What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-10-27 · 73 added, 118 removed, 298 unchanged (39% of the section changed)

3 unchanged sentences

dollars in thousands (except share data)

September 30,

2023 December 31, 2022

19 unchanged sentences

dollars in thousands (except share data)

September 30,

2023 December 31, 2022

7 unchanged sentences

Long-term debt, net 566,324 565,509

Deferred revenue 3,924 6,477

Deferred revenues 1,843 2,878

Long-term leases 19,973 18,762

8 unchanged sentences

issued and outstanding:

104,942,941 shares and 103,971,263 shares at September 30, 2022 (unaudited) and December 31, 2021, respectively

106,187,162 shares and 105,049,411 shares at March 31, 2023 (unaudited) and December 31, 2022, respectively

Additional paid-in capital 1,266,358 1,222,063

7 unchanged sentences

dollars in thousands (except share and per share data)

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2023 2022 2022

Unaudited Unaudited Audited

Unaudited Audited

Net revenues $ 122,182 $ 137,547 $ 537,840

7 unchanged sentences

Operating income (loss) ( 60,249 ) ( 806 ) ( 89,523 )

Financial expenses (income), net ( 1,194 ) 1,981 2,743 5,567 7,742

Financial income (expenses), net 9,169 ( 1,709 ) 7,677

Income (loss) before income tax ( 51,080 ) ( 2,515 ) ( 81,846 )

8 unchanged sentences

dollars in thousands

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2023 2022 2022

Unaudited Unaudited Audited

Unaudited Audited

Net income (loss) $ ( 53,061 ) $ ( 4,647 ) $ ( 92,534 )

19 unchanged sentences

Balance as of March 31, 2023 (Unaudited) 106,187,162 $ 1,266,358 $ ( 2,691 ) $ ( 831,521 ) $ 432,146

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

Share-based compensation to employees — 26,305 — — 26,305

Exercise of options and vested RSUs 215,256 4,211 — — 4,211

Other comprehensive income (loss), net of tax benefit of $ 0

— — ( 211 ) — ( 211 )

Net income (loss) — — — ( 26,576 ) ( 26,576 )

Balance as of September 30, 2022 (Unaudited) 104,942,941 $ 1,188,864 $ ( 2,306 ) $ ( 741,157 ) $ 445,401

Ordinary shares Additional

6 unchanged sentences

Exercise of options and vested RSUs 587,825 3,148 — — 3,148

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

2 unchanged sentences

Balance as of March 31, 2022 (Unaudited) 104,559,088 $ 1,127,782 $ ( 1,328 ) $ ( 690,573 ) $ 435,881

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

Share-based compensation to employees — 25,758 — — 25,758

Exercise of options and vested RSUs 176,328 3,042 — — 3,042

Other comprehensive income (loss), net of tax benefit of $ 0

— — 219 — 219

Net income (loss) — — — ( 13,124 ) ( 13,124 )

Balance as of September 30, 2021 (Unaudited) 103,817,566 $ 1,073,532 $ ( 900 ) $ ( 659,468 ) $ 413,164

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

dollars in thousands

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2023 2022 2022

Unaudited Unaudited Audited

Unaudited Audited

Cash flows from operating activities:

Net income (loss) $ ( 53,061 ) $ ( 4,647 ) $ ( 92,534 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 2,722 2,610 10,624

24 unchanged sentences

Cash, cash equivalents and restricted cash at the end of the period $ 186,639 $ 191,628 $ 115,834

NOVOCURE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands

Supplemental cash flow activities:

16 unchanged sentences

("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 .

4 unchanged sentences

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.

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.

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, 2022 (the "2022 10-K") filed with the Securities and Exchange Commission on February 23, 2023.

The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2022 10-K are applied consistently in these unaudited interim consolidated financial statements.

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 September 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents and short-term investments were composed of:

September 30, 2022

As of March 31, 2023 and December 31, 2022, the Company’s cash and cash equivalents and short-term investments were composed of:

March 31, 2023

Fair value level Adjusted cost basis Unrealized gains Unrealized losses Fair market value Recorded basis Cash and cash equivalents Short-term investments

2 unchanged sentences

Certificate of deposits and term deposits Level 2 295,804 — — 295,804 295,804 2,000 293,804

AFS securities (1)

Treasury bills Level 1 487 — ( 4 ) 483 483 — 483

Government and governmental agencies Level 2 8,264 — ( 48 ) 8,216 8,216 503 7,713

Corporate debt securities Level 2 137,850 8 ( 852 ) 137,006 137,006 137,006

$ 146,601 $ 8 $ ( 904 ) $ 145,705 $ 145,705 $ 503 $ 145,202

HTM securities (1)

8 unchanged sentences

Money market funds Level 1 105,629 — — 105,629 105,629 105,629 —

Certificate of deposits, notes and term deposits Level 2 565,089 — — 565,089 565,089 140,995 424,094

Certificate of deposits and term deposits Level 2 316,946 — — 316,946 316,946 — 316,946

HTM securities (1)

Treasury bills Level 1 $ 188,030 $ 8 $ ( 540 ) 187,498 188,030 $ — $ 188,030

Government and governmental agencies Level 2 $ 44,357 $ 12 $ ( 12 ) 44,357 44,357 $ — $ 44,357

Corporate debt securities Level 2 $ 304,766 $ 1,066 $ ( 587 ) 305,245 304,766 $ — $ 304,766

1 unchanged sentence

Total $ 969,425 $ 1,086 $ ( 1,139 ) $ 969,372 $ 969,425 $ 115,326 $ 854,099

(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.

(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 September 30, 2022 and December 31, 2021, all investments and equivalents mature in one year or less.

(1) Changes in fair value of held-to-maturity ("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.

In November 2022, the Company transferred all of its available-for-sale portfolio to HTM as part of the Company's investment strategy.

Such transfers are made at fair value at the date of transfer.

The net unrealized loss on these securities at the date of transfer was $ 911 .

These securities continue to be reported in accumulated comprehensive income (loss) and are amortized over the remaining lives of the securities as an adjustment to the yield.

As of March 31, 2023 and December 31, 2022, the unamortized unrealized loss balances were $ 88 and $ 445 , respectively, and are reported in accumulated other comprehensive income (loss).

In accordance with ASC No.

820, the Company measures its money market funds at fair value.

The fair value of the money market funds and HTM securities, which is presented for disclosure purposes, are classified within Level 1 or Level 2.

This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

As of March 31, 2023 and December 31, 2022, all investments mature in one year or less.

Unrealized losses from debt securities are primarily attributable to changes in interest rates.

1 unchanged sentence

Debt securities with continuous unrealized losses for less than 12 months and their related fair values were as follows:

September 30, 2022

Less than 12 months

Fair value Unrealized loss

March 31, 2023 December 31, 2022

Unaudited Audited

Less than 12 months Less than 12 months

Fair value Unrealized loss Fair value Unrealized loss

Treasury bills 116,323 ( 272 ) 162,813 ( 540 )

2 unchanged sentences

Total 342,403 ( 1,467 ) 363,375 ( 1,139 )

As of September 30, 2022, no continuous unrealized losses for 12 months or greater was identified.

As of March 31, 2023, no continuous unrealized losses for 12 months or greater was identified.

Inventories are stated at the lower of cost or net realizable value.

The weighted average methodology is applied to determine cost.

As of September 30, 2022 and December 31, 2021, the Company’s inventories were composed of:

September 30,

As of March 31, 2023 and December 31, 2022, the Company’s inventories were composed of:

2023 December 31,

9 unchanged sentences

Pledged deposits and bank guarantees.

As of September 30, 2022 and December 31, 2021, the Company pledged bank deposits of $ 2,296 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 $ 2,616 and $ 2,698 , respectively .

As of March 31, 2023 and December 31, 2022, the Company pledged bank deposits of $ 2,341 and $ 2,296 , 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 $ 2,700 and $ 2,459 , 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 September 30, 2022, the Company had no outstanding balance borrowed under the facility.

On November 6, 2020, the Company entered into a three-year $ 150,000 senior secured revolving credit facility ("2020 Credit Facility") with a syndicate of relationship banks.

On February 17, 2023, the Company gave irrevocable notice to the administrative agent under the 2020 Credit Facility that the Company terminated all commitments, effective February 22, 2023.

This effectively terminated the 2020 Credit Facility, as the Company's ability to borrow and the Company's obligations to comply with all covenants ended on such date.

The liens and guaranties in favor of the lenders are released.

There was no early termination fee payable and the Company had no outstanding balance borrowed under the 2020 Credit Facility.

The commitments under the 2020 Credit Facility were guaranteed by certain of the Company's subsidiaries and secured by a first lien on the Company's and certain of its subsidiaries’ assets.

Outstanding loans bore interest per annum at a sliding scale based on the our secured leverage ratio from 2.75 % to 3.25 % above the applicable interbank borrowing reference rate for the currency in which the loan is denominated.

Additionally, the 2020 Credit Facility contained a fee for the unused revolving credit commitments at a sliding scale based on our secured leverage ratio from 0.35 % to 0.45 %.

The 2020 Credit Facility contained financial covenants requiring maintenance of a minimum fixed charge coverage ratio and specifying a maximum senior secured net leverage ratio, as well as customary events of default which include a change of control, which are no longer applicable.

CONVERTIBLE NOTE

1 unchanged sentence

The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted as set forth in the Notes.

As of September 30, 2022, the conditions allowing holders of the Notes to convert were not met.

The Notes are therefore not convertible as of September 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 September 30, 2022 and December 31, 2021 are as follows:

September 30,

As of March 31, 2023, the conditions allowing holders of the Notes to convert were not met.

The Notes are therefore not convertible as of March 31, 2023 and are classified as long-term liability.

The net carrying amount of the liability of the Notes as of March 31, 2023 and December 31, 2022 are as follows:

2023 December 31,

4 unchanged sentences

Net carrying amount of liability component (1) $ 566,324 $ 565,509

(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 September 30, 2022 and December 31, 2021 were $ 413,385 and $ 467,469 , respectively.

(1) An effective 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 value of the net carrying amount of liability component of the Notes as of March 31, 2023 and December 31, 2022 were $ 468,271 and $ 455,091 , respectively.

Finance expense related to the Notes was as follows:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2022 2021 2022 2021

Unaudited Unaudited Audited

Three months ended March 31, Year ended December 31,

Unaudited Audited

Amortization of debt issuance costs

4 unchanged sentences

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.

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.

3 unchanged sentences

RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants.

As of September 30, 2022 , 16,836,815 ordinary shares were available for grant under the 2015 Plan.

A summary of the status of the Company’s option plans as of September 30, 2022 and changes during the period then ended is presented below:

Nine months ended September 30, 2022

As of March 31, 2023, 19,010,778 ordinary shares were available for grant under the 2015 Plan.

A summary of the status of the Company’s option plans as of March 31, 2023 and changes during the period then ended is presented below:

Three months ended March 31, 2023

of options Weighted

3 unchanged sentences

Forfeited and canceled ( 63,147 ) 96.06

Outstanding as of September 30, 2022 8,756,370 $ 37.04

Outstanding as of March 31, 2023 8,921,229 $ 40.86

Exercisable options 7,204,441 $ 30.28

For the nine months ended September 30, 2022, options to purchase 436,289 ordinary shares were exercised, resulting in the issuance of 436,289 ordinary shares.

A summary of the status of the Company’s RSUs and PSUs as of September 30, 2022 and changes during the period then ended is presented below.

Nine months ended September 30, 2022

For the three months ended March 31, 2023, options to purchase 429,752 ordinary shares were exercised, resulting in the issuance of 429,752 ordinary shares.

A summary of the status of the Company’s RSUs and PSUs as of March 31, 2023 and changes during the period then ended is presented below.

Three months ended March 31, 2023

of RSU/PSUs Weighted

4 unchanged sentences

Forfeited and cancelled ( 78,002 ) 99.08

Unvested as of September 30, 2022 (1) 5,067,502 66.49

(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 September 30, 2022, in accordance with ASC 718 as follows:

September 30, 2022

Unvested as of March 31, 2023 (1) 5,724,831 66.21

(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 March 31, 2023, in accordance with ASC 718 as follows:

March 31, 2023

PSUs Fair value at grant date per PSU Total fair value at grant date

6 unchanged sentences

3,197,631 $ 174,985

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.

1 unchanged sentence

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 September 30, 2022, 4,908,288 ordinary shares were available to be purchased by eligible employees under the ESPP.

As of March 31, 2023, 4,868,733 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.

1 unchanged sentence

We assessed fair value using the following underlying assumptions:

Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

Unaudited Audited

9 unchanged sentences

Risk-free interest rate 4.76 % 0.19 % 0.19 %- 2.52 %

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 nine months ended September 30, 2022 and 2021 and the year ended December 31, 2021 was:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2022 2021 2022 2021

Unaudited Unaudited Audited

The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three months ended March 31, 2023 and 2022 and the year ended December 31, 2022 was:

Three months ended March 31, Year ended December 31,

Unaudited Audited

Cost of revenues $ 2,006 $ 952 $ 4,690

7 unchanged sentences

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per ordinary share:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2022 2021 2022 2021

Unaudited Unaudited Audited

Three months ended March 31, Year ended December 31,

Unaudited Audited

Net income (loss) attributable to ordinary shares as reported used in computing basic and diluted net income (loss) per share $ ( 53,061 ) $ ( 4,647 ) $ ( 92,534 )

7 unchanged sentences

The following table presents long-lived assets by location:

September 30,

2023 December 31,

6 unchanged sentences

Others 1,264 1,261

Total $ 41,730 $ 35,616

Total long lived assets $ 48,670 $ 45,362

The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2022 2021 2022 2021

Unaudited Unaudited Audited

Three months ended March 31, Year ended December 31,

Unaudited Audited

United States $ 85,228 $ 97,416 $ 406,894

Germany 15,120 19,238 46,120

Other EMEA 7,538 7,081 23,423 23,035 30,577

Japan 8,669 8,750 32,781

Greater China (1) 5,315 4,368 21,332

Others 7,850 7,775 30,713

Total net revenues $ 122,182 $ 137,547 $ 537,840

1 unchanged sentence

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