TANDEM DIABETES CARE INC 10-Q

Item 1. Financial Statements. TANDEM DIABETES CARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) March 31, December 31, 2024 2023 Assets (Unaudited) (Note 1) Current assets: Cash and cash equivalents $ 58,979 $ 58,868 Short-term investments 408,831 409,044 Accounts receivable, net 92,965 105,555 Inventories 153,893 157,937 Prepaid and other current assets 20,525 16,585 Total current assets 735,193 747,989 Property and equipment, net 77,530 76,542 Operating lease right-of-use assets 88,286 87,791 Other long-term assets 40,036 40,336 Total assets $ 941,045 $ 952,658 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 48,143 $ 49,586 Accrued expenses 10,932 12,726 Employee-related liabilities 41,676 43,430 Operating lease liabilities 17,320 17,060 Deferred revenue 44,562 43,994 Other current liabilities 30,338 28,462 Total current liabilities 192,971 195,258 Convertible senior notes, net - long-term 347,497 285,035 Operating lease liabilities - long-term 112,732 113,572 Deferred revenue - long-term 12,299 13,331 Other long-term liabilities 32,482 31,830 Total liabilities 697,981 639,026 Commitments and contingencies (Note 13) — — Stockholders’ equity: Common stock, $ 0.001 par value; 200,000 shares authorized, 64,563 and 65,552 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively. 65 66 Additional paid-in capital 1,238,449 1,263,997 Accumulated other comprehensive income (loss) ( 935 ) 1,369 Accumulated deficit ( 994,515 ) ( 951,800 ) Total stockholders’ equity 243,064 313,632 Total liabilities and stockholders’ equity $ 941,045 $ 952,658 See accompanying notes to unaudited condensed consolidated financial statements. 1 TANDEM DIABETES CARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2024 2023 Sales $ 191,674 $ 169,383 Cost of sales 97,002 86,476 Gross profit 94,672 82,907 Operating expenses: Selling, general and administrative 90,106 89,814 Research and development 46,244 42,160 Acquired in-process research and development expenses — 78,750 Total operating expenses 136,350 210,724 Operating loss ( 41,678 ) ( 127,817 ) Other income (expense), net: Interest income and other, net 5,314 5,865 Interest expense ( 1,897 ) ( 1,634 ) Loss on extinguishment of debt ( 1,268 ) — Total other income (expense), net 2,149 4,231 Loss before income taxes ( 39,529 ) ( 123,586 ) Income tax expense 3,186 287 Net loss $ ( 42,715 ) $ ( 123,873 ) Other comprehensive income (loss): Unrealized gain (loss) on short-term investments $ ( 1,296 ) $ 1,749 Foreign currency translation losses ( 1,008 ) ( 25 ) Comprehensive loss $ ( 45,019 ) $ ( 122,149 ) Net loss per share - basic and diluted $ ( 0.65 ) $ ( 1.92 ) Weighted average shares used to compute basic and diluted net loss per share 65,326 64,549 See accompanying notes to unaudited condensed consolidated financial statements. 2 TANDEM DIABETES CARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands) Three Months Ended March 31, 2024 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2023 65,552 $ 66 $ 1,263,997 $ 1,369 $ ( 951,800 ) $ 313,632 Stock repurchase and retirement of shares ( 1,107 ) ( 1 ) ( 29,999 ) — — ( 30,000 ) Exercise of stock options 14 — 248 — — 248 Vesting of restricted stock units, net of shares withheld for taxes 104 — ( 1,759 ) — — ( 1,759 ) Stock-based compensation expense — — 21,591 — — 21,591 Purchase of capped call options related to convertible notes due 2029 — — ( 15,813 ) — — ( 15,813 ) Unwind of capped call options related to convertible notes due 2025 — — 184 — — 184 Unrealized loss on short-term investments — — — ( 1,296 ) — ( 1,296 ) Foreign currency translation losses — — — ( 1,008 ) — ( 1,008 ) Net loss — — — — ( 42,715 ) ( 42,715 ) Balance at March 31, 2024 64,563 $ 65 $ 1,238,449 $ ( 935 ) $ ( 994,515 ) $ 243,064 Three Months Ended March 31, 2023 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 64,513 $ 65 $ 1,170,888 $ ( 1,817 ) $ ( 729,189 ) $ 439,947 Exercise of stock options 45 — 857 — — 857 Vesting of restricted stock units, net of shares withheld for taxes 51 — ( 1,398 ) — — ( 1,398 ) Stock-based compensation expense — — 21,496 — — 21,496 Unrealized gain on short-term investments — — — 1,749 — 1,749 Foreign currency translation losses — — — ( 25 ) — ( 25 ) Net loss — — — — ( 123,873 ) ( 123,873 ) Balance at March 31, 2023 64,609 $ 65 $ 1,191,843 $ ( 93 ) $ ( 853,062 ) $ 338,753 See accompanying notes to unaudited condensed consolidated financial statements. 3 TANDEM DIABETES CARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 31, 2024 2023 Operating Activities Net loss $ ( 42,715 ) $ ( 123,873 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 4,043 3,396 Amortization of debt issuance costs 650 503 Provision for expected credit losses 2,198 1,386 Accretion (amortization) of discount or premium on short-term investments ( 434 ) 312 Stock-based compensation expense 22,039 21,194 Loss on extinguishment of debt 1,268 — Acquired in-process research and development expenses — 78,750 Other 52 94 Changes in operating assets and liabilities: Accounts receivable, net 9,765 22,845 Inventories 3,157 ( 19,916 ) Prepaid and other current assets ( 4,104 ) ( 5,208 ) Other long-term assets ( 236 ) ( 386 ) Accounts payable and accrued expenses ( 3,369 ) ( 919 ) Employee-related liabilities ( 1,654 ) ( 210 ) Deferred revenue ( 372 ) 925 Operating leases and other current liabilities 883 2,895 Other long-term liabilities 833 ( 114 ) Net cash used in operating activities ( 7,996 ) ( 18,326 ) Investing Activities Purchases of short-term investments ( 84,249 ) ( 109,115 ) Proceeds from maturities and redemptions of short-term investments 83,650 163,110 Purchases of property and equipment ( 4,457 ) ( 8,828 ) Acquisitions, including in-process research and development, net of cash acquired — ( 69,496 ) Purchases of intangible assets and strategic investments — ( 2,000 ) Net cash used in investing activities ( 5,056 ) ( 26,329 ) Financing Activities Proceeds from issuance of convertible senior notes due 2029, net of $ 9,400 debt issuance costs 306,850 — Repurchase of $ 246,740 principal amount of convertible senior notes due 2025 ( 246,123 ) — Payment for capped call transactions related to convertible senior notes due 2029 ( 15,813 ) — Repurchase and retirement of common stock ( 30,000 ) Proceeds from issuance of common stock under Company stock plans, net of cash used to settle withholding taxes on vested restricted stock ( 1,511 ) ( 541 ) Other financing activities 183 — Net cash provided by (used in) financing activities 13,586 ( 541 ) Effect of foreign exchange rate changes on cash ( 423 ) 441 Net increase (decrease) in cash and cash equivalents 111 ( 44,755 ) Cash and cash equivalents at beginning of period 58,868 172,517 Cash and cash equivalents at end of period $ 58,979 $ 127,762 Supplemental disclosures of cash flow information Income taxes paid $ 269 $ 369 Supplemental schedule of non-cash investing and financing activities Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 2,294 $ — Purchases of property and equipment included in accounts payable $ 3,214 $ 4,071 Intangible costs in accounts payable $ — $ 515 See accompanying notes to unaudited condensed consolidated financial statements. 4 TANDEM DIABETES CARE, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The Company Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of technology solutions for people living with diabetes. Tandem Diabetes Care, Inc. is incorporated in the state of Delaware. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc., together with its wholly-owned subsidiaries. The Company manufactures, sells, and supports insulin pump products that are designed to address the evolving needs and preferences of differentiated segments of the insulin-dependent diabetes market. The Company’s manufacturing, sales and support activities have been principally focused on the t:slim X2 Insulin Delivery System (t:slim X2), which has been the Company’s flagship pump platform and which has an advanced algorithm for managing insulin delivery, and is designed to display continuous glucose monitoring (CGM) sensor information directly on the pump home screen. In February 2024, the Company expanded its pump portfolio with the U.S. launch of Tandem Mobi. The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the mobile application, cloud-based diabetes management applications and the Tandem Device Updater, a Mac- and PC-compatible tool that offers and supports remote updates of the Company’s insulin pump software from a personal computer. The Company’s insulin pump products are generally considered durable medical equipment and have an expected lifespan of at least four years . In addition to insulin pumps, the Company sells single-use products that are used together with the pumps and are replaced every few days, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to a user’s body. Basis of Presentation and Principles of Consolidation The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature and considered necessary for a fair presentation of the financial information contained herein, have been included. Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (Annual Report), from which the balance sheet information herein was derived. The condensed consolidated financial statements include the accounts of Tandem Diabetes Care, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The functional currency of the Company’s foreign subsidiaries is their respective local currency. The Company translates the financial statements of its foreign subsidiaries into U.S. 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) 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. 2. Summary of Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2024, as compared to those disclosed in the Company’s 2023 Annual Report. 5 Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and accompanying notes as of the date of the condensed consolidated financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Accounts Receivable The Company grants credit to various customers in the ordinary course of business and is paid directly by customers who use its products, distributors and third-party insurance payors. 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 customer-related risks, review of outstanding invoices, forecasts about the future, and various other assumptions and estimates that are believed to be reasonable under the circumstances, including changes to credit risks as a result of recessionary concerns, changes in discretionary spending, increased interest rates, and other macroeconomic factors. 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. Operating Lease Right-of-Use Assets and Liabilities Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized when the Company takes possession of the leased property (Commencement Date) based on the present value of lease payments over the lease term. For lease agreements that contain lease and non-lease components, the Company accounts for both of those components as a single lease component. Rent expense on noncancelable leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the respective leases beginning on the Commencement Date. The difference between rent expense and rent paid is accounted for as a component of operating lease right-of-use assets on the Company’s condensed consolidated balance sheets. 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. Intangible Assets Subject to Amortization Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is recognized over their estimated useful lives on a straight-line basis. The Company did not recognize any intangible asset impairment losses during the three months ended March 31, 2024 and 2023. Strategic Investments The Company held equity investments totaling $ 10.1 million in two separate private companies at each of March 31, 2024 and December 31, 2023, each of which represented less than 5 % of the outstanding equity of the respective company as of the date of investment. The investments are carried at cost minus impairment, if any, adjusted for changes in observable prices. The Company monitors these investments 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. The investments were included as a component of other long-term assets on the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023. The Company also held a $ 22.3 million investment in subordinated convertible notes of one of its private investee companies. The subordinated notes are convertible into equity of the private company upon certain qualifying events, including at their final maturity in 2024. The subordinated convertible notes are non-interest bearing, and are only repayable before conversion into equity upon a change in control of the private company. At March 31, 2024, the $ 22.3 million subordinated convertible notes investment was included as a component of other long-term assets on the condensed consolidated balance sheet. 6 Revenue Recognition Revenue is generated primarily from sales of insulin pumps, single-use insulin cartridges and infusion sets to individual customers with third-party insurance coverage and through a network of distributors that resell the products to insulin-dependent diabetes customers. The Company recognizes revenue when it transfers control of the promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, net of estimated rebates and returns. Revenue Recognition for Arrangements with Multiple Performance Obligations The Company considers the individual deliverables in its product offerings to be separate performance obligations. The transaction price is determined based on the consideration expected to be received, based either on the stated value in contractual arrangements or the estimated cash to be collected in non-contracted arrangements. The Company allocates the consideration to the individual performance obligations and recognizes the consideration based on when the performance obligation is satisfied, considering whether or not this occurs at a point in time or over time. Generally, insulin pumps, cartridges, infusion sets, and accessories are deemed performance obligations that are satisfied at a point in time when the customer obtains control of the promised good, which typically is upon shipment for our distributor arrangements and upon receipt for sales directly to individual customers. Complementary products, such as t:connect, Tandem Source and the Tandem Device Updater, are considered distinct performance obligations that are satisfied over time, as access and support for these products is provided throughout the typical four-year warranty period of the insulin pumps. Accordingly, revenue related to the complementary products is deferred and recognized over a four-year period. 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. Revenue Recognition for Tandem Choice Program In September 2022, the Company launched a new technology access program referred to as Tandem Choice, that provides eligible, in-warranty t:slim X2 customers in the United States with the flexibility to obtain the newest hardware platform, Tandem Mobi, when it becomes commercially available. Participating customers have the right to purchase the alternative Tandem pump for a fee, referred to as Choice Right. The program was determined to create a material right for which a portion of each t:slim X2 pump transaction price was allocated and deferred. The Company 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 contemplated the likelihood that the respective option will be exercised. From July 1, 2023 to December 31, 2023, the Company reduced the fee for the Tandem Choice program. The change in the program resulted in an increase to the amount of the transaction price allocated to the material right during the limited-time offer period as the Company expected more customers to exercise the right with the lower program fee. The Company began selling Tandem Mobi insulin pumps in the first quarter of 2024 and eligibility for the Tandem Choice program ended in February 2024. Consequently, the Company ceased to allocate and defer a portion of the transaction price for the material right for pumps sold after that date. Eligible customers who purchased a t:slim X2 insulin pump during the program period will have until December 31, 2024 to exercise the option to switch to the Tandem Mobi for a stated fee. At March 31, 2024 and December 31, 2023, $ 31.5 million and $ 30.6 million, respectively, were allocated to the material right provided to customers who purchased a pump during the Tandem Choice program period. The Company recorded the amounts in current deferred revenue on the condensed consolidated balance sheets. Sales Rebates The Company is subject to certain rebates on pricing programs with managed care organizations, such as governmental and third-party commercial payors. The Company estimates provisions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data. Estimated sales rebates included in other long-term liabilities have an estimated payment due date beyond twelve months from the balance sheet date. Accordingly, actual rebates paid may differ from estimated amounts recorded in the accompanying condensed consolidated financial statements. 7 As of March 31, 2024 and December 31, 2023, total estimated sales rebates were included in the following condensed consolidated balance sheet accounts (in thousands): March 31, 2024 December 31, 2023 Other current liabilities $ 493 $ 505 Other long-term liabilities 8,260 8,042 Total sales rebate $ 8,753 $ 8,547 Warranty Reserve The Company generally provides a four-year warranty on its insulin pumps to end-user customers and may replace any pumps that do not function as intended in accordance with the product specifications within the warranty period. Additionally, the Company offers a six-month warranty on single-use insulin cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment, and the Company reevaluates the estimate of the warranty reserve obligation at each reporting period. Warranty costs are estimated primarily based on the current expected product replacement cost and expected replacement rates using historical experience. Insulin pumps returned to the Company may be refurbished and redeployed. Experience has shown that initial data for any given pump version or pump platform may be insufficient; therefore, the Company’s process relies on long-term historical averages of existing platforms until sufficient data are available. As actual experience becomes available, the Company uses the data to update the historical averages. The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to revised future expectations of performance based on enhanced hardware components, or new features and capabilities that may become available through Tandem Device Updater. Warranty expense is recorded as a component of cost of sales in the condensed consolidated statements of operations. The following table provides a reconciliation of the changes in product warranty liabilities for the three months ended March 31, 2024 and 2023 (in thousands): Three Months Ended March 31, 2024 2023 Balance at beginning of the period $ 37,173 $ 36,537 Provision for warranties issued during the period 10,409 8,373 Settlements made during the period ( 9,037 ) ( 7,683 ) Decreases in warranty estimates ( 907 ) ( 75 ) Balance at end of the period $ 37,638 $ 37,152 As of March 31, 2024 and December 31, 2023, total product warranty reserves were included in the following condensed consolidated balance sheet accounts (in thousands): March 31, 2024 December 31, 2023 Other current liabilities $ 18,166 $ 18,135 Other long-term liabilities 19,472 19,038 Total warranty reserve $ 37,638 $ 37,173 8 Stock-Based Compensation Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the requisite service period on a straight-line basis. The Company estimates the fair value of stock options issued under the Company’s stock incentive plans, and the fair value of the employees’ purchase rights under the Company’s Employee Stock Purchase Plan (ESPP) using the Black-Scholes option pricing model on the date of grant. The Black-Scholes option pricing model requires the use of assumptions about a number of variables, including stock price volatility, expected term, dividend yield and risk-free interest rate (see Note 8, “Stockholders’ Equity”). The fair value of restricted stock unit (RSU) awards issued under the Company’s stock incentive plans that vest solely based on service, is estimated based on the fair market value of the underlying stock on the date of grant. The fair value of RSU awards that vest based upon the Company’s actual performance relative to predefined performance metrics and the awardee’s continuing service through the measurement date is generally estimated based on the fair market value of the underlying stock on the date of grant and the probability that the specified performance criteria will be met. At each reporting period, the Company reassesses the probability of the achievement of such performance metrics. Any expense change resulting from an adjustment in the estimated shares to be released is recorded in the period of adjustment. Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing the net income or loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per share reflects the potential dilution that would occur if securities exercisable for or convertible into common stock were exercised for or converted into common stock. Dilutive common share equivalents are comprised of stock options and unvested RSUs outstanding under the Company’s stock incentive plans, potential awards to be granted pursuant to the ESPP, and common stock warrants, each calculated using the treasury stock method, and shares issuable upon conversion of the convertible senior notes calculated using the if-converted method. For the three months ended March 31, 2024 and 2023, 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 each of the periods presented. Potentially dilutive securities outstanding and not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in thousands, in common stock equivalent shares): Three Months Ended March 31, 2024 2023 Options to purchase common stock 133 916 Unvested restricted stock units 3,132 1,618 Warrants to purchase common stock 194 194 Awards granted under the ESPP 224 167 Convertible senior notes (if-converted) 4,241 2,554 7,924 5,449 9 3. Short-Term Investments The Company invests in marketable securities primarily consisting of debt instruments of the U.S. Government, U.S. 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 March 31, 2024 and December 31, 2023 (in thousands): At March 31, 2024 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value Available-for-sale securities: U.S. Government-sponsored enterprises $ 181,208 $ 113 $ ( 621 ) $ 180,700 U.S. Treasury securities 111,311 42 ( 117 ) 111,236 Commercial paper 63,788 10 ( 20 ) 63,778 Corporate debt securities 53,071 113 ( 67 ) 53,117 Total $ 409,378 $ 278 $ ( 825 ) $ 408,831 At December 31, 2023 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value Available-for-sale securities: U.S. Government-sponsored enterprises $ 181,851 $ 518 $ ( 215 ) $ 182,154 U.S. Treasury securities 114,714 318 ( 28 ) 115,004 Commercial paper 72,505 33 ( 27 ) 72,511 Corporate debt securities 39,225 156 ( 6 ) 39,375 Total $ 408,295 $ 1,025 $ ( 276 ) $ 409,044 The contractual maturities of available-for-sale debt securities as of March 31, 2024, were as follows (in thousands): Years to Maturity At March 31, 2024 Within One Year One to Two Years Two to Three Years Estimated Fair Value U.S. Government-sponsored enterprises $ 75,500 $ 39,171 $ 66,029 $ 180,700 U.S. Treasury securities 55,160 55,088 988 111,236 Commercial paper 63,778 — — 63,778 Corporate debt securities 17,736 35,381 — 53,117 Total $ 212,174 $ 129,640 $ 67,017 $ 408,831 The Company has classified all marketable securities, regardless of maturity, as short-term investments based upon the Company’s ability and intent to use any of those marketable securities to satisfy the Company’s liquidity requirements. 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 March 31, 2024 were primarily due to an increase in market interest rates after certain debt securities were purchased. 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 record an allowance for credit losses related to its available-for-sale debt securities at March 31, 2024 and December 31, 2023. 10 4. Composition of Certain Financial Statement Items Accounts Receivable Accounts receivable, net consisted of the following at March 31, 2024 and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 Accounts receivable $ 97,888 $ 110,453 Less: allowance for credit losses ( 4,923 ) ( 4,898 ) Accounts receivable, net $ 92,965 $ 105,555 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 months ended March 31, 2024 and 2023 (in thousands): Three Months Ended March 31, 2024 2023 Balance at beginning of the period $ 4,898 $ 4,327 Provision for expected credit losses 2,198 1,386 Write-offs and adjustments, net of recoveries ( 2,173 ) ( 1,246 ) Balance at end of the period $ 4,923 $ 4,467 Inventories Inventories consisted of the following at March 31, 2024 and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 Raw materials $ 52,850 $ 42,783 Work-in-process 21,883 44,026 Finished goods 79,160 71,128 Total inventories $ 153,893 $ 157,937 5. Fair Value Measurements The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in thousands): 11 Fair Value Measurements at March 31, 2024 Total Level 1 Level 2 Level 3 Assets Cash equivalents (1) $ 37,375 $ 37,375 $ — $ — U.S. Government-sponsored enterprises 180,700 — 180,700 — U.S. Treasury securities 111,236 111,236 — — Commercial paper 63,778 — 63,778 — Corporate debt securities 53,117 — 53,117 — Total assets $ 446,206 $ 148,611 $ 297,595 $ — Fair Value Measurements at December 31, 2023 Total Level 1 Level 2 Level 3 Assets Cash equivalents (1) $ 48,033 $ 48,033 $ — $ — U.S. Government-sponsored enterprises 182,154 — 182,154 — U.S. Treasury securities 115,004 115,004 — — Commercial paper 72,511 — 72,511 — Corporate debt securities 39,375 — 39,375 — Supranational bonds — — — — Total assets $ 457,077 $ 163,037 $ 294,040 $ — (1) Generally, cash equivalents include money market funds and investments with a maturity of three months or less from the date of purchase. The Company’s Level 1 financial instruments, which are in active markets, are valued using unadjusted quoted market prices for identical instruments. The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers. There were no transfers into or out of Level 3 assets during the three months ended March 31, 2024 and 2023, respectively. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. The Company’s convertible senior notes are carried at amortized cost on the condensed consolidated balance sheets (see Note 7, “Debt”). The Company estimated the fair value of its convertible senior notes based on Level 2 quoted market prices as follows (in thousands): 12 Fair Value Measurements at March 31, 2024 December 31, 2023 Convertible Senior Notes due 2025 $ 39,130 $ 271,688 Convertible Senior Notes due 2029 397,292 * Total fair value of outstanding convertible senior notes $ 436,422 $ 271,688 * Not applicable as no notes were outstanding at this date. In March 2024, the Company repurchased $ 246.7 million of principal of the Company’s Convertible Senior Notes due 2025 (see Note 7, “Debt”). 6. Leases The Company's leases consist of operating leases for general office space, research and development, manufacturing and warehouse facilities, and equipment. These noncancellable operating leases have initial lease terms from two years to thirteen years . Certain leases include an option to renew, with renewal terms that can extend the lease term for additional periods at the Company’s sole discretion. The Company includes the renewal option period in the lease term for those leases reasonably expected to be extended at the time of lease commencement. Supplemental Lease Disclosure Information The Company’s lease costs recorded in the condensed consolidated statements of operations were as follows (in thousands): Three Months Ended March 31, 2024 2023 Operating lease cost $ 4,051 $ 4,475 Short-term lease cost 21 96 Total lease cost $ 4,072 $ 4,571 Maturities of operating lease liabilities at March 31, 2024 were as follows (in thousands): Years Ending December 31, 2024 $ 12,943 2025 17,623 2026 17,506 2027 17,771 2028 14,278 Thereafter 90,004 Total undiscounted lease payments 170,125 Less: amount representing interest ( 40,073 ) Present value of operating lease liabilities 130,052 Less: current portion of operating lease liabilities ( 17,320 ) Operating lease liabilities - long-term $ 112,732 13 The weighted-average remaining lease term and weighted-average discount rate for operating leases were as follows: March 31, 2024 December 31, 2023 Weighted-average remaining lease term (in years) 9.9 10.2 Weighted-average discount rate used to determine operating lease liabilities 5.3 % 5.4 % Cash amounts paid included in the measurement of lease liabilities, representing operating cash flows, were $ 4.7 million and $ 1.8 million for the three months ended March 31, 2024 and 2023, respectively. 7. Debt Convertible Senior Notes Due 2029 On March 8, 2024, the Company completed an offering of $ 316.3 million aggregate principal amount of 1.50 % Convertible Senior Notes due 2029 (the 2029 Notes). The proceeds from the issuance of the 2029 Notes were $ 306.8 million, net of debt issuance costs. The Company used approximately $ 246.1 million of the net proceeds to repurchase approximately $ 246.7 million in aggregate principal amount of its Convertible Senior Notes Due 2025 (the 2025 Notes) concurrently with the pricing of the 2029 Notes in privately negotiated transactions. Concurrently, the Company also paid $ 1.3 million of accrued interest due at time of the note repurchase. As a result of the repurchase, the Company recognized a $ 1.3 million loss on extinguishment of debt in the condensed consolidated statement of operations for the three months ended March 31, 2024. The loss on extinguishment of debt included the unamortized debt issuance costs related to the portion of the 2025 Notes repurchased. The Company used $ 30.0 million of the net proceeds to repurchase shares of the Company’s common stock from certain purchasers of the 2029 Notes at a purchase price equal to the last reported sale price per share of the Company’s common stock on March 5, 2024, which was $ 27.105 per share. In addition, the Company used $ 15.8 million of the net proceeds to pay the cost of the capped call transactions (2029 Capped Call Transactions) discussed below. The Company intends to use the remainder of the net proceeds for general corporate purposes, which may include additional repurchases of the 2025 Notes from time to time, or the repayment at maturity, of the 2025 Notes. The 2029 Notes are the Company’s senior unsecured obligations. Interest is payable in cash semi-annually in arrears on March 15 and September 15 of each year beginning on September 15, 2024, at a rate of 1.50 % per year. The 2029 Notes mature on March 15, 2029 unless repurchased, redeemed, or converted in accordance with their terms prior to the maturity date. The initial conversion rate for the 2029 Notes is 28.9361 shares of common stock per $1,000 principal amount of the 2029 Notes, which is equivalent to an initial conversion price of approximately $ 34.56 per share of the Company’s common stock (2029 Notes Conversion Price). The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2029 Notes. The Company may not redeem the 2029 Notes prior to March 22, 2027. The Company has the option to redeem for cash all or any portion of the 2029 Notes on or after March 22, 2027 if the last reported sale price of the Company’s common stock has been at least 130 % of the 2029 Notes 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 2029 Notes to be redeemed, plus accrued and unpaid interest. No sinking fund is provided for the 2029 Notes. Holders of the 2029 Notes may convert all or a portion of their 2029 Notes at their option prior to December 15, 2028, in multiples of $1,000 principal amounts, only under the following circumstances: • during any calendar quarter commencing after the quarter ending on June 30, 2024 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the 2029 Notes Conversion Price on each applicable trading day; 14 • during the five business day period after any ten consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of the 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate of the 2029 Notes on such trading day; • if the Company calls such 2029 Notes for redemption, at any time before the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2029 Notes called (or deemed called) for redemption; or • on the occurrence of specified corporate events. On or after December 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2029 Notes, in integral multiples of $1,000 principal amount, at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the indenture governing the 2029 Notes. Convertible Senior Notes Due 2025 In May 2020, the Company completed an offering of $ 287.5 million aggregate principal amount of 1.50 % Convertible Senior Notes due 2025 (the 2025 Notes). The proceeds from the issuance of the Notes were $ 244.6 million, net of debt issuance costs and cash used to pay the cost of the capped call transactions (Capped Call Transactions) discussed below. In March 2024, the Company repurchased for cash $ 246.7 million in aggregate principal amount of the 2025 Notes, concurrently with the pricing of the 2029 Notes in privately negotiated transactions. The 2025 Notes are the Company’s senior unsecured obligations. Interest is payable in cash semi-annually in arrears beginning on November 1, 2020 at a rate of 1.50 % per year. The 2025 Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms before the maturity date. The 2025 Notes are convertible into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 8.8836 shares of common stock per $1,000 principal amount of the 2025 Notes, which is equivalent to an initial conversion price of $ 112.57 (2025 Notes Conversion Price) per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2025 Notes. The Company has the option to redeem for cash all or any portion of the 2025 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 2025 Notes 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 2025 Notes to be redeemed, plus accrued and unpaid interest. No sinking fund is provided for the 2025 Notes. Holders of the 2025 Notes may convert all or a portion of their 2025 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 2025 Notes on each such trading day; • during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2025 Notes for each day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate of the 2025 Notes on such trading day; • if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or 15 • on the occurrence of specified corporate events. On or after November 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the indenture governing the 2025 Notes. Holders of the 2025 Notes who convert in connection with a make-whole fundamental change or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2025 Notes may require us to repurchase all or a portion of the 2025 Notes at a price equal to 100 % of the principal amount of the Notes, plus any accrued and unpaid interest. The net carrying amount of the Company’s convertible senior notes on the condensed consolidated balance sheets consisted of the following (in thousands): March 31, 2024 December 31, 2023 Principal amount: Convertible Senior Notes Due 2025 $ 40,760 $ 287,500 Convertible Senior Notes Due 2029 316,250 * Total principal amount 357,010 287,500 Unamortized debt issuance costs ( 9,513 ) ( 2,465 ) Net carrying amount $ 347,497 $ 285,035 * Not applicable as no notes were outstanding at this date. The 2025 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 . The 2029 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 $ 34.56 per share. As of March 31, 2024 and December 31, 2023, the if-converted value of the 2025 Notes did not exceed the principal amount. As of March 31, 2024, the if-converted value of the 2029 Notes exceeded the principal amount by $ 7.8 million. The following table summarizes the effective interest rates for each of our convertible senior notes for the periods shown: March 31, 2024 March 31, 2023 Effective interest rate: Convertible Senior Notes Due 2025 2.2 % 2.2 % Convertible Senior Notes Due 2029 2.1 % * * Not applicable as no notes were outstanding at this date. The following table details interest expense related to the Notes recognized for the three March 31, 2024, and 2023 (in thousands): Three Months Ended March 31, 2024 2023 Contractual interest expense $ 1,145 $ 1,078 Amortization of debt issuance costs 467 447 Total interest expense $ 1,612 $ 1,525 16 2029 Capped Call Transactions In connection with the issuance of the 2029 Notes, the Company entered into Capped Call Transactions in March 2024 with certain counterparties at a net cost of $ 15.8 million (2029 Capped Call Transactions). The 2029 Capped Call Transactions are expected generally to reduce potential dilution to the Common Stock upon any conversion of the 2029 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap based on a cap price initially equal to $ 42.0128 per share, and is subject to certain adjustments under the terms of the 2029 Capped Call Transactions. 2025 Capped Call Transactions In connection with the issuance of the 2025 Notes, the Company entered into Capped Call Transactions in May 2020 with certain counterparties at a net cost of $ 34.1 million (2025 Capped Call Transactions). The 2025 Capped Call Transactions are expected generally to reduce potential dilution to the Common Stock upon any conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction or offset subject to a cap. The cap price of the 2025 Capped Call Transactions is initially $ 173.18 per share of the Company’s common stock, and is subject to certain adjustments under the terms of the 2025 Capped Call Transactions. In connection with the repurchase of certain 2025 Notes, the Company entered into unwind agreements with the existing option counterparties on March 5, 2024 to terminate a portion of the existing 2025 Capped Call Transactions in a notional amount corresponding to the amount of 2025 Notes repurchased (the Unwind Transactions). In connection with the Unwind Transactions, the Company received $ 0.2 million in cash as a termination payment in respect of the portion of the existing 2025 Capped Call Transactions that were unwound. The amount received was based generally on the termination values of the unwound portions of the existing 2025 Capped Call Transactions. For accounting purposes, each of the capped call transactions described above are separate transactions, and not part of the terms of the 2029 Notes or the 2025 Notes. As these transactions met certain criteria under the applicable accounting guidance, each of the capped call transactions were recorded in stockholders' equity and were not accounted for as derivatives. The cost of the transactions was recorded as a reduction of the Company’s additional paid-in capital in the Company’s condensed consolidated balance sheet and will not be remeasured. 8. Stockholders’ Equity Shares Reserved for Future Issuance The following shares of the Company's common stock were reserved for future issuance at March 31, 2024 (in thousands): Shares reserved for issuance upon conversion of Convertible Senior Notes 9,513 Shares underlying outstanding warrants 194 Shares underlying outstanding stock options 3,833 Shares underlying unvested restricted stock units 3,295 Shares authorized for issuance pursuant to awards granted under the ESPP 454 Shares authorized for future equity award grants 379 Total 17,668 Common Stock Warrants Warrants outstanding to purchase shares of the Company's common stock as of March 31, 2024 were as follows: Issue Date Exercise Price Per Share Warrants Outstanding Expiration Date of Warrants Outstanding March 2017 $ 23.50 193,788 March 2027 Each warrant allows the holder to purchase one share of common stock at the per share exercise price of the warrant. 17 Stock Incentive Plans In May 2023, the Company’s stockholders approved the 2023 Long-Term Incentive Plan (2023 Plan), under which 2,602,184 shares of common stock were initially reserved for issuance. Under the 2023 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units to individuals who are then employees, officers, directors or consultants of the Company. The 2023 Plan replaced the Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan), and no further equity awards will be granted under the 2013 Plan. Stock-Based Compensation 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 March 31, 2024 2023 Cost of sales $ 2,070 $ 1,594 Selling, general and administrative 13,288 14,112 Research and development 6,681 5,488 Total stock-based compensation expense $ 22,039 $ 21,194 The total stock-based compensation expense capitalized as part of the cost of the Company’s inventories was $ 1.5 million at March 31, 2024, and $ 2.0 million at December 31, 2023. Restricted Stock Units Restricted stock units (RSUs) have a grant value equal to the closing price of the Company’s common stock on the award date. The total number of RSUs granted and the respective weighted average grant date fair value were as follows: Three Months Ended March 31, 2024 2023 RSUs granted 358,059 154,146 Weighted average grant date fair value (per share) $ 25.36 $ 42.81 9. Employee Benefits Employee 401(k) Plan The Company has a defined contribution 401(k) plan for employees in the United States who are at least 18 years of age. Employees are eligible to participate in the plan beginning on the first day of the calendar month following their date of hire. Unless they affirmatively elect otherwise, employees are automatically enrolled in the plan following 30 days from date of hire or entry date. 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 . 10. Income Taxes For the three months ended March 31, 2024, the Company recognized income tax expense of $ 3.2 million on a pre-tax loss of $ 39.5 million. For the three months ended March 31, 2023, the Company recognized income tax expense of $ 0.3 million on a pre-tax loss of $ 123.6 million. Income tax expense for the three months ended March 31, 2024 and 2023, was primarily attributable to federal, state and foreign income tax expense as a result of current taxable income in certain jurisdictions. For the three months ended March 31, 2024, the Company calculated the provision for income taxes 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. For the three months ended March 31, 2023, the Company calculated the provision for income taxes using a discrete effective tax rate method as the annual effective tax rate method would not provide a reliable estimate. 18 The Company continues to maintain a full valuation allowance against its net deferred tax assets as of March 31, 2024, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration. 11. Business Segment and Geographic Information Segment Reporting Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker (CODM) in making decisions regarding resource allocation and assessing performance. The Company is organized based on its current product portfolio, which consists primarily of insulin pumps, single-use insulin cartridges and infusion sets for the storage and delivery of insulin. The Company views its operations and manages its business as one segment and a single reporting unit because key operating decisions and resource allocations are made by the CODM using consolidated financial data. Disaggregation of Revenue 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. In the United States and Canada, the Company also uses a direct sales force. The Company disaggregates its revenue by geography, major sales channel and product 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 months ended March 31, 2024 and 2023, 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 March 31, 2024 2023 United States $ 129,761 $ 131,242 Outside the United States 61,913 38,141 Total Sales $ 191,674 $ 169,383 Sales to distributors accounted for 61 % and 65 % of the Company’s United States sales for the three months ended March 31, 2024 and 2023, respectively. Sales to distributors accounted for the vast majority of the Company’s sales outside the United States for the three-month periods ended March 31, 2024 and 2023. Revenues by Product During the three months ended March 31, 2024 and 2023, sales by product were as follows (in thousands): Three Months Ended March 31, 2024 2023 Pump $ 87,287 $ 84,704 Supplies and other 105,533 86,702 Deferral for Tandem Choice program ( 1,146 ) ( 2,023 ) Total Sales $ 191,674 $ 169,383 19 12. Acquisitions AMF Medical Acquisition On December 10, 2022, the Company entered into a Share Purchase Agreement (Purchase Agreement) with AMF Medical SA, a corporation organized and existing under the laws of Switzerland (AMF Medical), and its shareholders to acquire all of the registered shares of AMF Medical (Transaction). AMF Medical is the developer of the Sigi Patch Pump, which is designed to be an ergonomic, rechargeable patch pump that reduces the burden of managing diabetes through its use of pre-filled insulin cartridges. The Sigi Patch Pump is under development and not commercially available. On January 19, 2023, the Company completed the acquisition of AMF Medical under the terms of the Purchase Agreement. The total aggregate consideration for the Transaction includes a previous strategic investment of Swiss Francs (CHF) 8.0 million made in the third quarter of 2022, a cash payment of CHF 62.4 million paid at the closing of the Transaction, and additional contingent earnout payments of up to CHF 129.6 million. The contingent earnout payments become payable upon the achievement of certain milestones, and are comprised of a payment of up to CHF 38.4 million upon the successful completion of key development milestones over the two years following the closing date of the Transaction, and a payment of up to CHF 91.2 million upon obtaining regulatory clearance from the FDA of an automated controller enabled (ACE) pump. The contingent consideration will be recognized as each contingency is resolved and the respective consideration is paid or becomes payable. As of March 31, 2024, the contingencies related to the earnout milestones were not yet resolved and, therefore, the related amounts were not included in the fair value of the asset acquired and were not recognized as a liability on the consolidated balance sheet at March 31, 2024. The Company funded the initial closing payment using existing cash balances. The transaction was accounted for as an asset acquisition as substantially all the value of the gross assets was concentrated in a single asset. The Company recorded a $ 78.8 million charge in 2023 representing the value of acquired in-process research and development assets with no alternative future use, and acquisition related expenses, on its condensed consolidated statements of operations in acquired in-process research and development expenses. The Company’s results of operations included the operating results of AMF Medical since the date of acquisition. 13. Commitments and Contingencies Legal and Regulatory Matters On September 8, 2023, a purported stockholder of the Company filed a putative securities class action complaint (captioned Lowe v. Tandem Diabetes Care, Inc., et al., Case No. 23-cv-1657 (“ Lowe ”)) in the United States District Court for the Southern District of California against the Company and certain of the Company’s current executive officers (“defendants”). On December 6, 2023, the court appointed Mason Raines, Thomas O. Martel, and Linna Rae Martel to serve as co-lead plaintiffs (“plaintiffs”). On February 1, 2024, the plaintiffs filed their amended complaint. In the amended complaint, the plaintiffs allege violations of the Securities Exchange Act of 1934, as amended, based on alleged materially false and misleading statements relating to our sales trends and financial forecasts. The plaintiffs seek to represent a class of persons who purchased or otherwise acquired Tandem common stock during the period between August 3, 2022, and November 2, 2022, inclusive. The plaintiffs also seek unspecified monetary damages, pre- and post-judgment interest, costs and fees, including attorneys’ fees and expert fees, and other relief. The defendants filed their motion to dismiss the amended complaint on March 11, 2024. The plaintiffs filed a response in opposition to defendants’ motion to dismiss on March 27, 2024, and on April 10, 2024, defendants filed their reply. On April 29, 2024, the court granted defendants’ motion to dismiss with leave to file a second amended complaint within 30 days. Two shareholder derivative cases were filed in the United States District Court for the Southern District of California on March 29, 2024 (captioned Bushansky v. John F. Sheridan et al. , Case No. 24-cv-608) and on April 23, 2024 (captioned Amersi v. John F. Sheridan et al. , Case No. 24-cv-726) against the individual members of Tandem’s Board of Directors and the Company. These lawsuits piggyback on the Lowe case, and allege that Tandem’s Board breached its fiduciary duties by failing to properly oversee and monitor the risks affecting the Company’s business, which resulted in reduced guidance, an associated stock drop, and the Lowe case. Although the Company intends to vigorously defend against these claims, there is no guarantee that the Company will prevail. Accordingly, the Company is unable to determine the ultimate outcome of these lawsuits or determine the amount or range of potential losses associated with these lawsuits. 20 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 claims incident to the normal course of the Company’s business activities, including actions with respect to intellectual property, data privacy, employment, regulatory, product liability and contractual matters. Although the results of such legal proceedings and claims cannot be predicted with certainty, as of March 31, 2024 the Company believes it is not currently a party to any 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 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. Letters of Credit In connection with one of the Company’s operating leases (see Note 6, “Leases”), the Company has a $ 4.9 million unsecured irrevocable standby letter of credit arrangement with a bank, under which the landlord of the building is the beneficiary. The Company is required to maintain the standby letter of credit throughout the term of the lease, which expires in April 2035. 21