What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 189 added, 94 removed, 656 unchanged (30% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In millions, except par value data) (As Adjusted)*

27 unchanged sentences

Preferred stock, $ 0.001 par value, 5.0 million shares authorized;

no shares issued and outstanding at March 31, 2022 and December 31, 2021

no shares issued and outstanding at June 30, 2022 and December 31, 2021

Common stock, $ 0.001 par value, 800.0 million shares authorized;

98.2 million and 98.1 million shares issued and outstanding, respectively, at March 31, 2022;

392.9 million and 392.6 million shares issued and outstanding, respectively, at June 30, 2022;

and 391.4 million and 388.0 million shares issued and outstanding, respectively, at December 31, 2021

3 unchanged sentences

Treasury stock, at cost;

0.1 million shares at March 31, 2022 and 0.8 million shares at December 31, 2021

0.3 million shares at June 30, 2022 and 3.4 million shares at December 31, 2021

( 37.3 ) ( 206.2 )

2 unchanged sentences

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In millions, except per share data) (As Adjusted)*

(As Adjusted)*

Revenue $ 696.2 $ 595.1 $ 1,325.0 $ 1,100.1

3 unchanged sentences

Research and development 121.7 129.1 257.6 238.5

Amortization of intangible assets 1.9 0.5 3.9 1.0

Selling, general and administrative 248.9 186.5 467.8 374.6

3 unchanged sentences

Income from equity investments — — 0.2 —

Interest and other income (expense), net ( 0.8 ) 0.1

Interest and other income, net 3.0 0.9 2.2 1.0

Income before income taxes 75.3 97.1 111.4 138.4

Income tax benefit ( 61.2 ) ( 15.2 )

Income tax expense (benefit) 24.4 18.7 ( 36.8 ) 3.5

Net income $ 50.9 $ 78.4 $ 148.2 $ 134.9

4 unchanged sentences

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In millions) (As Adjusted)*

(As Adjusted)*

Net income $ 50.9 $ 78.4 $ 148.2 $ 134.9

1 unchanged sentence

Translation adjustments and other ( 13.9 ) 0.2 ( 15.3 ) ( 0.1 )

Unrealized gain (loss) on marketable debt securities ( 5.2 ) —

Unrealized loss on marketable debt securities ( 3.0 ) ( 0.3 ) ( 8.2 ) ( 0.3 )

Total other comprehensive loss, net of tax ( 16.9 ) ( 0.1 ) ( 23.5 ) ( 0.4 )

4 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

Balance at March 31, 2022 392.5 $ 0.4 $ 1,996.3 $ ( 6.1 ) $ 236.0 $ ( 37.3 ) $ 2,189.3

Issuance of common stock under equity incentive plans 0.1 — — — — — —

Share-based compensation expense — — 32.6 — — — 32.6

Net income — — — — 50.9 — 50.9

Other comprehensive loss, net of tax — — — ( 16.9 ) — — ( 16.9 )

Balance at June 30, 2022 392.6 $ 0.4 $ 2,028.9 $ ( 23.0 ) $ 286.9 $ ( 37.3 ) $ 2,255.9

Three Months Ended June 30, 2021

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income Retained Earnings (Accumulated Deficit) Treasury Stock Total

Stockholders’

Shares Amount

Balance at March 31, 2021 (As Adjusted)* 386.8 $ 0.4 $ 1,763.2 $ 2.9 $ ( 21.7 ) $ ( 100.0 ) $ 1,644.8

Issuance of common stock under equity incentive plans 0.2 — — — — — —

Share-based compensation expense — — 31.6 — — — 31.6

Net income — — — — 78.4 — 78.4

Other comprehensive loss, net of tax — — — ( 0.1 ) — — ( 0.1 )

Balance at June 30, 2021 (As Adjusted)* 387.0 $ 0.4 $ 1,794.8 $ 2.8 $ 56.7 $ ( 100.0 ) $ 1,754.7

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2022

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total

10 unchanged sentences

Other comprehensive loss, net of tax — — — ( 23.5 ) — — ( 23.5 )

Balance at March 31, 2022 98.1 $ 0.1 $ 1,996.6 $ ( 6.1 ) $ 236.0 $ ( 37.3 ) $ 2,189.3

Three Months Ended March 31, 2021

Balance at June 30, 2022 392.6 $ 0.4 $ 2,028.9 $ ( 23.0 ) $ 286.9 $ ( 37.3 ) $ 2,255.9

Six Months Ended June 30, 2021

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income Accumulated Deficit Treasury Stock Total

Capital Accumulated Other Comprehensive Income Retained Earnings (Accumulated Deficit) Treasury Stock Total

Stockholders’

6 unchanged sentences

Other comprehensive loss, net of tax — — — ( 0.4 ) — — ( 0.4 )

Balance at March 31, 2021 (As Adjusted)* 96.7 $ 0.1 $ 1,763.5 $ 2.9 $ ( 21.7 ) $ ( 100.0 ) $ 1,644.8

Balance at June 30, 2021 (As Adjusted)* 387.0 $ 0.4 $ 1,794.8 $ 2.8 $ 56.7 $ ( 100.0 ) $ 1,754.7

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(In millions) (As Adjusted)*

23 unchanged sentences

Other investing activities ( 2.3 ) ( 4.5 )

Net cash used in investing activities ( 411.8 ) ( 112.2 )

Net cash provided by (used in) investing activities ( 556.7 ) 251.0

Financing activities

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5.3 ) 0.1

Decrease in cash, cash equivalents and restricted cash ( 336.5 ) ( 84.0 )

Increase (decrease) in cash, cash equivalents and restricted cash ( 317.2 ) 340.9

Cash, cash equivalents and restricted cash, beginning of period 1,053.6 818.2

4 unchanged sentences

Total cash, cash equivalents and restricted cash $ 736.4 $ 1,159.1

Six Months Ended

(As Adjusted)*

Supplemental disclosure of non-cash investing and financing transactions:

18 unchanged sentences

In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We expect that revenues we generate from the sales of our products will fluctuate from quarter to quarter.

5 unchanged sentences

We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation.

Amortization expense related to intangible assets has been presented separately from selling, general and administrative expenses in our consolidated statement of operations.

We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash.

2 unchanged sentences

We include translation-related adjustments in comprehensive income and in accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets.

We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income (expense), net in our consolidated statements of operations.

We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income, net in our consolidated statements of operations.

On June 10, 2022, the Company effected a four -for-one forward stock split of its common stock to shareholders of record as of May 19, 2022.

The par value of the common stock remains $ 0.001 per share.

All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

Use of Estimates

9 unchanged sentences

Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectible.

Generally, receivable balances greater than one year past due are deemed uncollectible.

Generally, receivable balances that are more than one year past due are deemed uncollectible.

Concentration of Credit Risk

30 unchanged sentences

rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements.

We classify our provisions related to

variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.

We classify our provisions related to variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.

We review the adequacy of our estimates for transaction price adjustments and variable consideration at each reporting date.

33 unchanged sentences

Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.

Accounts receivable as of March 31, 2022 included unbilled accounts receivable of $ 10.3 million.

Accounts receivable as of June 30, 2022 included unbilled accounts receivable of $ 9.3 million.

We expect to invoice and collect all unbilled accounts receivable within twelve months.

1 unchanged sentence

Our performance obligations are generally satisfied within twelve months of the initial contract date.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 18.3 million as of March 31, 2022 and $ 16.1 million as of December 31, 2021.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 21.3 million as of June 30, 2022 and $ 16.1 million as of December 31, 2021.

These balances are included in other long-term liabilities in our consolidated balance sheets.

11 unchanged sentences

Since we adopted ASU 2020-06 using the full retrospective approach, we were required to apply the guidance to all convertible debt instruments we had outstanding as of January 1, 2020.

Upon adoption of ASU 2020-06 as of January 1, 2020, we recognized $ 67.8 million cumulative-effect adjustment to increase retained earnings of for the decrease in interest expense and $ 242.3 million decrease in additional paid in capital for the elimination of the equity component.

Upon adoption of ASU 2020-06 as of January 1, 2020, we recognized $ 67.8 million cumulative-effect adjustment to increase retained earnings for the decrease in interest expense and $ 242.3 million decrease in additional paid in capital for the elimination of the equity component.

We have updated these financial statements to reflect the cumulative adjustment for the periods presented.

We have labeled our prior period financial statements and related notes “As Adjusted” to indicate the change required under the new accounting guidance.

Below is a summary of the changes in our consolidated balance sheets we originally reported as of December 31, 2020 and 2021 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted:

Below is a summary of the changes in our consolidated balance sheets we originally reported as of December 31, 2020 and 2021 under the ASC 470-20 legacy guidance compared to our adjusted balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four -for-one forward stock split:

Consolidated Balance Sheet As of December 31, 2020

(In millions) As Previously Reported ASU 2020-06 Adjustment As Adjusted

(In millions) As Previously Reported ASU 2020-06 Adjustment Stock Split Adjustment As Adjusted

Deferred tax assets $ 216.4 $ 91.3 $ — $ 307.7

Long-term senior convertible notes 1,667.2 365.9 — 2,033.1

Common stock 0.1 — 0.3 0.4

Additional paid-in-capital 2,125.3 ( 398.5 ) ( 0.3 ) 1,726.5

1 unchanged sentence

Consolidated Balance Sheet As of December 31, 2021

(In millions) As Previously Reported ASU 2020-06 Adjustment As Adjusted

(In millions) As Previously Reported ASU 2020-06 Adjustment Stock Split Adjustment As Adjusted

Deferred tax assets $ 220.8 $ 69.7 $ — $ 290.5

Long-term senior convertible notes 1,702.7 279.1 — 1,981.8

Common stock 0.1 — 0.3 0.4

Additional paid-in-capital 2,504.5 ( 395.5 ) ( 0.3 ) 2,108.7

Retained earnings (Accumulated deficit) $ ( 47.4 ) $ 186.1 $ — $ 138.7

Below is a summary of the changes in our consolidated statement of operations for the three months ended March 31, 2021 we originally reported at March 31, 2021 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted:

Consolidated Statement of Operations Three Months Ended March 31, 2021

(In millions) As Previously Reported ASU 2020-06 Adjustment As Adjusted

Below is a summary of the changes in our consolidated statements of operations for the three and six months ended June 30, 2021 we originally reported at June 30, 2021 under the ASC 470-20 legacy guidance compared to our adjusted balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four -for-one forward stock split:

Consolidated Statement of Operations Three Months Ended June 30, 2021

(In millions, except per share data) As Previously Reported ASU 2020-06 Adjustment As Adjusted

Interest expense $ ( 25.2 ) $ 20.4 $ ( 4.8 )

Income before income taxes 76.7 20.4 97.1

Income tax expense 13.8 4.9 18.7

Net income 62.9 15.5 78.4

Basic net income per share 0.16 0.04 0.20

Diluted net income per share (1)

$ 0.16 $ 0.03 $ 0.19

Shares used to compute diluted net income per share 398.4 28.7 427.1

Consolidated Statement of Operations Six Months Ended June 30, 2021

(In millions, except per share data) As Previously Reported ASU 2020-06 Adjustment As Adjusted

Interest expense $ ( 50.0 ) $ 40.5 $ ( 9.5 )

Income (Loss) before taxes 97.9 40.5 138.4

Income tax expense (benefit) ( 5.3 ) 8.8 3.5

5 unchanged sentences

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 2.9 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Below is a summary of the consolidated balance sheet as of March 31, 2022 and consolidated statement of operations for the three months ended March 31, 2022 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted.

Consolidated Balance Sheet As of March 31, 2022

(2) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 5.8 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Below is a summary of our consolidated balance sheet as of June 30, 2022 and consolidated statements of operations for the three and six months ended June 30, 2022 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted.

Consolidated Balance Sheet As of June 30, 2022

(In millions) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

4 unchanged sentences

Retained earnings $ 71.0 $ 215.9 $ 286.9

Consolidated Statement of Operations Three Months Ended March 31, 2022

(In millions) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Consolidated Statement of Operations Three Months Ended June 30, 2022

(In millions, except per share data) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Interest expense $ ( 25.4 ) $ 20.7 $ ( 4.7 )

Income before income taxes 54.6 20.7 75.3

Income tax expense 18.8 5.6 24.4

Net income 35.8 15.1 50.9

Basic net income per share 0.09 0.04 0.13

Diluted net income per share (1)

$ 0.09 $ 0.03 $ 0.12

Shares used to compute diluted net income per share 402.5 18.9 421.4

Consolidated Statement of Operations Six Months Ended June 30, 2022

(In millions, except per share data) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Loss on extinguishment of debt $ ( 0.4 ) $ 0.4 $ —

4 unchanged sentences

Basic net income per share (2)

0.30 0.08 0.38

Diluted net income per share $ 0.29 $ 0.07 $ 0.36

Shares used to compute diluted net income per share 402.1 27.0 429.1

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 1.6 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

(2) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 5.5 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Collaboration Agreements

3 unchanged sentences

Below are some example activities and how we account for them:

• Payments to collaboration partners through issuance of common stock as consideration in an asset acquisition are considered share-based payment to non-employees in exchange for goods within the scope of ASC Topic 718, “Compensation - Stock Compensation”.

The amount and the timing of the cost recognition of such milestones in our financial statements is driven by the accounting for the specific type of equity instrument under ASC 718 that aligns with the terms of the agreement, including any performance conditions.

financial statements is driven by the accounting for the specific type of equity instrument under ASC 718 that aligns with the terms of the agreement, including any performance conditions.

• The value associated with in-process research and development (“IPR&D”) in an asset acquisition incurred prior to regulatory approval is expensed as it does not have an alternative future use and is recorded as research and development expense.

3 unchanged sentences

Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from restricted stock units, warrants, and our senior convertible notes.

Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of warrants are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares consist of shares issuable from restricted stock units, or RSUs, performance stock units, or PSUs, warrants, and our senior convertible notes.

Potentially dilutive common shares issuable upon vesting of RSUs, PSUs, and exercise of warrants are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares issuable upon conversion of our senior convertible notes are determined using the if-converted method.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

As Adjusted As Adjusted

Net income $ 50.9 $ 78.4 $ 148.2 $ 134.9

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

As Adjusted As Adjusted

Restricted stock units 0.2 — 0.2 —

Senior convertible notes 8.0 — — —

Total 8.2 — 0.2 —

Recent Accounting Guidance

24 unchanged sentences

We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

This guidance is related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables.

The amendments in this update eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty.

The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

Collaboration with Verily Life Sciences

10 unchanged sentences

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $ 250.0 million through the issuance of 7,363,772 shares of our common stock.

We recorded a $ 217.7 million charge in our consolidated statements of operations during 2018 relating to the issuance of this common stock because this milestone payment did not meet the capitalization criteria.

We recorded a $ 217.7 million charge in our consolidated statements of operations

during 2018 relating to the issuance of this common stock because this milestone payment did not meet the capitalization criteria.

The value of the charge was based on our closing stock price of $ 29.57 per share on December 28, 2018, the date on which we obtained the necessary regulatory approvals and represents the date the performance- based awards were issued.

5 unchanged sentences

The sales-based milestones are contingent upon the achievement of certain revenue targets for a future commercial product.

As of March 31,

2022, we have not determined the achievement of the sales-based milestones to be probable and as such, no cost has been recognized for these milestones.

As of June 30, 2022, we have not determined the achievement of the sales-based milestones to be probable and as such, no cost has been recognized for these milestones.

All milestones may be paid in cash or shares of our common stock, at our election.

9 unchanged sentences

We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of March 31, 2022, classified in accordance with the fair value hierarchy:

The following table summarizes financial assets that we measured at fair value on a recurring basis as of June 30, 2022, classified in accordance with the fair value hierarchy:

Fair Value Measurements Using

29 unchanged sentences

(1) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

There were no transfers into or out of Level 3 securities during the three months ended March 31, 2022.

There were no transfers into or out of Level 3 securities during the three and six months ended June 30, 2022.

We hold certain other investments that we do not measure at fair value on a recurring basis.

5 unchanged sentences

Fair Value Measurements Using Level 1

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Senior Convertible Notes due 2023 $ 1,426.5 $ 2,589.6

6 unchanged sentences

The fair values of these derivatives are based on quoted market prices, which are Level 1 inputs, and the derivative instruments are recorded in current assets or current liabilities in our consolidated balance sheets consistent with the nature of the instrument at period end.

Derivative gains and losses are included in interest and other income (expense), net in our consolidated statements of operations.

As of March 31, 2022 and December 31, 2021, notional amounts of $ 38.0 million and $ 40.0 million, respectively, were outstanding to hedge certain foreign currency risk.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three months ended March 31, 2022 and March 31, 2021.

Derivative gains and losses are included in interest and other income, net in our consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, notional amounts of $ 40.0 million were outstanding to hedge certain foreign currency risk.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three and six months ended June 30, 2022 and June 30, 2021.

Our foreign currency exposures vary but are primarily concentrated in the Australian Dollar, the British Pound, the Canadian Dollar, the Euro, and the Malaysian Ringgit.

We monitor the costs and the impact of foreign currency risks upon our financial results as part of our risk management program.

We do not use derivative financial instruments for speculation or

trading purposes or for activities other than risk management.

We do not use derivative financial instruments for speculation or trading purposes or for activities other than risk management.

We do not require and are not required to pledge collateral for these financial instruments and we do not carry any master netting arrangements to mitigate the credit risk.

4 unchanged sentences

In general, non-financial assets, including goodwill, intangible assets, and property and equipment, are measured at fair value when there are indicators of impairment and are recorded at fair value only when an impairment is recognized.

We recorded no significant impairment losses during the three months ended March 31, 2022 and March 31, 2021.

We recorded no significant impairment losses during the three and six months ended June 30, 2022 and June 30, 2021.

Balance Sheet Details

1 unchanged sentence

Short-term marketable securities, consisting of available-for-sale debt securities, were as follows as of the dates indicated:

March 31, 2022

June 30, 2022

(In millions) Amortized

19 unchanged sentences

government agencies.

As of March 31, 2022, the estimated market value of our debt securities with contractual maturities up to twelve months and up to 18 months were $ 1,873.0 million and $ 99.2 million, respectively.

As of June 30, 2022, the estimated market value of our debt securities with contractual maturities up to twelve months were $ 2,019.4 million.

As of December 31, 2021, the estimated market value of our debt securities with contractual maturities up to twelve months and up to 18 months was $ 1,357.9 million and $ 320.7 million, respectively.

Gross realized gains and losses on sales of our debt securities for the three months ended March 31, 2022 and March 31, 2021 were not significant.

Gross realized gains and losses on sales of our debt securities for the three and six months ended June 30, 2022 and June 30, 2021 were not significant.

We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns.

For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment.

Unrealized losses on available-for-sale debt securities at March 31, 2022 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Unrealized losses on available-for-sale debt securities at June 30, 2022 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Accordingly, we have not recorded an allowance for credit losses.

We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Raw materials $ 151.1 $ 145.2

3 unchanged sentences

Prepaid and Other Current Assets

Prepaid and other current assets were $ 171.7 million and $ 81.6 million as of March 31, 2022 and December 31, 2021, respectively.

The increase in prepaid assets is driven primarily due to a $ 65.5 million increase in our income tax receivable and a $ 13.7 million increase in inventory related prepaid expenses.

(In millions) June 30, 2022 December 31, 2021

Prepaid expenses $ 67.7 $ 51.9

Income tax receivables 51.2 2.3

Other current assets 34.7 27.4

Total prepaid and other current assets $ 153.6 $ 81.6

Property and Equipment

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

$ 26.3 $ 15.6

8 unchanged sentences

(1 ) Represents finance lease right-of-use assets.

Other assets were $ 22.8 million and $ 10.5 million as of March 31, 2022 and December 31, 2021, respectively.

Other assets were $ 24.8 million and $ 10.5 million as of June 30, 2022 and December 31, 2021, respectively.

The increase in other assets is primarily due to an increase in long-term equity investments and a term deposit.

Accounts Payable and Accrued Liabilities

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Accounts payable trade $ 219.6 $ 189.4

6 unchanged sentences

Accrued Payroll and Related Expenses

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Accrued wages, bonus and taxes $ 57.6 $ 91.8

2 unchanged sentences

Other Long-Term Liabilities

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Finance lease obligations

$ 61.3 $ 57.0

Deferred revenue, long-term 21.3 16.1

Deferred tax liabilities 5.6 5.9

3 unchanged sentences

The carrying amounts of our senior convertible notes were as follows as of the dates indicated:

(Dollars in millions) March 31, 2022 December 31, 2021

(Dollars in millions) June 30, 2022 December 31, 2021

Principal amount:

5 unchanged sentences

For our senior convertible notes for which the if-converted value exceeded the principal amount, the amount in excess of principal was as follows as of the dates indicated:

(In millions) March 31, 2022 December 31, 2021

(In millions) June 30, 2022 December 31, 2021

Senior Convertible Notes due 2023 $ 643.4 $ 1,797.3

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(Dollars in millions) 2022 2021 2022 2021

As Adjusted As Adjusted

Cash interest expense:

Contractual coupon interest (1)

$ 2.2 $ 2.2 $ 4.4 $ 4.6

Non-cash interest expense:

9 unchanged sentences

The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $ 836.6 million.

The initial conversion rate of the 2023 Notes is 6.0869 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 164.29 per share, subject to adjustments.

The initial conversion rate of the 2023 Notes is 24.3476 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 41.07 per share, subject to adjustments, with a maximum conversion rate of 32.2604.

We entered into transactions for a convertible note hedge (the 2023 Note Hedge) and warrants (the 2023 Warrants) concurrently with the issuance of the 2023 Notes.

2 unchanged sentences

No principal payments are due on the 2023 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2023 Notes includes customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2023

Notes includes customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately.

For the twelve months ended December 31, 2021, holders of $ 57.7 million in aggregate principal amount of the 2023 Notes elected conversion at their option.

2 unchanged sentences

We received 967,380 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

For the three months ended March 31, 2022, holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option during the three months ended March 31, 2022.

Holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option during the six months ended June 30, 2022.

We settled these conversions using treasury stock.

1 unchanged sentence

We received 287,280 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

There were no conversions during the three months ended June 30, 2022.

Conversion Rights at the Option of the Holders

7 unchanged sentences

On or after September 1, 2023, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Circumstance (1) listed above occurred during the quarter ended December 31, 2021.

As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2022 through March 31, 2022.

Circumstance (1) listed above also occurred during the quarter ended March 31, 2022 and as a result, the 2023 Notes will remain convertible at the option of the holder from April 1, 2022 through June 30, 2022.

Circumstance (1) listed above occurred during the quarters ended December 31, 2021 and March 31, 2022.

As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2022 through June 30, 2022.

Circumstance (1) listed above also occurred during the quarter ended June 30, 2022 and as a result, the 2023 Notes will remain convertible at the option of the holder from July 1, 2022 through September 30, 2022.

See above for a description of conversion activity related to the 2023 Notes.

5 unchanged sentences

In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions with two of the initial purchasers of the 2023 Notes (the 2023 Counterparties) entitling us to purchase up to 20.7 million shares of our common stock at an initial price of $ 41.07 per share, each of which is subject to adjustment.

The cost of the 2023 Note Hedge was $ 218.9 million and we accounted for it as an equity instrument by recognizing $ 218.9 million in additional paid-in capital during 2018.

The cost of the 2023 Note Hedge was $ 218.9 million and we accounted for it as an equity instrument by recognizing $ 218.9 million in additional paid-in

capital during 2018.

The 2023 Note Hedge will expire on December 1, 2023.

38 unchanged sentences

Information related to availability and outstanding borrowings on our Amended Credit Agreement is as follows as of the date indicated:

(In millions) March 31, 2022

(In millions) June 30, 2022

Available principal amount $ 200.0

12 unchanged sentences

The Amended Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio.

We were in compliance with these covenants as of March 31, 2022.

As of March 31, 2022, we also have a guarantee facility related to our international operations which is collateralized by approximately an $ 11 million term deposit included in non-current “Other assets” on our consolidated balance sheets.

We were in compliance with these covenants as of June 30, 2022.

As of June 30, 2022, we also have a guarantee facility related to our international operations which is collateralized by a $ 10.5 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.

Contingencies

1 unchanged sentence

In addition, from time to time we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

During the year ended December 31, 2021 and the quarter ended March 31, 2022, we and certain Abbott Diabetes Care, Inc.

During the year ended December 31, 2021 and the six months ended June 30, 2022, we and certain Abbott Diabetes Care, Inc.

(“Abbott”) entities served complaints for patent infringement, validity and other patent related actions against each other in multiple jurisdictions, inside and outside the United States.

2 unchanged sentences

There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, financial condition or results of operations.

We estimate our annual effective tax rate to be 30.2 % for the full year 2022, which differed from the U.S.

We estimate our annual effective tax rate to be 31.4 % for the full year 2022, which differs from the U.S.

federal statutory rate due to state and foreign income taxes, nondeductible executive compensation, and increases to unrecognized tax benefits offset by federal research tax credits generated.

Our negative effective tax rate of 169.5 % for the three months ended March 31, 2022 was primarily due to discrete excess tax benefits recognized for share-based compensation for employees and the Verily milestone payment.

Our negative effective tax rate of 33.0 % for the six months ended June 30, 2022 was primarily due to discrete excess tax benefits recognized for share-based compensation for employees and the Verily milestone payment partially offset by income tax expense from normal, recurring operations.

Stockholders’ Equity

Share-Based Compensation

Our share-based compensation expense is associated with restricted stock units, or RSUs, performance stock units, or PSUs, and our Employee Stock Purchase Plan, or ESPP.

Our share-based compensation expense is associated with RSUs, PSUs, and our Employee Stock Purchase Plan, or ESPP.

The following table summarizes our share-based compensation expense included in our consolidated statements of operations for the periods shown.

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

3 unchanged sentences

Total share-based compensation expense $ 32.6 $ 31.6 $ 61.7 $ 59.6

At March 31, 2022, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 274.4 million and is expected to be recognized through 2026.

At June 30, 2022, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 230.6 million and is expected to be recognized through 2026.

Equity Award Activity

The total vest date fair value of RSUs and PSUs that vested during the three months ended March 31, 2022 was $ 124.2 million and $ 17.3 million, respectively.

The total vest date fair value of RSUs and PSUs that vested during the six months ended June 30, 2022 was $ 130.3 million and $ 17.3 million, respectively.

Business Segment and Geographic Information

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Dexcom is domiciled in the United States.

We sell our CGM systems through a direct sales force in the United States, Australia, Canada, New Zealand, and some countries in Europe, and through distribution arrangements in the United States, and certain countries in Africa, Asia, Europe, Latin America, and the Middle East, as well as Australia, Canada, and New Zealand.

We sell our CGM systems through a direct sales force in the North America, Asia Pacific, Europe and the Middle East, and through distribution arrangements in the United States, and certain countries in Africa, Asia, Europe, Latin America, and the Middle East, as well as Australia, Canada, and New Zealand.

Revenue by geographic region

During the three months ended March 31, 2022 and March 31, 2021, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

During the three and six months ended June 30, 2022 and June 30, 2021, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

The table below sets forth revenue by our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the components.

1 unchanged sentence

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

June 30, 2022 Three Months Ended

June 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

2 unchanged sentences

Total revenue $ 696.2 100 % $ 595.1 100 %

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

United States $ 962.2 73 % $ 842.7 77 %

Outside of the United States 362.8 27 % 257.4 23 %

Total revenues $ 1,325.0 100 % $ 1,100.1 100 %

Revenue by customer sales channel

The following table sets forth revenue by major sales channel for the three months ended March 31, 2022 and March 31, 2021:

The following table sets forth revenue by major sales channel for the three and six months ended June 30, 2022 and June 30, 2021:

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

June 30, 2022 Three Months Ended

June 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

2 unchanged sentences

Total revenue $ 696.2 100 % $ 595.1 100 %

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

Distributor $ 1,112.2 84 % $ 886.6 81 %

Direct 212.8 16 % 213.5 19 %

Total revenues $ 1,325.0 100 % $ 1,100.1 100 %

Subsequent Events

On July 26, 2022, a duly authorized committee of our Board of Directors authorized and approved a share repurchase program of up to $ 700 million of our outstanding common stock, with a repurchase period ending no later than June 30, 2023 (the “Share Repurchase Program”).

Repurchases of our common stock under the Share Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions or by other methods, at our discretion, and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, and other applicable federal and state laws and regulations.

The timing of any repurchases will depend on market conditions and will be made at our discretion.

The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements