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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-11-06 · 92 added, 181 removed, 164 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (Quarterly Report).

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties.

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We caution you that the foregoing list may not include all of the forward-looking statements made in this Quarterly Report.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Our forward-looking statements are based on our management’s current assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations or financial performance.

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We qualify all of our forward-looking statements by these cautionary statements.

We are a medical device company focused on the design, development and commercialization of technology solutions for people living with diabetes.

We are a global insulin delivery and diabetes technology company focused on the design, development and commercialization of technology solutions that reduce the burden of diabetes management.

We consider our primary addressable market to be people who live with type 1 diabetes.

Through our product development efforts, we are seeking to expand our addressable market to include people living with type 2 diabetes who require intensive insulin therapy.

We recently expanded our addressable market in the United States following U.S.

Food and Drug Administration (FDA) clearance of our products for people living with type 2 diabetes, ages 18 and older who require intensive insulin therapy.

Diabetes management can vary greatly from person-to-person, creating multiple market segments based on clinical needs and personal preferences.

Our goal is to address the individual needs of people with insulin-dependent diabetes and their care team, by offering flexibility and choice in intelligent insulin delivery systems, through an accessible portfolio of market-leading pumps, applications, and insights.

From inception in 2012 through June 2018, we derived nearly all of our sales from the shipment of insulin pumps and associated supplies to customers in the United States.

Starting in the third quarter of 2018, we began selling in select geographies outside the United States and our technology solutions are now available in approximately 25 countries worldwide.

From inception in 2012 through 2018, we derived nearly all of our sales from the shipment of insulin pumps and associated supplies to customers in the United States.

Starting in the third quarter of 2018, we began selling in select geographies outside the United States and our technology solutions are now available in 25 countries worldwide.

Through our portfolio approach, we offer people living with diabetes a choice in their therapy management system based on their individual needs and preferences.

In support of this strategy, we recently expanded our portfolio which now includes both the t:slim X2 and the Tandem Mobi insulin pumps.

In support of this strategy, our portfolio includes both the t:slim X2 and the Tandem Mobi insulin pumps.

The Tandem Mobi insulin pump is the world’s smallest durable automated insulin delivery (AID) system.

At approximately half the size of our t:slim X2 pump, Tandem Mobi is designed for people who seek even greater discretion and flexibility, and includes features such as expanded pump-control from our iOS mobile application, inductive charging, and an on-pump button that can be used for bolusing and other actions.

Since the beginning of 2024, we scaled the commercial release of Tandem Mobi in the United States, first offering integration with the Dexcom G6 sensor beginning in February followed by the Dexcom G7 beginning in June.

Beginning in early 2024, we scaled the commercial release of Tandem Mobi in the United States, first offering CGM integration with the Dexcom G6 sensor beginning in February 2024 followed by the Dexcom G7 beginning in June 2024.

The vast majority of our customers use their insulin pump with CGM integration.

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Control-IQ is an advanced hybrid-closed loop feature designed to help increase a user’s time in their targeted glycemic range.

Multiple studies, including three publications in the New England Journal of Medicine, have demonstrated that use of Control-IQ technology provides people across all demographics with improved clinical outcomes that are both immediate and sustained.

Multiple studies, including four publications in the New England Journal of Medicine with the most recent in March 2025 , have demonstrated that use of Control-IQ technology provides people across all demographics with improved clinical outcomes that are both immediate and sustained.

The t:slim X2 was the first pump in the industry on which remote software updates were made commercially available in the United States and is now also available in the countries we serve worldwide.

This has allowed our t:slim X2 and Tandem Mobi customers to update their own pump software.

This feature allows our t:slim X2 and Tandem Mobi customers to update their pump software independently.

We believe this offering is a competitive advantage that allows us to bring our customers clinical and lifestyle enhancements within their warranty cycle without having to purchase a new pump.

These enhancements include new developments in our AID technology, CGM integrations and mobile app features.

For example, in 2024 we offered pump software updates to allow Tandem pump users access to integrate with new CGM sensors.

For example, we recently offered a pump software update to allow Tandem pump users access to the latest generation of our algorithm, Control-IQ+ technology, offering greater levels of personalization and flexibility within our algorithm.

For more than a decade we have offered our customers, their caregivers and healthcare providers a data management application to provide a fast, easy and visual way to display diabetes therapy management data from our pumps and integrated CGMs.

In the second quarter of 2023, we expanded our digital technology solutions with the launch of Tandem Source in the United States.

In addition to displaying diabetes therapy management data, Tandem Source is also designed to serve as a portal for supplies reordering and pump software updates.

In the second quarter of 2024, we began a scaled launch of Tandem Source outside the United States.

In addition to displaying diabetes therapy management data, Tandem Source is also designed to serve as a portal for supplies reordering and pump software updates.

Our Strategy & Future Technology

Diabetes management can vary greatly from person-to-person, creating multiple market segments based on clinical needs and personal preferences.

Our goal is to address the individual needs of people with insulin-dependent diabetes and their care team, by providing flexibility and choice in intelligent insulin delivery systems through an accessible portfolio of market-leading pumps, applications, and insights.

In support of this strategy, our portfolio of future technologies includes:

Advancing our flagship t:slim platform, the t:slim X3 is planned to include enhanced technology, such as greater processing power and capacity to support our advanced algorithms, as well as increased battery life and improved durability.

This offering is intended to provide an alternative tubeless infusion site option for Tandem Mobi pump users.

It will allow a Tandem Mobi pump to be worn completely on the user’s body with no tubing, while still providing the benefit of detachability.

A goal of this design is to allow people living with diabetes to customize the way they wear their pump with each cartridge change, switching between tubed and tubeless wear configurations, to best suit their personal preferences and lifestyle .

The ergonomic, rechargeable and detachable Sigi Patch Pump is intended to reduce the burden of managing diabetes through its use of pre-filled insulin cartridges and compatibility with AID technology.

Extended Wear Infusion Sets

Infusion sets provide additional choice and flexibility to people living with diabetes.

We are currently developing extended wear infusion set technology.

Our goals for future infusion set innovations include solutions that enhance user experience, while reducing occlusions, body burden and waste.

Control-IQ Advancements

We are continuing to drive innovation in our algorithms, emphasizing automation, personalization and simplification to continue to improve therapeutic outcomes and provide a positive patient experience.

In late 2023, an enhanced version of our Control-IQ technology was cleared with additional features for people with type 1 diabetes age 2 and older.

In the third quarter of 2024, we completed a pivotal study to support expanding indications to include people living with type 2 diabetes.

We are also pursuing the use of different insulins with our Control-IQ technology.

For example, in the first half of 2024 we received approval for both the addition of Trurapi U-100 in Canada and Lyumjev in the European Union as compatible insulins that can be used with our t:slim X2 pump with Control-IQ technology.

Our goal is to redefine global leadership in insulin delivery with an accessible portfolio of transformational devices, applications and services that reduce the daily burden of living with diabetes.

In support of this strategy, our portfolio of future technologies includes enhancing the features and capabilities of our t:slim X2 and Tandem Mobi insulin pump platforms, including adding a tubeless infusion site option for Tandem Mobi users.

Our development efforts also include Sigi, our ergonomic and rechargeable patch pump, in addition to extended wear infusion technology and algorithm advancement in pursuit of offering fully closed loop technology.

Pump Reimbursement Cycle

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With programs dedicated to customer retention efforts, we expect such renewal purchases to represent an increasing portion of our pump shipments over time.

At the end of 2023, we had approximately 450,000 users in our in-warranty installed base, approximately one-third of whom live outside the United States.

The ordering patterns of, and levels of inventory carried by, our distributors outside the United States for pumps and supplies have historically been highly variable from period to period due to a number of factors, including summer vacations, the timing of product launches into new geographies and variability due to supply chain logistics, particularly during the global pandemic.

At December 31, 2024, we had over 480,000 users in our in-warranty installed base, approximately one-third of whom live outside the United States.

The ordering patterns of, and levels of inventory carried by, our distributors outside the United States for pumps and supplies have historically been highly variable from period to period due to a number of factors, including summer vacations, the timing of product launches, expansion into new geographies and variability due to supply chain logistics, particularly during the global pandemic.

This also influences the timing in which renewal eligibility begins for existing customers, which may not initially be consistent with trends in the United States market.

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The success of our products is variable and we believe it correlates to market acceptance, anticipated product launches and commercial availability.

We anticipate that our Tandem Choice program, and its related financial and accounting impact, may continue to materially impact our business until the conclusion of the program.

• Seasonality in the United States is associated with annual insurance deductibles and coinsurance requirements of the medical insurance plans used by our customers and the customers of our distributors.

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Other factors that may impact sales across the year include the timing of winter, summer and other seasonal holidays, particularly in our markets outside the United States.

• We believe our July 2023 announcement of U.S.

Food and Drug Administration (FDA) clearance of Tandem Mobi and its anticipated launch impacted the timing of purchasing decisions by our current and prospective customers in the second half of 2023 up through the United States commercial availability of Tandem Mobi in February 2024, resulting in delays that were unlike historical seasonal patterns or purchasing behaviors.

Regulatory approval and/or upcoming launches of other new Tandem or competitor products could also adversely impact timing of purchasing decisions.

• Regulatory approval and/or upcoming launches of other new Tandem or competing products could also adversely impact timing of purchasing decisions.

• In periods following new product launches, particularly with new hardware platforms, our cost of sales may increase on a per unit basis until the new products achieve manufacturing scale and operating expenses may be elevated by increased sales and marketing spend to support the product launches.

• We have expanded our business and launched new products in select geographies outside the United States.

The ordering patterns of our distributors outside the United States has historically been highly variable from period to period.

For example, we began operations of a European distribution center which led to a reduction of inventory levels at our distributors, significantly impacting sales patterns in the second half of 2022 and first half of 2023.

Reimbursement

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Because of the DME classification, our pumps and supplies are typically reimbursed through a medical benefit.

As our portfolio expands, we are pursuing a multi-channel managed care strategy and are in discussions to begin serving Mobi customers through the pharmacy channel.

As our portfolio expands, we are implementing a multi-channel managed care strategy and have begun serving Mobi customers through the pharmacy channel on a scaled basis in 2025.

• We generally have had broad insurance coverage for our current products from third-party payors.

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• Global economic and market uncertainty, such as recessionary concerns, changes in discretionary spending and increased interest rates have impacted our customers’ purchasing decisions and the buying patterns of our distributors.

• High inflation, fluctuations in foreign currency valuations and the effects of other macroeconomic factors and concerns has disrupted and may continue to disrupt our relationships with suppliers, third-party manufacturers, healthcare providers, distributors and our existing or potential customers.

• High inflation, fluctuations in foreign currency valuations, uncertainty regarding tariffs and trade relations, and the effects of other macroeconomic factors and concerns have disrupted and may continue to disrupt our relationships with suppliers, third-party manufacturers, healthcare providers, distributors and our existing or potential customers.

Components of Results of Operations

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Therefore, the lowest percentage of sales is typically reported in the first quarter of each calendar year and the highest percentage is typically reported in the fourth quarter.

See also “Trends and Uncertainties Impacting Financial Results—Seasonality” above.

From September 2022 through February 2024, we offered the Tandem Choice program to eligible t:slim X2 customers to provide a pathway to ownership of our newest hardware platform, Tandem Mobi, for a fee when available.

Eligible customers who purchased a t:slim X2 insulin pump during the program period have until December 31, 2024 to exercise the option to switch to the Tandem Mobi for a stated fee.

The accounting treatment for Tandem Choice is complex (see Note 2, “Summary of Significant Accounting Policies”).

See also “Trends and Uncertainties Impacting Financial Results — Markets, Seasonality, Competition, and Product Launches” above.

From September 2022 through February 2024, we offered the Tandem Choice program to eligible t:slim X2 customers to provide a pathway to ownership of Tandem Mobi for a fee once available.

Eligible customers who purchased a t:slim X2 insulin pump during the program period had until December 31, 2024 to exercise the option to switch to the Tandem Mobi for a stated fee.

The accounting treatment for Tandem Choice was complex (see Note 2, “Summary of Significant Accounting Policies”).

The program required the deferral of some portion of sales for shipments of eligible pumps between the third quarter of 2022 and the first quarter of 2024.

No election was made by the customer at the time of the initial sale, nor did the right offered to the customer impact the economics associated with how or when the initial pump sale was reimbursed.

If a customer elects to participate in Tandem Choice, we will recognize the existing sales deferral, incremental fees received and the associated costs of goods sold for the new insulin pump, Tandem Mobi, at the time of fulfillment.

When a customer elected to participate in Tandem Choice, we recognized the existing sales deferral, incremental fees received and the associated costs of goods sold for the new insulin pump, Tandem Mobi, at the time of fulfillment.

Qualifying customers were able to elect participation in Tandem Choice starting near the end of the second quarter of 2024.

Any remaining deferrals will be recognized when the program ends on December 31, 2024, provided all obligation under the Tandem Choice program are satisfied.

The balance of the Tandem Choice deferral was $ 30.1 million as of September 30, 2024.

The remaining deferral balance was recognized as revenue when the program ended on December 31, 2024.

Cost of Sales

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Acquired In-process Research and Development (IPR&D)

Acquired IPR&D reflects costs of external research and development projects acquired directly in a transaction other than a business combination, that do not have an alternative future use.

Acquired IPR&D reflects costs of external research and development projects acquired directly in a transaction other than a business combination, which do not have an alternative future use.

Other Income and Expense

Other income and expense primarily consists of interest earned on our cash equivalents and short-term investments, foreign currency transaction gains and losses and interest expense which includes the amortization of debt issuance costs related to our convertible senior notes.

In October 2023, we were notified that $3.1 million of additional interest beyond the 1.50% per annum had been accruing on the 2025 Notes since May 2021, pursuant to the terms of the indenture (see Note 7, “Debt”).

Other income and expense primarily consist of interest earned on our cash equivalents and short-term investments, income or loss from equity method investments, foreign currency transaction gains and losses and interest expense which includes the amortization of debt issuance costs related to our convertible senior notes.

Income Tax Expense (Benefit)

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Three Months Ended

September 30, Nine Months Ended September 30,

(in thousands, except percentages) 2025 2024

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Research and development 50,215 46,244

Acquired in-process research and development — — — 78,750

Acquired in-process research and development expenses

Total operating expenses 239,285 136,350

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Interest expense (1,862) (1,897)

Loss from equity method investments

Loss on extinguishment of debt — (1,268)

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Net loss $ (130,556) $ (42,715)

Comparison of the Three Months Ended September 30, 2024 and 2023

For the three months ended September 30, 2024, we shipped more than 31,000 pumps worldwide.

Comparison of the Three Months Ended March 31, 2025 and 2024

For the three months ended March 31, 2025, we shipped nearly 29,000 pumps worldwide.

Sales were $234.4 million, which included $83.8 million of sales outside the United States.

Sales were $185.6 million for the three months ended September 30, 2023, which included $55.4 million of sales outside the United States.

For the three months ended September 30, 2024, we recognized incremental pump sales of $1.0 million as a result of Tandem Choice fulfillments.

For the three months ended September 30, 2023, our revenues were reduced by $8.2 million for pump sales as a result of deferrals related to Tandem Choice.

The Tandem Choice program launched in the United States in September of 2022 and eligibility to participate in the program (and our associated sales deferrals) ended in February 2024 in conjunction with the launch of Tandem Mobi.

Sales were $191.7 million for the three months ended March 31, 2024, which included $61.9 million of sales outside the United States.

For the three months ended March 31, 2024, we deferred $1.1 million of pump sales as the result of Tandem Choice.

Sales by product in the United States were as follows (in thousands):

Three Months Ended

September 30,

Pump $ 72,141 $ 61,720

Supplies and other 78,491 69,187

Net revenue recognized (deferred) for Tandem Choice program

1,039 (8,236)

Net revenue deferred for Tandem Choice program

Total Sales in the United States $ 150,632 $ 129,761

Pump sales in the United States were $86.7 million for the third quarter of 2024, compared to $66.4 million in the third quarter of 2023.

Our pump shipments in the United States increased more than 20% to nearly 21,000 pumps in the third quarter of 2024 compared to the third quarter of 2023.

We also benefited from an increase in average selling prices across all product lines due to price increases, customer mix and a continued shift to a higher percent of direct sales versus in our distribution channel.

Sales to distributors accounted for 61% and 64% of the Company’s United States sales for the three months ended September 30, 2024 and 2023, respectively.

Sales of pump-related supplies increased primarily due to a year-over-year increase in our installed base of customers in the United States, as well as an increase in average selling prices.

Tandem Choice fulfillments in the third quarter of 2024 resulted in incremental sales of $1.0 million.

Sales in the United States for the three months ended September 30, 2023 were reduced by $8.2 million in sales deferrals related to Tandem Choice.

Pump sales in the United States increased primarily due to growth in pump shipments to over 17,000 in the first quarter of 2025, compared to 15,000 in the first quarter of 2024.

Sales of pump-related supplies increased as a result of volume growth, as well as an increase in average selling prices.

Sales in the first quarter of 2024 were reduced by $1.1 million from sales deferrals related to Tandem Choice, for which there were no comparable adjustments in 2025.

Sales by product outside the United States were as follows (in thousands):

Three Months Ended

September 30,

Pump $ 29,950 $ 25,567

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Total Sales Outside the United States $ 83,790 $ 61,913

Pump sales outside the United States were $28.1 million for the third quarter of 2024, compared to $21.7 million in the third quarter of 2023.

Our pump shipments outside the United States increased by over 30% to nearly 11,000 pumps for the third quarter of 2024 compared to the third quarter of 2023.

We also benefited from an increase in average selling prices due primarily to geographical mix.

Sales of pump-related supplies increased due to a year-over-year increase in our installed base of customers outside the United States.

Cost of Sales and Gross Profit

Our cost of sales for the three months ended September 30, 2024 was $119.3 million , resulting in gross profit of $124.7 million, compared to cost of sales of $95.9 million and gross profit of $89.8 million for the same period in 2023.

Cost of sales for the three months ended September 30, 2024 included a charge of $0.7 million for Tandem Choice fulfillments.

There was no comparable charge during the same period in 2023.

The gross margin for the three-month periods ended September 30, 2024 and 2023 was 51% and 48%, respectively.

The effect of our Tandem Choice program on gross profit and gross margin was negligible for the three months ended September 30, 2024.

Gross profit for the three months ended September 30, 2023 was reduced by $8.2 million, or approximately two percentage points of gross margin due to Tandem Choice.

The impact on gross margin from Tandem Choice will continue to fluctuate through the end of the program based on the number of eligible customers who ultimately elect to participate.

Excluding the impact of Tandem Choice, gross margin was flat compared to the prior year period.

Gross margin benefited from pricing improvement across all product lines and lower pump materials cost, offset by higher labor and overhead on a per-unit basis as we continued to scale the launch of Tandem Mobi.

Gross margin was positively impacted by product mix.

Pump sales, which have the highest gross margin, were 47% of total worldwide sales in the third quarter of 2024, compared to 43% in the third quarter of 2023.

Excluding the impact of Tandem Choice, pump sales for the third quarter of 2024 were 47% of worldwide sales and 45% of worldwide sales for the third quarter of 2023.

Operating Expenses

Our operating expenses for the three months ended September 30, 2024 were $150.7 million, compared to $121.3 million for the three months ended September 30, 2023.

The $29.4 million increase was primarily driven by increased development efforts for pipeline products as well as the ramp up of sales and marketing for Mobi.

Selling, General and Administrative Expenses.

SG&A expenses were $99.6 million for the three months ended September 30, 2024, compared to $79.3 million for the same period in 2023.

The $20.3 million increase was largely driven by higher employee-related expenses of $12.7 million due to increased headcount and overall higher cost of salaries and benefits.

We also experienced a $7.6 million increase in outside consulting and services largely to support business growth.

Research and Development Expenses .

R&D expenses increased to $51.1 million for the three months ended September 30, 2024, from $42.0 million for the same period in 2023.

The increase in R&D expenses was primarily the result of an increase of $6.0 million in employee benefits and salaries due to an increase in personnel to support our product development efforts.

We also experienced an increase in other non-employee discretionary spending, including clinical trial expenses, supplies and equipment costs.

Other Income (Expense), Net

Total other income (expense), net for the three months ended September 30, 2024 was $3.5 million income, compared to $0.8 million income in the same period in 2023.

Other income, net for the three months ended September 30, 2024 primarily consisted of $5.6 million of interest income earned on our cash equivalents and short-term investments, and $1.9 million of interest expense which included the amortization of debt issuance costs related to our convertible senior notes due 2025 and 2029 (the 2025 Notes and the 2029 Notes, respectively).

Other income, net for the three months ended September 30, 2023 primarily consisted of $5.9 million of interest income earned on our cash equivalents and short-term investments partially offset by $4.8 million of interest expense which included $3.1 million of additional accrued interest as discussed above, as well as the amortization of debt issuance costs related to the 2025 Notes.

Income Tax Expense

We recognized income tax expense of $0.6 million on a pre-tax loss of $22.6 million for the three months ended September 30, 2024, compared to income tax expense of $2.2 million on a pre-tax loss of $30.7 million for the three months ended September 30, 2023.

Income tax expense for the three months ended September 30, 2024 and 2023 was primarily attributable to state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

Comparison of the Nine Months Ended September 30, 2024 and 2023

For the nine months ended September 30, 2024, we shipped nearly 87,000 pumps worldwide.

Sales were $657.6 million, which included $199.4 million of sales outside the United States.

For the nine months ended September 30, 2024, there was negligible net impact to our revenues as a result of sales deferrals and fulfillments related to our Tandem Choice program.

Pump sales that occurred after February 2024 were not eligible for Tandem Choice.

Sales were $550.9 million for the same period in 2023, which included $147.0 million of sales outside the United States.

For the nine months ended September 30, 2023, we deferred $12.6 million of pump sales as the result of Tandem Choice.

Sales by product in the United States were as follows (in thousands):

Nine Months Ended September 30,

Pump $ 230,187 $ 207,180

Supplies and other 227,888 209,352

Net revenue recognized (deferred) for Tandem Choice program

Total Sales in the United States $ 458,122 $ 403,964

Pump sales in the United States were $230.2 million for the nine months ended September 30, 2024 compared to $207.2 million for the same period in 2023.

Our pump shipments in the United States increased by nearly 10% to more than 56,000 pumps for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The scaled launch of Tandem Mobi has impacted, and may continue to impact, the timing of customer purchases across the quarters.

For example, Tandem Mobi became commercially available in the United States in February 2024 initially with Dexcom G6 sensor integration, followed by Dexcom G7 sensor integration in June 2024.

Sales of pump-related supplies increased primarily due to a year-over-year increase in our ending estimated installed base of customers in the United States, as well as increase in average selling prices.

The net sales impact from revenue deferrals and fulfillments of our Tandem Choice program in the United States for the nine months ended September 30, 2024 was negligible.

For the nine months ended September 30, 2023, revenues were reduced by $12.6 million as the result of sales deferrals related to Tandem Choice.

The decrease in the net revenue deferral for Tandem Choice in 2024 as compared to 2023 was primarily due to the cessation of the sales deferral period in February 2024, which coincided with the launch of Tandem Mobi.

Pump sales that occurred after February 2024 were not eligible for Tandem Choice, nor subject to a sales deferral.

Sales by product outside the United States were as follows (in thousands):

Nine Months Ended September 30,

Pump $ 79,774 $ 67,235

Supplies and other 119,659 79,723

Total Sales Outside the United States $ 199,433 $ 146,958

Our pump shipments outside the United States increased by over 20% to more than 30,000 pumps for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Pump sales outside the United States were $79.8 million for the nine months ended September 30, 2024, compared to $67.2 million for the same period in 2023.

Throughout 2024, we have seen increased customer demand for our products.

In the first half of 2023, pump and supply shipments were impacted by an operational transition to a centralized European distribution center which resulted in significant disruption in distributor ordering patterns.

The transition was completed by the second half of 2023.

The increase in pump sales was offset by a slight decrease in pump average selling prices due primarily to geographical mix.

In addition to the distribution center transition, sales of pump-related supplies outside the United States increased due to growth in our installed base of customers.

Sales to distributors accounted for the overwhelming majority of our total sales outside the United States for the nine-month periods ended September 30, 2024, and 2023.

For the first quarter of 2025, both pumps and pump-related supply sales increased due to a year-over-year increase in volumes, with pump shipments growing to over 11,000 pumps for the first quarter of 2025, compared to 10,000 in the first quarter of 2024.

Cost of Sales and Gross Profit

Our cost of sales for the nine months ended September 30, 2024 was $325.4 million resulting in gross profit of $332.1 million, compared to cost of sales of $276.5 million and gross profit of $274.4 million for the same period in 2023.

The gross margin for the nine months ended September 30, 2024 was 51% compared to 50% in the same period in 2023.

The effect of Tandem Choice was negligible for the nine months ended September 30, 2024 compared to a gross margin reduction of approximately 1 percentage point for the nine months ended September 30, 2023.

The impact on gross margin from our Tandem Choice program will fluctuate through the expiration of the program based on the number and timing of eligible customers who ultimately elect to participate.

Gross margin benefited from pricing improvement and lower materials cost, offset by higher labor and overhead costs on a per-unit basis as we continue to scale the launch of Tandem Mobi.

Gross margin was negatively impacted by product mix.

Pump sales, which have the highest gross margin, were 47% of total worldwide sales for the nine months ended September 30, 2024, compared to 48% of worldwide sales for the first nine months of 2023.

Excluding the impact of Tandem Choice, pump sales for the nine months ended September 30, 2024 were 47% of total worldwide sales compared to 49% in the first nine months of 2023.

Our cost of sales for the three months ended March 31, 2025 was $116.0 million , resulting in gross profit of $118.4 million, compared to cost of sales of $97.0 million and gross profit of $94.7 million for the same period in 2024.

The gross margins for the three-month periods ended March 31, 2025 and 2024 were 51% and 49%, respectively.

This increase in gross margin was primarily driven by an improvement in pump manufacturing and non-manufacturing costs per unit.

Operating Expenses

Our operating expenses for the nine months ended September 30, 2024 were $430.7 million, compared to $472.6 million for the nine months ended September 30, 2023.

The $41.9 million decrease was primarily driven by $78.8 million of acquired in-process research and development expenses incurred in 2023 in connection with our acquisition of AMF Medical, for which there was no comparable expense in 2024.

In 2023, we also incurred a non-recurring operating lease impairment charge in SG&A of $14.1 million as a result of a facilities consolidation (see Note 6, “Leases”), and employee severance costs of $2.7 million.

These non-recurring expenses from 2023 were partially offset by higher operating expenses in 2024 related to development efforts for pipeline products as well as the ramp up of sales and marketing for Tandem Mobi.

Our operating expenses for the three months ended March 31, 2025 were $239.3 million, compared to $136.4 million for the three months ended March 31, 2024.

The $102.9 million increase was primarily driven by a $75.2 million charge to IPR&D in connection with the revised AMF purchase agreement (see Note 12, “Acquisitions”), as well as costs related to operating lease impairment and restructuring charges related to relocation of certain research and development activities and sales force expansion.

Selling, General and Administrative Expenses.

SG&A expenses increased 6% to $284.0 million for the nine months ended September 30, 2024, from $266.8 million for the same period in 2023.

Expenses for the nine months ended September 30, 2023 included non-recurring expenses of $14.1 million related to lease impairment charges and $2.1 million in severance costs in 2023.

Expenses for the nine months ended September 30, 2024 increased mainly due to higher employee-related, marketing and consulting expenses which related to new product launches.

SG&A expenses, including one-time charges for non-recurring facility impairment costs of $6.7 million and restructuring costs of $2.2 million, were $113.9 million for the three months ended March 31, 2025, compared to $90.1 million for the same period in 2024.

After one-time costs, the remaining increase was largely driven by higher employee-related expenses of $11.0 million due to increased headcount and sales force expansion.

Three Months Ended

Selling, general and administrative

$ 104,966 $ 90,106

Non-recurring facility impairment costs

Restructuring costs

Total SG&A expenses

$ 113,853 $ 90,106

Research and Development Expenses .

R&D expenses increased 15% to $146.7 million for the nine months ended September 30, 2024, from $127.1 million for the same period in 2023.

The increase in R&D expenses was primarily the result of an increase in salaries and related benefits from our acquisitions and an increase in personnel to support our product development efforts.

We also experienced an increase in other non-employee discretionary spending, including clinical trials costs and equipment expenses.

Acquired In-Process Research and Development Expenses.

Acquired IPR&D expenses of $78.8 million for the nine months ended September 30, 2023 represented the value of assets acquired, and acquisition related expenses, in connection with our acquisition of AMF Medical (see Note 12, “Acquisitions”).

R&D expenses, including one-time charges for non-recurring restructuring costs of $2.3 million, increased to $50.2 million for the three months ended March 31, 2025, from $46.2 million for the same period in 2024.

After one-time costs, the remaining increase in R&D expenses was primarily the result of other employee expenses.

Three Months Ended

Research and development

47,935 46,244

Restructuring costs

Total R&D expenses

$ 50,215 $ 46,244

Acquired In-Process Research and Development (IPR&D) Expenses.

Acquired IPR&D expenses were $75.2 million for the three months ended March 31, 2025, which represented costs associated with the revised AMF purchase agreement (see Note 12, “Acquisitions”).

We did not incur any IPR&D expenses for the three months ended March 31, 2024.

Other Income (Expense), Net

Total other income (expense), net for the nine months ended September 30, 2024 was $6.7 million income, compared to $9.2 million income in the same period in 2023.

Other income, net for the nine months ended September 30, 2024 primarily consisted of $16.7 million of interest income earned on our cash equivalents and short-term investments, partially offset by $5.6 million of interest expense which included the amortization of debt issuance costs related to our 2025 Notes and 2029 Notes.

Other income, net for the nine months ended September 30, 2023 primarily consisted of $15.2 million of interest income earned on our cash equivalents and short-term investments, and $2.0 million in foreign currency transaction gains, partially offset by $8.1 million of interest expense which included $3.1 million of additional interest as discussed above and the amortization of debt issuance costs related to our 2025 Notes.

Total other income (expense), net for the three months ended March 31, 2025 was a $1.2 million loss, compared to $2.1 million of income for the same period in 2024.

Other expense, net for the three months ended March 31, 2025 primarily consisted of $3.5 million loss on equity investment and $1.9 million of interest expense which included the amortization of debt issuance costs related to our convertible senior notes due 2025 and 2029 (the 2025 Notes and the 2029 Notes, respectively), offset by $4.3 million of interest income earned on our cash equivalents and short-term investments.

Other income, net for the three months ended March 31, 2024 primarily consisted of $5.3 million of interest income earned on our cash equivalents and short-term investments, partially offset by $1.9 million of interest expense which included the amortization of debt issuance costs related to the 2025 Notes and the 2029 Notes.

We also incurred a loss on debt extinguishment of $1.3 million during the three months ended March 31, 2024.

Income Tax Expense

We recognized income tax expense of $4.9 million on a pre-tax loss of $91.9 million for the nine months ended September 30, 2024, compared to income tax expense of $3.7 million on a pre-tax loss of $188.9 million for the nine months ended September 30, 2023.

Income tax expense for the nine months ended September 30, 2024 and 2023 was primarily attributable to federal, state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

We recognized income tax expense of $8.5 million on a pre-tax loss of $122.1 million for the three months ended March 31, 2025, compared to income tax expense of $3.2 million on a pre-tax loss of $39.5 million for the three months ended March 31, 2024.

Income tax expense for the three months ended March 31, 2025 and 2024 was primarily attributable to federal, state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

Liquidity and Capital Resources

At September 30, 2024, we had $473.3 million in cash and cash equivalents and short-term investments.

At March 31, 2025, we had $368.6 million in cash and cash equivalents and short-term investments.

We believe that our cash and cash equivalents, short-term investments, and future cash flows from operations will be sufficient to fund our ongoing core business activities for at least the next 12 months.

Our historical cash outflows have primarily been associated with cash used for operating activities such as research and development activities, sales, marketing and commercialization of our products worldwide, expansion of clinical and customer support organizations, the acquisition of intellectual property, equity investments and acquired assets, capital expenditures and debt service costs.

Our historical cash outflows have primarily been associated with cash used for operating activities such as research and development activities, sales, marketing and commercialization of our products worldwide, expansion of clinical and customer support organizations, the acquisition of intellectual property, equity investments and asset acquisitions, capital expenditures and debt service costs.

Historically, our principal sources of cash have included cash collected from product sales, private and public offerings of equity securities, exercises of employee stock awards and debt financing.

We expect to rely on these sources of cash, primarily from product sales, to fund our material cash requirements in both the short and long term.

The following table shows a summary of our cash flows for the nine months ended September 30, 2024, and 2023 (in thousands):

Nine Months Ended September 30,

The following table shows a summary of our cash flows for the three months ended March 31, 2025, and 2024 (in thousands):

Three Months Ended March 31,

Net cash provided by (used in):

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Effect of foreign exchange rate changes on cash (1,880) (423)

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

$ (15,660) $ 111

Operating Activities .

Net cash provided by operating activities was $13.5 million for the nine months ended September 30, 2024, compared to $24.6 million cash used in the same period in 2023.

For the nine months ended September 30, 2024, net loss was $96.8 million, net non-cash adjustments were $98.8 million, and change in working capital balances was an increase of $11.5 million.

For the nine months ended September 30, 2023, net loss was $192.6 million, net non-cash adjustments were $177.4 million and change in working capital balances was a decrease of $9.4 million.

For the nine months ended September 30, 2023, net non-cash adjustments included $78.8 million of acquired in-process research and development expenses related to our acquisition of AMF Medical, and a $14.1 million operating lease impairment charge.

Net cash used in operating activities was $18.3 million for the three months ended March 31, 2025, compared to $8.0 million used in the same period in 2024.

For the three months ended March 31, 2025, net loss was $130.6 million, net non-cash adjustments were $118.1 million, and changes in working capital balances was a decrease of $5.8 million.

For the three months ended March 31, 2024, net loss was $42.7 million, net non-cash adjustments were $29.8 million and change in working capital balances was an increase of $4.9 million.

Investing Activities .

Net cash used in investing activities was $28.5 million for the nine months ended September 30, 2024, which primarily consisted of $251.4 million of purchases of short-term investments, and $16.2 million in purchases of property and equipment, offset by $239.0 million in proceeds from maturities and redemptions of short-term investments.

Net cash used in investing activities was 69.2 million for the nine months ended September 30, 2023, which was primarily related to $391.0 million of purchases of short-term investments, $69.5 million for the acquisition of AMF Medical, including transaction costs (see Note 12, “Acquisitions”), and $21.6 million in purchases of property and equipment, of which $8.7 million was associated with improvements to the new headquarters lease facility, completed in 2023, offset by $415.5 million in proceeds from maturities and redemptions of short-term investments.

Net cash provided by investing activities was $9.2 million for the three months ended March 31, 2025, which primarily consisted of $65.1 million in proceeds from maturities and redemptions of short-term investments, offset by $43.5 million paid for IPR&D, $9.5 million in purchases of short-term investments, and $3.0 million in purchases of property and equipment.

Net cash used in investing activities was $5.1 million for the three months ended March 31, 2024, which primarily consisted of $84.2 million in purchases of short-term investments, and $4.5 million in purchases of property and equipment, offset by $83.7 million in proceeds from maturities and redemptions of short-term investments.

Financing Activities.

Net cash provided by financing activities was $6.1 million for the nine months ended September 30, 2024, which primarily consisted of net proceeds of $306.9 million from the issuance of the 2029 Notes which was partially offset by $246.1 million used in the repurchase of 2025 Notes, $30.0 million used in the repurchase and retirement of common stock and $15.8 million used to purchase Capped Call Options related to the 2029 Notes.

In addition, $9.0 million was used in payments for tax withholdings related to the issuance of common stock under our stock plans, net of proceeds received from common stock issuances for the period.

Net cash provided by financing activities was $1.5 million for the nine months ended September 30, 2023, which primarily consisted of proceeds from the issuance of common stock under our stock plans, net of payments for related tax withholdings.

Net cash used in financing activities was $4.7 million for the three months ended March 31, 2025, which consisted of payments for tax withholdings related to the issuance of common stock under our stock plans, partially offset by proceeds received from common stock issuances for the period.

Net cash provided by financing activities was $13.6 million for the three months ended March 31, 2024, which primarily consisted of net proceeds of $306.9 million from the issuance of the 2029 Notes, offset by $246.1 million used in the repurchase of the 2025 Notes, $30.0 million used to repurchase and retire common stock and $15.8 million used to purchase Capped Call Options related to the 2029 Notes.

In addition, $1.5 million was used in payments for tax withholdings related to the issuance of common stock under our stock plans.

Our liquidity position and capital requirements are subject to fluctuation based on a number of factors.

4 unchanged sentences

• the timing and amount of proceeds from the issuance of equity awards pursuant to employee stock plans;

• fluctuations in gross and operating margins;

• fluctuations in costs, gross and operating margins;

• fluctuations in working capital, including changes in accounts receivable, inventories, accounts payable, employee-related liabilities, and operating lease liabilities.

1 unchanged sentence

• support of our commercialization efforts related to our current and future products;

• expansion of our customer support resources for our growing installed customer base;

• expansion of our commercial resources for our growing installed customer base;

• research and product development efforts, including clinical trial costs;

• acquisitions, including contingent earnout payments that become payable upon the achievement of certain milestones;

• acquisitions, including strategic investments, equity method investments and future contingent payments associated with acquisitions;

• leasing or licensing of equipment, technology, intellectual property and other assets;

10 unchanged sentences

There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies Involving Management Estimates and Assumptions,” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes to our quantitative and qualitative disclosures about market risk during the three months ended March 31, 2025.

See Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a detailed discussion of our market risks.

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 2. Management’s Discussion and Analysis