What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-08 compared with 2023-02-09 · 61 added, 120 removed, 187 unchanged (49% of the section changed)

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Forward-looking statements are made as of the date of this report, deal with future events, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in those forward looking statements.

The risks and uncertainties include, among other things, impacts on our business due to health pandemics or other contagious outbreaks, such as the ongoing COVID-19 pandemic.

The risks and uncertainties that could cause actual results to differ materially are more fully described under “Risk Factors” in Part I, Item 1A of this Annual Report, elsewhere in this Annual Report, and in our other reports filed with the SEC.

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We received approval from the Food and Drug Administration, or FDA, and commercialized our first product in 2006.

We launched our latest generation system, the Dexcom G6 ® integrated Continuous Glucose Monitoring System, or G6, in 2018 and more recently received marketing clearance from the FDA on the Dexcom G7 ® in December 2022.

We launched our latest generation systems, the Dexcom G6 ® integrated Continuous Glucose Monitoring System, or G6, in 2018 and more recently received marketing clearance from the FDA on the Dexcom G7 ® , or G7, in December 2022.

Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “Dexcom” refer to DexCom, Inc.

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Eventually, we may apply our technological expertise to products beyond glucose monitoring.

Impact of Current Events

During 2020, 2021, and 2022, we have been subject to challenging social and economic conditions created as a result of the novel strain of coronavirus, SARS-CoV-2 and its variants, or COVID-19.

These conditions continue to create various financial impacts to our operations by necessitating precautions for our personnel to operate safely both in person as well as remotely.

Costs incurred include items like incremental payroll costs, consulting support, IT infrastructure and facilities-related costs.

As the result of the COVID-19 pandemic, and in coordination with an FDA communication of enforcement discretion, we made Dexcom CGM systems available for use in hospital settings and other healthcare facilities.

The extent of the impact of the ongoing COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales cycles, employee or industry events, and effect on our vendors, all of which are uncertain and cannot be predicted.

The ongoing COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, our customers, suppliers or third-party business partners conduct business and as a result, we have experienced moderate disruptions in our global operations.

We have experienced and may experience constrained supply or curtailed customer demand, including due to customer loss of private health insurance coverage for our products, that could materially adversely impact our business, results of operations and overall financial performance in future periods.

We currently utilize third parties to, among other things, manufacture components and materials for our devices, and to provide services such as sterilization services and we purchase these materials and services from numerous suppliers worldwide.

The ongoing COVID-19 pandemic has and may continue to have an adverse impact on our manufacturing and distribution capabilities.

Disruptions relating to the ongoing COVID-19 pandemic, including shelter-in-place orders in the U.S.

and other countries, could prevent employees, suppliers, distributors, and others from accessing manufacturing facilities and from transporting our products or the components required to manufacture our products.

For example, we have experienced some supply chain disruption due to the global restrictions resulting from the ongoing COVID-19 pandemic in the manufacturing of our next-generation CGM product.

Further, worldwide supply chain disruption relating to the ongoing COVID-19 pandemic has resulted in product shortages that has and may continue to impact our ability to manufacture our devices.

As of the filing date of this Annual Report, the extent to which the ongoing COVID-19 pandemic may impact our financial condition or results of operations or guidance is uncertain.

The effect of the ongoing COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods.

See “Risk Factors” in Part I, Item 1A of this Annual Report for further discussion of the possible impact of the ongoing COVID-19 pandemic on our business.

In addition, the global supply chain shortages and disruptions are impacting our ability to obtain certain raw materials and components used in our products.

We depend on single- or sole-source suppliers to obtain sufficient quantities of these components that are critical to manufacturing our products.

Disruptions at these suppliers could lead to a similar disruption in our ability to manufacture products on time to meet consumer demand.

In addition, these supply chain constraints may result in higher costs due to a more competitive supply environment.

These conditions may impact our gross margin.

Critical Accounting Estimates

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Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report, we believe that the following accounting estimates are most critical to a full understanding and evaluation of our reported financial results.

Members of our senior management have discussed the development and selection of these critical accounting estimates and their disclosure in this Annual Report with the Audit Committee of our Board of Directors.

While our significant accounting policies are described in Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting estimates are most critical to a full understanding and evaluation of our reported financial results.

Members of our senior management have discussed the development and selection of these critical accounting estimates and their disclosure in this Annual Report on Form 10-K with the Audit Committee of our Board of Directors.

Pharmacy Rebates

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An increase or decrease of 1% in our estimate of products sold subject to rebate during 2023, holding all other assumptions constant, would increase or decrease revenue by approximately $22.9 million.

For more information, see Revenue Recognition in Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report.

For more information, see Revenue Recognition in Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Excess and Obsolete Inventory

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We ended fiscal 2023 with cash, cash equivalents and short-term marketable securities totaling $2.72 billion.

Business Trends

In addition to the general impacts of current events on our company as described in the Overview, looking ahead we expect our business could be affected by the following:

• Increase in the worldwide incidence of people diagnosed with diabetes and costs related to the management and treatment of diabetes.

• Changes in medical reimbursement policies and programs.

• Growing demand for digital health technologies by both healthcare providers and consumers to reduce costs.

• An expected interest in empowering consumers to make better-informed decisions about their own health and new potential options for facilitating prevention, early diagnosis of life-threatening diseases, and management of chronic conditions outside of traditional health care settings.

• Growing research and interest in the use of CGM technology outside of the ambulatory care setting, including use by hospital systems.

• Continued product innovation and competition from other CGM device makers.

• Our ability to scale efficiently with the construction of our production facility in Malaysia.

Results of Operations

Financial Overview

For discussion related to the results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2021 Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission on February 14, 2022.

For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2022 Annual Report on Form 10-K, which was filed with the SEC on February 9, 2023.

Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022

Twelve Months Ended December 31, 2023 - 2022

(In millions, except per share amounts)

2023 % of Revenue (1)

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$ Change % Change

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

Revenue $ 3,622.3 100 % $ 2,909.8 100 % $ 712.5 24 %

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Research and development 505.8 14 % 484.2 17 % 21.6 4 %

Collaborative research and development fee — — % 87.1 4 % (87.1) **

Amortization of intangible assets 7.5 — % 3.7 — % 3.8 **

Selling, general and administrative 1,185.4 33 % 1,007.7 35 % 177.7 18 %

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Operating income 597.7 17 % 391.2 13 % 206.5 53 %

Interest expense (18.6) (1) % (18.8) (1) % 0.2 (1) %

Loss on extinguishment of debt — — % (0.1) — % 0.1 **

Income from equity investments 0.2 — % 11.6 — % (11.4) (98) %

Interest and other income (expense), net 18.0 1 % (1.7) — % 19.7 **

Other income (expense), net 112.7 3 % (0.4) — % 113.1 **

Income before income taxes 710.4 20 % 390.8 13 % 319.6 82 %

Income tax expense 49.6 2 % 39.9 2 % 9.7 24 %

Income tax expense (benefit) 168.9 5 % 49.6 2 % 119.3 **

Net income $ 541.5 15 % $ 341.2 12 % $ 200.3 59 %

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(1) The sum of the individual percentages may not equal the total due to rounding.

* 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,” to the consolidated financial statements in Part II, Item 8 of this Annual Report for further information.

** Not meaningful

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

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

We typically experience seasonality, with lower sales in the first quarter of each year compared to the immediately preceding fourth quarter.

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Research and development

Our research and development expenses primarily consist of engineering and research expenses related to our continuous glucose monitoring technology, clinical trials, regulatory expenses, quality assurance programs, materials and products for clinical trials.

Research and development expenses are primarily related to employee compensation, including salary, fringe benefits, share-based compensation, and temporary employee expenses.

We also incur significant expenses to operate our clinical trials including budgeted clinical site compensation and reimbursement, study monitoring and oversight expenses, clinical trial product and associated travel expenses.

Our research and development expenses also include fees for design services, contractors and development materials.

Our research and development expenses primarily consist of engineering and research expenses related to our sensing technology, clinical trials, regulatory expenses, quality assurance programs, employee compensation, and business process outsourcers.

Amortization of intangible assets

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Selling, general and administrative

Our selling, general and administrative expenses primarily consist of salary, fringe benefits and share-based compensation for our executive, financial, sales, marketing, information technology and administrative functions.

Our selling, general and administrative expenses primarily consist of employee compensation for our executive, financial, sales, marketing, information technology and administrative functions.

Other significant expenses include commissions, marketing and advertising, IT software license costs, insurance, professional fees for our outside legal counsel and independent auditors, litigation expenses, patent application expenses and consulting expenses.

Interest expense

Interest expense is comprised primarily of costs related to our senior convertible notes.

Income from equity investments

Income from equity investments is comprised of realized gains from the sale of an equity investment.

Interest and other income (expense), net

Interest and other income (expense), net consists primarily of interest income on our cash, cash equivalents and short-term marketable securities portfolio and foreign currency transaction gains and losses due to the effects of foreign currency fluctuations.

Other income (expense), net

Other income (expense), net consists primarily of interest and dividend income on our cash, cash equivalents and short-term marketable securities portfolio, foreign currency transaction gains and losses due to the effects of foreign currency fluctuations, and interest expense related to our senior convertible notes.

Twelve Months Ended December 31, 2023

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Disposable sensor and other revenue comprised approximately 87% of total revenue and Reusable Hardware revenue comprised approximately 13% of total revenue for the twelve months ended December 31, 2022.

Cost of Sales & Gross Profit Cost of sales and gross profit increased primarily due to an increase in sales volume.

The decrease in gross profit margin in 2022 compared to 2021 was primarily driven by price, product, and channel mix changes and impact of foreign currencies on revenue.

Research and Development Expense Research and development expense decreased primarily due to $43.0 million in lower third party and consulting fees most notably related to software development for new products and significant enhancements, $19.9 million in lower costs related to set-up and validation costs for new CGM equipment, and $9.7 million in lower clinical trials costs, partially offset by $26.5 million in compensation-related costs due to higher headcount.

Cost of sales & Gross profit

Cost of sales and gross profit increased primarily due to an increase in sales volume.

The decrease in gross profit margin in 2023 compared to 2022 was primarily driven by the increase of the amortization of an intangible asset and price, product, and channel mix changes.

Research and development expense

Research and development expense increased primarily due to $33.7 million in compensation-related costs most notably due to higher headcount, partially offset by $15.9 million of lower third party and consulting fees primarily related to software development for new products and significant enhancements.

We continue to believe that focused investments in research and development are critical to our future growth and competitive position in the marketplace, and to the development of new and updated products and services that are central to our core business strategy.

Collaborative Research and Development Fee Collaborative research and development fees of $87.1 million for the twelve months ended December 31, 2021 represents expense incurred in the fourth quarter of 2021 associated with a contingent milestone for regulatory approval under the Restated Collaboration Agreement.

See Note 2 “Collaboration with Verily Life Sciences” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information.

Selling, General and Administrative Expense Selling, general and administrative expense increased primarily due to $54.1 million in compensation-related costs most notably due to higher headcount, $26.0 million in advertising and marketing costs due to an increase in worldwide marketing campaigns, $23.0 million in long-lived asset impairment charges, $21.5 million in legal expense related to litigation, $13.0 million in travel and entertainment expenses, and $5.8 million in depreciation expense due to higher property and equipment balances and accelerated depreciation related to business transition activities.

Income from Equity Investments Income from equity investments of $11.6 million for the twelve months ended December 31, 2021 consisted solely of realized gains from the sale of an equity investment.

Interest and Other Income (Expense), Net Interest and other income (expense), net, increased primarily due to $22.1 million in interest income on our short-term marketable securities portfolio, partially offset by foreign currency transaction gains and losses due to the effects of foreign currency fluctuations.

The increase in interest income was primarily related to a significant increase in market interest rates, as well as an increase in the average invested balances during 2022 compared to 2021.

Income Tax Expense We recorded income tax expense on pre-tax book income for the twelve months ended December 31, 2022 and December 31, 2021.

The income tax expense we recorded for 2022 is primarily attributable to income tax expense from normal, recurring operations offset by excess tax benefits recognized for share-based compensation for employees (net of disallowed executive compensation) and the Verily milestone payment, and generation of research and development tax credits.

The income tax expense we recorded for 2021 is primarily attributable to income tax expense from normal, recurring operations offset by excess tax benefits recognized for employee share-based compensation, generation of research and development tax credits, and a one-time tax benefit related to tax law changes.

Selling, general and administrative expense

Selling, general and administrative expense increased primarily due to $88.8 million in compensation-related costs most notably due to higher headcount, $37.8 million in legal expense primarily related to a patent infringement lawsuit, and $36.6 million in advertising and marketing costs associated with global product launches.

Other income (expense), net Other income (expense), net, increased primarily due to $111.2 million in interest and dividend income on our cash, cash equivalents, and marketable securities portfolio.

The increase in interest income was related to a change in market interest rates, as well as an increase in the average invested balances during 2023 compared to 2022.

Income tax expense (benefit) We recorded income tax expense on pre-tax book income for the twelve months ended December 31, 2023 and December 31, 2022.

The income tax expense we recorded for 2023 is primarily attributable to income tax expense from normal, recurring operations as well as income taxes related to an intra-entity transfer of certain intellectual property partially offset by excess tax benefits recognized for share-based compensation for employees (net of disallowed executive compensation) and the Verily milestone payment, and generation of research and development tax credits.

The income tax expense we recorded for 2022 is primarily attributable to income tax expense from normal, recurring operations partially offset by excess tax benefits recognized for employee share-based compensation (net of disallowed executive compensation) and the Verily milestone.

Liquidity and Capital Resources

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A substantial portion of our operations are located in the United States, and the majority of our sales since inception have been made in U.S.

We will be exposed to additional foreign currency exchange risk related to our foreign operations when we begin manufacturing in Malaysia and as our business continues to increase in

markets outside of the United States.

See “Foreign Currency Exchange Risk” in Part II, Item 7A of this Annual Report for more information.

We will be exposed to additional foreign currency exchange risk related to our international operations as we expand our manufacturing internationally and as our business continues to increase in international markets.

See “Foreign Currency Exchange Risk” in Part II, Item 7A of this Annual Report on Form 10-K for more information.

Main Sources of Liquidity

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For the twelve months ended December 31, 2023, we had positive cash flows of $748.5 million from operating activities.

We anticipate that we will continue to generate positive cash flow from operations for the foreseeable future.

We anticipate that we will continue to generate positive cash flows from operations for the foreseeable future.

Senior Convertible Notes

We received net proceeds of $836.6 million in November 2018 from the 2023 Notes offering and net proceeds of $1.19 billion in May 2020 from the 2025 Notes offering.

We used $100.0 million of the net proceeds from the offering of the 2023 Notes to repurchase a portion of our common stock in 2018.

We used $282.6 million of the net proceeds from the offering of the 2025 Notes to repurchase a portion of our senior convertible notes due 2022, or 2022 Notes.

We intend to use the remainder of the net proceeds from the 2023 Notes and 2025 Notes offerings for general corporate purposes and capital expenditures, including working capital needs.

We received net proceeds of $1.19 billion in May 2020 from the 2025 Notes offering and net proceeds of $1.23 billion from the 2028 Notes offering.

We used $282.6 million of the net proceeds from the offering of the 2025 Notes to repurchase a portion of our senior convertible notes due in 2022.

We used $289.9 million of the net proceeds from the offering of the 2028 Notes to purchase capped call transactions and repurchase shares of our common stock in May 2023.

We intend to use the remainder of the net proceeds from the 2025 Notes offering and 2028 Notes offering for general corporate purposes and capital expenditures, including working capital needs.

We may also use the net proceeds to expand our current business through in-licensing or acquisitions of, or investments in, other businesses, products or technologies;

however, we do not have any significant commitments with respect to any such acquisitions or investments at this time.

The 2023 Note Hedge is expected to reduce the potential equity dilution upon any conversion of the 2023 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023 Notes.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report for conversion activity related to the 2023 Notes and shares received as the result of exercising a portion of the 2023 Note Hedge as well as for more information about the 2023 Notes and the 2025 Notes, the 2023 Note Hedge, and the 2023 Warrants.

In connection with the 2028 Notes offering we purchased the 2028 Capped Calls.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information about our senior convertible notes and the 2028 Capped Calls.

Revolving Credit Agreement

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Revolving loans will be available for general corporate purposes, including working capital and capital expenditures.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more details on the Revolving Credit Agreement.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more details on the Revolving Credit Agreement.

Short-term Liquidity Requirements

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As of December 31, 2023, we had a working capital ratio of 2.84 and a quick ratio of 2.38, which indicates that our current assets are more than enough to cover our short-term liabilities.

We expect to have significant capital expenditures for the next year to drive our strategic initiative of building out our manufacturing facility and equipment in Malaysia and the capacity scale-up in Mesa, Arizona.

We expect to have significant capital expenditures for the next year to scale-up capacity in Mesa, Arizona and drive our strategic initiatives of building out our manufacturing facilities and/or equipment in Malaysia and Ireland.

We believe that our cash, cash equivalents, and marketable securities balances, projected cash contributions from our commercial operations, and borrowings under our Credit Facility will be sufficient to meet our anticipated seasonal working capital needs, all capital expenditure requirements, material cash requirements as described below, and other liquidity requirements associated with our operations for at least the next 12 months.

We may use cash to repurchase Dexcom shares or for strategic initiatives that strengthen our foundation for long-term growth.

On July 26, 2022, a duly authorized committee of our Board of Directors authorized 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.

As of December 31, 2022, approximately $142.3 million remained available for repurchase pursuant to our share repurchase program.

See Note 9 “Employee Benefit Plans and Stockholders’ Equity” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more details.

As of December 31, 2022, we have outstanding senior convertible notes that will mature in December 2023.

We may elect to settle the remaining principal amount outstanding of the 2023 Notes with cash and/ or shares of Dexcom common stock prior to maturity once certain conditions are met.

We may use cash to repurchase Dexcom shares or for other strategic initiatives that strengthen our foundation for long-term growth.

Long-term Liquidity Requirements

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We expect to meet our long-term liquidity requirements from our main sources of liquidity as described above to support our future operations, capital expenditures, acquisitions, and other liquidity requirements associated with our operations beyond the next 12 months.

As of December 31, 2022, we have outstanding senior convertible notes that will mature in November 2025 for the 2025 Notes.

As of December 31, 2023, we have outstanding senior convertible notes that will mature in November 2025 and May 2028.

However, the outstanding principal of our senior convertible notes could be converted into cash and/or shares of our common stock prior to maturity once certain conditions are met.

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Material Cash Requirements

From time to time in the ordinary course of business, we enter into a variety of purchase arrangements including but not limited to, purchase arrangements related to capital expenditures, components used in manufacturing for the United States and Malaysia, and research and development activities.

See Purchase Commitments in Note 6 “Leases and Other Commitments” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information.

As of January 1, 2022, for U.S.

tax purposes, research and development expenses are required to be capitalized and amortized rather than immediately deducted.

As a result, our annual cash tax payments to the United States Treasury have increased in the current year.

We issued senior convertible notes in November 2018 and May 2020.

The aforementioned obligations include both principal and interest for these notes.

Although these notes mature in December 2023 and November 2025, they may be converted into cash and shares of our common stock prior to maturity if certain conditions are met.

We issued our outstanding senior convertible notes in May 2020 and May 2023.

These obligations include both principal and interest for these notes.

Although these notes mature in November 2025 and May 2028, respectively, they may be converted into cash and/or shares of our common stock prior to maturity if certain conditions are met.

Any conversion prior to maturity can result in repayment of the principal amounts sooner than the scheduled repayment.

As of December 31, 2022, we had outstanding letters of credit of $7.3 million for which we cannot forecast with certainty the amount and timing of repayments.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report for further discussion of the terms of our senior convertible notes.

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We also have land leases in Penang, Malaysia for the build-out of our international manufacturing facility lease that expire through 2082.

We anticipate incurring significant expenditures related to the build-out of the Malaysia manufacturing facility and equipment in the next two years.

See Leases in Note 6 “Leases and Other Commitments” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information.

Under our Restated Collaboration Agreement with Verily, additional sales-based milestone payments equivalent to 5,154,640 shares of our common stock, calculated based on the $175.0 million initial milestone amount divided by the volume-weighted average trading price during the 15 consecutive days ending on the date of the Restated Collaboration Agreement, may become due and payable by us upon achievement of certain sales-based milestones.

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

If we elect to make these milestone payments in cash, any such cash payment would be equal to the number of shares that would otherwise be issued for the given milestone payment multiplied by the value of our stock on the date the relevant milestone is achieved, adjusted for stock splits, dividends, and the like.

We intend to pay these milestones in shares of our common stock and as such we do not expect to have a material cash requirement for this agreement.

See Note 2 “Development and Other Agreements” to the consolidated financial statements in Part II, Item 8 of this Annual Report for further discussion of the Collaboration Agreement with Verily.

See Note 5 “Debt” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information about the terms of the Credit Agreement, our senior convertible notes, the 2023 Note Hedge, and the 2023 Warrants.

We anticipate incurring significant expenditures related to our Malaysia manufacturing facility and equipment over the next year and the build-out of the Ireland manufacturing facility and equipment over the next five years.

See Leases in Note 6 “Leases and Other Commitments” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information about our leases.

The following table sets forth a summary of our cash flows for the periods indicated.

See the consolidated financial statements in Part II, Item 8 of this Annual Report for complete statements of cash flows for these periods.

As of December 31, 2022, we had $2.46 billion in cash, cash equivalents and short-term marketable securities, which is a decrease of $275.0 million compared to $2.73 billion as of December 31, 2021.

See the consolidated financial statements in Part II, Item 8 of this Annual Report for complete consolidated statements of cash flows for these periods.

As of December 31, 2023, we had $2.72 billion in cash, cash equivalents and short-term marketable securities, which is an increase of $267.9 million compared to $2.46 billion as of December 31, 2022.

The primary cash flows during the twelve months ended December 31, 2023 and 2022 are described below.

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December 31, 2023 December 31, 2022

Operating Cash Flows + $341.2 million of net income and $301.6 million of net non-cash adjustments, partially offset by $26.7 million of net changes in working capital balances

+ $216.9 million of net income and $357.6 million of net non-cash adjustments, partially offset by $132.0 million of net changes in working capital balances

Operating Cash Flows + $541.5 million of net income and $203.8 million of net non-cash adjustments, and a net increase of $3.2 million in changes of working capital balances

+ $341.2 million of net income and $301.6 million of net non-cash adjustments, and a net increase of $26.7 million in changes of working capital balances

Net non-cash adjustments were primarily related to share-based compensation and depreciation and amortization.

Net non-cash adjustments were primarily related to collaborative research and development fees, share-based compensation, non-cash interest expense for our senior convertible notes, and depreciation and amortization.

Investing Cash Flows - $364.8 million capital expenditures

+ $193.2 million net proceeds from marketable securities

- $138.5 million net purchases of marketable securities

+ $15.7 million in proceeds from the sale of an equity investment

Net non-cash adjustments were primarily related to share-based compensation and depreciation and amortization.

Investing Cash Flows - $253.0 million in net purchases of marketable securities

- $364.8 million in capital expenditures

- $236.6 million in capital expenditures

- $138.5 million in net purchases of marketable securities

- $19.5 million in purchases of equity investments

- $389.2 million capital expenditures

- $30.2 million in acquisitions, net of cash acquired

- $14.5 million in purchases of equity investments

Financing Cash Flows + $22.5 million in proceeds from the issuance of common stock under our employee stock plans

+ $20.3 million in proceeds from the issuance of common stock under our employee stock plans

Financing Cash Flows + $1.23 billion in proceeds from issuance of senior convertible notes, net of issuance costs

+ $22.5 million in proceeds from issuance of common stock under our employee stock plans

+ $26.6 million in proceeds from issuance of common stock under our employee stock plans

- $557.7 million in purchases of treasury stock

- $9.9 million in payments for financing leases

- $787.3 million in payments for conversions of senior convertible notes

- $15.6 million in payments for financing leases

- $688.7 million in purchases of treasury stock

- $101.3 million in purchases of capped call transactions

Recent Accounting Guidance

For a description of recently issued accounting guidance that is applicable to our financial statements, see Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report.

For a description of recently issued accounting pronouncements and the potential impact on our consolidated financial statements, if any, see Note 1 “Organization and Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of this Annual Report.

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-K

Item 7. Management’s Discussion and Analysis