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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________________
FORM 10-Q
___________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to ___________
Commission File Number: 001-38829
___________________________________________________
Shockwave Medical, Inc.
(Exact Name of Registrant as Specified in its Charter)
___________________________________________________
Delaware27-0494101
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5403 Betsy Ross Drive
Santa Clara, California
95054
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (510) 279-4262
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class of securitiesTrading symbol(s)Name of each national exchange and principal
U.S. market for the securities
Shockwave Medical, Inc., common stock, par value $0.001 per share
SWAV
The Nasdaq Stock Market LLC
(Nasdaq 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 x No o
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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filerxAccelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 1, 2022, the registrant had 36,142,292 shares of common stock, $0.001 par value per share, outstanding.



Table of Contents
Page



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements relating to our expectations, projections, beliefs, and prospects, which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “might,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they may relate to future expectations around growth, strategy, and anticipated trends in our business, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements are only predictions based on our current expectations, estimates, assumptions, and projections about future events and are applicable only as of the dates of such statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including due to the pandemic’s impact on our sales, expenses, supply chain, manufacturing, research and development activities, clinical trials, and employees;
our ability to design, develop, manufacture and market innovative products to treat patients with challenging medical conditions, particularly in peripheral artery disease, coronary artery disease and aortic stenosis;
our expected future growth, including growth in international sales;
the size and growth potential of the markets for our products, and our ability to serve those markets;
the rate and degree of market acceptance of our products;
coverage and reimbursement for procedures performed using our products;
the performance of third parties in connection with the development of our products, including third-party suppliers;
the impact of government laws and regulatory developments in the United States and foreign countries;
our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;
our plans and the expected timing to research, develop and commercialize our products and any other approved or cleared product;
our ability to scale our organizational culture of cooperative product development and commercial execution;
the development, regulatory approval, efficacy and commercialization of competing products;
our ability to develop and maintain our corporate infrastructure, including our internal controls;
our estimates regarding expenses, future financial performance and capital requirements; and
our expectations regarding our ability to obtain and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions and other factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, together with any updates in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. There may also be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Except to the extent required by law, we undertake no obligation to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.
1


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
SHOCKWAVE MEDICAL, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
September 30,
2022
December 31,
20211
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$127,779 $89,209 
Short-term investments 122,888 111,772 
Accounts receivable, net 64,224 37,435 
Inventory68,974 42,978 
Prepaid expenses and other current assets11,393 4,508 
Total current assets395,258 285,902 
Operating lease right-of-use assets33,107 27,496 
Property and equipment, net39,265 24,361 
Equity method investment4,573 5,987 
Other assets3,606 1,936 
TOTAL ASSETS$475,809 $345,682 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$3,469 $3,520 
Term notes, current portion 5,500 
Accrued liabilities49,492 40,870 
Lease liability, current portion1,260 1,738 
Total current liabilities54,221 51,628 
Lease liability, noncurrent portion38,532 28,321 
Term notes, noncurrent portion14,853 11,630 
Related party contract liability, noncurrent portion12,273 12,273 
TOTAL LIABILITIES119,879 103,852 
STOCKHOLDERS’ EQUITY:
Preferred stock  
Common stock36 35 
Additional paid-in capital535,230 494,806 
Accumulated other comprehensive loss(1,612)(202)
Accumulated deficit(177,724)(252,809)
TOTAL STOCKHOLDERS’ EQUITY355,930 241,830 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$475,809 $345,682 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 The condensed consolidated balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements as of that date.
2


SHOCKWAVE MEDICAL, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenue:
Product revenue $131,330 $65,155 $345,707 $152,963 
Cost of revenue:
Cost of product revenue17,874 10,949 47,494 28,775 
Gross profit113,456 54,206 298,213 124,188 
Operating expenses:
Research and development20,177 13,735 57,956 35,827 
Sales and marketing42,082 28,393 118,558 78,098 
General and administrative14,434 9,265 39,988 25,117 
Total operating expenses76,693 51,393 216,502 139,042 
Income (loss) from operations36,763 2,813 81,711 (14,854)
Income (loss) from equity method investment97 (342)(1,414)(5,865)
Interest expense(316)(165)(917)(795)
Other expense, net(1,423)(280)(3,206)(369)
Net income (loss) before taxes35,121 2,026 76,174 (21,883)
Income tax provision118 78 1,089 195 
Net income (loss)$35,003 $1,948 $75,085 $(22,078)
Unrealized loss on available-for-sale securities(275)(17)(1,410)(16)
Total comprehensive income (loss)$34,728 $1,931 $73,675 $(22,094)
Net income (loss) per share
Basic$0.97 $0.06 $2.10 $(0.63)
Diluted$0.92 $0.05 $1.99 $(0.63)
Shares used in computing net income (loss) per share
Basic36,003,931 35,207,276 35,807,264 35,013,072 
Diluted37,948,049 37,567,176 37,813,107 35,013,072 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


SHOCKWAVE MEDICAL, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
 Accumulated
Deficit
Total
Stockholders
Equity
Shares Amount 
Balance — December 31, 202135,444,472 $35 $494,806 $(202)$(252,809)$241,830 
Exercise of stock options54,913 1 390 — — 391 
Unrealized loss on available-for-sale securities— — — (815)— (815)
Issuance of common stock under employee stock purchase plan14,172 — 2,135 — — 2,135 
Issuance of common stock in connection with vesting of restricted stock units210,835 — — — — — 
Taxes withheld on net settled vesting of restricted stock units(31)— (6)— — (6)
Stock-based compensation— — 9,767 — — 9,767 
Net income— — — — 14,521 14,521 
Balance — March 31, 202235,724,361 $36 $507,092 $(1,017)$(238,288)$267,823 
Exercise of stock options111,601 — 500 — — 500 
Unrealized loss on available-for-sale securities— — — (320)— (320)
Issuance of common stock in connection with vesting of restricted stock units71,491 — — — — — 
Stock-based compensation— — 11,504 —  11,504 
Net income— — — — 25,561 25,561 
Balance — June 30, 202235,907,453 $36 $519,096 $(1,337)$(212,727)$305,068 
Exercise of stock options170,620 — 1,303 — — 1,303 
Unrealized loss on available-for-sale securities— — — (275)— (275)
Issuance of common stock under employee stock purchase plan15,473 — 2,352 — — 2,352 
Issuance of common stock in connection with vesting of restricted stock units40,053 — — — — — 
Stock-based compensation— — 12,479 — — 12,479 
Net income— — — — 35,003 35,003 
Balance — September 30, 202236,133,599 $36 $535,230 $(1,612)$(177,724)$355,930 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.













4



SHOCKWAVE MEDICAL, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares Amount
Balance — December 31, 202034,684,337 $35 $469,283 $9 $(243,673)$225,654 
Exercise of stock options159,325 — 773 — — 773 
Unrealized gain on available-for-sale securities— — — 7 — 7 
Issuance of common stock under employee stock purchase plan20,594 — 1,141 — — 1,141 
Issuance of common stock in connection with vesting of restricted stock units107,237 — — — — — 
Taxes withheld on net settled vesting of restricted stock units(42,529)— (5,114)— — (5,114)
Stock-based compensation— — 5,394 — — 5,394 
Net loss— — — — (23,601)(23,601)
Balance — March 31, 202134,928,964 $35 $471,477 $16 $(267,274)$204,254 
Exercise of stock options149,101 — 1,085 — — 1,085 
Unrealized loss on available-for-sale securities— — — (6)— (6)
Issuance of common stock in connection with vesting of restricted stock units71,761 — — — — — 
Taxes withheld on net settled vesting of restricted stock units(20,537)— (3,223)— — (3,223)
Stock-based compensation— — 6,662 — — 6,662 
Net loss— — — — (425)(425)
Balance — June 30, 202135,129,289 $35 $476,001 $10 $(267,699)$208,347 
Exercise of stock options122,615 — 691 — — 691 
Unrealized loss on available-for-sale securities— — — (17)— (17)
Issuance of common stock under employee stock purchase plan16,239 — 1,696 — — 1,696 
Issuance of common stock in connection with vesting of restricted stock units26,809 — — — — — 
Stock-based compensation— — 7,626 — — 7,626 
Net income— — — — 1,948 1,948 
Balance — September 30, 202135,294,952 $35 $486,014 $(7)$(265,751)$220,291 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


SHOCKWAVE MEDICAL, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$75,085 $(22,078)
Adjustments to reconcile net income (loss) to net cash provided (used) in operating activities:
Depreciation and amortization3,318 2,685 
Loss from equity method investment1,414 5,865 
Stock-based compensation32,247 19,049 
Non-cash lease expense2,300 1,184 
Accretion of discount on available-for-sale securities303 1,022 
Amortization of debt issuance costs473 357 
Foreign currency remeasurement2,887  
Changes in operating assets and liabilities:
Accounts receivable(27,113)(18,277)
Inventory(24,372)(7,982)
Prepaid expenses and other current assets(3,615)(1,966)
Other assets(1,174)128 
Accounts payable109 2,168 
Accrued and other current liabilities4,377 13,011 
Lease liabilities(943)(961)
Net cash provided by (used in) operating activities65,296 (5,795)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities(85,252)(75,566)
Proceeds from maturities of available-for-sale securities72,423 134,700 
Purchase of property and equipment(14,045)(9,616)
Net cash (used in) provided by investing activities(26,874)49,518 
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of taxes withheld on net settled vesting of restricted stock units(6)(8,337)
Proceeds from stock option exercises1,672 2,549 
Proceeds from issuance of common stock under employee stock purchase plan4,487 2,837 
Principal payments of term loan(2,750) 
Net cash provided by (used in) financing activities3,403 (2,951)
Effect of exchange rate changes on cash and cash equivalents(2,755) 
Net increase in cash, cash equivalents and restricted cash39,070 40,772 
Cash, cash equivalents and restricted cash at beginning of period90,874 51,873 
Cash, cash equivalents and restricted cash equivalents at end of period$129,944 $92,645 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid$442 $440 
Income tax paid$1,415 $114 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use asset obtained in exchange for lease liability$7,911 $5,406 
Property and equipment purchases included in accounts payable and accrued liabilities$6,221 $2,510 
Equity method investment obtained in exchange for related party contract liability$ $12,273 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
1. Organization and Basis of Presentation
Shockwave Medical, Inc. (the “Company”) was incorporated on June 17, 2009. The Company is primarily engaged in the development of Intravascular Lithotripsy (“IVL”) technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular and heart valve disease. Built on a balloon catheter platform, the IVL technology uses lithotripsy to disrupt both superficial and deep vascular calcium, while minimizing soft tissue injury, and an integrated angioplasty balloon to dilate blockages at low pressures, restoring blood flow.
In 2016, the Company began commercial and manufacturing operations, and began selling catheters based on the IVL technology. The Company’s headquarters are in Santa Clara, California. The Company is located and operates primarily in the United States and has seven wholly-owned foreign subsidiaries as of September 30, 2022. The unaudited condensed financial statements include the accounts of Shockwave Medical, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
As of September 30, 2022, the Company had cash, cash equivalents and short-term investments of $250.7 million, which are available to fund future working capital requirements. The Company believes that its cash and cash equivalents as of September 30, 2022, will be sufficient for the Company to continue as a going concern for at least 12 months from the date the unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”). The Company’s future capital requirements will depend on many factors, including its growth rate, the timing and extent of its spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities and the scope, duration and continuing impact of the COVID-19 pandemic.
Risk and Uncertainties

Due to uncertainty in the macroeconomic environment, including in connection with the effects of COVID-19, increasing inflation and rising interest rates, there is ongoing disruption in the global economy and financial markets. The Company is subject to continuing risks and uncertainties as a result of the foregoing, and is closely monitoring the impact of the current macroeconomic environment and the COVID-19 pandemic on all aspects of its business, including the impacts on its customers, patients, employees, suppliers, vendors, business partners and distribution channels. Specifically, the Company continues to see some disruptions in the operations of certain of its third-party suppliers, resulting in increased lead-times, higher component costs and lower allocations for the Company’s purchase of some components. In certain cases, this has resulted in the Company being required to procure materials from alternate suppliers or incur higher logistical expenses. The Company is continuing to work closely with its manufacturing partners and suppliers to enable the Company to source key components and maintain appropriate inventory levels to meet customer demand. The Company, however, has not experienced material disruptions in its supply chain to date. The Company’s future results of operations and liquidity could be adversely impacted by a variety of factors related to the COVID-19 pandemic, including those discussed in the section entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022 (the “2021 Annual Report”). As of the date of issuance of these condensed consolidated financial statements, the extent to which the current macroeconomic environment and the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity, or results of operations remains uncertain.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial
7


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
statements as of that date. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the 2021 Annual Report.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:
September 30,
2022
December 31,
2021
(in thousands)
Cash and cash equivalents$127,779 $89,209 
Restricted cash2,165 1,665 
Total cash, cash equivalents, and restricted cash$129,944 $90,874 
Restricted cash as of September 30, 2022 and December 31, 2021 relates to letters of credit established for the Company’s office leases and is recorded as other assets on the condensed consolidated balance sheets.
Equity Method Investments
Entities which the Company has significant influence over activities of the entity, but does not control, are accounted for under the equity method of accounting in accordance with Topic 323, Investments - Equity Method and Joint Ventures. The Company’s carrying value in the equity method investment is reported as equity method investment on the Company’s consolidated balance sheets. The Company records its proportionate share of the underlying income or loss which is recognized in earnings or loss from the equity method investment. The Company eliminates a portion of intra-entity profit to the extent the goods sold by the Company have not yet been sold through by the equity method investee to an end customer at the end of the reporting period. The profit earned by the Company from the equity method investee for items not yet sold through is eliminated through equity method earnings or loss which is recognized in income (loss) from equity method investment.

The Company assesses its equity method investment for impairment when events or circumstances suggest that the carrying amount of the investment may be impaired. The Company considers all available evidence in assessing whether a decline in fair value is other than temporary. If the decline in fair value is determined to be other than temporary, the difference between the carrying amount of the investment and estimated fair value is recognized as an impairment charge.
Revenue
To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, Revenue from Contracts with Customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Product Revenue
The Company records product revenue primarily from the sale of its IVL catheters. The Company sells its products to hospitals, primarily through direct sales representatives, as well as through distributors in selected international markets. Additionally, a portion of the Company’s revenue is generated through a consignment model under which inventory is maintained at hospitals.
8


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
Product revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
For products sold through direct sales representatives, control is transferred upon delivery to customers. For products sold to distributors internationally and products sold to customers that utilize stocking orders, control is transferred upon shipment or delivery to the customer’s named location, based on the contractual shipping terms. For consignment inventory, control is transferred at the time the IVL catheters are consumed in a procedure. The Company has elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfillment activity, and not a separate performance obligation.
The Company may provide for the use of an IVL generator and connector cable under an agreement to customers at no charge to facilitate use of the IVL catheters. These agreements generally do not contain contractually enforceable minimum commitments and are generally cancellable by either party with 30 days notice.
License Revenue
For arrangements that contain a license of the Company’s functional intellectual property with a customer, the Company considers whether the license grant is distinct from other performance obligations in the arrangement. A license grant of functional intellectual property is generally considered to be capable of being distinct if a customer can benefit from the license on its own or together with other readily available resources. License revenue for licenses of functional intellectual property is recognized at a point in time when the Company satisfies its performance obligation of transferring the license to the customer.
Consideration received in advance of the satisfaction of a performance obligation is recognized as a contract liability. No license revenues were recognized for the three and nine months ended September 30, 2022.
Stock-Based Compensation
The Company accounts for share-based payments at fair value. The fair value of stock options is measured using the Black-Scholes option-pricing model. For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for stock-based compensation awards is the date of grant and the expense is recognized on a straight-line basis, over the vesting period. For share-based awards that vest upon the satisfaction of a performance target, the related compensation cost is recognized over the requisite service period based on the expected achievement of the performance target. The Company accounts for forfeitures as they occur.
Internal-Use Software
The Company has internal-use software consisting of cloud-based hosting arrangements with service contracts. The Company capitalizes certain costs incurred to implement such software within prepaid expenses and other current assets, or within other assets. Eligible costs of internal use software and implementation costs of certain hosting arrangements are capitalized. Once the software is ready for its intended use, the Company starts amortizing the capitalized implementation costs on a straight-line basis over the estimated service term or associated hosting arrangement, as applicable.
9


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
3. Financial Instruments and Fair Value Measurements
The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy:
September 30, 2022
Level 1Level 2Level 3Total
(in thousands)
Assets:
U.S. Treasury securities$100,124 $ $ $100,124 
Money market funds35,698   35,698 
Commercial paper 6,999  6,999 
Corporate bonds 15,765  15,765 
Total assets$135,822 $22,764 $ $158,586 
December 31, 2021
Level 1Level 2Level 3Total
(in thousands)
Assets:
U.S. Treasury securities$80,155 $ $ $80,155 
Money market funds47,541   47,541 
Commercial paper 20,472  20,472 
Corporate bonds 11,145  11,145 
Total assets$127,696 $31,617 $ $159,313 
4. Cash Equivalents and Short-Term Investments
The following is a summary of the Company’s cash equivalents and short-term investments:
September 30, 2022
Amortized
Cost Basis
Unrealized
Gains
Unrealized
Losses
Fair Value
(in thousands)
U.S. Treasury securities$101,587 $ $(1,463)$100,124 
Money market funds35,698 — — 35,698 
Commercial paper6,999   6,999 
Corporate bonds15,914  (149)15,765 
Total$160,198 $ $(1,612)$158,586 
Reported as:
Cash equivalents$35,698 
Short-term investments122,888 
Total$158,586 
10


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2021
Amortized
Cost Basis
Unrealized
Gains
Unrealized
Losses
Fair Value
(in thousands)
U.S. Treasury securities$80,353 $ $(198)$80,155 
Money market funds47,541 — — 47,541 
Commercial paper20,472   20,472 
Corporate bonds11,149  (4)11,145 
Total$159,515 $ $(202)$159,313 
Reported as:
Cash equivalents$47,541 
Short-term investments111,772 
Total$159,313 
For the three and nine months ended September 30, 2022, there were no credit losses related to available-for-sales securities. The Company recognized no realized gains or losses on its cash equivalents and short-term investments in the periods presented.
The remaining contractual maturities of the Company’s cash equivalents and short-term investments were as follows:
September 30,
2022
Fair Value
(in thousands)
Money market funds
$35,698 
One year or less 95,495 
Greater than one year and less than two years 27,393 
Total$158,586 
5. Balance Sheet Components
Inventory
Inventory consists of the following:
September 30,
2022
 December 31,
2021
(in thousands)
Raw material$17,438 $7,685 
Work in progress9,923 13,315 
Finished goods40,990 20,326 
Consigned inventory623 1,652 
Total inventory$68,974 $42,978 



11


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
Accrued Liabilities
Accrued liabilities consist of the following:
September 30,
2022
December 31,
2021
(in thousands)
Employee compensation$26,671 $25,749 
Research and development costs4,172 4,605 
Asset purchases7,449 4,101 
Professional services3,663 2,636 
Excise, sales, income and other taxes2,747 1,232 
Other4,790 2,547 
Total accrued liabilities$49,492 $40,870 
6. Commitments and Contingencies
Operating Leases
The Company’s operating leases consist of leased facilities for the Company’s headquarter offices, as well as for laboratory and manufacturing space. Also included in operating leases are leases for vehicles, for use by certain employees of the Company, which were not material for the periods presented.

The weighted average remaining lease term and discount rate used to measure the Company’s operating lease liabilities were 9.2 years and 5.2%, respectively. The Company estimated the discount rate using the incremental borrowing rate as the rate implicit in the lease was not readily determinable.

Short-term leases are leases having a term of 12 months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases. As of September 30, 2022, the Company has no material finance leases. Operating lease cost was $1.2 million and $0.5 million for the three months ended September 30, 2022 and 2021, respectively. Operating lease cost was $3.6 million and $1.5 million for the nine months ended September 30, 2022 and 2021, respectively

As of September 30, 2022, the maturities of the payments due under the Company’s operating lease liabilities were as follows:
Years ending December 31,
(in thousands)
2022 (remainder)$1,295 
20235,238 
20245,367 
20255,526 
20265,690 
Thereafter30,791 
Total minimum lease payments$53,907 
Less: imputed interest and adjustments(14,115)
Total lease liability$39,792 

12


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
7. Term Notes
Loan and Security Agreement
In February 2020, the Company entered into a First Amendment to its Loan and Security Agreement with Silicon Valley Bank (the “Amended SVB Credit Agreement”) to, among other things, refinance its then-existing term loan, which is accounted for as a modification of the Loan and Security Agreement. The Amended SVB Credit Agreement provided the Company with a supplemental term loan in the amount of $16.5 million. The principal amount outstanding under the supplemental term loan accrued interest at a floating per annum rate equal to the greater of (i) the Prime Rate minus 1.25% and (ii) 3.5%. The interest rate was 5.0% as of September 30, 2022.
The supplemental term loan was set to mature on December 1, 2023. The Amended SVB Credit Agreement provided an interest-only payment period through June 30, 2022.
The additional final payment for the Amended SVB Credit Agreement was $1.6 million, to be accrued over the term of the supplemental term loan using an effective interest rate that reflects the revised cash flows of the modified term loan.
The supplemental term loan was secured by all of the Company’s assets, excluding intellectual property and certain other assets. The loan contained customary affirmative and restrictive covenants, including with respect to the Company’s ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to its holders, make investments, merge or consolidate with any other person or engage in transactions with the Company’s affiliates, but did not include any financial covenants.
Current and noncurrent debt and net discount or premium balances were as follows:
September 30,
2022
December 31,
2021
(in thousands)
Principal amount of term note$13,750 $16,500 
Net premium associated with accretion of final payment, and other debt issuance costs1,103 630 
Term note, current and noncurrent14,853 17,130 
Less term note, current portion (5,500)
Term note, noncurrent portion$14,853 $11,630 
In October 2022, the Company's outstanding amounts under the Amended SVB Credit Agreement were refinanced on a long-term basis and are accordingly classified as term note, noncurrent as of September 30, 2022. See Note 13 for a discussion of the Company’s prepayment and termination of the credit facility under the Amended SVB Credit Agreement and entry into a new revolving credit facility.
8. Stock-Based Compensation
Total stock-based compensation was as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
(in thousands)(in thousands)
Cost of product revenue$388 $263 $1,559 $718 
Research and development2,695 1,686 7,409 4,343 
Sales and marketing4,901 3,051 13,241 7,693 
General and administrative3,748 2,387 10,038 6,295 
Total stock-based compensation$11,732 $7,387 $32,247 $19,049 
13


SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
Stock-based compensation of $0.7 million and $0.2 million was capitalized into inventory for the three months ended September 30, 2022 and 2021, respectively. Stock-based compensation of $1.5 million and $0.6 million was capitalized into inventory for the nine months ended September 30, 2022 and 2021, respectively. Stock-based compensation capitalized into inventory is recognized as cost of product revenue when the related product is sold.
2009 Equity Incentive Plan and 2019 Equity Incentive Plan
On June 17, 2009, the Company adopted the 2009 Equity Incentive Plan (the “2009 Plan”) under which the Company's Board of Directors (the “Board”) had the authority to issue stock options to employees, directors and consultants.
In February 2019, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”), which became effective in connection with the Company's initial public offering (the “IPO”). As a result, effective as of March 6, 2019, the Company may not grant any additional awards under the 2009 Plan. The 2009 Plan will continue to govern outstanding equity awards granted thereunder. The Company initially reserved 2,000,430 shares of common stock for the issuance of a variety of awards under the 2019 Plan, including stock options, stock appreciation rights, awards of restricted stock and awards of restricted stock units (“RSUs”). In addition, the number of shares of common stock reserved for issuance under the 2019 Plan will automatically increase on the first day of January for a period of up to ten years, which commenced on January 1, 2020, in an amount equal to 3% of the total number of shares of the Company’s capital stock outstanding on the last day of the preceding year, or a lesser number of shares determined by the Board. As of September 30, 2022, there were 4,809,697 shares available for issuance under the 2019 Plan.
Stock Options
Option activity under the 2009 Plan and 2019 Plan is set forth below:
Shares
Available
for Grant
Number
of Shares
Weighted-
Average
Exercise
Price Per
Share
Weighted-
Average
Remaining
Term
Aggregate
Intrinsic
Value
(in years)(in thousands)
Balance, December 31, 20213,745,216 1,524,985 $6.01 5.76$262,793 
Awards authorized1,063,334 — 
Options exercised— (337,134)6.51 
Options cancelled1,147 (1,147)10.17 
Balance, September 30, 20224,809,697 1,186,704 $5.86 4.87$323,035 
Vested and exercisable,
September 30, 2022
1,141,273 $5.51 4.81$311,066 
Vested and expected to vest, 
September 30, 2022
1,186,704 $5.86 4.87$323,035 
Restricted Stock Units
RSUs are share awards that entitle the holder to receive freely tradable shares of the Company’s common stock upon vesting. RSUs cannot be transferred and the awards are subject to forfeiture if the holder’s employment terminates prior to the release of the vesting restrictions. RSUs generally vest over a four-year period with straight-line annual vesting, provided the employee remains continuously employed with the Company. The fair value of RSUs is equal to the closing price of the Company’s common stock on the grant date.
In February 2022, the Company granted performance-based restricted stock units (“PRSUs”) to certain key executives. The vesting of these PRSUs is dependent on the achievement of certain performance targets related to the Company’s compound annual growth rate of revenue over a two or three year performance period, provided the executives remain employed with the Company at the time of vesting. The number of PRSUs that vest will vary from 0% to 200% of the target which will be determined based on the level of performance attained for each performance period. The fair value of
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SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
these PRSUs is equal to the closing price of the Company’s common stock on the grant date. Compensation cost for PRSUs is recognized over the requisite service period based on the expected achievement of performance targets.
RSU and PRSU activity under the 2019 Plan is set forth below. Grant activity for all PRSUs is disclosed at target (100%):
Restricted Stock UnitsPerformance-Based Restricted Stock Units
Number
of Shares
Weighted-
Average
Grant Date
Fair Value
Per Share
Number
of Shares
Weighted-
Average
Grant Date
Fair Value
Per Share
Balance, December 31, 20211,156,683 $93.27  $ 
RSUs granted352,112 182.14 37,397 161.51
RSUs forfeited(65,538)135.86   
RSUs vested(322,379)84.23   
Balance, September 30, 20221,120,878 121.30 37,397 161.51 
Employee Stock Purchase Plan
In February 2019, the Company adopted the 2019 Employee Stock Purchase Plan (“ESPP”), which became effective in connection with the IPO on March 6, 2019. The Company initially reserved 300,650 shares of common stock for purchase under the ESPP. Each offering under the ESPP to Company employees to purchase stock under the ESPP begins on each September 1 and March 1 and ends on the following February 28 or 29 and August 31, respectively. On each purchase date, which falls on the last date of each offering period, ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of (1) the fair market value per share of the common stock on the offering date or (2) the fair market value of the common stock on the purchase date. The occurrence and duration of offering periods under the ESPP are subject to the determinations of the Company’s Compensation Committee of the Board, in its sole discretion.
The fair value of the ESPP shares is estimated using the Black-Scholes option pricing model. The Company recorded $0.8 million and $0.3 million of stock-based compensation expense related to the ESPP for the three months ended September 30, 2022 and 2021, respectively. The Company recorded $1.6 million and $0.9 million of stock-based compensation expense related to the ESPP for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, a total of 1,197,296 shares were available for issuance under the ESPP.
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SHOCKWAVE MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
9. Net Income (Loss) Per Share
The components of basic and diluted net income (loss) per share were as follows (in thousands, except share and per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Numerator:
Net income (loss)$35,003 $1,948 $75,085 $(22,078)
Denominator:
Basic:
Weighted average number of common shares outstanding - basic36,003,931 35,207,276 35,807,264