You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (Quarterly Report).
Forward-looking statements speak only as of the date they were made and, except to the extent required by law or the rules of the Nasdaq Global Market, we undertake no obligation to update or review any forward-looking statement because of new information, future events or other factors.
We qualify all of our forward-looking statements by these cautionary statements.
COVID-19 Global Pandemic Impact and Considerations
Products Under Development
Delivery Devices
t:slim X3
Mobi: Tubeless
Our patch pump design is in its early stages and is being developed for people living with diabetes who want a disposable tubeless solution.
Infusion Sets
Device Software
Control-IQ Advancements
Mobile Control
We are working to expand our mobile control capability. In the future, our t:connect mobile app is planned to include additional pump control features, such as full operation of our Mobi pump.
Building a robust ecosystem and portfolio around our flagship insulin pumps requires product development efforts to integrate, add, and enhance complementary system components.
Data and Insights
Settings Automation
United States Pump Unit Shipments
the Three Months Ended in Respective Years
Trends Impacting Financial Results
•market acceptance of our products and competitive products by people with insulin-dependent diabetes, their caregivers and healthcare providers;
•the introduction of new products, treatment techniques or technologies for the treatment of diabetes, including the timing of the commercialization of new products by us and our competitors;
•seasonality in the United States associated with annual insurance deductibles and coinsurance requirements of the medical insurance plans used by our customers and the customers of our distributors;
•the timing of holidays and summer vacations, which may vary by geography and may be further influenced by the lifting or relaxation of COVID-19 related restrictions and broader availability of vaccines;
•the buying patterns of our distributors and other customers;
•changes in the competitive landscape, including as a result of companies entering or exiting the diabetes therapy market;
•access to adequate coverage and reimbursement for our current and future products by third-party payors, and reimbursement decisions by third-party payors;
•the magnitude and timing of any changes to our facilities, manufacturing operations and other infrastructure, and factors impacting our ability to access our facilities;
•anticipated and actual regulatory approvals of our products and competitive products; and
•product recalls impacting, or the suspension or withdrawal of regulatory clearance or approval relating to, our products or the products of our competitors.
•changes in customer purchasing behavior due to the economic environment such as inflation or threat of recession;
•anticipated new product launches and the timing of their commercial availability;
•our recently announced Tandem Choice program and its related financial and accounting impact;
•the disruptions caused by the COVID-19 global pandemic on suppliers, third-party manufacturers, healthcare providers, distributors and our existing or potential customers;
•ability to enter into, maintain agreements, and accomplish continued success in current and future product integrations with CGM partners;
•expansion and new product launches in select geographies outside the United States, including initial orders to stock inventories; and
Components of Results of Operations
Cost of sales includes raw materials, labor costs, manufacturing overhead expenses, product training costs, royalties, freight, reserves for expected warranty costs, costs of supporting our digital health platforms, scrap and charges for excess and obsolete inventories. Manufacturing overhead expenses include expenses relating to quality assurance, manufacturing engineering, material procurement, inventory control, facilities, equipment, information technology and operations supervision and management.
Selling, General and Administrative
Acquired In-process Research and Development (IPR&D) Expenses
Acquired IPR&D reflects costs of external research and development projects acquired directly in a transaction other than a business combination, that do not have an alternative future use.
Other Income and Expense
Income Tax Expense (Benefit)
Because the Company maintains a full valuation allowance against its net deferred tax assets, income tax expense is expected to primarily consist of current state and foreign cash tax expense as a result of taxable income anticipated or incurred in those jurisdictions. Income tax expense (benefit) may fluctuate in future quarters due to adjustments related to non-recurring transactions and changes in certain tax assessments.
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021
Sales by product in the United States were as follows (in thousands):
Total Sales in the United States $ 146,035 $ 133,106
Sales by product outside the United States were as follows (in thousands):
Total Sales Outside the United States $ 58,512 $ 46,521
Comparison of the Nine Months Ended September 30, 2022 and 2021
Sales by product in the United States were as follows (in thousands):
Sales outside the United States by product were as follows (in thousands):
$ 128,778
Liquidity and Capital Resources
The following table shows a summary of our cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):
Months Ended September 30,
52,605 $ 17,762
Our liquidity position and capital requirements are subject to fluctuation based on a number of factors. In particular, our cash inflows and outflows are principally impacted by the following:
•our ability to generate sales, the timing of those sales, the mix of products sold and the collection of receivables from period to period;
•the timing of any additional financings, and the net proceeds raised from such financings;
•the timing and amount of the exercise of outstanding warrants, and proceeds from the issuance of equity awards pursuant to employee stock plans;
•fluctuations in gross margins and operating margins;
•the impacts and disruptions caused by the COVID-19 global pandemic.
Both our primary short-term and long-term capital needs are expected to include expenditures related to:
•support of our commercialization efforts related to our current and future products;
•expansion of our customer support resources for our growing installed customer base;
•research and product development efforts, including clinical trial costs;
•acquisitions, leasing or licensing of equipment, technology, intellectual property and other assets;
•additional facilities leases and related tenant improvements;
•investments for the development, improvement and acquisition of manufacturing, testing and packaging equipment to support business growth and increase capacity; and
•payments under licensing, development and commercialization agreements.
•acquisition and subsequent integration of businesses, products and technologies.
Cash payments due by calendar year for our Convertible Senior Notes at September 30, 2022 are as follows (in thousands):
(1) The Convertible Senior Notes may be settled in cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.
Critical Accounting Policies
Off-Balance Sheet Arrangements
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