouse space beginning March 1, 2017 through February 28, 2022, under which we are obligated to pay approximately $0.4 million in lease payments over the term of the lease. In October 2021, we extended our warehouse lease through May 2025, under which we are obligated to pay approximately $0.4 million over the extended term.
In August 2020, we entered into a lease for approximately 35,411 square feet of manufacturing space to begin in April 2021 and to last through June 2031 at a facility in Costa Rica, under which we are obligated to pay approximately $3.9 million in lease payments over the term of the lease. We plan to use this facility to build-out certain manufacturing capabilities so that we can vertically integrate the assembly of IPGs, peripherals and various other manufacturing related activities.
We have entered into supply agreements with certain of our suppliers that required certain minimum annual purchase agreements. As of September 30, 2022, we had minimum annual purchase commitments of $17.6 million due each year from 2023 to 2025.
We have also entered into a service agreement for which we are committed to pay $2.5 million in each of the next two years over the remaining term of the service agreement, as well as a license agreement for which we are committed to pay $0.1 million over the remaining term of license agreement.
33
As of September 30, 2022, our contractual obligations related to the 2025 Notes are payments of interest of $2.6 million due for the remainder of 2022, payments of interest of $5.2 million due each year from 2023 through 2024, and payments of interest and principal totaling $192.4 million due in 2025.
Off-Balance Sheet Arrangements
Through September 30, 2022, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. For information regarding indemnification obligations, refer to Note 6, Commitments and Contingencies, of Notes to Condensed Consolidated Financial Statements within this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposures to other market risks related to fluctuation in interest rates, market prices and foreign currency exchange have not changed materially since December 31, 2021. For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022, the end of the period covered by this Quarterly Report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The legal proceedings information set forth in Note 6 Commitments and Contingencies, of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.
Item 1A. Risk Factors
In addition to other information contained elsewhere in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report as filed on February 23, 2022, which could materially affect our business, financial condition or future results. There have been no material changes to our risk factors since our Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
34
Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
35
Item 6. Exhibits
Exhibit |
|
|
|
Incorporated by Reference |
|||||||
Number |
|
Description of Document |
|
Form |
|
Date |
|
Number |
|
Filed Herewith |
|
|
|
|
|
|
|
||||||
3.1 |
|
|
8-K |
|
11/12/2014 |
|
3.1 |
|
|
||
|
|
|
|
|
|
||||||
3.2 |
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation. |
|
8-K |
|
5/24/2019 |
|
3.1 |
|
|
|
|
|
|
|
|
|
||||||
3.3 |
|
|
8-K |
|
11/12/2014 |
|
3.2 |
|
|
||
|
|
|
|
|
|
||||||
3.4 |
|
|
8-K |
|
5/24/2019 |
|
3.2 |
|
|
||
|
|
|
|
|
|
||||||
4.1 |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||||||
4.2 |
|
|
S-1/A |
|
10/27/2014 |
|
4.2 |
|
|
||
|
|
|
|
|
|
||||||
4.3 |
|
|
8-K |
|
6/13/2016 |
|
4.1 |
|
|
||
|
|
|
|
|
|
||||||
4.5 |
|
|
8-K |
|
4/7/2020 |
|
4.2 |
|
|
||
|
|
|
|
|
|
||||||
4.6 |
|
Form of 2.75% Senior Convertible Note Due 2025 (included in Exhibit 4.6). |
|
8-K |
|
4/7/2020 |
|
4.3 |
|
|
|
|
|
|
|
|
|
||||||
4.7 |
|
|
10-K |
|
2/25/2020 |
|
4.6 |
|
|
||
|
|
|
|
|
|
||||||
31.1 |
|
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
||||||
31.2 |
|
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
||||||
32.1** |
|
|
|
|
|
|
|
|
X |
||
|
|
|
|
|
|
||||||
36
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. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|||||
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|||||
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|||||
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
X |
|
|
|
|
|
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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# Indicates management contract or compensatory plan.
** The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Nevro Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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NEVRO CORP. |
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(Registrant) |
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Date: November 2, 2022 |
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/s/ D. KEITH GROSSMAN |
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D. Keith Grossman |
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Chief Executive Officer (Principal Executive Officer) |
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Date: November 2, 2022 |
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/s/ RODERICK H. MACLEOD |
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Roderick H. MacLeod |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
38
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, D. Keith Grossman, certify that:
Date: November 2, 2022
/s/ D. KEITH GROSSMAN |
D. Keith Grossman |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Roderick H. MacLeod, certify that:
Date: November 2, 2022
/s/ RODERICK H. MACLEOD |
Roderick H. MacLeod |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Nevro Corp. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), D. Keith Grossman, Chief Executive Officer of the Company, and Roderick H. MacLeod, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 2, 2022
/s/ D. KEITH GROSSMAN |
D. Keith Grossman |
Chief Executive Officer (Principal Executive Officer) |
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/s/ RODERICK H. MACLEOD |
Roderick H. MacLeod |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accounts receivable, allowance for doubtful accounts | $ 1,222 | $ 1,385 |
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 290,000,000 | 290,000,000 |
| Common stock, shares issued | 36,107,515 | 35,709,570 |
| Common stock, shares outstanding | 35,424,599 | 35,026,654 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Income Statement [Abstract] | ||||
| Revenue | $ 100,466 | $ 93,205 | $ 292,521 | $ 284,145 |
| Cost of revenue | 31,164 | 28,575 | 91,393 | 87,235 |
| Gross profit | 69,302 | 64,630 | 201,128 | 196,910 |
| Operating expenses | ||||
| Research and development | 14,030 | 11,553 | 39,118 | 34,956 |
| Sales, general and administrative | 78,190 | 79,521 | 241,488 | 226,673 |
| Certain litigation charges (credits) | (105,000) | 20,000 | (105,000) | 20,000 |
| Total operating expenses | (12,780) | 111,074 | 175,606 | 281,629 |
| Income (Loss) from operations | 82,082 | (46,444) | 25,522 | (84,719) |
| Interest income | 1,128 | 99 | 1,553 | 559 |
| Interest expense | (1,608) | (3,688) | (4,819) | (15,939) |
| Other income (expense), net | 391 | 30 | 844 | (515) |
| Income (Loss) before income taxes | 81,993 | (50,003) | 23,100 | (100,614) |
| Provision for income taxes | 485 | 72 | 907 | 612 |
| Net income (loss) | 81,508 | (50,075) | 22,193 | (101,226) |
| Other comprehensive loss: | ||||
| Changes in foreign currency translation adjustment | (1,690) | (401) | (3,293) | (651) |
| Changes in unrealized gains on short-term investments, net | (102) | (8) | (1,384) | (127) |
| Net change in other comprehensive loss | (1,792) | (409) | (4,677) | (778) |
| Comprehensive income (loss) | $ 79,716 | $ (50,484) | $ 17,516 | $ (102,004) |
| Net income (loss) per common share | ||||
| Basic | $ 2.30 | $ (1.44) | $ 0.63 | $ (2.91) |
| Diluted | $ 2.22 | $ (1.44) | $ 0.63 | $ (2.91) |
| Weighted average number of shares used to compute net income (loss) per share | ||||
| Basic | 35,402,086 | 34,878,443 | 35,265,193 | 34,774,423 |
| Diluted | 37,338,945 | 34,878,443 | 35,501,609 | 34,774,423 |
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying interim condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, and the related interim information contained within the notes to the financial statements, are unaudited. The unaudited interim condensed consolidated financial statements (the condensed consolidated financial statements) have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information and on the same basis as the audited financial statements included on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the Annual Report) filed with the Securities and Exchange Commission (SEC) on February 23, 2022. The condensed consolidated financial statements are prepared in U.S. dollars and include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and the consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021. All such adjustments are of a normal and recurring nature. The interim financial data as of September 30, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future period. The consolidated balance sheet as of December 31, 2021 was derived from the audited financials as of that date. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Annual Report. Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by the management. Actual results may differ from those estimates under different assumptions or conditions. The COVID-19 pandemic has negatively impacted, and may continue to negatively impact the Company’s operations and revenues and overall financial condition. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets which could impact the Company’s estimates and assumptions. Changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates. Basic and Diluted Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing the net loss by the weighted average number of common shares and potentially dilutive common stock equivalents outstanding for the period, if inclusion of these is dilutive. Potentially dilutive common stock equivalents include the common stock options, restricted stock units and performance stock units. Additionally, upon adoption of ASU 2020-06 on January 1, 2022, the Company uses the if-converted method and presumes share settlement for its 2025 Notes when calculating the dilutive effect of these notes. Prior to the adoption, the Company applied the treasury stock method when calculating the potential dilutive effect, if any, of the convertible senior notes which were intended to settle or have settled in cash the principal outstanding. Furthermore, in connection with the offerings of the convertible senior notes, the Company entered into convertible note hedges and warrants. However, the convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. Warrants were considered anti-dilutive to the extent that their strike price were above the Company's average share price during the period. Certain Litigation Charges (Credits) The Company records a liability for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required. Payments received from litigation settlements are recorded as litigation credits. The Company records litigation charges (credits) considered to be significant infrequent transactions as Certain litigation charges (credits) in the consolidated statements of operations. Foreign Currency Translation Unrealized foreign exchange gains and losses from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the reporting entity are recorded in other income (expense), net. Additionally, realized gains and losses resulting from transactions denominated in currencies other than the local currency are recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company recorded net unrealized and net realized foreign currency transaction gains (losses) during the periods presented as follows (in thousands):
Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity. Instead, entities will account for the convertible debt as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method as of January 1, 2022. The adoption of ASU 2020-06 resulted in an increase of $34.3 million to reflect the full principal amount of the convertible senior notes due 2025 issued in April 2020 (2025 Notes), net of debt issuance costs, a reduction of $48.3 million to additional paid-in capital to remove the equity component separately recorded for the conversion features and the debt issuance costs allocated to the conversion feature and a cumulative-effect adjustment of $14.0 million reducing the beginning balance of accumulated deficit as of January 1, 2022. Upon the adoption of ASU 2020-06, interest expense is reduced as the Company no longer recognizes any amortization of debt discounts as interest expense, due to the removal of the unamortized debt discounts. In addition, the use of the if-converted method for the 2025 Notes in calculating diluted net income (loss) per share calculation under ASU 2020-06 had no impact to the number of potentially dilutive shares in each of the periods presented. The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06 were as follows (in thousands):
Significant Accounting Policies With the exception of the policies and accounting pronouncements above, there have been no other material changes to the Company’s significant accounting policies from its Annual Report. |
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Revenue |
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| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | 2. Revenue The following table presents revenue by geography, based on the billing address of the customer (in thousands):
The United States is the only country that accounts for 10% or more of the revenue during the periods presented:
There were no customers that accounted for 10% or more of the Company’s revenue for each of the three and nine months ended September 30, 2022 and 2021. Additionally, there were no customers that accounted for 10% or more of the Company’s accounts receivable balance as of September 30, 2022 and December 31, 2021. For each of the three and nine months ended September 30, 2022, the Company recognized bad debt credits of $7,000 and expenses of $0.2 million, respectively. For the three and nine months ended September 30, 2021, the Company recognized bad debt expenses of $14,000 and $0.1 million, respectively. In July 2021, the Company received FDA approval of its proprietary 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with painful diabetic neuropathy (PDN). For the three and nine months ended September 30, 2022, PDN represented 13% and 11% of worldwide permanent implant procedures, respectively, which resulted in approximately $13.4 million and $30.4 million in revenue, respectively. The Company classifies PDN revenue by using estimates and assumptions based on historical experiences and knowledge of current conditions, given available information. |
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Lease Accounting |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease Accounting | 3. Lease Accounting The Company has operating leases for office space, a manufacturing facility, warehouse, research and development facilities and equipment. Leases with terms of 12 months or less are not recorded on the balance sheet, as the related lease expenses are recognized on a straight-line basis over the lease term. The Company accounts for lease components (such as fixed payments) separately from non-lease components (such as common area expenses). The weighted average lease terms and discounts rates are as follows:
As of September 30, 2022, the maturity of lease liabilities are as follows (in thousands):
Supplemental lease cost information are as follows (in thousands):
Supplemental balance sheet information are as follows (in thousands):
Supplemental cash flow information are as follows (in thousands):
See Note 6 for further details of the Company’s lease commitments. |
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 4. Fair Value Measurements Cash Equivalents and Short-Term Investments The Company’s cash equivalents are comprised of investments in money market funds that are classified as Level 1 of the fair value hierarchy. The Company’s money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. The Company’s short-term investments are comprised of agency bonds, commercial paper, corporate notes and treasury bonds. All short-term investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
(i) Included in cash and cash equivalents on the condensed consolidated balance sheets. (ii) Included in short-term investments on the condensed consolidated balance sheets. (iii) Included in cash and cash equivalents or short-term investments on the condensed consolidated balance sheets. Convertible Senior Notes As of September 30, 2022 and December 31, 2021, the fair value of the 2.75% convertible senior notes due 2025 was $179.3 million and $212.0 million, respectively. The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (See Note 7). |
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Balance Sheet Components |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Components | 5. Balance Sheet Components Cash and Cash Equivalents The Company considers all highly-liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include money market funds in the amount of $109.6 million and $9.6 million as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company’s cash equivalents were held at institutions in the United States and include deposits in a money market fund which was unrestricted as to withdrawal or use. The Company also held cash in foreign banks of approximately $16.6 million at September 30, 2022 and $8.6 million at December 31, 2021 that was not insured. The Company has not experienced any losses on its deposits of cash and cash equivalents. Investments The fair value of the Company’s cash equivalents and short-term investments approximates their respective carrying amounts due to their short-term maturity. The following is a summary of the gross unrealized gains and unrealized losses on the Company’s investment securities, excluding investments in money market funds (in thousands):
Realized gains or losses and other-than-temporary impairments, if any, on available-for-sale securities are reported in other income (expense), net as incurred. The cost of securities sold is determined based on the specific identification method. The amount of realized gains and realized losses on investments recorded for the periods presented has not been material. The contractual maturities of the Company’s investment securities as of September 30, 2022 were as follows (in thousands):
Inventories (in thousands)
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the standard cost method which approximates the first-in, first-out basis. Net realizable value is determined as the prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company regularly reviews inventory quantities compared to forecasted sales to record a provision for excess and obsolete inventory when appropriate. Inventory write-downs are recorded for excess and obsolete inventory. The Company estimates forecasted sales by considering product acceptance in the marketplace, customer demand, historical sales, product obsolescence and technological innovations. The Company’s policy is to write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected lower of cost or net realizable value, and inventory in excess of expected requirements. The estimate of excess quantities is judgmental and primarily dependent on the Company’s estimates of future demand for a particular product. If the estimate of future demand is inaccurate based on actual sales, the Company may increase the write-down for excess inventory for that component and record a charge to inventory impairment in the accompanying consolidated statements of operations and comprehensive loss. The Company periodically evaluates the carrying value of inventory on hand for potential excess amount over demand using the same lower of cost or net realizable value approach as that has been used to value the inventory. The Company also periodically evaluates inventory quantities in consideration of actual loss experience. As a result of these evaluations, the Company recognized total write-downs of $1.4 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $3.6 million and $3.7 million for the nine months ended September 30, 2022 and 2021, respectively. The Company’s estimation of the future demand for a particular component of the Company’s products may vary and may result in changes in estimates in any particular period.
Property and Equipment, Net (in thousands)
The Company recognized depreciation and amortization expense on property and equipment as follows (in thousands):
Accrued Liabilities (in thousands)
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | 6. Commitments and Contingencies Operating Leases In March 2015, the Company entered into a lease agreement for approximately 50,000 square feet of office space located in Redwood City, California for a period beginning on June 30, 2015 and ending in May 2022, with initial annual payments of approximately $2.0 million, increasing to $2.4 million annually during the final year of the lease term. In December 2016, the Company entered into a first amendment to the lease for an additional approximately 50,000 square feet of office space adjacent to the premises under the original lease (the Expansion Premises), with initial annual payments of $1.2 million, increasing to $2.9 million in the final year of the amended lease term. The lease for the Expansion Premises commenced on June 1, 2018, and it will expire on May 31, 2025. The first amendment also extends the lease term for the original premises to terminate on the same date as the Expansion Premises. The Company entered into a separate non-cancellable facility lease for warehouse space beginning on March 1, 2017 through February 28, 2022, under which it is obligated to pay approximately $0.4 million in lease payments over the term of the lease. In October 2021, the Company entered into a first amendment of the warehouse lease, which extends the lease term to terminate on May 31, 2025 and under which the Company is obligated to pay approximately $0.4 million over the term of the extension period. In August 2020, the Company entered into a lease for approximately 35,411 square feet of space for a manufacturing facility in Costa Rica to begin in and to last through , under which it is obligated to pay approximately $3.9 million in lease payments over the term of the lease. On the commencement date in April 2021, the Company classified and measured the lease, resulting in the recording of operating assets of $2.9 million and operating lease liabilities of $2.9 million. See Note 3 for further discussion on Lease Accounting. Warranty Obligations The Company provides a limited one- to five-year warranty and warrants that its products will operate substantially in conformity with product specifications. The Company records an estimate for the provision for warranty claims in cost of revenue when the related revenues are recognized. This estimate is based on historical and anticipated rates of warranty claims, the cost per claim and the number of units sold. The Company regularly assesses the adequacy of its recorded warranty obligations and adjusts the amounts as necessary. Activities related to warranty obligations were as follows (in thousands):
Contingencies From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities related to, for example, employment matters and patent issues. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. When determining the estimated loss or range of loss, significant judgement is required. The Company accrued a loss contingency of $20.0 million as of September 30, 2021 related to the Delaware I case described in the Legal Matters section below, which remained accrued as of December 31, 2021. In the third quarter of 2022, the Company reached an agreement with Boston Scientific (defined below) to settle their ongoing intellectual property litigations. Pursuant to the parties’ settlement, the Company received a payment from Boston Scientific of $85.0 million in cash, and Boston Scientific has released the $20.0 million verdict it was awarded by a Delaware jury in 2021. As a result, the Company reversed the liability related to the $20.0 million loss contingency that it accrued in the period ended September 30, 2021. There were no other contingent liabilities requiring accrual as of September 30, 2022 or December 31, 2021. Indemnification The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made. 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 maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that reduces the Company’s exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. Legal Matters Boston Scientific Litigations California Litigation Related to High Frequency On November 28, 2016, the Company filed a lawsuit for patent infringement against Boston Scientific Corporation and Boston Scientific Neuromodulation Corporation (collectively, Boston Scientific). The lawsuit, filed in the U.S. District Court for the Northern District of California (the California Court), asserted that Boston Scientific was infringing, or would soon begin infringing, seven of the Company’s patents covering inventions relating to the Senza system and 10 kHz Therapy. Shortly after the Company filed this lawsuit in 2016, Boston Scientific cancelled its original launch plan and modified its SCS system to avoid infringing the asserted patents. On July 24, 2018, the California Court issued an order on claim construction and summary judgment. In the order, the California Court ruled that the Company’s asserted method claims were patent eligible and not invalid as indefinite. Collectively, the asserted method claims cover methods for delivering SCS therapy at frequencies between 1.5 kHz and 100 kHz. The California Court, however, found that Boston Scientific was not currently infringing the six upheld method claims because Boston Scientific cancelled its original launch plans and ultimately never practiced the asserted method claims in the United States. Specifically, the California Court found that Boston Scientific's sale of the Spectra WaveWriter systems for commercial use in the United States did not infringe the upheld method claims because Boston Scientific modified the Spectra WaveWriter systems to prevent them from being programmed to generate signals above 1.2 kHz. The California Court also found that the Company’s asserted system claims were invalid as indefinite. As discussed below, the California Court’s finding of invalidity was overturned by the U.S. Court of Appeals for the Federal Circuit (the Federal Circuit). On July 31, 2018, the parties entered into an agreement to dismiss the Company’s declaratory judgment claims, without prejudice, so that the Company and Boston Scientific could each appeal portions of the California Court’s July 24th ruling to the Federal Circuit. On April 9, 2020, the Federal Circuit returned its ruling, which vacated and remanded the California Court’s judgment of invalidity. As a result of the Federal Circuit’s ruling, the system claims invalidated by the California Court were reinstated, and thus all of the Company’s asserted claims remain valid and enforceable. On December 14, 2020, the parties agreed to the final dismissal of all remaining claims before the California Court based on Boston Scientific’s assertion to the court that it did not have any current plans to commercially launch a high frequency SCS system in the United States. The California Court entered the agreed upon dismissal on December 16, 2020. Delaware Litigations Unrelated to High Frequency On December 9, 2016, Boston Scientific filed a patent infringement lawsuit alleging the Company’s manufacture, use and sale of the Senza system infringes ten of Boston Scientific’s patents covering spinal cord stimulation technology related to stimulation leads, rechargeable batteries and telemetry (the Delaware I litigation). On April 27, 2018, Boston Scientific filed a second lawsuit alleging patent infringement of nine patents, trade secret misappropriation and tortious interference with contract (the Delaware II litigation). Both lawsuits were filed in the U.S. District Court for the District of Delaware. In relation to the Delaware I litigation, the Company filed petitions for inter partes review at the U.S. Patent and Trademark Office (USPTO), which resulted in the invalidation of all of the asserted claims of Boston Scientific’s U.S. Patent Nos. 7,587,241 and 6,895,280, in February 2019. The invalidity rulings by the Patent Trial and Appeal Board (PTAB) at the USPTO were later affirmed by the Federal Circuit on May 18, 2020 and May 29, 2020, respectively. In relation to the Delaware II litigation, the Company filed seven petitions for inter partes review at the PTAB against seven of the nine patents asserted by Boston Scientific. As a result of those petitions, in January 2021, the PTAB invalidated all but two of the challenged Boston Scientific claims across the seven inter partes reviews. The invalidity rulings by the PTAB were later affirmed by the Federal Circuit on March 10, 2022, and March 18, 2022, respectively. Through various orders from the court, portions of Boston Scientific’s Delaware I case were dismissed, and portions of Boston Scientific’s Delaware II case were stayed for future litigation. The stay of the Delaware II litigation was lifted in April 2022, and the case was expected to proceed to a trial in 2023. In relation to the Delaware I case, of the ten patents originally asserted on December 9, 2016, Boston Scientific proceeded to trial with four patents directed to SCS leads and lead manufacturing techniques. On November 1, 2021, a Delaware jury found that the Company infringed Boston Scientific’s patents U.S. 7,891,085 (the ‘085 patent) and U.S. 8,019,439, and that the Company did not infringe Boston Scientific’s patents U.S. 8,646,172 and U.S. 8,650,747. With regard to the ‘085 patent, the jury found that the infringement was willful, though the infringement of the ‘085 patent was only directed to a limited number of SCS leads that the Company sold internationally between 2012 and 2014. Boston Scientific does not assert that the Company continues to infringe the ‘085 patent. The Delaware jury awarded Boston Scientific $20.0 million. The Company disagreed with this decision and intended to appeal. In relation to the Delaware II litigation, the Company also filed counterclaims against Boston Scientific, alleging patent infringement of five Nevro patents. In March 2021, on the basis of Boston Scientific’s petition, the PTAB initiated inter partes reviews of two of Nevro’s five counterclaim patents. The two instituted inter partes reviews were directed to Nevro’s U.S. Patent Nos. 10,076,665 and 9,002,460. On March 14, 2022, the PTAB upheld claim 8 of Nevro’s U.S. Patent No. 10,076,665, but invalidated the rest of the challenged claims, and the PTAB invalidated all of the challenged claims of Nevro’s U.S. Patent No. 9,002,460. The Company expected litigation to proceed for the remaining three counterclaim patents, and for a trial to be held for the three counterclaim patents in 2023. On February 23, 2021, the Company filed a patent infringement lawsuit against Boston Scientific alleging that its January 2021 launch of the WaveWriter Alpha™ SCS System infringes five of the Company’s patents covering spinal cord stimulation technology related to delivering paresthesia-free therapy at frequencies below 1,200 Hz. The lawsuit, filed in the U.S. District Court for the District of Delaware (the Delaware III litigation), sought unspecified damages and attorney’s fees, as well as preliminary and/or permanent injunctive relief against further infringement. The Company expected a trial for the Delaware III litigation would be held in October 2023. With regard to the Delaware III litigation, Boston Scientific filed inter partes review petitions against three of the five asserted patents; specifically, U.S. Patent Nos. 8,829,209; 10,576,286; and 10,556,112. The PTAB’s institution decisions for these inter partes reviews was expected in August 2022. On August 1, 2022, the Company issued a press release and a Form 8-K relating to its agreement with Boston Scientific to settle their ongoing intellectual property litigations. Pursuant to the parties’ settlement, Nevro received a net payment from Boston Scientific of $85.0 million in cash, and Boston Scientific has released the $20.0 million verdict it was awarded by a Delaware jury on November 1, 2021 in the aforementioned Delaware I case. As a result of the release, Nevro reversed the liability related to the $20.0 million loss contingency that it accrued in the period ended September 30, 2021. In addition, Nevro granted Boston Scientific a worldwide, non-exclusive, non-transferable license to practice paresthesia-free therapy at frequencies below 1,500 Hz and a covenant not to sue for any features embodied in any current Boston Scientific products for frequencies below 1,500 Hz. Boston Scientific also granted Nevro a worldwide, non-exclusive, non-transferable license under Boston Scientific’s asserted patent families and a covenant not to sue for any features embodied in any current Nevro products. The settlement gives Boston Scientific the freedom to operate using the features and capabilities embodied in its current line of products for frequencies below 1,500 Hz, and gives the Company the freedom to operate using the features and capabilities embodied in its current line of products. The settlement concluded all of the existing litigations between Nevro and Boston Scientific. Stimwave Litigation On February 14, 2019, the Company filed a lawsuit for patent infringement against Stimwave Technologies, Inc. (Stimwave) in the Delaware Court asserting that Stimwave was infringing the Company’s patents covering inventions related to its 10 kHz Therapy and the Senza system, as well as a claim for false advertising under the Lanham Action Section 43(a), 15 U.S.C. § 1125(a). In relation to this lawsuit, on July 24, 2019, the Delaware Court granted the Company’s motion for preliminary injunction, and issued an order barring Stimwave, and all affiliated persons and entities, from infringing patent claims covering frequencies between 3 kHz and 10 kHz. On February 27, 2020, the Company and Stimwave entered into a Settlement Agreement, in which Stimwave agreed to cease commercialization of all high frequency spinal cord stimulation systems worldwide. Stimwave also agreed to entry of a permanent injunction in the Delaware Court, under which Stimwave’s products will not deliver spinal cord stimulation therapy that includes pulse frequencies between 1,500 Hz and 100,000 Hz. The permanent injunction was filed with the Delaware Court and entered on March 2, 2020. After the Delaware Court entered the permanent injunction, the case (including Stimwave’s appeal of the preliminary injunction order) were dismissed. As part of the permanent injunction filing, Stimwave acknowledged the validity of the patents Nevro asserted in the litigation. Per the Company’s request, the permanent injunction order does not enjoin Stimwave from providing follow-up care and programming for any patients who were already programmed with high frequency therapy in the United States prior to March 6, 2020, and in the rest of the world prior to April 30, 2020. Nalu Litigation On February 28, 2020, the Company filed a lawsuit in the Delaware Court for patent infringement against Nalu Medical, Inc. (Nalu) asserting that Nalu is infringing the Company’s patents covering inventions related to its 10 kHz Therapy and the Senza system. The Company’s patent infringement assertions were based, in part, on Nalu imbedding a high frequency SCS therapy in a version of its “PSP” waveform. During the litigation, Nalu modified its PSP waveform so that it no longer included an imbedded high frequency signal. As a result, on December 21, 2021, the Company announced that it had reached a favorable settlement agreement with Nalu to terminate the litigation. The Company is and may from time to time continue to be involved in various legal proceedings to defend its intellectual property, including several pending European patent oppositions at the European Patent Office (EPO) initiated by the Company’s competitors Medtronic and Boston Scientific, an entitlement action filed by Boston Scientific in Germany, and an invalidity proceeding in China. In addition, the Company is and may from time to time also be involved in various legal proceedings of a character normally incident to the ordinary course of business, such as employment matters, product liability matters, and professional liability matters, which the Company does not deem to be material to its business and condensed consolidated financial statements at this stage. Flathead Partners Litigation/Arbitration On July 15, 2022, the Company filed a lawsuit in the U.S. District Court for the Northern District of California for breach of contract against Flathead Partners, LLC, the Mayo Foundation for Medical Education and Research, and Mayo Clinic Ventures (herein referred to as “Flathead Partners”). The Company’s suit alleged that Flathead Partners breached the 2006 license agreement between the Company and the Mayo Clinic (referred to in the Company’s 10-K filing as the “Mayo License”), when Flathead Partners unilaterally asserted control of pending U.S. Patent Application 16/286,389 (the “’389 Application”), which is subject to the Mayo License. The suit sought to enjoin the Flathead Partners from taking any action at the U.S. Patent Office with respect to the ‘389 Application, and to thereafter engage in an arbitration as called for in the Mayo License. On July 27, 2022, the Flathead Partners agreed to enter into an arbitration to determine which party shall have control of prosecution of the ‘389 Application, and whether there are ongoing royalty obligations under the Mayo License. Therefore, Nevro dismissed the lawsuit in the Northern District of California. The parties have since been engaged in an arbitration, the details of which are subject to the confidentiality provisions outlined in the Mayo License. |
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Debt |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | 7. Debt 2021 Notes and Convertible Note Hedge and Warrant Transactions On June 1, 2021, the Company's 1.75% convertible senior notes due 2021 (the 2021 Notes) matured and the Company settled the 2021 Notes. The Company paid $172.5 million to settle the outstanding principal and issued 682,912 shares of common stock to holders who elected to convert the 2021 Notes. As such, the 2021 Notes are no longer outstanding. In addition, the Company exercised its option under the bond hedge and received 682,916 shares of common stock from the bank counterparties. On the balance sheet, these shares are shown as issued but not outstanding.
2025 Notes and Convertible Note Hedge and Warrant Transactions In April 2020, the Company issued $165.0 million aggregate principal amount of 2.75% convertible senior notes due 2025 in a registered underwritten public offering and an additional $24.8 million aggregate principal amount of such notes pursuant to underwriters’ exercise in full of their option to purchase additional 2025 Notes. The interest rates are fixed at 2.75% per annum and are payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2020. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $183.6 million. Each $1,000 principal amount of the 2025 Notes will initially be convertible into 9.5238 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $105.00 per share, subject to adjustment upon the occurrence of specified events. The 2025 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 October 1, 2024, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s 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 on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture to the 2025 Notes) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after October 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2025 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 the Company undergoes a fundamental change prior to the maturity date, holders of the 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 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 September 30, 2022 , the conditions allowing holders of the 2025 Notes to convert have not been met. Therefore, the 2025 Notes are not convertible during the three months ended December 31, 2022. As of September 30, 2022, the if-converted value of the 2025 Notes did not exceed the principal value of those notes. In connection with the offering of the 2025 Notes, the Company entered into convertible note hedge transactions with certain bank counterparties in which the Company has the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 1.8 million shares of the Company’s common stock at a price of approximately $105.00 per share. The total cost of the convertible note hedge transactions was $52.4 million. In addition, the Company sold warrants to certain bank counterparties whereby the holders of the warrants have the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 1.8 million shares of the Company’s common stock at a price of $147.00 per share. The Company received $34.9 million in cash proceeds from the sale of these warrants. Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset any actual dilution from the conversion of these notes and to effectively increase the overall conversion price from $105.00 to $147.00 per share. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded in stockholders’ equity and will not be subsequently remeasured as long as they continue to meet the conditions for equity classification. The net cost of $17.5 million incurred in connection with the convertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital on the consolidated balance sheet. In accounting for the issuance of the convertible senior notes, prior to the adoption of ASU 2020-06, the Company separated the 2025 Notes 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 convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2025 Notes. The equity component was not remeasured as long as it continued to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (debt discount) was amortized to interest expense over the term of the 2025 Notes expense at an effective interest rate of 10.2% over the contractual terms of the notes. Upon the adoption of ASU 2020-06 on January 1, 2022, the Company reversed the separation of the debt and equity components and accounted for the 2025 Notes wholly as debt. The Company also reversed the amortization of the debt discount, with a cumulative adjustment to retained earnings on the adoption date. In accounting for the debt issuance costs related to the 2025 Notes, prior to the adoption of ASU 2020-06, the Company allocated the total amount incurred to the liability and equity components of the 2025 Notes based on the same proportion as the accounting for the proceeds from the issuance of the 2025 Notes. Issuance costs attributable to the liability component were to be amortized to interest expense using the effective interest method over the contractual terms of the 2025 Notes. Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity. Upon the adoption of ASU 2020-06 on January 1, 2022, the Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost to be amortized as interest expense over the remaining term of the 2025 Notes, with a cumulative adjustment to retained earnings on the adoption date. The effective interest rate for the 2025 Notes was 3.5% in the three and nine months ended September 30, 2022 and 10.2% in the three and nine months ended September 30, 2021. The decrease in the effective interest rate is due to the elimination of interest expense related to the conversion feature of the 2025 Notes as a result of adopting ASU 2020-06. See Note 1 for the cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06. The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands):
The net carrying amount of the equity component of the 2025 Notes was as follows (in thousands):
The following table sets forth the interest expense recognized related to the 2021 Notes and the 2025 Notes (in thousands):
The debt discount associated with the equity component of the 2025 Notes was reversed upon the adoption of ASU 2020-06, which resulted in a decrease in the amount of non-cash interest expense to be recognized after the adoption date of January 1, 2022. |
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Basic and Diluted Net Income (Loss) Per Share |
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| Basic and Diluted Net Income (Loss) Per Share | Basic and Diluted Net Income (Loss) Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period, if inclusion of these is dilutive. Upon adoption of ASU 2020-06 on January 1, 2022, the Company uses the if-converted method and presumes share settlement for its 2025 Notes when calculating the dilutive effect of these notes. Prior to the adoption, the Company applied the treasury stock method when calculating the potential dilutive effect, if any, of the convertible senior notes which were intended to settle or have settled in cash the principal outstanding. Furthermore, in connection with the offerings of the convertible senior notes, the Company entered into convertible note hedges and warrants. However, the convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. Warrants were considered anti-dilutive to the extent that their strike price were above the Company's average share price during the period. The following table presents the reconciliation of net income (loss) used in computing basic and diluted net income (loss) per common share (in thousands):
The following table presents the reconciliation of weighted average shares used in computing basic and diluted net income (loss) per common share:
The following table presents the net income (loss) per common share - basic and diluted:
Because the Company has reported a net loss for the three and nine months ended September 30, 2021, the diluted net loss per common share is the same as basic net loss per common share for those periods. The following potentially dilutive securities outstanding at the end of the periods presented have been excluded from the computation of diluted shares outstanding, as the effect would be anti-dilutive:
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Employee Benefit Plans |
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Sep. 30, 2022 | |
| Postemployment Benefits [Abstract] | |
| Employee Benefit Plans | 9. Employee Benefit Plans 401(k) Plan In 2007, the Company adopted a 401(k) plan for its employees whereby eligible employees may contribute up to the maximum amount permitted by the Internal Revenue Code. In June 2016, the Company adopted a policy to match a portion of employee contributions for all qualified employees participating in the 401(k) plan. The Company recorded an expense for matching contributions of $0.4 million and $3.3 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $2.8 million for the three and nine months ended September 30, 2021, respectively. Employee Stock Purchase Plan The Company’s 2014 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP generally provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or on the last trading day of the offering period. There were zero and 84,837 shares of common stock issued under the ESPP for each of the three and nine months ended September 30, 2022, respectively and zero and 37,753 shares of common stock issued under the ESPP for the three and nine months ended September 30, 2021, respectively. Shares available for future purchase under the ESPP were 1,482,677 at September 30, 2022. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation The accompanying interim condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, and the related interim information contained within the notes to the financial statements, are unaudited. The unaudited interim condensed consolidated financial statements (the condensed consolidated financial statements) have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information and on the same basis as the audited financial statements included on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the Annual Report) filed with the Securities and Exchange Commission (SEC) on February 23, 2022. The condensed consolidated financial statements are prepared in U.S. dollars and include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and the consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021. All such adjustments are of a normal and recurring nature. The interim financial data as of September 30, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future period. The consolidated balance sheet as of December 31, 2021 was derived from the audited financials as of that date. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Annual Report. |
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| Use of Estimates | Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by the management. Actual results may differ from those estimates under different assumptions or conditions. The COVID-19 pandemic has negatively impacted, and may continue to negatively impact the Company’s operations and revenues and overall financial condition. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets which could impact the Company’s estimates and assumptions. Changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates. |
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| Basic and Diluted Net Income (Loss) Per Share | Basic and Diluted Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing the net loss by the weighted average number of common shares and potentially dilutive common stock equivalents outstanding for the period, if inclusion of these is dilutive. Potentially dilutive common stock equivalents include the common stock options, restricted stock units and performance stock units. Additionally, upon adoption of ASU 2020-06 on January 1, 2022, the Company uses the if-converted method and presumes share settlement for its 2025 Notes when calculating the dilutive effect of these notes. Prior to the adoption, the Company applied the treasury stock method when calculating the potential dilutive effect, if any, of the convertible senior notes which were intended to settle or have settled in cash the principal outstanding. Furthermore, in connection with the offerings of the convertible senior notes, the Company entered into convertible note hedges and warrants. However, the convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. Warrants were considered anti-dilutive to the extent that their strike price were above the Company's average share price during the period. |
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| Certain Litigation Charges (Credits) | Certain Litigation Charges (Credits) The Company records a liability for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required. Payments received from litigation settlements are recorded as litigation credits. The Company records litigation charges (credits) considered to be significant infrequent transactions as Certain litigation charges (credits) in the consolidated statements of operations. |
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| Foreign Currency Translation | Foreign Currency Translation Unrealized foreign exchange gains and losses from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the reporting entity are recorded in other income (expense), net. Additionally, realized gains and losses resulting from transactions denominated in currencies other than the local currency are recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company recorded net unrealized and net realized foreign currency transaction gains (losses) during the periods presented as follows (in thousands):
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity. Instead, entities will account for the convertible debt as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method as of January 1, 2022. The adoption of ASU 2020-06 resulted in an increase of $34.3 million to reflect the full principal amount of the convertible senior notes due 2025 issued in April 2020 (2025 Notes), net of debt issuance costs, a reduction of $48.3 million to additional paid-in capital to remove the equity component separately recorded for the conversion features and the debt issuance costs allocated to the conversion feature and a cumulative-effect adjustment of $14.0 million reducing the beginning balance of accumulated deficit as of January 1, 2022. Upon the adoption of ASU 2020-06, interest expense is reduced as the Company no longer recognizes any amortization of debt discounts as interest expense, due to the removal of the unamortized debt discounts. In addition, the use of the if-converted method for the 2025 Notes in calculating diluted net income (loss) per share calculation under ASU 2020-06 had no impact to the number of potentially dilutive shares in each of the periods presented. The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06 were as follows (in thousands):
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| Significant Accounting Policies | Significant Accounting Policies With the exception of the policies and accounting pronouncements above, there have been no other material changes to the Company’s significant accounting policies from its Annual Report. |
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| Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include money market funds in the amount of $109.6 million and $9.6 million as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company’s cash equivalents were held at institutions in the United States and include deposits in a money market fund which was unrestricted as to withdrawal or use. The Company also held cash in foreign banks of approximately $16.6 million at September 30, 2022 and $8.6 million at December 31, 2021 that was not insured. The Company has not experienced any losses on its deposits of cash and cash equivalents. |
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| Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the standard cost method which approximates the first-in, first-out basis. Net realizable value is determined as the prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company regularly reviews inventory quantities compared to forecasted sales to record a provision for excess and obsolete inventory when appropriate. Inventory write-downs are recorded for excess and obsolete inventory. The Company estimates forecasted sales by considering product acceptance in the marketplace, customer demand, historical sales, product obsolescence and technological innovations. The Company’s policy is to write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected lower of cost or net realizable value, and inventory in excess of expected requirements. The estimate of excess quantities is judgmental and primarily dependent on the Company’s estimates of future demand for a particular product. If the estimate of future demand is inaccurate based on actual sales, the Company may increase the write-down for excess inventory for that component and record a charge to inventory impairment in the accompanying consolidated statements of operations and comprehensive loss. The Company periodically evaluates the carrying value of inventory on hand for potential excess amount over demand using the same lower of cost or net realizable value approach as that has been used to value the inventory. The Company also periodically evaluates inventory quantities in consideration of actual loss experience. As a result of these evaluations, the Company recognized total write-downs of $1.4 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $3.6 million and $3.7 million for the nine months ended September 30, 2022 and 2021, respectively. The Company’s estimation of the future demand for a particular component of the Company’s products may vary and may result in changes in estimates in any particular period. |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Unrealized and Net Realized Foreign Currency Transaction Gains (Losses) | The Company recorded net unrealized and net realized foreign currency transaction gains (losses) during the periods presented as follows (in thousands):
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| Cumulative Effect Of Changes | The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06 were as follows (in thousands):
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Revenue (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Revenue by Geography on Billing Address of Customer | The following table presents revenue by geography, based on the billing address of the customer (in thousands):
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| Schedule of Revenue by Major Customers by Geographic Area | The United States is the only country that accounts for 10% or more of the revenue during the periods presented:
|
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Lease Accounting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Weighted Average Lease Terms and Discounts Rates | The weighted average lease terms and discounts rates are as follows:
|
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| Schedule of Maturity of Lease Liabilities | As of September 30, 2022, the maturity of lease liabilities are as follows (in thousands):
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| Supplemental Lease Cost Information | Supplemental lease cost information are as follows (in thousands):
|
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| Schedule Of Operating Lease Assets and Liabilities | Supplemental balance sheet information are as follows (in thousands):
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| Schedule of Supplemental Cash Flow Information Related to Lease | Supplemental cash flow information are as follows (in thousands):
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Fair Value Measurements (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments Measured at Fair Value on Recurring Basis | The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
(i) Included in cash and cash equivalents on the condensed consolidated balance sheets. (ii) Included in short-term investments on the condensed consolidated balance sheets. (iii)
Included in cash and cash equivalents or short-term investments on the condensed consolidated balance sheets. |
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Balance Sheet Components (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Gross Unrealized Gains and Unrealized Losses of Investment Securities Excluding Investments in Money Market Funds | The following is a summary of the gross unrealized gains and unrealized losses on the Company’s investment securities, excluding investments in money market funds (in thousands):
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| Summary of Contractual Maturities of Investment Securities | The contractual maturities of the Company’s investment securities as of September 30, 2022 were as follows (in thousands):
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| Components of Inventories | Inventories (in thousands)
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| Schedule of Property and Equipment, Net and Depreciation and Amortization Expense | Property and Equipment, Net (in thousands)
The Company recognized depreciation and amortization expense on property and equipment as follows (in thousands):
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| Summary of Accrued Liabilities | Accrued Liabilities (in thousands)
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Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Activities Related to Warranty Obligations | Activities related to warranty obligations were as follows (in thousands):
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Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Expense Recognized Related to Convertible Notes | The following table sets forth the interest expense recognized related to the 2021 Notes and the 2025 Notes (in thousands):
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| 2025 Notes and Convertible Notes [Member] | Debt, Liability Component [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Carrying Amount of Convertible Debt | The net carrying amount of the liability component of the 2025 Notes was as follows (in thousands):
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| 2025 Notes and Convertible Notes [Member] | Debt, Equity Component [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Carrying Amount of Convertible Debt | The net carrying amount of the equity component of the 2025 Notes was as follows (in thousands):
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Basic and Diluted Net Income (Loss) Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Computation of Basic and Diluted Net Loss per Share | The following table presents the reconciliation of net income (loss) used in computing basic and diluted net income (loss) per common share (in thousands):
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| Schedule of Weighted Average Shares used in Computing Basic and Diluted Net Income (Loss) Per Common Share | The following table presents the reconciliation of weighted average shares used in computing basic and diluted net income (loss) per common share:
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| Schedule of Net Income (Loss) Per Common Share - Basic and Diluted | The following table presents the net income (loss) per common share - basic and diluted:
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| Computation of Potentially Dilutive Securities Outstanding Excluded from Computation of Diluted Shares | The following potentially dilutive securities outstanding at the end of the periods presented have been excluded from the computation of diluted shares outstanding, as the effect would be anti-dilutive:
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Summary of Significant Accounting Policies - Net Unrealized and Net Realized Foreign Currency Transaction Gains (Losses) (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Accounting Policies [Abstract] | ||||
| Net unrealized foreign currency gain (loss) | $ 1,026 | $ (745) | $ 2,249 | $ (2,861) |
| Net realized foreign currency gain (loss) | $ (585) | $ 787 | $ (1,296) | $ 2,385 |
Summary of Significant Accounting Policies - Cumulative Effect Of Changes (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jan. 01, 2022 |
Dec. 31, 2021 |
|---|---|---|---|
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
| Long-term debt | $ 186,559 | $ 151,310 | |
| Additional paid-in capital | 917,946 | 928,138 | |
| Accumulated deficit | $ (588,005) | (624,193) | |
| ASU 2020-06 [Member] | |||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
| Long-term debt | $ 185,655 | ||
| Additional paid-in capital | 879,798 | ||
| Accumulated deficit | (610,198) | ||
| Scenario Previously Reported [Member] | |||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
| Long-term debt | 151,310 | ||
| Additional paid-in capital | 928,138 | ||
| Accumulated deficit | $ (624,193) | ||
| Restatement Adjustment [Member] | ASU 2020-06 [Member] | |||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
| Long-term debt | 34,345 | ||
| Additional paid-in capital | (48,340) | ||
| Accumulated deficit | $ 13,995 |
Revenue - Summary of Revenue by Geography on Billing Address of Customer (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Disaggregation Of Revenue [Line Items] | ||||
| Total revenue | $ 100,466 | $ 93,205 | $ 292,521 | $ 284,145 |
| United States [Member] | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Total revenue | 86,130 | 78,052 | 248,393 | 237,806 |
| International [Member] | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Total revenue | $ 14,336 | $ 15,153 | $ 44,128 | $ 46,339 |
Revenue - Schedule of Revenue by Major Customers by Geographic Area (Detail) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Revenue Benchmark | Geographic Concentration Risk [Member] | United States [Member] | ||||
| Concentration Risk [Line Items] | ||||
| Revenue | 86.00% | 84.00% | 85.00% | 84.00% |
Lease Accounting - Schedule of Weighted Average Lease Terms and Discounts Rates (Detail) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Leases [Abstract] | ||
| Weighted-average remaining lease term | 3 years 6 months 25 days | 4 years 2 months 12 days |
| Weighted-average discount rate | 7.00% | 7.00% |
Lease Accounting - Schedule of Maturity of Lease Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Leases [Abstract] | ||
| 2022, remaining months | $ 1,478 | |
| 2023 | 6,019 | |
| 2024 | 6,201 | |
| 2025 | 2,849 | |
| 2026 | 405 | |
| Thereafter | 1,978 | |
| Total lease payments | 18,930 | |
| Less: Interest | (2,236) | |
| Present value of lease liabilities | $ 16,694 | $ 19,990 |
Lease Accounting - Supplemental Lease Cost Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Leases [Abstract] | ||||
| Operating lease cost | $ 1,342 | $ 1,333 | $ 4,027 | $ 3,901 |
Lease Accounting - Summary of Operating Lease Assets and Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Operating Leases: | ||
| Operating lease assets | $ 14,497 | $ 17,577 |
| Other current liabilities | $ 5,070 | $ 4,588 |
| Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Other current liabilities | Other current liabilities |
| Long term operating lease liabilities | $ 11,624 | $ 15,402 |
| Total operating lease liabilities | $ 16,694 | $ 19,990 |
Lease Accounting - Schedule of Supplemental Cash Flow Information Related to Lease (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flow from operating leases | $ 1,478 | $ 1,373 | $ 4,242 | $ 3,880 |
Fair Value Measurements - Additional Information (Detail) - 2.75% Convertible Senior Notes due 2025 [Member] - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Debt instrument, interest rate | 2.75% | 2.75% |
| Debt instrument due year | 2025 | 2025 |
| Fair Value of Notes | $ 179.3 | $ 212.0 |
Balance Sheet Components - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Investments, Debt and Equity Securities [Abstract] | |||||
| Money market funds | $ 109.6 | $ 109.6 | $ 9.6 | ||
| Cash held in foreign banks | 16.6 | 16.6 | $ 8.6 | ||
| Write down of inventory | $ 1.4 | $ 0.7 | $ 3.6 | $ 3.7 | |
Balance Sheet Components - Summary of Gross Unrealized Gains and Unrealized Losses of Investment Securities Excluding Investments in Money Market Funds (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | $ 257,807 | $ 332,692 |
| Gross Unrealized Holding Gains | 11 | 4 |
| Gross Unrealized Holding Losses | (1,761) | (371) |
| Aggregate Fair Value | 256,057 | 332,325 |
| Agency Bonds [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 120,860 | 42,546 |
| Gross Unrealized Holding Gains | 11 | |
| Gross Unrealized Holding Losses | (557) | (8) |
| Aggregate Fair Value | 120,314 | 42,538 |
| Commercial Paper [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 17,230 | 61,886 |
| Gross Unrealized Holding Gains | 2 | |
| Gross Unrealized Holding Losses | (55) | (4) |
| Aggregate Fair Value | 17,175 | 61,884 |
| Corporate Notes [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 30,371 | |
| Gross Unrealized Holding Losses | (20) | |
| Aggregate Fair Value | 30,351 | |
| Treasury Bonds [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 119,717 | 197,889 |
| Gross Unrealized Holding Gains | 2 | |
| Gross Unrealized Holding Losses | (1,149) | (339) |
| Aggregate Fair Value | $ 118,568 | $ 197,552 |
Balance Sheet Components - Summary of Contractual Maturities of Investment Securities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investments, Debt and Equity Securities [Abstract] | ||
| Amortized Cost, Amounts maturing within one year | $ 228,000 | |
| Amortized Cost, Amounts maturing after one year through five years | 29,807 | |
| Amortized Cost | 257,807 | $ 332,692 |
| Fair Value, Amounts maturing within one year | 226,300 | |
| Fair Value, Amounts maturing after one year through five years | 29,757 | |
| Fair Value, Total investment securities | $ 256,057 | $ 332,325 |
Balance Sheet Components - Components of Inventories (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 47,869 | $ 50,160 |
| Finished goods | 50,656 | 43,357 |
| Total inventories | $ 98,525 | $ 93,517 |
Balance Sheet Components - Schedule of Property and Equipment, Net (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 48,481 | $ 43,319 |
| Less: Accumulated depreciation and amortization | (27,308) | (22,655) |
| Property and equipment, net | 21,173 | 20,664 |
| Laboratory And Manufacturing Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 11,031 | 8,722 |
| Computer Equipment and Software [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 18,087 | 16,349 |
| Furniture and Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 4,357 | 4,215 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 10,589 | 10,316 |
| Construction in Process [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 4,417 | $ 3,717 |
Balance Sheet Components - Schedule of Property and Equipment, Depreciation and Amortization Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation and amortization expense | $ 1,602 | $ 1,220 | $ 4,658 | $ 3,470 |
Balance Sheet Components - Summary of Accrued Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|---|---|---|---|
| Payables and Accruals [Abstract] | ||||||
| Accrued payroll and related expenses | $ 33,396 | $ 30,957 | ||||
| Accrued professional fees | 1,038 | 6,547 | ||||
| Accrued taxes | 1,334 | 1,074 | ||||
| Accrued clinical and research expenses | 195 | 305 | ||||
| Accrued interest | 2,609 | 1,305 | ||||
| Accrued warranty | 751 | $ 636 | 664 | $ 544 | $ 822 | $ 699 |
| Accrued other | 4,065 | 4,665 | ||||
| Total accrued liabilities | $ 43,388 | $ 45,517 |
Commitments and Contingencies - Additional Information (Detail) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Aug. 01, 2022
USD ($)
|
Nov. 01, 2021
USD ($)
|
Oct. 31, 2021
USD ($)
|
Aug. 31, 2020
USD ($)
ft²
|
Dec. 31, 2016
USD ($)
ft²
|
Mar. 31, 2015
USD ($)
ft²
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
Apr. 30, 2021
USD ($)
|
Apr. 27, 2018
Patent
|
Dec. 09, 2016
Patent
|
|
| Other Commitments [Line Items] | |||||||||||||
| Additional operating lease assets | $ 2,900,000 | ||||||||||||
| Additional operating lease liabilities | $ 2,900,000 | ||||||||||||
| Standard product warranty, description | limited one- to five-year warranty | ||||||||||||
| Contingent liabilities | $ 20,000,000.0 | $ 20,000,000.0 | $ 20,000,000.0 | $ 20,000,000.0 | |||||||||
| Other contingent liabilities | 0 | $ 0 | $ 0 | ||||||||||
| Boston Scientific Corporation [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Contingent liabilities | 20,000,000.0 | ||||||||||||
| Patent infringement lawsuit allegation against number of patents | Patent | 9 | 10 | |||||||||||
| Amount awarded by jury | $ 20,000,000.0 | $ 20,000,000.0 | |||||||||||
| Payment received pursuant to legal settlement | $ 85,000,000.0 | $ 85,000,000.0 | |||||||||||
| Costa Rica [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Lease agreement, commencement period | 2020-08 | ||||||||||||
| Area of office space | ft² | 35,411 | ||||||||||||
| Lease agreement, effective date | Apr. 30, 2021 | ||||||||||||
| Lease agreement, expiration date | Jun. 30, 2031 | ||||||||||||
| Lease agreement, lease expense | $ 3,900,000 | ||||||||||||
| Redwood Office Agreement [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Lease agreement, commencement period | 2015-03 | ||||||||||||
| Area of office space | ft² | 50,000 | ||||||||||||
| Lease agreement, effective date | Jun. 30, 2015 | ||||||||||||
| Lease agreement, expiration period | 2022-05 | ||||||||||||
| Lease expense, payment due | $ 2,000,000.0 | ||||||||||||
| Annual lease expense payable in final year of lease term | $ 2,400,000 | ||||||||||||
| Redwood Office Agreement Additional Expansion Premises [Member] | Amendment 1 [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Area of office space | ft² | 50,000 | ||||||||||||
| Lease expense, payment due | $ 1,200,000 | ||||||||||||
| Annual lease expense payable in final year of lease term | $ 2,900,000 | ||||||||||||
| Commencement date description | The lease for the Expansion Premises commenced on June 1, 2018 | ||||||||||||
| Lease commencement date | Jun. 01, 2018 | ||||||||||||
| Lease agreement, expiration date | May 31, 2025 | ||||||||||||
| Non-cancellable Facility Lease [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Lease agreement, effective date | Mar. 01, 2017 | ||||||||||||
| Lease agreement, expiration date | Feb. 28, 2022 | ||||||||||||
| Lease agreement, lease expense | $ 400,000 | ||||||||||||
| Non-cancellable Facility Lease [Member] | Amendment 1 [Member] | |||||||||||||
| Other Commitments [Line Items] | |||||||||||||
| Lease agreement, expiration date | May 31, 2025 | ||||||||||||
| Lease agreement, lease expense | $ 400,000 | ||||||||||||
Commitments and Contingencies - Schedule of Activities Related to Warranty Obligations (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||||
| Beginning balance | $ 636 | $ 822 | $ 664 | $ 699 |
| Provision for warranty | 822 | 622 | 2,325 | 1,899 |
| Utilization | (707) | (900) | (2,238) | (2,054) |
| Ending balance | $ 751 | $ 544 | $ 751 | $ 544 |
Debt - Additional Information (Detail) |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
|
Jun. 01, 2021
USD ($)
shares
|
Apr. 30, 2020
USD ($)
d
$ / shares
shares
|
Sep. 30, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
Sep. 30, 2021 |
|
| 2021 Notes and Convertible Notes [Member] | Debt, Liability Component [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Principal amount | $ 172,500,000 | ||||
| Convertible notes, shares issued | shares | 682,912 | ||||
| Share received on option exercise | shares | 682,916 | ||||
| Debt instrument, interest rate | 1.75% | ||||
| Debt instrument due year | 2021 | ||||
| 2025 Notes and Convertible Notes [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Convertible notes, shares issued | shares | 9.5238 | ||||
| Aggregate principal amount of convertible senior notes | $ 165,000,000.0 | ||||
| Debt instrument, interest rate | 2.75% | ||||
| Debt instrument due year | 2025 | ||||
| Additional aggregate principal amount of convertible senior notes | $ 24,800,000 | ||||
| Debt instrument frequency of payment | semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2020 | ||||
| Net proceeds from the debt offering after deducting transaction costs | 183,600,000 | ||||
| Convertible notes principal amount | $ 1,000 | ||||
| Convertible notes, type of equity security issued | common stock | ||||
| Convertible notes, conversion price | $ / shares | $ 105.00 | ||||
| Debt instrument convertible, percentage of conversion price | 130.00% | ||||
| Percentage of repurchase price, which is equal to principal amount of convertible notes | 100.00% | ||||
| Converted Value in Excess of Principal | $ 0 | ||||
| Number of shares purchased under convertible note hedge transactions | shares | 1,800,000 | ||||
| Purchase price of the shares issued under convertible note hedge transactions | $ / shares | $ 105.00 | ||||
| Total cost of the convertible note hedge transactions | $ 52,400,000 | ||||
| Proceeds from issuance of warrants | 34,900,000 | ||||
| Net cost of reduction to additional paid-in capital | $ 17,500,000 | ||||
| Debt instrument, effective interest rate | 10.20% | 3.50% | 10.20% | ||
| 2025 Notes and Convertible Notes [Member] | Warrant [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Number of shares issued for warrants under convertible note hedge transactions | shares | 1,800,000 | ||||
| Purchase price of the shares issued under convertible note hedge transactions | $ / shares | $ 147.00 | ||||
| 2025 Notes and Convertible Notes [Member] | 130% for Applicable Conversion Price [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Debt instrument convertible trading days | d | 20 | ||||
| Debt instrument convertible consecutive trading days | d | 30 | ||||
| 2025 Notes and Convertible Notes [Member] | 98% Applicable Conversion Price [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Debt instrument convertible trading days | d | 5 | ||||
| Debt instrument convertible consecutive trading days | d | 10 | ||||
| 2025 Notes and Convertible Notes [Member] | Minimum [Member] | Warrant [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Overall conversion price | $ / shares | $ 105.00 | ||||
| 2025 Notes and Convertible Notes [Member] | Maximum [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Percentage of closing sale price of common stock | 98.00% | ||||
| 2025 Notes and Convertible Notes [Member] | Maximum [Member] | Warrant [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Overall conversion price | $ / shares | $ 147.00 | ||||
| 2025 Notes and Convertible Notes [Member] | Debt, Liability Component [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Principal amount | $ 189,750,000 | $ 189,750,000 |
Debt - Net Carrying Amount of Liability Component of Convertible Debt (Detail) - 2025 Notes and Convertible Notes [Member] - Debt, Liability Component [Member] - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Principal | $ 189,750 | $ 189,750 |
| Unamortized discount | (35,079) | |
| Unamortized issuance cost | (3,191) | (3,361) |
| Net carrying amount | $ 186,559 | $ 151,310 |
Debt - Net Carrying Amount of Equity Component of Convertible Debt (Detail) - 2025 Notes and Convertible Notes [Member] - Debt, Equity Component [Member] $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| Debt Instrument [Line Items] | |
| Debt discount related to value of conversion option | $ 49,947 |
| Debt issuance cost | (1,607) |
| Net carrying amount | $ 48,340 |
Debt - Interest Expense Recognized Related to Convertible Notes (Detail) - 2021 Notes and 2025 Notes [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Debt Instrument [Line Items] | ||||
| Contractual interest expense | $ 1,305 | $ 1,305 | $ 3,914 | $ 5,180 |
| Amortization of debt discounts as interest expense | 2,209 | 9,709 | ||
| Amortization of debt issuance costs | 303 | 174 | 904 | 1,048 |
| Total interest expense | $ 1,608 | $ 3,688 | $ 4,818 | $ 15,937 |
Basic and Diluted Net Income (Loss) Per Share - Reconciliation of Net Income (Loss) Used in Computing Basic and Diluted Net Income (Loss) Per Common Share (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Earnings Per Share [Abstract] | ||||
| Net income (loss) used in basic net income (loss) per common share | $ 81,508 | $ (50,075) | $ 22,193 | $ (101,226) |
| Plus: Assumed conversions of dilutive convertible notes | 1,305 | |||
| Net income (loss) used in diluted net income (loss) per common share | $ 82,813 | $ (50,075) | $ 22,193 | $ (101,226) |
Basic and Diluted Net Income (Loss) Per Share - Reconciliation of Weighted Average Shares used in Computing Basic and Diluted Net Income (Loss) Per Common Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Earnings Per Share [Abstract] | ||||
| Weighted average shares used to compute basic net income (loss) per share | 35,402,086 | 34,878,443 | 35,265,193 | 34,774,423 |
| Plus effect of dilutive securities: | ||||
| Stock-based awards from employee equity plans | 129,718 | 236,416 | ||
| Convertible senior notes | 1,807,141 | |||
| Weighted average shares used to compute diluted net income (loss) per share | 37,338,945 | 34,878,443 | 35,501,609 | 34,774,423 |
Basic and Diluted Net Income (Loss) Per Share - Schedule of Net Income (Loss) Per Common Share Basic and Diluted (Details) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Earnings Per Share [Abstract] | ||||
| Basic | $ 2.30 | $ (1.44) | $ 0.63 | $ (2.91) |
| Diluted | $ 2.22 | $ (1.44) | $ 0.63 | $ (2.91) |
Basic and Diluted Net Income (Loss) Per Share - Computation of Potentially Dilutive Securities Outstanding Excluded from Computation of Diluted Shares (Detail) - shares |
3 Months Ended | 9 Months Ended | |
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
| Potentially dilutive securities excluded from computation of diluted shares outstanding | 942,445 | 1,807,141 | 2,175,523 |
| Stock-based Awards from Employee Equity Plans [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
| Potentially dilutive securities excluded from computation of diluted shares outstanding | 843,165 | 995,336 | |
| Convertible Senior Notes [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
| Potentially dilutive securities excluded from computation of diluted shares outstanding | 49,876 | 1,807,141 | 827,553 |
| Warrants Related to the Issuance of Convertible Senior Notes [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
| Potentially dilutive securities excluded from computation of diluted shares outstanding | 49,404 | 352,634 | |
Employee Benefit Plans - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Expense for matching contributions | $ 0.4 | $ 0.2 | $ 3.3 | $ 2.8 |
| ESPP offering period | 6 months | |||
| Employee Stock [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Maximum employee subscription rate | 15.00% | 15.00% | ||
| Purchase price of common stock shares, lower of fair market value, percentage | 85.00% | |||
| Shares of common stock issued | 0 | 0 | 84,837 | 37,753 |
| Shares available for future purchase | 1,482,677 | 1,482,677 | ||