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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to        
Commission File Number:  000-51222
dxcm-20210930_g1.jpg
DEXCOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0857544
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6340 Sequence Drive, San Diego, CA 92121
(Address of principal executive offices)
(858200-0200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par Value Per ShareDXCMNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 21, 2021, there were 96,922,034 shares of the registrant’s common stock outstanding.

DexCom, Inc.
Table of Contents
Page
ITEM 1.
Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DexCom, Inc.
Consolidated Balance Sheets
(Unaudited)
(In millions, except par value data)September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,444.3 $817.6 
Short-term marketable securities1,253.6 1,890.1 
Accounts receivable, net529.1 428.5 
Inventory351.3 234.7 
Prepaid and other current assets77.9 53.9 
Total current assets3,656.2 3,424.8 
Property and equipment, net742.2 515.3 
Operating lease right-of-use assets91.3 93.3 
Goodwill23.9 19.3 
Deferred tax assets216.3 216.4 
Intangibles and other assets, net46.0 21.4 
Total assets$4,775.9 $4,290.5 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities$598.0 $481.1 
Accrued payroll and related expenses115.3 114.3 
Short-term operating lease liabilities19.3 16.5 
Deferred revenue2.3 2.2 
Total current liabilities734.9 614.1 
Long-term senior convertible notes 1,703.5 1,667.2 
Long-term operating lease liabilities102.9 101.8 
Other long-term liabilities98.5 80.9 
Total liabilities2,639.8 2,464.0 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020
  
Common stock, $0.001 par value, 200.0 million shares authorized; 97.8 million and 96.9 million shares issued and outstanding, respectively, at September 30, 2021; and 96.9 million and 96.1 million shares issued and outstanding, respectively, at December 31, 2020
0.1 0.1 
Additional paid-in capital2,322.1 2,125.3 
Accumulated other comprehensive income1.4 3.2 
Accumulated deficit(28.0)(202.1)
Treasury stock, at cost; 0.9 million shares at September 30, 2021 and 0.8 million shares at December 31, 2020
(159.5)(100.0)
Total stockholders’ equity2,136.1 1,826.5 
Total liabilities and stockholders’ equity$4,775.9 $4,290.5 
See accompanying notes
3

DexCom, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions, except per share data)2021202020212020
Revenues$650.2 $500.9 $1,750.3 $1,357.8 
Cost of sales203.3 160.5 542.4 476.8 
Gross profit446.9 340.4 1,207.9 881.0 
Operating expenses:
Research and development128.8 87.7 367.3 240.7 
Selling, general and administrative199.8 158.6 575.4 444.8 
Total operating expenses328.6 246.3 942.7 685.5 
Operating income118.3 94.1 265.2 195.5 
Interest expense(25.1)(24.4)(75.1)(60.1)
Loss on extinguishment of debt(0.8)(0.5)(0.8)(5.9)
Interest and other income (expense), net(1.7)5.9 (0.7)14.2 
Income before income taxes90.7 75.1 188.6 143.7 
Income tax expense19.8 2.9 14.5 5.3 
Net income$70.9 $72.2 $174.1 $138.4 
Basic net income per share$0.73 $0.75 $1.80 $1.48 
Shares used to compute basic net income per share96.9 95.8 96.6 93.8 
Diluted net income per share$0.71 $0.73 $1.74 $1.43 
Shares used to compute diluted net income per share100.5 99.5 99.8 96.9 

See accompanying notes
4

DexCom, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2021202020212020
Net income$70.9 $72.2 $174.1 $138.4 
Other comprehensive income (loss), net of tax:
Translation adjustments and other(1.3)0.4 (1.4)0.2 
Unrealized gain (loss) on marketable debt securities(0.1)(1.1)(0.4)0.3 
Total other comprehensive income (loss), net of tax(1.4)(0.7)(1.8)0.5 
Comprehensive income$69.5 $71.5 $172.3 $138.9 

See accompanying notes
5

DexCom, Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months Ended September 30, 2021
(In millions)Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Treasury StockTotal
Stockholders’
Equity
SharesAmount
Balance at June 30, 202196.7 $0.1 $2,193.6 $2.8 $(98.9)$(100.0)$1,997.6 
Issuance of common stock under equity incentive plans0.1 — — — — —  
Issuance of common stock for Employee Stock Purchase Plan— — 11.6 — — — 11.6 
Conversions of 2023 Notes0.2 — 24.3 — — 5.6 29.9 
Benefit of note hedge upon conversions of 2023 Notes(0.1)— 65.1 — — (65.1) 
Share-based compensation expense— — 27.5 — — — 27.5 
Net income— — — — 70.9 — 70.9 
Other comprehensive loss, net of tax— — — (1.4)— — (1.4)
Balance at September 30, 202196.9 $0.1 $2,322.1 $1.4 $(28.0)$(159.5)$2,136.1 

Three Months Ended September 30, 2020
(In millions)Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Treasury StockTotal
Stockholders’
Equity
SharesAmount
Balance at June 30, 202095.4 $0.1 $2,079.8 $3.5 $(629.5)$(100.0)$1,353.9 
Issuance of common stock under equity incentive plans0.2 — — — — —  
Issuance of common stock for Employee Stock Purchase Plan— — 8.6 — — — 8.6 
Repurchase and conversions of 2022 Notes0.4 — 34.6 — — — 34.6 
Share-based compensation expense— — 30.7 — — — 30.7 
Net income— — — — 72.2 — 72.2 
Other comprehensive loss, net of tax— — — (0.7)— — (0.7)
Balance at September 30, 202096.0 $0.1 $2,153.7 $2.8 $(557.3)$(100.0)$1,499.3 

See accompanying notes


6

DexCom, Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Nine Months Ended September 30, 2021
(In millions)Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Treasury StockTotal
Stockholders’
Equity
SharesAmount
Balance at December 31, 202096.1 $0.1 $2,125.3 $3.2 $(202.1)$(100.0)$1,826.5 
Issuance of common stock under equity incentive plans0.7 — — — — — — 
Issuance of common stock for Employee Stock Purchase Plan— — 20.3 — — — 20.3 
Conversions of 2023 Notes0.2 — 24.3 — — 5.6 29.9 
Benefit of note hedge upon conversions of 2023 Notes(0.1)— 65.1 — — (65.1) 
Share-based compensation expense— — 87.1 — — — 87.1 
Net income— — — — 174.1 — 174.1 
Other comprehensive loss, net of tax— — — (1.8)— — (1.8)
Balance at September 30, 202196.9 $0.1 $2,322.1 $1.4 $(28.0)$(159.5)$2,136.1 

Nine Months Ended September 30, 2020
(In millions)Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Treasury StockTotal
Stockholders’
Equity
SharesAmount
Balance at December 31, 201991.6 $0.1 $1,675.9 $2.3 $(695.7)$(100.0)$882.6 
Issuance of common stock under equity incentive plans1.0 — 0.3 — — — 0.3 
Issuance of common stock for Employee Stock Purchase Plan— — 15.0 — — — 15.0 
Equity component of 2025 Notes issuance, net of issuance costs— — 289.4 — — — 289.4 
Repurchase and conversions of 2022 Notes3.4 — 87.8 — — — 87.8 
Share-based compensation expense— — 85.3 — — — 85.3 
Net income— — — — 138.4 — 138.4 
Other comprehensive income, net of tax— — — 0.5 — — 0.5 
Balance at September 30, 202096.0 $0.1 $2,153.7 $2.8 $(557.3)$(100.0)$1,499.3 

See accompanying notes

7

DexCom, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
(In millions)20212020
Operating activities
Net income$174.1 $138.4 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization69.9 46.7 
Share-based compensation87.1 85.3 
Loss on extinguishment of debt0.8 5.9 
Non-cash interest expense66.7 52.0 
Deferred income taxes0.2  
Other non-cash income and expenses30.5 5.5 
Changes in operating assets and liabilities:
Accounts receivable, net(90.6)(83.8)
Inventory(106.2)(80.9)
Prepaid and other assets(18.2)(11.8)
Operating lease right-of-use assets and liabilities, net(0.1)(1.3)
Accounts payable and accrued liabilities115.3 126.6 
Accrued payroll and related expenses0.5 4.3 
Deferred revenue and other liabilities6.7 16.7 
Net cash provided by operating activities336.7 303.6 
Investing activities
Purchases of marketable securities(1,540.2)(2,143.1)
Proceeds from sale and maturity of marketable securities2,165.3 1,298.5 
Purchases of property and equipment(309.0)(138.8)
Acquisitions, net of cash acquired(31.6) 
Other investing activities(4.5)(10.6)
Net cash provided by (used in) investing activities280.0 (994.0)
Financing activities
Proceeds from issuance of convertible notes, net of issuance costs 1,188.8 
Repurchase of convertible notes  (282.6)
Net proceeds from issuance of common stock20.3 15.3 
Other financing activities(9.1)(4.5)
Net cash provided by financing activities11.2 917.0 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.9)0.8 
Increase in cash, cash equivalents and restricted cash627.0 227.4 
Cash, cash equivalents and restricted cash, beginning of period818.2 446.4 
Cash, cash equivalents and restricted cash, end of period$1,445.2 $673.8 
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents$1,444.3 $673.5 
Restricted cash0.9 0.3 
Total cash, cash equivalents and restricted cash$1,445.2 $673.8 
Supplemental disclosure of non-cash investing and financing transactions:
Shares issued for repurchase and conversions of senior convertible notes$94.5 $1,350.9 
Shares received under note hedge upon conversions of 2023 Notes$(65.1)$ 
Acquisition of property and equipment included in accounts payable and accrued liabilities$30.2 $27.8 
Right-of-use assets obtained in exchange for operating lease liabilities$12.2 $34.8 
Right-of-use assets obtained in exchange for finance lease liabilities$6.3 $33.4 
See accompanying notes
8

DexCom, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Significant Accounting Policies
Organization and Business
DexCom, Inc. is a medical device company that develops and markets continuous glucose monitoring, or CGM, systems for the management of diabetes by patients, caregivers, and clinicians around the world. Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “Dexcom” refer to DexCom, Inc. and its subsidiaries.
Basis of Presentation and Principles of Consolidation
We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission, or SEC, Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.
Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. We expect that revenues we generate from the sales of our products will fluctuate from quarter to quarter. We experience seasonality that is typical in our industry, with lower sales in the first quarter of each year compared to the fourth quarter of the previous year.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2020 included in the Annual Report on Form 10-K that we filed with the SEC on February 11, 2021.
These consolidated financial statements include the accounts of DexCom, Inc. and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash. For international subsidiaries whose functional currencies are the local currencies, we translate the financial statements 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. We include translation-related adjustments in comprehensive income and in accumulated other comprehensive income in the equity section of our consolidated balance sheets. We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income (expense), net in our consolidated statements of operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in our consolidated financial statements and the disclosures made in the accompanying notes. Areas requiring significant estimates include rebates, transaction price, the collectibility of accounts receivable, excess or obsolete inventories and the valuation of inventory, accruals for litigation contingencies, and the amount of our worldwide tax provision and the realizability of deferred tax assets. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are generally recorded at the invoiced amount for distributors and at net realizable value for direct customers, which is determined using estimates of claim denials and historical reimbursement experience without regard to aging category. Accounts receivable are not interest bearing. We evaluate the creditworthiness of significant customers based on historical trends, the financial condition of our customers, and external market factors. We generally do not require collateral from our customers. We maintain an allowance for doubtful accounts for potential credit losses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectible. Generally, receivable balances greater than one year past due are deemed uncollectible.
9

Concentration of Credit Risk
Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term marketable securities, and accounts receivable. We limit our exposure to credit risk by placing our cash and investments with a few major financial institutions. We have also established guidelines regarding diversification of our investments and their maturities that are designed to maintain principal and maximize liquidity. We review these guidelines periodically and modify them to take advantage of trends in yields and interest rates and changes in our operations and financial position.
Revenue Recognition
We generate our revenue from the sale of disposable sensors and our reusable transmitter and receiver, collectively referred to as Reusable Hardware. We also refer to Reusable Hardware in this section as Components. We generally recognize revenue when control is transferred to our customers in an amount that reflects the net consideration to which we expect to be entitled.
In determining how revenue should be recognized, a five-step process is used, which includes identifying performance obligations in the contract, determining whether the performance obligations are separate, allocating the transaction price to each separate performance obligation, estimating the amount of variable consideration to include in the transaction price and determining the timing of revenue recognition for separate performance obligations.
Contracts and Performance Obligations
We consider customer purchase orders, which in most cases are governed by agreements with distributors or third-party payors, to be contracts with a customer. For each contract, we consider the obligation to transfer Components to the customer, each of which are distinct, to be separate performance obligations. We also provide free-of-charge software, mobile applications and updates for our Dexcom Share® remote monitoring system. The standalone selling prices of Dexcom Share® are estimated based on an expected cost plus a margin approach.
Transaction Price
Transaction price for the Components reflects the net consideration to which we expect to be entitled. Transaction price is typically based on the contracted rates less an estimate of claim denials and historical reimbursement experience by payor, which include current and future expectations regarding reimbursement rates and payor mix.
Variable Consideration
We include an estimate of variable consideration in the calculation of the transaction price at the time of sale, when control of the Components transfers to the customer. Variable consideration includes, but is not limited to: rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements. We classify our provisions related to variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.
Rebates
We are subject to rebates on pricing programs with managed care organizations, such as pharmacy benefit managers, governmental and third-party commercial payors, primarily in the U.S. We estimate provisions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.
Chargebacks
We participate in chargeback programs, primarily with government entities in the U.S., under which pricing on products below negotiated list prices is provided to participating entities and equal to the difference between their acquisition cost and the lower negotiated price. We estimate provisions for chargebacks primarily based on historical experience on a product and program basis, current contract prices under the chargeback programs and channel inventory data.
Consideration Payable to the Customer
We pay administrative and service fees to certain of our distributors based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. We accrue for these fees based on actual net sales and contractual fee rates negotiated with the customer.
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Product Returns
In accordance with the terms of their distribution agreements, most distributors do not have rights of return. The distributors typically have a limited time frame to notify us of any missing, damaged, defective or non-conforming products. We generally provide a “30-day money back guarantee” program whereby first-time end-user customers may return Reusable Hardware. We estimate our product returns provision principally based on historical experience by applying a historical return rate to the amounts of revenue estimated to be subject to returns. Additionally, we consider other specific factors such as estimated shelf life of inventory in the distribution channel and changes to customer terms.
Prompt Payment Discounts
We provide customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. We estimate prompt payment discount accruals based on actual net sales and contractual discount rates.
Various Other Promotional or Incentive Arrangements
Other promotional or incentive arrangements are periodically offered to customers, including but not limited to co-payment assistance we provide to patients with commercial insurance, promotional programs related to the launch of products or other targeted promotions. We record a provision for the incentive earned based on the number of estimated claims and our estimate of the cost per claim related to product sales that we have recognized as revenue.
Revenue Recognition
The timing of revenue recognition is based on the satisfaction of performance obligations. Substantially all of the performance obligations associated with our Components are satisfied at a point in time, which typically occurs at shipment of our products. Terms of direct and distributor orders are generally Freight on Board (FOB) shipping point for U.S. orders or Free Carrier (FCA) shipping point for international orders. For certain sales transactions, control transfers at delivery of the product to the customer.
In cases where our free-of-charge software, mobile applications and updates are deemed to be separate performance obligations, revenue is recognized over time on a ratable basis over the estimated life of the related Reusable Hardware component.
Our sales of Components include an assurance-type warranty.
Contract Balances
Contract balances represent amounts presented in our consolidated balance sheets when either we have transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable and deferred revenue. Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.
Accounts receivable as of September 30, 2021 included unbilled accounts receivable of $9.2 million. We expect to invoice and collect all unbilled accounts receivable within 12 months.
We record deferred revenue when we have entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation.
Our performance obligations are generally satisfied within 12 months of the initial contract date. The deferred revenue balance related to performance obligations that will be satisfied after 12 months was $13.8 million as of September 30, 2021 and $8.2 million as of December 31, 2020. These balances are included in other long-term liabilities in our consolidated balance sheets. Revenue recognized in the period from performance obligations satisfied in previous periods was not material for the periods presented.
Deferred Cost of Sales
Deferred cost of sales are associated with transactions for which revenue recognition criteria are not met but product has shipped and released from inventory. Deferred cost of sales are included in prepaid and other current assets in our consolidated balance sheets.
Incentive Compensation Costs
We generally expense incentive compensation associated with our internal sales force when incurred because the amortization period for such costs, if capitalized, would have been one year or less. We record these costs in selling, general and administrative expense in our consolidated statements of operations.
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Net Income Per Share
Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.
Potentially dilutive common shares consist of shares issuable from restricted stock units, warrants, and our senior convertible notes. Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of warrants are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of our senior convertible notes are determined using the if-converted method. In periods of net losses, we exclude all potentially dilutive common shares from the computation of the diluted net loss per share for those periods as the effect would be anti-dilutive.
The following table sets forth the computation of basic and diluted net income per share for the periods shown.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2021202020212020
Net income$70.9 $72.2 $174.1 $138.4 
Net income per common share
Basic$0.73 $0.75 $1.80 $1.48 
Diluted$0.71 $0.73 $1.74 $1.43 
Basic weighted average shares outstanding96.9 95.8 96.6 93.8 
Dilutive potential common stock outstanding:
Restricted stock units0.5 1.0 0.5 1.1 
Warrants3.1 2.7 2.7 2.0 
Senior convertible notes    
Diluted weighted average shares outstanding100.5 99.5 99.8 96.9 
Outstanding anti-dilutive securities not included in the diluted net income per share attributable to common stockholders calculations were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2021202020212020
Restricted stock units    
Warrants    
Senior convertible notes7.0 7.2 7.0 8.8 
Total7.0 7.2 7.0 8.8 
Recent Accounting Guidance
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. Our adoption of ASU 2019-12 at the beginning of the first quarter of 2021 did not have a significant impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This new guidance is intended to reduce
12

the complexity of accounting for convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments. Entities may adopt ASU 2020-06 using either a partial retrospective or fully retrospective method of transition. This ASU is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We will adopt ASU 2020-06 in the first quarter of 2022, and expect to use the full retrospective method, reflecting the application of the new standard in each prior reporting period. We have started the process of evaluating the impact of the full retrospective adoption of ASU 2020-06 on our consolidated financial statements. We expect the adoption of ASU 2020-06 will lead to an increase in the carrying value of the senior convertible notes on our Consolidated Balance Sheets.
2. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
We estimate the fair value of our Level 1 financial instruments, which are in active markets, using unadjusted quoted market prices for identical instruments.
We obtain the fair values for our Level 2 financial instruments, which are not in active markets, from a primary professional pricing source that uses quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Fair values obtained from this professional pricing source can also be based on pricing models whereby all significant observable inputs, including maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers or other market related data, are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset. We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values of our Level 2 marketable securities portfolio balance provided by our investment managers.
The following table summarizes financial assets that we measured at fair value on a recurring basis as of September 30, 2021, classified in accordance with the fair value hierarchy:
Fair Value Measurements Using
(In millions)Level 1Level 2Level 3Total
Cash equivalents$782.8 $250.0 $ $1,032.8 
Debt securities, available for sale:
U.S. government agencies 898.8  898.8 
Commercial paper 254.8  254.8 
Corporate debt 100.0  100.0 
Total debt securities, available for sale 1,253.6  1,253.6 
Other assets (1)
6.3   6.3 
Total assets measured at fair value on a recurring basis$789.1 $1,503.6 $ $2,292.7 
(1) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.
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The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2020, classified in accordance with the fair value hierarchy:
 Fair Value Measurements Using
(In millions)Level 1Level 2Level 3Total
Cash equivalents$491.5 $150.0 $ $641.5 
Debt securities, available for sale:
U.S. government agencies 1,570.4  1,570.4 
Commercial paper 258.8  258.8 
Corporate debt 60.9  60.9 
Total debt securities, available for sale 1,890.1  1,890.1 
Other assets (1)
3.4   3.4 
Total assets measured at fair value on a recurring basis$494.9 $2,040.1 $ $2,535.0 
(1) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.
There were no transfers into or out of Level 3 securities during the three and nine months ended September 30, 2021.
We hold certain other investments that we do not measure at fair value on a recurring basis. The carrying values of these investments are not significant and we include them in other assets in our consolidated balance sheets. It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are privately held and limited information is available. We monitor the information that becomes available from time to time and adjust the carrying values of these investments if there are identified events or changes in circumstances that have a significant adverse effect on the fair values.
Fair Value of Senior Convertible Notes
The fair value, based on trading prices (Level 1), of our senior convertible notes were as follows as of the dates indicated:
Fair Value Measurements Using Level 1
(In millions)September 30, 2021December 31, 2020
Senior Convertible Notes due 2023$2,719.0 $1,936.4 
Senior Convertible Notes due 20251,432.2 1,219.2 
Total fair value of outstanding senior convertible notes$4,151.2 $3,155.6 
For more information on the carrying values of our senior convertible notes, see Note 4, “Debt.”
Foreign Currency and Derivative Financial Instruments
From time to time we engage in hedging transactions to reduce foreign currency risks. The fair values of these derivatives are based on quoted market prices, which are Level 1 inputs, and the derivative instruments are recorded in current assets or current liabilities in our consolidated balance sheets consistent with the nature of the instrument at period end. Derivative gains and losses are included in interest and other income (expense), net in our consolidated statements of operations.
As of September 30, 2021 and December 31, 2020, notional amounts of $48.0 million and $48.0 million, respectively, were outstanding to hedge certain foreign currency risk. The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three and nine months ended September 30, 2021 or 2020.
Our foreign currency exposures vary but are primarily concentrated primarily in the Australian Dollar, the British Pound, the Canadian Dollar, and the Euro. We monitor the costs and the impact of foreign currency risks upon our financial results as part of our risk management program. We do not use derivative financial instruments for speculation or trading purposes or for activities other than risk management. We do not require and are not required to pledge collateral for these financial instruments and we do not carry any master netting arrangements to mitigate the credit risk.
14

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
In accordance with authoritative guidance, we measure certain non-financial assets and liabilities at fair value on a non-recurring basis. These measurements are usually performed using the discounted cash flow method or cost method and Level 3 inputs. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment. In general, non-financial assets, including goodwill, intangible assets, and property and equipment, are measured at fair value when there are indicators of impairment and are recorded at fair value only when any impairment is recognized. We recorded no significant impairment losses during the three and nine months ended September 30, 2021 and 2020.
3. Balance Sheet Details
Short-Term Marketable Securities
Short-term marketable securities, consisting of debt securities, were as follows as of the dates indicated:
September 30, 2021
(In millions)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Market
Value
Debt securities, available for sale:
U.S. government agencies$898.9 $ $(0.1)$898.8 
Commercial paper254.8   254.8 
Corporate debt100.1  (0.1)100.0 
Total debt securities, available for sale$1,253.8 $ $(0.2)$1,253.6 
December 31, 2020
(In millions)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Market
Value
Debt securities, available for sale:
U.S. government agencies$1,570.4 $0.1 $(0.1)$1,570.4 
Commercial paper258.7 0.1  258.8 
Corporate debt60.9   60.9 
Total debt securities, available for sale$1,890.0 $0.2 $(0.1)$1,890.1 
As of September 30, 2021, the estimated market value of available-for-sale securities with contractual maturities up to 12 months and up to 18 months were $1,083.7 million and $169.9 million, respectively. As of December 31, 2020, all of our debt securities had contractual maturities of less than 12 months. Gross realized gains and losses on sales of our debt securities for the three and nine months ended September 30, 2021 and September 30, 2020 were not significant.
We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale debt securities at September 30, 2021 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Accordingly, we have not recorded an allowance for credit losses. We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.
15

Inventory
(In millions)September 30, 2021December 31, 2020
Raw materials$129.1 $69.9 
Work-in-process18.4 14.2 
Finished goods203.8 150.6 
Total inventory$351.3 $234.7 
Property and Equipment
(In millions)September 30, 2021December 31, 2020
Land (1)
$15.6 $15.6 
Building (1)
49.1 49.2 
Furniture and fixtures27.7 15.3 
Computer software and hardware45.5 35.7 
Machinery and equipment241.5 198.9 
Leasehold improvements242.4 135.8 
Construction in progress 323.4 219.0 
Total cost945.2 669.5 
Less accumulated depreciation and amortization(203.0)(154.2)
Total property and equipment, net$742.2 $515.3 
(1) Represents finance lease right-of-use assets.
 Intangibles and Other Assets, Net
We recorded net intangible assets of $23.4 million, consisting primarily of customer-related relationship, as result of an acquisition in the third quarter of 2021.
Accounts Payable and Accrued Liabilities
(In millions)September 30, 2021December 31, 2020
Accounts payable trade$210.0 $163.3 
Accrued tax, audit, and legal fees34.0 15.3 
Accrued rebates 293.4 247.0 
Accrued warranty12.5 11.7 
Other accrued liabilities 48.1 43.8 
Total accounts payable and accrued liabilities$598.0 $481.1 
Accrued Payroll and Related Expenses
(In millions)September 30, 2021December 31, 2020
Accrued wages, bonus and taxes$88.4 $87.7 
Other accrued employee benefits26.9 26.6 
Total accrued payroll and related expenses$115.3 $114.3 
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Other Long-Term Liabilities
(In millions)September 30, 2021December 31, 2020
Finance lease obligations
$57.8 $54.0 
Contractual obligations12.6 12.6 
Other liabilities28.1 14.3 
Total other long-term liabilities$98.5 $80.9 


4. Debt
Senior Convertible Notes
The carrying amounts of our senior convertible notes were as follows as of the dates indicated:
(Dollars in millions)