Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read together with our unaudited condensed financial statements and related notes and other financial information included elsewhere in this Quarterly Report, as well as our audited financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 22, 2021 (“2020 Annual Report”).
In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements. T he forward-looking statements in this report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such risks and uncertainties include those described throughout this Quarterly Report, including in this discussion as well as in the section titled “Risk Factors” under Part II, Item 1A below. The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and, except as required by law we undertake no obligation to update or revise these statements, whether as a result of any new information, future developments or otherwise. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Overview
Our technology is designed to elevate the dialysis experience for patients, and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, Tablo frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines. The integration of water purification and on-demand dialysate production enables Tablo to serve as a dialysis clinic on wheels and allows providers to standardize to a single technology platform from the hospital to the home. Tablo is also intelligent and connected, with automated documentation and the ability to integrate with electronic medical record reporting, along with streamlined remote machine management to maximize device uptime. We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs by up to 80% in the intensive care unit. In addition, Tablo has been shown to deliver robust clinical care. In studies we have conducted, patients have reported experiencing fewer symptoms and better quality sleep while on Tablo. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment. Tablo is cleared by the U.S. Food and Drug Administration (“FDA”) for use in the hospital, clinic or home setting.
We designed Tablo from the ground up to be a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere and by anyone. Tablo is comprised of a compact console with integrated water purification, on-demand dialysate production and a simple-to-use touchscreen interface. With Tablo, we are bringing data to dialysis. Tablo is built to live in a connected setting with cloud-based system monitoring, patient analytics, remote treatment monitoring and clinical recordkeeping and the ability to activate new capabilities and enhancements through wireless software updates. Tablo’s data analytics and connectivity also enable predictive preventative maintenance to maximize machine uptime. Unlike existing hemodialysis machines, which have limited clinical versatility across care settings and are generally burdened by specialized and expensive infrastructure, Tablo is a single enterprise dialysis solution that can be seamlessly utilized across different care settings and for multiple clinical needs.
Driving adoption of Tablo in the acute care setting has been our primary focus to date. We have invested in growing our economic and clinical evidence, built a veteran sales and clinical support team with significant expertise, and implemented a comprehensive training and customer experience program. Our experience in the acute market has demonstrated Tablo’s clinical flexibility and operational versatility, while also delivering meaningful cost savings to the providers. We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute care market as well as driving utilization and fleet expansion with our existing customers. While the COVID-19 pandemic has presented opportunities to demonstrate the real-world benefits of Tablo over traditional machines, we believe these benefits, in addition to the other advantages of Tablo, are continuing to drive customer purchasing decisions.
Tablo is also well suited for home-based dialysis. Tablo was cleared by the FDA for use in patients with acute and/or chronic renal failure in September 2014. Subsequently, on March 31, 2020, Tablo was cleared by the FDA for patient use in the home. Our ability to reduce training time, patient dropout, preparation and set up time, and the total treatment time required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home investigational device exemption (“IDE”) trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate and grow this market successfully, we are focused on refining our home distribution, logistics and support systems to help ensure they are ready for rapid scale. We are also working with providers, patients and payors to increase awareness and adoption of transitional care units (“TCUs”) as a bridge to home based therapy. To demonstrate the cost advantages of Tablo in the home setting, we will also be collecting additional patient clinical experience and outcomes data.
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We sell our solution through our direct sales organization, which covers most major metropolitan markets in the United States. As of June 3 0 , 2021 , our sales organization is comprised of 29 capital sales team members, responsible for generating new customer demand for Tablo , and 70 clinical sales team members responsible for driving utilization and fleet expansion of Tablo consoles at existing customer sites. In addition, our field service team comprised of 78 members provides maintenance services and product support to Tablo customers. The same sales organization and field service team drive Tablo penetration in both the acute and home markets. We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business.
We are continuing to execute a well-defined strategy designed to expand gross margins. First, we have successfully begun production at our own console manufacturing facility. Second, we are adding a second-source contract manufacturer for our cartridges to help gain higher efficiency and lower material and logistics cost. Third, we will continue to drive scale across our console platform to leverage our supply base and help improve our manufacturing efficiency. Fourth, we will continue to utilize our cloud-based data system, as well as enhanced product performance, to help drive down the cost of service.
We generate revenue primarily from the initial sale of Tablo consoles, and recurring sales of per-treatment consumables, including the Tablo cartridge, which generates significant total revenue over the life of the console. We generate additional revenue via annual service contracts and shipping and handling charged to customers. Our total revenue was $25.2 million and $11.7 million for the three months ended June 30, 2021 and 2020, respectively, and $48.1 million and $18.9 million for the six months ended June 30, 2021 and 2020, respectively.
For the three months ended June 30, 2021 and 2020, we incurred net losses of $30.2 million and $26.5 million, respectively, and for the six months ended June 30, 2021 and 2020, we incurred net losses of $60.2 million and $47.2 million, respectively. As of June 30, 2021, we had an accumulated deficit of $554.3 million.
On September 17, 2020, we completed our initial public offering (“IPO”), in which we sold 10,293,777 shares of common stock (which included 1,342,666 shares that were offered and sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares in connection with the IPO) at a price to the public of $27.00 per share. We received aggregate net proceeds of approximately $254.8 million after deducting offering costs, underwriting discounts and commissions of approximately $23.1 million. Upon the closing of the IPO, all of our outstanding redeemable convertible preferred stock automatically converted into shares of common stock.
On April 13, 2021, we completed a follow-on public offering and sold 2,945,864 shares of our common stock (which included 445,864 shares that were offered and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $53.50 per share. We received aggregate net proceeds of approximately $149.1 million after deducting offering costs, underwriting discounts and commissions of $8.5 million.
Impacts of the COVID-19 pandemic
We believe that the COVID-19 pandemic has highlighted the limitations of traditional machines and the benefits of Tablo, driving an increase in demand for Tablo during 2020. We also believe the advantages of Tablo highlighted by the pandemic are now embedded as one of the many factors driving our customers’ purchasing decisions and do not expect to experience significant revenue driven solely by COVID-19 in future periods. However, the duration and extent of the COVID-19 pandemic remain uncertain, particularly in light of ongoing vaccination efforts and emerging variant strains of the virus, and we cannot predict with certainty the ultimate impact of the COVID-19 pandemic and related containment measures on our business.
In order to operate in a safe manner, we continue to monitor and follow the latest health and safety guidelines of the U.S. Centers for Disease Control and Prevention, Occupational Safety and Health Administration, and local and state public health departments where we operate. These guidelines continue to change in light of local circumstances related to vaccine availability, population vaccination rates and emerging variant strains of the virus (including the Delta variant which appears to be highly transmissible). For employees working on-site, we continue to follow masking protocols consistent with evolving health and safety guidelines, facilitate social distancing and practice increased sanitizing standards. We have strongly encouraged all of our employees to get vaccinated, and continue to provide vaccination site information and COVID-19 testing at our facilities. We also actively support remote work arrangements. In addition, we have created a business continuity plan and incident management team to respond quickly and effectively to changes in order to offer customers uninterrupted products, services and support while safeguarding the best interest of employees, suppliers and stockholders.
Our business may also be impacted by an escalation or a continuation of the COVID-19 pandemic. While the operations at our contract manufacturing partners’ facilities and our outsourced business administration service provider, TACNA, for our facility in Tijuana, Mexico, have not yet experienced significant disruption as a result of the pandemic, the possibility that such disruption may occur remains. Additionally, the COVID-19 pandemic has disrupted the operations of certain of our third-party suppliers, resulting in increased lead-times, higher component costs and lower allocations for our purchase of some components (including certain critical components) and, in certain cases, requiring us to procure materials from alternative sources or incur higher logistical expenses. We have worked closely with our manufacturing partners and suppliers to enable us to source key components and maintain appropriate
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inventory levels to meet customer demand and have not experienced material disruptions in our supply chain to date. H ow long the pandemic and measures intended to contain the spread of COVID-19 will continue remains uncertain and depends on ongoing developments, including but not limited to any resurgences of the virus including emerging variant strains such as the Delta variant , federal, state and local government actions taken in response, and continued availability, effectiveness and public acceptance of CO VID -19 vaccines. As a result, we cannot predict what effect COVID-19 and the associated containment measures will ultimately have on our suppliers and vendors, in particular for any of our suppliers and vendors that may not qualify as essential businesses and suffer more significant or lengthier disruptions to their business operations. There is no assurance that we will not experience more significant disruptions in our supply chain in the future, particularly if the operations of our contract manufacturing partners, our critical single source component providers, or the facility we operate in Tijuana, Mexico in collaboration with T ACNA , are more severely impacted by the pandemic and associated containment measures.
Results of Operations
The following table summarizes our results of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Revenue:
Product revenue
$
20,628
$
9,697
$
38,838
$
15,623
Service and other revenue
4,588
2,045
9,294
3,309
Total revenue
25,216
11,742
48,132
18,932
Cost of revenue:
Cost of product revenue
22,077
15,291
42,654
24,853
Cost of service and other revenue
2,087
1,215
4,137
2,407
Total cost of revenue
24,164
16,506
46,791
27,260
Gross profit
1,052
(4,764
)
1,341
(8,328
)
Operating expenses:
Research and development
8,032
6,053
15,602
11,891
Sales and marketing
13,204
9,244
26,353
16,526
General and administrative
9,722
4,848
18,968
8,374
Total operating expenses
30,958
20,145
60,923
36,791
Loss from operations
(29,906
)
(24,909
)
(59,582
)
(45,119
)
Interest income and other income, net
164
67
276
527
Interest expense
(431
)
(1,032
)
(853
)
(2,033
)
Change in fair value of redeemable convertible preferred stock
warrant liability
—
(631
)
—
(530
)
Loss before provision for income taxes
(30,173
)
(26,505
)
(60,159
)
(47,155
)
Provision for income taxes
35
—
74
-
Net loss
$
(30,208
)
$
(26,505
)
$
(60,233
)
$
(47,155
)
Comparison of the Three and Six Months Ended June 30, 2021 and 2020
Revenue
Three Months Ended June 30,
Change
Six Months Ended June 30,
Change
(dollars in thousands)
2021
2020
$
%
2021
2020
$
%
Revenue:
Product revenue
$
20,628
$
9,697
$
10,931
113
%
$
38,838
$
15,623
$
23,215
149
%
Service and other revenue
4,588
2,045
2,543
124
%
9,294
3,309
5,985
181
%
Total revenue
$
25,216
$
11,742
13,474
115
%
$
48,132
$
18,932
29,200
154
%
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Product revenue increased by $10.9 million, or 113% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, driven by a $8.7 million increase in consoles revenue and a $2.2 million increase in consumables revenue. The increase in consoles revenue was driven by new customer adoption, fleet expansion across existing customer sites, higher average selling prices and a $0.7 million increase in console leasing revenue. The increase in consumables revenue was driven by our growth in console installed base.
Product revenue increased by $23.2 million, or 149% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, driven by a $18.4 million increase in consoles revenue and a $4.8 million increase in consumables revenue. The increase in consoles revenue was driven by new customer adoption, fleet expansion across existing customer sites, higher average selling prices and a $1.4 million increase in console leasing revenue. The increase in consumables revenue was driven by our growth in console installed base.
Service and other revenue increased for the three and six months ended June 30, 2021 from the three and six months ended June 30, 2020. The increase was primarily due to services associated with our growth in console installed base, including leased consoles.
Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended June 30,
Change
Six Months Ended June 30,
Change
(dollars in thousands)
2021
2020
$
%
2021
2020
$
%
Cost of revenue:
Cost of product revenue
$
22,077
$
15,291
$
6,786
44
%
$
42,654
$
24,853
$
17,801
72
%
Cost of service and other revenue
2,087
1,215
872
72
%
4,137
2,407
1,730
72
%
Total cost of revenue
$
24,164
$
16,506
7,658
46
%
$
46,791
$
27,260
19,531
72
%
Gross profit
1,052
(4,764
)
5,816
122
%
1,341
(8,328
)
9,669
116
%
Gross margin
4.2
%
(40.6
)
%
2.8
%
(44.0
)
%
Cost of product revenue increased by $6.8 million, or 44% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was primarily due to higher console and consumable volume of $12.8 million and higher depreciation expense for leased consoles of $0.2 million. This was offset by a $5.9 million reduction in product costs and a $0.4 million decrease in manufacturing overhead.
Cost of product revenue increased by $17.8 million, or 72% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase was primarily due to higher console and consumable volume of $27.8 million, higher depreciation expense for leased consoles of $0.4 million and higher manufacturing overhead of $0.1 million. This was offset by a $10.6 million reduction in product costs.
Cost of service and other revenue increased by $0.9 million, or 72% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was pri marily due to additional headcount costs in our service department, which were absorbed across our larger installed base.
Cost of service and other revenue increased by $1.7 million, or 72% for the six months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was pri marily due to additional headcount costs in our service department, which were absorbed across our larger installed base.
Gross profit increased by $5.8 million, or 122% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The gross margin percentage improved by 44.8 percentage points for the three months ended June 30, 20 21, as compared to the three months ended June 30, 2020, driven primarily by the impact of our cost reduction activities.
Gross profit increased by $9.7 million, or 116% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The gross margin percentage improved by 46.8 percentage points for the six months ended June 30, 20 21, as compared to the six months ended June 30, 2020, driven primarily by the impact of our cost reduction activities.
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Operating Expenses
Three Months Ended June 30,
Change
Six Months Ended June 30,
Change
(dollars in thousands)
2021
2020
$
%
2021
2020
$
%
Operating expenses:
Research and development
$
8,032
$
6,053
$
1,979
33
%
$
15,602
$
11,891
$
3,711
31
%
Sales and marketing
13,204
9,244
3,960
43
%
26,353
16,526
9,827
59
%
General and administrative
9,722
4,848
4,874
101
%
18,968
8,374
10,594
127
%
Total operating expenses
$
30,958
$
20,145
10,813
54
%
$
60,923
$
36,791
24,132
66
%
Research and development expenses increased by $2.0 million, or 33% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $1.1 million increase in compensation and personnel costs, which includes a $0.5 million increase in stock-based compensation expense, and a $0.8 million increase in consultant services.
Research and development expenses increased by $3.7 million, or 31% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $3.2 million increase in compensation and personnel costs, which includes a $1.6 million increase in stock-based compensation expense, and a $0.8 million increase in consultant services. The increases were partially offset by a $0.4 million decrease in supplies and materials.
Sales and marketing expenses increased by $4.0 million, or 43% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $2.3 million increase in compensation and personnel costs, which includes a $1.0 million increase in stock-based compensation expense , a $0.9 million increase in clinical sales consultant services, a $0.5 million increase in travel expenses and a $0.2 million increase in allocated costs for facilities and information technology to support the general expansion of our operations .
Sales and marketing expenses increased by $9.8 million, or 59% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $6.9 million increase in compensation and personnel costs, which includes a $2.6 million increase in stock-based compensation expense , a $2.0 million increase in clinical sales consultant services, a $0.4 million increase in allocated costs for facilities and information technology to support the general expansion of our operations , a $0.2 million in travel expenses and a $0.2 million increase in freight expenses .
General and administrative expenses increased by $4.9 million, or 101% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $3.1 million increase in compensation and personnel costs, which includes a $1.8 million increase in stock-based compensation expense, a $0.9 million increase in insurance costs, a $0.6 million increase in outside services costs, and a $0.4 million increase in allocated costs for facilities and information technology to support the general expansion of our operations. The increases were partially offset by a $0.1 million decrease in professional and consultant services.
General and administrative expenses increased by $10.6 million, or 127% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $6.6 million increase in compensation and personnel costs, which includes a $4.3 million increase in stock-based compensation expense, a $1.8 million increase in insurance costs, a $1.2 million increase in allocated costs for facilities and information technology to support the general expansion of our operations, a $0.6 million increase in outside services costs, and a $0.5 million increase in professional and consultant services. The increases were partially offset by a $0.1 million decrease in depreciation expense.
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Other Income (Expense), Net
Three Months Ended June 30,
Change
Six Months Ended June 30,
Change
(dollars in thousands)
2021
2020
$
%
2021
2020
$
%
Other Income (Expense), Net:
Interest income and other income, net
$
164
$
67
$
97
145
%
$
276
$
527
$
(251
)
(48
)%
Interest expense
(431
)
(1,032
)
601
(58
)%
(853
)
(2,033
)
1,180
(58
)%
Change in fair value of redeemable
convertible preferred stock
warrant liability
—
(631
)
631
*
—
(530
)
530
*
Total other expense, net
$
(267
)
$
(1,596
)
1,329
(83
)%
$
(577
)
$
(2,036
)
1,459
(72
)%
* Not meaningful
Interest income and other income, net increased by $0.1 million, or 145% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, primarily driven by a value added taxes refund related to startup costs in our new manufacturing facility received in the second quarter of 2021.
Interest income and other income, net decreased by $0.3 million, or 48% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease was primarily due to a $0.6 million decrease in interest income driven by lower interest rates in the first half of 2021. This decrease was partially offset by a $0.3 million value added taxes refund primarily related to startup costs in our new manufacturing facility received during the first half of 2021.
Interest expense decreased for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020. The decrease was driven primarily by a lower interest rate under the SVB Term Loan as compared to the rate under the Perceptive Term Loan, which we voluntarily repaid in July 2020.
The change in the fair value of redeemable convertible preferred stock warrant liability was driven by the changes in assumptions used to value the warrant liability. Upon the closing of our IPO in September 2020, all shares of our outstanding redeemable convertible preferred stock warrants were either exercised into common stock or automatically converted into warrants to purchase common stock. Accordingly, we have ceased to incur the change in the fair value of redeemable convertible preferred stock warrant liability as the entire redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital.
Liquidity and Capital Resources
Sources of Liquidity
As of June 30, 2021, the Company had cash, cash equivalents and short-term investments of $396.2 million, which are available to fund future operations, and restricted cash of $33.3 million, for a total cash, cash equivalents, restricted cash and short-term investments balance of $429.5 million.
Since our inception, we have incurred net losses and negative cash flows from operations. To date, we have financed our operations and capital expenditures primarily through sales of redeemable convertible preferred stock and common stock, revenue from sales and issuances of debt. In September 2020, we completed our IPO for aggregate net proceeds of approximately $254.8 million (inclusive of the full exercise of the underwriters’ option to purchase additional shares), net of offering costs, underwriter discounts and commissions of $23.1 million. In April 2021, we completed a follow-on public offering for aggregate net proceeds of approximately $149.1 million , after deducting offering costs, underwriting discounts and commissions of $8.5 million.
We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. We may raise additional capital through the issuance of additional equity financing, debt financings or other sources. If this financing is not available to us at adequate levels or on acceptable terms, we may need to reevaluate our operating plans. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. We believe that our existing cash, cash equivalents and short-term investments, and cash generated from sales of our products, will be sufficient to meet our anticipated needs for at least the next 12 months from the date of this Quarterly Report.
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Cash Flows Summary
The following table summarizes the cash flows for each of the periods indicated (in thousands):
Six Months Ended June 30,
2021
2020
Net cash (used in) provided by:
Operating activities
$
(69,457
)
$
(44,059
)
Investing activities
(104,267
)
25,471
Financing activities
153,026
126,797
Net (decrease) increase in cash, cash equivalents and restricted cash
$
(20,698
)
$
108,209
Operating Activities
The net cash used in operating activities of $69.5 million for the six months ended June 30, 2021 was due to a net loss of $60.2 million and a net cash outflow from the change in our operating assets and liabilities of $23.1 million, which were partially offset by adjustments for stock-based compensation expense of $9.8 million, depreciation and amortization of $2.6 million, non-cash lease expense of $0.5 million, accretion of discount on investments of $0.4 million, non-cash interest expense of $0.3 million, and provision for inventories of $0.3 million. The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories of $12.1 million due to the timing of inventory purchases including advance purchases of inventory due to the transition to our own manufacturing facility, anticipated demand and to mitigate supply chain disruptions, which partially related to COVID-19 , an increase in accounts receivable of $9.9 million due to timing of collections, a net decrease in account payable, accrued expenses and other current liabilities of $1.0 million due to timing of vendor payments and a decrease in accrued payroll and related benefits of $1.5 million, and a decrease in operating lease liabilities of $0.4 million. The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue of $1.1 million due to the growth of our business, an increase in prepaid expenses and other assets of $0.6 million, and an increase in accrued warranty liability of $0.2 million.
The net cash used in operating activities for the six months ended June 30, 2020 was $44.1 million, attributable to a net loss of $47.2 million and a net change in our net operating assets and liabilities of $0.3 million, partially offset by non-cash charges of $3.4 million. Non-cash charges primarily consisted of $1.3 million in stock-based compensation, $0.7 million in depreciation and amortization, $0.5 million in the change in the fair value of the redeemable convertible preferred stock warrant liability, $0.4 million in non-cash interest expense, $0.2 million in provision for inventory and $0.1 million in no-cash lease expense. The change in our net operating assets and liabilities was primarily due to a $3.4 million increase in accounts receivable and a $2.0 million increase in inventories due to growth in our business, a $0.7 million decrease in accounts payable due to timing of payments and a $0.6 million increase in prepaid expenses and other assets. These changes were partially offset by a $2.5 million increase in accrued expenses and other current liabilities due to timing of payments, a $2.2 million increase in deferred revenue mainly due to the growth of our business, a $1.1 million increase in accrued payroll and related benefits and a $0.6 million increase in accrued warranty liability.
Investing Activities
The net cash used in investing activities of $104.3 million for the six months ended June 30, 2021 was due primarily to the purchases of investment securities of $122.4 million and the purchases of property and equipment of $1.8 million, partially offset by the sales and maturities of investment securities of $19.9 million.
The net cash provided by investing activities for the six months ended June 30, 2020 was $25.5 million and related primarily to the sales and maturities of investment securities of $30.5 million, partially offset by the purchases of property and equipment of $5.0 million.
Financing Activities
The net cash provided by financing activities of $153.0 million for the six months ended June 30, 2021 was due primarily to the net proceeds of $149.1 million from the issuance of our common stock upon the follow-on offering and the proceeds of $3.9 million from employee exercises of stock options and employee stock purchase plan purchases.
The net cash provided by financing activities for the six months ended June 30, 2020 was due primarily to the net proceeds of $126.8 million from the issuance of our Series E redeemable convertible preferred stock.
Contractual Obligations and Commitments
During the three and six months ended June 30, 2021, there have been no material changes to our contractual obligations from those disclosed in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” included in our 2020 Annual Report.
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Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the financial condition and results of operations is based on the financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Annual Report. For additional information, please refer to Note 2 to our unaudited condensed financial statements in this Quarterly Report.
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Because (i) the aggregate worldwide market value of our voting common stock held by non-affiliates (or "public float") exceeded $700 million on June 30, 2021, (ii) we will have been subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) for at least twelve calendar months, (iii) we have previously filed an annual report under Section 13(a) or 15(d) of the Exchange Act and (iv) we are not eligible for smaller reporting company status because we exceed the public float and revenue threshold for such status, we will qualify as a "large accelerated filer" under Rule 12b-2 of the Exchange Act as of the end of the current fiscal year. As a large accelerated filer, we will no longer qualify as an emerging growth company.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for more information.
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