What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-24 · 307 added, 254 removed, 787 unchanged (42% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Income for the Years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Operations for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive I ncome for the Years ended December 31, 2022, 2021 and 2020

6 unchanged sentences

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

1 unchanged sentence

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

Change in accounting principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for convertible debt in 2022 due to the adoption of Accounting Standards Update 2020-06, Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Basis for opinions

18 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Convertible Debt Repurchase and Conversion

As described further in Note 15 to the consolidated financial statements, the Company repurchased and converted its 1.375% Convertible Senior Notes (“the notes”) due November 2024 for cash and the issuance of common stock.

This resulted in a total loss on extinguishment of $ 42.4 million.

We identified this transaction as a critical audit matter.

The principal considerations for our determination that this matter is a critical audit matter are the application of the accounting guidance for cash paid to note holders and the estimation of fair value of the debt component of the notes.

The guidance for accounting for the inducement as a debt extinguishment is complex.

The Company estimated the fair value of the debt component to determine the loss on extinguishment using a yield model that includes several assumptions, including the discount rate.

Our audit procedures included, but were not limited to, the following:

• We tested the design and operating effectiveness of controls related to management’s accounting and valuation for the repurchase transaction including management’s evaluation of the qualifications of specialists and review of the work performed by the specialists.

• We consulted with our national office resources regarding management’s accounting conclusion that the repurchase of the notes be accounted for as an extinguishment of debt.

• With the assistance of valuation professionals with specialized skills and knowledge, we tested management’s fair value of the debt component of the notes.

This included an assessment of the appropriateness of the methodology, inputs and key assumptions used.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Contract Dispute

As described further in note 17 to the financial statements, the Company entered into an Asset Purchase Agreement as part of the resolution to an ongoing contract dispute.

Pursuant to this agreement the Company made a one-time payment of $25.0 million to the counterparty for the acquisition of developed technology, patents, and the release of future obligations.

This amount was allocated between the intangible assets acquired and the settlement component based on estimated fair values.

We identified the accounting for the resolution of the contract dispute as a critical audit matter.

The principal considerations for our determination that the accounting for the resolution of the contract dispute is a critical audit matter are (1) applying the accounting guidance for allocating the consideration paid, which is complex and requires judgement and (2) estimating the allocation of the fair value of those elements.

These considerations heightened the complexity surrounding the design and execution of audit procedures to respond to this risk.

Our audit procedures related to the contract dispute resolution included the following, among others.

• We consulted with our national office resources regarding management’s accounting conclusion that the transaction consisted of multiple elements to be valued and that consideration paid should be allocated using estimated fair values.

• With the assistance of valuation professionals with specialized skills and knowledge, we tested management’s fair value of the identified intangible assets.

This included an assessment of the appropriateness of the methodology, inputs and key assumptions used, particularly the selection of the relief from royalty method to value the intangible assets, prospective financial information, royalty rates, the probability factor related to defending the patent asset and the selection of the discount rate.

Variable consideration – Rebates to Intermediaries

As described further in note 2 to the financial statements, the Company provides for certain rebates for sales of its product through intermediaries.

The Company estimates variable consideration related to rebates to pharmacy benefit managers based on historical experience adjusted for revenue growth, market trends and events, individual agreements, product mix and, as available, channel inventory data.

We identified the rebate estimate as a critical audit matter.

The principal consideration for our determination that the rebate estimate is a critical audit matter is the level of judgement and complexity surrounding the design and execution of audit procedures to respond to this risk due to the subjectivity of the adjustments to historical experience based on recent product variation and volume.

Our audit procedures related to the rebate estimate included the following, among others.

• We tested the design and operating effectiveness of controls related to management’s process to determine rebates, including the completeness and accuracy of the underlying data used in management’s estimation.

• We tested the completeness and accuracy of inputs into the calculation as follows:

inspected source documents on a sample basis to test historical rebates, compared revenue growth rates to other audited schedules, and performed sensitivity analyses on the subjective adjustments to historical experience.

• We performed retrospective analysis comparing amounts invoiced to and paid by the Company to previously estimated amounts.

/s/ GRANT THORNTON LLP

8 unchanged sentences

Cash and cash equivalents $ 674.7 $ 791.6

Short-term investments — 40.4

Accounts receivable, net (Related Party Transactions Note 5)

Accounts receivable trade, net 140.9 135.2

Accounts receivable trade, net — related party 64.7 25.8

Inventories 346.8 303.2

9 unchanged sentences

Accounts payable $ 30.8 $ 37.7

Accrued expenses and other current liabilities (Related Party Transactions Note 5)

Accrued expenses and other current liabilities 301.0 164.3

Accrued expenses and other current liabilities — related party 5.4 1.7

Current portion of long-term debt 27.5 25.1

3 unchanged sentences

Total liabilities 1,774.7 1,492.5

Commitment and Contingencies (Note 17)

Commitments and contingencies (Note 17)

Stockholders’ Equity

Preferred stock, $ .001 par value:

5,000,000 shares at December 31, 2021 and 2020

Issued and outstanding:

zero shares at December 31, 2021 and 2020

Common stock, $ .001 par value:

100,000,000 shares at December 31, 2021 and 2020

Issued and outstanding:

69,178,691 and 66,017,444 shares at December 31, 2021 and 2020

Preferred stock, $ .001 par value, 5,000,000 shares authorized;

none issued and outstanding

Common stock, $ .001 par value, 100,000,000 authorized;

69,511,286 and 69,178,691 issued and outstanding

Additional paid-in capital 1,040.6 1,207.9

Accumulated deficit ( 584.3 ) ( 649.5 )

Accumulated other comprehensive (loss) income ( 2.2 ) 5.5

Accumulated other comprehensive income (loss) 20.0 ( 2.2 )

Total stockholders’ equity 476.4 556.3

2 unchanged sentences

INSULET CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

(in millions, except share and per share data) 2022 2021 2020

Revenue (Related Party Transactions Note 5)

$ 1,098.8 $ 904.4 $ 738.2

Revenue $ 1,055.4 $ 1,040.6 $ 904.4

Revenue from related party 249.9 58.2 —

Total revenue 1,305.3 1,098.8 904.4

Cost of revenue 499.7 346.7 322.1

Gross profit 805.6 752.1 582.3

Research and development 160.1 146.8 132.3

Selling, general and administrative 466.0 384.0 298.0

Research and development expenses 180.2 160.1 146.8

Selling, general and administrative expenses 587.8 466.0 384.0

Operating income 37.6 126.0 51.5

17 unchanged sentences

Net income $ 4.6 $ 16.8 $ 6.8

Other comprehensive (loss) income, net of tax

Other comprehensive income (loss), net of tax

Foreign currency translation adjustment ( 10.3 ) ( 11.9 ) 6.8

Unrealized gain on cash flow hedges 32.5 4.5 —

Unrealized (loss) gain on available-for-sale securities ( 0.3 ) ( 0.1 ) 1.1

Total other comprehensive (loss) income, net of tax ( 7.7 ) 6.7 1.7

Total comprehensive income $ 9.1 $ 13.5 $ 13.3

Unrealized loss on available-for-sale securities — ( 0.3 ) ( 0.1 )

Total other comprehensive income (loss), net of tax 22.2 ( 7.7 ) 6.7

Comprehensive income $ 26.8 $ 9.1 $ 13.5

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

9 unchanged sentences

62,685 $ 0.1 $ 749.0 $ ( 672.0 ) $ ( 1.2 ) $ 75.9

Exercise of options to purchase common stock 1,340 — 46.6 — — 46.6

Issuance of shares for employee stock purchase plan 51 — 4.3 — — 4.3

Stock-based compensation — — 28.7 — — 28.7

Restricted stock units vested, net of shares withheld for taxes 230 — ( 8.6 ) — — ( 8.6 )

Conversion feature of 0.375 % Notes, net of issuance costs

— — 207.8 — — 207.8

Extinguishment of conversion feature on 1.25 % Notes, net of issuance costs

— — ( 642.3 ) — — ( 642.3 )

Issuance of shares for debt extinguishment 1,875 — 299.4 — — 299.4

Purchase of capped call options — — ( 85.4 ) — — ( 85.4 )

Net income — — — 11.6 — 11.6

Other comprehensive income — — — — 1.7 1.7

Balance, December 31, 2019

62,685 0.1 749.0 ( 672.0 ) ( 1.2 ) 75.9

Adoption of ASU 2016-13 (Note 2) — — — ( 1.1 ) — ( 1.1 )

2 unchanged sentences

Issuance of shares for employee stock purchase plan 38 — 6.0 — — 6.0

Stock-based compensation — — 35.9 — — 35.9

Stock-based compensation expense — — 35.9 — — 35.9

Restricted stock units vested, net of shares withheld for taxes 250 — ( 29.8 ) — — ( 29.8 )

5 unchanged sentences

Issuance of shares for employee stock purchase plan 36 — 8.1 — — 8.1

Stock-based compensation — — 34.4 — — 34.4

Stock-based compensation expense — — 34.4 — — 34.4

Restricted stock units vested, net of shares withheld for taxes 176 — ( 28.2 ) — — ( 28.2 )

6 unchanged sentences

69,179 0.1 1,207.9 ( 649.5 ) ( 2.2 ) 556.3

Adoption of ASU 2020-06 (Note 2) — — ( 207.7 ) 60.6 — ( 147.1 )

Exercise of options to purchase common stock 147 — 6.9 — — 6.9

Issuance of shares for employee stock purchase plan 53 — 9.4 — — 9.4

Stock-based compensation expense — — 40.9 — — 40.9

Restricted stock units vested, net of shares withheld for taxes 132 — ( 16.8 ) — — ( 16.8 )

Net income — — — 4.6 — 4.6

Other comprehensive income — — — — 22.2 22.2

Balance, December 31, 2022

69,511 $ 0.1 $ 1,040.6 $ ( 584.3 ) $ 20.0 $ 476.4

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

5 unchanged sentences

Net income $ 4.6 $ 16.8 $ 6.8

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

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

Depreciation and amortization 63.2 57.4 55.4

Non-cash interest 40.2 45.2 35.6

Stock-based compensation 34.4 35.9 28.7

Stock-based compensation expense 40.9 34.4 35.9

Non-cash interest expense 5.8 40.2 45.2

Loss on extinguishment of convertible debt — 42.4 —

3 unchanged sentences

Accounts receivable ( 12.9 ) ( 45.5 ) ( 13.7 )

Accounts receivable — related party ( 38.9 ) ( 25.8 ) —

Inventories ( 49.1 ) ( 154.4 ) ( 50.5 )

2 unchanged sentences

Accrued expenses and other liabilities 133.9 22.7 27.8

Net cash (used in) provided by operating activities ( 68.1 ) 84.0 98.4

Accrued expenses and other liabilities — related party 3.7 1.7 —

Net cash provided by (used in) operating activities 119.0 ( 68.1 ) 84.0

Cash flows from investing activities

Capital expenditures ( 122.9 ) ( 111.9 ) ( 129.0 )

Investments in developed software ( 12.9 ) ( 10.8 ) ( 37.5 )

Acquisition of a business ( 26.0 ) — —

Acquisition of intangible assets ( 21.5 ) — —

Proceeds from the maturity or sale of investments 40.0 218.4 247.9

Purchases of investments — ( 37.9 ) ( 150.6 )

Cash paid for investments ( 7.8 ) — —

Receipts from the maturity or sale of marketable securities — 40.0 218.4

Cash paid for marketable securities — — ( 37.9 )

Net cash (used in) provided by investing activities ( 191.1 ) ( 82.7 ) 14.0

Cash flows from financing activities

Proceeds from issuance of convertible debt, net of issuance costs — — 780.2

Repayment of convertible debt — ( 460.9 ) —

1 unchanged sentence

Repayment of term loan ( 5.0 ) ( 2.5 ) —

Proceeds from equipment financings, net of issuance costs 43.1 60.0 —

Proceeds from equipment financings, net — 43.1 60.0

Repayment of equipment financings ( 17.4 ) ( 17.8 ) ( 1.4 )

2 unchanged sentences

Payment of debt issuance costs — ( 4.0 ) ( 0.5 )

Purchase of capped call options — — ( 85.4 )

Prepayments of financing lease obligation ( 15.3 ) — —

Proceeds from issuance of common stock, net — — 477.5

2 unchanged sentences

Payment of withholding taxes in connection with vesting of restricted stock units ( 16.8 ) ( 28.2 ) ( 29.8 )

Net cash provided by financing activities 40.7 605.5 73.5

Net cash (used in) provided by financing activities ( 40.3 ) 40.7 605.5

Effect of exchange rate changes on cash ( 4.3 ) ( 5.5 ) 4.8

3 unchanged sentences

$ 689.7 $ 806.4 $ 922.0

Supplemental cash flow information

Cash paid for interest, net of amount capitalized $ 21.5 $ 2.6 $ —

Cash paid for taxes $ 7.0 $ 3.0 $ 2.5

Purchases of property, plant and equipment included in accounts payable and accrued expenses $ 6.1 $ 6.7 $ 13.3

Purchases of intangible assets included in accounts payable and accrued expenses $ 3.2 $ — $ 0.5

Lease liabilities arising from obtaining right-of-use assets $ 0.7 $ 2.5 $ 9.8

Supplemental cash flow information (Note 24)

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

2 unchanged sentences

Nature of the Business

Insulet Corporation (the “Company”) is primarily engaged in the development, manufacture and sale of its proprietary Omnipod System, an innovative, continuous insulin delivery system for people with insulin-dependent diabetes.

The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod device (“Pod”) that is worn on the body for up to three days at a time, and its wireless companion, the handheld Personal Diabetes Manager (“PDM”) or Controller.

The Omnipod System, which features two discreet, easy-to-use devices, communicates wirelessly, provides for virtually pain-free automated cannula insertion and eliminates the need for multiple daily injections using syringes or insulin pens or the use of pump and tubing.

Insulet Corporation (the “Company”) is primarily engaged in the development, manufacture, and sale of its proprietary Omnipod ® System, a continuous insulin delivery system for people with insulin-dependent diabetes.

The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod device (“Pod”) that the user fills with insulin and wears directly on the body for up to three days at a time, which delivers personalized doses of insulin, and the Personal Diabetes Manager (“PDM”) or Controller, a wireless, handheld device that programs the Pod with the user's personalized insulin-delivery instructions and wirelessly monitors the Pod’s operation.

The Omnipod System includes:

the Omnipod Insulin Management System (“Omnipod”) and its next generation Omnipod DASH TM Insulin Management System (“Omnipod DASH”).

the Omnipod Insulin Management System (“Classic Omnipod”), its next generation Omnipod DASH ® Insulin Management System (“Omnipod DASH”), and its newest generation Omnipod ® 5 Automated Insulin Delivery System (“Omnipod 5”).

Omnipod DASH features a secure Bluetooth enabled Pod and PDM with a color touch screen user interface supported by smartphone connectivity.

Omnipod 5, which builds on our Omnipod DASH mobile platform, is a tubeless automated insulin delivery system, that integrates with a continuous glucose monitor (“CGM”) to manage blood sugar and is fully controlled by a compatible personal smartphone or Omnipod 5 Controller.

The CGM is sold separately by a third party.

The Company generates most of its revenue from sales of the Omnipod System, which is sold in the U.S., Europe, Canada, the Middle East, and Australia.

1 unchanged sentence

Intermediaries include independent distributors who resell the Omnipod to end-users and wholesalers who sell the Company’s product to end-users through the pharmacy channel in the United States.

In addition to selling the Omnipod System for insulin delivery, the Company also partners with global pharmaceutical and biotechnology companies to tailor the Omnipod System technology platform for the delivery of subcutaneous drugs across other therapeutic areas.

The majority of the Company’s drug delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy.

Substantially all of the Company’s Drug Delivery revenue consists of sales of pods to Amgen for use in the Neulasta ® Onpro ® kit, a delivery system for Amgen’s Neulasta to help reduce the risk of infection after intense chemotherapy.

Summary of Significant Accounting Policies

7 unchanged sentences

All intercompany balances and transactions have been eliminated.

Reclassification of Prior Period Amounts

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.

Unbilled revenues have been combined with accounts receivable, net on the consolidated balance sheet.

The impact of this change was an increase to accounts receivable, net and a decrease to prepaid expenses and other current assets at December 31, 2020.

Unbilled revenue is presented in Note 8.

In addition, the Company reclassified the change in unbilled receivables from the change in prepaid expenses and other current assets to the change in accounts receivable in the prior year statements of cash flows in the amount of $ 1.9 million and $ 0.1 million for the years ended December 31, 2020 and 2019 , respectively.

There was no change to previously reported total current assets or net cash (used in) provided by operating activities.

Foreign Currency Translation

For the foreign subsidiaries of the Company, assets and liabilities are translated into U.S.

dollars using exchange rates as of the balance sheet date, and income and expenses are translated using the average exchange rates in effect for the related month.

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S.

dollars using exchange rates as of the balance sheet date, while income and expenses of foreign subsidiaries are translated using the average exchange rates in effect for the related month.

The net effect of these translation adjustments is reported in accumulated other comprehensive income (loss) within stockholders’ equity on the consolidated balance sheet.

Net realized and unrealized (losses) gains from foreign currency transactions are included in other (expense) income, net in the consolidated statement of income and were $( 2.0 ) million, $ 3.2 million and $( 0.6 ) million for the years ended December 31, 2021, 2020 and 2019, respectively.

Net realized and unrealized (losses) gains from foreign currency transactions are included in other (expense) income, net in the consolidated statement of operations and were $( 1.3 ) million, $( 2.0 ) million and $ 3.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Cash and Cash Equivalents

1 unchanged sentence

Cash equivalents may include money market mutual funds, commercial paper, and U.S.

government and agency

bonds that are carried at cost, which approximates their fair value.

government and agency bonds, that are carried at cost, which approximates their fair value.

Restricted cash required to be set aside in connection with equipment financings or that serves as collateral for outstanding letters of credit and bank guarantees is included in other assets and cash and cash equivalents on the consolidated balance sheet.

Investments in Marketable Securities

Investments may consist of certificates of deposit, commercial paper, U.S.

government and agency bonds and corporate bonds.

Theses available-for-sale marketable securities are carried at fair value and unrealized gains and losses are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity on the consolidated balance sheet.

The Company has investments in equity securities of privately held companies in which the Company’s interest is less than 20%, the Company does not exercise significant influence over the investee, and the investment does not have a readily determinable fair value.

These investments are carried at cost less impairment, if any.

If an observable price change in orderly transactions for the identical or similar investment in the same issuer is identified, the investment is measured at its fair value as of the date that the observable transaction occurred with the adjustments reflected in other (expense) income, net in the Company’s consolidated statements of operations.

In 2022, the Company made strategic investments in two companies in the amount of $ 5.0 million and $ 2.8 million.

As of December 31, 2022 and December 31, 2021, the total carrying value of the Company’s investments in equity securities without readily determinable fair values was $ 8.7 million and $ 0.9 million, respectively.

As of December 31, 2022 and 2021, there were no impairments or adjustments to the Company’s equity investments without readily determinable fair values.

The Company may also invest in marketable securities, including certificates of deposit, commercial paper, U.S.

government and agency bonds, and corporate bonds, which are classified as available-for-sale and carried at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity on the consolidated balance sheet.

Investments with a stated maturity date of more than one year from the balance sheet date and that are not expected to be used in current operations are classified as long-term investments on the consolidated balance sheet.

The Company reviews investments for other-than-temporary impairment when the fair value of an investment is less than its amortized cost.

If an available-for-sale security is other than temporarily impaired, the loss is included in other income (expense), net in the consolidated statement of income.

If an available-for-sale security is other than temporarily impaired, the loss is included in other (expense) income, net in the consolidated statement of operations.

Accounts Receivable and Allowance for Credit Losses

21 unchanged sentences

The Company incurs commission costs to obtain a contract related to new customer starts.

These costs are capitalized as contract assets in other assets, net of the short-term portion included in prepaid and other current assets.

Costs to obtain a contract are amortized to selling, general and administrative expense on a straight-line basis over the expected period of benefit, which considers future product upgrades for which a commission would be paid.

These costs are capitalized as contract assets in other assets on the consolidated balance sheet, net of the short-term portion included in prepaid and other current assets.

Costs to obtain a contract are amortized to selling, general and administrative expense on a straight-line basis over the expected period of benefit, which considers future product upgrades.

These costs are periodically reviewed for impairment.

2 unchanged sentences

Risks that relate to interest rate exposure are managed by using interest rate swaps.

The Company recognizes derivative instruments as either assets or liabilities at fair value

on the consolidated balance sheet.

The Company recognizes derivative instruments as either assets or liabilities at fair value on the consolidated balance sheet.

Changes in a derivative financial instrument’s fair value are recognized in earnings unless specific hedge criteria are met, in which case changes in fair value are recognized as adjustments to other comprehensive income.

7 unchanged sentences

Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity.

See Notes 6 and 15 for financial assets and liabilities held at carrying amount on the consolidated balance sheet and Notes 7 and 16 for investments and derivative instruments measured at fair value on a recurring basis.

See Notes 6 and 15 for financial assets and liabilities held at carrying amount on the consolidated balance sheet and Notes 16 for derivative instruments measured at fair value on a recurring basis.

Property, Plant and Equipment

28 unchanged sentences

Internal-use software 3 to 5 years

Intellectual property 15 years

Amortization expense is included in selling, general and administrative expenses in the consolidated statement of income.

Developed technology 13 to 15 years

Patents 8 to 15 years

Amortization expense is included in selling, general and administrative expenses in the consolidated statement of operations.

The Company reviews intangible assets for impairment by comparing the fair value of the assets, estimated using an income approach, with their carrying value.

9 unchanged sentences

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments.

The Company’s incremental borrowing rate estimates a secured rate that reflects the term of the lease, the nature of the underlying asset and the economic environment.

The Company’s incremental borrowing rate reflects a secured rate that considers the term of the lease, the nature of the underlying asset and the economic environment.

The Company excludes leases with an expected term of one year or less from recognition on the consolidated balance sheet.

6 unchanged sentences

Product Warranty

The Company provides a four-year warranty on its PDMs sold in the United States and Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications.

The Company provides a four-year warranty on its PDMs and Controllers sold in the United States and Europe and a five-year warranty on PDMs sold in Canada and may replace Pods that do not function in accordance with product specifications.

The Company estimates its warranty obligation at the time the product is shipped based on historical experience and the estimated cost to service the claims.

Costs to service the claims reflect the current product cost.

Costs to service the claims reflect the current product cost, reclaim costs, shipping and handling costs and direct and incremental distribution and customer service support costs.

Since the Company continues to introduce new products and versions, the anticipated performance of the product over the warranty period is also considered in estimating warranty reserves.

Warranty expense is recorded in cost of revenue in the consolidated statements of income.

Warranty expense is recorded in cost of revenue in the consolidated statements of operations.

Revenue Recognition

5 unchanged sentences

Contracts with the Company’s intermediaries are generally in the form of master service agreements against which firm purchase orders are issued.

At the outset of the contract, the Company assesses the customer’s ability and intention to pay, which is based on a

variety of factors including historical payment experience or, in the case of a new intermediary, credit references and other available financial information pertaining to the customer and, in the case of a new direct customer, an investigation of insurance eligibility.

At the outset of the contract, the Company assesses the customer’s ability and intention to pay, which is based on a variety of factors including historical payment experience or, in the case of a new intermediary, credit references and other available financial information pertaining to the customer and, in the case of a new direct customer, an investigation of insurance eligibility.

• Identify Performance Obligations.

The performance obligations in contracts for the delivery of the Omnipod to new end-users, either directly to end-users or through intermediaries, primarily consist of the PDM and the initial and subsequent quantity of Pods ordered.

In the Company’s judgment, these performance obligations are capable of being distinct and distinct in the context of the contract in that the customer can benefit from each item in conjunction with other readily available resources and the transfer of the PDM and the Pods is separately identifiable in the contract with the customer.

The performance obligations in contracts for the delivery of the Omnipod to new end-users, either directly to end-users or through intermediaries, primarily consist of the PDM/Controller and the initial and subsequent quantity of Pods ordered.

In the Company’s judgment, these performance obligations are capable of being distinct and distinct in the context of the contract in that the customer can benefit from each item in conjunction with other readily available resources and the transfer of the PDM/Controller and the Pods is separately identifiable in the contract with the customer.

• Determine Transaction Price.

The price charged for the PDM and Pods is dependent on the Company’s pricing as established with third-party payors and intermediaries.

The price charged for the PDM/Controller and Pods is dependent on the Company’s pricing as established with third-party payors and intermediaries.

The Company provides a right of return for sales of its Omnipod to new end-users and certain of our distributors and wholesalers.

The Company also provides for certain rebates and discounts for sales of its product through intermediaries.

These rights of return, discounts and rebates represent variable consideration and reduce the transaction price at the outset of the contract based on the Company’s estimates, which are primarily based on the expected value method using historical and other data (such as product return trends or forecast sale volumes) related to actual product returns, discounts and rebates paid in each market in which the Omnipod is sold.

These rights of return, discounts, and rebates represent variable consideration and reduce the transaction price at the outset of the contract based on the Company’s estimates, which are primarily based on the expected value method using historical and other data (such as product return trends or forecasted sale volumes) related to actual product returns, discounts, and rebates paid in each market in which the Omnipod is sold.

Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur;

5 unchanged sentences

The Company transfers the Omnipod at a point in time, which is determined based on when the customer gains control of the product.

Generally, intermediaries in the U.S.

obtain control upon shipment based on the contractual terms including right to payment and transfer of title and risk of ownership.

Generally, intermediaries in the United States, obtain control upon shipment based on the contractual terms, including right to payment and transfer of title and risk of ownership.

For sales directly to end-users and international intermediaries, control is generally transferred at the time of delivery based on customary business practices related to risk of ownership, including transfer of title.

4 unchanged sentences

The Company recognizes revenue over time using a blend of costs incurred to date relative to total estimated costs at completion and time incurred to date relative to total production time to measure progress toward the satisfaction of its performance obligations.

The Company believes that both incurred cost and elapsed time reflect the value generated, which best depicts the transfer of control to the customer.

The Company believes that both incurred cost and elapsed time reflect the value

generated, which best depicts the transfer of control to the customer.

Contract costs include third-party costs as well as an allocation of manufacturing overhead.

12 unchanged sentences

Advertising expenses were $ 41.2 million, $ 44.1 million, and $ 30.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Stock-Based Compensation

Stock-Based Compensation Expense

The Company measures stock-based compensation on the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period.

The amount of stock-based compensation recognized during a period is based on the portion of the awards that are expected to vest.

The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are expected to vest.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

5 unchanged sentences

Interest and penalties are classified as a component of income tax expense.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents, short-term and long-term investments in marketable securities and accounts receivable.

Concentration Risk

Credit Risk— Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and accounts receivable.

The Company maintains most of its cash, and investments with a limited number of financial institutions that have a high investment grade credit rating.

See Notes 4 and 7 for customer concentration.

Recently Adopted Accounting Standard

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 eliminates certain exceptions in the former guidance regarding the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements.

Supply Risk— The Company’s Drug Delivery product is currently produced at a single contract manufacturer.

Additionally, the Company uses different types of semiconductor chips, which are sourced from external suppliers, in the manufacturing of its products.

While the Company has multiple suppliers of semiconductor chips, each type is typically sourced from a single supplier.

Supply chain disruptions, supplier shortages, logistic delays, or quality problems could result in manufacturing delays, increased costs, or a possible loss of sales, which could adversely affect operating results.

Recently Adopted Accounting Standards

Convertible Debt

Effective January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2020-06, Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity using the modified retrospective method for convertible debt instruments outstanding as of the date of adoption.

Under ASU 2020-06, a convertible debt

instrument is generally reported as a single liability at its amortized cost with no separate accounting for embedded conversion features.

Consequently, the effective interest rate of convertible debt instruments is closer to the coupon interest rate under the new guidance.

The following table shows the adjustments made to the consolidated balance sheet as of January 1, 2022 as a result of adopting the new guidance.

(in millions) As Reported

Prior to ASU 2020-06 Adjustments As Adjusted

Under ASU 2020-06

December 31, 2021 January 1, 2022 January 1, 2022

Long-term debt, net (1)

$ 1,248.8 $ 147.1 $ 1,395.9

Additional paid-in-capital (2)

$ 1,207.9 $ ( 207.7 ) $ 1,000.2

Accumulated deficit (3)

$ ( 649.5 ) $ 60.6 $ ( 588.9 )

(1) The increase in debt resulted from the derecognition of the discount associated with the embedded conversion feature, offset by the remaining debt issuance costs reclassified out of equity.

(2) The decrease in additional paid-in-capital resulted from the derecognition of the embedded conversion feature and debt issuance costs bifurcated to equity.

(3) The decrease to accumulated deficit represents the cumulative interest expense recognized related to the amortization of the bifurcated conversion option and debt issuance costs.

In addition to the adjustments in the table above, the Company wrote-off the related deferred tax liabilities with a corresponding adjustment to the valuation allowance, resulting in no net impact to the cumulative adjustment recorded to accumulated deficit.

Adoption of this standard had no impact on the Company’s diluted earnings per share as the Company historically calculated earnings per share using the if-converted method.

Reference Rate Reform

ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Reporting and ASU 2021-01, Reference Rate Reform (Topic 848) – Scope allow companies to elect optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform (e.g., discontinuation of the London Interbank Offered Rate (“LIBOR”)) if certain criteria are met.

During the fourth quarter of 2022, the Company elected to apply optional expedients for contract modifications to all eligible debt instruments and hedging relationships affected by the transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

Accordingly, the Company did not have to assess whether the contract modification should be accounted for as a debt extinguishment.

Additionally, the Company was not required to dedesignate hedging relationships when the contractual terms changed.

The adoption of these standards had no impact on our consolidated financial statements.

Segment and Geographic Data

2 unchanged sentences

The Company has concluded that its Chief Executive Officer (“CEO”) is the CODM as the CEO is the ultimate decision maker for key operating decisions, determining the allocation of resources and assessing the financial performance of the Company.

These decisions, allocations and assessments are performed by the CODM using consolidated financial information, as the Company’s current product offering primarily consists of the Omnipod System and drug delivery devices based on the Omnipod platform.

These decisions, allocations, and assessments are performed by the CODM using consolidated financial information, as the Company’s current product offering primarily consists of the Omnipod System and drug delivery device based on the Omnipod platform.

Geographic information about revenue, based on customer location, is as follows:

12 unchanged sentences

China 87.6 84.1

Malaysia 51.6 —

Other 7.5 7.0

14 unchanged sentences

Distributor B 17 % 12 % 10 %

Distributor C * 10 % 11 %

Distributor D 16 % * *

* Represents less than 10% of revenue for the period.

19 unchanged sentences

The spouse of one of the members of the Company’s Board of Directors is an executive officer of the distributor.

During the year ended December 31, 2021, the Company recorded $ 58.2 million of net revenues from the distributor.

At December 31, 2021, the Company had $ 25.8 million of net accounts receivable due from the distributor and an aggregate $ 1.7 million of distribution fees due to the distributor and deferred revenue, included in accrued expenses and other current liabilities on its consolidated balance sheet.

The Company recorded $ 249.9 million and $ 58.2 million of net revenues from the distributor for the years ended December 31, 2022 and 2021, respectively.

The Company had $ 64.7 million and $ 25.8 million of net accounts receivable due from the distributor as of December 31, 2022 and 2021, respectively.

In addition, the Company had an aggregate of $ 5.4 million and $ 1.7 million of distribution fees due to the distributor and deferred revenue, which was included in accrued expenses and other current liabilities on the consolidated balance sheet as of December 31, 2022 and 2021, respectively.

Cash and Cash Equivalents

4 unchanged sentences

Money market mutual funds 487.3 630.7

Time deposits 50.8 —

Restricted cash 0.5 1.6

2 unchanged sentences

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 689.7 $ 806.4

The restricted cash included in other assets on the consolidated balance sheet is held as a compensating balance against long-term borrowings.

All cash and cash equivalents are level 1 in the fair value hierarchy.

The table below provides amortized costs, gross unrealized gains and losses, fair values and the level in the fair value hierarchy for the Company’s investments at December 31, 2020.

The Company had no investments at December 31, 2021.

Realized gains or losses were insignificant for the years ended December 31, 2021, 2020 and 2019.

(in millions) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Level 1 Level 2 (1)

December 31, 2020

government and agency bonds $ 35.1 $ 0.2 $ — $ 35.3 $ 35.3 $ —

Corporate bonds 2.8 0.1 — 2.9 — 2.9

Certificates of deposit 2.2 — — 2.2 — 2.2

Total short-term investments $ 40.1 $ 0.3 $ — $ 40.4 $ 35.3 $ 5.1

(1) Fair value was determined using market prices obtained from third-party pricing sources.

The restricted cash included in other assets on the consolidated balance sheet is held as a compensating balance against long-term borrowings.

Certain of the Company’s subsidiaries participate in a multi-currency, notional cash pooling arrangement with a third-party bank provider to manage global liquidity requirements.

Under this arrangement, which began in 2022, cash deposited by participating subsidiaries may be used to offset amounts owed to the bank by other participating subsidiaries to the extent the overall balance in the cash pool is at least zero, providing legal rights of offset.

As of December 31, 2022, the Company had a net cash position of approximately $ 0.7 million, consisting of a gross cash position of approximately $ 48.7 million less cash borrowings of approximately $ 48.0 million by participating subsidiaries, which is reflected as cash and cash equivalents in the consolidated balance sheet.

Accounts Receivable

5 unchanged sentences

Accounts receivable, net $ 140.9 $ 135.2

At December 31, 2021, two distributors accounted for 35 % of the Company’s consolidated net accounts receivable trade.

At December 31, 2020, one distributor accounted for 15 % consolidated the Company’s net accounts receivable trade .

The percentages of total net accounts receivable trade for customers that represent 10% or more of total net accounts receivable trade were as follows:

As of December 31,

Distributor A 34 % 21 %

Distributor B 11 % *

Distributor D 23 % 15 %

* Represents less than 10% of total net accounts receivable trade.

The following table presents the activity in the allowance for credit losses, which is comprised primarily of our direct consumer receivable portfolio.

2 unchanged sentences

(in millions) 2022 2021 2020

Credit losses at beginning of year, after adoption of ASU 2016-1 $ 2.9 $ 4.9

Credit losses at beginning of year $ 2.7 $ 2.9 $ 4.9

Provision for expected credit losses 4.2 3.1 3.3

9 unchanged sentences

Total inventories $ 346.8 $ 303.2

Amounts charged to the consolidated statements of operations for excess and obsolete inventory, including related to the phase-out of Classic Omnipod for the years ended December 31, 2022, 2021, and 2020 were $ 8.4 million, $ 2.8 million, and $ 2.2 million , respectively.

Cloud Computing Costs

7 unchanged sentences

Capitalized implementation costs, net $ 88.0 $ 63.2

Amortization expense was $ 2.9 million and $ 1.4 million for the years ended December 31, 2021 and 2020, respectively.

Amortization expense for the year ended December 31, 2019 was insignificant.

Amortization expense is recognized on a straight-line basis over the expected term of the hosting arrangements, which range from 3 to 5 years.

Amortization expense was $ 12.7 million, $ 2.9 million, and $ 1.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Property, Plant and Equipment, Net

12 unchanged sentences

Depreciation expense related to property and equipment was $ 56.0 million, $ 50.6 million, and $ 38.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Construction in process primarily consists of manufacturing equipment located at the Company’s U.S.

manufacturing facility in Acton, Massachusetts and contract manufacturer in Kunshan (Shanghai), China, most of which is expected to be placed into service during 2022.

Construction in process primarily consists of manufacturing equipment for our new manufacturing facility being constructed in Malaysia, most of which is expected to be placed into service in 2024.

Construction in progress also consists of tooling and other machinery and equipment for our existing manufacturing lines, most of which is expected to be placed into service during 2023 .

Business Combination

On January 3, 2022, the Company acquired substantially all of the assets related to the manufacture and production of shape-memory alloy wire assemblies that are used in the production of Pods from Dynalloy, Inc., a maker of dynamic alloys.

The aggregate purchase price was $ 29.0 million, of which $ 26.0 million was paid in cash upon closing, and the remaining $ 3.0 million was paid in January 2023.

Transaction costs were expensed as incurred and were not material.

The following table summarizes the fair value allocation of the assets acquired at the date of acquisition:

(in millions)

Inventories $ 0.5

Property, plant and equipment 0.9

Other assets 0.2

Goodwill (tax deductible) 12.0

Developed technology ( 15 year useful life)

Total assets acquired $ 29.0

The primary factor that contributed to an acquisition price in excess of the fair value of assets acquired and the establishment of goodwill was the expected cost savings resulting from the integration of a supplier.

Goodwill and Other Intangible Assets, Net

The carrying amount of goodwill was $ 39.8 million at both December 31, 2021 and December 31, 2020.

The change in the carrying amount of goodwill for the period is as follows:

(in millions)

Goodwill at December 31, 2021 $ 39.8

Acquisition (Note 11)

Foreign currency translation ( 0.1 )

Goodwill at December 31, 2022 $ 51.7

Intangible Assets, Net

3 unchanged sentences

Customer relationships $ 43.2 $ ( 27.5 ) $ 15.7 $ 43.4 $ ( 23.4 ) $ 20.0

$ 43.4 $ ( 23.4 ) $ 20.0 $ 43.3 $ ( 18.3 ) $ 25.0

Internal-use software 34.8 ( 12.0 ) 22.8 25.5 ( 10.2 ) 15.3

Intellectual property 1.6 ( 0.3 ) 1.3 1.1 ( 0.2 ) 0.9

Developed technology (1)

27.4 ( 1.0 ) 26.4 — — —

11.0 ( 0.4 ) 10.6 1.6 ( 0.3 ) 1.3

Total intangible assets $ 116.4 $ ( 40.9 ) $ 75.5 $ 70.5 $ ( 33.9 ) $ 36.6

(1) Includes customer relationships acquired from the Company’s former European distributor.

(1) Includes intangible assets acquired in December 2022.

See Note 17 for additional information.

Intangible asset amortization expense was $ 7.2 million, $ 6.8 million, and $ 17.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

As discussed in Note 17, amortization expense for the year ended December 31, 2020 includes $ 14.6 million of cumulative amortization associated with customer relationships that were acquired in 2018.

Amortization expense associated with the intangible assets included on the Company’s consolidated balance sheet as of December 31, 2022 is expected to be as follows:

6 unchanged sentences

Accrued rebates 69.6 28.7

Warranty liability - current portion 57.3 2.4

Professional and consulting services 27.5 22.8

6 unchanged sentences

Warranty expense 87.0 10.7

Warranty claims settled ( 10.6 ) ( 12.5 )

Changes in estimates ( 14.0 ) —

Warranty fulfillment ( 17.7 ) ( 10.6 )

Product warranty liability at end of year $ 62.1 $ 6.8

In 2022, the Company issued voluntary Medical Device Corrections (“MDCs”) for its Omnipod DASH PDM related to its battery and for its Omnipod 5 Controller related to its charging port and cable.

The Company initially accrued an estimated liability of $ 68.9 million related to these MDCs, which was subsequently revised by $ 11.0 million, resulting in a net charge of $ 57.9 million for the year ended December 31, 2022.

The $ 11.0 million change in estimate primarily resulted from significantly fewer customers requesting a replacement Omnipod DASH PDM prior to the Company’s updated PDM being available.

As of December 31, 2022, the Company leased certain office spaces, laboratory space, warehouse space, and automobiles, all of which were classified as operating leases.

10 unchanged sentences

The Company’s total operating lease cost was $ 8.8 million, $ 6.0 million, and $ 5.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 5.7 million and $ 4.6 million for the years ended December 31, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 4.6 million, $ 5.7 million, and $ 4.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Maturities of lease liabilities as of December 31, 2022 are as follows:

Years Ending December 31, (in millions)

Thereafter 28.6

Total future minimum lease payments 48.4

2 unchanged sentences

As of December 31, 2022, the weighted average remaining lease term for operating leases was 12.2 years and the weighted-average discount rate used to determine the operating lease liability was 6.3 %.

During the year ended December 31, 2021, the Company entered into an operating lease for additional warehouse space.

The lease commences in 2022 and has a term of 7 years.

Total future minimum lease payments under this lease is $ 12.7 million.

In October 2022, the Company made an upfront payment of $ 4.0 million upon entering into an agreement to acquire real estate in Malaysia, including land and building to be constructed thereon (“the Malaysia Purchase Agreement”).

In December 2022, the Company made an additional $ 11.3 million payment upon entering into a change order for additional specifications of the building.

The building is expected to be completed no later than January 1, 2024, at which time the Company can either purchase or lease the real estate.

The Company will also have the option to purchase the property at any point after the commencement date of the lease and is contractually obligated to purchase the property nine months after the commencement date of the lease.

Because the Company is reasonably certain to purchase the real estate, the lease term is equal to the economic life of the underlying asset.

The Company is involved in the design of the building but does not control the real estate prior to the lease commencement date.

Accordingly, the payments made are included in other assets on the consolidated balance sheet at December 31, 2022.

Total undiscounted future lease payments, including the price to purchase the asset, are approximately $ 24.6 million as of December 31, 2022.

The components of debt consisted of the following:

1 unchanged sentence

(in millions) 2022 2021

1.375 % Convertible Senior Notes due November 2024

0.375 % Convertible Senior Notes due September 2026

Term loan due May 2028 497.5 —

Revolving Credit Facility expires May 2024 $ — $ —

Equipment financing due May 2024 9.5 16.0

Equipment financing due November 2025 22.5 29.6

Equipment financing due July 2028 38.2 —

5.15 % Mortgage due November 2025

0.375 % Convertible Senior Notes due September 2026

Term loan due May 2028 492.5 497.5

Equipment financing due July 2028 34.4 38.2

Unamortized debt discount ( 7.6 ) ( 159.9 )

3 unchanged sentences

Total long term-debt, net $ 1,374.3 $ 1,248.8

1.375 % Convertible Senior Notes

In 2021, the Company repurchased $ 370.4 million in principal ($ 305.7 million net of discount and issuance costs) of its 1.375 % Convertible Senior Notes due November 2024 (“ 1.375 % Notes”) for $ 460.8 million in cash and the issuance of 2.2 million shares with a fair value of $ 622.7 million.

The remaining $ 32.1 million in principal of the 1.375 % Notes were converted into approximately 0.4 million shares with a fair value of $ 99.8 million.

The debt repurchase and conversions resulted in a $ 42.4 million loss on extinguishment, including cash paid to the note holders as an inducement to convert and transaction costs.

Equipment Financings

In October 2020, the Company entered into a Master Equipment Lease Agreement for a loan of $ 60.0 million secured by two manufacturing lines located at the Company’s Acton, Massachusetts manufacturing facility.

The loan for the first manufacturing line is payable over 42 months and has an effective interest rate of 5.8 %.

The loan for the second manufacturing line is payable over 60 months and has an effective interest rate of 4.8 %.

In July 2021, the Company entered into a $ 43.1 million equipment financing transaction secured by one of the manufacturing lines located at the Company's Acton, Massachusetts manufacturing facility.

The equipment financing is payable over 84 months and has an effective interest rate of 4.3 %.

5.15 % Mortgage

In October 2020, the Company entered into a Mortgage Loan Agreement (the “Mortgage”), which provides for a $ 70.0 million loan with an effective interest rate of 5.7 %.

Proceeds under the Mortgage are secured by the Company’s Acton, Massachusetts headquarters.

The Mortgage is repayable in monthly installments of $ 0.5 million, with the outstanding principal balance of the loan due in November 2025.

The Mortgage contains non-financial customary covenants, none of which are considered restrictive to the Company’s operations.

0.375 % Convertible Senior Notes

In September 2019, the Company issued $ 800.0 million aggregate principal amount of 0.375 % Convertible Senior Notes due September 2026 (the “ 0.375 % Notes”).

The Company has $ 800.0 million aggregate principal amount of 0.375 % Convertible Senior Notes due September 2026 (the “ 0.375 % Notes”) outstanding.

The notes are convertible into the Company’s common stock at an initial conversion rate of 4.4105 shares of common stock per $1,000 principal amount of the notes, which is equivalent to a conversion price of $ 226.73 per share, subject to adjustment under certain circumstances.

3 unchanged sentences

The remaining $ 14.5 million of debt issuance costs was recorded as a reduction of debt on the consolidated balance sheet.

The net proceeds of $ 780.2 million were used to fund the redemption of the Company’s 1.25 % Convertible Senior Notes due September 2021 (the “ 1.25 % Notes”) and to purchase capped call options (“Capped Calls”), both of which are discussed below.

The net proceeds of $ 780.2 million were used to fund the redemption of the Company’s 1.25 % Convertible Senior Notes due September 2021 and to purchase the capped call options (“Capped Calls”) discussed below.

Additional interest of 0.5 % per annum is payable if the Company fails to timely file required documents or reports with the Securities and Exchange Commission (“SEC”).

2 unchanged sentences

The Company assessed the value of the embedded derivatives at each balance sheet date and determined it had nominal value.

In conjunction with the issuance of the 0.375 % Notes, the Company paid $ 85.4 million to enter into Capped Calls on the Company’s common stock with certain counterparties, which was recorded as a reduction to additional paid-in capital on the consolidated balance sheet.

By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the 0.375 % Notes.

In conjunction with the issuance of the 0.375 % Notes, the Company purchased Capped Calls on the Company’s common stock with certain counterparties to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the 0.375 % Notes.

The Capped Calls have an initial strike price of $ 335.90 per share, which represents a premium of 100 % over the last reported sale price of the Company’s common stock of $ 167.95 per share on the date of the transaction.

1 unchanged sentence

Senior Secured Credit Agreement

In May 2021, the Company entered into a senior secured credit agreement (the “Credit Agreement”), which includes a $ 500 million seven year senior secured term loan B (the “Term Loan”) for net proceeds of $ 489.5 million, which was used to fund the cash portion of the repurchase of the 1.375 % Notes discussed above.

The Term Loan bears interest at a rate of LIBOR plus 3.25 %, with a 0.50 % LIBOR floor, and contains leverage and fixed charge coverage ratio covenants, both of which are measured upon the occurrence of future debt.

Under the same agreement, the Company obtained a $ 60 million three year senior secured revolving credit facility (the “Revolving Credit Facility”).

Outstanding borrowings bear interest at a rate of LIBOR plus an applicable margin of 2.75 % to 3.25 % based on the Company’s net leverage ratio.

On November 30, 2022, the Company amended the Term Loan to bear interest at a rate of SOFR plus 3.25 %, with a 0.50 % SOFR floor.

The Term Loan contains leverage and fixed charge coverage ratio covenants, both of which are measured upon the incurrence of future debt.

Under the same agreement, the Company obtained a three-year senior secured revolving credit facility (the “Revolving Credit Facility”).

In 2022, the Company increased the borrowing capacity under the Revolving Credit Facility to $100.0 million and amended the agreement such that outstanding borrowings bear interest at a rate of SOFR plus an applicable margin of 2.75 % to 3.25 % based on the Company’s net leverage ratio.

The Revolving Credit Facility contains a covenant to maintain a specified leverage ratio under certain conditions when there are amounts outstanding.

2 unchanged sentences

Additionally, borrowings under the Credit Agreement are senior to all of the Company’s unsecured indebtedness, including the convertible notes.

Equipment Financings

The loan for the first manufacturing line is payable over 42 months and has an effective interest rate of 5.8 %.

The loan for the second manufacturing line is payable over 60 months and has an effective interest rate of 4.8 %.

In July 2021, the Company entered into a $ 43.1 million equipment financing transaction secured by one the manufacturing lines located at the Company's Acton, Massachusetts manufacturing facility.

The equipment financing is payable over 84 months and has an effective interest rate of 4.3 %.

5.15 % Mortgage

In October 2020, the Company entered into a Mortgage Loan Agreement (the “Mortgage”), which provides for a $ 70.0 million loan with an effective interest rate of 5.7 %.

Proceeds under the Mortgage are secured by the Company’s Acton, Massachusetts headquarters.

The Mortgage is repayable in monthly installments of $ 0.5 million, with the outstanding principal balance of the loan due in November 2025.

The Mortgage contains non-financial customary covenants, none of which are considered restrictive to the Company’s operations.

1.375 % Convertible Senior Notes

In 2019, the Company repurchased its $ 345.0 million principal amount ($ 312.0 million net of discount and issuance costs) 1.25 % Notes for total consideration of $ 963.0 million comprised of $ 663.6 million in cash and $ 299.4 million representing the fair value of the 1.87 million shares issued.

The Company allocated $ 642.3 million of the settlement to the fair value of the equity component and $ 320.7 million to the debt component, which resulted in an $ 8.7 million loss on extinguishment.

The remaining $ 32.1 million in principal of the 1.375 % Notes were converted into approximately 0.4 million shares with a fair value of $ 99.8 million.

The debt repurchase and conversions resulted in a $ 42.4 million loss on extinguishment, including cash paid to the note holders as an inducement to convert and transaction costs.

Maturity of Debt

7 unchanged sentences

Value Estimated

1.375 % Convertible Senior Notes (1)

Term loan due May 2028 (1)

$ 482.2 $ 485.1 $ 485.2 $ 498.1

1 unchanged sentence

788.8 1,038.7 638.8 938.8

Term loan due May 2028 (2)

485.2 498.1 — —

Equipment financings (3)

3 unchanged sentences

Total $ 1,401.9 $ 1,654.7 $ 1,273.9 $ 1,586.8

(1) Convertible debt is classified as Level 2 in the fair value hierarchy.

Fair value was determined using the Company’s quoted stock price and the contractual conversion rate.

(1) Term debt is classified as Level 1 in the fair value hierarchy.

Fair value was determined using quoted market prices.

(2) The Notes are classified as Level 2 in the fair value hierarchy.

Fair value was determined using the Company’s quoted stock price and the contractual conversion rate.

(3) The equipment financings and Mortgage are classified as Level 3 in the fair value hierarchy.

2 unchanged sentences

The Company manages interest rate exposure through the use of interest rate swap transactions with financial institutions acting as principal counterparties.

In May 2021, the Company entered into two interest rate swap agreements that expire on April 30, 2025.

Under the interest rate swap agreements, the Company receives variable rate interest payments and pays fixed interest rates of 0.95 % and 0.96 % on a total notional value of $ 480.0 million of its Term Loan.

Under the Company’s interest rate swap agreements that expire on April 30, 2025, the Company receives variable rate interest payments and pays fixed interest rates of 0.95 % and 0.96 % on a total notional value of $ 480.0 million of its Term Loan.

The Company has designated the interest rate swaps as cash flow hedges.

The fair value of interest rate swaps, which are classified as Level 2 in the fair value hierarchy, represent the estimated amounts the Company would receive or pay to terminate the contracts and is determined using industry standard valuation models and market-based observable inputs, including credit risk and interest rate yield curves.

The fair value of the interest rate swap was $ 4.5 million at December 31, 2021 and was included in other assets on the consolidated balance sheet.

The fair value of the interest rate swaps was $ 36.9 million and $ 4.5 million at December 31, 2022 and December 31, 2021, respectively, and was included in other assets on the consolidated balance sheets.

As of December 31, 2022, the Company estimates that $ 19.8 million of net gains related to the interest rate swaps included in accumulated other comprehensive income will be reclassified into the statement of operations over the next 12 months.

Commitments and Contingencies

Legal Proceedings

Between May 5, 2015 and June 16, 2015, three class action lawsuits were filed by shareholders in the U.S.

District Court, for the District of Massachusetts, against the Company and certain then current and former executives of the Company.

Two suits subsequently were voluntarily dismissed.

Arkansas Teacher Retirement System v.

Insulet, et al., 1:15-cv-12345, (“ATRS”) alleged that the Company (and certain then current and former executives) committed violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by making allegedly false and misleading statements about the Company’s business, operations, and prospects.

On February 8, 2018, the parties executed a binding stipulation of settlement, under which all claims were released, and a payment was made into an escrow account for the plaintiffs and the class they purport to represent.

On August 6, 2018, the Court issued an order approving the settlement.

On June 25, 2021, the Court issued an order on the plaintiffs’ motion for fees and expenses, a final judgment approving the settlement, and an order of dismissal with prejudice.

The Company had previously accrued fees and expenses in connection with this matter for the amount of the final settlement liability that was not covered by insurance, the amount of which was not material to the Company’s consolidated financial statements.

In addition, on April 26, 2017, a derivative action (Walker v.

DeSisto, et al., 1:17-cv-10738) (“Walker”) was filed, and on October 13, 2017, a second derivative action (Carnazza v.

DeSisto, et al., 1:17-cv-11977) (“Carnazza”) was filed, both on behalf of the Company, each by a shareholder in the U.S.

District Court for the District of Massachusetts against the Company (as a nominal defendant) and certain individual then current and former officers and directors of the Company.

The allegations in the actions are substantially similar to those alleged in the securities class action.

The actions seek, among other things, damages, disgorgement of certain types of compensation or profits, and attorneys’ fees and costs.

On July 11, 2018, the parties executed a binding stipulation of settlement, under which all claims were released, and a payment of attorneys’ fees and reimbursement of expenses will be paid to plaintiffs’ counsel, subject to the Court’s approval.

On July 13, 2018, the plaintiffs filed a motion for preliminary approval of the settlement.

On June 28, 2021, the Court issued an order preliminarily approving

the proposed settlement.

On September 9, 2021, the Court held a hearing to decide whether the proposed settlement should be finally approved, and issued an order and final judgment the same day approving the settlement and the payment of attorneys’ fees and reimbursement of expenses to plaintiffs’ counsel, and dismissing the case with prejudice.

Such fees and expenses paid to plaintiffs' counsel were covered by the Company’s insurance.

In June 2020, Roche Diabetes Care, Inc.

1 unchanged sentence

Patent 7,931,613.

Roche is seeking monetary damages and attorneys’ fees and costs.

Since the patent expired in 2019, Roche is not seeking injunctive relief and the lawsuit will have no impact on ongoing sales of the Company’s products.

The Company believes that it has meritorious defenses to Roche’s claims and intends to vigorously defend against them.

The court has set a trial date of July 25, 2022 .

By Order of the Court, on October 29, 2021, representatives of Roche and the Company participated in a mediation conference, the results of which were unsuccessful.

At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or range of estimates, of potential losses, which could be material.

In July 2020, the Company filed a patent infringement claim against Roche Diabetes Care Limited (“Roche Ltd.”) in the United Kingdom alleging that Roche Ltd.’s manufacture and sale of the Accu-Chek® Solo insulin pump and its consumable components infringes European Patent No.

1 335 764 in the United Kingdom.

The Company was seeking an injunction to last until expiry of the patent and monetary damages.

A trial was held in May 2021 and the judge ultimately sided with Roche Ltd.

on non-infringement and invalidity of the patent, which was slated to expire in August 2021.

Accordingly, no injunction was issued and no monetary damages were awarded.

Roche was seeking monetary damages and attorneys’ fees and costs.

In July 2022, the Company entered into a Settlement and License Agreement (the “Settlement Agreement”) with Roche to settle the pending litigation.

Pursuant to the Settlement Agreement, in exchange for a release of claims, mutual covenant not to sue for five years , and license to the patent in suit from Roche, the Company made a one-time payment of $ 20.0 million to Roche.

On July 12, 2022, following the filing by the parties of a Stipulation of Dismissal, the Court ordered the case dismissed with prejudice.

The $ 20.0 million charge is included in selling, general and administrative expenses for the year ended December 31, 2022.

The Company is, from time to time, involved in the normal course of business in various legal proceedings, including intellectual property, contract, employment, and product liability suits.

Other than as described above, the Company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its results of operations.

The Company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its results of operations.

Contract Dispute

Throughout 2022, the Company was engaged in negotiations over a contractual dispute involving in-licensed intellectual property.

In December, 2022, the Company entered into an agreement with Automated Glucose Control LLC (the “Asset Purchase Agreement”).

Pursuant to the Asset Purchase Agreement, the Company made a one-time payment of $ 25.0 million for the acquisition of developed technology and patents and the release of future obligations, including any future royalty obligations.

This amount, together with transaction costs, was allocated between the assets acquired and the settlement of the contractual dispute.

A value of $ 12.0 million was allocated to acquired developed technology and a value of $ 9.5 million was allocated to acquired patents.

The acquired developed technology and patents are being amortized over their useful lives of 13 years.

The remaining $ 3.6 million was allocated to the settlement and is included in selling, general and administrative expenses for the year ended December 31, 2022.

Letters of Credit

In 2022, the Company entered into a $ 20.0 million uncommitted letter of credit facility.

Concurrently with the execution of the Malaysia Purchase Agreement discussed in Note 14, a $ 17.2 million letter of credit was issued under this facility to backstop a bank guarantee for the same amount.

The bank guarantee, to which the Company is not a party to, serves as security for the building while under construction until the Company purchases the property.

The Company pays interest on outstanding borrowings and commitment fees on the maximum amount available to be drawn under the letter of credit at a rate of between 1.65 % and 2.25 %, depending on the Company’s credit rating.

The letter of credit includes customary covenants, none of which are considered restrictive to the Company’s operations.

Fees to Former European Distributor

Following the expiration of an agreement with a former European distributor on June 30, 2018, the Company was required to pay a quarterly per-unit fee for Omnipod sales to certain customers of the former European distributor for a one-year period through June 30, 2019.

The Company recognized a liability and an associated intangible asset for this fee as qualifying sales occurred.

The Company recognized a liability and an associated intangible asset for this fee as qualifying sales

The methodology applicable for determining the total fee under the distribution agreement was subject to an arbitration proceeding in Switzerland.

2 unchanged sentences

Since the customer relationships were acquired on July 1, 2018, the Company recorded cumulative amortization in the amount of $ 14.6 million during the fourth quarter of 2020, as if the total fee for the intangible asset had been amortized since the acquisition date.

Stock-Based Compensation

Stock-Based Compensation Expense

Equity Award Plan

3 unchanged sentences

As of December 31, 2022, 2.7 million shares remain available for future issuance under the 2017 Plan.

Stock-Based Compensation

Stock-Based Compensation Expense

Compensation expense related to stock-based awards was recorded as follows:

45 unchanged sentences

The grant-date fair value of RSUs, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

The Company determines the fair value of restricted stock units based on the closing price of its common stock on the date of grant.

The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.

RSU activity is as follows:

13 unchanged sentences

Stock-based payments that contain performance conditions are recognized when such conditions are probable of being achieved.

Certain of these performance stock units could ultimately vest at up to 200 % of the target award depending on the achievement of the performance criteria.

Certain of these PSUs could ultimately vest at up to 200 % of the target award depending on the achievement of the performance criteria.

The Company determines the fair value of PSUs based on the closing price of its common stock on the date of grant.

PSU activity is as follows:

17 unchanged sentences

The Company issued 52,724 , 36,103 , and 38,313 shares of common stock for the years ended December 31, 2022, 2021, and 2020, respectively, to employees participating in the ESPP.

As of December 31, 2021, 472,659 shares remain available for future issuance under the ESPP Plan.

As of December 31, 2022, 419,935 shares remain available for future issuance under the ESPP.

The Company uses the Black-Scholes pricing model to determine the fair value of shares purchased under the ESPP.

14 unchanged sentences

This cost is expected to be recognized over a weighted average period of 0.4 years.

Accumulated Other Comprehensive (Loss) Income

Changes in the components of accumulated other comprehensive (loss) income, net of tax, were as follows:

(in millions) Foreign Currency Translation Adjustment Unrealized (Losses) Gains on Available-for-sale Securities Unrealized Gains on Cash Flow Hedges Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Changes in the components of accumulated other comprehensive income (loss), net of tax, were as follows:

(in millions) Foreign Currency Translation Adjustment Unrealized Gains on Available-for-sale Securities Unrealized Gains on Cash Flow Hedges Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2019

$ ( 1.6 ) $ 0.4 $ — $ ( 1.2 )

Other comprehensive income 0.6 1.1 — 1.7

Other comprehensive income (loss) 6.8 ( 0.1 ) — 6.7

Balance, December 31, 2020

5.2 0.3 — 5.5

Other comprehensive income (loss) 6.8 ( 0.1 ) — 6.7

Other comprehensive (loss) income before reclassifications ( 11.9 ) ( 0.3 ) 3.0 ( 9.2 )

Amounts reclassified to net income — — 1.5 1.5

Balance, December 31, 2021

51 unchanged sentences

Change in valuation allowance 133.9 77.2 336.2

Tax rate changes ( 30.9 ) — —

Intercompany transfer of intellectual property — 4.6 —

5 unchanged sentences

The Company files federal, state, and foreign tax returns, which are subject to examination by the relevant tax authorities.

The tax filings relating to the Company’s U.S.

The Company’s U.S.

federal and state tax returns are currently open to examination for tax years 2019 through 2021.

8 unchanged sentences

Tax credits 33.6 28.8

Capital loss carryforwards — 12.2

Capitalized research and development expenditures 30.4 —

Warranty 14.6 1.6

Amortization of debt discount 11.0 —

Inventory capitalization 4.1 6.5

1 unchanged sentence

Interest limitation carryforwards 1.7 7.3

Stock-based compensation 5.9 5.8

Incentive compensation 15.8 10.4

Other 15.0 9.9

5 unchanged sentences

Capitalized contract acquisition costs ( 10.4 ) ( 9.2 )

Unrealized gains on cash flow hedges ( 8.8 ) ( 1.1 )

Other ( 1.9 ) ( 2.9 )

5 unchanged sentences

federal, state, and foreign deferred tax assets, as management has determined that it is more-likely-than-not that these net deferred tax assets will not be realized.

During 2021, the Company recorded a full valuation allowance against its U.K.

deferred tax assets as a result of additional costs incurred in connection with a transfer of intellectual property.

These valuation allowances are based on cumulative tax losses in the U.S.

and the uncertainty of generating future taxable income in these jurisdictions to utilize our loss and credit carryforwards.

The $ 39.0 million increase in the Company’s valuation allowance during the year ended December 31, 2021 was primarily due to temporary differences in the U.S.

and the recording of a $ 11.0 million valuation allowance in the U.K.

and the uncertainty of generating future taxable income in these jurisdictions to utilize loss and credit carryforwards.

The $ 40.4 million increase in the Company’s valuation allowance during the year ended December 31, 2022 was primarily due to temporary differences in the United States.

The Company’s net operating loss carryforwards consist of the following:

7 unchanged sentences

The remaining U.S.

federal carryforwards, if not utilized, expire through 2037, and the state net operating loss carryforwards expire through 2041.

The utilization of such net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon the Company’s ability to generate taxable income in the U.S.

federal carryforwards, if not utilized, expire from 2028 through 2037, and the state net operating loss carryforwards expire from 2023 through 2042.

The utilization of such net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon the Company’s ability to generate taxable income in the United States.

Research and development and other tax credits were $ 37.0 million and $ 31.4 million at December 31, 2022 and 2021, respectively.

If not utilized, federal research and development credits will begin to expire in 2022.

If not utilized, federal research and development credits will expire through 2042.

These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based on changes in the ownership of the Company ordinary shares.

1 unchanged sentence

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted net income per share is computed using the weighted average number of common shares outstanding and, when dilutive, common share equivalents from outstanding stock options and restricted stock units (using the treasury-stock method), and potential common shares from the Company’s convertible notes (using the if-converted method).

Diluted net income per share is computed using the weighted average number of common shares outstanding and, when dilutive, common share equivalents.

The weighted-average number of common shares used in the computation of basic and diluted net income per share were as follows:

15 unchanged sentences

Total 3,892 5,771 8,187

Supplemental Cash Flow Information

Years Ended December 31,

(in millions) 2022 2021 2020

Cash paid for interest, net of amount capitalized $ 34.2 $ 21.5 $ 2.6

Cash paid for taxes $ 5.5 $ 7.0 $ 3.0

Purchases of property, plant and equipment included in accounts payable and accrued expenses $ 3.9 $ 6.1 $ 6.7

Purchases of intangible assets included in accounts payable and accrued expenses $ 0.4 $ 3.2 $ —

Lease liabilities arising from obtaining right-of-use assets $ 25.5 $ 0.7 $ 2.5

Subsequent Events

In January 2022, the Company paid $ 29 million to acquire a supplier to bring key intellectual property and expertise in-house, strengthen production capabilities and mitigate supply chain risks.

In addition, the Company made a $ 5 million strategic investment in another company.

In February 2023, the Company paid $ 25 million in cash to acquire insulin pump patents that may be used for automated insulin delivery from Bigfoot Biomedical, Inc.

Additionally, the Company made a $ 2 million strategic investment in another company.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

6 unchanged sentences

Year Ended December 31, 2022

Allowance for credit losses $ 2.9 $ 3.1 $ — $ ( 3.3 ) $ 2.7

Reserve for rebates $ 34.1 $ 247.1 $ — $ ( 203.9 ) $ 77.3

1 unchanged sentence

Year Ended December 31, 2021

Allowance for credit losses $ 3.8 $ 3.3 $ 1.1 $ ( 5.3 ) $ 2.9

Reserve for rebates $ 16.9 $ 143.3 $ — $ ( 126.1 ) $ 34.1

1 unchanged sentence

Year Ended December 31, 2020

Allowance for doubtful accounts $ 3.6 $ 4.5 $ — $ ( 4.3 ) $ 3.8

Reserve for rebates $ 12.1 $ 82.5 $ — $ ( 77.7 ) $ 16.9

Deferred tax valuation allowance $ 104.4 $ 61.7 $ — $ ( 22.7 ) $ 143.4

(1) Increase in allowance for credit losses from the adoption of ASU 2016-13, Credit Losses (Topic 326).

(1) Represents the increase in deferred tax valuation allowance resulting from the adoption of ASU 2020-06, Debt — Debt with Conversations and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

Refer to Note 2 to the consolidated financial statements included in Item 8 for additional information.

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-K

Item 8. Financial Statements and Supplementary Data