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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from              to                 
Commission File Number 001-36189
_____________________________________________________________________________________________
Tandem Diabetes Care, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________
Delaware20-4327508
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
11075 Roselle Street92121
San Diego, California
(Zip Code)
(Address of principal executive offices)
(858) 366-6900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Exchange on Which Registered
Common Stock, par value $0.001 per shareTNDMNasdaq Global 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  ☐
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 filerxAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 29, 2022, there were 64,221,212 shares of the registrant’s Common Stock outstanding.



TABLE OF CONTENTS
Part IFinancial Information
Item 1Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2022 (Unaudited) and December 31, 2021
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3Quantitative and Qualitative Disclosures About Market Risk
Item 4Controls and Procedures
Part IIOther Information
Item 1Legal Proceedings
Item 1ARisk Factors
Item 6Exhibits






PART I. FINANCIAL INFORMATION
Item 1.      Financial Statements

TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)

June 30,December 31,
20222021
Assets(Unaudited)(Note 1)
Current assets:
Cash and cash equivalents$114,966 $71,181 
Short-term investments520,365 552,630 
Accounts receivable, net103,763 110,725 
Inventories88,098 68,551 
Prepaid and other current assets7,852 8,433 
Total current assets835,044 811,520 
Property and equipment, net58,901 50,386 
Operating lease right-of-use assets126,672 27,503 
Other long-term assets15,958 15,728 
Total assets$1,036,575 $905,137 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$50,661 $28,032 
Accrued expenses7,610 9,419 
Employee-related liabilities35,429 51,556 
Operating lease liabilities9,925 9,279 
Deferred revenue11,713 10,182 
Other current liabilities23,921 23,388 
Total current liabilities139,259 131,856 
Convertible senior notes, net - long-term282,345 281,467 
Operating lease liabilities - long-term129,802 23,922 
Deferred revenue - long-term18,343 16,940 
Other long-term liabilities17,242 17,840 
Total liabilities586,991 472,025 
Commitments and contingencies (Note 12)  
Stockholders’ equity:
Common stock, $0.001 par value; 200,000 shares authorized, 64,210 and 63,833 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.
64 64 
Additional paid-in capital1,118,168 1,068,259 
Accumulated other comprehensive loss(4,282)(616)
Accumulated deficit(664,366)(634,595)
Total stockholders’ equity449,584 433,112 
Total liabilities and stockholders’ equity$1,036,575 $905,137 
See accompanying notes to unaudited condensed consolidated financial statements.
1


TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Sales$200,262 $172,139 $376,169 $313,176 
Cost of sales98,316 79,685 183,130 147,435 
Gross profit101,946 92,454 193,039 165,741 
Operating expenses:
Selling, general and administrative80,614 66,523 153,885 125,086 
Research and development33,571 20,499 66,731 38,460 
Total operating expenses114,185 87,022 220,616 163,546 
Operating income (loss)(12,239)5,432 (27,577)2,195 
Other income (expense), net:
Interest income and other, net769 418 1,150 690 
Interest expense(1,537)(1,509)(3,053)(3,015)
Change in fair value of common stock warrants57 (272)91 (962)
Total other expense, net(711)(1,363)(1,812)(3,287)
Income (loss) before income taxes(12,950)4,069 (29,389)(1,092)
Income tax expense (benefit)2,106 61 382 (56)
Net income (loss)$(15,056)$4,008 $(29,771)$(1,036)
Other comprehensive income (loss):
Unrealized loss on short-term investments$(1,124)$(51)$(3,641)$(89)
Foreign currency translation loss(97)(26)(25)(102)
Comprehensive income (loss) $(16,277)$3,931 $(33,437)$(1,227)
Net income (loss) per share, basic$(0.23)$0.06 $(0.47)$(0.02)
Net income (loss) per share, diluted$(0.24)$0.06 $(0.47)$(0.02)
Weighted average shares used to compute basic net income (loss) per share64,077 62,717 63,979 62,583 
Weighted average shares used to compute diluted net income (loss) per share64,078 65,663 63,980 62,583 
See accompanying notes to unaudited condensed consolidated financial statements.
2



TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands)

Three Months Ended June 30, 2022
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at March 31, 202263,941 $64 $1,089,689 $(3,061)$(649,310)$437,382 
Exercise of stock options70 — 2,615 — — 2,615 
Vesting of restricted stock units, net of shares withheld for taxes66 — (2,276)— — (2,276)
Issuance of common stock for Employee Stock Purchase Plan129 — 7,915 — — 7,915 
Exercise of common stock warrants4 — 68 — — 68 
Stock-based compensation expense— — 20,157 — — 20,157 
Unrealized loss on short-term investments— — — (1,124)— (1,124)
Foreign currency translation adjustments— — — (97)— (97)
Net loss— — — — (15,056)(15,056)
Balance at June 30, 2022
64,210 $64 $1,118,168 $(4,282)$(664,366)$449,584 

Six Months Ended June 30, 2022
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202163,833 $64 $1,068,259 $(616)$(634,595)$433,112 
Exercise of stock options172 — 6,398 — — 6,398 
Vesting of restricted stock units, net of shares withheld for taxes70 — (2,575)— — (2,575)
Issuance of common stock for Employee Stock Purchase Plan129 — 7,915 — — 7,915 
Exercise of common stock warrants6 — 83 — — 83 
Stock-based compensation expense— — 38,088 — — 38,088 
Unrealized loss on short-term investments— — — (3,641)— (3,641)
Foreign currency translation adjustments— — — (25)— (25)
Net loss— — — — (29,771)(29,771)
Balance at June 30, 202264,210 $64 $1,118,168 $(4,282)$(664,366)$449,584 
See accompanying notes to unaudited condensed consolidated financial statements.
3



Three Months Ended June 30, 2021
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at March 31, 202162,571 $63 $968,450 $106 $(655,205)$313,414 
Exercise of stock options252 — 8,172 — — 8,172 
Vesting of restricted stock units, net of shares withheld for taxes29 — (867)— — (867)
Issuance of common stock for Employee Stock Purchase Plan100 — 6,317 — — 6,317 
Stock-based compensation expense— — 15,118 — — 15,118 
Unrealized loss on short-term investments— — — (51)— (51)
Foreign currency translation adjustments— — — (26)— (26)
Net income— — — — 4,008 4,008 
Balance at June 30, 2021
62,952 $63 $997,190 $29 $(651,197)$346,085 

Six Months Ended June 30, 2021
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202062,335 $62 $1,025,233 $220 $(659,210)$366,305 
Effect of change in accounting for convertible senior notes (1)— — (85,803)— 9,049 (76,754)
Exercise of stock options363 1 11,307 — — 11,308 
Vesting of restricted stock units, net of shares withheld for taxes29 — (867)— — (867)
Issuance of common stock for Employee Stock Purchase Plan100 — 6,317 — — 6,317 
Exercise of common stock warrants125 — 437 — — 437 
Fair value of common stock warrants at time of exercise— — 12,434 — — 12,434 
Stock-based compensation expense— — 28,132 — — 28,132 
Unrealized loss on short-term investments— — — (89)— (89)
Foreign currency translation adjustments— — — (102)— (102)
Net loss— — — — (1,036)(1,036)
Balance at June 30, 2021
62,952 $63 $997,190 $29 $(651,197)$346,085 
(1) The Company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, effective January 1, 2021 (see Note 2, “Summary of Significant Accounting Policies”).
See accompanying notes to unaudited condensed consolidated financial statements.
4


TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Six Months Ended June 30,
20222021
Operating Activities
Net loss$(29,771)$(1,036)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense7,181 6,925 
Amortization of debt issuance costs896 859 
Provision for expected credit losses1,990 874 
Provision for inventory obsolescence641 211 
Change in fair value of common stock warrants(91)962 
Amortization of premium (discount) on short-term investments1,799 (306)
Stock-based compensation expense38,241 27,924 
Other262 (106)
Changes in operating assets and liabilities:
Accounts receivable, net4,922 1,046 
Inventories(20,352)(2,965)
Prepaid and other current assets1,524 411 
Other long-term assets(901)(159)
Accounts payable & Accrued expenses20,193 11,957 
Employee-related liabilities(16,126)2,318 
Deferred revenue2,934 5,288 
Operating leases & Other current liabilities7,443 1,170 
Other long-term liabilities(84)2,207 
Net cash provided by operating activities20,701 57,580 
Investing Activities
Purchases of short-term investments(229,719)(385,580)
Proceeds from maturities of short-term investments238,862 308,607 
Proceeds from sales of short-term investments17,686 20,788 
Purchases of property and equipment(14,760)(5,339)
Acquisition of intangible assets and equity investments(515)(9,331)
Net cash provided by (used in) investing activities11,554 (70,855)
Financing Activities
Proceeds from issuance of common stock under Company stock plans, net11,738 16,758 
Proceeds from exercise of common stock warrants83 438 
Other financing activities(270) 
Net cash provided by financing activities11,551 17,196 
Effect of foreign exchange rate changes on cash(21)44 
Net increase in cash and cash equivalents43,785 3,965 
Cash and cash equivalents at beginning of period71,181 94,613 
Cash and cash equivalents at end of period$114,966 $98,578 
Supplemental disclosures of cash flow information
Income taxes paid$162 $197 
Supplemental schedule of non-cash investing and financing activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations$110,515 $15,087 
Purchase of property and equipment included in accounts payable $1,255 $452 
Intangible costs in accounts payable and other long-term liabilities$515 $1,029 
See accompanying notes to unaudited condensed consolidated financial statements.
5




TANDEM DIABETES CARE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
The Company
Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of technology solutions for people living with diabetes. Tandem Diabetes Care, Inc. is incorporated in the state of Delaware. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc., together with its wholly-owned subsidiaries in the United States, Canada and the Netherlands.
The Company manufactures, sells and supports insulin pump products that are designed to address the evolving needs and preferences of differentiated segments of the insulin-dependent diabetes market. The Company’s manufacturing, sales and support activities principally focus on the t:slim X2 Insulin Delivery System (t:slim X2), the Company’s flagship pump platform which has an advanced algorithm for managing insulin delivery, and is designed to display continuous glucose monitoring (CGM) sensor information directly on the pump home screen. The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the t:connect mobile app and cloud-based diabetes management application (t:connect), and the Tandem Device Updater, a Mac and PC-compatible tool which offers and supports remote updates of the Company’s insulin pump software from a personal computer. The Company’s insulin pump products are generally considered durable medical equipment and have an expected lifespan of at least four years. In addition to insulin pumps, the Company sells disposable products that are used together with the pumps and are replaced every few days, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to a user’s body, as well as other accessories for enhanced usability.
Basis of Presentation and Principles of Consolidation
The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.
Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (Annual Report), from which the balance sheet information herein was derived. The condensed consolidated financial statements include the accounts of Tandem Diabetes Care, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The functional currency of the Company’s foreign subsidiaries is their respective local currency. The Company translates the financial statements of its foreign subsidiaries into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses. Translation related adjustments are included in other comprehensive income (loss), and in accumulated other comprehensive income (loss) in the stockholders’ equity section of the Company’s condensed consolidated balance sheets. Foreign exchange gains or losses resulting from balances denominated in a currency other than the functional currency are recognized in interest income and other, net in the Company’s condensed consolidated statements of operations.
Reclassifications
Starting with the first quarter of 2022, the Company included the liability related to common stock warrants (see Note 5, “Fair Value Measurements”) as a component of other current liabilities on the Company’s condensed consolidated balance sheet. In addition, deferred revenue long-term, which was previously reported as a component of other long-term liabilities, is now separately reported on the condensed consolidated balance sheet. The corresponding balances at December 31, 2021, have been reclassified to conform to the current year presentation.
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2. Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2022, as compared to those disclosed in the Company’s 2021 Annual Report.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes as of the date of the consolidated financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.
Accounts Receivable
The Company grants credit to various customers in the ordinary course of business and is paid directly by customers who use its products, distributors and third-party insurance payors. The Company maintains an allowance for its current estimate of expected credit losses. Provisions for expected credit losses are estimated based on historical experience, assessment of specific risk, review of outstanding invoices, forecasts about the future, and various assumptions and estimates that are believed to be reasonable under the circumstances, including credit risks as a result of the coronavirus pandemic (COVID-19 global pandemic). Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. The carrying value and estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of June 30, 2022 and December 31, 2021 (see Note 5, “Fair Value Measurements”).
The Company’s convertible senior notes are carried at amortized cost on the condensed consolidated balance sheets (see Note 7, “Debt”). The Company measures the fair value of its convertible senior notes for disclosure purposes. The Company estimated the fair value of its convertible senior notes to be $269.5 million and $430.0 million at June 30, 2022 and December 31, 2021, respectively, based on Level 2 quoted market prices as of those dates.
Operating Lease Right-of-Use Assets and Liabilities
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized when the Company takes possession of the leased property (the Commencement Date) based on the present value of lease payments over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842 Leases, the Company combines lease and non-lease components. Rent expense on noncancelable leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the respective leases beginning on the Commencement Date. The difference between rent expense and rent paid is accounted for as a component of operating lease right-of-use assets on the Company’s consolidated balance sheets. Landlord improvement allowances and other similar lease incentives are recorded as a reduction of the right-of-use leased assets, and are amortized on a straight-line basis as a reduction to operating lease costs.
Cost Basis Equity Investment

The Company made an $8.1 million equity investment in a private company in the second quarter of 2021, which represented less than 5% of the outstanding equity of that company as of the date of investment. The investment is recorded using the cost minus impairment, if any, adjusted for changes in observable prices and is included as a component of other long-term assets on the consolidated balance sheets. The Company monitors this investment to evaluate whether any increase or decline in its value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions.
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Intangible Assets Subject to Amortization
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is recognized over their estimated useful lives on a straight-line basis. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not recognize any impairment losses during the six months ended June 30, 2022 and 2021.
Revenue Recognition
Revenue is generated primarily from sales of insulin pumps, disposable insulin cartridges and infusion sets to individual customers with third-party insurance coverage and through a network of distributors that resell the products to insulin-dependent diabetes customers. The Company recognizes revenue when it transfers control of the promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, net of estimated returns.
Revenue Recognition for Arrangements with Multiple Performance Obligations
The Company considers the individual deliverables in its product offering as separate performance obligations. The transaction price is determined based on the consideration expected to be received, based either on the stated value in contractual arrangements or the estimated cash to be collected in non-contracted arrangements. The Company allocates the consideration to the individual performance obligations and recognizes the consideration based on when the performance obligation is satisfied, considering whether or not this occurs at a point in time or over time. Generally, insulin pumps, cartridges, infusion sets and accessories are deemed performance obligations that are satisfied at a point in time when the customer obtains control of the promised good, which typically is upon shipment for our distributor arrangements and upon receipt for sales directly to individual customers. Complementary products, such as t:connect and the Tandem Device Updater, are considered distinct performance obligations that are satisfied over time, as access and support for these products is provided throughout the typical four-year warranty period of the insulin pumps. Accordingly, revenue related to the complementary products is deferred and recognized over a four-year period. Where there is no standalone value for the complementary product, the Company determines its value by applying the expected cost plus a margin approach and then allocates the residual to the insulin pumps.
Warranty Reserve
The Company generally provides a four-year warranty on its insulin pumps to end user customers and may replace any pumps that do not function as intended in accordance with the product specifications within the warranty period. Additionally, the Company offers a six-month warranty on disposable insulin cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment, and the Company reevaluates the estimate of the warranty reserve obligation at each reporting period. Warranty costs are estimated primarily based on the current expected product replacement cost and expected replacement rates utilizing historical experience. Insulin pumps returned to the Company may be refurbished and redeployed. Experience has shown that initial data for any given pump version may be insufficient; therefore, the Company’s process relies on long-term historical averages until sufficient data are available. As actual experience becomes available, the Company uses the data to update the historical averages. The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to the length of time each pump version has been in the field and revised future expectations of performance based on new features and capabilities that may become available through Tandem Device Updater.
The following table provides a reconciliation of the changes in product warranty liabilities for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Balance at beginning of the period$30,444 $23,169 $30,401 $22,075 
Provision for warranties issued during the period7,279 8,020 14,480 13,916 
Settlements made during the period(5,687)(4,751)(11,708)(9,007)
Decrease in warranty estimates(132)(770)(1,269)(1,316)
Balance at end of the period$31,904 $25,668 $31,904 $25,668 
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As of June 30, 2022 and December 31, 2021, total product warranty reserves were included in the following consolidated balance sheet accounts (in thousands):
June 30, 2022December 31, 2021
Other current liabilities$14,663 $13,076 
Other long-term liabilities17,241 17,325 
Total warranty reserve$31,904 $30,401 

Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the requisite service period on a straight-line basis. The Company estimates the fair value of stock options issued under the Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan) and the fair value of the employees’ purchase rights under the Company’s 2013 Employee Stock Purchase Plan (ESPP) using the Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of assumptions about a number of variables, including stock price volatility, expected term, dividend yield and risk-free interest rate (see Note 8, “Stockholders’ Equity”). The fair value of restricted stock unit (RSU) awards issued under the 2013 Plan that vest solely based on service is estimated based on the fair market value of the underlying stock on the date of grant. The fair value of RSU awards issued under the 2013 Plan that vest based upon the Company’s actual performance relative to predefined performance metrics, and the awardee’s continuing service through the measurement date, is estimated based on the fair market value of the underlying stock on the date of grant and the probability that the specified performance criteria will be met. At each reporting period, the Company reassesses the probability of the achievement of such performance metrics. Any expense change resulting from an adjustment in the estimated shares to be released is recorded in the period of adjustment.
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing the net income or loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per share reflects the potential dilution that would occur if securities exercisable for or convertible into common stock were exercised for or converted into common stock. Dilutive common share equivalents are comprised of stock options and unvested RSUs outstanding under the Company’s stock plans, potential awards to be granted pursuant to the ESPP, and common stock warrants, each calculated using the treasury stock method; and shares issuable upon conversion of the convertible senior notes calculated using the if-converted method. For common stock warrants that are recorded as a liability in the accompanying condensed consolidated balance sheets, the calculation of diluted loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of the warrants is dilutive to loss per share for the period, an adjustment is made to net loss used in the calculation to remove the change in fair value of the warrants from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method. For the three and six months ended June 30, 2022, the net loss used in the calculation of diluted net loss per share was increased by $0.1 million and $0.1 million, respectively, to remove the gain recognized from the change in fair value of certain common stock warrants based on the dilutive effect of assumed exercise, and the denominator was increased by 958 shares and 965 shares, respectively, calculated under the treasury stock method.
For the six months ended June 30, 2021, there was no difference in the weighted average number of shares used to calculate basic and diluted net loss per share due to the Company’s net loss position. For the three months ended June 30, 2021, the numerator and denominator of the diluted net income per share computation were calculated as follows (in thousands):

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Three Months Ended June 30, 2021
Net income - basic and diluted$4,008 
Weighted average shares outstanding - basic62,717 
Dilutive common share equivalents:
Options to purchase common stock2,550 
Unvested restricted stock units246 
Warrants to purchase common stock148 
Awards to be granted under the ESPP2 
Weighted average shares outstanding - diluted65,663 
Potentially dilutive securities outstanding and not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in thousands, in common stock equivalent shares):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Options to purchase common stock1,235  1,327 5,136 
Unvested restricted stock units980  765 170 
Warrants to purchase common stock195 30 195 251 
Awards granted under the ESPP11  6 4 
Convertible senior notes (if-converted)2,554 2,554 2,554 2,554 
4,975 2,584 4,847 8,115 
Recent Accounting Pronouncements

In June 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in
an Entity’s Own Equity, which is intended to simplify the accounting for convertible instruments. This new guidance eliminated certain models that require separate accounting for embedded conversion features, and eliminated certain of the conditions for equity classification for contracts in an entity’s own equity. Accordingly, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance could be adopted through either a modified retrospective method of transition or a fully retrospective method of transition. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company elected to early adopt the new standard on January 1, 2021 using the modified retrospective method and, accordingly, recorded a net reduction to accumulated deficit of $9.0 million, a decrease to additional paid-in capital of $85.8 million, and an increase to convertible senior notes, net - long-term of $76.8 million to reflect the impact of the accounting change (see Note 7, “Debt”).
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3. Short-Term Investments
The Company invests in marketable securities primarily consisting of debt instruments of the U.S. Government, U.S. Government-sponsored enterprises, and financial institutions and corporations with strong credit ratings. The following represents a summary of the estimated fair value of short-term investments at June 30, 2022 and December 31, 2021 (in thousands):
At June 30, 2022Amortized
Cost
Gross Unrealized
Gain
Gross Unrealized
Loss
Estimated
Fair Value
Available-for-sale securities:
U.S. Treasury securities$281,783 $4 $(3,364)$278,423 
Commercial paper147,872 4 (225)147,651 
Corporate debt securities49,515  (215)49,300 
U.S. Government-sponsored enterprises42,948 1 (458)42,491 
Supranational bonds2,512  (12)2,500 
Total$524,630 $9 $(4,274)$520,365 

At December 31, 2021Amortized
Cost
Gross Unrealized
Gain
Gross Unrealized
Loss
Estimated
Fair Value
Available-for-sale securities:
U.S. Treasury securities$222,206 $ $(482)$221,724 
Commercial paper218,391 14 (24)218,381 
Corporate debt securities58,881  (45)58,836 
U.S. Government-sponsored enterprises50,773 1 (88)50,686 
Supranational bonds3,003   3,003 
Total$553,254 $15 $(639)$552,630 

The contractual maturities of available-for-sale debt securities as of June 30, 2022, were as follows (in thousands):
Years to Maturity
At June 30, 2022Within One YearOne to Two YearsEstimated Fair Value
U.S. Treasury securities$256,417 $22,006 $278,423 
Commercial paper147,651  147,651 
Corporate debt securities38,538 10,762 49,300 
U.S. Government-sponsored enterprises40,495 1,996 42,491 
Supranational bonds2,500  2,500 
Total$485,601 $34,764 $520,365 

The Company has classified all marketable securities, regardless of maturity, as short-term investments based upon the Company’s ability and intent to use any of those marketable securities to satisfy the Company’s liquidity requirements.

The Company reviews the portfolio of available-for-sale debt securities quarterly to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns. Unrealized losses on available-for-sale debt securities at June 30, 2022 were primarily due to the recent increase in market interest rates. The Company does not intend to sell the available-for-sale debt securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity. Based on the credit quality of the available-for-sale debt securities in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, the Company did not recognize any impairment losses related to its available-for-sale debt securities at June 30, 2022.
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4. Composition of Certain Financial Statement Items
Accounts Receivable
Accounts receivable, net consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Accounts receivable$108,363 $114,974 
Less: allowance for credit losses(4,600)(4,249)
Accounts receivable, net$103,763 $110,725 

Allowance for Credit Losses
The following table provides a reconciliation of the changes in the allowance for estimated accounts receivable credit losses for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Balance at beginning of the period$4,344 $3,559 $4,249 $3,857 
Provision for expected credit losses1,144 731 1,990 874 
Write-offs and adjustments, net of recoveries(888)(617)(1,639)(1,058)
Balance at end of the period$4,600 $3,673 $4,600 $3,673 

Inventories
Inventories consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Raw materials$34,786 $26,911 
Work-in-process15,616 16,612 
Finished goods37,696 25,028 
Total inventories$88,098 $68,551 

5. Fair Value Measurements
Authoritative guidance on fair value measurements defines fair value, and provides a consistent framework for measuring fair value and for disclosures of each major asset and liability category measured at fair value on either a recurring or a nonrecurring basis. Fair value is intended to reflect an assumed 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. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1:Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:Inputs, other than quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3:Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own valuation techniques that require input assumptions.
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The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):
Fair Value Measurements at
June 30, 2022
TotalLevel 1Level 2Level 3
Assets
Cash equivalents(1)
$57,720 $57,720 $ $ 
U.S. Treasury securities278,423 278,423   
Commercial paper147,651  147,651  
Corporate debt securities49,300  49,300  
U.S. Government-sponsored enterprises42,491  42,491  
Supranational bonds2,500  2,500  
Total assets$578,085 $336,143 $241,942 $ 
Liabilities
Common stock warrants(2)
$56 $ $ $56 
Total liabilities$56 $ $ $56 

Fair Value Measurements at
December 31, 2021
TotalLevel 1Level 2Level 3
Assets
Cash equivalents(1)
$48,286 $48,286 $ $ 
U.S. Treasury securities221,724 221,724   
Commercial paper218,381  218,381  
Corporate debt securities