| Balance Sheet Components | 4. Balance sheet components Cash, cash equivalents and marketable securities The Company considers all short-term highly liquid investments with a maturity of three months or less to be cash equivalents. The Company’s marketable debt securities are classified and accounted for as available-for-sale. Cash equivalents are recorded at cost plus accrued interest, which is considered adjusted cost, and approximates fair value. Marketable debt securities are included in cash equivalents and marketable securities based on the maturity date of the security. Short-term investments are included in marketable securities in the current period presentation. The Company considers investments with maturities greater than three months, but less than one year, to be marketable securities. Investments are reported at fair value with realized and unrealized gains or losses reported in other income (expense), net. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Credit losses and other-than-temporary impairments are declines in fair value that are not expected to recover and are charged to other income (expense), net. Cash, cash equivalents, and marketable securities consist of the following:
March 31,
December 31,
Cash and cash equivalents
2022
2021
Cash
$
36,677
$
48,817
Money market accounts
176,722
186,707
Total cash and cash equivalents
$
213,399
$
235,524
Marketable securities
Corporate bonds
$
9,989
$
9,989
Total marketable securities
$
9,989
$
9,989
Accounts receivable and allowance for bad debts, returns, and adjustments Accounts receivable are customer obligations due under normal sales and rental terms. The Company performs credit evaluations of the customers’ financial condition and generally does not require collateral. The allowance for doubtful accounts is maintained at a level that, in management’s opinion, is adequate to absorb potential losses related to accounts receivable and is based upon the Company’s continuous evaluation of the collectability of outstanding balances. Management’s evaluation takes into consideration such factors as past bad debt experience, economic conditions and information about specific receivables. The Company’s evaluation also considers the age and composition of the outstanding amounts in determining their net realizable value. The allowance for doubtful accounts is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in general and administrative expense for sales revenue in the periods in which they become known. The allowance is increased by bad debt provisions, net of recoveries, and is reduced by direct write-offs. The Company generally does not allow returns from providers for reasons not covered under its standard warranty. Therefore, provision for returns applies primarily to direct-to-consumer sales. This reserve is calculated primarily based on actual historical return rates under the Company’s 30-day return program and is applied to the related sales revenue for the last month of the quarter reported. The Company also records an estimate for rental revenue adjustments which is recorded as a reduction of rental revenue and net rental accounts receivable balances. These adjustments result from contractual adjustments, audit adjustments, untimely claims filings, or billings not paid due to another provider performing same or similar functions for the patient in the same period, all of which prevent billed revenue from becoming realizable. The reserve is based on historical revenue adjustments as a percentage of rental revenue billed and unbilled during the related period. When recording the allowance for doubtful accounts for sales revenue, the bad debt expense account (general and administrative expense account) is charged and when recording allowance for sales returns, the sales returns account (contra sales revenue account) is charged. The Company consistently applies its allowance estimation methodology from period-to-period. The Company’s best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known, the Company adjusts its assumptions accordingly to change its estimate of accounts receivable. Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of March 31, 2022 and December 31, 2021 were as follows:
As of
As of
Net accounts receivable
March 31, 2022
December 31, 2021
Rental (1)
$
7,072
$
6,011
Business-to-business and other receivables (2)
26,911
18,441
Total net accounts receivable
$
33,983
$
24,452
(1)
Rental includes Medicare, Medicaid/other government, private insurance and patient pay.
(2)
Business-to-business receivables included one customer with an accounts receivable balance of $4,268 and $5,945 as of March 31, 2022 and December 31, 2021, respectively. The customer received extended payment terms through a direct financing plan offered. The Company also has a credit insurance policy in place, which allocated up to $10,000 in coverage as of March 31, 2022 and December 31, 2021 for this customer with a $400 deductible and 10% retention. The following tables sets forth the accounts receivable allowances as of March 31, 2022 and December 31, 2021:
As of
As of
Allowances - accounts receivable
March 31, 2022
December 31, 2021
Doubtful accounts
$
53
$
52
Sales returns
969
810
Total allowances - accounts receivable
$
1,022
$
862
Concentration of credit risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. At times, cash account balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation (FDIC). However, management believes the risk of loss to be minimal. The Company performs periodic evaluations of the relative credit standing of these institutions and has not experienced any losses on its cash and cash equivalents to date. The Company has also entered into hedging relationships with a single counterparty to offset the forecasted Euro-based revenues. The credit risk has been reduced due to a net settlement arrangement whereby the Company is allowed to net settle transactions with a single net amount payable by one party to the other. Concentration of customers and vendors The Company primarily sells its products to traditional home medical equipment providers, distributors, and resellers in the United States and in foreign countries on a credit basis. The Company also sells its products direct-to-consumers primarily on a prepayment basis. The Medicare service reimbursement programs represented more than 10% of the Company’s total revenue for the three months ended March 31, 2022. Medicare represented more than 10% of the Company’s total revenue for the three months ended March 31, 2022 and one single customer for the three months ended March 31, 2021. Three single customers and Medicare each represented more than 10% of the Company’s net accounts receivable balance with accounts receivable balances of $5,778, $4,268, $3,673 and $3,461, respectively, as of March 31, 2022, and one single customer and Medicare of $5,945 and $2,685, respectively, as of December 31, 2021. The Company also rents products directly to consumers for insurance reimbursement, which resulted in a customer concentration relating to Medicare’s service reimbursement programs. Medicare’s service reimbursement programs accounted for 79.0% and 83.9% of rental revenue in the three months ended March 31, 2022 and March 31, 2021, respectively, and based on total revenue were 12.8% and 9.5% for the three months ended March 31, 2022 and March 31, 2021, respectively. Accounts receivable balances relating to Medicare’s service reimbursement programs (including held and unbilled, net of allowances) amounted to $3,461 or 10.2% of total net accounts receivable as of March 31, 2022 as compared to $2,685 or 11.0% of total net accounts receivable as of December 31, 2021. The Company currently purchases raw materials from a limited number of vendors, which resulted in a concentration of three major vendors. The three major vendors supply the Company with raw materials used to manufacture the Company’s products. For the three months ended March 31, 2022, the Company’s three major vendors accounted for 25.2%, 19.9% and 8.4%, respectively, of total raw material purchases. For the three months ended March 31, 2021, the Company’s three major vendors accounted for 19.9%, 10.8% and 9.6%, respectively, of total raw material purchases. A portion of revenue is earned from sales outside the United States. Approximately 73.2% and 79.3% of the non-U.S. revenue for the three months ended March 31, 2022 and March 31, 2021, respectively, were invoiced in Euros. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the three months ended March 31, 2022 and March 31, 2021, respectively, is as follows:
Three months ended March 31,
2022
2021
U.S. revenue
$
52,444
$
71,212
Non-U.S. revenue
27,941
15,720
Total revenue
$
80,385
$
86,932
Inventories Inventories are stated at the lower of cost and net realizable value, using the first-in, first-out (FIFO) method. The Company records adjustments at least quarterly to inventory for potentially excess, obsolete, slow-moving or impaired items. The Company recorded noncurrent inventory related to inventories that are expected to be realized or consumed after one year of $797 and $1,943 as of March 31, 2022 and December 31, 2021, respectively. Noncurrent inventories are primarily related to raw materials purchased in bulk to support long-term expected repairs to reduce costs and are classified in other assets. The Company prepaid for raw materials of $10,968 and $15,426 as of March 31, 2022 and December 31, 2021, respectively, that were classified in prepaid expenses and other current assets. During the three months ended March 31, 2022 and March 31, 2021, $533 and $607, respectively, of inventory was transferred to rental equipment and was considered a noncash transaction in the production and purchase of rental equipment on the consolidated statements of cash flows. Inventories that are considered current consist of the following:
March 31,
December 31,
2022
2021
Raw materials and work-in-progress
$
22,550
$
21,909
Finished goods
13,313
12,116
Less: reserves
(1,785
)
(2,152
)
Inventories, net
$
34,078
$
31,873
Property and equipment Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the assets’ estimated useful lives as follows:
Rental equipment
1.5-5 years
Manufacturing equipment and tooling
3-5 years
Computer equipment and software
2-3 years
Furniture and equipment
3-5 years
Leasehold improvements
Lesser of estimated useful life or remaining lease term Expenditures for additions, improvements and replacements are capitalized and depreciated to a salvage value of $0. Repair and maintenance costs on rental equipment are included in cost of rental revenue on the consolidated statements of comprehensive loss. Repair and maintenance expense, which includes labor, parts and freight, for rental equipment was $1,030 and $935 for the three months ended March 31, 2022 and March 31, 2021, respectively. Included within property and equipment is construction in process, primarily related to the design and engineering of tooling, jigs and other machinery. In addition, this item also includes computer software or development costs that have been purchased but have not completed the final configuration process for implementation into the Company’s systems. These items have not been placed in service; therefore, no depreciation or amortization was recognized for these items in the respective periods. Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the three months ended March 31, 2022 and March 31, 2021, respectively.
Three months ended March 31,
2022
2021
Rental equipment
$
2,638
$
1,888
Other property and equipment
975
946
Total depreciation and amortization
$
3,613
$
2,834
Property and equipment and rental equipment with associated accumulated depreciation is summarized below as of March 31, 2022 and December 31, 2021, respectively.
March 31,
December 31,
Property and equipment
2022
2021
Rental equipment, net of allowances of $1,450 and $1,290, respectively
$
59,387
$
59,073
Other property and equipment
31,298
31,522
Property and equipment
90,685
90,595
Accumulated depreciation
Rental equipment
33,668
33,355
Other property and equipment
17,688
18,314
Accumulated depreciation
51,356
51,669
Property and equipment, net
Rental equipment, net of allowances of $1,450 and $1,290, respectively
25,719
25,718
Other property and equipment
13,610
13,208
Property and equipment, net
$
39,329
$
38,926
Long-lived assets The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360 — Property, Plant, and Equipment Goodwill and other identifiable intangible assets Goodwill The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:
Balance as of December 31, 2021
$
32,979
Translation adjustment
(45
)
Balance as of March 31, 2022
$
32,934
As of March 31, 2022, the Company had no accumulated impairment losses related to goodwill. Intangible assets There were no accumulated impairment losses related to the Company’s intangible assets as of March 31, 2022 and December 31, 2021. The following tables represent the changes in net carrying values of intangible assets as of the respective dates:
Average
estimated
Gross
useful lives
carrying
Accumulated
March 31, 2022
(in years)
amount
amortization
Net amount
Technology
10
$
77,700
$
20,396
$
57,304
Licenses
10
185
181
4
Patents and websites
5
4,519
3,927
592
Customer relationships
4
1,333
1,333
—
Commercials
2-3
348
248
100
Total
$
84,085
$
26,085
$
58,000
Average
estimated
Gross
useful lives
carrying
Accumulated
December 31, 2021
(in years)
amount
amortization
Net amount
Technology
10
$
77,700
$
18,454
$
59,246
Licenses
10
185
180
5
Patents and websites
5
4,519
3,746
773
Customer relationships
4
1,361
1,361
—
Commercials
2-3
799
676
123
Total
$
84,564
$
24,417
$
60,147
Annual estimated amortization expense for each of the succeeding fiscal years is as follows:
March 31,
2022
Remaining 9 months of 2022
$
6,365
2023
7,854
2024
7,821
2025
7,790
2026
7,774
Thereafter
20,396
$
58,000
Current liabilities Accounts payable and accrued expenses as of March 31, 2022 and December 31, 2021 consisted of the following:
March 31,
December 31,
2022
2021
Accounts payable
$
18,109
$
10,258
Accrued inventory (in-transit and unvouchered receipts) and trade payables
10,340
12,488
Accrued purchasing card liability
2,508
1,488
Accrued franchise, sales and use taxes
492
486
Other accrued expenses
926
969
Accounts payable and accrued expenses
$
32,375
$
25,689
Accrued payroll as of March 31, 2022 and December 31, 2021 consisted of the following:
March 31,
December 31,
2022
2021
Accrued bonuses
$
1,292
$
8,274
Accrued wages and other payroll related items
4,221
5,469
Accrued vacation
3,012
2,894
Accrued employee stock purchase plan deductions
314
670
Accrued payroll
$
8,839
$
17,307 |
