What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-03 · 149 added, 136 removed, 608 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except par value)

June 30, December 31,

September 30, December 31,

Assets (Unaudited) (Note 1)

27 unchanged sentences

Common stock, $ 0.001 par value;

200,000 shares authorized, 64,210 and 63,833 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.

200,000 shares authorized, 64,265 and 63,833 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital 1,140,158 1,068,259

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

5 unchanged sentences

Research and development 36,798 24,102 103,529 62,562

Acquired in-process research and development expenses 31,016 — 31,016 —

Total operating expenses 151,918 89,025 372,534 252,571

4 unchanged sentences

Change in fair value of common stock warrants 12 ( 392 ) 103 ( 1,354 )

Total other expense, net ( 711 ) ( 1,363 ) ( 1,812 ) ( 3,287 )

Total other income (expense), net 144 ( 1,872 ) ( 1,668 ) ( 5,159 )

Income (loss) before income taxes ( 47,349 ) 5,848 ( 76,738 ) 4,756

2 unchanged sentences

Other comprehensive income (loss):

Unrealized loss on short-term investments $ ( 1,124 ) $ ( 51 ) $ ( 3,641 ) $ ( 89 )

Unrealized gain (loss) on short-term investments $ ( 258 ) $ 8 $ ( 3,899 ) $ ( 81 )

Foreign currency translation loss ( 524 ) ( 23 ) ( 549 ) ( 125 )

8 unchanged sentences

(In thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2022 63,941 $ 64 $ 1,089,689 $ ( 3,061 ) $ ( 649,310 ) $ 437,382

Balance at June 30, 2022 64,210 $ 64 $ 1,118,168 $ ( 4,282 ) $ ( 664,366 ) $ 449,584

Exercise of stock options 26 — 583 — — 583

Vesting of restricted stock units, net of shares withheld for taxes 29 — ( 952 ) — — ( 952 )

Issuance of common stock for Employee Stock Purchase Plan 129 — 7,915 — — 7,915

Exercise of common stock warrants 4 — 68 — — 68

Stock-based compensation expense — — 22,359 — — 22,359

2 unchanged sentences

Net loss — — — — ( 48,970 ) ( 48,970 )

Balance at June 30, 2022

Balance at September 30, 2022

64,265 $ 64 $ 1,140,158 $ ( 5,064 ) $ ( 713,336 ) $ 421,822

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Common Stock Additional

8 unchanged sentences

Vesting of restricted stock units, net of shares withheld for taxes 99 — ( 3,527 ) — — ( 3,527 )

Issuance of common stock for Employee Stock Purchase Plan 129 — 7,915 — — 7,915

Issuance of common stock under Employee Stock Purchase Plan 129 — 7,915 — — 7,915

Exercise of common stock warrants 6 — 83 — — 83

3 unchanged sentences

Net loss — — — — ( 78,741 ) ( 78,741 )

Balance at June 30, 2022 64,210 $ 64 $ 1,118,168 $ ( 4,282 ) $ ( 664,366 ) $ 449,584

Balance at September 30, 2022

64,265 $ 64 $ 1,140,158 $ ( 5,064 ) $ ( 713,336 ) $ 421,822

See accompanying notes to unaudited condensed consolidated financial statements.

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2021 62,571 $ 63 $ 968,450 $ 106 $ ( 655,205 ) $ 313,414

Balance at June 30, 2021 62,952 $ 63 $ 997,190 $ 29 $ ( 651,197 ) $ 346,085

Exercise of stock options 464 — 18,992 — — 18,992

Vesting of restricted stock units, net of shares withheld for taxes 5 — ( 297 ) — — ( 297 )

Issuance of common stock for Employee Stock Purchase Plan 100 — 6,317 — — 6,317

Exercise of common stock warrants 30 — 156 — — 156

Fair value of common stock warrants at time of exercise — — 3,066 — — 3,066

Stock-based compensation expense — — 15,873 — — 15,873

Unrealized loss on short-term investments — — — ( 51 ) — ( 51 )

Unrealized gain on short-term investments — — — 8 — 8

Foreign currency translation adjustments — — — ( 23 ) — ( 23 )

Net income — — — — 5,794 5,794

Balance at June 30, 2021

Balance at September 30, 2021

63,451 $ 63 $ 1,034,980 $ 14 $ ( 645,403 ) $ 389,654

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Common Stock Additional

9 unchanged sentences

Vesting of restricted stock units, net of shares withheld for taxes 34 — ( 1,164 ) — — ( 1,164 )

Issuance of common stock for Employee Stock Purchase Plan 100 — 6,317 — — 6,317

Issuance of common stock under Employee Stock Purchase Plan 100 — 6,317 — — 6,317

Exercise of common stock warrants 156 — 593 — — 593

3 unchanged sentences

Foreign currency translation adjustments — — — ( 125 ) — ( 125 )

Net loss — — — — ( 1,036 ) ( 1,036 )

Balance at June 30, 2021

Net income — — — — 4,758 4,758

Balance at September 30, 2021

63,451 $ 63 $ 1,034,980 $ 14 $ ( 645,403 ) $ 389,654

5 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

Net loss $ ( 29,771 ) $ ( 1,036 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ ( 78,741 ) $ 4,758

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

Depreciation and amortization expense 10,689 10,325

5 unchanged sentences

Stock-based compensation expense 60,477 43,653

Acquired in-process research and development expenses 31,016 —

Other ( 544 ) ( 132 )

4 unchanged sentences

Other long-term assets ( 960 ) ( 154 )

Accounts payable & Accrued expenses 20,193 11,957

Accounts payable and Accrued expenses 28,038 10,854

Employee-related liabilities ( 3,585 ) 13,061

Deferred revenue 4,998 7,774

Operating leases & Other current liabilities 7,443 1,170

Operating leases and Other current liabilities 24,305 3,561

Other long-term liabilities 1,042 2,580

5 unchanged sentences

Purchases of property and equipment ( 28,470 ) ( 8,434 )

Acquisition of intangible assets and equity investments ( 515 ) ( 9,331 )

Net cash provided by (used in) investing activities 11,554 ( 70,855 )

Acquisition, including in-process research and development, net of cash acquired ( 25,697 ) —

Acquisition of intangible assets and strategic investments ( 8,855 ) ( 9,331 )

Net cash used in investing activities ( 2,609 ) ( 110,058 )

Financing Activities

8 unchanged sentences

Supplemental disclosures of cash flow information

Interest paid $ 2,156 $ 2,156

Income taxes paid $ 162 $ 260

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dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses.

Translation related adjustments are included in other comprehensive income (loss), and in accumulated other comprehensive income (loss) in the stockholders’ equity section of the Company’s condensed consolidated balance sheets.

Translation related adjustments are included in other comprehensive income (loss) in the condensed consolidated statements of operations, and in accumulated other comprehensive income (loss) in the stockholders’ equity section of the Company’s condensed consolidated balance sheets.

Foreign exchange gains or losses resulting from balances denominated in a currency other than the functional currency are recognized in interest income and other, net in the Company’s condensed consolidated statements of operations.

4 unchanged sentences

Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2022, as compared to those disclosed in the Company’s 2021 Annual Report.

There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2022, as compared to those disclosed in the Company’s 2021 Annual Report, except for adding the accounting policies related to an asset acquisition and recently launched Tandem Choice technology access program (Tandem Choice), which are included herein.

Use of Estimates

5 unchanged sentences

The Company maintains an allowance for its current estimate of expected credit losses.

Provisions for expected credit losses are estimated based on historical experience, assessment of specific risk, review of outstanding invoices, forecasts about the future, and various assumptions and estimates that are believed to be reasonable under the circumstances, including credit risks as a result of the coronavirus pandemic (COVID-19 global pandemic).

Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

2 unchanged sentences

Short-term investments are carried at fair value.

The carrying value and estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of June 30, 2022 and December 31, 2021 (see Note 5, “Fair Value Measurements”).

The carrying value and estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of September 30, 2022 and December 31, 2021 (see Note 5, “Fair Value Measurements”).

The Company’s convertible senior notes are carried at amortized cost on the condensed consolidated balance sheets (see Note 7, “Debt”).

The Company measures the fair value of its convertible senior notes for disclosure purposes.

The Company estimated the fair value of its convertible senior notes to be $ 269.5 million and $ 430.0 million at June 30, 2022 and December 31, 2021, respectively, based on Level 2 quoted market prices as of those dates .

The Company estimated the fair value of its convertible senior notes to be $ 257.6 million and $ 430.0 million at September 30, 2022 and December 31, 2021, respectively, based on Level 2 quoted market prices as of those dates .

Operating Lease Right-of-Use Assets and Liabilities

5 unchanged sentences

Landlord improvement allowances and other similar lease incentives are recorded as a reduction of the right-of-use leased assets, and are amortized on a straight-line basis as a reduction to operating lease costs.

Cost Basis Equity Investment

The Company made an $ 8.1 million equity investment in a private company in the second quarter of 2021, which represented less than 5 % of the outstanding equity of that company as of the date of investment.

The investment is recorded using the cost minus impairment, if any, adjusted for changes in observable prices and is included as a component of other long-term assets on the consolidated balance sheets.

Strategic Investments

During the third quarter of 2022, the Company made an $ 8.3 million investment in a private company.

The investment is accounted for using the cost method, as the investment does not have a readily determinable fair value, and is included as a component of other long-term assets on the condensed consolidated balance sheet at September 30, 2022.

During the second quarter of 2021, the Company made an $ 8.1 million equity investment in a private company, which represented less than 5 % of the outstanding equity of that company as of the date of investment.

The investment is accounted for using the cost minus impairment, if any, adjusted for changes in observable prices and is included as a component of other long-term assets on the consolidated balance sheets.

The Company monitors this investment to evaluate whether any increase or decline in its value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions .

Capillary Biomedical Acquisition

On July 21, 2022, the Company acquired Capillary Biomedical, Inc.

(Capillary Biomedical) an infusion set developer, for total cash consideration of $ 24.7 million, and the assumption of $ 4.7 million of long-term debt.

The debt becomes due and payable upon the first sale or license of the commercialized product, and is included as a component of other long-term liabilities on the condensed consolidated balance sheet at September 30, 2022.

Capillary Biomedical’s extended-wear infusion set technology is currently in development and is not yet commercially available.

The Company funded the purchase price using existing cash balances.

The transaction was accounted for as an asset acquisition as substantially all the value of the gross assets were concentrated in a single asset.

At the acquisition date, the Company recorded a $ 31.0 million charge representing the value of acquired in-process research and development assets with no alternative future use, and acquisition related expenses, in acquired in-process research and development expenses on its condensed consolidated statements of operations.

Intangible Assets Subject to Amortization

2 unchanged sentences

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company did no t recognize any impairment losses during the six months ended June 30, 2022 and 2021.

The Company did no t recognize any impairment losses during the nine months ended September 30, 2022 and 2021.

Revenue Recognition

9 unchanged sentences

Where there is no standalone value for the complementary product, the Company determines its value by applying the expected cost plus a margin approach and then allocates the residual to the insulin pumps.

Tandem Choice Program

In September 2022, the Company announced and launched a new technology access program, (Tandem Choice) that provides eligible, in-warranty t:slim X2 customers in the United States with the flexibility to obtain the next generation hardware platform when it is commercially available.

Participating customers have the right to purchase the next generation Tandem pump for a fee (the Choice Right).

The Tandem Choice expires on December 31, 2024.

For purposes of evaluating the Tandem Choice, in accordance with ASC 606, the Company has determined that the ability for a customer to upgrade to a new technology, represents a material right because the pricing inherent in such option provides the customer with a discount that is incremental to the range of discounts that would otherwise be granted for the related goods and services to comparable customers.

The standalone selling price for the Choice Right was estimated based on the adjusted market assessment approach and contemplates the likelihood that the respective option will be exercised.

At September 30, 2022, $ 0.6 million was allocated to the material right and recorded in current deferred revenue on the condensed consolidated balance sheet.

Warranty Reserve

8 unchanged sentences

The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to the length of time each pump version has been in the field and revised future expectations of performance based on new features and capabilities that may become available through Tandem Device Updater.

The following table provides a reconciliation of the changes in product warranty liabilities for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table provides a reconciliation of the changes in product warranty liabilities for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Settlements made during the period ( 6,148 ) ( 4,665 ) ( 17,856 ) ( 13,672 )

Decrease in warranty estimates ( 132 ) ( 770 ) ( 1,269 ) ( 1,316 )

Increases (decreases) in warranty estimates 110 ( 80 ) ( 1,159 ) ( 1,396 )

Balance at end of the period $ 34,610 $ 27,545 $ 34,610 $ 27,545

As of June 30, 2022 and December 31, 2021, total product warranty reserves were included in the following consolidated balance sheet accounts (in thousands):

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, total product warranty reserves were included in the following consolidated balance sheet accounts (in thousands):

September 30, 2022 December 31, 2021

Other current liabilities $ 16,244 $ 13,076

16 unchanged sentences

Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method.

For the three and six months ended June 30, 2022, the net loss used in the calculation of diluted net loss per share was increased by $ 0.1 million and $ 0.1 million, respectively, to remove the gain recognized from the change in fair value of certain common stock warrants based on the dilutive effect of assumed exercise, and the denominator was increased by 958 shares and 965 shares, respectively, calculated under the treasury stock method.

For the six months ended June 30, 2021, there was no difference in the weighted average number of shares used to calculate basic and diluted net loss per share due to the Company’s net loss position.

For the three months ended June 30, 2021, the numerator and denominator of the diluted net income per share computation were calculated as follows (in thousands):

Three Months Ended June 30, 2021

For the three and nine months ended September 30, 2022, the net loss used in the calculation of diluted net loss per share was increased by $ 12,000 and $ 0.1 million, respectively, to remove the gain recognized from the change in fair value of certain common stock warrants based on the dilutive effect of assumed exercise, and the denominator was increased by 937 shares and 959 shares, respectively, calculated under the treasury stock method.

For the three and nine months ended September 30, 2021, the numerator and denominator of the diluted net income per share computation were calculated as follows (in thousands):

Three Months Ended September 30, 2021 Nine Months Ended

September 30, 2021

Net income - basic and diluted $ 5,794 $ 4,758

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

7 unchanged sentences

In June 2020, the FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in

an Entity’s Own Equity , which is intended to simplify the accounting for convertible instruments.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which is intended to simplify the accounting for convertible instruments.

This new guidance eliminated certain models that require separate accounting for embedded conversion features, and eliminated certain of the conditions for equity classification for contracts in an entity’s own equity.

8 unchanged sentences

Government-sponsored enterprises, and financial institutions and corporations with strong credit ratings.

The following represents a summary of the estimated fair value of short-term investments at June 30, 2022 and December 31, 2021 (in thousands):

At June 30, 2022 Amortized

The following represents a summary of the estimated fair value of short-term investments at September 30, 2022 and December 31, 2021 (in thousands):

At September 30, 2022 Amortized

Cost Gross Unrealized

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Total $ 553,254 $ 15 $ ( 639 ) $ 552,630

The contractual maturities of available-for-sale debt securities as of June 30, 2022, were as follows (in thousands):

The contractual maturities of available-for-sale debt securities as of September 30, 2022, were as follows (in thousands):

Years to Maturity

At June 30, 2022 Within One Year One to Two Years Estimated Fair Value

At September 30, 2022 Within One Year One to Two Years Estimated Fair Value

Treasury securities $ 245,708 $ 10,248 $ 255,956

6 unchanged sentences

The Company reviews the portfolio of available-for-sale debt securities quarterly to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns.

Unrealized losses on available-for-sale debt securities at June 30, 2022 were primarily due to the recent increase in market interest rates.

Unrealized losses on available-for-sale debt securities at September 30, 2022 were primarily due to the recent increase in market interest rates.

The Company does not intend to sell the available-for-sale debt securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity.

Based on the credit quality of the available-for-sale debt securities in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses.

Accordingly, the Company did not recognize any impairment losses related to its available-for-sale debt securities at June 30, 2022.

Accordingly, the Company did not record an allowance for credit losses related to its available-for-sale debt securities at September 30, 2022.

Composition of Certain Financial Statement Items

Accounts Receivable

Accounts receivable, net consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Accounts receivable, net consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Accounts receivable $ 117,078 $ 114,974

2 unchanged sentences

Allowance for Credit Losses

The following table provides a reconciliation of the changes in the allowance for estimated accounts receivable credit losses for the three and six months ended June 30, 2022 and 2021 (in thousands):

The following table provides a reconciliation of the changes in the allowance for estimated accounts receivable credit losses for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

Balance at end of the period $ 4,273 $ 3,794 $ 4,273 $ 3,794

Inventories consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Inventories consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Raw materials $ 40,841 $ 26,911

10 unchanged sentences

Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own valuation techniques that require input assumptions.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in thousands):

Fair Value Measurements at

June 30, 2022

September 30, 2022

Total Level 1 Level 2 Level 3

29 unchanged sentences

The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers.

The Company's Level 3 liabilities at June 30, 2022 and December 31, 2021 included the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017.

The Company's Level 3 liabilities at September 30, 2022 and December 31, 2021 included the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017.

The Series A warrants, which expire in October 2022, provide holders the right to purchase shares of the Company’s common stock at an exercise price of $ 3.50 per share.

As of June 30, 2022 and December 31, 2021, there were Series A warrants outstanding to purchase 1,000 shares of the Company’s common stock (see Note 8, “Stockholders’ Equity”).

The Company reassesses the fair value of the outstanding Series A warrants at each reporting date utilizing a Black-Scholes pricing model.

As of September 30, 2022 and December 31, 2021, there were Series A warrants outstanding to purchase 1,000 shares of the Company’s common stock (see Note 8, “Stockholders’ Equity”).

The Company reassesses the fair value of the outstanding Series A warrants at each reporting date using a Black-Scholes pricing model.

Variables used in the pricing model include the closing market price of the Company’s common stock at the balance sheet date, as well as estimated stock price volatility, dividend yield, remaining warrant term, and risk-free interest rate.

A significant increase (decrease) in any of these inputs in isolation, particularly the market price of the Company’s common stock, would have resulted in a significantly higher (lower) fair value measurement .

The assumptions used to estimate the fair values of the outstanding Series A warrants at June 30, 2022 and December 31, 2021 are presented below:

The assumptions used to estimate the fair values of the outstanding Series A warrants at September 30, 2022 and December 31, 2021 are presented below:

Series A Warrants

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Risk-free interest rate 2.8 % 0.3 %

2 unchanged sentences

Expected term (in years) 0.1 0.8

The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended

The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended

September 30,

Balance at beginning of period $ 147 $ 14,261

8 unchanged sentences

Because the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease Commencement Date to determine the operating lease right-of-use assets and liabilities based on the present value of future lease payments over the lease term.

The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.

The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced before that date.

Certain leases include an option to renew, with renewal terms that can extend the lease term for additional periods.

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The Company intends to use Phase I of the Tech Center Lease for operations currently occupying 77,458 square feet of leased space, located on Roselle Street in San Diego, California, that is scheduled to expire in May 2023.

The initial lease term Phase I Commencement Date occurred in March 2022 when the Company was tendered possession of the Phase I portion of the Premises, and rent payments commence in September 2022 (the Phase I Rent Commencement Date).

The initial lease term Phase I Commencement Date occurred in March 2022 when the Company was tendered possession of the Phase I portion of the Premises, and rent payments commenced in September 2022 (the Phase I Rent Commencement Date).

The Phase II Commencement Date is expected to occur upon the earlier of (i) the date upon which the Company first commences business in the Phase II portion of the Premises, and (ii) May 1, 2025 (the Phase II Rent Commencement Date).

16 unchanged sentences

The Company’s lease costs recorded in the condensed consolidated statements of operations were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Total lease cost $ 5,133 $ 2,235 $ 13,393 $ 6,482

Maturities of operating lease liabilities at June 30, 2022 were as follows (in thousands):

Maturities of operating lease liabilities at September 30, 2022 were as follows (in thousands):

Years Ending December 31,

7 unchanged sentences

The weighted-average remaining lease term and weighted-average discount rate for operating leases were as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Weighted-average remaining lease term (in years) 10.9 5.0

Weighted-average discount rate used to determine operating lease liabilities 5.3 % 5.6 %

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows from operating leases, was $ 5.9 million and $ 4.7 million for the six months ended June 30, 2022 and 2021, respectively .

Leases For Which Accounting Has Not Yet Commenced

Tech Center Lease - Phase II

As of June 30, 2022, the Commencement Date for Phase II of the Tech Center Lease had not yet occurred.

Accordingly, the condensed consolidated balance sheet at June 30, 2022 does not include operating lease right-of-use assets and operating lease liabilities, and the condensed consolidated statements of operations for the three and six months ended June 30, 2022 do not include any lease costs, related to Phase II of the Tech Center Lease.

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows from operating leases, was $ 9.4 million and $ 7.1 million for the nine months ended September 30, 2022 and 2021, respectively .

Lease For Which Accounting Has Not Yet Commenced

As of September 30, 2022, the Commencement Date for Phase II of the Tech Center Lease had not yet occurred.

Accordingly, the condensed consolidated balance sheet at September 30, 2022 does not include operating lease right-of-use assets and operating lease liabilities, and the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 do not include any lease costs, related to Phase II of the Tech Center Lease.

In addition, the above disclosures of the Company’s lease costs, maturities of operating lease liabilities, and the weighted-average remaining lease term and weighted-average discount rate, do not include any amounts related to Phase II of the Tech Center Lease.

11 unchanged sentences

The Company expects to settle conversions through a combination settlement, which involves payment in cash equal to the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion.

The Company may not redeem the Notes prior to May 6, 2023.

The Company may not redeem the Notes before May 6, 2023.

The Company has the option to redeem for cash all or any portion of the Notes on or after May 6, 2023 if the last reported sale price of the Company’s common stock has been at least 130 % of the Conversion Price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest.

No sinking fund is provided for the Notes.

Holders of the Notes may convert all or a portion of their Notes at their option prior to November 1, 2024, in multiples of $1,000 principal amounts, only under the following circumstances:

Holders of the Notes may convert all or a portion of their Notes at their option before November 1, 2024, in multiples of $1,000 principal amounts, only under the following circumstances:

• if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the Notes on each such trading day;

6 unchanged sentences

The net carrying amount of the Notes on the condensed consolidated balance sheets consisted of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Principal amount $ 287,500 $ 287,500

1 unchanged sentence

Net carrying amount $ 282,787 $ 281,467

As of June 30, 2022, the unamortized debt issuance costs of $ 5.2 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2 % over the remaining period of approximately three years .

The following table details interest expense related to the Notes recognized for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30, Six Months Ended

As of September 30, 2022, the unamortized debt issuance costs of $ 4.7 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2 % over the remaining period of approximately 2.7 years.

The following table details interest expense related to the Notes recognized for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

The Notes will have a dilutive effect to the extent the average market price per share of common stock for a given reporting period exceeds the conversion price of $ 112.57 .

As of June 30, 2022, the if-converted value of the Notes did not exceed the principal amount.

As of September 30, 2022, the if-converted value of the Notes did not exceed the principal amount.

As of December 31, 2021, the if-converted value of the Notes exceeded the principal amount by $ 96.9 million.

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Line of Credit

On May 18, 2022, the Company entered into a three-year Revolving Line of Credit Agreement, that provides the Company with an available principal borrowing amount of $ 100.0 million (the Line of Credit).

On May 18, 2022, the Company entered into a three-year Revolving Line of Credit Agreement that provides the Company with a maximum principal borrowing amount of $ 100.0 million (the Line of Credit), reduced by any letters of credit issued and outstanding under a $ 15.0 million letter of credit sub-limit.

The Line of Credit allows the Company to request advances thereunder, and to use the proceeds of such advances for general corporate purposes, including working capital and capital expenditures.

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a minimum consolidated interest coverage ratio and a maximum consolidated net leverage ratio.

The Company was in compliance with these financial maintenance covenants as of June 30, 2022.

The Company was in compliance with these financial maintenance covenants as of September 30, 2022.

The Line of Credit is secured by a first priority security interest in substantially all of the assets of the Company and its subsidiaries.

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The Credit Agreement also includes a commitment fee ranging from 0.20 % to 0.35 % per annum on the average daily unused amount of the Line of Credit, payable quarterly.

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to the maturity date, without premium or penalty.

As of June 30, 2022, the Company had no outstanding borrowings under the Line of Credit.

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time before the maturity date, without premium or penalty.

As of September 30, 2022, the Company’s outstanding borrowings and available balance under the Line of Credit were as follows (in millions):

Available principal amount $ 100.0

Outstanding borrowings —

Outstanding letters of credit 4.9

Total available balance $ 95.1

Stockholders’ Equity

Shares Reserved for Future Issuance

The following shares of the Company's common stock were reserved for future issuance at June 30, 2022 (in thousands):

The following shares of the Company's common stock were reserved for future issuance at September 30, 2022 (in thousands):

Shares reserved for issuance upon conversion of Convertible Senior Notes 2,554

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Common Stock Warrants

Warrants outstanding to purchase shares of the Company's common stock as of June 30, 2022 were as follows:

Warrants outstanding to purchase shares of the Company's common stock as of September 30, 2022 were as follows:

Issue Date Exercise Price Per Share Warrants Outstanding Expiration Date of Warrants Outstanding

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March 2017 $ 23.50 193,788 March 2027

July 2012 - August 2012 $ 73.73 1,359 July 2022 - August 2022

Each warrant allows the holder to purchase one share of the Company's common stock at the exercise price per share of the respective warrant.

The Company issued 3,843 and 5,678 shares of its common stock, respectively, upon the exercise of warrants during the three and six months ended June 30, 2022, and 522 and 125,522 shares of its common stock, respectively, upon the exercise of warrants during the three and six months ended June 30, 2021.

The Company issued zero shares and 5,678 shares of its common stock, respectively, upon the exercise of warrants during the three and nine months ended September 30, 2022, and 29,985 and 155,517 shares of its common stock, respectively, upon the exercise of warrants during the three and nine months ended September 30, 2021.

The Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan) was originally approved by the Company’s board of directors in October 2013.

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Common stock options have an exercise price equal to the closing price of the Company's common stock on the applicable grant date, and have a maximum term of ten years .

Stock options granted prior to the second quarter of 2022, generally vest over a four-year period as to 25 % of the underlying shares on the first anniversary of the grant date, with the balance of the options vesting monthly over the following three years .

Stock options granted before the second quarter of 2022, generally vest over a four-year period as to 25 % of the underlying shares on the first anniversary of the grant date, with the balance of the options vesting monthly over the following three years .

Stock options granted during the second quarter of 2022 and thereafter vest over a three-year period as to 33 % of the underlying shares on the first anniversary of the grant date, with the balance of the options vesting monthly over the following two years .

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The total number of common stock options granted and the respective assumptions used in the Black-Scholes option-pricing model were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Nine Months Ended September 30,

Stock options granted 83,008 355,008

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Restricted stock units (RSUs) have a grant value equal to the closing price of the Company’s common stock on the award date.

RSUs granted prior to March 2022, generally vest over a four-year period based on continued service to the Company as to 25 % of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following three years .

RSUs granted before March 2022, generally vest over a four-year period based on continued service to the Company as to 25 % of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following three years .

RSUs granted in March 2022 and thereafter vest over a three-year period based on continued service to the Company as to 33 % of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following two years .

In addition, the Company granted 53,662 performance-based RSUs, during the three and six month periods ended June 30, 2022 and 25,674 performance-based RSUs, during the three and six month periods ended June 30, 2021.

In addition, the Company granted 53,662 and 25,674 performance-based RSUs, respectively, during the nine months ended September 30, 2022 and 2021.

The performance-based RSUs have a grant value equal to the closing price of the Company’s common stock on the award date, and vest upon the Company’s actual performance relative to predefined performance metrics and subject to the awardee’s continuing service through the December 31, 2024 measurement date.

The total number of RSUs granted, which includes performance-based RSUs, and the respective weighted average grant date fair value were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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The assumptions used in the Black-Scholes option-pricing model for the ESPP were as follows:

Three Months Ended June 30, Six Months Ended

2022 2021 2022 2021

Nine Months Ended

September 30,

Weighted average grant date fair value (per share) $ 26.57 $ 29.24

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The following table summarizes the allocation of stock-based compensation expense included in the condensed consolidated statements of operations for all stock-based compensation arrangements (in thousands):

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Total stock-based compensation expense $ 22,237 $ 15,729 $ 60,477 $ 43,653

The total stock-based compensation expense capitalized as part of the cost of the Company’s inventories was $ 0.8 million at June 30, 2022, and $ 1.0 million at December 31, 2021.

The total stock-based compensation expense capitalized as part of the cost of the Company’s inventories was $ 0.9 million at September 30, 2022, and $ 1.0 million at December 31, 2021.

Employee Benefits

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Under the terms of the plan, employees may make voluntary contributions as a percent of compensation, and the Company may elect to match a discretionary percentage of employee contributions.

The Company did not provide a matching contribution prior to 2022, but began making a discretionary match in the first quarter of 2022.

For the three and six months ended June 30, 2022, the Company recognized income tax expense of $ 2.1 million and $ 0.4 million, respectively, on a pre-tax loss of $ 13.0 million and $ 29.4 million, respectively.

The Company calculated the provision for income taxes for the three and six months ended June 30, 2022, using the discrete effective tax rate method as the annual effective tax rate method would not provide a reliable estimate.

Income tax expense for the three months ended June 30, 2022 was primarily attributable to the change from the annual effective tax rate method used in the first quarter of 2022 to the discrete effective tax rate method, and state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

Income tax expense for the six months ended June 30, 2022 was primarily attributable to state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

For the three and six months ended June 30, 2021, the Company recognized income tax expense of $ 0.1 million on a pre-tax income of $ 4.1 million, and an income tax benefit of $ 0.1 million on a pre-tax loss of $ 1.1 million respectively.

The Company calculated the provision (benefit) for income taxes for the three and six months ended June 30, 2021, by applying an estimate of the annual effective tax rate for the full year to ordinary income (loss) adjusted by the tax impact of discrete items.

The income tax benefit for the six months ended June 30, 2021 was primarily attributable to the pre-tax loss position, partially offset by state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

The Company continues to maintain a full valuation allowance against its net deferred tax assets as of June 30, 2022, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration.

The Company did not provide a matching contribution before 2022, but began making a discretionary match in the first quarter of 2022.

For the three and nine months ended September 30, 2022, the Company recognized income tax expense of $ 1.6 million and $ 2.0 million, respectively, on a pre-tax loss of $ 47.3 million and $ 76.7 million.

Income tax expense for the three and nine months ended September 30, 2022 was primarily attributable to federal, state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

For the three and nine months ended September 30, 2021, the Company recognized income tax expense of $ 0.1 million on a pre-tax income of $ 5.8 million, and an income tax benefit of $ 2,000 on pre-tax income of $ 4.8 million, respectively.

The income tax benefit for the nine months ended September 30, 2021 was primarily attributable to excess tax benefits from stock compensation, offset by state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

The Company calculated the provision (benefit) for income taxes for the three and nine months ended September 30, 2022 and 2021, by applying an estimate of the annual effective tax rate for the full year to ordinary income (loss) adjusted by the tax impact of discrete items.

The Company continues to maintain a full valuation allowance against its net deferred tax assets as of September 30, 2022, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration.

Business Segment and Geographic Information

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The Company primarily sells its products through national and regional distributors in the United States on a non-exclusive basis, and through distribution partners outside the United States, including in select European countries, Canada, Australia, New Zealand, Saudi Arabia and South Africa.

In the United States and Canada, the Company utilizes a direct sales force.

In the United States and Canada, the Company uses a direct sales force.

The Company disaggregates its revenue by geography and by major sales channel as management believes these categories best depict how the nature, amount and timing of revenues and cash flows are affected by economic factors.

Revenues by Geographic Region and Customer Sales Channel

During the three and six months ended June 30, 2022 and 2021, no individual country outside the United States generated revenue that represented more than 10% of total revenue.

During the three and nine months ended September 30, 2022 and 2021, no individual country outside the United States generated revenue that represented more than 10% of total revenue.

The table below sets forth revenues for the Company’s two primary geographical markets, based on the geographic location to which its products are shipped (in thousands).

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Total Sales $ 204,547 $ 179,627 $ 580,716 $ 492,803

Sales to distributors accounted for 65 % and 68 % of the Company’s total United States sales for the three months ended June 30, 2022 and 2021, respectively, and 65 % and 68 % of the Company’s total United States sales for the six months ended June 30, 2022 and 2021, respectively.

Sales to distributors accounted for 96 % and 95 % of the Company’s total sales outside the United States for the three months ended June 30, 2022 and 2021, respectively, and 96 % and 95 % of the Company’s total sales outside the United States for the six months ended June 30, 2022 and 2021, respectively.

Sales to distributors accounted for 66 % and 68 % of the Company’s total United States sales for the three months ended September 30, 2022 and 2021, respectively, and 65 % and 68 % of the Company’s total United States sales for the nine months ended September 30, 2022 and 2021, respectively.

Sales to distributors accounted for 96 % and 96 % of the Company’s total sales outside the United States for the three months ended September 30, 2022 and 2021, respectively, and 96 % and 95 % of the Company’s total sales outside the United States for the nine months ended September 30, 2022 and 2021, respectively.

Commitments and Contingencies

Legal and Regulatory Matters

In May 2020, the Company was named as a defendant in three California state court class action lawsuits arising from the same data breach.

In May 2020, the Company was named as a defendant in three California state court class action lawsuits arising from a phishing incident that occurred in January 2020.

Collectively, these lawsuits seek statutory, compensatory, actual, and punitive damages;

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and attorney fees, costs, and expenses from the Company.

On July 24, 2020, these three pending lawsuits were consolidated into a single case in the Superior Court of the State of California in the County of San Bernardino entitled Joseph Deluna et al v.

On July 24, 2020, these three lawsuits were consolidated into a single case in the Superior Court of the State of California in the County of San Bernardino entitled Joseph Deluna et al.

Tandem Diabetes Care, Inc .

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The plaintiffs filed a motion for class certification on January 7, 2021 and the Company filed a motion for summary adjudication on plaintiffs’ CMIA claim on April 7, 2022.

Both motions are fully briefed, and the Court’s order on each motion is pending.

The Company anticipates the Court will hear argument on both motions in the third quarter of 2022, though not yet scheduled.

Both motions are fully briefed.

The Company anticipates the Court will hear argument on both motions in the fourth quarter of 2022 or the first quarter of 2023.

Although the Company continues to vigorously defend against these claims, there is no guarantee that the Company will prevail.

The Company presently is unable to determine the ultimate outcome of these lawsuits or determine the amount (or range) of possible losses associated with the lawsuits.

In September 2020, the Company was named as a defendant in a lawsuit entitled Buck Walsh, individually and on behalf of others similarly situated v.

Tandem Diabetes Care, Inc., which was filed in the Superior Court of the State of California in the County of San Diego.

The alleged violations include business and professions code and labor code violations for failure to compensate wages, unpaid meal and rest periods, and failure to reimburse for necessary business-related expenses.

The case was brought as a class action and was later amended to also include a representative action under the California Private Attorney General Act, or PAGA.

The class of plaintiffs includes hourly paid or non-exempt employees of the Company who were employed from April 6, 2016 through the date of adjudication.

The parties recently agreed to resolve all claims in the lawsuit.

The settlement of claims covered by the PAGA matter were approved by the Superior Court of the State of California in the County of San Diego on September 21, 2021 and settlement amounts were disbursed in 2021.

In October 2021, a settlement of the class action related claims was preliminarily approved by an independent arbitrator mutually acceptable to both parties.

The class action is intended to resolve the claims of the individual plaintiff, as well as the remaining members of the class, unless an individual class member submits a timely request for exclusion.

The material terms of the settlement are set forth in a binding Memorandum of Agreement dated as of July 1, 2021, which was approved by the independent arbitrator on April 18, 2022.

This lawsuit was resolved and closed upon disbursement of the settlement amount in May 2022.

From time to time, the Company is involved in various other legal proceedings, regulatory matters, and other disputes or claims arising from or related to the normal course of its business activities, including actions with respect to intellectual property, data privacy, employment, regulatory, product liability and contractual matters.

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However, regardless of the merit of the claims raised or the outcome, legal proceedings may have an adverse impact on the Company as a result of defense and settlement costs, diversion of management time and resources, and other factors.

Except as set forth above, as of June 30, 2022, there were no legal proceedings, regulatory matters, or other disputes or claims for which a material loss was considered probable or for which the amount (or range) of loss was reasonably estimable.

Except as set forth above, as of September 30, 2022, there were no legal proceedings, regulatory matters, or other disputes or claims for which a material loss was considered probable or for which the amount (or range) of loss was reasonably estimable.

However, regardless of the merits of the claims raised or the outcome, legal proceedings, regulatory matters, and other disputes and claims may have an adverse impact on the Company because of as a result of defense and settlement costs, diversion of management time and resources, and other factors.

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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-Q

Item 1. Financial Statements