What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-02-24 · 386 added, 275 removed, 819 unchanged (45% of the section changed)

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Insulet Corporation

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, 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”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

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

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Opinion on 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, 2023 and 2022, 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, 2023, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2024 expressed an adverse opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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 matters

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(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

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 a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Variable consideration – Rebates to pharmacy benefit managers

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.

The Company estimates variable consideration related to rebates to pharmacy benefit managers in the United States when determining the transaction price at the time of sale.

We identified the rebate estimate for pharmacy benefit managers as a critical audit matter.

The principal consideration for our determination that the rebate estimate related to pharmacy benefit managers is a critical audit matter was the high degree of auditor judgment in applying procedures to evaluate the significant estimation made by management.

Management's estimate is based on historical experience adjusted for revenue growth, trends, specific known market events, and as available channel inventory data.

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.

• Evaluated the significant assumptions and the completeness and accuracy of the underlying data used in management’s calculation through inspection of source documents and agreement to other audited schedules.

• Performed retrospective analysis comparing actual rebates incurred to the previously estimated amounts.

• We tested the design and operating effectiveness of controls related to management’s estimate.

Income taxes – Realizability of the U.S.

deferred tax assets

As described further in Note 23 to the financial statements, management records valuation allowances against deferred tax assets when a judgment is made, that it is more likely than not, that a tax benefit will not be realized.

The realization of deferred tax assets is dependent upon the generation of future U.S.

taxable income during the periods in which those temporary differences will become deductible.

We identified the realizability of the Company’s U.S.

deferred tax assets as a critical audit matter.

The principal consideration for our determination that the realizability of U.S.

deferred tax assets is a critical audit matter is the significant judgment regarding the weighting of available positive and negative evidence to determine that the existing valuation allowance on U.S.

deferred tax assets remains appropriate.

Our audit procedures related to the realizability of the U.S.

deferred tax assets included the following, among others.

With the involvement of tax professionals, including consultation with national office resources, we assessed the appropriateness of management’s evaluation of available positive and negative evidence supporting the valuation allowance position.

/s/ GRANT THORNTON LLP

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Stockholders’ Equity

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

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

none issued and outstanding

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Accumulated deficit ( 378.0 ) ( 584.3 )

Accumulated other comprehensive income (loss) 20.0 ( 2.2 )

Accumulated other comprehensive income 8.0 20.0

Total stockholders’ equity 732.7 476.4

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Operating income 220.0 37.6 126.0

Interest expense, net ( 26.7 ) ( 61.2 ) ( 45.1 )

Interest expense ( 36.2 ) ( 36.0 ) ( 61.7 )

Interest income 28.6 9.3 0.5

Loss on extinguishment of debt — — ( 42.4 )

Other (expense) income, net ( 1.1 ) ( 1.9 ) 3.3

Other income (expense), net 2.2 ( 1.1 ) ( 1.9 )

Income before income taxes 214.6 9.8 20.5

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Net income $ 206.3 $ 4.6 $ 16.8

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustment 2.5 ( 10.3 ) ( 11.9 )

Unrealized gain on cash flow hedges 32.5 4.5 —

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

Unrealized (loss) gain on cash flow hedges ( 14.2 ) 32.5 4.5

Unrealized loss on securities ( 0.3 ) — ( 0.3 )

Total other comprehensive (loss) income, net of tax ( 12.0 ) 22.2 ( 7.7 )

Comprehensive income $ 194.3 $ 26.8 $ 9.1

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Capital Accumulated

Deficit Accumulated Other Comprehensive (Loss) Income Total

Deficit Accumulated Other Comprehensive Income (Loss) Total

Stockholders’

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66,017 $ 0.1 $ 1,264.3 $ ( 666.3 ) $ 5.5 $ 603.6

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

Issuance of common stock 2,370 — 477.5 — — 477.5

Exercise of options to purchase common stock 364 — 15.4 — — 15.4

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

Extinguishment of conversion feature on 1.375 % Notes, net of issuance costs

— — ( 808.5 ) — — ( 808.5 )

Issuance of shares for debt extinguishment 2,586 — 722.4 — — 722.4

Net income — — — 16.8 — 16.8

Other comprehensive income — — — — 6.7 6.7

Other comprehensive loss — — — — ( 7.7 ) ( 7.7 )

Balance, December 31, 2021

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

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

Extinguishment of conversion feature on 1.375 % Notes, net of issuance costs

— — ( 808.5 ) — — ( 808.5 )

Issuance of shares for debt extinguishment 2,586 — 722.4 — — 722.4

Net income — — — 4.6 — 4.6

Other comprehensive loss — — — — ( 7.7 ) ( 7.7 )

Other comprehensive income — — — — 22.2 22.2

Balance, December 31, 2022

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

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

Exercise of options to purchase common stock 249 — 16.3 — — 16.3

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Net income — — — 206.3 — 206.3

Other comprehensive income — — — — 22.2 22.2

Other comprehensive loss — — — — ( 12.0 ) ( 12.0 )

Balance, December 31, 2023

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Investments in developed software ( 8.5 ) ( 12.9 ) ( 10.8 )

Acquisition of other intangible assets ( 25.1 ) ( 21.5 ) —

Acquisition of a business ( 3.0 ) ( 26.0 ) —

Acquisition of intangible assets ( 21.5 ) — —

Cash paid for investments ( 7.2 ) ( 7.8 ) —

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

Cash paid for marketable securities — — ( 37.9 )

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

Net cash used in investing activities ( 119.4 ) ( 191.1 ) ( 82.7 )

Cash flows from financing activities

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Repayment of equipment financings ( 19.8 ) ( 17.4 ) ( 17.8 )

Proceeds from mortgage, net of issuance costs — — 68.3

Repayment of mortgage ( 2.2 ) ( 2.1 ) ( 2.0 )

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Prepayments of financing lease obligation — ( 15.3 ) —

Proceeds from issuance of common stock, net — — 477.5

Proceeds from exercise of stock options 16.3 6.9 15.4

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Effect of exchange rate changes on cash 1.8 ( 4.3 ) ( 5.5 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 116.7 ) ( 115.6 ) 708.3

Net increase (decrease) in cash, cash equivalents, and restricted cash 14.5 ( 116.7 ) ( 115.6 )

Cash, cash equivalents, and restricted cash, beginning of year 689.7 806.4 922.0

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Nature of the Business

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:

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

Currently, the Omnipod platform’s revenue generating products include:

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.

Each product 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, Omnipod DASH features a secure Bluetooth enabled Pod that is controlled by a smartphone-like Personal Diabetes Manager (“PDM”) with a color touch screen user interface.

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.

The Omnipod System is sold either directly to end-users or indirectly through intermediaries.

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.

The Company generates most of its revenue from sales of its Omnipod products, which are sold in the U.S., Europe, Canada, the Middle East, and Australia either directly to end-users or indirectly through intermediaries.

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

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.

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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 operations and were $( 1.3 ) million, $( 2.0 ) million and $ 3.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Net realized and unrealized gains (losses) from foreign currency transactions are included in other income (expense), net in the consolidated statement of operations and were $( 0.4 ) million, $( 1.3 ) million and $( 2.0 ) million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cash and Cash Equivalents

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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.

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.

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, cash deposited by participating subsidiaries may be in positive or negative cash positions to the extent the overall balance in the cash pool is at least zero.

The net cash balance of the notional cash pooling arrangement is included within cash and cash equivalents in the consolidated balance sheets and was insignificant at both December 31, 2023 and 2022.

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.

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 income (expense), net in the Company’s consolidated statements of operations.

The Company also has investments in debt securities of privately held companies, which are either classified as available-for-sale securities or for which the Company has elected the fair value option.

The available-for-sale securities are recorded 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.

The other investment is a debt security that contains embedded derivatives.

Unrealized gains and losses for this investment are recorded as a component of other income (loss), net in the consolidated statement of operations.

All investments in debt securities are recorded within other assets on the consolidated balance sheet.

The Company may also invest in marketable securities, including term deposits, 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 (expense) income, net in the consolidated statement of operations.

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 operations.

Accounts Receivable and Allowance for Credit Losses

Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Credit Losses (Topic 326) (“ASU 2016-13”) using the modified retrospective method, whereby the guidance is applied prospectively as of the date of adoption and prior periods are not restated.

The cumulative effect of adopting ASU 2016-13 resulted in a $ 1.1 million increase to the opening balance of accumulated deficit upon adoption related to an increase in the allowance for credit losses on accounts receivable.

Trade accounts receivable consist of amounts due from third-party payors, customers, and intermediaries and are presented at amortized cost.

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The risk of loss in this portfolio is low based on the Company’s historical experience.

The estimate of expected credit losses considers payment history as well as credit ratings of the distributors, in addition to current conditions and supportable forecasts.

The estimate of expected credit losses considers payment history and the financial condition of the distributors.

National Healthcare System Receivables —The Company measures expected credit losses on national healthcare system receivables using an individual reserve methodology.

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Level 3 — significant unobservable inputs for which there are little or no market data, which require the Company to develop its own assumptions.

Judgement is involved in estimating inputs, such as discount rates, used in Level 3 fair value measurements.

Changes to these inputs can have a significant effect on fair value measurements and amounts that could be realized.

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 16 for derivative instruments measured at fair value on a recurring basis.

Property, Plant and Equipment

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The Company may assess its goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If management concludes, based on its assessment of relevant events, facts, and circumstances that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to determine if there is any impairment.

Alternatively, the Company may elect to initially perform a quantitative analysis instead of starting with a qualitative analysis.

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Cloud Computing Arrangements

Cloud computing arrangements includes services used to support certain internal corporate functions as well as technology platforms that support commercial initiatives.

The Company capitalizes costs incurred to implement cloud computing arrangements that are service contracts within other current and non-current assets and amortizes such costs over the expected term of the hosting arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses.

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Lease agreements generally have lease and non-lease components, which are accounted for separately.

At lease commencement, the Company recognizes operating lease liabilities equal to the present value of the lease payments and operating lease assets representing the right to use the underlying asset for the lease term.

The Company assesses if it is reasonably certain to exercise lease options to extend or terminate the lease for inclusion or exclusion in the lease term when the Company measures the lease liability.

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.

At lease commencement, the Company recognizes lease liabilities equal to the present value of the future lease payments and lease assets representing the right to use the underlying asset throughout the lease term.

Certain leases may contain variable lease payments, including periodic payments that can be avoided by the Company.

Variable payments that do not depend on an index or rate are excluded from the right-of-use asset and lease liability and are recognized as expenses in the period in which the obligation for those payments is incurred.

Certain of the Company’s leases contain options to extend and/or terminate the lease, and/or to purchase the underlying asset.

The lease term used to calculate the right-of-use asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

The Company’s leases do not provide an implicit rate;

accordingly, 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 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.

Operating lease assets includes lease payments made prior to lease commencement and excludes lease incentives and initial direct costs incurred.

Right-of-use assets are calculated as the initial measurement of the lease liability plus lease payments made prior to lease commencement and initial direct costs incurred, less lease incentives received.

Lease expense is recognized on a straight-line basis over the lease term.

For finance leases, the right-of-use asset is amortized to amortization expense and interest expense is recorded in connection with the lease liability.

Contingencies

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If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed.

Legal costs associated with loss contingencies are expensed as incurred.

Product Warranty

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.

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, reclaim costs, shipping and handling costs and direct and incremental distribution and customer service support costs.

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• 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/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.

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

In the Company’s judgment, these performance obligations are capable of being 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/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 provides a right of return for sales of its Omnipod products 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 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;

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• Recognize Revenue as Performance Obligations are Satisfied.

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

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

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.

The Company’s Drug Delivery product line includes sales of a modified version of the Omnipod to pharmaceutical and biotechnology companies who use the Company’s technology as a delivery method for their drugs.

Revenue from product training is recognized in the period it is provided.

The Company records deferred revenue related to product training as there is generally a lag between when the customer is billed and when the end-user receives product training.

The Company’s Drug Delivery product line includes sales of a modified version of the Pod to pharmaceutical and biotechnology companies who use the Company’s technology as a delivery method for their drugs.

For the majority of this product line, revenue is recognized, with an associated unbilled receivable, as the product is produced pursuant to the customer’s firm purchase commitments.

2 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.

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Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect in the years in which the differences are expected to reverse.

The Company reviews its deferred tax assets for recoverability considering historical profitability, projected future taxable income, and the expected timing of the reversals of existing temporary differences and tax planning strategies.

The Company reviews its deferred tax assets for recoverability by considering all available positive and negative evidence, including historical profitability, projected future taxable income, and the expected timing of the reversals of existing temporary differences and tax planning strategies.

A valuation allowance is provided to reduce the deferred tax assets if, based on the available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.

1 unchanged sentence

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

The Company has not reclassified income tax effects within accumulated other comprehensive income (loss) to retained earnings due to its full valuation allowance.

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.

The Company maintains most of its cash and investments with a limited number of financial institutions that have a high investment grade credit rating, which exceed Federal Deposit Insurance Corporation limits.

See Notes 4 and 7 for customer concentration.

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.

Supply Risk— 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.

1 unchanged sentence

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):

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.

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 this guidance.

The cumulative effect of adopting ASU 2020-06 resulted in a $ 207.7 million decrease to the opening balance of additional paid-in-capital upon adoption resulting from the derecognition of the embedded conversion feature and debt issuance costs bifurcated to equity, a $ 60.6 million decrease to the opening balance of accumulated deficit representing the cumulative interest expense recognized related to the amortization of the bifurcated conversion option and debt issuance costs, and a $ 147.1 million increase in long-term debt resulting from the derecognition of the discount associated with the embedded conversion feature, offset by the remaining debt issuance costs reclassified out of equity.

In addition, 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.

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.

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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 device 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 platform and drug delivery device based on the Omnipod platform.

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

1 unchanged sentence

(in millions) 2023 2022 2021

United States (1)

$ 1,287.0 $ 942.3 $ 738.9

International 410.1 363.0 359.9

Total $ 1,305.3 $ 1,098.8 $ 904.4

(1) Includes U.S.

Omnipod and Drug Delivery revenues.

Total revenue $ 1,697.1 $ 1,305.3 $ 1,098.8

Geographic information about long-lived assets, net, excluding goodwill and other intangible assets is as follows:

1 unchanged sentence

(in millions) 2023 2022

United States $ 453.2 $ 445.4

$ 461.3 $ 453.2

China 82.0 87.6

1 unchanged sentence

Other 7.9 7.5

Total $ 599.9 $ 536.5

Total long-lived assets, net

$ 664.9 $ 599.9

Revenue and Contract Acquisition Costs

The following table summarizes the Company’s disaggregated revenues:

The following table summarizes the Company’s disaggregated revenue:

Years Ended December 31,

(in millions) 2023 2022 2021

Omnipod $ 884.8 $ 651.5 $ 526.9

International Omnipod 363.0 359.9 308.0

Total Omnipod 1,247.8 1,011.4 834.9

$ 1,251.0 $ 884.8 $ 651.5

International 410.1 363.0 359.9

Total Omnipod Products 1,661.1 1,247.8 1,011.4

Drug Delivery 36.0 57.5 87.4

6 unchanged sentences

Distributor C 19 % 17 % 12 %

Distributor D 16 % * *

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

9 unchanged sentences

Deferred revenue recognized $ 16.0 $ 2.1 $ 4.4

Contract acquisition costs, representing capitalized commission costs related to new customers, net of amortization, were included in the following consolidated balance sheet accounts in the amounts shown:

As of December 31,

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

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.

The Company recorded $ 473.7 million, $ 249.9 million and $ 58.2 million of net revenues from the distributor for the years ended December 31, 2023, 2022, and 2021, respectively.

At each period end, related party transactions recorded on the consolidated balance sheets were as follows:

As of December 31,

(in millions) 2023 2022

Accounts receivable, net $ 119.5 $ 64.7

Distribution fees payable (1)

Deferred revenue (1)

(1) Balances are included in accrued expenses and other current liabilities.

Cash and Cash Equivalents

4 unchanged sentences

Money market mutual funds 547.0 487.3

Time deposits 50.8 —

Term deposits

Restricted cash — 0.5

2 unchanged sentences

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 704.2 $ 689.7

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

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.

Restricted cash included in other assets on the consolidated balance sheet as of December 31, 2022 was held as a compensating balance against long-term borrowings.

Accounts Receivable

9 unchanged sentences

Distributor B 25 % 23 %

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.

Distributor C 18 % 11 %

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

The allowance for credit losses of other portfolios is insignificant.

13 unchanged sentences

Total inventories $ 402.6 $ 346.8

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.

Amounts charged to the consolidated statements of operations for excess and obsolete inventory for the years ended December 31, 2023, 2022, and 2021 were $ 3.7 million, $ 8.4 million, and $ 2.8 million, respectively.

Cloud Computing Costs

7 unchanged sentences

Capitalized implementation costs, net $ 106.7 $ 88.0

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 is recognized on a straight-line basis over the expected term of the hosting arrangements, which range from three to ten years .

Amortization expense was $ 20.3 million, $ 12.7 million, and $ 2.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

3 unchanged sentences

(in millions) 2023 2022

Land $ 2.5 $ 2.5

Building and building improvements (2)

3 unchanged sentences

Construction in process 137.5 112.3

Total property, plant and equipment 834.6 715.7

Property, plant and equipment, gross 958.1 834.6

accumulated depreciation (2)

( 293.2 ) ( 234.7 )

Property, plant and equipment, net $ 664.9 $ 599.9

(1) Includes $ 6.5 million of land at December 31, 2023 related to the finance lease discussed in Note 15.

(2) Includes $ 31.7 million of building and building improvements and $ 0.4 million of accumulated depreciation at December 31, 2023 related to the finance lease discussed in Note 15.

Capitalized interest expense was $ 1.6 million, $ 1.3 million, and $ 5.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Depreciation expense related to property and equipment was $ 62.6 million, $ 56.0 million, and $ 50.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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 .

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

Business Combination

13 unchanged sentences

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

Year Ended December 31,

(in millions) 2023 2022

Goodwill at December 31, 2021 $ 39.8

Goodwill at beginning of the year

$ 51.7 $ 39.8

Acquisition (Note 11)

Foreign currency translation — ( 0.1 )

Goodwill at December 31, 2022 $ 51.7

Goodwill at end of the year $ 51.7 $ 51.7

Intangible Assets, Net

10 unchanged sentences

See Note 19 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 for intangible assets was $ 10.2 million, $ 7.2 million, and $ 6.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

In February 2023, the Company paid Bigfoot Biomedical, Inc.

$ 25.1 million, including transaction costs, to acquire patent assets related to pump-based automated insulin delivery technologies.

The acquired patent assets have a useful life of 11 years.

Amortization expense associated with the intangible assets included on the Company’s consolidated balance sheet as of December 31, 2023 is expected to be as follows:

Years Ending December 31, (in millions)

Equity Securities

As of December 31, 2023 and 2022, the total carrying value of the Company’s investments in equity securities without readily determinable fair values was $ 9.7 million and $ 8.7 million, respectively.

During 2023, the unrealized gain recorded due to changes in the fair value of equity investments was insignificant.

There were no adjustments as of December 31, 2022.

Debt Securities

In 2023, the Company made a strategic investment in debt securities of a privately held entity in the amount of $ 5.0 million.

The debt securities mature in December 2024, unless converted earlier.

The amortized cost basis and fair value of the investment are $ 5.0 million and $ 4.7 million, respectively, as of December 31, 2023.

The unrealized loss recorded due to changes in the fair value of the investment during 2023 was insignificant.

In 2023, the Company made a strategic investment in a privately held entity in the amount of $ 2.0 million.

The investment is a debt security with embedded derivatives and is accounted for by applying the fair value option, as this approach best reflects the underlying economics of the transaction.

The fair value of the investment was calculated using a combination of the market approach and income approach methodologies.

During 2023, a $ 1.8 million unrealized gain on the investment was recorded in other income (loss), net in the consolidated statement of operations.

The fair value of the investment as of December 31, 2023 was $ 3.8 million and is reported within other assets on the consolidated balance sheet.

The amount of interest earned on the investment in 2023 was insignificant.

Accrued Expenses and Other Current Liabilities

2 unchanged sentences

(in millions) 2023 2022

Employee compensation and related costs $ 95.9 $ 70.3

Accrued rebates $ 144.0 $ 69.6

Warranty liability - current portion 57.3 2.4

Employee compensation and related costs 122.0 95.9

Professional and consulting services 34.1 27.5

Warranty liability - current portion 4.8 57.3

Other 68.8 50.7

Accrued expenses and other current liabilities $ 373.7 $ 301.0

Product Warranty Costs

Reconciliations of the changes in the Company’s product warranty liability were as follows:

3 unchanged sentences

Warranty expense 18.6 87.0

Changes in estimates ( 14.0 ) —

Change in estimate ( 11.5 ) ( 14.0 )

Warranty fulfillment ( 58.9 ) ( 17.7 )

Product warranty liability at end of year $ 10.3 $ 62.1

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.

During the fourth quarter of 2022, the Company issued two voluntary medical device correction notices (“MDCs”), one for its Omnipod DASH PDM relating to its battery and the other for its Omnipod 5 Controller relating to its charging port and cable.

During the year ended December 31, 2022, the Company initially recorded an estimated liability of $ 68.9 million related to these MDCs, which was subsequent 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.

During the year ended December 31, 2023, the Company revised the estimated liability for these MDCs by an additional $ 11.5 million.

This change in estimate primarily resulted from lower distribution costs.

The Company had a liability of $ 0.7 million and $ 54.6 million related to the MDCs included in its product warranty liability at December 31, 2023, and 2022, respectively.

As of December 31, 2023, the Company leased certain automobiles and facilities for offices, laboratories, manufacturing, and warehousing, all of which were classified as operating leases.

Certain of the Company’s operating leases include escalating rental payments, some include the option to extend for up to 10 years, and some include options to terminate the leases at certain times within the lease term.

As of December 31, 2022, operating lease assets and operating lease liabilities were included in the following consolidated balance sheet accounts in the amounts shown:

The Company also leases land and a manufacturing building in Malaysia, which are classified as finance leases.

The Company has the option to purchase the property at any point after the completion of construction and is contractually obligated to purchase the property nine months after completion, which occurred in December 2023.

Because the Company is reasonably certain to purchase the property, the lease term of each finance lease equals the economic life of the underlying asset.

As of December 31, 2023, the Company had not exercised the purchase option.

As of December 31, 2023, lease assets and lease liabilities were included in the following consolidated balance sheet accounts in the amounts shown:

Years Ended December 31,

(in millions) 2023 2022

Operating leases

Operating lease asset:

4 unchanged sentences

Total operating lease liabilities $ 33.0 $ 31.0

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 $ 4.6 million, $ 5.7 million, and $ 4.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Finance leases

Finance lease assets:

Property, plant and equipment, net $ 37.8 $ —

Finance lease liabilities:

Current portion of long-term debt and finance leases $ 22.9 $ —

The Company’s operating and financing lease cost was as follows:

Year Ended December 31,

(in millions)

2023 2022 2021

Operating lease cost $ 8.8 $ 8.8 $ 6.0

Finance lease cost:

Amortization of leased assets 0.4 — —

Interest on lease liabilities 0.6 — —

Total finance lease cost 1.0 — —

Total operating and financing lease cost $ 9.8 $ 8.8 $ 6.0

Maturities of lease liabilities as of December 31, 2023 are as follows:

Years Ending December 31, (in millions)

(in millions)

Years Ending December 31, Operating Leases

Finance Lease (1)

2024 $ 5.7 $ 23.2

Thereafter 33.8 —

2 unchanged sentences

Present value of future minimum lease payments $ 33.0 $ 22.9

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 %.

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.

(1) Excludes optional variable lease payments.

As of December 31, 2023, the weighted average remaining lease term and weighted-average discount rate for leases were as follows:

Operating Leases

Finance Leases

Weighted average remaining lease term 12.4 years 9 months

Weighted-average discount rate used to determine the lease liability 7.1 % 6.0 %

The components of debt consisted of the following:

1 unchanged sentence

(in millions) 2023 2022

Revolving Credit Facility expires May 2024 $ — $ —

Equipment financing due May 2024 $ 2.7 $ 9.5

2 unchanged sentences

0.375 % Convertible Senior Notes due September 2026

Equipment financing 12.7 —

Term loan due May 2028 487.5 492.5

Revolving Credit Facility expires June 2028 — —

Equipment financing due July 2028 29.0 34.4

Finance lease obligation (1)

Unamortized debt discount ( 6.4 ) ( 7.6 )

3 unchanged sentences

Total long term-debt, net $ 1,366.4 $ 1,374.3

(1) Refer to Note 15 for information regarding finance lease obligation.

Equipment Financings

4 unchanged sentences

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

In May 2023, the Company entered into an arrangement under which the Company may obtain up to $ 24.0 million of financing for manufacturing equipment.

The Company is involved in the construction of the manufacturing equipment;

accordingly, it is included in property, plant and equipment on the consolidated balance sheet at December 31, 2023.

The Company’s obligation reflects payments made to date by the third-party bank to the equipment manufacturer, net of discount and less repayment of principal.

The financing obligation will mature 36 months following completion of construction and has an effective interest rate of 9.4 %.

5.15 % Mortgage

5 unchanged sentences

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.

The notes will be convertible June 1, 2026 through August 28, 2026 and prior to then under certain circumstances.

The Company recorded a debt discount of $ 213.0 million related to the 0.375 % Notes resulting from the allocation of a portion of the proceeds to the fair value of the conversion feature reflecting a nonconvertible debt borrowing rate of 5.29 % per annum.

The Company also incurred debt issuance costs and other expenses of $ 19.8 million, of which $ 5.3 million was recorded as a reduction to the value of the conversion feature allocated to equity.

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 and to purchase the capped call options (“Capped Calls”) discussed below.

The notes are convertible into cash, shares of the Company’s common stock, or the combination of cash and shares of common stock, at the Company's election, 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.

The notes will be convertible at the holder's election, from June 1, 2026 through August 28, 2026 and prior to then under certain circumstances as set forth in the agreement.

Additionally, on or after September 6, 2023, the Company may redeem for cash all or a portion of the Notes, if its stock price has been equal to or greater than $ 294.75 fo r at least 20 of the prior 30 consecutive trading days including the date which the Company provides notice of redemption .

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”).

4 unchanged sentences

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.

The Capped Calls cover 3.5 million shares of common stock.

The Capped Calls cover 3.5 million shares of common stock and are recorded within stockholders’ equity on the consolidated balance sheets.

As of December 31, 2023 and 2022, the net carrying amount of the Notes was $ 791.8 million and $ 788.8 million, respectively, net of unamortized issuance costs of $ 8.2 million and $ 11.2 million, respectively.

As of December 31, 2023, the effective interest rate was 0.76 %.

The components of interest expense related to the Notes were as follows:

Years Ended December 31,

(in millions)

2023 2022 2021

Contractual interest expense

$ 3.0 $ 3.0 $ 3.0

Amortization of debt issuance costs

Total interest recognized on the Convertible Notes $ 6.0 $ 6.0 $ 4.9

Senior Secured Credit Agreement

2 unchanged sentences

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.

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

In 2023, the Company increased the borrowing capacity under the Revolving Credit Facility to $ 300.0 million and amended the agreement such that outstanding borrowings bear interest at a rate of SOFR plus an applicable margin of 2.625 % to 3.25 %

based on the Company’s net leverage ratio and credit rating and extended the maturity date to the earlier of June 2028 or 91 days prior to the maturity date of the Company's term loan if still outstanding.

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.

In January 2024, the Company amended its Credit Agreement.

Refer to Note 26 for additional information.

1.375 % Convertible Senior Notes

2 unchanged sentences

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.

Carrying Value

The carrying value amounts of the Company’s debt were as follows:

As of December 31,

(in millions) 2023 2022

Term loan due May 2028

$ 479.2 $ 482.1

0.375 % Convertible Senior Notes

Equipment financings

5.15 % Mortgage

Finance lease obligation 22.9 —

Total debt, net $ 1,415.8 $ 1,401.8

Maturity of Debt

1 unchanged sentence

Years Ending December 31, (in millions)

The carrying amount and the estimated fair value of the Company’s debt were as follows:

As of December 31,

(in millions) Carrying

Value Estimated

Fair Value Carrying

Value Estimated

Financial Instruments and Fair Value

Financial Instruments Disclosed at Fair Value

The following tables provide a summary of the significant financial instruments that are disclosed at fair value on a recurring basis as of December 31, 2023 and 2022:

Fair Value Measurements at December 31, 2023

(in millions) Level 1 Level 2 Level 3 Total

Term loan due May 2028 (1)

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— — 62.6 62.6

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

(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.

The fair values were determined using the cost bases of the financial liabilities, which approximate their carrying values .

$ 490.2 $ 765.6 $ 121.9 $ 1,377.7

Fair Value Measurements at December 31, 2022

(in millions) Level 1 Level 2 Level 3 Total

Term loan due May 2028 (1)

$ 485.1 $ — $ — $ 485.1

0.375 % Convertible Senior Notes (2)

— 1,038.7 — 1,038.7

Equipment financings (3)

— — 66.4 66.4

5.15 % Mortgage (3)

— — 64.5 64.5

$ 485.1 $ 1,038.7 $ 130.9 $ 1,654.7

(1) Fair value of the Term Loan was determined using quoted market prices.

(2) Fair value of the notes was determined using the Company’s quoted stock price and the contractual conversion rate.

(3) The fair values of the equipment financings and mortgage approximate their carrying values and were determined using their cost basis.

Assets Measured at Fair Value on a Recurring Basis

The following tables provide a summary of assets that are measured at fair value on a recurring basis as of December 31, 2023 and 2022:

Fair Value Measurements at December 31, 2023

(in millions) Level 1 Level 2 Level 3 Total

$ 103.7 $ — $ — $ 103.7

Money market mutual funds (1)

547.0 — — 547.0

Term deposits (2)

— 53.5 — 53.5

Interest rate swaps (3)

— 22.8 — 22.8

Debt securities (4)

Other investments (4)

$ 650.7 $ 76.3 $ 8.5 $ 735.5

Fair Value Measurements at December 31, 2022

(in millions) Level 1 Level 2 Level 3 Total

$ 136.1 $ — $ — $ 136.1

Money market mutual funds (1)

487.3 — — 487.3

Term deposits (2)

— 50.8 — 50.8

Restricted cash (1)

Interest rate swaps (3)

— 36.9 — 36.9

$ 623.9 $ 87.7 $ — $ 711.6

(1) Cash and cash equivalents are carried at face amounts, which approximate their fair values.

(2) Fair value is determined using Level 2 inputs.

(3) Fair value represents 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 swaps is included in other assets on the consolidated balance sheets.

(4) Fair value is determined using industry standard valuation models and market-based unobservable inputs, including credit spread and risk free rate.

The range used for the risk free rate is 3.8 % - 5.6 %.

The following is a reconciliation of changes in fair value of investments, which were acquired during the year ended December 31, 2023:

(in millions) Debt Securities Other Investments Total

Balance at December 31, 2022 $ — $ — $ —

Purchases 5.0 2.0 7.0

Unrealized gain included in other income (expense), net — 1.8 1.8

Unrealized loss on securities included in other comprehensive income ( 0.3 ) — ( 0.3 )

Balance at December 31, 2023 $ 4.7 $ 3.8 $ 8.5

Assets Measured at Fair Value on a Non-Recurring Basis

Due to an observable price change in an orderly transaction during 2023, the Company adjusted the carrying value of certain investments in equity securities held as of December 31, 2023, which resulted in an unrealized gain of $ 0.8 million.

The investments are classified as Level 2 in the fair value hierarchy.

Derivative Instruments

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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 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, 2023, the Company estimates that $ 18.3 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.

When recognized, gains and losses on cash flow hedges reclassified from accumulated other comprehensive income are recognized within interest expense, net.

Commitments and Contingencies

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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.

In 2022, the Company entered into a $ 20 million uncommitted letter of credit facility, and concurrently with the execution of the Malaysia Purchase Agreement discussed in Note 15, a $ 16.5 million letter of credit was issued under the facility to backstop a bank guarantee for the same amount.

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

In 2023, additional letters of credit totaling $ 3.5 million were issued under this facility.

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

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

In December 2020, Insulet entered into a settlement agreement with the former distributor pursuant to which the Company paid the distributor an additional one-time payment of $ 36.2 million, for a total fee of $ 41.2 million, representing the cost to acquire the customer relationships.

This amount was recorded as an intangible asset on the consolidated balance sheet.

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.

In aggregate, the Company had letters of credit totaling $ 20.9 million and $ 18.6 million as of December 31, 2023 and 2022, respectively.

Stock-Based Compensation Expense

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The Company uses the Black-Scholes pricing model to determine the fair value of options granted.

The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s stock over the expected term of the award, the expected life of the award, the risk-free interest rate, and the dividend yield.

The assumptions used in the Black-Scholes pricing model are as follows:

• Risk-free Interest Rate —The risk-free interest rate is the implied yield available on U.S.

treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.

• Expected Term —The expected term of options granted represents the period of time for which the options are expected to be outstanding.

The Company estimates the expected term using both historical and hypothetical exercise data for outstanding options.

• Dividend Yield —The Company has never declared or paid any cash dividends on any of its capital stock and does not expect to do so in the foreseeable future.

Accordingly, the Company uses an expected dividend yield of zero to calculate the grant-date fair value of a stock option.

• Expected Volatility —The expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate during the expected term of options granted.

The Company determines the expected volatility based primarily upon the historical volatility of the Company’s common stock over a period commensurate with the option’s expected term.

The assumptions used in the Black-Scholes pricing model for options granted during each year, along with the weighted-average grant-date fair values, were as follows:

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0.5 % - 0.6 %

0.3 % - 1.4 %

Expected life of options (in years) 4.2

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41.4 % - 41.6 %

39.5 % - 41.7 %

Fair value per option $ 115.32 $ 93.26 $ 95.92

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Restricted Stock Units

Restricted Stock Units (“RSUs”) generally vest in equal annual installments over a three-year period, however during the fourth quarter of 2020, the Company issued a company-wide grant, a significant portion of which immediately vested.

Restricted Stock Units (“RSUs”) generally vest in equal annual installments over a three-year period.

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 RSUs based on the closing price of its common stock on the date of grant.

RSU activity is as follows:

Activity for RSUs is as follows:

Shares Weighted

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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:

Activity for PSUs is as follows:

Shares Weighted

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180,301 $ 249.10

Granted 83,710 250.25

60,587 $ 276.36

Vested ( 40,023 ) $ 217.34

2 unchanged sentences

122,466 $ 261.65

(1) Includes a 7,636 share adjustment to awards granted in 2020 for the three-year performance cycle award period ended 2022, based on the actual performance achievement of 84 %.

(2) Based on 111 % achievement of the performance metrics, approximately 18,000 shares of Insulet were earned for awards that were granted in 2021 for the performance period ended December 31, 2023.

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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)

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

Balance, December 31, 2020

$ 5.2 $ 0.3 $ — $ 5.5

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

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

Amounts reclassified to net income — — 1.5 1.5

Balance, December 31, 2021

4 unchanged sentences

( 17.0 ) — 37.0 20.0

Other comprehensive (loss) income before reclassifications ( 10.3 ) — 36.5 26.2

Other comprehensive income (loss) before reclassifications 2.5 ( 0.3 ) 6.1 8.3

Amounts reclassified to net income — — ( 20.3 ) ( 20.3 )

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The total amount contributed by the Company to these defined contribution plans was $ 12.1 million, $ 9.8 million, and $ 8.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Interest Expense, Net

Interest expense, net of portion capitalized was as follows:

Years Ended December 31,

(in millions) 2022 2021 2020

Cash interest, net of interest rate swaps $ 32.0 $ 27.1 $ 9.5

Accretion of debt discount 1.5 36.7 42.3

Amortization of debt issuance costs 4.3 3.5 2.9

Capitalized interest ( 1.3 ) ( 5.6 ) ( 6.6 )

Interest expense, net of portion capitalized 36.5 61.7 48.1

Interest income ( 9.8 ) ( 0.5 ) ( 3.0 )

Interest expense, net $ 26.7 $ 61.2 $ 45.1

and foreign components of income before income taxes were as follows:

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Foreign 4.1 4.8 2.0

Total current expense 6.1 2.5 4.2

Total current tax expense

Federal 0.1 — —

Foreign 0.4 ( 0.9 ) 1.2

Total deferred expense ( 0.9 ) 1.2 ( 1.3 )

Income tax expense $ 5.2 $ 3.7 $ 2.9

Reconciliations of the federal statutory income rate to the Company’s effective income tax rate are as follows:

Total deferred tax expense (benefit)

0.5 ( 0.9 ) 1.2

Total income tax expense $ 8.3 $ 5.2 $ 3.7

Reconciliations of the U.S.

federal statutory rate to the Company’s effective tax rate are as follows:

Years Ended December 31,

3 unchanged sentences

State taxes, net of federal benefit 2.4 ( 5.0 ) ( 9.5 )

Tax credits ( 74.1 ) ( 16.8 ) ( 40.5 )

Federal and state R&D credits

( 5.9 ) ( 49.4 ) ( 26.2 )

Stock-based compensation ( 3.2 ) ( 94.8 ) ( 117.0 )

4 unchanged sentences

Foreign income taxed in the U.S.

14.5 — ( 21.0 )

Change in valuation allowance ( 10.8 ) 124.4 97.9

Tax rate changes 0.5 ( 30.9 ) —

Change to prior year R&D credit

Intercompany transfer of intellectual property — — 4.6

Other ( 0.6 ) 1.7 0.4

Effective income tax rate 53.4 % 18.2 % 29.6 %

Effective tax rate 3.9 % 53.4 % 18.2 %

For all periods presented, no provision for income taxes has been provided on undistributed earnings of the Company’s foreign subsidiaries, except for Canada, because such earnings are indefinitely reinvested in the foreign operations.

1 unchanged sentence

A deferred tax liability related to the repatriation of approximately $ 32.7 million indefinitely reinvested earnings would not be material to the Company’s consolidated financial statements, primarily due to treaty-based withholding tax rates in the jurisdictions in which the Company operates.

During 2023 the Company commenced a multi-year research and development (“R&D”) credit study that resulted in an increase to U.S.

federal and state R&D credit carryforwards related to the 2022 tax year.

This has been reported as a favorable adjustment to prior year taxes in the effective tax rate and a corresponding increase to the valuation allowance.

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

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net operating loss carryforwards from 2003 and forward may be subject to examination if the losses are utilized in future years.

As of December 31, 2022, 2021, and 2020 the Company had no uncertain tax positions.

The components of the net deferred tax asset at the end of each year are as follows:

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

(in millions)

Unrecognized tax benefits at December 31, 2022 $ —

Additions related to current period tax positions

Additions related to prior period tax positions

Unrecognized tax benefits at December 31, 2023

As of December 31, 2023, the balance of unrecognized tax benefits, if recognized, would not impact the effective tax rate due to a full valuation allowance against the Company's U.S.

deferred tax assets.

As of December 31, 2022 and 2021, the Company had no unrecognized tax benefits that would impact the effective tax rates.

The Company does not anticipate that the amount of existing unrecognized tax benefits will materially increase or decrease within the next 12 months.

No interest and penalties were recognized related to uncertain tax positions for the years ended December 31, 2023, 2022 and 2021 and no interest and penalties were accrued for as of December 31, 2023 and 2022.

The components of the net deferred tax asset at the end of each year consist of the following:

As of December 31,

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Warranty 2.2 14.6

Accrued expenses 22.9 10.2

Amortization of debt discount 7.8 11.0

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Incentive compensation 13.5 9.4

Stock-based compensation 8.0 6.4

Other 5.4 4.5

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Property, plant and equipment ( 38.1 ) ( 31.5 )

Amortization of debt discount — ( 22.9 )

Capitalized contract acquisition costs ( 10.4 ) ( 10.4 )

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The Company maintained a valuation allowance of $ 202.9 million and $ 222.8 million at December 31, 2023 and 2022, respectively, against U.S.

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.

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 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:

Years Ended December 31,

federal, state, and certain 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.

These valuation allowances are based on the weighting of positive and negative evidence, including a history of cumulative tax losses in prior years.

The $ 19.9 million decrease in the Company’s valuation allowance during the year ended December 31, 2023 was primarily due to the utilization of net operating losses and changes in temporary differences in the United States.

As of December 31, 2023, the Company’s net operating loss carryforwards were as follows:

(in millions)

Federal $ 573.8 $ 708.8

Expiration Period

Net Operating Loss Carryforwards

As of December 31, 2023, the Company’s tax credit carryforwards were as follows:

(in millions)

Expiration Period

Tax Credit Carryforwards

2024 - 2043 $ 40.1

State 2024 - 2043 $ 23.6

Foreign $ 30.1 $ 16.4

As of December 31, 2022, $ 190.6 million of the U.S.

federal net operating losses and the full amount of the foreign net operating losses have an indefinite carryforward period.

The remaining 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 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.

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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:

The computation of basic and diluted net income per share was as follows:

Years Ended December 31,

(in thousands) 2022 2021 2020

Weighted average number of common shares outstanding, basic 69,375 67,698 64,735

(in millions, except share and per share data) 2023 2022 2021

Net income $ 206.3 $ 4.6 $ 16.8

Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes

Net income, diluted $ 216.7 $ 4.6 $ 16.8

Weighted average number of common shares outstanding, basic (in thousands)

69,751 69,375 67,698

Convertible Notes 3,528 — —

Stock options 286 454 686

Restricted stock units 68 81 195

Weighted average number of common shares outstanding, diluted 69,910 68,579 65,946

Weighted average number of common shares outstanding, diluted (in thousands)

73,633 69,910 68,579

Net income per share

$ 2.96 $ 0.07 $ 0.25

$ 2.94 $ 0.07 $ 0.24

The number of common share equivalents excluded from the computation of diluted net income per share because either the effect would have been anti-dilutive, or the performance criteria related to the units had not yet been met, were as follows:

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(in thousands) 2023 2022 2021

Restricted stock units 322 227 166

Stock options 163 137 53

0.375 % Convertible Senior Notes

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1.375 % Convertible Senior Notes

— 2,024 4,319

Restricted stock units 227 166 282

Stock options 137 53 58

Total 485 3,892 5,771

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Cash paid for taxes $ 8.1 $ 5.5 $ 7.0

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 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.

Purchases of property and equipment included in accounts payable and accrued expenses $ 7.1 $ 3.9 $ 6.1

Purchases of property, plant and equipment included in long-term debt $ 12.9 $ — $ —

Purchases of developed software included in accounts payable and accrued expenses $ 0.2 $ 0.4 $ 3.2

Operating lease liabilities arising from obtaining right-of-use assets $ 5.4 $ 25.5 $ 0.7

Finance lease liability arising from obtaining right-of-use assets $ 22.3 $ — $ —

Lease payment made for amounts included in the measurement of operating lease liabilities $ 5.7 $ 4.6 $ 5.7

Subsequent Event

In January 2024, the Company amended its Term Loan to bear interest at a rate of SOFR plus 3.00 %, with a 0 % SOFR floor.

At the same time, the Company amended its Revolving Credit Facility such that outstanding borrowings bear interest at a rate of SOFR plus an applicable margin of 2.375 % to 3.00 % based on the Company’s net leverage ratio and credit rating.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

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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