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Table of Contents

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, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33462
_____________________________________________________
INSULET CORPORATION
(Exact name of Registrant as specified in its charter)
________________________________________________________________________________________________________
 
Delaware
 
04-3523891
 
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
100 Nagog Park
Acton
Massachusetts
 
01720
 
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (978600-7000
________________________________________________________________________________________________________
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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
Accelerated filer
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share
PODD
The NASDAQ Stock Market, LLC
As of July 25, 2019, the registrant had 60,271,673 shares of common stock outstanding.




TABLE OF CONTENTS
 
 
 
 
 
 
 


Table of Contents

PART I - FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements (Unaudited)
INSULET CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
119,867

 
$
113,906

Short-term investments
189,881

 
175,040

Accounts receivable trade, less allowance for doubtful accounts of $4,098 and $3,610
66,958

 
63,294

Unbilled receivable
11,781

 
13,378

Inventories
85,109

 
71,414

Prepaid expenses and other current assets
25,211

 
24,254

Total current assets
498,807

 
461,286

Long-term investments
62,677

 
140,784

Property and equipment, net
334,025

 
258,379

Other intangible assets, net
13,040

 
10,383

Goodwill
39,739

 
39,646

Other assets
29,435

 
18,266

Total assets
$
977,723

 
$
928,744

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
24,752

 
$
25,500

Accrued expenses and other current liabilities
81,021

 
90,157

Total current liabilities
105,773

 
115,657

Convertible debt, net
607,351

 
591,978

Other liabilities
14,819

 
9,010

Total liabilities
727,943

 
716,645

Stockholders’ Equity
 
 
 
Preferred stock, $.001 par value, 5,000,000 authorized; none issued and outstanding

 

Common stock, $.001 par value, 100,000,000 authorized; 60,149,926 and 59,188,758 issued and outstanding
60

 
59

Additional paid-in capital
930,383

 
898,559

Accumulated other comprehensive loss
(2,829
)
 
(2,905
)
Accumulated deficit
(677,834
)
 
(683,614
)
Total stockholders’ equity
249,780

 
212,099

Total liabilities and stockholders’ equity
$
977,723

 
$
928,744


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

INSULET CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands, except share and per share data)
2019
 
2018
 
2019
 
2018
Revenue
$
177,136

 
$
124,262

 
$
336,691

 
$
247,840

Cost of revenue
60,718

 
42,190

 
113,577

 
89,953

Gross profit
116,418

 
82,072

 
223,114

 
157,887

Operating expenses:
 
 
 
 
 
 
 
Research and development
32,264

 
18,801

 
64,218

 
39,068

Sales and marketing
47,401

 
36,575

 
89,017

 
69,624

General and administrative
29,150

 
22,371

 
55,011

 
44,870

Total operating expenses
108,815

 
77,747

 
208,246

 
153,562

Operating income
7,603

 
4,325

 
14,868

 
4,325

Interest expense, net of portion capitalized
(7,642
)
 
(7,290
)
 
(14,257
)
 
(15,208
)
Other income, net
1,923

 
1,686

 
5,977

 
3,368

Income (loss) before income taxes
1,884

 
(1,279
)
 
6,588

 
(7,515
)
Income tax expense
482

 
412

 
808

 
745

Net income (loss)
$
1,402

 
$
(1,691
)
 
$
5,780

 
$
(8,260
)
Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.02

 
$
(0.03
)
 
$
0.10

 
$
(0.14
)
Diluted
$
0.02

 
$
(0.03
)
 
$
0.09

 
$
(0.14
)
Weighted-average number of shares used in calculating net income (loss) per share:
 
 
 
 
 
 
 
Basic
59,844,991

 
58,833,498

 
59,601,365

 
58,659,111

Diluted
61,486,325

 
58,833,498

 
61,332,451

 
58,659,111


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

INSULET CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Net income (loss)
$
1,402

 
$
(1,691
)
 
$
5,780

 
$
(8,260
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax
(359
)
 
(741
)
 
(1,174
)
 
(1,059
)
Unrealized gain (loss) on available-for-sale debt securities, net of tax
615

 
(109
)
 
1,250

 
(834
)
Total other comprehensive income (loss), net of tax
256

 
(850
)
 
76

 
(1,893
)
Total comprehensive income (loss)
$
1,658

 
$
(2,541
)
 
$
5,856

 
$
(10,153
)

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

INSULET CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)


Consolidated Statement of Stockholders' Equity for the three months ended June 30, 2019:
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders’
Equity
(in thousands, except share data)
Shares
 
Amount
 
 
Balance at March 31, 2019
59,638,439

 
$
60

 
$
905,891

 
$
(679,236
)
 
$
(3,085
)
 
$
223,630

Exercise of options to purchase common stock
447,214

 

 
14,599

 
 
 
 
 
14,599

Issuance for employee stock purchase plan
27,613

 

 
2,030

 
 
 
 
 
2,030

Stock-based compensation expense
 
 
 
 
8,294

 
 
 
 
 
8,294

Restricted stock units vested, net of shares withheld for taxes
36,660

 

 
(431
)
 
 
 
 
 
(431
)
Net income
 
 
 
 
 
 
1,402

 
 
 
1,402

Other comprehensive income
 
 
 
 
 
 
 
 
256

 
256

Balance at June 30, 2019
60,149,926

 
$
60

 
$
930,383

 
$
(677,834
)
 
$
(2,829
)
 
$
249,780



Consolidated Statement of Stockholders' Equity for the three months ended June 30, 2018:
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders’
Equity
(in thousands, except share data)
Shares
 
Amount
 
 
Balance at March 31, 2018
58,723,242

 
$
59

 
$
865,520

 
$
(693,475
)
 
$
(1,536
)
 
$
170,568

Exercise of options to purchase common stock
194,327

 

 
6,780

 
 
 
 
 
6,780

Issuance for employee stock purchase plan
24,643

 

 
1,481

 
 
 
 
 
1,481

Stock-based compensation expense
 
 
 
 
6,936

 
 
 
 
 
6,936

Restricted stock units vested, net of shares withheld for taxes
33,183

 

 
(876
)
 
 
 
 
 
(876
)
Debt retirement
 
 
 
 
(3,200
)
 
 
 
 
 
(3,200
)
Net loss
 
 
 
 
 
 
(1,691
)
 
 
 
(1,691
)
Other comprehensive loss
 
 
 
 
 
 
 
 
(850
)
 
(850
)
Balance at June 30, 2018
58,975,395

 
$
59

 
$
876,641

 
$
(695,166
)
 
$
(2,386
)
 
$
179,148














The accompanying condensed notes are an integral part of these consolidated financial statements.
6


Table of Contents

Consolidated Statement of Stockholders' Equity for the six months ended June 30, 2019:
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders’
Equity
(in thousands, except share data)
Shares
 
Amount
 
 
Balance at December 31, 2018
59,188,758

 
$
59

 
$
898,559

 
$
(683,614
)
 
$
(2,905
)
 
$
212,099

Exercise of options to purchase common stock
716,687

 
1

 
23,659

 
 
 
 
 
23,660

Issuance for employee stock purchase plan
27,613

 

 
2,030

 
 
 
 
 
2,030

Stock-based compensation expense
 
 
 
 
14,078

 
 
 
 
 
14,078

Restricted stock units vested, net of shares withheld for taxes
216,868

 

 
(7,943
)
 
 
 
 
 
(7,943
)
Net income
 
 
 
 
 
 
5,780

 
 
 
5,780

Other comprehensive income
 
 
 
 
 
 
 
 
76

 
76

Balance at June 30, 2019
60,149,926

 
$
60

 
$
930,383

 
$
(677,834
)
 
$
(2,829
)
 
$
249,780


Consolidated Statement of Stockholders' Equity for the six months ended June 30, 2018:
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders’
Equity
(in thousands, except share data)
Shares
 
Amount
 
 
Balance at December 31, 2017
58,319,348

 
$
58

 
$
866,206

 
$
(707,255
)
 
$
(493
)
 
$
158,516

Exercise of options to purchase common stock
308,369

 

 
9,741

 
 
 
 
 
9,741

Issuance for employee stock purchase plan
24,643

 

 
1,481

 
 
 
 
 
1,481

Stock-based compensation expense
 
 
 
 
15,117

 
 
 
 
 
15,117

Restricted stock units vested, net of shares withheld for taxes
323,035

 
1

 
(12,692
)
 
 
 
 
 
(12,691
)
Debt retirement
 
 
 
 
(3,212
)
 
 
 
 
 
(3,212
)
Adoption of ASC 606
 
 
 
 
 
 
20,349

 
 
 
20,349

Net loss
 
 
 
 
 
 
(8,260
)
 
 
 
(8,260
)
Other comprehensive loss
 
 
 
 
 
 
 
 
(1,893
)
 
(1,893
)
Balance at June 30, 2018
58,975,395

 
$
59

 
$
876,641

 
$
(695,166
)
 
$
(2,386
)
 
$
179,148



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

INSULET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended June 30,
(in thousands)
2019
 
2018
Cash flows from operating activities
 
 
 
Net income (loss)
$
5,780

 
$
(8,260
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
 
 
 
Depreciation and amortization
11,026

 
7,131

Non-cash interest expense
15,372

 
14,427

Stock-based compensation expense
14,078

 
15,117

Provision for bad debts
1,969

 
1,586

Other
(589
)
 
(130
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable and unbilled receivable
(5,406
)
 
(7,217
)
Inventories
(14,005
)
 
(7,959
)
Prepaid expenses and other assets
(3,076
)
 
(4,823
)
Accounts payable, accrued expenses and other current liabilities
(3,749
)
 
(17,873
)
Deferred revenue
190

 
(2,626
)
Other liabilities
(1,313
)
 
232

Net cash provided by (used in) operating activities
20,277

 
(10,395
)
Cash flows from investing activities
 
 
 
Purchases of property, equipment
(91,949
)
 
(87,730
)
Acquisition of intangible assets
(4,965
)
 
(2,207
)
Purchases of investments
(39,065
)
 
(117,940
)
Receipts from the maturity or sale of investments
104,186

 
90,774

Net cash used in investing activities
(31,793
)
 
(117,103
)
Cash flows from financing activities
 
 
 
Repayment of convertible debt

 
(6,687
)
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan
25,690

 
11,206

Payments for taxes related to net share settlement of equity awards
(7,943
)
 
(12,691
)
Net cash provided by (used in) financing activities
17,747

 
(8,172
)
Effect of exchange rate changes on cash
(270
)
 
(661
)
Net increase (decrease) in cash, cash equivalents and restricted cash
5,961

 
(136,331
)
Cash, cash equivalents and restricted cash at beginning of period
113,906

 
272,577

Cash, cash equivalents and restricted cash at end of period
$
119,867

 
$
136,246

Non-cash investing and financing activities:
 
 
 
Purchases of property and equipment included in accounts payable and accrued expenses
$
3,051

 
$
12,300




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

INSULET CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Nature of the Business
Insulet Corporation (“Insulet”) is primarily engaged in the development, manufacturing and sale of its proprietary Omnipod® System, an innovative, discreet and easy-to-use continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod System consists of two product lines: the Omnipod Insulin Management System (“Omnipod”), which Insulet has been selling since 2005, and its next generation Omnipod DASHTM Insulin Management System (“Omnipod DASH” or “DASH”). Insulet began a full market release of Omnipod DASH in the United States at the end of the first quarter of 2019. Collectively, these products are referred to as the “Omnipod System”.
In addition to using the Omnipod System for insulin delivery, Insulet also partners with global pharmaceutical and biotechnology companies to tailor the Omnipod System technology platform for the delivery of their drugs across other therapeutic areas. The majority of Insulet's drug delivery revenue currently consists of sales to Amgen supplying the Neulasta® Onpro® kit, an innovative delivery system for Amgen’s white blood cell booster to help reduce the risk of infection during intense chemotherapy.

Note 2. Basis of Presentation
Basis of Presentation
The accompanying financial statements reflect the consolidated operations of Insulet and its subsidiaries (the “Company”). The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the application of certain of its significant accounting policies that may materially affect the reported amounts of assets, liabilities, equity, revenue and expenses. Actual results may differ from those estimates. In management's opinion, the unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the interim results reported. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019, or for any other subsequent interim period.
The year-end balance sheet data was derived from audited consolidated financial statements. These consolidated financial statements do not include all of the annual disclosures required by U.S. GAAP; accordingly, they should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Shipping and Handling Costs
Shipping and handling costs are included in general and administrative expenses and were $2.3 million and $1.4 million for the three months ended June 30, 2019 and 2018, respectively, and were $4.9 million and $2.5 million for the six months ended June 30, 2019 and 2018, respectively.

Reclassification of Prior Period Amounts
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. Software license costs have been reallocated from general and administrative expenses to research and development and sales and marketing expenses based on license usage. These reclassifications have no effect on previously reported net income.

Recently Adopted Accounting Standards
Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 and its related amendments (collectively referred to as ASC 842), which amends the guidance in former ASC Topic 840, Leases. The new standard requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for those leases classified as operating leases. The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method, whereby the new guidance is applied prospectively as of the date of adoption and prior periods are not restated. The Company elected the practical expedients that permit the Company to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. The Company also excludes leases with an expected term of less than one year from the application of ASC 842. Adoption of the lease standard had a material impact on the Company's consolidated balance sheet, which is disclosed in Note 11.
Effective January 1, 2019, the Company early adopted ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires certain costs to implement a cloud computing arrangement that is a service contract to be capitalized consistent with the rules applicable to internal-use software capitalization projects. The Company adopted this new guidance effective January 1, 2019, prospectively. The Company defers

9

Table of Contents

eligible costs related to the implementation of cloud computing arrangements within other current and non-current assets and amortizes such costs over the expected term of the hosting arrangement to the same income statement line as the associated cloud operating expenses. Adoption of this standard resulted in the Company capitalizing $0.7 million and $2.0 million of cloud computing implementation costs for the three and six months ended June 30, 2019, respectively.

Note 3. Revenue and Contract Acquisition Costs
The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
U.S. Omnipod
$
98,074

 
$
78,047

 
$
184,177

 
$
148,319

International Omnipod
62,736

 
28,509

 
119,624

 
66,913

Total Diabetes Revenue
160,810

 
106,556

 
303,801

 
215,232

Drug Delivery
16,326

 
17,706

 
32,890

 
32,608

Total
$
177,136

 
$
124,262

 
$
336,691

 
$
247,840


Revenue for customers comprising more than 10% of total revenue were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,


2019
 
2018
 
2019
 
2018
Amgen, Inc.
*
 
14%
 
10%
 
13%
Ypsomed
*
 
*
 
*
 
17%
Cardinal Health Inc. and affiliates
12%
 
13%
 
11%
 
12%
* Represents less than 10% of consolidated revenue.
Deferred revenue related to unsatisfied performance obligations was included in the following consolidated balance sheet accounts in the amounts shown:
 
 
As of
(in thousands)
 
June 30, 2019
 
December 31, 2018
Accrued expenses and other current liabilities
 
$
1,374

 
$
1,184

Other liabilities
 
986

 
931

Total deferred revenue
 
$
2,360

 
$
2,115

 
 
 
 
 

Revenue recognized during the three and six months ended June 30, 2019 included in deferred revenue at the beginning of 2019 was $0.2 million and $1.1 million, respectively. Revenue recognized during the three and six months ended June 30, 2018 included in deferred revenue at the beginning of 2018 was $1.1 million and $2.4 million, respectively. No revenue was recognized during the three and six months ended June 30, 2019 and 2018 from performance obligations satisfied or partially satisfied in previous periods.
Contract acquisition costs, representing capitalized commissions costs related to new patient starts, net of amortization, were included in the following consolidated balance sheet accounts in the amounts shown:
 
 
As of
(in thousands)
 
June 30, 2019
 
December 31, 2018
Prepaid expenses and other current assets
 
$
8,452

 
$
7,277

Other assets
 
18,183

 
15,988

Total capitalized contract acquisition costs, net
 
$
26,635

 
$
23,265

 
 
 
 
 

The Company recognized $2.1 million and $4.1 million of amortization of capitalized contract acquisition costs during the three and six months ended June 30, 2019, respectively.

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Note 4. Investments
Cash and Cash Equivalents
Included in the Company's cash and cash equivalents are restricted cash amounts set aside for collateral on outstanding letters of credit totaling $2.7 million at both June 30, 2019 and December 31, 2018.

Marketable Securities
The Company's short-term and long-term investments in debt securities had maturity dates that range from 8 days to 23 months as of June 30, 2019. The Company’s investment portfolio included approximately 40 available-for-sale debt securities that had insignificant unrealized loss positions as of June 30, 2019 and December 31, 2018. The Company's investments had insignificant realized gains or losses for both the three and six months ended June 30, 2019 and June 30, 2018.
The Company uses the following fair value hierarchy to measure the fair value of assets and liabilities:
Level 1 — quoted prices in active markets for identical assets or liabilities;
Level 2 — observable inputs other than quoted prices in active markets for identical assets or liabilities;
Level 3 — unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions. The Company had no Level 3 assets or liabilities as of June 30, 2019 and December 31, 2018.
The following table provides amortized cost, gross unrealized gains and losses, fair value and the level in the fair value hierarchy for the Company's investments as of June 30, 2019 and December 31, 2018:
(in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized (Losses)
 
Fair Value
 
Level 1
 
Level 2
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Money market mutual funds
$
50,427

 
$

 
$

 
$
50,427

 
$
45,439

 
$
4,988

Total cash equivalents
$
50,427

 
$

 
$

 
$
50,427

 
$
45,439

 
$
4,988

 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency bonds
$
103,776

 
$
69

 
$
(67
)
 
$
103,778

 
$
69,779

 
$
33,999

Corporate bonds
76,256

 
162

 
(13
)
 
76,405

 

 
76,405

Certificates of deposit
9,688

 
13

 
(3
)
 
9,698

 

 
9,698

Total short-term investments
$
189,720

 
$
244

 
$
(83
)
 
$
189,881

 
$
69,779

 
$
120,102

 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency bonds
$
57,647

 
$
294

 
$
(3
)
 
$
57,938

 
$
29,915

 
$
28,023

Corporate bonds
814

 
44

 
(40
)
 
818

 

 
818

Certificates of deposit
3,904

 
17

 

 
3,921

 

 
3,921

Total long-term investments
$
62,365

 
$
355

 
$
(43
)
 
$
62,677

 
$
29,915

 
$
32,762

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Money market mutual funds
$
47,199

 
$

 
$

 
$
47,199

 
$
47,199

 
$

Total cash equivalents
$
47,199

 
$

 
$

 
$
47,199

 
$
47,199

 
$

 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency bonds
$
112,995

 
$

 
$
(486
)
 
$
112,509

 
$
69,605

 
$
42,904

Corporate bonds
56,235

 

 
(210
)
 
56,025

 

 
56,025

Certificates of deposit
6,506

 

 

 
6,506

 

 
6,506

Total short-term investments
$
175,736

 
$

 
$
(696
)
 
$
175,040

 
$
69,605

 
$
105,435

 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency bonds
$
90,458

 
$
99

 
$
(155
)
 
$
90,402

 
$
64,086

 
$
26,316

Corporate bonds
46,743

 
43

 
(68
)
 
46,718

 

 
46,718

Certificates of deposit
3,664

 

 

 
3,664

 

 
3,664

Total long-term investments
$
140,865

 
$
142

 
$
(223
)
 
$
140,784

 
$
64,086

 
$
76,698




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Note 5. Convertible Debt, Net
The Company had outstanding convertible debt and related debt issuance costs on its consolidated balance sheet as follows:
 
As of
(in thousands)
June 30, 2019
 
December 31, 2018
1.25% Convertible Senior Notes, due September 2021
$
344,992

 
$
344,992

1.375% Convertible Senior Notes, due November 2024
402,500

 
402,500

Unamortized debt discount
(129,616
)
 
(143,616
)
Debt issuance costs
(10,525
)
 
(11,898
)
Total convertible debt, net
$
607,351

 
$
591,978


The carrying amount and the estimated fair value of the Company's convertible debt, which is based on the Level 2 quoted market prices as of June 30, 2019 and December 31, 2018 were as follows:
 
As of
 
June 30, 2019
 
December 31, 2018
(in thousands)
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
1.25% Convertible Senior Notes, due September 2021
$
308,574

 
$
693,455

 
$
301,006

 
$
483,851

1.375% Convertible Senior Notes, due November 2024
298,777

 
512,797

 
290,972

 
426,026

  Total
$
607,351

 
$
1,206,252

 
$
591,978

 
$
909,877



Note 6. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, excluding unvested restricted common shares. Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding and, when dilutive, potential common share equivalents from outstanding stock options and restricted stock units (using the treasury-stock method), and potential common shares from the Company's convertible debt (using the if-converted method).
The table below sets forth the components used in the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2019. Because the Company reported a net loss for the three and six months ended June 30, 2018, all potential dilutive common shares have been excluded from the computation of the diluted net loss per share for three and six months ended June 30, 2018, as the effect would have been anti-dilutive.
 
June 30, 2019
 (in thousands, except share and per share data)
Three Months Ended
 
Six Months Ended
Numerator:
 
 
 
Net income
$
1,402

 
$
5,780

Denominator:
 
 
 
Basic weighted average common shares outstanding
59,844,991

 
59,601,365

Effect of dilutive securities
 
 
 
Stock options
1,479,713

 
1,513,886

Restricted stock units
161,621

 
217,200

Convertible debt

 

Diluted shares
61,486,325

 
61,332,451

Net income per share:
 
 
 
Basic
$
0.02

 
$
0.10

Diluted
$
0.02

 
$
0.09


For the three and six months ended June 30, 2019, certain potential outstanding shares from stock options, restricted stock units and convertible debt were excluded from the computation of diluted net income per share because the effect of including these items was anti-dilutive. Additionally, certain performance-based restricted stock units were excluded from the computation of diluted net income per share because the underlying performance conditions for such restricted stock units had not yet been met.

12

Table of Contents

The number of potential common share equivalents excluded from the computation of diluted net income (loss) per share for the three and six months ended June 30, 2019 and 2018 are as follows:
 
June 30, 2019
 
June 30, 2018
 
Three Months Ended
 
Six Months Ended
 
Three and Six Months Ended
1.25% Convertible Senior Notes
5,910,954

 
5,910,954

 
5,910,954

1.375% Convertible Senior Notes
4,319,429

 
4,319,429

 
4,319,429

Unvested restricted stock units
426,550

 
421,776

 
914,710

Stock options
181,132

 
231,289

 
3,199,238

Total
10,838,065

 
10,883,448

 
14,344,331



Note 7. Inventories
At the end of each period, inventories were comprised of the following:
 
As of
(in thousands)
June 30, 2019
 
December 31, 2018
Raw materials
$
17,960