NovoCure Ltd 10-Q

Item 1. Financial Statements NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) June 30, 2022 December 31, 2021 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 367,014 $ 208,802 Short-term investments 581,503 728,898 Restricted cash 749 807 Trade receivables, net 97,563 93,567 Receivables and prepaid expenses 18,195 17,025 Inventories 29,531 24,427 Total current assets 1,094,555 1,073,526 LONG-TERM ASSETS: Property and equipment, net 26,561 22,693 Field equipment, net 12,377 12,923 Right-of-use assets 18,281 18,267 Other long-term assets 10,898 12,086 Total long-term assets 68,117 65,969 TOTAL ASSETS $ 1,162,672 $ 1,139,495 The accompanying notes are an integral part of these unaudited consolidated financial statements. 2 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) June 30, 2022 December 31, 2021 Unaudited Audited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 79,910 $ 72,600 Other payables, lease liabilities and accrued expenses 55,489 70,002 Total current liabilities 135,399 142,602 LONG-TERM LIABILITIES: Long-term debt, net 563,846 562,216 Deferred revenue 4,541 6,477 Long-term leases 13,377 12,997 Employee benefit liabilities 3,598 4,543 Other long-term liabilities 239 166 Total long-term liabilities 585,601 586,399 TOTAL LIABILITIES 721,000 729,001 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Share capital - Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 104,727,685 shares and 103,971,263 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively — — Additional paid-in capital 1,158,348 1,099,589 Accumulated other comprehensive income (loss) ( 2,095 ) ( 3,169 ) Retained earnings (accumulated deficit) ( 714,581 ) ( 685,926 ) TOTAL SHAREHOLDERS' EQUITY 441,672 410,494 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,162,672 $ 1,139,495 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share and per share data) Three months ended June 30, Six months ended June 30, Year ended December 31, 2022 2021 2022 2021 2021 Unaudited Unaudited Audited Net revenues $ 140,866 $ 133,517 $ 278,413 $ 268,212 $ 535,031 Cost of revenues 28,503 28,599 56,230 54,984 114,877 Gross profit 112,363 104,918 222,183 213,228 420,154 Operating costs and expenses: Research, development and clinical studies 57,075 50,315 99,309 96,231 201,303 Sales and marketing 44,750 34,138 82,634 65,495 137,057 General and administrative 31,666 32,760 62,174 63,885 126,127 Total operating costs and expenses 133,491 117,213 244,117 225,611 464,487 Operating income (loss) ( 21,128 ) ( 12,295 ) ( 21,934 ) ( 12,383 ) ( 44,333 ) Financial expenses (income), net 2,228 940 3,937 3,586 7,742 Income (loss) before income tax ( 23,356 ) ( 13,235 ) ( 25,871 ) ( 15,969 ) ( 52,075 ) Income tax 652 1,406 2,784 2,800 6,276 Net income (loss) $ ( 24,008 ) $ ( 14,641 ) $ ( 28,655 ) $ ( 18,769 ) $ ( 58,351 ) Basic net income (loss) per ordinary share $ ( 0.23 ) $ ( 0.14 ) $ ( 0.27 ) $ ( 0.18 ) $ ( 0.56 ) Weighted average number of ordinary shares used in computing basic net income (loss) per share 104,627,789 103,484,866 104,408,164 103,061,557 103,433,274 Diluted net income (loss) per ordinary share $ ( 0.23 ) $ ( 0.14 ) $ ( 0.27 ) $ ( 0.18 ) $ ( 0.56 ) Weighted average number of ordinary shares used in computing diluted net income (loss) per share 104,627,789 103,484,866 104,408,164 103,061,557 103,433,274 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) U.S. dollars in thousands Three months ended June 30, Six months ended June 30, Year ended December 31, 2022 2021 2022 2021 2021 Unaudited Unaudited Audited Net income (loss) $ ( 24,008 ) $ ( 14,641 ) $ ( 28,655 ) $ ( 18,769 ) $ ( 58,351 ) Other comprehensive income (loss), net of tax: Change in foreign currency translation adjustments 680 413 1,010 145 302 Unrealized gain (loss) from debt securities ( 769 ) — ( 769 ) — — Pension benefit plan ( 678 ) 416 833 2,568 361 Total comprehensive income (loss) $ ( 24,775 ) $ ( 13,812 ) $ ( 27,581 ) $ ( 16,056 ) $ ( 57,688 ) NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY U.S. dollars in thousands (except share data) Ordinary shares Additional paid-in capital Accumulated other comprehensive loss Retained earnings (accumulated deficit) Total shareholders' equity Balance as of December 31, 2021 (audited) 103,971,263 $ 1,099,589 $ ( 3,169 ) $ ( 685,926 ) $ 410,494 Share-based compensation to employees — 25,045 — — 25,045 Exercise of options and vested RSUs 587,825 3,148 — — 3,148 Other comprehensive income (loss), net of tax benefit of $ 0 — — 1,841 — 1,841 Net income (loss) — — — ( 4,647 ) ( 4,647 ) Balance as of March 31, 2022 (Unaudited) 104,559,088 $ 1,127,782 $ ( 1,328 ) $ ( 690,573 ) $ 435,881 Share-based compensation to employees — 25,823 — — 25,823 Proceeds from issuance of shares 46,709 2,759 — — 2,759 Exercise of options and vested RSUs 121,888 1,984 — — 1,984 Other comprehensive income (loss), net of tax benefit of $ 0 — — ( 767 ) — ( 767 ) Net income (loss) — — — ( 24,008 ) ( 24,008 ) Balance as of June 30, 2022 (Unaudited) 104,727,685 $ 1,158,348 $ ( 2,095 ) $ ( 714,581 ) $ 441,672 5 Table of Contents Ordinary shares Additional paid-in capital Accumulated other comprehensive loss Retained earnings (accumulated deficit) Total shareholders' equity Balance as of December 31, 2020 (audited) 102,334,276 $ 1,111,435 $ ( 3,832 ) $ ( 631,077 ) $ 476,526 Share-based compensation to employees — 18,863 — — 18,863 Exercise of options and vested RSUs 853,184 7,961 — — 7,961 Cumulative effect adjustment resulting from ASU 2020-06 early adoption — ( 132,474 ) — 3,502 ( 128,972 ) Other comprehensive income (loss), net of tax benefit of $ 0 — — 1,884 — 1,884 Net income (loss) — — — ( 4,128 ) ( 4,128 ) Balance as of March 31, 2021 (Unaudited) 103,187,460 $ 1,005,785 $ ( 1,948 ) $ ( 631,703 ) $ 372,134 Share-based compensation to employees — 27,881 — — 27,881 Proceeds from issuance of shares 17,291 2,371 — — 2,371 Exercise of options and vested RSUs 436,487 8,695 — — 8,695 Other comprehensive income (loss), net of tax benefit of $ 0 — — 829 — 829 Net income (loss) — — — ( 14,641 ) ( 14,641 ) Balance as of June 30, 2021 (Unaudited) 103,641,238 $ 1,044,732 $ ( 1,119 ) $ ( 646,344 ) $ 397,269 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Three months ended June 30, Six months ended June 30, Year ended December 31, 2022 2021 2022 2021 2021 Unaudited Unaudited Audited Cash flows from operating activities: Net income (loss) $ ( 24,008 ) $ ( 14,641 ) $ ( 28,655 ) $ ( 18,769 ) $ ( 58,351 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 2,654 2,480 5,264 4,850 10,251 Accrued Interest ( 602 ) — ( 823 ) — ( 94 ) Asset write-downs and impairment of field equipment 216 178 351 354 649 Share-based compensation 25,823 27,881 50,868 46,744 94,900 Foreign currency remeasurement loss (gain) 943 372 1,192 2,529 3,231 Decrease (increase) in accounts receivables 2,257 3,026 ( 5,204 ) 7,649 5,270 Amortization of discount (premium) 827 925 1,511 1,528 3,101 Decrease (increase) in inventories ( 209 ) 1,663 ( 5,013 ) 367 2,483 Decrease (increase) in other long-term assets 2,356 1,584 4,219 3,016 4,519 Increase (decrease) in accounts payables and accrued expenses 7,649 5,122 ( 7,160 ) 2,496 27,777 Increase (decrease) in other long-term liabilities ( 2,144 ) ( 2,418 ) ( 4,475 ) ( 6,812 ) ( 10,980 ) Net cash provided by (used in) operating activities $ 15,762 $ 26,172 $ 12,075 $ 43,952 $ 82,756 Cash flows from investing activities: Purchase of property, equipment and field equipment $ ( 4,131 ) $ ( 2,618 ) $ ( 9,224 ) $ ( 6,599 ) $ ( 24,170 ) Proceeds from maturity of short-term investments 437,034 — 716,034 608,000 958,000 Purchase of short-term investments ( 277,146 ) — ( 568,463 ) ( 549,848 ) ( 1,078,664 ) Net cash provided by (used in) investing activities $ 155,757 $ ( 2,618 ) $ 138,347 $ 51,553 $ ( 144,834 ) Cash flows from financing activities: Proceeds from issuance of shares, net $ 2,759 $ 2,371 $ 2,759 $ 2,371 $ 4,546 Repayment of long-term debt ( 7 ) ( 7 ) ( 14 ) ( 13 ) ( 26 ) Exercise of options 1,984 8,695 5,132 16,656 21,182 Net cash provided by (used in) financing activities $ 4,736 $ 11,059 $ 7,877 $ 19,014 $ 25,702 Effect of exchange rate changes on cash, cash equivalents and restricted cash $ ( 120 ) $ ( 3 ) $ ( 145 ) $ ( 105 ) $ ( 188 ) Increase (decrease) in cash, cash equivalents and restricted cash 176,135 34,610 158,154 114,414 ( 36,564 ) Cash, cash equivalents and restricted cash at the beginning of the period 191,628 325,977 209,609 246,173 246,173 Cash, cash equivalents and restricted cash at the end of the period $ 367,763 $ 360,587 $ 367,763 $ 360,587 $ 209,609 7 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Supplemental cash flow activities: Cash paid during the period for: Income taxes paid (refunded), net $ 1,854 $ 2,490 $ 3,027 $ 85 $ 3,110 Interest paid $ 1 $ 1 $ 2 $ 2 $ 101 Non-cash activities: Right-of-use assets obtained in exchange for lease liabilities $ 279 $ 665 $ 3,859 $ 949 $ 5,387 The accompanying notes are an integral part of these unaudited consolidated financial statements. 8 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data) NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Organization . NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") devices, including Optune and Optune Lua (collectively, our "Products"), for the treatment of solid tumor cancers. The Company currently markets Optune in the United States ("U.S."), Germany, Japan and certain other countries. The Company currently markets Optune Lua in the U.S. and European Union. The Company also has a License and Collaboration Agreement (the "Zai Agreement") with Zai Lab (Shanghai) Co., Ltd. ("Zai") to market Optune in China, Hong Kong, Macau and Taiwan ("Greater China"). During the year ended December 31, 2019, the Company implemented changes to its corporate entity operating structure, including transferring certain intellectual property to its Swiss subsidiary, primarily to align corporate entities with the Company’s evolving operations and business model. As of January 1, 2022, the effective place of daily management and control of the Company moved to Switzerland and the Company has become a Swiss tax resident. Financial statement preparation . The accompanying unaudited consolidated financial statements include the accounts of the Company and intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation for the periods presented. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on February 24, 2022 (the "2021 10-K"). The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2021 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below: Short-term investments The Company accounts for investments in debt securities in accordance with ASC 320, "Investments—Debt and Equity Securities." Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date. The Company classifies part of its debt securities as available-for-sale ("AFS") and the rest of the balance as held-to-maturity ("HTM") when the Company has the intent and ability to hold the securities to maturity. Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities sold. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net. Each reporting period, the Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs. Allowance for credit losses on available-for-sale debt securities are recognized in the Company’s consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders’ equity. 9 Table of Contents Held-to-maturity debt securities are stated at amortized cost of which is adjusted for amortization of premiums and accretion of discounts to maturity and any credit losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate. NOTE 2: CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents include items almost as liquid as cash with maturity periods of three months or less when purchased, and short-term investments include items with maturity dates between three months and one year when purchased. As of June 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents and short-term investments were composed of: June 30, 2022 Fair value level Adjusted cost basis Unrealized gains Unrealized losses Fair market value Recorded basis Cash and cash equivalents Short-term investments Cash $ 7,173 $ — $ — $ 7,173 $ 7,173 $ 7,173 $ — Money market funds Level 1 217,498 — — 217,498 217,498 217,498 — Certificate of deposits and term deposits Level 2 486,770 — — 486,770 486,770 140,829 345,941 AFS securities (1) U.S. Treasury bills Level 1 547 — ( 10 ) 537 537 — 537 Government and governmental agencies Level 2 7,786 — ( 32 ) 7,754 7,754 — 7,754 Corporate debt securities Level 2 139,567 11 ( 738 ) 138,840 138,840 1,514 137,326 $ 147,900 $ 11 $ ( 780 ) $ 147,131 $ 147,131 $ 1,514 $ 145,617 HTM securities (2) Corporate debt securities Level 2 $ 89,945 $ — $ ( 213 ) $ 89,732 $ 89,945 $ — $ 89,945 $ 89,945 $ — $ ( 213 ) $ 89,732 $ 89,945 $ — $ 89,945 Total $ 949,286 $ 11 $ ( 993 ) $ 948,304 $ 948,517 $ 367,014 $ 581,503 December 31, 2021 Fair value level Adjusted cost basis Unrealized gains Unrealized losses Fair market value Recorded basis Cash and cash equivalents Short-term investments Cash $ 3,139 $ — $ — $ 3,139 $ 3,139 $ 3,139 $ — Money market funds Level 1 64,668 — — 64,668 64,668 64,668 — Certificate of deposits, notes and term deposits Level 2 565,089 — — 565,089 565,089 140,995 424,094 HTM securities (2) U.S. Treasury bills Level 1 199,981 8 — 199,989 199,981 — 199,981 Corporate debt securities Level 2 104,823 — — 104,823 104,823 — 104,823 $ 304,804 $ 8 $ — $ 304,812 $ 304,804 $ — $ 304,804 Total $ 937,700 937700408.11 $ 8 $ — $ 937,708 $ 937,700 $ 208,802 $ 728,898 (1) Changes in fair value of AFS securities are recorded in other comprehensive income. If unrealized loss is identified as credit loss, this loss will be recorded as finance expenses. 10 Table of Contents (2) Changes in fair value of HTM securities are presented for disclosure purposes as required by ASC 320 and are recorded as finance expenses only if the unrealized loss is identified as a credit loss. As of June 30, 2022 and December 31, 2021, all investments and equivalents mature in one year or less. Unrealized losses from debt securities are primarily attributable to changes in interest rates. The Company does not believe any remaining unrealized losses represent impairments based on the evaluation of available evidence. Debt securities with continuous unrealized losses for less than 12 months and their related fair values were as follows: June 30, 2022 Less than 12 months Fair value Unrealized loss U.S. Treasury bills $ 537 $ ( 10 ) Government and governmental agencies 7,754 ( 32 ) Corporate debt securities 132,264 ( 738 ) Total $ 140,555 $ ( 780 ) As of June 30, 2022, no continuous unrealized losses for 12 months or greater was identified. NOTE 3: INVENTORIES Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. As of June 30, 2022 and December 31, 2021, the Company’s inventories were composed of: June 30, 2022 December 31, 2021 Unaudited Audited Raw materials $ 2,545 $ 1,485 Work in progress 11,573 8,274 Finished products 15,413 14,668 Total $ 29,531 $ 24,427 NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES Operating Leases. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than 2044. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2025. Pledged deposits and bank guarantees. As of June 30, 2022 and December 31, 2021, the Company pledged bank deposits of $ 2,319 and $ 2,350 , respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $ 2,642 and $ 2,698 , respectively . Senior secured revolving credit facility. On November 6, 2020, the Company entered into a three-year $ 150,000 senior secured revolving credit facility with a syndicate of relationship banks. For additional information, see Note 12(c) to the Consolidated Financial Statements in the 2021 10-K. As of June 30, 2022, the Company had no outstanding balance borrowed under the facility. 11 Table of Contents NOTE 5: CONVERTIBLE NOTE On November 5, 2020, the Company issued $ 575,000 aggregate principal amount of 0 % Convertible Senior Notes due 2025 (the “Notes”). The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted as set forth in the Notes. As of June 30, 2022, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible as of June 30, 2022 and are classified as long-term liability. For additional information, see Note 10(a) to the Consolidated Financial Statements in the 2021 10-K. The net carrying amounts of the liability of the Notes as of June 30, 2022 and December 31, 2021 are as follows: June 30, 2022 December 31, 2021 Unaudited Audited Liability component, net: Principal amount $ 575,000 $ 575,000 Unamortized issuance costs ( 11,154 ) ( 12,784 ) Net carrying amount of liability component (1) $ 563,846 $ 562,216 (1) An effective market interest rate determines the fair value of the Notes, therefore they are categorized as Level 3 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair values of the net carrying amount of liability component of the Notes as of June 30, 2022 and December 31, 2021 were $ 430,776 and $ 467,469 , respectively. Finance expense related to the Notes was as follows: Three months ended June 30, Six months ended June 30, Year ended December 31, 2021 2022 2021 2022 2021 Unaudited Unaudited Audited Amortization of debt issuance costs 820 976 1,630 1,685 3,339 Total finance expense recognized $ 820 $ 976 $ 1,630 $ 1,685 $ 3,339 NOTE 6: SHARE OPTION PLANS AND ESPP In September 2015, the Company adopted the 2015 Omnibus Incentive Plan (the “2015 Plan”). Under the 2015 Plan, the Company can issue various types of equity compensation awards such as share options, restricted shares, performance shares, restricted share units (“RSUs”), performance-based share units (“PSUs”), long-term cash awards and other share-based awards. Options granted under the 2015 Plan generally have a two-year or four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are canceled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan generally vest over a three year period. PSUs granted under the 2015 Plan generally vest between a three - and six-year period as performance targets are attained. RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants. As of June 30, 2022, 16,945,169 ordinary shares were available for grant under the 2015 Plan. 12 Table of Contents A summary of the status of the Company’s option plans as of June 30, 2022 and changes during the period then ended is presented below: Six months ended June 30, 2022 Unaudited Number of options Weighted average exercise price Outstanding at beginning of year 8,549,322 $ 33.09 Granted 665,007 80.67 Exercised ( 269,961 ) 18.78 Forfeited and canceled ( 68,591 ) 79.17 Outstanding as of June 30, 2022 8,875,777 $ 36.74 Exercisable options 7,189,164 $ 24.86 For the six months ended June 30, 2022, options to purchase 269,961 ordinary shares were exercised, resulting in the issuance of 269,961 ordinary shares. A summary of the status of the Company’s RSUs and PSUs as of June 30, 2022 and changes during the period then ended is presented below. Six months ended June 30, 2022 Unaudited Number of RSU/PSUs Weighted average grant date fair value Unvested at beginning of year 4,459,107 $ 65.56 Granted 1,104,033 81.04 Vested ( 439,752 ) 84.86 Forfeited and cancelled ( 64,844 ) 95.64 Unvested as of June 30, 2022 (1) 5,058,544 66.88 (1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of performance milestones which are not probable, as of June 30, 2022, in accordance with ASC 718 as follows: June 30, 2022 Number of PSUs Fair value at grant date per PSU Total fair value at grant date 2,703,852 $ 48.16 $ 130,218 108,113 69.37 7,500 124,701 $ 80.59 10,050 17,712 84.68 1,500 7,605 $ 87.66 667 10,532 94.94 1,000 189,626 $ 114.26 21,667 3,162,141 $ 172,602 These PSUs will be expensed over the performance period when the vesting conditions become probable in accordance with ASC 718. 13 Table of Contents In September 2015, the Company adopted an employee share purchase plan (“ESPP”) to encourage and enable eligible employees to acquire ownership of the Company’s ordinary shares purchased through accumulated payroll deductions on an after-tax basis. In the United States, the ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code and the provisions of the ESPP are construed in a manner consistent with the requirements of such section. As of June 30, 2022, 4,908,288 ordinary shares were available to be purchased by eligible employees under the ESPP. The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants. For market condition awards, the Company also applied the Monte-Carlo simulation model. We assessed fair value using the following underlying assumptions: Six months ended June 30, Year ended December 31, 2021 2022 2021 Unaudited Audited Stock Option Plans Expected term (years) 5.33 - 5.83 5.50 - 6.00 5.50 - 6.00 Expected volatility 60 %- 62 % 60 %- 62 % 60 %- 63 % Risk-free interest rate 1.58 %- 3.04 % 0.85 %- 1.02 % 0.78 %- 1.27 % Dividend yield 0.00 % 0.00 % 0.00 % ESPP Expected term (years) 0.50 0.50 0.50 Expected volatility 51.00 % 54.00 % 54 %- 81 % Risk-free interest rate 0.19 % 0.09 % 0.05 %- 0.09 % Dividend yield 0.00 % 0.00 % 0.00 % The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and six months ended June 30, 2022 and 2021 and the year ended December 31, 2021 was: Three months ended June 30, Six months ended June 30, Year ended December 31, 2021 2022 2021 2022 2021 Unaudited Unaudited Audited Cost of revenues $ 1,029 $ 827 $ 1,981 $ 1,560 $ 3,471 Research, development and clinical studies 7,624 8,505 14,425 13,629 27,597 Sales and marketing 6,802 6,429 13,457 10,900 22,673 General and administrative 10,368 12,120 21,005 20,655 41,159 Total share-based compensation expense $ 25,823 $ 27,881 $ 50,868 $ 46,744 $ 94,900 NOTE 7: Basic and diluted net income (loss) per ordinary share Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus potential dilutive shares (deriving from options, RSUs, PSUs, convertible notes and the ESPP) considered outstanding during the period, in accordance with ASC 260-10, as determined under the if-converted method. 14 Table of Contents The following table sets forth the computation of the Company’s basic and diluted net income (loss) per ordinary share: Three months ended June 30, Six months ended June 30, Year ended December 31, 2021 2022 2021 2022 2021 Unaudited Unaudited Audited Net income (loss) attributable to ordinary shares as reported used in computing basic and diluted net income (loss) per share $ ( 24,008 ) $ ( 14,641 ) $ ( 28,655 ) $ ( 18,769 ) $ ( 58,351 ) Weighted average number of ordinary shares used in computing basic net income (loss) per share 104,627,789 103,484,866 104,408,164 103,061,557 103,433,274 Weighted average number of ordinary shares used in computing diluted net income (loss) per share 104,627,789 103,484,866 104,408,164 103,061,557 103,433,274 Weighted anti-dilutive shares outstanding which were not included in the diluted calculation 7,746,398 9,098,788 7,790,467 9,363,037 8,524,922 Basic net income (loss) per ordinary share $ ( 0.23 ) $ ( 0.14 ) $ ( 0.27 ) $ ( 0.18 ) $ ( 0.56 ) Diluted net income (loss) per ordinary share $ ( 0.23 ) $ ( 0.14 ) $ ( 0.27 ) $ ( 0.18 ) $ ( 0.56 ) 15 Table of Contents NOTE 8: SUPPLEMENTAL INFORMATION The Company operates in a single reportable segment. The following table presents long-lived assets by location: June 30, 2022 December 31, 2021 Unaudited Audited United States $ 25,754 $ 23,263 Israel 6,094 5,297 Switzerland 4,316 4,085 Japan 975 799 Germany 697 1,020 Others 1,102 1,152 Total $ 38,938 $ 35,616 The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows: Three months ended June 30, Six months ended June 30, Year ended December 31, 2021 2022 2021 2022 2021 Unaudited Unaudited Audited United States $ 108,203 $ 87,139 $ 205,619 $ 173,047 $ 353,110 EMEA: Germany 10,347 25,362 29,585 51,726 93,939 Other EMEA 8,111 7,335 15,886 15,954 30,577 Japan 8,272 8,750 17,022 17,028 34,640 Greater China (1) 5,933 4,931 10,301 10,457 22,765 Total net revenues $ 140,866 $ 133,517 $ 278,413 $ 268,212 $ 535,031 (1) For additional information, see Note 12 to the Consolidated Financial Statements in the 2021 10-K. 16 Table of Contents