10-Q 1 nvro-10q_20220331.htm 10-Q nvro-10q_20220331.htm
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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, 2022

or

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

Commission File Number: 001-36715  

Nevro Corp.

(Exact name of registrant as specified in its charter)

 

Delaware

 

56-2568057

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1800 Bridge Parkway

Redwood City, CA

(Address of principal executive offices)

94065

(Zip Code)

(650) 251-0005

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

NVRO

 

The 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 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 27, 2022, there were 35,260,684 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 


 

Nevro Corp.

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I—FINANCIAL INFORMATION

 

3

 

 

 

Item 1. Condensed Consolidated Financial Statements (unaudited)

 

3

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

 

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021

 

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

Item 4. Controls and Procedures

 

29

 

 

 

PART II—OTHER INFORMATION

 

29

 

 

 

Item 1. Legal Proceedings

 

29

 

 

 

Item 1A. Risk Factors

 

29

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

29

 

 

 

Item 3. Defaults Upon Senior Securities

 

29

 

 

 

Item 4. Mine Safety Disclosures

 

29

 

 

 

Item 5. Other Information

 

29

 

 

 

Item 6. Exhibits

 

30

 

 

 

SIGNATURES

 

32

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Nevro Corp.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,471

 

 

$

34,710

 

Short-term investments

 

 

274,171

 

 

 

327,317

 

Accounts receivable, net of allowance for doubtful accounts of $1,237 and $1,385 at

   March 31, 2022 and December 31, 2021, respectively

 

 

63,054

 

 

 

70,475

 

Inventories

 

 

90,588

 

 

 

93,517

 

Prepaid expenses and other current assets

 

 

13,095

 

 

 

5,185

 

Total current assets

 

 

490,379

 

 

 

531,204

 

Property and equipment, net

 

 

20,837

 

 

 

20,664

 

Operating lease assets

 

 

16,569

 

 

 

17,577

 

Other assets

 

 

4,488

 

 

 

4,493

 

Restricted cash

 

 

606

 

 

 

606

 

Total assets

 

$

532,879

 

 

$

574,544

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

27,135

 

 

$

31,999

 

Accrued liabilities

 

 

38,326

 

 

 

45,517

 

Other current liabilities

 

 

4,863

 

 

 

4,687

 

Total current liabilities

 

 

70,324

 

 

 

82,203

 

Long-term debt

 

 

185,953

 

 

 

151,310

 

Long-term operating lease liabilities

 

 

14,185

 

 

 

15,402

 

Other long-term liabilities

 

 

22,031

 

 

 

22,013

 

Total liabilities

 

 

292,493

 

 

 

270,928

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized at March 31, 2022

   and December 31, 2021; zero shares issued and outstanding at March 31, 2022

   and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value, 290,000,000 shares authorized at March 31,

   2022 and December 31, 2021; 35,876,367 and 35,709,570 shares issued at

   March 31, 2022 and December 31, 2021, respectively; 35,193,451 and

   35,026,654 shares outstanding at March 31, 2022 and

   December 31, 2021, respectively

 

 

35

 

 

 

35

 

Additional paid-in capital

 

 

886,451

 

 

 

928,138

 

Accumulated other comprehensive income (loss)

 

 

(1,577

)

 

 

(364

)

Accumulated deficit

 

 

(644,523

)

 

 

(624,193

)

Total stockholders’ equity

 

 

240,386

 

 

 

303,616

 

Total liabilities and stockholders’ equity

 

$

532,879

 

 

$

574,544

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3


 

Nevro Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

87,842

 

 

$

88,610

 

Cost of revenue

 

 

28,750

 

 

 

26,316

 

Gross profit

 

 

59,092

 

 

 

62,294

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

12,536

 

 

 

11,534

 

Sales, general and administrative

 

 

79,325

 

 

 

73,272

 

Total operating expenses

 

 

91,861

 

 

 

84,806

 

Loss from operations

 

 

(32,769

)

 

 

(22,512

)

Interest income

 

 

143

 

 

 

297

 

Interest expense

 

 

(1,603

)

 

 

(6,547

)

Other income (expense), net

 

 

85

 

 

 

(457

)

Loss before income taxes

 

 

(34,144

)

 

 

(29,219

)

Provision for income taxes

 

 

181

 

 

 

342

 

Net loss

 

 

(34,325

)

 

 

(29,561

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Changes in foreign currency translation adjustment

 

 

(192

)

 

 

(312

)

Changes in unrealized gains on short-term investments, net

 

 

(1,021

)

 

 

(147

)

Net change in other comprehensive loss

 

 

(1,213

)

 

 

(459

)

Comprehensive loss

 

$

(35,538

)

 

$

(30,020

)

Net loss per share, basic and diluted

 

$

(0.98

)

 

$

(0.85

)

Weighted average number of common shares used to

   compute basic and diluted net loss per share

 

 

35,073,862

 

 

 

34,633,749

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 


4


 

Nevro Corp.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share data)

 

For the three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at December 31, 2021

 

 

35,026,654

 

 

$

35

 

 

$

928,138

 

 

$

(624,193

)

 

$

(364

)

 

$

303,616

 

Adjustments from adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(48,340

)

 

 

13,995

 

 

 

 

 

 

(34,345

)

Exercise of common stock options

 

 

10,642

 

 

 

 

 

 

545

 

 

 

 

 

 

 

 

 

545

 

Issuance of common stock upon release of restricted stock units

 

 

263,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for tax obligations

 

 

(107,257

)

 

 

 

 

 

(7,298

)

 

 

 

 

 

 

 

 

(7,298

)

Stock based compensation

 

 

 

 

 

 

 

 

13,406

 

 

 

 

 

 

 

 

 

13,406

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(34,325

)

 

 

 

 

 

(34,325

)

Change in other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,213

)

 

 

(1,213

)

Balances at March 31, 2022

 

 

35,193,451

 

 

$

35

 

 

$

886,451

 

 

$

(644,523

)

 

$

(1,577

)

 

$

240,386

 

 

For the three months ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at December 31, 2020

 

 

34,583,064

 

 

$

35

 

 

$

880,660

 

 

$

(492,833

)

 

$

598

 

 

$

388,460

 

Exercise of common stock options

 

 

28,152

 

 

 

 

 

 

1,331

 

 

 

 

 

 

 

 

 

1,331

 

Issuance of common stock upon release of restricted stock units

 

 

99,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for tax obligations

 

 

(17,886

)

 

 

 

 

 

(2,801

)

 

 

 

 

 

 

 

 

(2,801

)

Stock based compensation

 

 

 

 

 

 

 

 

9,235

 

 

 

 

 

 

 

 

 

9,235

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(29,561

)

 

 

 

 

 

(29,561

)

Change in other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(459

)

 

 

(459

)

Balances at March 31, 2021

 

 

34,692,719

 

 

$

35

 

 

$

888,425

 

 

$

(522,394

)

 

$

139

 

 

$

366,205

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


5


 

Nevro Corp.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(34,325

)

 

$

(29,561

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,495

 

 

 

1,101

 

Amortization of operating lease assets

 

 

1,008

 

 

 

886

 

Stock-based compensation expense

 

 

13,408

 

 

 

9,237

 

Amortization of premium (accretion of discount) on short-term investments

 

 

449

 

 

 

435

 

Provision for doubtful accounts

 

 

(50

)

 

 

(831

)

Write-down of inventory

 

 

1,086

 

 

 

1,545

 

Amortization of debt discount and issuance costs

 

 

298

 

 

 

4,487

 

Unrealized (gains) losses on foreign currency transactions

 

 

252

 

 

 

1,330

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

7,015

 

 

 

12,141

 

Inventories

 

 

1,919

 

 

 

(5,639

)

Prepaid expenses and other current assets

 

 

(7,915

)

 

 

(6,153

)

Other assets

 

 

3

 

 

 

253

 

Accounts payable

 

 

(5,190

)

 

 

5,871

 

Accrued liabilities

 

 

(6,673

)

 

 

(1,011

)

Other long-term liabilities

 

 

(1,198

)

 

 

(962

)

Net cash used in operating activities

 

 

(28,418

)

 

 

(6,871

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(40,226

)

 

 

(147,658

)

Proceeds from maturity of short-term investments

 

 

91,900

 

 

 

200,555

 

Purchases of property and equipment

 

 

(1,607

)

 

 

(2,555

)

Net cash provided by (used in) investing activities

 

 

50,067

 

 

 

50,342

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Minimum tax withholding paid on behalf of employees for net share settlement

 

 

(7,298

)

 

 

(2,801

)

Proceeds from issuance of common stock to employees

 

 

545

 

 

 

1,331

 

Net cash provided by financing activities

 

 

(6,753

)

 

 

(1,470

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(135

)

 

 

(61

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

14,761

 

 

 

41,940

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

35,316

 

 

 

45,203

 

Cash, cash equivalents and restricted cash at end of period

 

$

50,077

 

 

$

87,143

 

Significant non-cash transactions

 

 

 

 

 

 

 

 

Purchases of property and equipment in accounts payable

 

$

585

 

 

$

1,170

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6


 

Nevro Corp.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, and the related interim information contained within the notes to the financial statements, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information and on the same basis as the audited financial statements included on the Company’s Annual Report on Form 10-K (Annual Report) filed with the Securities and Exchange Commission (SEC) on February 23, 2022. The condensed consolidated financial statements are prepared in U.S. dollars and include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of March 31, 2022, and the results of its operations and cash flows for the three months ended March 31, 2022 and 2021. All such adjustments are of a normal and recurring nature. The interim financial data as of March 31, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future period.

The consolidated balance sheet as of December 31, 2021 was derived from the audited financials as of that date. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Annual Report.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by the management. Actual results may differ from those estimates under different assumptions or conditions.

The COVID-19 pandemic has negatively impacted, and may continue to negatively impact the Company’s operations and revenues and overall financial condition. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets which could impact the Company’s estimates and assumptions. Changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates.

Foreign Currency Translation

Unrealized foreign exchange gains and losses from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the reporting entity are recorded in other income (expense), net. Additionally, realized gains and losses resulting from transactions denominated in currencies other than the local currency are recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company recorded net unrealized and net realized foreign currency transaction gains (losses) during the periods presented as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Net unrealized foreign currency gain (loss)

 

$

166

 

 

$

(1,452

)

Net realized foreign currency gain (loss)

 

 

(75

)

 

 

1,002

 

 

Recent Accounting Pronouncements

Accounting Pronouncements Recently 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).  The ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded

7


conversion features as a component of equity. Instead, entities will account for the convertible debt as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method as of January 1, 2022. The adoption of ASU 2020-06 resulted in an increase of $34.3 million to reflect the full principal amount of the 2025 Notes, net of debt issuance costs, a reduction of $48.3 million to additional paid-in capital to remove the equity component separately recorded for the conversion features and the debt issuance costs allocated to the conversion feature and a cumulative-effect adjustment of $14.0 million reducing the beginning balance of accumulated deficit as of January 1, 2022. Upon the adoption of ASU 2020-06, interest expense is reduced as the Company no longer recognizes any amortization of debt discounts as interest expense, due to the removal of the unamortized debt discounts. In addition, the use of the if-converted method for the 2025 Notes in calculating diluted net income (loss) per share calculation under ASU 2020-06 had no impact to the number of potentially dilutive shares in each of the periods presented.

The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2022 for the adoption of ASU 2020-06 were as follows (in thousands):

 

 

 

Balance at

 

 

Adjustments Due

 

 

Balance at

 

 

 

December 31, 2021

 

 

to ASU 2020-06

 

 

January 1, 2022

 

Long term debt

 

$

151,310

 

 

$

34,345

 

 

$

185,655

 

Additional paid-in capital

 

$

928,138

 

 

$

(48,340

)

 

$

879,798

 

Accumulated deficit

 

$

(624,193

)

 

$

13,995

 

 

$

(610,198

)

 

Significant Accounting Policies

With the exception of the policies and accounting pronouncements above, there have been no other material changes to the Company’s significant accounting policies from its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

2. Revenue

The following table presents revenue by geography, based on the billing address of the customer (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

United States

 

$

73,214

 

 

$

74,737

 

International

 

 

14,628

 

 

 

13,873

 

Total revenue

 

$

87,842

 

 

$

88,610

 

The United States is the only country that accounts for 10% or more of the revenue during the periods presented:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

United States

 

 

83

%

 

 

84

%

There were no customers that accounted for 10% or more of the Company’s revenue for each of the three months ended March 31, 2022 and 2021.  Additionally, there were no customers that accounted for 10% or more of the Company’s accounts receivable balance as of March 31, 2022 and December 31, 2021. For each of the three months ended March 31, 2022 and 2021, the Company recognized a recovery of bad debt expenses of $0.1 million, respectively

In July 2021, the Company received FDA approval of its proprietary 10 kHz Therapy for the management of chronic intractable pain of the lower limbs, including unilateral or bilateral pain, associated with painful diabetic neuropathy (PDN). For the three months ended March 31, 2022, PDN represented 7% of worldwide permanent implant procedures, which resulted in approximately $6.0 million in revenue. The Company classifies PDN revenue by using estimates and assumptions based on historical experiences and knowledge of current conditions, given available information.

 

8


 

3. Lease Accounting

The Company has operating leases for office space, a manufacturing facility, warehouse, research and development facilities and equipment. Leases with terms of 12 months or less are not recorded on the balance sheet, as the related lease expenses are recognized on a straight-line basis over the lease term.  The Company accounts for lease components (such as fixed payments) separately from non-lease components (such as common area expenses). 

The weighted average lease terms and discounts rates are as follows:

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Operating Lease Term and Discount Rate

 

 

 

 

 

 

 

 

Weighted-average remaining lease term

 

3.98 years

 

 

4.20 years

 

Weighted-average discount rate

 

7.0%

 

 

7.0%

 

As of March 31, 2022, the maturity of lease liabilities are as follows (in thousands):

 

 

 

Operating Leases

 

2022, remaining months

 

$

4,345

 

2023

 

 

6,019

 

2024

 

 

6,201

 

2025

 

 

2,849

 

2026

 

 

405

 

Thereafter

 

 

1,978

 

Total lease payments

 

 

21,797

 

Less: Interest

 

 

(2,848

)

Present value of lease liabilities

 

$

18,949

 

Supplemental lease cost information are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating lease cost

 

$

1,342

 

 

$

1,234

 

Supplemental balance sheet information are as follows (in thousands):

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Operating Leases:

 

 

 

 

 

 

 

 

Operating lease assets

 

$

16,569

 

 

$

17,577

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

4,764

 

 

$

4,588

 

Long term operating lease liabilities

 

 

14,185

 

 

 

15,402

 

Total operating lease liabilities

 

$

18,949

 

 

$

19,990

 

Supplemental cash flow information are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flow from operating leases

 

$

1,375

 

 

$

1,248

 

See Note 6 for further details of the Company’s lease commitments.

 

 

9


 

4. Fair Value Measurements

Cash Equivalents and Short-Term Investments

The Company’s cash equivalents are comprised of investments in money market funds that are classified as Level 1 of the fair value hierarchy. The Company’s money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities.  The Company’s short-term investments are comprised of agency bonds, commercial paper, corporate notes and treasury bonds. All short-term investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

Balance as of March 31, 2022

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (i)

 

$

28,796

 

 

$

 

 

$

 

 

$

28,796

 

Agency bonds (ii)

 

 

 

 

 

32,514

 

 

 

 

 

 

32,514

 

Corporate notes (ii)

 

 

 

 

 

20,196

 

 

 

 

 

 

20,196

 

Treasury bonds (ii)

 

 

221,461

 

 

 

 

 

 

 

 

 

221,461

 

Total assets

 

$

250,257

 

 

$

52,710

 

 

$

 

 

$

302,967

 

 

Balance as of December 31, 2021

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (i)

 

$

9,562