Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 25, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-37918 | |
Entity Registrant Name | iRhythm Technologies, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 20-8149544 | |
Entity Address, Address Line One | 699 8th Street Suite 600 | |
Entity Address, City or Town | San Francisco, | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94103 | |
City Area Code | 415 | |
Local Phone Number | 632-5700 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 30,110,878 | |
Title of 12(b) Security | Common Stock, Par Value $0.001 Per Share | |
Trading Symbol | IRTC | |
Security Exchange Name | NASDAQ | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001388658 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 71,222 | $ 127,562 |
Short-term investments | 132,316 | 111,569 |
Accounts receivable, net | 60,534 | 46,430 |
Inventory | 14,452 | 10,268 |
Prepaid expenses and other current assets | 7,326 | 9,693 |
Total current assets | 285,850 | 305,522 |
Property and equipment, net | 71,515 | 55,944 |
Operating lease right-of-use assets | 62,010 | 84,587 |
Goodwill | 862 | 862 |
Other assets | 20,153 | 16,052 |
Total assets | 440,390 | 462,967 |
Current liabilities: | ||
Accounts payable | 7,404 | 10,509 |
Accrued liabilities | 60,264 | 51,486 |
Deferred revenue | 3,003 | 3,049 |
Debt, current portion | 0 | 11,667 |
Operating lease liabilities, current portion | 12,920 | 11,142 |
Total current liabilities | 83,591 | 87,853 |
Debt, noncurrent portion | 34,931 | 9,690 |
Other noncurrent liabilities | 1,163 | 697 |
Operating lease liabilities, noncurrent portion | 81,481 | 85,212 |
Total liabilities | 201,166 | 183,452 |
Commitments and contingencies (Note 7) | ||
Stockholders’ equity: | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding at September 30, 2022 and December 31, 2021 | 0 | 0 |
Common stock, $0.001 par value; 100,000,000 shares authorized; 30,094,205 shares at September 30, 2022 and 29,493,726 at December 31, 2021 issued and outstanding | 28 | 27 |
Additional paid-in capital | 741,879 | 685,594 |
Accumulated other comprehensive loss | (681) | (61) |
Accumulated deficit | (502,002) | (406,045) |
Total stockholders’ equity | 239,224 | 279,515 |
Total liabilities and stockholders’ equity | $ 440,390 | $ 462,967 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 30,094,205 | 29,493,726 |
Common stock, shares outstanding (in shares) | 30,094,205 | 29,493,726 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Statement [Abstract] | ||||
Revenue, net | $ 103,875 | $ 85,432 | $ 298,304 | $ 241,021 |
Cost of revenue | 32,954 | 29,284 | 95,379 | 78,737 |
Gross profit | 70,921 | 56,148 | 202,925 | 162,284 |
Operating expenses: | ||||
Research and development | 11,448 | 8,685 | 33,935 | 26,801 |
Selling, general and administrative | 80,559 | 70,745 | 235,468 | 203,227 |
Impairment and restructuring charges | 0 | 0 | 26,608 | 0 |
Total operating expenses | 92,007 | 79,430 | 296,011 | 230,028 |
Loss from operations | (21,086) | (23,282) | (93,086) | (67,744) |
Interest expense | (614) | (279) | (3,125) | (921) |
Other income (expense), net | 365 | (76) | 450 | 103 |
Loss before income taxes | (21,335) | (23,637) | (95,761) | (68,562) |
Income tax provision | 116 | 94 | 196 | 308 |
Net loss | $ (21,451) | $ (23,731) | $ (95,957) | $ (68,870) |
Net loss per common share, basic (in USD per share) | $ (0.71) | $ (0.81) | $ (3.22) | $ (2.35) |
Net loss per common share, diluted (in USD per share) | $ (0.71) | $ (0.81) | $ (3.22) | $ (2.35) |
Weighted-average shares, basic (in shares) | 30,055,166 | 29,397,845 | 29,836,601 | 29,294,559 |
Weighted-average shares, diluted (in shares) | 30,055,166 | 29,397,845 | 29,836,601 | 29,294,559 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (21,451) | $ (23,731) | $ (95,957) | $ (68,870) |
Other comprehensive loss: | ||||
Net change in unrealized loss on short-term investments | (98) | (13) | (620) | (17) |
Comprehensive loss | $ (21,549) | $ (23,744) | $ (96,577) | $ (68,887) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities | ||
Net loss | $ (95,957) | $ (68,870) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 9,930 | 6,738 |
Stock-based compensation | 41,946 | 42,651 |
Accretion of discounts on investments, net | 216 | 1,348 |
Provision for doubtful accounts and contractual allowances | 43,778 | 23,935 |
Amortization of operating lease right-of-use assets | 4,865 | 5,041 |
Impairment charges | 23,164 | 0 |
Other | 230 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (57,882) | (46,823) |
Inventory | (4,375) | (4,643) |
Prepaid expenses and other current assets | 2,367 | 1,722 |
Other assets | (4,099) | (473) |
Accounts payable | (3,105) | 492 |
Accrued liabilities | 8,072 | 11,338 |
Deferred revenue | (46) | 1,444 |
Operating lease liabilities | (4,692) | (959) |
Reimbursement of tenant improvement allowance | 0 | 2,351 |
Net cash used in operating activities | (35,588) | (24,708) |
Cash flows from investing activities | ||
Purchases of property and equipment | (22,737) | (23,442) |
Purchases of short-term investments | (137,548) | (66,676) |
Sales of short-term investments | 34,965 | 0 |
Maturities of short-term investments | 81,000 | 222,515 |
Net cash provided by (used in) investing activities | (44,320) | 132,397 |
Cash flows from financing activities | ||
Payment of long-term debt | (21,389) | (8,750) |
Proceeds from term loan | 35,000 | 0 |
Proceeds from issuance of common stock in connection with employee equity incentive plans | 10,034 | 5,657 |
Tax withholding upon vesting of restricted stock awards | 0 | (25,853) |
Payments of issuance costs for long term debt | (77) | 0 |
Net cash provided by (used in) financing activities | 23,568 | (28,946) |
Net (decrease) increase in cash and cash equivalents | (56,340) | 78,743 |
Cash and cash equivalents beginning of period | 127,562 | 88,628 |
Cash and cash equivalents end of period | 71,222 | 167,371 |
Supplemental disclosures of cash flow information | ||
Interest paid | 2,676 | 943 |
Non-cash investing and financing activities | ||
Property and equipment costs included in accounts payable and accrued liabilities | 1,179 | 36 |
Right-of-use assets obtained in exchange for operating lease liabilities | 7,666 | 6,443 |
Capitalized stock-based compensation | $ 4,306 | $ 2,534 |
Condensed Consolidated Statem_4
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive income (loss) |
Beginning balance (in shares) at Dec. 31, 2020 | 29,019,350 | ||||
Beginning balance at Dec. 31, 2020 | $ 341,612 | $ 27 | $ 646,258 | $ (304,684) | $ 11 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock in connection with employee equity incentive plans, net (in shares) | 401,991 | ||||
Issuance of common stock in connection with employee equity incentive plans, net | 5,657 | 5,657 | |||
Tax withholding upon vesting of restricted stock awards | (25,853) | (25,853) | |||
Stock-based compensation | 43,311 | 43,311 | |||
Net loss | (68,870) | (68,870) | |||
Net change in unrealized loss on short-term investments | (17) | (17) | |||
Ending balance (in shares) at Sep. 30, 2021 | 29,421,341 | ||||
Ending balance at Sep. 30, 2021 | 295,840 | $ 27 | 669,373 | (373,554) | (6) |
Beginning balance (in shares) at Jun. 30, 2021 | 29,386,146 | ||||
Beginning balance at Jun. 30, 2021 | 306,442 | $ 27 | 656,231 | (349,823) | 7 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock in connection with employee equity incentive plans, net (in shares) | 35,195 | ||||
Issuance of common stock in connection with employee equity incentive plans, net | 80 | 80 | |||
Tax withholding upon vesting of restricted stock awards | (1) | (1) | |||
Stock-based compensation | 13,063 | 13,063 | |||
Net loss | (23,731) | (23,731) | |||
Net change in unrealized loss on short-term investments | (13) | (13) | |||
Ending balance (in shares) at Sep. 30, 2021 | 29,421,341 | ||||
Ending balance at Sep. 30, 2021 | 295,840 | $ 27 | 669,373 | (373,554) | (6) |
Beginning balance (in shares) at Dec. 31, 2021 | 29,493,726 | ||||
Beginning balance at Dec. 31, 2021 | $ 279,515 | $ 27 | 685,594 | (406,045) | (61) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock in connection with employee equity incentive plans, net (in shares) | 172,915 | 600,479 | |||
Issuance of common stock in connection with employee equity incentive plans, net | $ 10,034 | $ 1 | 10,033 | ||
Stock-based compensation | 46,252 | 46,252 | |||
Net loss | (95,957) | (95,957) | |||
Net change in unrealized loss on short-term investments | (620) | (620) | |||
Ending balance (in shares) at Sep. 30, 2022 | 30,094,205 | ||||
Ending balance at Sep. 30, 2022 | 239,224 | $ 28 | 741,879 | (502,002) | (681) |
Beginning balance (in shares) at Jun. 30, 2022 | 29,963,627 | ||||
Beginning balance at Jun. 30, 2022 | 244,642 | $ 28 | 725,748 | (480,551) | (583) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock in connection with employee equity incentive plans, net (in shares) | 130,578 | ||||
Issuance of common stock in connection with employee equity incentive plans, net | 1,662 | 1,662 | |||
Stock-based compensation | 14,469 | 14,469 | |||
Net loss | (21,451) | (21,451) | |||
Net change in unrealized loss on short-term investments | (98) | (98) | |||
Ending balance (in shares) at Sep. 30, 2022 | 30,094,205 | ||||
Ending balance at Sep. 30, 2022 | $ 239,224 | $ 28 | $ 741,879 | $ (502,002) | $ (681) |
Organization and Description of
Organization and Description of Business | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | Organization and Description of Business iRhythm Technologies, Inc. (the “Company”) was incorporated in the state of Delaware in September 2006. The Company is a digital healthcare company redefining the way physicians diagnose cardiac arrhythmias by combining wearable biosensing technology with cloud-based data analytics and deep-learning capabilities. The Company began commercial operations in the United States in 2008 following initial 510(k) clearance of its technology by the U.S. Food and Drug Administration. The Company is headquartered in San Francisco, California, which also serves as a clinical center. The Company has additional clinical centers in Deerfield, Illinois and Houston, Texas and a manufacturing facility in Cypress, California. The Company has wholly-owned subsidiaries in the United Kingdom, Singapore and Japan. The Company manages its operations as a single operating segment. The Company derives substantially all of its revenue and maintains substantially all of its assets in the United States. The Company provides ambulatory cardiac rhythm monitoring services that are regulated by the Centers for Medicare and Medicaid Services (“CMS”) utilizing the Company's medical device technology at its clinical centers, supporting the physicians who diagnose and treat cardiac arrhythmias. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any other future year. The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in the Company’s annual report on Form 10-K, filed with the SEC on February 28, 2022. Risks and Uncertainties Macroeconomic Factors and the Effects of the COVID-19 Pandemic As a result of the COVID-19 pandemic and macroeconomic factors, the Company has experienced business disruptions affecting the availability and cost of materials, which has impacted its supply chain and reduced margins. While the Company has continued to deliver its Zio service by operating with remote employees and essential employees on site, any government mandates could further impact the Company's ability to provide its Zio service effectively, and could impede the progress of all ongoing initiatives. Appropriate social distancing techniques and other measures at the Company's facilities have been implemented for employees who are required by job scope or who have chosen to return to the Company’s facilities. The Company's remote work arrangements resulting from the COVID-19 pandemic and subsequent decision to pursue a sublease for its San Francisco headquarters resulted in an impairment of its right of use asset and related leasehold improvements and furniture, and the Company may incur additional impairment charges related to real property lease agreements. The Company is continuously reviewing its liquidity and anticipated capital requirements. The Company believes it will have adequate liquidity over the next 12 months to operate its business and to meet its cash requirements. As of September 30, 2022, the Company is in compliance with its debt covenants. Macroeconomic factors have contributed to delays in payments of outstanding receivables, supply chain disruptions, including shortages and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that the Company has undertaken to address financial and operational challenges faced by the Company's customers. This impact is having a material, adverse impact on liquidity, capital resources, supply chain, operations and business and those of the third parties on which the Company relies, and could worsen over time. In addition, the extent to which the COVID-19 pandemic impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. The full extent of potential delays or impacts on the business, financial condition, cash flows and results of operations remains unknown. Reimbursement Government payors may change their coverage and reimbursement policies, as well as payment amounts, in a way that would prevent or limit reimbursement for the Company’s Zio service, which would significantly harm the Company’s business. Government and other third-party payors require the Company to report the service for which it is seeking reimbursement by using a Current Procedural Terminology ("CPT") code-set maintained by the American Medical Association (“AMA”). For Zio XT, the Company had historically utilized temporary CPT codes (or Category III CPT codes), used for newly introduced technologies specific to its category of diagnostic monitoring. The process to convert temporary Category III CPT codes to permanent Category I CPT codes is governed by the AMA and CMS. Determinations of which products or services will be eligible for reimbursement by Medicare can be developed at the national level through a national coverage determination (“NCD”) issued by CMS or at the local level through a local coverage determination (“LCD”), issued by one or more of the regional Medicare Administrative Contractors (“MACs”), who are private contractors that process and pay claims on behalf of CMS for different geographic regions. In the absence of a specific NCD, as has historically been the case with the Zio XT service, the MAC with jurisdiction over a specific geographic region will have the discretion to issue an LCD. The Company’s Zio service may be eligible for reimbursement at the rates set by the regional MACs until CMS establishes national payment rates for the CPT codes that the Company uses to seek reimbursement for the Zio XT service. On October 25, 2019, the AMA’s CPT Editorial Panel established eight new Category I CPT codes that are applicable to the Zio XT service and took effect on January 1, 2021. Category I CPT codes 93241 through 93248 are split between two sets of four codes with rates tied to those codes for (i) wear-time of greater than 48 hours and up to 7 days, and (ii) greater than 7 days and up to 15 days. The Company primarily relies on CPT codes 93243 (for wear-time of greater than 48 hours and up to 7 days) and 93247 (for wear-time of greater than 7 days and up to 15 days) to seek reimbursement for its Zio XT service. In November 2021, CMS published the Calendar Year 2022 Medicare Physician Fee Schedule Final Rule (the “2022 Final Rule”). In the 2022 Final Rule, CMS did not establish national pricing for Calendar Year 2022 for Category I CPT codes 93241, 93243, 93245 and 93247, which include the two CPT codes upon which the Company primarily relies for its Zio XT service. Instead, CMS designated these for contractor pricing in Calendar Year 2022, which meant that prices would be set regionally by each MAC. In January 2022, Novitas Solutions, the MAC which covers the region where the Company’s independent diagnostic testing facility ("IDTF") in Houston, Texas is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $223 and $233, respectively. These updated rates were retroactive to January 1, 2022. These rates were higher than the rates posted by Novitas in 2021, but continue to be significantly below historical Medicare rates for the Company’s Zio XT service. In April 2022, National Government Services ("NGS"), the MAC which covers the region where the Company’s IDTF in Deerfield, Illinois is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $335 and $347, respectively. These updated rates were retroactive to January 1, 2022. These rates are higher than the historical Medicare rates for the Company’s Zio XT service. On November 2, 2022, CMS released its Calendar Year 2023 Medicare Physician Fee Schedule (“MPFS”) final rule (the “2023 Final Rule”) for publication in the Federal Register on November 18, 2022. The 2023 Final Rule updates payment policies, payment rates, and other provisions for services furnished on or after January 1, 2023, including rates related to the Category I CPT codes for long-term electrocardiogram (“ECG”) monitoring and recording that the Company uses to seek reimbursement for its Zio XT service. Specifically, CMS finalized relative value units for CPT codes 93247 (for wear-time greater than 7 days and up to 15 days) and 93243 (for wear-time greater than 48 hours up to 7 days). CMS also established a Calendar Year 2023 “Conversion Factor” that, collectively with the Medicare payment reduction (sequestration) and the sequestration under the Statutory Pay-As-You-Go Act of 2010, the Company interprets as reflecting national reimbursement rates of $224 and $213 for CPT codes 93247 and 93243 codes, respectively. Based on the Calendar Year 2023 Geographic Practice Cost Index modifiers in the 2023 Final Rule that are applicable to the locations of the Company’s Medicare-enrolled IDTFs in Deerfield, Illinois, Houston, Texas, and San Francisco, California, the Company estimates the applicable reimbursement rates could range from $227 to $307 for CPT code 93247 and $216 to $292 for CPT code 93243. The Company remains engaged with CMS and the Medicare Administrative Contractors (“MACs”) to advocate for national rates that reflect the full value of long-term ECG monitoring to enable appropriate access and the availability of quality healthcare services for the benefit of the Company's patients. The Company cannot provide certainty at this time on the potential outcome of further discussions with CMS or the MACs or on the timing of any additional action to be taken. Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, the Company is, and will continue to be, subject to changes to the level of Medicare coverage and reimbursement for its Zio service, and unfavorable coverage determinations at the national or local level could adversely affect its business and results of operations. Further, the establishment of national Medicare rates could cause some commercial third-party payors to reduce their reimbursement rates for the Zio XT service to be consistent with the Medicare rates. Although a large majority of commercial customers have re-contracted the Zio XT service at pre-existing rates since the establishment of the Category I long-term ECG monitoring codes on January 1, 2021, the Company believes commercial customers may apply downward pressure on their rates to align with the Medicare rates. As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021, which contained differences between the submitted price and reimbursement rate and overall denials, increased significantly compared to the Company’s historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, however, the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact the Company’s results of operations. If the Company is unable to achieve a level of revenues adequate to support its cost structure, or is unable to reduce its overall cost structure, this would raise substantial doubts about its ability to continue as a going concern. Supply Chain Constraints Economies worldwide have also seen indirect COVID-19 pandemic related disruptions, including supply chain impacts, material inflation, and labor constraints in certain markets and geographies. Such economic disruption has had an adverse effect on the Company's business environment as increased lead times and component shortages have resulted in higher inventory costs. While the Company has increased inventory safety stock levels to help mitigate the delays and disruptions in supply, the Company cannot be certain that any prolonged, intensified, or worsened effect from the COVID-19 pandemic would not further impact its supply chain. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contractual allowances, allowance for doubtful accounts, the useful lives of property and equipment, the recoverability of long-lived assets including the estimated usage of the printed circuit board assemblies (“PCBAs”), the incremental borrowing rate for operating leases, accounting for income taxes, impairment of right-of-use assets ("ROU assets"), and various inputs used in estimating stock-based compensation. Certain of these estimates are impacted by uncertainties surrounding COVID-19, such as revenue recognition, contractual allowances for revenue, allowance for doubtful accounts, and stock-based compensation. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that management believes are reasonable under the circumstances, including assumptions as to future events. Actual results may differ from those estimates. For further details on estimates used to calculate the impairment on ROU assets, see Note 6 . Impairment and Restructuring Charges included in the notes to the unaudited condensed consolidated financial statements . Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. Any impairments to right of use assets, leasehold improvements, or other assets as a result of a sublease or other similar action are initially recognized when a decision to take such action is made and recorded as an operating expense. Similar to other long-lived assets, management tests ROU assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For ROU assets, such circumstances may include subleases that do not fully recover the costs of the associated leases or commitments to sublease a property. For the three months ended September 30, 2022, the Company has not recorded any long-lived asset impairment charges. For the nine months ended September 30, 2022, the Company recorded $23.2 million of long-lived asset impairment charges in the unaudited condensed consolidated statement of operations. See Note 6. Impairment and Restructuring Charges included in the notes to the unaudited condensed consolidated financial statements . Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances Accounts receivable include amounts due to the Company from healthcare institutions, third-party payors, and government payors and their related patients, due to the Company's normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated allowance for doubtful accounts and contractual allowances. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on its assessment of the collectability of customer accounts and recognizes the provision as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. The Company records a provision as a contractual allowance based on the estimated differences between contracted amounts and expected collection rates. Such provisions are based on the Company's historical experience and are reported as a reduction of revenue. The Company regularly reviews the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company submitted the majority of Zio XT claims from the first and second quarter of 2021 on a delayed basis due to the transition from Category III CPT codes to Category I CPT codes and uncertainty over reimbursement rates. Claims were being held due to a combination of negotiations with payors and administrative delays in processing payments. Most of the held claims were released and submitted by the end of the second quarter of 2021. For the contracted portfolio, once submitted, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement rate and overall denials increased significantly compared to its historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, and the collection cycle for these claims is significantly longer than usual. This makes the timing of the Company's collections more difficult to predict. While the Company believes it has properly estimated the impact to its contractual allowances and allowance for doubtful accounts, inherent uncertainty caused by the longer-collection cycle and claims adjudication process could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods. As of September 30, 2022, uncollected claims as a result of the CPT code transition were $11.5 million , net of contractual allowances. The following table presents the changes in the allowance for doubtful accounts (in thousands): Nine Months Ended Year Ended Nine Months Ended Balance, beginning of period $ 14,012 $ 12,711 $ 12,711 Add: provision for doubtful accounts 12,244 9,615 5,884 Add (less): write-offs, net of recoveries and other adjustments 17 (8,314) (6,484) Balance, end of period $ 26,273 $ 14,012 $ 12,111 The following table presents the changes in the contractual allowance (in thousands): Nine Months Ended Year Ended Nine Months Ended Balance, beginning of period $ 31,274 $ 21,281 $ 21,281 Add: provision for contractual allowances 31,534 27,459 18,051 Less: realized contractual adjustments (259) (17,466) (11,524) Balance, end of period $ 62,549 $ 31,274 $ 27,808 Concentrations of Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. Cash balances are deposited in financial institutions which, at times may be in excess of federally insured limits. Cash equivalents are invested in highly-rated money market funds. The Company invests in a variety of financial instruments, such as but not limited to, U.S. government securities, corporate notes and commercial paper, and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many geographies. The Company does not require collateral. The Company records an allowance for doubtful accounts based on the assessment of the collectability of customer accounts, considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay . CMS accounted for approximately 26% and 24% of the Company's revenue for the three and nine months ended September 30, 2022, respectively, and 15% and 14% of the Company's revenue for each of the three and nine months ended September 30, 2021, respectively. CMS accounted for 20% and 8% of accounts receivable at September 30, 2022 and December 31, 2021, respectively. Revenue Revenue Recognition The Company’s revenue is generated primarily from the provision of its ambulatory cardiac rhythm monitoring service, the Zio XT service. The Zio XT service is an ambulatory cardiac rhythm monitoring service that has a patient wear period of up to 14 days and is billable when the monitoring reports are delivered to the healthcare provider, which is also when the service is complete, and the Company recognizes revenue. The time from when the patient has the Zio XT device applied to the time the report is posted is generally around 25 days. The Company has concluded that the Zio XT service is a single performance obligation on the basis that the customer cannot benefit from each component of the service on its own or together with other resources that are readily available to the customer. The Zio AT service is an ambulatory cardiac rhythm monitoring service that is provided during the patient wear period. During the patient wear period, the Zio AT monitoring system is intended to capture, analyze and report symptomatic and asymptomatic cardiac events and continuous ECG information. While continuously recording patient ECG data, both patient-triggered and automatically detected arrhythmia events are transmitted to a monitoring center for review and reporting according to physician-selected notification criteria. After wear, a final report is generated based on beat-to-beat information from the entire ECG recording. The Zio AT service revenue is recognized over the patient wear period and delivery of electronic Zio reports with two performance obligations. The Company recognizes as revenue the amount of consideration to which it expects to be entitled in exchange for performing the Zio service. The consideration to which the Company is entitled varies by portfolio, as further defined below, and includes estimates that require significant judgment by management. A unique aspect of the healthcare industry is multiple parties' involvement in the service transaction. In addition to any payment made by the patient, often a third-party, such as a commercial or governmental payor or healthcare institution, will pay the Company for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between the Company and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered. A small portion of the Company’s transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for its service, the Company considers factors such as insurance claims which are adjudicated as allowable under the applicable policy and: (i) payment history from both payors and patient out-of-pocket costs; (ii) payor coverage; (iii) whether there is a contract between the payor or healthcare institution and the Company; (iv) historical amount received for the service; and (v) any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A summary of the payment arrangements with third-party payors and healthcare institutions is as follows: • Contracted third-party payors – The Company has contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage. • CMS – The Company has enrolled as an independent diagnostic testing facility with regional Medicare Administrative Contractors and will receive reimbursement per the relevant national or contractor-priced CPT code rates for the CMS-covered services rendered to the patient. • Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of the Company’s historical collection experience for its non-contracted services. This rate is reviewed at least quarterly. • Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which the Company has negotiated amounts for its monitoring services, including certain governmental agencies such as the Veterans Administration and Department of Defense. The Company is utilizing the portfolio approach practical expedient under Accounting Standard Codification ("ASC") 606, Revenue from Contracts with Customers, for revenue recognition whereby services provided under each of the above payor types form a separate portfolio. The Company accounts for the contracts within each portfolio as a collective group rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, the Company has concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis. For contracted and CMS portfolios, the Company recognizes revenue, net of contractual allowances, and recognizes an allowance for doubtful accounts for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and the Company has historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The Company accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. The Company estimates the denied claims, which require management judgment. The estimated denied claims are based on historical information, and judgment includes the historical period utilized. The Company monitors the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if the Company misses the payors’ filing deadlines and could result in a reduction in the Company’s receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that the Company bill patient co-payments and deductibles and from time to time the Company may not be able to collect such amounts due to credit risk. The Company provides for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statement of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. As discussed in the Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances section above, the inherent uncertainty caused by longer-collection cycle and claims adjudication process related to delays in submission because of the CPT code transition in 2021 could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods. For non-contracted portfolios, the Company is providing an implicit price concession due to the lack of a contracted rate with the underlying payor, the result of which requires the Company to estimate the transaction price based on historical cash collections utilizing the expected value method. All subsequent adjustments to the transaction price are recorded as an adjustment to revenue. For healthcare institutions, the transaction price is determined based on negotiated rates, and the Company has historical experience collecting substantially all of these contracted rates. Historical cash collection indicates that it is probable that substantially all of the transaction price will be received. As such, the Company is not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense. Disaggregation of Revenue The Company disaggregates revenue from contracts with customers by payor type. The Company believes these categories aggregate the payor types by nature, amount, timing and uncertainty of its revenue streams. Disaggregated revenue by payor type and major service line for three and nine months ended September 30, 2022 and September 30, 2021 were as follows (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Contracted third-party payors $ 56,016 $ 49,944 $ 163,218 $ 146,169 Non-contracted third-party payors 5,723 7,350 17,380 19,175 Centers for Medicare and Medicaid Services 27,253 12,411 72,074 33,577 Healthcare institutions 14,883 15,727 45,632 42,100 Total $ 103,875 $ 85,432 $ 298,304 $ 241,021 Revenue generated from the United States comprised substantially all of the Company's revenue. No other country comprised 10% or greater of the Company's revenue during each of the three and nine months ended September 30, 2022 and 2021. Contract Liabilities ASC 606, Revenue from Contracts with Customers, requires an entity to present a revenue contract as a contract liability when the Company has an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer, or an amount of consideration from the customer is due and unconditional (whichever is earlier). Certain of the Company’s customers pay the Company directly for the Zio XT service upon shipment of devices. Such advance payments are contract liabilities and are recorded as deferred revenue on the unaudited condensed consolidated balance sheets and revenue is recognized when reports are delivered to the healthcare provider. During the nine months ended September 30, 2022, $3.0 million relating to the contract liability balance at the beginning of 2022 was recognized as revenue. During the nine months ended September 30, 2021, $0.9 million included in the contract liability balance at the beginning of 2021 was recognized as revenue. Contract Costs Under ASC 340, Other Assets and Deferred Costs , ("ASC 340") the incremental costs of obtaining a contract with a customer are recognized as an asset. Incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company’s current commission programs are considered incremental. However, as a practical expedient, ASC 340 , permits the Company to immediately expense contract acquisition costs, as the asset that would have resulted from capitalizing these costs will be amortized in one year or less. Stock-based Compensation The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. The fair value of market condition awards is determined using the Monte-Carlo option pricing model and the fair value of stock options is determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock |
Cash Equivalents and Investment
Cash Equivalents and Investments | 9 Months Ended |
Sep. 30, 2022 | |
Cash Equivalents And Investments [Abstract] | |
Cash Equivalents and Investments | Cash Equivalents and Investments The fair value of cash equivalents and short-term investments at September 30, 2022 and December 31, 2021, were as follows (in thousands): September 30, 2022 Amortized Gross Unrealized Estimated Gains Losses Money market funds $ 24,716 $ — $ — $ 24,716 U.S. government securities 132,997 3 (684) 132,316 Total cash equivalents and short-term investments $ 157,713 $ 3 $ (684) $ 157,032 Classified as: Cash equivalents $ 24,716 Short-term investments 132,316 Total cash equivalents and short-term investments $ 157,032 December 31, 2021 Amortized Gross Unrealized Estimated Gains Losses Money market funds $ 110,137 $ — $ — $ 110,137 U.S. government securities 50,490 — (46) 50,444 Corporate notes 31,158 — (15) 31,143 Commercial paper 29,982 — — 29,982 Total cash equivalents and short-term investments $ 221,767 $ — $ (61) $ 221,706 Classified as: Cash equivalents $ 110,137 Short-term investments 111,569 Total cash equivalents and short-term investments $ 221,706 The Company's cash equivalents and short-term investments are due within one year. There were no short-term investments that were in an unrealized loss position for more than twelve months as of September 30, 2022. Unrealized losses recognized in other comprehensive loss and amounts reclassified to net loss from short-term investments were not material for the three and nine months ended September 30, 2022 and September 30, 2021. Short-term investments held as of September 30, 2022, had a weighted average maturity of 115 days. As of September 30, 2022, the short-term investments in an unrealized loss position are primarily U.S. Treasury Bills of varying maturities, which are sensitive to changes in the yield curve and other market conditions. As of September 30, 2022, the Company does not intend to sell, and it is not more likely than not that it will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of default on interest or principal payments for any of the Company's debt securities. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 - Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The corporate notes, commercial paper and government securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The Company's interest-bearing obligation is classified as a Level 1 input. As of September 30, 2022 the fair value of the Company’s outstanding interest-bearing obligation approximated the carrying value of each $34.9 million. As of December 31, 2021 the fair value of the Company’s outstanding interest-bearing obligation approximated the carrying value of each $21.4 million. The Company had no transfers between levels of the fair value hierarchy of its assets measured at fair value. The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands). September 30, 2022 Level 1 Level 2 Level 3 Total Assets Money market funds $ 24,716 $ — $ — $ 24,716 U.S. government securities — 132,316 — 132,316 Total $ 24,716 $ 132,316 $ — $ 157,032 December 31, 2021 Level 1 Level 2 Level 3 Total Assets Money market funds $ 110,137 $ — $ — $ 110,137 U.S. government securities — 50,444 — 50,444 Corporate notes — 31,143 — 31,143 Commercial paper — 29,982 — 29,982 Total $ 110,137 $ 111,569 $ — $ 221,706 |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Balance Sheet Components | Balance Sheet Components Inventory and Other Assets Inventory consisted of the following (in thousands): September 30, December 31, Raw materials $ 8,195 $ 5,101 Finished goods 6,257 5,167 Total $ 14,452 $ 10,268 The Company uses PCBAs in each wearable Zio XT and Zio AT monitor as well as in the wireless gateway used in conjunction with the Zio AT monitor. The PCBAs are used numerous times and have useful lives beyond one year. Each time a PCBA is used in a wearable Zio XT monitor or a PCBA and wireless gateway are used with Zio AT monitor, a portion of the cost of the PCBA and gateway are recorded as a cost of revenue in the unaudited condensed consolidated statements of operations. PCBAs, which are recorded as other assets in the unaudited condensed consolidated balance sheets, were $17.4 million and $13.9 million as of September 30, 2022, and December 31, 2021, respectively. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): September 30, December 31, Laboratory and manufacturing equipment $ 7,445 $ 5,029 Computer equipment and software 2,540 2,353 Furniture and fixtures 4,109 4,174 Leasehold improvements 23,340 20,431 Internal-use software 66,086 46,661 Total property and equipment, gross 103,520 78,648 Less: accumulated depreciation and amortization (32,005) (22,704) Total property and equipment, net $ 71,515 $ 55,944 During the nine months ended September 30, 2022, internal-use-software increased by $19.4 million. This increase relates to the enhancements to the Company’s core technology, products and services and AI, as well as investment in future technology, such as the Zio Monitor, the Company's new biosensor technology platform, and the clinically-integrated ZEUS System for the Zio Watch. Depreciation and amortization expense was $3.4 million and $9.9 million for the three and nine months ended September 30, 2022, and $2.5 million and $6.7 million for the three and nine months ended September 30, 2021, respectively. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, ranging from three . Impairment and Restructuring included in the notes to the unaudited condensed consolidated financial statements. The Company did not record any impairment charges during the three months ended September 30, 2022. Accrued Liabilities Accrued liabilities consisted of the following (in thousands): September 30, December 31, Accrued payroll and related expenses $ 32,463 $ 34,484 Accrued vacation 7,997 7,431 Accrued professional services fees 6,251 1,724 Claims payable 3,779 2,988 Accrued ESPP contributions 2,612 1,002 Other 7,162 3,857 Total accrued liabilities $ 60,264 $ 51,486 Restructuring liability of $0.4 million as of September 30, 2022 is included in other accrued liabilities above. For further information, refer to Note 6 . Impairment and Restructuring included in the notes to the unaudited condensed consolidated financial statements. |
Impairment and Restructuring Ch
Impairment and Restructuring Charges | 9 Months Ended |
Sep. 30, 2022 | |
Restructuring and Related Activities [Abstract] | |
Impairment and Restructuring Charges | Impairment and Restructuring Charges In February 2022, the Company's board of directors (the “Board”) approved a restructuring plan ("Restructuring Plan") to allow it to effectively and efficiently scale its business, which resulted in severance and other employment related costs of $3.4 million during the nine months ended September 30, 2022. Also in February 2022, the Board approved reducing the Company's leased space for its headquarters in San Francisco, California, by a total amount of leased square footage of approximately 50%. As a result, the Company recognized an impairment of its right of use asset and related leasehold improvements and furniture and fixtures in the amount of $23.2 million during the nine months ended September 30, 2022. The Company's restructuring and impairment charges are described below (in thousands): Nine Months Ended Restructuring charges $ 3,444 Impairment charges 23,164 Total $ 26,608 Restructuring The following table provides a summary of changes in the restructuring liabilities associated with the Restructuring Plan (in thousands): December 31, Charges Cash Payments September 30, Employee severance $ — $ 3,444 $ (3,050) $ 394 Total $ — $ 3,444 $ (3,050) $ 394 The Company did not incur restructuring charges during the three months ended September 30, 2022. Impairment The following table presents impairment charges recorded during the nine months ended September 30, 2022: Nine Months Ended ROU asset $ 20,451 Leasehold improvements 2,211 Furniture and fixtures 502 Total $ 23,164 There was no impairment during the three months ended September 30, 2022. The Company has engaged a leasing broker and has formalized a marketing plan for the San Francisco office market. The sublease market for commercial office space is currently very challenging in the San Francisco area due to lower demand for leased office space as most companies have adjusted to allowing their employees to work from home during and after the COVID-19 pandemic that has persisted throughout 2020 and 2021. The Company expects that it will only be able to sublease a portion of its existing office space at a rate below the amount that it is currently paying. Significant judgment and estimates are required in assessing impairment of ROU assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, and determining appropriate discount rates. For further details on the Company's leases, refer to Note 7 . Commitments and Contingencies included in the notes to the unaudited condensed consolidated financial statements. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Arrangements The Company has entered into leases for office, manufacturing and clinical centers space, under non-cancelable operating leases, which expire on various dates through 2031. The leases generally contain scheduled rent increases or escalation clauses and renewal options. Operating leases classified as right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the term of the lease, net of lease incentives. Operating lease right-of-use assets also include any lease payments made to the lessor at or before the commencement date. The Company is also subject to variable lease payments related to janitorial services and electricity, which are not included in the operating lease right-of-use asset as they are based on actual usage. The Company recognizes operating lease expense, generally on a straight-line basis, over the lease period. The total operating lease cost recognized during the nine months ended September 30, 2022 was $10.3 million , primarily consisting of right-of use asset amortization, net of amortization for lease incentives as well as lease accretion. Cash paid for operating leases during the nine months ended September 30, 2022, was $10.2 million. On February 15, 2022, the Board agreed to pursue a sublease of the majority of space on one floor (approximately 50%) of the San Francisco Lease. The Company recorded $20.5 million in impairment charges on its ROU asset during the nine months ended September 30, 2022. No impairment charges on its ROU assets were recorded during the three months ended September 30, 2022. See Note 6. Impairment and Restructuring included in the notes to the unaudited condensed consolidated financial statements, for further details. As of September 30, 2022, maturities of operating lease liabilities were as follows (in thousands): Year ending December 31: 2022 (remainder of the year) $ 3,449 2023 13,958 2024 14,253 2025 14,645 2026 15,071 Thereafter 71,397 Total lease payments 132,773 Less: imputed interest (38,372) Total lease liabilities $ 94,401 The weighted average remaining lease term of the Company's operating leases as of September 30, 2022, was 8.90 years. The weighted average discount rate of the Company's operating leases was 7.28% as of September 30, 2022. Legal Proceedings From time to time, the Company is involved in claims and legal proceedings or investigations that arise in the ordinary course of business. Such matters could have an adverse impact on the Company's reputation, business, and financial condition and divert the attention of its management from the operation of its business. These matters are subject to many uncertainties and outcomes that are not predictable. On February 1, 2021, a putative class action lawsuit was filed in the United States District Court for the Northern District of California alleging that the Company and its former Chief Executive Officer, Kevin M. King, violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder (“Securities Class Action Lawsuit”). On August 2, 2021, the lead plaintiff filed an amended complaint and filed a further amended complaint on September 24, 2021. The amended complaint names as defendants, in addition to the Company and Mr. King, the Company's former Chief Executive Officer, Michael J. Coyle, and former Chief Financial Officer and current Chief Operating Officer, Douglas J. Devine. The purported class in the amended complaint includes all persons who purchased or acquired the Company's common stock between August 4, 2020 and July 13, 2021, and seeks unspecified damages purportedly sustained by the class. On October 27, 2021, the Company filed a motion to dismiss the amended complaint. The motion to dismiss was fully briefed, and the Court held a hearing on the motion on February 4, 2022, after which the Court took the matter under submission. On March 31, 2022, the Court issued an order granting the Company’s motion to dismiss the Securities Class Action Lawsuit, without allowing the plaintiff further leave to amend, and entered judgment in favor of the Company and the other defendants. On April 29, 2022, the plaintiff that filed the initial complaint in the action filed a notice of appeal. On September 7, 2022, the plaintiff-appellant filed its opening brief, and the Company filed a motion to dismiss for lack of standing to appeal and Article III standing on September 27, 2022. On October 17, 2022, the plaintiff filed its response to the Company's motion to dismiss, and the Company filed its reply in support of the motion to dismiss on November 3, 2022. The Company believes the class action to be without merit and plan to defend itself vigorously. On March 26, 2021, the Company received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with the Food and Drug Administration and the Company’s products. On October 14, 2021, the Company received a second subpoena requesting additional information. The Company is cooperating fully and is providing the requested information. Development Agreement On September 3, 2019, the Company entered into a Development Collaboration Agreement (the “Development Agreement”) with Verily Life Sciences LLC (“Verily”). The Development Agreement involves joint development and production of intellectual property between the Company and Verily. Each participant has primary responsibility for certain aspects of development and approval, with all processes to be performed at each respective party’s own cost. Costs incurred by the Company in connection with the Development Agreement will be expensed as research and development expense in accordance with ASC 730, Research and Development . The Company and Verily will develop certain next-generation atrial fibrillation (“Afib”) screening, detection, or monitoring products pursuant to the Development Agreement, which products will involve combining Verily and the Company’s technology platforms and capabilities. Under the terms of the Development Agreement, the Company paid Verily an upfront fee of $5.0 million in 2019. In addition, the Company agreed to make additional cash payments to Verily up to an aggregate of $12.75 million in milestone payments upon achievement of various development and regulatory milestones over the term of the Development Agreement. The Company has achieved milestones tied to payments totaling $11.0 million to date and expect to make additional payments over the term of the Development Agreement of $1.75 million, subject to the achievement of certain development and regulatory milestones including provisioning of the Zio Watch to enable market evaluation scheduled to begin in 2023. No payment-triggering milestones were achieved during the nine months ended September 30, 2022. The Development Agreement provides each party with licenses to use certain intellectual property of the other party for development activities in the field of Afib screening, detection, or monitoring. Ownership of developed intellectual property will be allocated to the Company or Verily depending on the subject matter of the underlying developed intellectual property, and, for certain subject matter, shall be jointly owned. Indemnifications |
Debt
Debt | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt Bank Debt In October 2018, the Company entered into the Third Amended and Restated Loan and Security Agreement with SVB (“SVB Loan Agreement”). Under the SVB Loan Agreement, the Company had borrowed $35.0 million and had made repayments through March 2022, at which time the outstanding balance was $18.5 million. On March 28, 2022, the Company entered into a Second Amendment (“2022 Amendment”) to its SVB Loan Agreement which provided for a term loan facility in the aggregate principal amount of up to $75.0 million (the “2022 Term Loans”), of which $35.0 million was borrowed at closing and a portion of the proceeds was used to pay in full the outstanding balance of $18.5 million under the SVB Loan Agreement. The remaining $40.0 million of 2022 Term Loans may be borrowed from time to time at the Company’s option, in increments of at least $10.0 million, through December 31, 2023. The Company shall pay interest only on the 2022 Term Loans until April 1, 2025, when it shall commence repaying the 2022 Term Loans in 24 equal consecutive monthly installments, with all obligations under the 2022 Term Loans maturing on March 1, 2027. Interest charged on the 2022 Term Loans shall accrue at a floating per annum rate equal to the greater of: (A) the Prime Rate plus 0.25%; and (B) 3.50%. The Company is also required to pay fees on any prepayment of the 2022 Term Loans, ranging from 3.0% to 1.0% depending on the date of prepayment, and a final payment equal to 5.0% of the principal amount of the 2022 Term Loans drawn. Once repaid or prepaid, the 2022 Term Loans may not be reborrowed. The 2022 Amendment also amended the terms of the revolving credit line under the SVB Loan Agreement, which provided for an aggregate principal amount of $25.0 million, to: (i) extend the maturity date from August 1, 2023 to March 1, 2027, (ii) increase the letters of credit sublimit to $15.0 million and (iii) increase the cash management services sublimit to $15.0 million. Interest charged on the principal amount outstanding under the revolving credit line shall accrue at a floating per annum rate equal to the greater of (A) the Prime Rate plus 0.25% and (B) 3.50%. The Company is required to pay an annual fee equal to 0.15% of the revolving credit line. As of September 30, 2022, no loans were outstanding under the revolving credit line. The 2022 Amendment also amended the SVB Loan Agreement to require the Company to comply, as of the last day of each fiscal quarter, with a quick ratio of at least 1.15 to 1.0 or minimum adjusted EBITDA of at least $15.0 million. The Company was in compliance with its loan covenants as of September 30, 2022. Future minimum payments Future minimum payments under the Amendment to the SVB Loan Agreement as of September 30, 2022, are as follows (in thousands): Year Ending December 31, 2022 (remainder of the year) $ 560 2023 2,307 2024 2,313 2025 15,142 2026 18,412 Thereafter 4,423 Total 43,157 Less: Amount representing interest (8,157) Less: Debt issuance costs (69) Total carrying value $ 34,931 Reported as: Debt, noncurrent portion $ 34,931 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesThe Company recorded a tax provision related to its U.S. state taxes and the U.K. subsidiary during the three and nine months ended September 30, 2022, and September 30, 2021. Due to the uncertainties surrounding the realization of the U.S. deferred tax assets through future taxable income, the Company has provided a full valuation allowance and, therefore, no benefit has been recognized for the U.S. net operating loss carryforwards and other deferred tax assets. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Common stock The Company’s amended and restated certificate of incorporation dated October 25, 2016, as amended, authorizes the Company to issue 100,000,000 shares of common stock with a par value of $0.001 per share and 5,000,000 shares of preferred stock with a par value of $0.001 per share. The holders of common stock are entitled to receive dividends when funds and assets are legally available and when declared by the board of directors, subject to the prior rights of holders of all series of convertible preferred stock outstanding. No dividends were declared through September 30, 2022. The Company had reserved shares of common stock for issuance as follows: September 30, December 31, Options issued and outstanding 329,817 504,106 Unvested restricted stock units and performance-based restricted stock units 2,076,613 1,649,561 Shares available for grant under future stock plans 10,075,062 9,011,213 Shares available for future issuance 12,481,492 11,164,880 |
Equity Incentive Plans
Equity Incentive Plans | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Equity Incentive Plans | Equity Incentive Plans Equity Incentive Plan Activity A summary of share-based awards available for grant under the 2016 Equity Incentive Plan is as follows: Awards Available for Grant Balance at December 31, 2021 7,159,675 Additional awards authorized 1,474,686 Awards granted (991,066) Awards forfeited 192,431 Balance at September 30, 2022 7,835,726 Restricted Stock Units The following table summarizes restricted stock units ("RSU") and performance-based restricted stock units ("PRSU") activity: Restricted Stock Units Performance Based Restricted Stock Units Number of Shares Average Grant Date Fair Value Number of Shares 1 Average Grant Date Fair Value Balance at December 31, 2021 1,361,311 $ 84.99 288,250 $ 119.21 Stock units granted 646,797 150.75 344,269 138.79 Stock units vested (326,023) 87.11 (46,934) 257.61 Stock units cancelled and expired (165,849) 111.15 (25,208) 109.82 Balance at September 30, 2022 1,516,236 $ 109.75 560,377 $ 120.07 1 Based on the maximum number of performance based restricted stock units in the key executive grant agreements, the actual number of units granted will be based on the annual unit volume CAGR as described below. As of September 30, 2022, there was $120.0 million, net of estimated forfeitures, related to unrecognized RSU expense, which the Company expects to recognize over a weighted average period of 1.9 years and $31.2 million, net of estimated forfeitures, related to unrecognized PRSU expense, which the Company expects to recognize over a weighted average period of 2.3 years. The Company grants PRSUs to key executives of the Company. PRSUs can be earned in accordance with the performance equity program for each respective grant as follows: In February 2020, the Company granted PRSUs (“February 2020 awards”) for fiscal year 2022's annual unit volume CAGR compared to fiscal year 2019's annual unit volume CAGR, measuring a minimum performance threshold of 19.7% to earn 50.0% of target, and a maximum threshold of 29.0% achieved to earn 200.0% of target. These February 2020 awards are subject to the recipients continued employment through the vesting date of March 15, 2023. In January 2021, the Company granted PRSUs (“January 2021 awards”) for fiscal year 2021's annual consolidated revenue compared to fiscal year 2020's annual consolidated revenue, measuring a performance threshold of 10.0% to earn 100.0% of target. These January 2021 awards were subject to the recipients continued employment through the vesting date of March 15, 2022. In February 2021, the Company granted PRSU's (“February 2021 awards”) for fiscal year 2023's annual unit volume CAGR compared to fiscal year 2020's annual unit volume CAGR, measuring a minimum performance threshold of 19.7% to earn 50.0% of target, and a maximum threshold of 29.0% achieved to earn 200.0% of target. These February 2021 awards are subject to recipients continued employment through the vesting date of March 15, 2024. In February 2022, the Company granted PRSU's (“February 2022 awards”) for fiscal year 2024's annual unit volume CAGR compared to fiscal year 2021's annual unit volume CAGR, measuring a minimum performance threshold of 13.0% to earn 50.0% of target, and a maximum threshold of 23.0% achieved to earn 200.0% of target. These February 2022 awards are subject to the recipients continued employment through the vesting date of March 15, 2025. In addition, in February 2022, the Company granted market-based RSU's to its Chief Executive Officer. These RSU's are based on a fiscal year 2024's annual unit volume CAGR compared to fiscal year 2021's annual unit volume CAGR and a comparison of the S&P Healthcare Index to the Company's total shareholder return (“TSR”). These February 2022 awards are subject to the recipient's continued employment through the vesting date of March 15, 2025. Options The Company did not grant any stock options during the nine months ended September 30, 2022. The following table summarizes stock option activity: Options Outstanding Options Weighted- Weighted- Aggregate Balance at December 31, 2021 504,106 $ 40.97 5.20 $ 38,675 Options exercised (172,915) 36.58 Options forfeited (1,374) 83.15 Balance at September 30, 2022 329,817 43.10 4.68 27,105 Options exercisable – September 30, 2022 328,658 42.96 4.68 27,055 Options vested and expected to vest – September 30, 2022 329,807 $ 43.10 4.68 $ 27,105 The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the last day of the reporting period. As of September 30, 2022, there was an immaterial amount of unrecognized option expense as the options are fully vested. Employee Stock Purchase Plan In October 2016, the Company’s Board of Directors and stockholders approved the Employee Stock Purchase Plan (“ESPP”). The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15.0% of their eligible compensation, subject to any plan limitations. The ESPP provides for 12 month offering periods that contain two 6-month purchase periods. At the end of each purchase period, employees purchase shares at 85.0% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the purchase period. During the nine months ended September 30, 2022, 54,607 shares of common stock have been issued to employees participating in the ESPP and 2,239,336 shares were available for issuance under the ESPP. The fair value of each ESPP share is estimated on the enrollment date of the offering period using the Black-Scholes option-pricing model using the assumptions of the expected term ranging from 0.5 year to 1.0 year, expected volatility of 88.9%, risk-free rate of 1.9% and dividend yield of 0.0%. The fair value of stock purchase rights to be granted under the ESPP during the six-month period from June 1, 2022 to November 30, 2022 was $55.02 per share and for the one-year period from June 1, 2022 to May 31, 2023 was $68.52 per share. As of September 30, 2022, the Company had $2.6 million of unrecognized compensation expense related to ESPP subscriptions that will be recognized over a weighted average period of 0.5 years. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation Market-based PRSU Valuation The fair value of market based RSUs was estimated at the date of grant using the Monte-Carlo option pricing model with the assumptions below. Nine Months Ended 2022 Expected term (in years) 2.88 Expected volatility 81.2 % Risk-free interest rate 1.72 % Dividend yield — % Stock-Based Compensation Expense The following table summarizes the total stock-based compensation expense included in the unaudited condensed consolidated statements of operations for all periods presented (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Cost of revenue $ 618 $ 471 $ 1,540 $ 1,387 Research and development 1,717 1,265 4,841 4,351 Selling, general and administrative 10,610 10,424 35,565 36,913 Total stock-based compensation expense $ 12,945 $ 12,160 $ 41,946 $ 42,651 Non-Employee Stock-Based Compensation Expense On January 12, 2021, the Company's former Chief Executive Officer (“CEO”) resigned and entered into a Consulting Professional Services Agreement ("CPSA") with the Company. Pursuant to the original terms of the awards, the former CEO will continue to vest in outstanding awards as long as services are provided to the Company under the CPSA as a non-employee consultant or a member of the Company's Board of Directors. In accordance with ASC 718, Compensation - Stock Compensation , the Company recognized expense related to all awards expected to vest over the duration of the CPSA in the three months ended March 31, 2021, as an equity-based severance cost because the consulting services are not substantive. The former CEO total expense related to non-employee stock-based compensation recognized for the nine months ended September 30, 2021 was $5.0 million. No expenses were recorded during the three and nine months ended September 30, 2022. In March 2022, the former CEO retired from the Board and as a non-employee consultant. Vesting for all outstanding awards was accelerated upon his retirement. The Company recognized no expenses during the three months ended September 30, 2022. The Company recognized expense of $0.9 million related to the retirement of the former CEO during the nine months ended September 30, 2022. On June 3, 2022, the Company's former Chief Clinical Officer ("CCO") retired and entered into a Consulting Agreement ("CA") with the Company. Pursuant to the original terms of the awards, the CCO will continue to vest in her outstanding awards as long as services are provided to the Company under the CA as a non-employee consultant. In accordance with ASC 718, Compensation - Stock Compensation , the Company recognized expense related to all awards expected to vest over the duration of the CA in the current period as an equity-based severance cost because the consulting services are not substantive. The former CCO total non-employee stock-based compensation expense recognized no expenses for the three months ended September 30, 2022 and $0.2 million for the nine months ended September 30, 2022. On July 25, 2022, the Company's former Executive Vice President, Chief Commercial Officer ("EVP") resigned and entered into a CA with the Company. Pursuant to the original terms of the agreement, the EVP outstanding awards will continue to vest during the period of his CA services. In accordance with ASC 718, Compensation - Stock Compensation, the Company will continue to record stock-based compensation expense related to the awards expected to vest over the duration of the CA , because the consulting services are substantive. The EVP's total expense related to non-employee stock-based compensation recognized for both three and nine months ended September 30, 2022 was $0.1 million. |
Net Loss Per Common Share
Net Loss Per Common Share | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | Net Loss Per Common Share As the Company has net losses for the three and nine months ended September 30, 2022, and 2021, all potential common shares were deemed to be anti-dilutive. The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Numerator: Net loss $ (21,451) $ (23,731) $ (95,957) $ (68,870) Denominator: Weighted-average shares used to compute net loss per common share, basic and diluted 30,055,166 29,397,845 29,836,601 29,294,559 Net loss per common share, basic and diluted $ (0.71) $ (0.81) $ (3.22) $ (2.35) The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per common share for the nine months ended September 30, 2022 and 2021, because their inclusion would be anti-dilutive: Nine Months Ended 2022 2021 Options to purchase common stock 329,817 518,614 RSUs and PRSUs unvested 2,076,613 1,491,922 Total 2,406,430 2,010,536 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any other future year. |
Risks and Uncertainties | Risks and Uncertainties Macroeconomic Factors and the Effects of the COVID-19 Pandemic As a result of the COVID-19 pandemic and macroeconomic factors, the Company has experienced business disruptions affecting the availability and cost of materials, which has impacted its supply chain and reduced margins. While the Company has continued to deliver its Zio service by operating with remote employees and essential employees on site, any government mandates could further impact the Company's ability to provide its Zio service effectively, and could impede the progress of all ongoing initiatives. Appropriate social distancing techniques and other measures at the Company's facilities have been implemented for employees who are required by job scope or who have chosen to return to the Company’s facilities. The Company's remote work arrangements resulting from the COVID-19 pandemic and subsequent decision to pursue a sublease for its San Francisco headquarters resulted in an impairment of its right of use asset and related leasehold improvements and furniture, and the Company may incur additional impairment charges related to real property lease agreements. The Company is continuously reviewing its liquidity and anticipated capital requirements. The Company believes it will have adequate liquidity over the next 12 months to operate its business and to meet its cash requirements. As of September 30, 2022, the Company is in compliance with its debt covenants. Macroeconomic factors have contributed to delays in payments of outstanding receivables, supply chain disruptions, including shortages and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that the Company has undertaken to address financial and operational challenges faced by the Company's customers. This impact is having a material, adverse impact on liquidity, capital resources, supply chain, operations and business and those of the third parties on which the Company relies, and could worsen over time. In addition, the extent to which the COVID-19 pandemic impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. The full extent of potential delays or impacts on the business, financial condition, cash flows and results of operations remains unknown. Reimbursement Government payors may change their coverage and reimbursement policies, as well as payment amounts, in a way that would prevent or limit reimbursement for the Company’s Zio service, which would significantly harm the Company’s business. Government and other third-party payors require the Company to report the service for which it is seeking reimbursement by using a Current Procedural Terminology ("CPT") code-set maintained by the American Medical Association (“AMA”). For Zio XT, the Company had historically utilized temporary CPT codes (or Category III CPT codes), used for newly introduced technologies specific to its category of diagnostic monitoring. The process to convert temporary Category III CPT codes to permanent Category I CPT codes is governed by the AMA and CMS. Determinations of which products or services will be eligible for reimbursement by Medicare can be developed at the national level through a national coverage determination (“NCD”) issued by CMS or at the local level through a local coverage determination (“LCD”), issued by one or more of the regional Medicare Administrative Contractors (“MACs”), who are private contractors that process and pay claims on behalf of CMS for different geographic regions. In the absence of a specific NCD, as has historically been the case with the Zio XT service, the MAC with jurisdiction over a specific geographic region will have the discretion to issue an LCD. The Company’s Zio service may be eligible for reimbursement at the rates set by the regional MACs until CMS establishes national payment rates for the CPT codes that the Company uses to seek reimbursement for the Zio XT service. On October 25, 2019, the AMA’s CPT Editorial Panel established eight new Category I CPT codes that are applicable to the Zio XT service and took effect on January 1, 2021. Category I CPT codes 93241 through 93248 are split between two sets of four codes with rates tied to those codes for (i) wear-time of greater than 48 hours and up to 7 days, and (ii) greater than 7 days and up to 15 days. The Company primarily relies on CPT codes 93243 (for wear-time of greater than 48 hours and up to 7 days) and 93247 (for wear-time of greater than 7 days and up to 15 days) to seek reimbursement for its Zio XT service. In November 2021, CMS published the Calendar Year 2022 Medicare Physician Fee Schedule Final Rule (the “2022 Final Rule”). In the 2022 Final Rule, CMS did not establish national pricing for Calendar Year 2022 for Category I CPT codes 93241, 93243, 93245 and 93247, which include the two CPT codes upon which the Company primarily relies for its Zio XT service. Instead, CMS designated these for contractor pricing in Calendar Year 2022, which meant that prices would be set regionally by each MAC. In January 2022, Novitas Solutions, the MAC which covers the region where the Company’s independent diagnostic testing facility ("IDTF") in Houston, Texas is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $223 and $233, respectively. These updated rates were retroactive to January 1, 2022. These rates were higher than the rates posted by Novitas in 2021, but continue to be significantly below historical Medicare rates for the Company’s Zio XT service. In April 2022, National Government Services ("NGS"), the MAC which covers the region where the Company’s IDTF in Deerfield, Illinois is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $335 and $347, respectively. These updated rates were retroactive to January 1, 2022. These rates are higher than the historical Medicare rates for the Company’s Zio XT service. On November 2, 2022, CMS released its Calendar Year 2023 Medicare Physician Fee Schedule (“MPFS”) final rule (the “2023 Final Rule”) for publication in the Federal Register on November 18, 2022. The 2023 Final Rule updates payment policies, payment rates, and other provisions for services furnished on or after January 1, 2023, including rates related to the Category I CPT codes for long-term electrocardiogram (“ECG”) monitoring and recording that the Company uses to seek reimbursement for its Zio XT service. Specifically, CMS finalized relative value units for CPT codes 93247 (for wear-time greater than 7 days and up to 15 days) and 93243 (for wear-time greater than 48 hours up to 7 days). CMS also established a Calendar Year 2023 “Conversion Factor” that, collectively with the Medicare payment reduction (sequestration) and the sequestration under the Statutory Pay-As-You-Go Act of 2010, the Company interprets as reflecting national reimbursement rates of $224 and $213 for CPT codes 93247 and 93243 codes, respectively. Based on the Calendar Year 2023 Geographic Practice Cost Index modifiers in the 2023 Final Rule that are applicable to the locations of the Company’s Medicare-enrolled IDTFs in Deerfield, Illinois, Houston, Texas, and San Francisco, California, the Company estimates the applicable reimbursement rates could range from $227 to $307 for CPT code 93247 and $216 to $292 for CPT code 93243. The Company remains engaged with CMS and the Medicare Administrative Contractors (“MACs”) to advocate for national rates that reflect the full value of long-term ECG monitoring to enable appropriate access and the availability of quality healthcare services for the benefit of the Company's patients. The Company cannot provide certainty at this time on the potential outcome of further discussions with CMS or the MACs or on the timing of any additional action to be taken. Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, the Company is, and will continue to be, subject to changes to the level of Medicare coverage and reimbursement for its Zio service, and unfavorable coverage determinations at the national or local level could adversely affect its business and results of operations. Further, the establishment of national Medicare rates could cause some commercial third-party payors to reduce their reimbursement rates for the Zio XT service to be consistent with the Medicare rates. Although a large majority of commercial customers have re-contracted the Zio XT service at pre-existing rates since the establishment of the Category I long-term ECG monitoring codes on January 1, 2021, the Company believes commercial customers may apply downward pressure on their rates to align with the Medicare rates. As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021, which contained differences between the submitted price and reimbursement rate and overall denials, increased significantly compared to the Company’s historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, however, the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact the Company’s results of operations. If the Company is unable to achieve a level of revenues adequate to support its cost structure, or is unable to reduce its overall cost structure, this would raise substantial doubts about its ability to continue as a going concern. Supply Chain Constraints Economies worldwide have also seen indirect COVID-19 pandemic related disruptions, including supply chain impacts, material inflation, and labor constraints in certain markets and geographies. Such economic disruption has had an adverse effect on the Company's business environment as increased lead times and component shortages have resulted in higher inventory costs. While the Company has increased inventory safety stock levels to help mitigate the delays and disruptions in supply, the Company cannot be certain that any prolonged, intensified, or worsened effect from the COVID-19 pandemic would not further impact its supply chain. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contractual allowances, allowance for doubtful accounts, the useful lives of property and equipment, the recoverability of long-lived assets including the estimated usage of the printed circuit board assemblies (“PCBAs”), the incremental borrowing rate for operating leases, accounting for income taxes, impairment of right-of-use assets ("ROU assets"), and various inputs used in estimating stock-based compensation. Certain of these estimates are impacted by uncertainties surrounding COVID-19, such as revenue recognition, contractual allowances for revenue, allowance for doubtful accounts, and stock-based compensation. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that management believes are reasonable under the circumstances, including assumptions as to future events. Actual results may differ from those estimates. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. |
Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances | Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances Accounts receivable include amounts due to the Company from healthcare institutions, third-party payors, and government payors and their related patients, due to the Company's normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated allowance for doubtful accounts and contractual allowances. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on its assessment of the collectability of customer accounts and recognizes the provision as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. The Company records a provision as a contractual allowance based on the estimated differences between contracted amounts and expected collection rates. Such provisions are based on the Company's historical experience and are reported as a reduction of revenue. The Company regularly reviews the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company submitted the majority of Zio XT claims from the first and second quarter of 2021 on a delayed basis due to the transition from Category III CPT codes to Category I CPT codes and uncertainty over reimbursement rates. Claims were being held due to a combination of negotiations with payors and administrative delays in processing payments. Most of the held claims were released and submitted by the end of the second quarter of 2021. For the contracted portfolio, once submitted, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement rate and overall denials increased significantly compared to its historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, and the collection cycle for these claims is significantly longer than usual. This makes the timing of the Company's collections more difficult to predict. While the Company believes it has properly estimated the impact to its contractual allowances and allowance for doubtful accounts, inherent uncertainty caused by the longer-collection cycle and claims adjudication process could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods. As of September 30, 2022, uncollected claims as a result of the CPT code transition were $11.5 million |
Concentrations of Risk | Concentrations of Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. Cash balances are deposited in financial institutions which, at times may be in excess of federally insured limits. Cash equivalents are invested in highly-rated money market funds. The Company invests in a variety of financial instruments, such as but not limited to, U.S. government securities, corporate notes and commercial paper, and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments. |
Revenue Recognition | Revenue Revenue Recognition The Company’s revenue is generated primarily from the provision of its ambulatory cardiac rhythm monitoring service, the Zio XT service. The Zio XT service is an ambulatory cardiac rhythm monitoring service that has a patient wear period of up to 14 days and is billable when the monitoring reports are delivered to the healthcare provider, which is also when the service is complete, and the Company recognizes revenue. The time from when the patient has the Zio XT device applied to the time the report is posted is generally around 25 days. The Company has concluded that the Zio XT service is a single performance obligation on the basis that the customer cannot benefit from each component of the service on its own or together with other resources that are readily available to the customer. The Zio AT service is an ambulatory cardiac rhythm monitoring service that is provided during the patient wear period. During the patient wear period, the Zio AT monitoring system is intended to capture, analyze and report symptomatic and asymptomatic cardiac events and continuous ECG information. While continuously recording patient ECG data, both patient-triggered and automatically detected arrhythmia events are transmitted to a monitoring center for review and reporting according to physician-selected notification criteria. After wear, a final report is generated based on beat-to-beat information from the entire ECG recording. The Zio AT service revenue is recognized over the patient wear period and delivery of electronic Zio reports with two performance obligations. The Company recognizes as revenue the amount of consideration to which it expects to be entitled in exchange for performing the Zio service. The consideration to which the Company is entitled varies by portfolio, as further defined below, and includes estimates that require significant judgment by management. A unique aspect of the healthcare industry is multiple parties' involvement in the service transaction. In addition to any payment made by the patient, often a third-party, such as a commercial or governmental payor or healthcare institution, will pay the Company for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between the Company and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered. A small portion of the Company’s transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for its service, the Company considers factors such as insurance claims which are adjudicated as allowable under the applicable policy and: (i) payment history from both payors and patient out-of-pocket costs; (ii) payor coverage; (iii) whether there is a contract between the payor or healthcare institution and the Company; (iv) historical amount received for the service; and (v) any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A summary of the payment arrangements with third-party payors and healthcare institutions is as follows: • Contracted third-party payors – The Company has contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage. • CMS – The Company has enrolled as an independent diagnostic testing facility with regional Medicare Administrative Contractors and will receive reimbursement per the relevant national or contractor-priced CPT code rates for the CMS-covered services rendered to the patient. • Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of the Company’s historical collection experience for its non-contracted services. This rate is reviewed at least quarterly. • Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which the Company has negotiated amounts for its monitoring services, including certain governmental agencies such as the Veterans Administration and Department of Defense. The Company is utilizing the portfolio approach practical expedient under Accounting Standard Codification ("ASC") 606, Revenue from Contracts with Customers, for revenue recognition whereby services provided under each of the above payor types form a separate portfolio. The Company accounts for the contracts within each portfolio as a collective group rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, the Company has concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis. For contracted and CMS portfolios, the Company recognizes revenue, net of contractual allowances, and recognizes an allowance for doubtful accounts for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and the Company has historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The Company accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. The Company estimates the denied claims, which require management judgment. The estimated denied claims are based on historical information, and judgment includes the historical period utilized. The Company monitors the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if the Company misses the payors’ filing deadlines and could result in a reduction in the Company’s receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that the Company bill patient co-payments and deductibles and from time to time the Company may not be able to collect such amounts due to credit risk. The Company provides for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statement of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. As discussed in the Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances section above, the inherent uncertainty caused by longer-collection cycle and claims adjudication process related to delays in submission because of the CPT code transition in 2021 could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods. For non-contracted portfolios, the Company is providing an implicit price concession due to the lack of a contracted rate with the underlying payor, the result of which requires the Company to estimate the transaction price based on historical cash collections utilizing the expected value method. All subsequent adjustments to the transaction price are recorded as an adjustment to revenue. For healthcare institutions, the transaction price is determined based on negotiated rates, and the Company has historical experience collecting substantially all of these contracted rates. Historical cash collection indicates that it is probable that substantially all of the transaction price will be received. As such, the Company is not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense. |
Contract Liabilities | Contract Liabilities ASC 606, Revenue from Contracts with Customers, requires an entity to present a revenue contract as a contract liability when the Company has an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer, or an amount of consideration from the customer is due and unconditional (whichever is earlier). |
Contract Costs | Contract Costs Under ASC 340, Other Assets and Deferred Costs , ("ASC 340") the incremental costs of obtaining a contract with a customer are recognized as an asset. Incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company’s current commission programs are considered incremental. However, as a practical expedient, ASC 340 , permits the Company to immediately expense contract acquisition costs, as the asset that would have resulted from capitalizing these costs will be amortized in one year or less. |
Share-based Compensation | Stock-based Compensation The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. The fair value of market condition awards is determined using the Monte-Carlo option pricing model and the fair value of stock options is determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For restricted stock, the compensation cost for these awards is based on the closing price of the Company’s common stock on the date of grant, and recognized as compensation expense on a straight-line basis over the requisite service period. The Company recognizes compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant, net of estimated forfeitures. The Company estimates the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Allowance for Doubtful Accounts | The following table presents the changes in the allowance for doubtful accounts (in thousands): Nine Months Ended Year Ended Nine Months Ended Balance, beginning of period $ 14,012 $ 12,711 $ 12,711 Add: provision for doubtful accounts 12,244 9,615 5,884 Add (less): write-offs, net of recoveries and other adjustments 17 (8,314) (6,484) Balance, end of period $ 26,273 $ 14,012 $ 12,111 |
Schedule of Changes in Contractual Allowance | The following table presents the changes in the contractual allowance (in thousands): Nine Months Ended Year Ended Nine Months Ended Balance, beginning of period $ 31,274 $ 21,281 $ 21,281 Add: provision for contractual allowances 31,534 27,459 18,051 Less: realized contractual adjustments (259) (17,466) (11,524) Balance, end of period $ 62,549 $ 31,274 $ 27,808 |
Schedule of Disaggregated Revenue by Payor Type and Major Service | Disaggregated revenue by payor type and major service line for three and nine months ended September 30, 2022 and September 30, 2021 were as follows (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Contracted third-party payors $ 56,016 $ 49,944 $ 163,218 $ 146,169 Non-contracted third-party payors 5,723 7,350 17,380 19,175 Centers for Medicare and Medicaid Services 27,253 12,411 72,074 33,577 Healthcare institutions 14,883 15,727 45,632 42,100 Total $ 103,875 $ 85,432 $ 298,304 $ 241,021 |
Cash Equivalents and Investme_2
Cash Equivalents and Investments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Cash Equivalents And Investments [Abstract] | |
Schedule of Cash Equivalents and Short-Term Investments | The fair value of cash equivalents and short-term investments at September 30, 2022 and December 31, 2021, were as follows (in thousands): September 30, 2022 Amortized Gross Unrealized Estimated Gains Losses Money market funds $ 24,716 $ — $ — $ 24,716 U.S. government securities 132,997 3 (684) 132,316 Total cash equivalents and short-term investments $ 157,713 $ 3 $ (684) $ 157,032 Classified as: Cash equivalents $ 24,716 Short-term investments 132,316 Total cash equivalents and short-term investments $ 157,032 December 31, 2021 Amortized Gross Unrealized Estimated Gains Losses Money market funds $ 110,137 $ — $ — $ 110,137 U.S. government securities 50,490 — (46) 50,444 Corporate notes 31,158 — (15) 31,143 Commercial paper 29,982 — — 29,982 Total cash equivalents and short-term investments $ 221,767 $ — $ (61) $ 221,706 Classified as: Cash equivalents $ 110,137 Short-term investments 111,569 Total cash equivalents and short-term investments $ 221,706 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value of Company's Financial Assets and Liabilities | The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands). September 30, 2022 Level 1 Level 2 Level 3 Total Assets Money market funds $ 24,716 $ — $ — $ 24,716 U.S. government securities — 132,316 — 132,316 Total $ 24,716 $ 132,316 $ — $ 157,032 December 31, 2021 Level 1 Level 2 Level 3 Total Assets Money market funds $ 110,137 $ — $ — $ 110,137 U.S. government securities — 50,444 — 50,444 Corporate notes — 31,143 — 31,143 Commercial paper — 29,982 — 29,982 Total $ 110,137 $ 111,569 $ — $ 221,706 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Inventory Components | Inventory consisted of the following (in thousands): September 30, December 31, Raw materials $ 8,195 $ 5,101 Finished goods 6,257 5,167 Total $ 14,452 $ 10,268 |
Schedule of Property and Equipment, Net Components | Property and equipment, net consisted of the following (in thousands): September 30, December 31, Laboratory and manufacturing equipment $ 7,445 $ 5,029 Computer equipment and software 2,540 2,353 Furniture and fixtures 4,109 4,174 Leasehold improvements 23,340 20,431 Internal-use software 66,086 46,661 Total property and equipment, gross 103,520 78,648 Less: accumulated depreciation and amortization (32,005) (22,704) Total property and equipment, net $ 71,515 $ 55,944 |
Schedule of Accrued Liabilities Components | Accrued liabilities consisted of the following (in thousands): September 30, December 31, Accrued payroll and related expenses $ 32,463 $ 34,484 Accrued vacation 7,997 7,431 Accrued professional services fees 6,251 1,724 Claims payable 3,779 2,988 Accrued ESPP contributions 2,612 1,002 Other 7,162 3,857 Total accrued liabilities $ 60,264 $ 51,486 |
Impairment and Restructuring _2
Impairment and Restructuring Charges (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Restructuring and Related Activities [Abstract] | |
Summary of Changes in the Restructuring Liabilities | The Company's restructuring and impairment charges are described below (in thousands): Nine Months Ended Restructuring charges $ 3,444 Impairment charges 23,164 Total $ 26,608 The following table provides a summary of changes in the restructuring liabilities associated with the Restructuring Plan (in thousands): December 31, Charges Cash Payments September 30, Employee severance $ — $ 3,444 $ (3,050) $ 394 Total $ — $ 3,444 $ (3,050) $ 394 |
Schedule of Impairment Charges | The following table presents impairment charges recorded during the nine months ended September 30, 2022: Nine Months Ended ROU asset $ 20,451 Leasehold improvements 2,211 Furniture and fixtures 502 Total $ 23,164 |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Maturities of Operating Lease Liabilities | As of September 30, 2022, maturities of operating lease liabilities were as follows (in thousands): Year ending December 31: 2022 (remainder of the year) $ 3,449 2023 13,958 2024 14,253 2025 14,645 2026 15,071 Thereafter 71,397 Total lease payments 132,773 Less: imputed interest (38,372) Total lease liabilities $ 94,401 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Future Minimum Payments | Future minimum payments under the Amendment to the SVB Loan Agreement as of September 30, 2022, are as follows (in thousands): Year Ending December 31, 2022 (remainder of the year) $ 560 2023 2,307 2024 2,313 2025 15,142 2026 18,412 Thereafter 4,423 Total 43,157 Less: Amount representing interest (8,157) Less: Debt issuance costs (69) Total carrying value $ 34,931 Reported as: Debt, noncurrent portion $ 34,931 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Schedule of Common Stock Shares Reserved for Future Issuance | The Company had reserved shares of common stock for issuance as follows: September 30, December 31, Options issued and outstanding 329,817 504,106 Unvested restricted stock units and performance-based restricted stock units 2,076,613 1,649,561 Shares available for grant under future stock plans 10,075,062 9,011,213 Shares available for future issuance 12,481,492 11,164,880 |
Equity Incentive Plans (Tables)
Equity Incentive Plans (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Summary of Share-based Awards Available for Grant Under 2016 Plan | A summary of share-based awards available for grant under the 2016 Equity Incentive Plan is as follows: Awards Available for Grant Balance at December 31, 2021 7,159,675 Additional awards authorized 1,474,686 Awards granted (991,066) Awards forfeited 192,431 Balance at September 30, 2022 7,835,726 |
Summary of Restricted Stock Units, Activity | The following table summarizes restricted stock units ("RSU") and performance-based restricted stock units ("PRSU") activity: Restricted Stock Units Performance Based Restricted Stock Units Number of Shares Average Grant Date Fair Value Number of Shares 1 Average Grant Date Fair Value Balance at December 31, 2021 1,361,311 $ 84.99 288,250 $ 119.21 Stock units granted 646,797 150.75 344,269 138.79 Stock units vested (326,023) 87.11 (46,934) 257.61 Stock units cancelled and expired (165,849) 111.15 (25,208) 109.82 Balance at September 30, 2022 1,516,236 $ 109.75 560,377 $ 120.07 1 Based on the maximum number of performance based restricted stock units in the key executive grant agreements, the actual number of units granted will be based on the annual unit volume CAGR as described below. |
Summary of Stock Option Activity Under 2006 and 2016 Plans | The following table summarizes stock option activity: Options Outstanding Options Weighted- Weighted- Aggregate Balance at December 31, 2021 504,106 $ 40.97 5.20 $ 38,675 Options exercised (172,915) 36.58 Options forfeited (1,374) 83.15 Balance at September 30, 2022 329,817 43.10 4.68 27,105 Options exercisable – September 30, 2022 328,658 42.96 4.68 27,055 Options vested and expected to vest – September 30, 2022 329,807 $ 43.10 4.68 $ 27,105 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Assumptions Used to Estimate Fair Value of Awards | The fair value of market based RSUs was estimated at the date of grant using the Monte-Carlo option pricing model with the assumptions below. Nine Months Ended 2022 Expected term (in years) 2.88 Expected volatility 81.2 % Risk-free interest rate 1.72 % Dividend yield — % |
Summary of Total Stock-Based Compensation Expense Included in Statements of Operations and Comprehensive Loss | The following table summarizes the total stock-based compensation expense included in the unaudited condensed consolidated statements of operations for all periods presented (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Cost of revenue $ 618 $ 471 $ 1,540 $ 1,387 Research and development 1,717 1,265 4,841 4,351 Selling, general and administrative 10,610 10,424 35,565 36,913 Total stock-based compensation expense $ 12,945 $ 12,160 $ 41,946 $ 42,651 |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Net Loss per Share Attributable to Common Stock holders | The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Numerator: Net loss $ (21,451) $ (23,731) $ (95,957) $ (68,870) Denominator: Weighted-average shares used to compute net loss per common share, basic and diluted 30,055,166 29,397,845 29,836,601 29,294,559 Net loss per common share, basic and diluted $ (0.71) $ (0.81) $ (3.22) $ (2.35) |
Schedule of Anti-dilutive Securities Excluded from Diluted Net Loss per Common Share | The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per common share for the nine months ended September 30, 2022 and 2021, because their inclusion would be anti-dilutive: Nine Months Ended 2022 2021 Options to purchase common stock 329,817 518,614 RSUs and PRSUs unvested 2,076,613 1,491,922 Total 2,406,430 2,010,536 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2022 USD ($) performanceObligation | Sep. 30, 2021 | Sep. 30, 2022 USD ($) performanceObligation | Sep. 30, 2021 USD ($) | Dec. 31, 2021 | Nov. 02, 2022 USD ($) | Apr. 30, 2022 USD ($) | Jan. 31, 2022 USD ($) | Oct. 25, 2019 code | |
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Number of new category 1 CPT codes | code | 8 | ||||||||
Long-lived asset impairment | $ 0 | $ 23,200,000 | |||||||
Uncollected claims | $ 11,500,000 | $ 11,500,000 | |||||||
Number of performance obligations | performanceObligation | 2 | 2 | |||||||
Deferred Revenue, Current and Other Noncurrent Liabilities | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Total revenue recognized that was included in contract liability | $ 3,000,000 | $ 900,000 | |||||||
Federal Government Agencies | Revenue | Customer Concentration Risk | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Concentration of credit risk (in percentage) | 26% | 15% | 24% | 14% | |||||
Federal Government Agencies | Accounts Receivable | Customer Concentration Risk | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Concentration of credit risk (in percentage) | 20% | 8% | |||||||
Product And Services Zio X T Service Code93243 | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Reimbursement rate | $ 335 | $ 223 | |||||||
Product And Services Zio X T Service Code93243 | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Reimbursement rate | $ 213 | ||||||||
Product And Services Zio X T Service Code93243 | Minimum | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Estimated reimbursement rate | 216 | ||||||||
Product And Services Zio X T Service Code93243 | Maximum | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Estimated reimbursement rate | 292 | ||||||||
Product And Services Zio X T Service Code93247 | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Reimbursement rate | $ 347 | $ 233 | |||||||
Product And Services Zio X T Service Code93247 | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Reimbursement rate | 224 | ||||||||
Product And Services Zio X T Service Code93247 | Minimum | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Estimated reimbursement rate | 227 | ||||||||
Product And Services Zio X T Service Code93247 | Maximum | Subsequent Event | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Estimated reimbursement rate | $ 307 | ||||||||
Zio XT service | |||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||
Equipment wear period (in days) | 14 days | ||||||||
Period from device applied to the time the report is posted (in days) | 25 days |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Changes in Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Change In The Allowance For Doubtful Accounts | |||
Balance, beginning of period | $ 14,012 | $ 12,711 | $ 12,711 |
Add: provision for doubtful accounts | 12,244 | 5,884 | 9,615 |
Add (less): write-offs, net of recoveries and other adjustments | 17 | (6,484) | (8,314) |
Balance, end of period | $ 26,273 | $ 12,111 | $ 14,012 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Changes in Contractual Allowance (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Changes In The Contractual Allowance | |||
Balance, beginning of period | $ 31,274 | $ 21,281 | $ 21,281 |
Add: provision for contractual allowances | 31,534 | 18,051 | 27,459 |
Less: realized contractual adjustments | (259) | (11,524) | (17,466) |
Balance, end of period | $ 62,549 | $ 27,808 | $ 31,274 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Disaggregated Revenue by Payor Type and Major Service (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue, net | $ 103,875 | $ 85,432 | $ 298,304 | $ 241,021 |
Contracted third-party payors | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, net | 56,016 | 49,944 | 163,218 | 146,169 |
Non-contracted third-party payors | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, net | 5,723 | 7,350 | 17,380 | 19,175 |
Centers for Medicare and Medicaid Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, net | 27,253 | 12,411 | 72,074 | 33,577 |
Healthcare institutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, net | $ 14,883 | $ 15,727 | $ 45,632 | $ 42,100 |
Cash Equivalents and Investme_3
Cash Equivalents and Investments - Schedule of Cash Equivalents and Available For Sale Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 157,713 | $ 221,767 |
Gains | 3 | 0 |
Losses | (684) | (61) |
Estimated Fair Value | 157,032 | 221,706 |
Cash equivalents | 24,716 | 110,137 |
Short-term investments | 132,316 | 111,569 |
Total cash equivalents and short-term investments | 157,032 | 221,706 |
Money market funds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 24,716 | 110,137 |
Gains | 0 | 0 |
Losses | 0 | 0 |
Estimated Fair Value | 24,716 | 110,137 |
U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 132,997 | 50,490 |
Gains | 3 | 0 |
Losses | (684) | (46) |
Estimated Fair Value | $ 132,316 | 50,444 |
Corporate notes | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 31,158 | |
Gains | 0 | |
Losses | (15) | |
Estimated Fair Value | 31,143 | |
Commercial paper | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 29,982 | |
Gains | 0 | |
Losses | 0 | |
Estimated Fair Value | $ 29,982 |
Cash Equivalents and Investme_4
Cash Equivalents and Investments - Narrative (Details) | 9 Months Ended |
Sep. 30, 2022 investment_security | |
Cash Equivalents And Investments [Abstract] | |
Short-term investments in unrealized loss for more than 12 months | 0 |
Short-term investments, weighted average maturity of days | 115 days |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Carrying amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Outstanding interest-bearing obligations | $ 34.9 | $ 21.4 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value of Company's Financial Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | $ 157,032 | $ 221,706 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 24,716 | 110,137 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 132,316 | 111,569 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 24,716 | 110,137 |
Money market funds | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 24,716 | 110,137 |
Money market funds | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
Money market funds | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 132,316 | 50,444 |
U.S. government securities | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | 0 |
U.S. government securities | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 132,316 | 50,444 |
U.S. government securities | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | $ 0 | 0 |
Corporate notes | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 31,143 | |
Corporate notes | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | |
Corporate notes | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 31,143 | |
Corporate notes | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | |
Commercial paper | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 29,982 | |
Commercial paper | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 0 | |
Commercial paper | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | 29,982 | |
Commercial paper | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets | $ 0 |
Balance Sheet Components - Comp
Balance Sheet Components - Components of Inventory and Printed Circuit Board Assemblies ("PCBAs") (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Inventory [Line Items] | ||
Total inventory and printed circuit board assemblies | $ 14,452 | $ 10,268 |
Raw materials | ||
Inventory [Line Items] | ||
Total inventory and printed circuit board assemblies | 8,195 | 5,101 |
Finished goods | ||
Inventory [Line Items] | ||
Total inventory and printed circuit board assemblies | $ 6,257 | $ 5,167 |
Balance Sheet Components - Narr
Balance Sheet Components - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Inventory [Line Items] | |||||
Increase in internal use software | $ 19,400 | ||||
Depreciation and amortization | $ 3,400 | $ 2,500 | 9,930 | $ 6,738 | |
Impairment charges to leasehold improvements, furniture and fixtures | 0 | 23,164 | $ 0 | ||
Restructuring liability | 400 | 400 | |||
Leasehold improvements | San Francisco | |||||
Inventory [Line Items] | |||||
Impairment charges to leasehold improvements, furniture and fixtures | 0 | 2,200 | |||
Furniture and fixtures | San Francisco | |||||
Inventory [Line Items] | |||||
Impairment charges to leasehold improvements, furniture and fixtures | 0 | $ 500 | |||
Minimum | |||||
Inventory [Line Items] | |||||
Property and equipment, estimated useful life (in years) | 3 years | ||||
Maximum | |||||
Inventory [Line Items] | |||||
Property and equipment, estimated useful life (in years) | 5 years | ||||
Printed circuit board assemblies | |||||
Inventory [Line Items] | |||||
Useful lives of PCBAs | 1 year | ||||
Other assets | $ 17,400 | $ 17,400 | $ 13,900 |
Balance Sheet Components - Co_2
Balance Sheet Components - Components of Property and Equipment, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | $ 103,520 | $ 78,648 |
Less: accumulated depreciation and amortization | (32,005) | (22,704) |
Total property and equipment, net | 71,515 | 55,944 |
Laboratory and manufacturing equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 7,445 | 5,029 |
Computer equipment and software | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 2,540 | 2,353 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 4,109 | 4,174 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 23,340 | 20,431 |
Internal-use software | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | $ 66,086 | $ 46,661 |
Balance Sheet Components - Co_3
Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued payroll and related expenses | $ 32,463 | $ 34,484 |
Accrued vacation | 7,997 | 7,431 |
Accrued professional services fees | 6,251 | 1,724 |
Claims payable | 3,779 | 2,988 |
Accrued ESPP contributions | 2,612 | 1,002 |
Other | 7,162 | 3,857 |
Total accrued liabilities | $ 60,264 | $ 51,486 |
Impairment and Restructuring _3
Impairment and Restructuring Charges - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Feb. 28, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 3,444,000 | |||
Reduction to leased square footage (percent) | 50% | |||
Impairment charges to leasehold improvements, furniture and fixtures | $ 0 | 23,164,000 | $ 0 | |
2022 Restructuring Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 0 | 3,444,000 | ||
Employee severance | 2022 Restructuring Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 3,444,000 |
Impairment and Restructuring _4
Impairment and Restructuring Charges - Restructuring and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Restructuring and Related Activities [Abstract] | ||||
Restructuring charges | $ 3,444 | |||
Impairment charges | $ 0 | 23,164 | $ 0 | |
Total | $ 0 | $ 0 | $ 26,608 | $ 0 |
Impairment and Restructuring _5
Impairment and Restructuring Charges- Summary of Changes in Restructuring Liabilities (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Restructuring Reserve [Roll Forward] | ||
Charges | $ 3,444,000 | |
Restructuring reserve, ending balance | $ 400,000 | 400,000 |
2022 Restructuring Plan | ||
Restructuring Reserve [Roll Forward] | ||
Restructuring reserve, beginning balance | 0 | |
Charges | 0 | 3,444,000 |
Cash Payments | (3,050,000) | |
Restructuring reserve, ending balance | 394,000 | 394,000 |
Employee severance | 2022 Restructuring Plan | ||
Restructuring Reserve [Roll Forward] | ||
Restructuring reserve, beginning balance | 0 | |
Charges | 3,444,000 | |
Cash Payments | (3,050,000) | |
Restructuring reserve, ending balance | $ 394,000 | $ 394,000 |
Impairment and Restructuring _6
Impairment and Restructuring Charges - Schedule of Impairment charges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Impaired Long-Lived Assets Held and Used [Line Items] | |||
Impairment charges | $ 0 | $ 23,164 | $ 0 |
ROU asset | |||
Impaired Long-Lived Assets Held and Used [Line Items] | |||
Impairment charges | $ 0 | 20,451 | |
Leasehold improvements | |||
Impaired Long-Lived Assets Held and Used [Line Items] | |||
Impairment charges | 2,211 | ||
Furniture and fixtures | |||
Impaired Long-Lived Assets Held and Used [Line Items] | |||
Impairment charges | $ 502 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Nov. 04, 2022 USD ($) | Feb. 15, 2022 floor | Dec. 31, 2019 USD ($) | Sep. 03, 2019 USD ($) | |
Lessee, Lease, Description [Line Items] | |||||||
Operating lease, cost | $ 10,300 | ||||||
Operating lease, payments | 10,200 | ||||||
Sublease of majority floor space | floor | 1 | ||||||
Sublease percentage | 50% | ||||||
Impairment charges | $ 0 | $ 23,164 | $ 0 | ||||
Weighted average remaining term of operating leases (in years) | 8 years 10 months 24 days | 8 years 10 months 24 days | |||||
Weighted average discount rate of operating leases (as a percent) | 728% | 728% | |||||
Collaboration agreement milestone payments | $ 0 | $ 0 | |||||
Collaboration agreement, additional milestone payments, between 2022 and early 2023 | 1,750 | 1,750 | |||||
Subsequent Event | |||||||
Lessee, Lease, Description [Line Items] | |||||||
Collaboration agreement milestone payments | $ 11,000 | ||||||
Verily Life Sciences LLC | |||||||
Lessee, Lease, Description [Line Items] | |||||||
Upfront fee related to development agreement | $ 5,000 | ||||||
Additional aggregate milestone payments related to development agreement | $ 12,750 | ||||||
ROU asset | |||||||
Lessee, Lease, Description [Line Items] | |||||||
Impairment charges | $ 0 | $ 20,451 |
Commitments and Contingencies_2
Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 (remainder of the year) | $ 3,449 |
2023 | 13,958 |
2024 | 14,253 |
2025 | 14,645 |
2026 | 15,071 |
Thereafter | 71,397 |
Total lease payments | 132,773 |
Less: imputed interest | (38,372) |
Total lease liabilities | $ 94,401 |
Debt - Narrative (Details)
Debt - Narrative (Details) | 1 Months Ended | 9 Months Ended | ||||
Mar. 28, 2022 USD ($) paymentInstallment | Mar. 27, 2022 | Oct. 31, 2018 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Mar. 31, 2022 USD ($) | |
Debt Instrument [Line Items] | ||||||
Proceeds from issuance of debt | $ 35,000,000 | $ 0 | ||||
2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, covenant compliance, amount | $ 15,000,000 | |||||
Minimum | 2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, covenant, quick ratio | 100% | |||||
Maximum | 2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, covenant, quick ratio | 115% | |||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 25,000,000 | |||||
Letter of Credit | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | 15,000,000 | |||||
Cash Management Services | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 15,000,000 | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Proceeds from issuance of debt | $ 35,000,000 | |||||
Amount outstanding under revolving credit line | $ 18,500,000 | |||||
Commitment fee percentage | 5% | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | 2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 75,000,000 | |||||
Proceeds from line of credit | 35,000,000 | |||||
Line of credit facility, remaining borrowing capacity | 40,000,000 | |||||
Term loan borrowed installments | $ 10,000,000 | |||||
Repayment consecutive monthly installments | paymentInstallment | 24 | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | 2018 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Repayment of long-term line of credit | $ 18,500,000 | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Commitment fee percentage | 1% | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Commitment fee percentage | 3% | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | Prime rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread deduction on variable rate (in percentage) | 3.50% | |||||
Third Amended and Restated SVB Loan Agreement | SVB Term Loan | Prime rate | 2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit facility interest rate | 0.25% | |||||
Third Amended and Restated SVB Loan Agreement | Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Amount outstanding under revolving credit line | $ 0 | |||||
Commitment fee percentage | 0.15% | |||||
Third Amended and Restated SVB Loan Agreement | Revolving Credit Facility | Prime rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread deduction on variable rate (in percentage) | 3.50% | |||||
Third Amended and Restated SVB Loan Agreement | Revolving Credit Facility | Prime rate | 2022 Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit facility interest rate | 0.25% |
Debt - Schedule of Future Minim
Debt - Schedule of Future Minimum Payments (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Debt, noncurrent portion | $ 34,931 | $ 9,690 |
Third Amended and Restated SVB Loan Agreement | ||
Debt Instrument [Line Items] | ||
2022 (remainder of the year) | 560 | |
2023 | 2,307 | |
2024 | 2,313 | |
2025 | 15,142 | |
2026 | 18,412 | |
Thereafter | 4,423 | |
Total | 43,157 | |
Less: Amount representing interest | (8,157) | |
Less: Debt issuance costs | (69) | |
Total carrying value | $ 34,931 |
Income Taxes (Details)
Income Taxes (Details) | Sep. 30, 2022 USD ($) |
Income Tax Disclosure [Abstract] | |
Benefit recognized for net operating loss carryforwards | $ 0 |
Stockholders' Equity - Narrativ
Stockholders' Equity - Narrative (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Equity [Abstract] | ||
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Dividends declared | $ 0 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Common Stock Shares Reserved for Future Issuance (Details) - shares | Sep. 30, 2022 | Dec. 31, 2021 |
Class of Stock [Line Items] | ||
Shares available for future issuance (in shares) | 12,481,492 | 11,164,880 |
Options issued and outstanding | ||
Class of Stock [Line Items] | ||
Shares available for future issuance (in shares) | 329,817 | 504,106 |
Unvested restricted stock units and performance-based restricted stock units | ||
Class of Stock [Line Items] | ||
Shares available for future issuance (in shares) | 2,076,613 | 1,649,561 |
Shares available for grant under future stock plans | ||
Class of Stock [Line Items] | ||
Shares available for future issuance (in shares) | 10,075,062 | 9,011,213 |
Equity Incentive Plans - Summar
Equity Incentive Plans - Summary of Share-based Awards Available for Grant under 2016 Plan (Details) - 2016 Plan | 9 Months Ended |
Sep. 30, 2022 shares | |
Share-Based Awards Available For Grant | |
Beginning balance (in shares) | 7,159,675 |
Additional awards authorized (in shares) | 1,474,686 |
Awards granted (in shares) | (991,066) |
Awards forfeited (in shares) | 192,431 |
Ending balance (in shares) | 7,835,726 |
Equity Incentive Plans - Restri
Equity Incentive Plans - Restricted Stock Units ("RSU") and Performance-Based Restricted Stock Units ("PRSU") Activity (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Restricted Stock Units | |
Number of Shares | |
Beginning balance (in shares) | shares | 1,361,311 |
Stock units granted (in shares) | shares | 646,797 |
Stock units vested (in shares) | shares | (326,023) |
Stock units cancelled and expired (in shares) | shares | (165,849) |
Ending balance (in shares) | shares | 1,516,236 |
Average Grant Date Fair Value | |
Beginning balance (in USD per share) | $ / shares | $ 84.99 |
Stock units granted (in USD per share) | $ / shares | 150.75 |
Stock units vested (in USD per share) | $ / shares | 87.11 |
Stock units cancelled and expired (in USD per share) | $ / shares | 111.15 |
Ending balance (in USD per share) | $ / shares | $ 109.75 |
Performance Based Restricted Stock Units | |
Number of Shares | |
Beginning balance (in shares) | shares | 288,250 |
Stock units granted (in shares) | shares | 344,269 |
Stock units vested (in shares) | shares | (46,934) |
Stock units cancelled and expired (in shares) | shares | (25,208) |
Ending balance (in shares) | shares | 560,377 |
Average Grant Date Fair Value | |
Beginning balance (in USD per share) | $ / shares | $ 119.21 |
Stock units granted (in USD per share) | $ / shares | 138.79 |
Stock units vested (in USD per share) | $ / shares | 257.61 |
Stock units cancelled and expired (in USD per share) | $ / shares | 109.82 |
Ending balance (in USD per share) | $ / shares | $ 120.07 |
Equity Incentive Plans - Summ_2
Equity Incentive Plans - Summary of Stock Option Activity (Details) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) $ / shares shares | |
Options Outstanding | ||
Beginning balance (in shares) | shares | 504,106 | |
Options exercised (in shares) | shares | (172,915) | |
Options forfeited (in shares) | shares | (1,374) | |
Ending balance (in shares) | shares | 329,817 | 504,106 |
Options exercisable (in shares) | shares | 328,658 | |
Options vested and expected to vest (in shares) | shares | 329,807 | |
Weighted- Average Exercise Price Per Share | ||
Beginning balance (in USD per share) | $ / shares | $ 40.97 | |
Options exercised (in USD per share) | $ / shares | 36.58 | |
Options forfeited (in USD per share) | $ / shares | 83.15 | |
Ending balance (in USD per share) | $ / shares | 43.10 | $ 40.97 |
Options exercisable (in USD per share) | $ / shares | 42.96 | |
Options vested and expected to vest (in USD per share) | $ / shares | $ 43.10 | |
Weighted- Average Remaining Contractual Life (years) | ||
Weighted-average remaining contractual life for options outstanding (in years) | 4 years 8 months 4 days | 5 years 2 months 12 days |
Weighted-average remaining contractual life for options exercisable (in years) | 4 years 8 months 4 days | |
Weighted-average remaining contractual life for options vested and expected to vest (in years) | 4 years 8 months 4 days | |
Aggregate Intrinsic Value (in thousands) | ||
Aggregate intrinsic value of options outstanding | $ | $ 27,105 | $ 38,675 |
Aggregate intrinsic value of options exercisable | $ | 27,055 | |
Aggregate intrinsic value of options vested and expected to vest | $ | $ 27,105 |
Equity Incentive Plans - Narrat
Equity Incentive Plans - Narrative (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Feb. 28, 2022 | Feb. 28, 2021 | Jan. 31, 2021 | Feb. 29, 2020 | Oct. 31, 2016 offering_purchase_period | Nov. 30, 2022 $ / shares | Sep. 30, 2022 USD ($) shares | May 31, 2023 $ / shares | Dec. 31, 2021 shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Restricted stock units granted (in shares) | 0 | ||||||||
Shares available for future issuance (in shares) | 12,481,492 | 11,164,880 | |||||||
Employee Stock Purchase Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Unamortized compensation costs related to unvested stock options, expected weighted average period of recognition (in years) | 6 months | ||||||||
Percentage of payroll deductions of eligible compensation | 15% | ||||||||
Offering period (in months) | 12 months | ||||||||
Number of purchase period | offering_purchase_period | 2 | ||||||||
Purchase period (in months) | 6 months | ||||||||
Percentage of common stock fair market value available for employee purchase | 85% | ||||||||
Common stock issued to employees (in shares) | 54,607 | ||||||||
Shares available for future issuance (in shares) | 2,239,336 | ||||||||
Expected volatility | 88.90% | ||||||||
Risk-free interest rate | 1.90% | ||||||||
Dividend yield | 0% | ||||||||
Total unamortized compensation costs, net of estimated forfeitures related to unvested stock options | $ | $ 2.6 | ||||||||
Employee Stock Purchase Plan | Forecast | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Expected term (in years) | 6 months | 1 year | |||||||
Fair value of stock purchase rights to be granted under the ESPP (in USD per share) | $ / shares | $ 55.02 | $ 68.52 | |||||||
Minimum | Employee Stock Purchase Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Expected term (in years) | 6 months | ||||||||
Maximum | Employee Stock Purchase Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Expected term (in years) | 1 year | ||||||||
Performance Based Restricted Stock Units ("PRSU") | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Total unamortized compensation costs, net of estimated forfeitures related to unvested stock options | $ | $ 120 | ||||||||
Unamortized compensation costs related to unvested stock options, expected weighted average period of recognition (in years) | 1 year 10 months 24 days | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2020 Awards | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 19.70% | ||||||||
Performance target to be earned at performance threshold (in percentage) | 50% | 50% | 50% | ||||||
Performance Based Restricted Stock Units ("PRSU") | 2020 Awards | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 29% | 29% | |||||||
Performance target to be earned at performance threshold (in percentage) | 200% | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2021 Awards | Minimum | Awarded February 2021 | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 19.70% | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2021 Awards | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 10% | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2021 Awards | Maximum | Awarded February 2021 | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance target to be earned at performance threshold (in percentage) | 200% | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2022 Awards | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 13% | ||||||||
Performance Based Restricted Stock Units ("PRSU") | 2022 Awards | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Performance threshold (in percentage) | 23% | ||||||||
Performance target to be earned at performance threshold (in percentage) | 200% | 100% | |||||||
Restricted Stock Units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Total unamortized compensation costs, net of estimated forfeitures related to unvested stock options | $ | $ 31.2 | ||||||||
Unamortized compensation costs related to unvested stock options, expected weighted average period of recognition (in years) | 2 years 3 months 18 days |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Assumptions Used to Estimate Fair Value of Awards (Details) - Market Condition Awards | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected term (in years) | 2 years 10 months 17 days |
Expected volatility | 81.20% |
Risk-free interest rate | 1.72% |
Dividend yield | 0% |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Total Stock-Based Compensation Expense Included in Statements of Operations and Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation expense | $ 12,945 | $ 12,160 | $ 41,946 | $ 42,651 |
Cost of revenue | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation expense | 618 | 471 | 1,540 | 1,387 |
Research and development | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation expense | 1,717 | 1,265 | 4,841 | 4,351 |
Selling, general and administrative | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total stock-based compensation expense | $ 10,610 | $ 10,424 | $ 35,565 | $ 36,913 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 12,945 | $ 12,160 | $ 41,946 | $ 42,651 |
Consulting and Professional Services Agreement (“CPSA”) | CEO | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 0 | 0 | $ 5,000 | |
Consulting and Professional Services Agreement (“CPSA”) | CCO | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 0 | 200 | ||
Consulting and Professional Services Agreement (“CPSA”) | EVP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 100 | 100 | ||
Acceleration of Consulting and Professional Services Agreement | CEO | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 900 |
Net Loss Per Common Share - Com
Net Loss Per Common Share - Computation of Basic and Diluted Net Loss per Share Attributable to Common Stock holders (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Numerator: | ||||
Net loss | $ (21,451) | $ (23,731) | $ (95,957) | $ (68,870) |
Denominator: | ||||
Weighted-average shares used to compute net loss per common share, basic (in shares) | 30,055,166 | 29,397,845 | 29,836,601 | 29,294,559 |
Weighted-average shares used to compute net loss per common share, diluted (in shares) | 30,055,166 | 29,397,845 | 29,836,601 | 29,294,559 |
Net loss per common share, basic (in USD per share) | $ (0.71) | $ (0.81) | $ (3.22) | $ (2.35) |
Net loss per common share, diluted (in USD per share) | $ (0.71) | $ (0.81) | $ (3.22) | $ (2.35) |
Net Loss Per Common Share - Sch
Net Loss Per Common Share - Schedule of Anti-dilutive Securities Excluded from Diluted Net Loss per Common Share (Details) - shares | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss (in shares) | 2,406,430 | 2,010,536 |
Options to purchase common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss (in shares) | 329,817 | 518,614 |
RSUs and PRSUs unvested | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from diluted net loss (in shares) | 2,076,613 | 1,491,922 |