What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 129 added, 104 removed, 741 unchanged (24% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

June 30, 2022 December 31, 2021

September 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 June 30, 2022 and December 31, 2021

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

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

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

393.1 million and 386.2 million shares issued and outstanding, respectively, at September 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;

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

6.9 million shares at September 30, 2022 and 3.4 million shares at December 31, 2021

( 595.0 ) ( 206.2 )

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

12 unchanged sentences

Income from equity investments — — 0.2 —

Interest and other income, net 3.0 0.9 2.2 1.0

Interest and other income (expense), net 3.3 ( 1.7 ) 5.5 ( 0.7 )

Income before income taxes 146.2 112.0 257.6 250.4

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

Income tax expense 45.0 24.7 8.2 28.2

Net income $ 101.2 $ 87.3 $ 249.4 $ 222.2

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

Translation adjustments and other ( 19.6 ) ( 1.3 ) ( 34.9 ) ( 1.4 )

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

Unrealized gain (loss) on marketable debt securities 1.5 ( 0.1 ) ( 6.7 ) ( 0.4 )

Total other comprehensive loss, net of tax ( 18.1 ) ( 1.4 ) ( 41.6 ) ( 1.8 )

4 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

(In millions) Common Stock Additional

2 unchanged sentences

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 — — — — — —

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

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 12.4 — — — 12.4

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Share-based compensation expense — — 30.8 — — — 30.8

1 unchanged sentence

Other comprehensive loss, net of tax — — — ( 18.1 ) — — ( 18.1 )

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

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

Three Months Ended September 30, 2021

(In millions) Common Stock Additional

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

Capital Accumulated Other Comprehensive Income Retained Earnings 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

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

Issuance of common stock under equity incentive plans 0.3 — — — — — —

Issuance of common stock for Employee Stock Purchase Plan 0.1 — 11.6 — — — 11.6

Conversions of 2023 Notes 0.8 — 26.7 — — 5.6 32.3

Benefit of note hedge upon conversions of 2023 Notes ( 0.5 ) — 65.1 — — ( 65.1 ) —

Share-based compensation expense — — 27.5 — — — 27.5

1 unchanged sentence

Other comprehensive loss, net of tax — — — ( 1.4 ) — — ( 1.4 )

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

Balance at September 30, 2021 (As Adjusted)* 387.7 $ 0.4 $ 1,925.7 $ 1.4 $ 144.0 $ ( 159.5 ) $ 1,912.0

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

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In millions) Common Stock Additional

6 unchanged sentences

Issuance of common stock in connection with achievement of regulatory approval milestone, net of issuance costs 2.9 — ( 189.3 ) — — 189.2 ( 0.1 )

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Conversions of 2023 Notes 0.4 — 4.2 — — 13.2 17.4

3 unchanged sentences

Other comprehensive loss, net of tax — — — ( 41.6 ) — — ( 41.6 )

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

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

Nine Months Ended September 30, 2021

(In millions) Common Stock Additional

5 unchanged sentences

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 20.3 — — — 20.3

Tax benefit related to Senior Convertible Notes — — — — — — —

Conversions of 2023 Notes 0.8 — 26.7 — — 5.6 32.3

Benefit of note hedge upon conversions of 2023 Notes ( 0.5 ) — 65.1 — — ( 65.1 ) —

Share-based compensation expense — — 87.1 — — — 87.1

1 unchanged sentence

Other comprehensive loss, net of tax — — — ( 1.8 ) — — ( 1.8 )

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

Balance at September 30, 2021 (As Adjusted)* 387.7 $ 0.4 $ 1,925.7 $ 1.4 $ 144.0 $ ( 159.5 ) $ 1,912.0

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

3 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(In millions) (As Adjusted)*

26 unchanged sentences

Net proceeds from issuance of common stock 22.5 20.3

Purchases of treasury stock ( 557.7 ) —

Other financing activities ( 16.3 ) ( 9.1 )

Net cash provided by financing activities 1.0 0.4

Net cash provided by (used in) financing activities ( 551.5 ) 11.2

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 12.6 ) ( 0.9 )

6 unchanged sentences

Total cash, cash equivalents and restricted cash $ 699.1 $ 1,445.2

Six Months Ended

Nine Months Ended

September 30,

(As Adjusted)*

19 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 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.

Operating results for the three and nine months ended September 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.

10 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, 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 (expense), 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.

81 unchanged sentences

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

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

Accounts receivable as of September 30, 2022 included unbilled accounts receivable of $ 8.7 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 $ 21.3 million as of June 30, 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 $ 23.6 million as of September 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.

14 unchanged sentences

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 our adjusted balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four -for-one forward stock split:

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 consolidated 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

12 unchanged sentences

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

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

Below is a summary of the changes in our consolidated statements of operations for the three and nine months ended September 30, 2021 we originally reported under the ASC 470-20 legacy guidance compared to our adjusted consolidated statements of operations 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 September 30, 2021

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

7 unchanged sentences

Shares used to compute diluted net income per share 402.0 28.3 430.3

Consolidated Statement of Operations Six Months Ended June 30, 2021

Consolidated Statement of Operations Nine Months Ended September 30, 2021

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

9 unchanged sentences

(2) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 8.6 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

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

Consolidated Balance Sheet As of September 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 $ 155.5 $ 232.6 $ 388.1

Consolidated Statement of Operations Three Months Ended June 30, 2022

Consolidated Statement of Operations Three Months Ended September 30, 2022

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

7 unchanged sentences

Shares used to compute diluted net income per share 398.9 26.9 425.8

Consolidated Statement of Operations Six Months Ended June 30, 2022

Consolidated Statement of Operations Nine Months Ended September 30, 2022

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

15 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.

• 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.

• 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.

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

14 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

1 unchanged sentence

Restricted stock units 1.3 — 0.5 —

Senior convertible notes 8.0 — — —

Total 8.2 — 0.2 —

Recent Accounting Guidance

45 unchanged sentences

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

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.

As of September 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 June 30, 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 September 30, 2022, classified in accordance with the fair value hierarchy:

Fair Value Measurements Using

7 unchanged sentences

Supranationals — 13.5 — 13.5

— 43.5 — 43.5

Total debt securities, available-for-sale — 1,673.8 — 1,673.8

14 unchanged sentences

Supranationals — 54.0 — 54.0

— 54.0 — 54.0

Total debt securities, available-for-sale — 1,678.6 — 1,678.6

2 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 and six months ended June 30, 2022.

There were no transfers into or out of Level 3 securities during the three and nine months ended September 30, 2022 and 2021 .

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

The carrying values of these investments are not significant and we include them in other assets in our consolidated balance sheets.

The carrying values of these investments are $ 17.0 million as of September 30, 2022 and $ 4.5 million as of December 31, 2021.

We include them in other assets in our consolidated balance sheets.

It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are privately held and limited information is available.

3 unchanged sentences

Fair Value Measurements Using Level 1

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

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

Senior Convertible Notes due 2023 $ 1,533.4 $ 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, 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.

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

As of September 30, 2022 and December 31, 2021, notional amounts of $ 51.0 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 and nine months ended September 30, 2022 and September 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.

7 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 and six months ended June 30, 2022 and June 30, 2021.

We recorded no significant impairment losses during the three and nine months ended September 30, 2022 and September 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:

June 30, 2022

September 30, 2022

(In millions) Amortized

19 unchanged sentences

government agencies.

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 and six months ended June 30, 2022 and June 30, 2021 were not significant.

As of September 30, 2022, the estimated market value of our debt securities with contractual maturities up to twelve months was $ 1.67 billion.

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 $ 1.36 billion and $ 320.7 million, respectively.

Gross realized gains and losses on sales of our debt securities for the three and nine months ended September 30, 2022 and September 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 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.

Unrealized losses on available-for-sale debt securities at September 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) June 30, 2022 December 31, 2021

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

Raw materials $ 165.2 $ 145.2

3 unchanged sentences

Prepaid and Other Current Assets

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

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

Prepaid expenses $ 90.5 $ 51.9

3 unchanged sentences

Property and Equipment

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

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

$ 25.6 $ 15.6

8 unchanged sentences

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

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.

Other assets were $ 33.7 million and $ 10.5 million as of September 30, 2022 and December 31, 2021, respectively.

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

Accounts Payable and Accrued Liabilities

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

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

Accounts payable trade $ 198.1 $ 189.4

6 unchanged sentences

Accrued Payroll and Related Expenses

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

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

Accrued wages, bonus and taxes $ 83.3 $ 91.8

2 unchanged sentences

Other Long-Term Liabilities

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

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

Finance lease obligations

2 unchanged sentences

Deferred tax liabilities 5.3 5.9

Other tax liabilities 25.5 2.8

Other liabilities 8.5 8.2

2 unchanged sentences

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

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

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

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

Senior Convertible Notes due 2023 $ 749.5 $ 1,797.3

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2022 2021 2022 2021

25 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.

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.

Holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option during the nine months ended September 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.

There were an immaterial amount of conversions during the three months ended September 30, 2022 that settled in the fourth quarter.

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 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.

Circumstance (1) listed above occurred during the quarters ended December 31, 2021, March 31, 2022, and June 30, 2022.

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

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

(In millions) September 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 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.

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

As of September 30, 2022, we also have a guarantee facility related to our international operations which is collateralized by a $ 9.8 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 six months ended June 30, 2022, we and certain Abbott Diabetes Care, Inc.

During the year ended December 31, 2021 and the nine months ended September 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.

We intend to vigorously pursue our claims and defenses in these cases to protect our intellectual property and to defend against Abbott’s infringement allegations.

We do not believe we are party to any currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations.

We do not believe we are party to any other currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations.

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.

1 unchanged sentence

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 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.

Our effective tax rate of 3.2 % for the nine months ended September 30, 2022 was primarily due to income tax expense from normal, recurring operations, partially offset by discrete excess tax benefits recognized for share-based compensation for employees and the Verily milestone payment.

Stockholders’ Equity

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

3 unchanged sentences

Total share-based compensation expense $ 30.8 $ 27.5 $ 92.5 $ 87.1

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.

At September 30, 2022, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 201.9 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 six months ended June 30, 2022 was $ 130.3 million and $ 17.3 million, respectively.

The total vest date fair value of RSUs and PSUs that vested during the nine months ended September 30, 2022 was $ 135.2 million and $ 17.3 million, respectively.

Share Repurchase Program and Treasury Shares

On July 26, 2022, a duly authorized committee of our Board of Directors authorized and approved a share repurchase program of up to $ 700.0 million of our outstanding common stock, with a repurchase period ending no later than June 30, 2023 (the “Share Repurchase Program”).

Shares of common stock repurchased under the Share Repurchase Program become treasury shares.

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.

On August 1, 2022, we entered into an accelerated share repurchase (“ASR”) agreement with JPMorgan Chase Bank, National Association (“JP Morgan”) to repurchase up to$ 700.0 million of our common stock on an accelerated basis through September 29, 2022.

On August 3, 2022, we paid $ 700.0 million to JP Morgan and received an initial delivery of approximately 3.0 million shares of common stock.

The final notional amount under the ASR agreement was $ 557.7 million or approximately 6.6 million shares of our common stock based on the daily average volume-weighted average price of our common stock during the term of the ASR for the period from August 1, 2022 to August 31, 2022, less a discount.

The ASR agreement concluded on September 1, 2022.

The ASR was a forward contract indexed to our own common stock.

The forward contract met all of the applicable criteria for equity classification, so we did not account for it as a derivative instrument.

We have reflected the shares delivered to us by the financial institution as treasury shares as of the dates they were delivered to us in computing weighted average shares outstanding for both basic and diluted net income per share.

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired.

We have not yet determined the ultimate disposition of repurchased shares and consequently we continue to hold them as treasury shares rather than retiring them.

Future stock repurchases under the Share Repurchase Program are at the discretion of our management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.

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.

Business Segment and Geographic Information

10 unchanged sentences

Revenue by geographic region

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.

During the three and nine months ended September 30, 2022 and September 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

June 30, 2022 Three Months Ended

June 30, 2021

September 30, 2022 Three Months Ended

September 30, 2021

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

2 unchanged sentences

Total revenue $ 769.6 100 % $ 650.2 100 %

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

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

1 unchanged sentence

Outside of the United States 559.0 27 % 418.0 24 %

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

Total revenue $ 2,094.6 100 % $ 1,750.3 100 %

Revenue by customer sales channel

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

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

Three Months Ended

June 30, 2022 Three Months Ended

June 30, 2021

September 30, 2022 Three Months Ended

September 30, 2021

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

2 unchanged sentences

Total revenue $ 769.6 100 % $ 650.2 100 %

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

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

1 unchanged sentence

Direct 326.2 16 % 311.4 18 %

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”).

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.

Total revenue $ 2,094.6 100 % $ 1,750.3 100 %

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