Quarterly report pursuant to Section 13 or 15(d)

Balance Sheet Components

v3.22.1
Balance Sheet Components
3 Months Ended
Mar. 31, 2022
Balance Sheet Related Disclosures [Abstract]  
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. In accordance with ASC 360, long-lived assets to be held are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. No impairments were recorded as of March 31, 2022 and March 31, 2021.

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