10-Q 1 gkos-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37463 

GLAUKOS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

33-0945406

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

One Glaukos Way

Aliso Viejo, California

92656

(Address of registrant’s principal executive offices)

(Zip Code)

(949) 367-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

GKOS

New York Stock Exchange

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 filer

Accelerated filer

Non-accelerated filer

Smaller 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 April 30, 2024, there were 50,367,507 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

GLAUKOS CORPORATION

Form 10-Q

For the Quarterly Period Ended March 31, 2024

Table of Contents

   

Page

PART I: FINANCIAL INFORMATION

6

Item 1.

Financial Statements

6

Condensed Consolidated Balance Sheets

6

Condensed Consolidated Statements of Operations

7

Condensed Consolidated Statements of Comprehensive Loss

8

Condensed Consolidated Statements of Stockholders’ Equity

9

Condensed Consolidated Statements of Cash Flows

10

Notes to Condensed Consolidated Financial Statements

11

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II: OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

52

Item 5.

Other Information

52

Item 6.

Exhibits

53

SIGNATURES

54

2

Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) All statements other than statements of historical or current facts included in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Any statements in this Quarterly Report on Form 10-Q regarding future operations, including our expectations for future expenses, capital expenditures and income, our expectations regarding the impact of the macroeconomic environment, our strategy for growth, product development activities, the impact of the regulatory environment, including the timing and likelihood of regulatory approvals and the impact of new or changing regulations and pricing, and market position are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions based on the information available to management at the time of this report. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these forward-looking statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

You are urged to carefully review the disclosures we make concerning the risks we face and other factors that may affect the outcome of our forward-looking statements and our business and operating results, including the risks set forth in the “Risk Factors Summary” below and further described in the "Risk Factors" section of this report, which includes a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate, and actual results may differ materially from those expressed or implied by the forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. You are therefore cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date of this document. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We use Glaukos, our logo, iStent, iStent inject, iStent infinite, iPrism, iDose TR, iPRIME, MIGS, Avedro, Photrexa, iLink, KXL, Epioxa, iLution, Retina XR and other marks as trademarks. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

References throughout this document to “we,” “us,” “our,” the “Company,” or “Glaukos” refer to Glaukos Corporation and its consolidated subsidiaries.

3

Risk Factors Summary

Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are further described below in the section titled “Risk Factors” in Part I, Item 1A of this report. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business. In addition to the following summary, you should consider the information set forth in the “Risk Factors” section and the other information contained in this report before investing in our securities.

Risks Related to Our Business

Failure to achieve commercial success of iDose TR could materially impact our business.
Downturns or volatility in general economic conditions and public health crises could harm our business.
Supply and/or manufacturing disruptions impacting our principal revenue-producing products could reduce our gross margins and negatively impact our operating results.
We may not reach sustained profitability.
We may fail to generate sufficient sales of our commercialized products or to develop and commercialize additional products.
We are subject to a variety of risks associated with our international operations.
We may not meet our customers’ expectations for the quality or delivery of our products, which could harm our reputation and sales.
If ophthalmic surgeons do not use or if they misuse our products, our business could be harmed.
We may fail to manage our anticipated growth effectively and may not be able to meet customer demand.
We may be unable to retain or recruit qualified personnel for growth.
We have and may continue to enter into acquisitions, collaborations, in-licensing agreements, joint ventures, alliances or partnerships with third parties that could fail.
Cybersecurity incidents, service interruptions, or data corruption could materially disrupt our operations and adversely affect our business.
Failure to comply with data privacy and security laws could have a material adverse effect on our business.
Our net operating loss tax carryforwards may not be available to offset future taxable income.

Risks Related to Our Indebtedness

Our debt service obligations could limit our cash flow, and we may not have sufficient cash flow from our business to pay our debt obligations.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
We may fail to raise the funds necessary to settle conversions of the Convertible Notes in cash or to repurchase the Convertible Notes upon a fundamental change.
The capped call transactions may affect the value of our common stock, and subject us to counterparty risk.

Risks Related to Our Regulatory Environment

Compliance with applicable regulations can be costly and failure to comply with such regulations could harm our business, financial condition and operating results.
Legislative or regulatory reform of the healthcare system could hinder or prevent our products’ commercial success.
Inadequate or inconsistent reimbursement for our products may adversely impact our business.

Risks Related to Our Intellectual Property

4

Failure to protect our intellectual property could substantially impair our ability to compete.
Intellectual property claims or litigation could be costly, time-consuming and unsuccessful and could interfere with our ability to successfully commercialize our products.

Risks Related to Our Common Stock

Provisions in our Certificate of Incorporation and Bylaws limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts.
Our Certificate of Incorporation designates the sole and exclusive forum for certain types of actions and proceedings, which could limit our stockholders’ ability to obtain a favorable judicial forum.

5

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

March 31, 

December 31, 

2024

2023

    

(unaudited)

    

 

Assets

Current assets:

Cash and cash equivalents

$

42,495

$

93,467

Short-term investments

230,365

201,964

Accounts receivable, net

46,545

39,850

Inventory

50,185

41,986

Prepaid expenses and other current assets

19,020

18,194

Total current assets

388,610

395,461

Restricted cash

5,856

5,856

Property and equipment, net

101,858

103,212

Operating lease right-of-use assets

26,683

27,146

Finance lease right-of-use asset

43,575

44,180

Intangible assets, net

281,919

282,956

Goodwill

66,134

66,134

Deposits and other assets

18,703

15,469

Total assets

$

933,338

$

940,414

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

12,752

$

13,440

Accrued liabilities

59,486

60,574

Total current liabilities

72,238

74,014

Convertible senior notes

283,117

282,773

Operating lease liability

30,110

30,427

Finance lease liability

70,289

70,538

Deferred tax liability, net

7,144

7,144

Other liabilities

19,710

13,752

Total liabilities

482,608

478,648

Commitments and contingencies (Note 12)

Stockholders' equity:

Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding

-

-

Common stock, $0.001 par value; 150,000 shares authorized; 49,875 and 49,148 shares issued and 49,847 and 49,120 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

50

49

Additional paid-in capital

1,089,280

1,059,751

Accumulated other comprehensive income

1,437

1,165

Accumulated deficit

(639,905)

(599,067)

Less treasury stock (28 shares as of March 31, 2024 and December 31, 2023)

(132)

(132)

Total stockholders' equity

450,730

461,766

Total liabilities and stockholders' equity

$

933,338

$

940,414

See accompanying notes to condensed consolidated financial statements.

6

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

Three Months Ended

March 31, 

    

2024

    

2023

    

Net sales

$

85,622

$

73,899

Cost of sales

20,258

18,071

Gross profit

65,364

55,828

Operating expenses:

Selling, general and administrative

61,975

53,650

Research and development

30,726

35,171

Acquired in-process research and development

11,729

-

Total operating expenses

104,430

88,821

Loss from operations

(39,066)

(32,993)

Non-operating expense:

Interest income

3,083

1,648

Interest expense

(3,450)

(3,408)

Other (expense) income, net

(1,028)

528

Total non-operating expense

(1,395)

(1,232)

Loss before taxes

(40,461)

(34,225)

Income tax provision

377

401

Net loss

$

(40,838)

$

(34,626)

Basic and diluted net loss per share

$

(0.82)

$

(0.72)

Weighted average shares used to compute basic and diluted net loss per share

49,580

47,881

See accompanying notes to condensed consolidated financial statements.

7

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

Three Months Ended

March 31, 

    

2024

    

2023

    

Net loss

$

(40,838)

$

(34,626)

Other comprehensive income (loss):

Foreign currency translation income (loss)

355

(103)

Unrealized (loss) income on short-term investments

(83)

1,753

Other comprehensive income

272

1,650

Total comprehensive loss

$

(40,566)

$

(32,976)

See accompanying notes to condensed consolidated financial statements.

8

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

income

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2023

49,148

$

49

$

1,059,751

$

1,165

$

(599,067)

 

(28)

$

(132)

$

461,766

Common stock issued under stock plans, net

672

1

13,364

-

-

-

-

13,365

Asset acquisition through issuance of common stock

55

-

5,000

-

-

-

-

5,000

Stock-based compensation

-

-

11,165

-

-

-

-

11,165

Other comprehensive income

-

-

-

272

-

-

-

272

Net loss

-

-

-

-

(40,838)

-

-

(40,838)

Balance at March 31, 2024

49,875

$

50

$

1,089,280

$

1,437

$

(639,905)

 

(28)

$

(132)

$

450,730

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

(loss) income

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2022

47,782

$

48

$

997,470

$

(2,975)

$

(464,406)

 

(28)

$

(132)

$

530,005

Common stock issued under stock plans, net

187

-

1,301

-

-

-

-

1,301

Stock-based compensation

-

-

10,184

-

-

-

-

10,184

Other comprehensive income

-

-

-

1,650

-

-

-

1,650

Net loss

-

-

-

-

(34,626)

-

-

(34,626)

Balance at March 31, 2023

47,969

$

48

$

1,008,955

$

(1,325)

$

(499,032)

 

(28)

$

(132)

$

508,514

See accompanying notes to condensed consolidated financial statements.

9

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Three Months Ended March 31, 

    

2024

    

2023

 

Operating Activities

Net loss

$

(40,838)

$

(34,626)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

2,685

2,078

Amortization of intangible assets

6,228

6,228

Noncash lease expense

1,071

1,036

Amortization of debt issuance costs

343

343

Deferred income tax benefit

-

(5)

Gain on disposal of fixed assets

10

-

Stock-based compensation

11,165

10,184

Unrealized foreign currency losses

1,456

(186)

Amortization of premium on short-term investments

(1,111)

(55)

Other liabilities

2,526

684

Acquired in-process R&D acquired through the issuance of common stock

5,000

-

Changes in operating assets and liabilities:

Accounts receivable, net

(7,106)

(1,651)

Inventory

(8,551)

(3,089)

Prepaid expenses and other current assets

(912)

(2,498)

Accounts payable and accrued liabilities

(3,620)

(9,266)

Other assets

(2,216)

59

Net cash used in operating activities

(33,870)

(30,764)

Investing activities

Purchases of short-term investments

(49,250)

(96,295)

Proceeds from sales and maturities of short-term investments

21,880

89,902

Purchases of property and equipment

(968)

(6,908)

Investment in company-owned life insurance

(1,045)

(531)

Net cash used in investing activities

(29,383)

(13,832)

Financing activities

Proceeds from exercise of stock options

13,055

675

Proceeds from share purchases under Employee Stock Purchase Plan

2,687

2,163

Payment of employee taxes related to vested restricted stock units

(2,378)

(1,537)

Principal paid on finance lease

(197)

(149)

Net cash provided by financing activities

13,167

1,152

Effect of exchange rate changes on cash and cash equivalents

(886)

317

Net decrease in cash, cash equivalents and restricted cash

(50,972)

(43,127)

Cash, cash equivalents and restricted cash at beginning of period

99,323

126,603

Cash, cash equivalents and restricted cash at end of period

$

48,351

$

83,476

Supplemental disclosures of cash flow information

Taxes paid, net of refunds

$

351

$

255

Other interest paid

$

1,073

$

1,086

Supplemental schedule of noncash investing and financing activities

Purchases of property and equipment included in accounts payable and accrued liabilities

$

1,575

$

2,421

See accompanying notes to condensed consolidated financial statements.

10

GLAUKOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.  Organization and Basis of Presentation

Organization and business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic pharmaceutical and medical technology company focused on developing novel dropless platform therapies and commercializing associated products for the treatment of glaucoma, corneal disorders, and retinal diseases. The Company first developed Micro-Invasive Glaucoma Surgery (MIGS) as an alternative to the traditional glaucoma treatment paradigm, launching its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a rare corneal disorder, keratoconus, that was approved by the United States (U.S.) Food and Drug Administration (FDA) in 2016. The Company received FDA approval in December 2023 of its first procedural pharmaceutical product, the iDose TR, and began commercializing the product in a controlled manner in February 2024. The Company is developing a portfolio of platforms to support ongoing pharmaceutical and medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of glaucoma; corneal disorders such as keratoconus, dry eye and refractive vision correction; and retinal diseases such as neovascular age-related macular degeneration, diabetic macular edema and retinal vein occlusion.

The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the U.S. for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

As permitted by Form 10-Q and Article 10 of Regulation S-X, under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2023, which are contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 23, 2024. The Company’s results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period.

Recent developments

On March 7, 2024, the Company issued $5.0 million of its common stock and paid approximately $5.1 million in cash in connection with the acquisition of 100% of the outstanding equity interests in a clinical stage biopharma company (the Seller) focused on developing novel therapeutics for rare ophthalmic diseases, including all related patents and patent applications, technology and know-how. The Company accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business, and the acquisition costs are recorded within acquired in-process research and development on the condensed consolidated statement of operations. Under the terms of the agreement, if these proprietary technologies are commercialized, the Company may have to make potential payments of up to $51.0 million upon the achievement of certain event-based development milestones, potential payments of up to $150.0 million upon the achievement of certain commercial sales-based milestones should annual net sales of a licensed product eventually exceed various levels, and up to a low double digit royalty on net sales. Furthermore, because the first

11

two development milestones are payable in either cash or Company shares at the Company’s sole discretion, the Company has accrued a liability in the amount of $1.4 million related to these two milestones, which is classified as other liabilities within the condensed consolidated balance sheets, as the contingent consideration is not expected to be paid within the next twelve months. See also Note 4, Fair Value Measurements for additional details regarding this contingent consideration.

Effective March 17, 2023, the Company entered into a sales agreement (Sales Agreement) with Celanese Canada ULC (Celanese) under which Celanese will make available and supply to the Company certain raw materials used to create a nanoporous membrane utilized in the iDose TR, and authorized the Company to reference its Drug Master File (DMF) with respect to such raw materials, which is required for the Company to commercialize iDose TR. The term of the Sales Agreement is four years after the iDose TR launch date in February 2024. In exchange for the ability to obtain future raw materials and the rights related to the DMF, the Company is subject to minimum compensation payments over four years of $6.3 million and potential additional royalties based on a percentage of sales of the iDose TR product. The Company recognized an intangible asset related to the minimum compensation payments at fair value of $5.2 million upon the date of acquisition, which was determined to be the iDose TR launch date. The $5.2 million is included in Intangible Assets, Net on the condensed consolidated balance sheets and will be amortized to cost of sales over its useful life of four years, which is the initial term of the Sales Agreement. A member of the Celanese board of directors also sits on the board of directors of the Company.

Note 2.  Summary of Significant Accounting Policies

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions used in the preparation of the accompanying condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2024 reflect the Company’s estimates of the impact of the macroeconomic environment, including the impact of inflation, supply shortages or delays, changes in supply and demand, foreign exchange rate fluctuations and other conditions which have led to disruptions in commerce and pricing stability. While the specific impact of these factors is not readily determinable, in the past three months the Company has not experienced a material financial statement impact or business disruptions as a result of these negative macroeconomic and geopolitical trends. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of March 31, 2024.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statements of cash flows as of the beginning and end of the three months ended March 31, 2024 (in thousands):

March 31, 

December 31, 

2024

2023

Cash and cash equivalents

$

42,495

$

93,467

Restricted cash

5,856

5,856

Cash, cash equivalents and restricted cash

$

48,351

$

99,323

The Company’s cash and cash equivalents include cash in readily available checking and money market accounts, as well as certificates of deposit. The Company maintains balances of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.

12

Recently Adopted Accounting Pronouncements

The Company has not adopted any recent accounting pronouncements that had a material impact on its condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid by jurisdiction. The ASU is effective for public business entities’ annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segments Disclosures. While ASU 2023-07 requires incremental disclosures, it does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine reportable segments. This ASU is effective for all public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements. Early adoption is permitted; however, the Company is not early adopting the standard.

Note 3.  Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

At March 31, 2024

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

  

U.S. government agency bonds

less than 3

$

21,000

$

-

$

(128)

$

20,872

U.S. treasury securities

less than 2

156,184

57

(133)

156,108

Bank certificates of deposit

less than 2

8,920

3

(6)

8,917

Commercial paper

less than 1

 

3,232

 

-

 

(1)

 

3,231

Corporate notes

less than 3

 

25,338

 

51

 

(137)

 

25,252

Asset-backed securities

less than 2

 

13,068

 

19

 

(130)

 

12,957

Municipal bonds

less than 3

3,010

18

-

3,028

Total

$

230,752

$

148

$

(535)

$

230,365

At December 31, 2023

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

 

U.S. government agency bonds

less than 3

$

25,995

$

2

$

(347)

$

25,650

U.S. treasury securities

less than 2

124,780

274

(36)

125,018

Bank certificates of deposit

less than 1

7,100

9

-

7,109

Commercial paper

less than 1

 

5,679

 

4

 

(1)

 

5,682

Corporate notes

less than 3

 

21,292

 

77

 

(229)

 

21,140

Asset-backed securities

less than 2

 

12,415

 

41

 

(135)

 

12,321

Municipal bonds

less than 3

5,010

34

-

5,044

Total

$

202,271

$

441

$

(748)

$

201,964

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized

13

cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, and any significant deterioration in economic conditions.

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest expense in the condensed consolidated statements of operations through an allowance for credit losses. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive loss. Unrealized losses on available-for-sale debt securities as of March 31, 2024 and December 31, 2023 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. Further, the Company does not intend to sell these investments prior to maturity and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis. Accordingly, the Company did not record an allowance for credit losses with these investments as of March 31, 2024 and December 31, 2023.

Accounts Receivable, Net

Accounts receivable consisted of the following (in thousands):

March 31, 

December 31, 

    

2024

    

2023

  

Accounts receivable

$

47,960

$

41,051

Allowance for credit losses

(1,415)

(1,201)

$

46,545

$

39,850

The Company’s allowance for credit losses represents management’s estimate of current expected credit losses related to customer receivables. There were immaterial bad-debt write offs charged during the three months ended March 31, 2024.

Additionally, no customers accounted for more than 10% of net accounts receivable as of March 31, 2024 or December 31, 2023.

Inventory

Inventory consisted of the following (in thousands):

March 31, 

December 31, 

    

2024

    

2023

  

Finished goods

$

24,899

$

16,699

Work in process

12,748

12,870

Raw material

12,538

12,417

$

50,185

$

41,986

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

March 31, 

December 31, 

    

2024

    

2023

Accrued bonuses

$

6,733

$

20,588

Accrued payroll taxes

7,315

2,365

Accrued vacation benefits

5,463

5,269

Accrued sales rebates

11,338

8,935

Other accrued liabilities

28,637

23,417

$

59,486

$

60,574

14

Note 4. Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

The valuation of assets and liabilities is subject to fair value measurements using a three-tiered approach and fair value measurements are classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

At March 31, 2024

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

March 31, 

identical assets

inputs

inputs

    

2024

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets

Cash equivalents:

Money market funds (i)

$

5,128

$

5,128

$

-

$

-

Available for sale securities:

U.S. government agency bonds (ii)

$

20,872

$

-

$

20,872

$

-

U.S. treasury securities (ii)

156,108

-

156,108

-

Commercial paper (ii)

3,231

-

3,231

-

Bank certificates of deposit (ii)

8,917

-

8,917

-

Corporate notes (ii)

25,252

-

25,252

-

Asset-backed securities (ii)

12,957

-

12,957

-

Municipal bonds (ii)

3,028

-

3,028

-

Investments held for deferred compensation plans (iii)

12,634

-

12,634

-

Total Assets

$

248,127

$

5,128

$

242,999

$

-

Liabilities

Deferred compensation plans (iv)

$

12,421

$

-

$

12,421

$

-

Contingent consideration (iv)

$

1,442

$

-

$

-

$

1,442

Total Liabilities

$

13,863

$

-

$

12,421

$

1,442

(i)Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets.
(ii)Included in short-term investments on the condensed consolidated balance sheets.
(iii)Included in deposits and other assets on the condensed consolidated balance sheets.
(iv)Included in other liabilities on the condensed consolidated balance sheets.

15

At December 31, 2023

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

December 31, 

identical assets

inputs

inputs

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets

Cash equivalents:

Money market funds (i)

$

52,156

$

52,156

$

-

$

-

Available for sale securities:

U.S. government agency bonds (ii)

$

25,650

$

-

$

25,650

$

-

U.S. treasury securities (ii)

125,018

-

125,018

-

Commercial paper (ii)