PENUMBRA INC, 10-Q filed on 5/4/2021
Quarterly Report
v3.21.1
Cover - shares
3 Months Ended
Mar. 31, 2021
Apr. 12, 2021
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2021  
Document Transition Report false  
Entity File Number 001-37557  
Entity Registrant Name Penumbra, Inc  
Entity Address, Address Description One Penumbra Place  
Entity Address, City or Town Alameda  
Entity Address, State or Province CA  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 05-0605598  
Entity Address, Postal Zip Code 94502  
City Area Code 510  
Local Phone Number 748-3200  
Title of 12(b) Security Common Stock, Par value $0.001 per share  
Trading Symbol PEN  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   36,482,357
Entity Central Index Key 0001321732  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Amendment Flag false  
v3.21.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 55,632 $ 69,670
Marketable investments 186,977 195,162
Accounts receivable, net of allowance for credit losses of $2,137 and $2,198 at March 31, 2021 and December 31, 2020, respectively 126,415 114,608
Inventories 245,321 219,527
Prepaid expenses and other current assets 20,782 18,735
Total current assets 635,127 617,702
Property and equipment, net 50,314 48,169
Operating lease right-of-use assets 40,691 41,192
Finance lease right-of-use assets 37,697 38,065
Intangible assets, net 10,097 10,639
Goodwill 8,006 8,372
Deferred taxes 48,978 50,139
Other non-current assets 9,914 8,705
Total assets 840,824 822,983
Current liabilities:    
Accounts payable 15,389 14,109
Accrued liabilities 90,214 85,795
Current operating lease liabilities 4,822 4,697
Current finance lease liabilities 1,437 1,331
Total current liabilities 111,862 105,932
Non-current operating lease liabilities 43,525 44,183
Non-current finance lease liabilities 27,000 27,066
Other non-current liabilities 7,966 8,014
Total liabilities 190,353 185,195
Commitments and contingencies
Stockholders’ equity:    
Common stock 36 36
Additional paid-in capital 603,022 598,299
Accumulated other comprehensive (loss) income (425) 2,541
Retained earnings 52,458 40,622
Total Penumbra, Inc. stockholders’ equity 655,091 641,498
Non-controlling interest (4,620) (3,710)
Total stockholders’ equity 650,471 637,788
Total liabilities and stockholders’ equity $ 840,824 $ 822,983
v3.21.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
Allowance for credit losses $ 2,137 $ 2,198
v3.21.1
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Revenue $ 169,204 $ 137,329
Cost of revenue 57,867 49,320
Gross profit 111,337 88,009
Operating expenses:    
Research and development 18,076 12,946
Sales, general and administrative 79,798 74,453
Total operating expenses 97,874 87,399
Income from operations 13,463 610
Interest income, net 480 299
Other expense, net (1,476) (1,655)
Income (loss) before income taxes 12,467 (746)
Provision for (benefit from) income taxes 1,541 (1,634)
Consolidated net income 10,926 888
Net loss attributable to non-controlling interest (910) (537)
Net income attributable to Penumbra, Inc. $ 11,836 $ 1,425
Net income attributable to Penumbra, Inc. per share:    
Basic (in dollars per share) $ 0.32 $ 0.04
Diluted (in dollars per share) $ 0.32 $ 0.04
Weighted average shares outstanding:    
Basic (in shares) 36,455,712 35,042,912
Diluted (in shares) 37,533,520 36,362,726
v3.21.1
Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement of Comprehensive Income [Abstract]    
Consolidated net income $ 10,926 $ 888
Other comprehensive loss, net of tax:    
Foreign currency translation adjustments, net of tax (2,695) (1,634)
Net change in unrealized losses on available-for-sale securities, net of tax (271) (617)
Total other comprehensive loss, net of tax (2,966) (2,251)
Consolidated comprehensive income (loss) 7,960 (1,363)
Net loss attributable to non-controlling interest (910) (537)
Comprehensive income (loss) attributable to Penumbra, Inc. $ 8,870 $ (826)
v3.21.1
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained Earnings (Accumulated Deficit)
Retained Earnings (Accumulated Deficit)
Cumulative Effect, Period of Adoption, Adjustment
Total Penumbra, Inc. Stockholders’ Equity
Total Penumbra, Inc. Stockholders’ Equity
Cumulative Effect, Period of Adoption, Adjustment
Non-controlling Interest
Beginning balance (in shares) at Dec. 31, 2019     35,001,581              
Beginning balance at Dec. 31, 2019 $ 485,613 $ (1,198) $ 35 $ 430,659 $ (2,324) $ 57,522 $ (1,198) $ 485,892 $ (1,198) $ (279)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Issuance of common stock (in shares)     81,485              
Issuance of common stock 396   $ 0 396       396    
Shares held for tax withholdings (in shares)     (12,058)              
Shares held for tax withholdings (2,105)     (2,105)       (2,105)    
Stock-based compensation (6,774)     (6,774)   0   (6,774)   0
Other comprehensive income (loss) (2,251)       (2,251)     (2,251)    
Net income (loss) 1,425         1,425   1,425    
Net loss attributable to non-controlling interest (537)                 (537)
Consolidated net income 888                  
Ending balance (in shares) at Mar. 31, 2020     35,071,008              
Ending balance at Mar. 31, 2020 488,117   $ 35 435,724 (4,575) 57,749   488,933   (816)
Beginning balance (in shares) at Dec. 31, 2020     36,414,732              
Beginning balance at Dec. 31, 2020 637,788   $ 36 598,299 2,541 40,622   641,498   (3,710)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Issuance of common stock (in shares)     79,080              
Issuance of common stock 666   $ 0 666       666    
Shares held for tax withholdings (in shares)     (11,955)              
Shares held for tax withholdings (3,036)     (3,036)       (3,036)    
Stock-based compensation 7,093     7,093       7,093    
Other comprehensive income (loss) (2,966)       (2,966)     (2,966)    
Net income (loss) 11,836         11,836   11,836    
Net loss attributable to non-controlling interest (910)                 (910)
Consolidated net income 10,926                  
Ending balance (in shares) at Mar. 31, 2021     36,481,857              
Ending balance at Mar. 31, 2021 $ 650,471   $ 36 $ 603,022 $ (425) $ 52,458   $ 655,091   $ (4,620)
v3.21.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement of Cash Flows [Abstract]    
Consolidated net income $ 10,926 $ 888
Adjustments to reconcile consolidated net income to net cash used in operating activities:    
Depreciation and amortization 3,471 2,959
Stock-based compensation 6,395 5,689
Inventory write-downs 991 1,097
Deferred taxes 1,223 (1,502)
Other 886 168
Changes in operating assets and liabilities:    
Accounts receivable (12,943) (238)
Inventories (31,608) (15,090)
Prepaid expenses and other current and non-current assets (3,463) (1,544)
Accounts payable 1,272 921
Accrued expenses and other non-current liabilities 8,482 732
Net cash provided by (used in) operating activities (14,368) (5,920)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of marketable investments (12,266) 0
Proceeds from sales of marketable investments 0 7,188
Proceeds from maturities of marketable investments 19,497 12,980
Purchases of property and equipment (3,991) (10,131)
Other (150) 0
Net cash provided by (used in) investing activities 3,090 10,037
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercises of stock options 666 396
Payment of employee taxes related to vested stock (3,036) (2,105)
Payments of finance lease obligations (337) (1,958)
Payment of acquisition-related obligations 0 (683)
Other 93 0
Net cash used in financing activities (2,614) (4,350)
Effect of foreign exchange rate changes on cash and cash equivalents (146) (90)
NET DECREASE IN CASH AND CASH EQUIVALENTS (14,038) (323)
CASH AND CASH EQUIVALENTS—Beginning of period 69,670 72,779
CASH AND CASH EQUIVALENTS—End of period 55,632 72,456
NONCASH INVESTING AND FINANCING ACTIVITIES:    
Right-of-use assets obtained in exchange for lease obligations 803 325
Right-of-use assets obtained in exchange for finance lease obligations 428 0
Purchase of property and equipment funded through accounts payable and accrued liabilities $ 2,184 $ 1,702
v3.21.1
Organization and Description of Business
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Description of Business 1. Organization and Description of Business
v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2020 was derived from the audited financial statements as of that date.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of March 31, 2021, the results of its operations for the three months ended March 31, 2021 and 2020, the changes in comprehensive income (loss) and stockholders’ equity for the three months ended March 31, 2021 and 2020, and the cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiary. The portion of equity and consolidated net income not attributable to the Company is considered non-controlling interest and is classified separately in the condensed consolidated financial statements. Any subsequent changes in the Company’s ownership interest while the Company retains its controlling interest in its majority-owned subsidiary will be accounted for as equity transactions. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, allowances for credit losses, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, operating and financing lease right-of-use (“ROU”) assets and liabilities, income taxes, contingent consideration and other contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other data. Actual results could differ from those estimates.
Segments
The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity: the design, development, manufacturing and marketing of innovative medical devices, and
operates as one operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.
Recently Adopted Accounting Standards
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes— Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This new standard removes certain exceptions for recognizing deferred taxes of foreign investments, the incremental approach to performing intraperiod allocation, and calculating income taxes for year-to-date interim period losses when such losses exceed anticipated full year losses. The standard also adds guidance to reduce complexity in certain areas, including accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in goodwill tax basis, enacted tax law changes impact during interim periods, and allocation of taxes to members of a consolidated group which are not subject to tax. The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements during the three months ended March 31, 2021.
v3.21.1
Investments and Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Investments and Fair Value of Financial Instruments
3. Investments and Fair Value of Financial Instruments
Marketable Investments
The Company’s marketable investments have been classified and accounted for as available-for-sale. The following table presents the Company’s marketable investments as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021
Securities with net gains or losses in accumulated other comprehensive income (loss)    
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $4,247 $$— $— $4,249 
U.S. agency and government sponsored securities4,548 — — 4,555 
U.S. states and municipalities47,283 148 (6)— 47,425 
Corporate bonds130,411 396 (59)— 130,748 
Total$186,489 $553 $(65)$— $186,977 

December 31, 2020
Securities with net gains or losses in accumulated other comprehensive income (loss)
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $4,242 $$— $— $4,246 
U.S. agency and government sponsored securities7,846 11 — — 7,857 
U.S. states and municipalities47,934 162 (1)— 48,095 
Corporate bonds134,298 669 (3)— 134,964 
Total$194,320 $846 $(4)$— $195,162 
As of March 31, 2021, the total amortized cost basis of the Company’s impaired available-for-sale securities exceeded its fair value by a nominal amount. The Company reviewed its impaired available-for-sale securities and concluded that the decline in fair value was not related to credit losses and is recoverable. Accordingly, during the three months ended March 31, 2021 no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive loss.
The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than twelve months or for twelve months or more as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. states and municipalities$3,590 $(6)$— $— $3,590 $(6)
Corporate bonds32,127 (59)— — 32,127 (59)
Total$35,717 $(65)$— $— $35,717 $(65)

December 31, 2020
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. states and municipalities1,408 (1)— — 1,408 (1)
Corporate bonds$12,552 $(3)$— $— $12,552 $(3)
Total$13,960 $(4)$— $— $13,960 $(4)
The following table presents the contractual maturities of the Company’s marketable investments as of March 31, 2021 (in thousands):
March 31, 2021
 Amortized CostFair Value
Due in less than one year$100,191 $100,403 
Due in one to five years86,298 86,574 
Total$186,489 $186,977 
Fair Value of Financial Instruments
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 measurement date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The Company classifies its cash equivalents and marketable investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on
proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.
The Company did not hold any Level 3 marketable investments as of March 31, 2021 or December 31, 2020. During the three months ended March 31, 2021 and 2020, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2021 or December 31, 2020.
The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020 (in thousands):
 As of March 31, 2021
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$11,056 $— $— $11,056 
Marketable investments:
Commercial paper— 4,249 — 4,249 
U.S. agency and government sponsored securities— 4,555 — 4,555 
U.S. states and municipalities— 47,425 — 47,425 
Corporate bonds— 130,748 — 130,748 
Total$11,056 $186,977 $— $198,033 

 As of December 31, 2020
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds33,054 — — 33,054 
Marketable investments:
Commercial paper— 4,246 — 4,246 
U.S. agency and government sponsored securities— 7,857 — 7,857 
U.S. states and municipalities— 48,095 — 48,095 
Corporate bonds— 134,964 — 134,964 
Total$33,054 $195,162 $— $228,216 

Contingent Consideration Obligations
As of March 31, 2021 and December 31, 2020, there were no contingent consideration liabilities classified as Level 3. The Company had a contingent consideration liability balance of $1.2 million related to milestone payments due in connection with the 2017 acquisition of Crossmed S.p.a. (“Crossmed”) and was based on actual revenue performance for the year ended December 31, 2019 and not based on unobservable inputs. The Company made this payment during the three months ended March 31, 2020 of which $0.5 million is presented in operating activities and $0.7 million is presented in financing activities in the condensed consolidated statement of cash flows.
The following table summarizes the changes in fair value of the contingent consideration obligation for the three months ended March 31, 2020 (in thousands):
Fair Value of Contingent Consideration
Balance at December 31, 2019$1,206 
Payments of contingent consideration liabilities(1,186)
Changes in fair value— 
Foreign currency remeasurement(20)
Balance at March 31, 2020$— 
v3.21.1
Balance Sheet Components
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Balance Sheet Components
4. Balance Sheet Components
Inventories
The following table shows the components of inventories as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Raw materials$58,816 $45,341 
Work in process20,853 22,099 
Finished goods165,652 152,087 
Inventories$245,321 $219,527 
Accrued Liabilities
The following table shows the components of accrued liabilities as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Payroll and employee-related cost$57,234 $50,083 
Accrued expenses13,213 9,246 
Sales return provision1,470 9,812 
Product warranty3,314 2,896 
Other acquisition-related costs(1)
3,000 3,000 
Other accrued liabilities11,983 10,758 
Total accrued liabilities$90,214 $85,795 

(1) Amount consists of a contingent liability related to an anti-dilution provision from the asset acquisition of MVI Health Inc. (“MVI”) in 2018.
The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Balance at the beginning of the period$2,896 $2,318 
Accruals of warranties issued775 1,589 
Settlements of warranty claims(357)(1,011)
Balance at the end of the period$3,314 $2,896 
v3.21.1
Intangible Assets
3 Months Ended
Mar. 31, 2021
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible Assets
5. Intangible Assets
Acquired Intangible Assets
The following tables present details of the Company’s acquired finite-lived intangible assets, as of March 31, 2021 and December 31, 2020 (in thousands, except weighted-average amortization period):
As of March 31, 2021Weighted-Average Amortization PeriodGross Carrying AmountAccumulated AmortizationNet
Customer relationships15.0 years$6,991 $(1,748)$5,243 
Trade secrets and processes20.0 years5,256 (854)4,402 
Other5.0 years1,803 (1,351)452 
Total intangible assets16.7 years$14,050 $(3,953)$10,097 

As of December 31, 2020Weighted-Average
Amortization Period
Gross Carrying AmountAccumulated AmortizationNet
Customer relationships15.0 years$7,311 $(1,706)$5,605 
Trade secrets and processes20.0 years5,256 (788)4,468 
Other5.0 years1,885 (1,319)566 
Total intangible assets16.6 years$14,452 $(3,813)$10,639 
The customer relationships and other intangible assets subject to amortization relate to the acquisition of Crossmed during the third quarter of 2017. The gross carrying amount and accumulated amortization of these intangible assets are subject to foreign currency translation effects. The Company’s $5.3 million trade secrets and processes intangible asset was recognized in connection with a royalty buyout agreement entered into during the first quarter of 2018.
The following table presents the amortization expense recorded related to the Company’s finite-lived intangible assets for the three months ended March 31, 2021 and March 31, 2020 (in thousands):
 Three Months Ended March 31,
 20212020
Cost of revenue$66 $66 
Sales, general and administrative212 194 
Total$278 $260 
v3.21.1
Goodwill
3 Months Ended
Mar. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill
6. Goodwill
The following table presents the changes in goodwill during the three months ended March 31, 2021 (in thousands):
Total Company
Balance as of December 31, 2020$8,372 
Foreign currency translation (366)
Balance as of March 31, 2021$8,006 
v3.21.1
Debt
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Indebtedness
7. Indebtedness
Credit Agreement
On April 24, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and lender, and Bank of America, N.A. and Citibank, N.A. as lenders. The Credit Agreement is secured and provides for up to $100 million in available revolving borrowing capacity with an option, subject to certain conditions, for the Company to increase the aggregate borrowing capacity to up to $150 million, and was set to mature on April 23, 2021. The Company entered into an amended one-year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender, and Bank of America, N.A. and Citibank, N.A. as lenders during the three months ended March 31, 2021.
The amended Credit Agreement extended the maturity date from April 23, 2021 to February 21, 2022 and has substantially the same terms and conditions as the prior credit agreement with certain changes including the exclusion of certain one-time charges and expenses incurred during the fiscal quarters ended September 30, 2020 and December 31, 2020 from the calculation of the financial covenants, reductions in interest rate floors applicable to revolving loans and other changes to borrowing mechanics under the Credit Agreement.
The Credit Agreement requires the Company to maintain a minimum fixed charge coverage ratio and to not exceed a maximum leverage ratio. As of March 31, 2021, the Company was in compliance with these requirements.
As of March 31, 2021 and December 31, 2020, there were no borrowings outstanding under the amended Credit Agreement.
v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
8. Commitments and Contingencies
Royalty Obligations
In March 2005, the Company entered into a license agreement that requires the Company to make minimum royalty payments to the licensor on a quarterly basis. In July 2019, the Company amended the license agreement to extend its term for an additional ten years and to increase the required minimum annual royalty payments by $0.2 million. As of both March 31, 2021 and December 31, 2020, the amended license agreement required minimum quarterly royalty payments of $0.3 million. On each January 1, the quarterly calendar year minimum royalty shall be adjusted to equal the prior year’s minimum royalty adjusted by a percentage equal to the percentage change in the “consumer price index for all urban consumers” for the prior calendar year as reported by the U.S. Department of Labor. Unless terminated earlier, the term of the amended license agreement shall expire June 30, 2029.
In April 2012, the Company entered into an agreement that requires the Company to pay, on a quarterly basis, a 5% royalty on sales of products covered under applicable patents. The first commercial sale of covered products occurred in April 2014. Unless terminated earlier, the royalty term for each applicable product shall continue for fifteen years following the first commercial sale of such patented product, or when the applicable patent covering such product has expired, whichever is sooner.
Royalty expense included in cost of revenue for the three months ended March 31, 2021 and 2020, was $0.5 million and $0.7 million, respectively.
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Refer to Note “3. Investments and Fair Value of Financial Instruments” for more information on contingent liabilities recorded on the condensed consolidated balance sheet.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. In many such arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The Company also agrees to indemnify many indemnified parties for product defect and similar claims. The term of these indemnification agreements is generally perpetual.
The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with any of these indemnification requirements has been recorded to date.
Litigation
From time to time, the Company is subject to other claims and assessments in the ordinary course of business.
On January 15, 2021, a putative securities class action complaint was filed against the Company and its CEO, Adam Elsesser, and Executive Vice President, Global Marketing and Public Relations, Gita Barry, on behalf of a single shareholder in the U.S. District Court for the Northern District of California, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint sought unspecified damages on behalf of a purported class that would comprise all individuals who purchased or otherwise acquired the Company's common stock between August 3, 2020 and December 15, 2020. The complaint alleged securities law violations based on allegedly misleading statements and/or omissions made in connection with the Company’s JET 7 Xtra Flex product. On March 16, 2021, the plaintiff voluntarily dismissed the complaint without prejudice.
The Company is not currently a party to any litigation matter that, individually or in the aggregate, is expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
v3.21.1
Stockholder's Equity
3 Months Ended
Mar. 31, 2021
Share-based Payment Arrangement [Abstract]  
Stockholder's Equity
9. Stockholders’ Equity
Equity Incentive Plans
Stock Options
Activity of stock options under the 2005 Plan, 2011 Plan and 2014 Plan (collectively, the "Plans") is set forth below:
Number of SharesWeighted-Average
Exercise Price
Balance at December 31, 20201,020,978 $23.38 
Exercised(42,408)15.70 
Canceled/Forfeited— — 
Balance at March 31, 2021978,570 23.71 
 
Restricted Stock and Restricted Stock Units
Activity of unvested restricted stock awards and restricted stock units under the Plans during the three months ended March 31, 2021 is set forth below: 
Number of SharesWeighted -Average
Grant Date Fair Value
Unvested at December 31, 2020369,629 $163.03 
Granted53,080 255.00 
Released/Vested - Restricted Stock/RSUs(36,672)140.42 
Canceled/Forfeited(4,182)175.99 
Unvested at March 31, 2021381,855 177.84 
As of March 31, 2021, 364,777 restricted stock awards and restricted stock units are expected to vest.
Stock-based Compensation
The following table sets forth the stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 (in thousands):
 Three Months Ended March 31,
 20212020
Cost of revenue$798 $648 
Research and development1,062 874 
Sales, general and administrative4,535 4,167 
Total$6,395 $5,689 
As of March 31, 2021, total unrecognized compensation cost was $55.6 million related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.9 years.
The total stock-based compensation cost capitalized in inventory was $1.3 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively.
v3.21.1
Accumulated Other Comprehensive Loss
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Accumulated Other Comprehensive Loss
10. Accumulated Other Comprehensive (Loss) Income
Other comprehensive loss consists of two components: unrealized gains or losses on the Company’s available-for-sale marketable investments and gains or losses from foreign currency translation adjustments. Until realized and reported as a component of consolidated net (loss) income, these comprehensive (loss) income items accumulate and are included within accumulated other comprehensive income (loss). Unrealized gains and losses on the Company’s marketable investments are reclassified from accumulated other comprehensive income (loss) into earnings when realized upon sale, and are determined based on specific identification of securities sold. Gains and losses from the translation of assets and liabilities denominated in non-U.S. dollar functional currencies are included in accumulated other comprehensive income (loss).
The following table summarizes the changes in the accumulated balances during the period and includes information regarding the manner in which the reclassifications out of accumulated other comprehensive income (loss) into earnings affect the Company’s condensed consolidated statements of operations and consolidated statements of comprehensive (loss) income (in thousands):    
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
 Marketable
Investments
 Currency Translation
Adjustments
 Total Marketable
Investments
 Currency Translation
Adjustments
 Total
Balance, beginning of the period$647 $1,894 $2,541 $238 $(2,562)$(2,324)
Other comprehensive (loss) income before reclassifications:
Unrealized (loss) gain — marketable investments(353)— (353)(689)— (689)
Foreign currency translation (losses) gains — (2,695)(2,695)— (1,634)(1,634)
Income tax effect — expense82 — 82 72 — 72 
Net of tax(271)(2,695)(2,966)(617)(1,634)(2,251)
Amounts reclassified from accumulated other comprehensive income (loss) to consolidated net (loss) income:
Realized gain (loss) — marketable investments— — — — — — 
Income tax effect — expense (benefit)— — — — — — 
Net of tax— — — — — — 
Net current-year other comprehensive (loss) income(271)(2,695)(2,966)(617)(1,634)(2,251)
Balance, end of the period$376 $(801)$(425)$(379)$(4,196)$(4,575)
v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
11. Income Taxes
The Company’s income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both
the United States and foreign jurisdictions. Significant judgment and estimates are required in determining the consolidated income tax expense.
During interim periods, the Company generally utilizes the estimated annual effective tax rate (“AETR”) method which involves the use of forecasted information. Under the AETR method, the provision is calculated by applying the estimated AETR for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Jurisdictions with tax assets for which the Company believes a tax benefit cannot be realized are excluded from the computation of its AETR.
The Company’s provision for income taxes was $1.5 million for the three months ended March 31, 2021, which was primarily due to tax expenses attributable to its worldwide profits offset by excess tax benefits from stock-based compensation attributable to its U.S. jurisdiction. The Company’s benefit from income taxes was $1.6 million for the three months ended March 31, 2020, which was primarily due to tax benefits attributable to its worldwide losses as a result of the COVID-19 pandemic impact combined with excess tax benefits from stock-based compensation attributable to its U.S. jurisdiction.
The Company’s effective tax rate changed to 12.4% for the three months ended March 31, 2021, compared to 219.0% for the three months ended March 31, 2020. The Company’s change in effective tax rate was primarily attributable to small tax expenses over relatively large worldwide profits for the three months ended March 31, 2021, when compared to large tax benefits over relatively small worldwide losses for the three months ended March 31, 2020.
Significant domestic deferred tax assets (“DTAs”) were generated in recent years, primarily due to excess tax benefits from stock option exercises and vesting of restricted stock. The Company evaluates all available positive and negative evidence, objective and subjective in nature, in each reporting period to determine if sufficient taxable income will be generated to realize the benefits of its DTAs and, if not, a valuation allowance to reduce the DTAs is recorded. As of March 31, 2021 and 2020, the Company maintains a valuation allowance against its Federal Research and Development Tax Credit and California DTAs as the Company could not conclude at the required more-likely-than-not level of certainty, that the benefit of these tax attributes would be realized prior to expiration. As of March 31, 2021 and 2020, the Company also maintains a valuation allowance against DTAs acquired from MVI which are subject to Separate Return Limitation Year (“SRLY”) rules that limit the utilization of the pre-acquisition tax attributes to offset future taxable income solely generated by MVI.
The Company maintains that all foreign earnings, with the exception of a portion of the earnings of its German subsidiary, are permanently reinvested outside the United States and therefore deferred taxes attributable to such are not provided for in the Company’s condensed consolidated financial statements as of March 31, 2021. The Company will repatriate foreign earnings only to the extent doing so will not result in any material U.S. tax consequences. Thus, deferred taxes on any potential future repatriation of a portion of the earnings of its German subsidiary were not reflected in the Company’s condensed consolidated financial statements as of March 31, 2021.
v3.21.1
Net (Loss) Income Attributable to Penumbra, Inc. Per Share
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
Net (Loss) Income Attributable to Penumbra, Inc. Per Share
12. Net Income Attributable to Penumbra, Inc. Per Share
The Company computed basic net income attributable to Penumbra, Inc. per share based on the weighted average number of shares of common stock outstanding during the period. The Company computed diluted net income attributable to Penumbra, Inc. per share based on the weighted average number of shares of common stock outstanding plus potentially dilutive common stock equivalents outstanding during the period using the treasury stock method. For the purposes of this calculation, stock options, restricted stock, restricted stock units and stock sold through the Company’s employee stock purchase plan are considered common stock equivalents.
A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income attributable to Penumbra, Inc. per share is as follows (in thousands, except share and per share amounts):
 Three Months Ended March 31,
 20212020
Numerator:
Net income attributable to Penumbra, Inc.$11,836 $1,425 
Denominator:
Weighted average shares used to compute net income attributable to common stockholders:
Basic36,455,712 35,042,912 
Potential dilutive stock-based options and awards1,077,808 1,319,814 
Diluted37,533,520 36,362,726 
Net income attributable to Penumbra, Inc. per share:
Basic$0.32 $0.04 
Diluted$0.32 $0.04 
For the three months ended March 31, 2021 and 2020, outstanding stock-based awards of 22 thousand and 18 thousand shares, respectively, were excluded from the computation of diluted net income attributable to Penumbra, Inc. per share because their effect would have been anti-dilutive.
v3.21.1
Revenues
3 Months Ended
Mar. 31, 2021
Revenue from Contract with Customer [Abstract]  
Revenues
13. Revenues
Revenue Recognition
Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers.
The following table presents the Company’s revenues disaggregated by geography, based on the destination to which the Company ships its products, for the three months ended March 31, 2021 and 2020 (in thousands):
 Three Months Ended March 31,
 20212020
United States$120,070 $95,774 
International49,134 41,555 
Total$169,204 $137,329 
The following table presents the Company’s revenues disaggregated by product category, for the three months ended March 31, 2021 and 2020 (in thousands):
 Three Months Ended March 31,
 20212020
Vascular$89,165 $59,253 
Neuro80,039 78,076 
Total$169,204 $137,329 
China Distribution and Technology Licensing Agreement
In December 2020, the Company entered into a distribution and technology licensing arrangement with its existing distribution partner in China. In addition to modifying the Company’s standard distribution agreement with its Chinese partner, the Company agreed to license the technology for certain products to its Chinese partner to permit the manufacturing and commercialization of such products in China as well as provide certain regulatory support. Apart from the standard distribution
agreement, the Company will receive fixed payments upon transferring its distinct licensed technology and providing related regulatory support and receive royalty payments on the downstream sales of the licensed products.
Performance Obligations
Delivery of products - The Company’s contracts with customers typically contain a single performance obligation, delivery of the Company’s products. Satisfaction of that performance obligation occurs when control of the promised goods transfers to the customer, which is generally upon shipment for non-consignment sale agreements and upon utilization for consignment sale agreements.
Payment terms - Our payment terms vary by the type and location of our customer. The timing between fulfillment of performance obligations and when payment is due is not significant and does not give rise to financing transactions. The Company did not have any contracts with significant financing components as of March 31, 2021.
Product returns - The Company may allow customers to return products purchased at the Company’s discretion. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period in which the related product revenue is recognized. The Company currently estimates product return liabilities using its own historic sales information, trends, industry data, and other relevant data points.
Warranties - The Company offers its standard warranty to all customers and it is not available for sale on a standalone basis. The Company’s standard warranty represents its guarantee that its products function as intended, are free from defects, and comply with agreed-upon specifications and quality standards. This assurance does not constitute a service and is not a separate performance obligation.
Transaction Price
Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns utilizing historical return rates, rebates, discounts, and other adjustments to net revenue. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price. When determining if variable consideration should be constrained, management considers whether there are factors that could result in a significant reversal of revenue and the likelihood of a potential reversal. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are reassessed each reporting period as required. During the three months ended March 31, 2021, the Company made no material changes in estimates for variable consideration. When the Company performs shipping and handling activities after control of goods is transferred to the customer, they are considered as fulfillment activities, and costs are accrued for when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
v3.21.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation and Consolidation
The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited. The unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2020 was derived from the audited financial statements as of that date.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company’s financial position as of March 31, 2021, the results of its operations for the three months ended March 31, 2021 and 2020, the changes in comprehensive income (loss) and stockholders’ equity for the three months ended March 31, 2021 and 2020, and the cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Consolidation The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiary. The portion of equity and consolidated net income not attributable to the Company is considered non-controlling interest and is classified separately in the condensed consolidated financial statements. Any subsequent changes in the Company’s ownership interest while the Company retains its controlling interest in its majority-owned subsidiary will be accounted for as equity transactions. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity accounts; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to marketable investments, allowances for credit losses, the amount of variable consideration included in the transaction price, warranty reserve, valuation of inventories, useful lives of property and equipment, operating and financing lease right-of-use (“ROU”) assets and liabilities, income taxes, contingent consideration and other contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other data. Actual results could differ from those estimates.
Segments
Segments
The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity: the design, development, manufacturing and marketing of innovative medical devices, and
operates as one operating segment. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.
Recently Adopted Accounting Standards and Recently Issued Accounting Standards
Recently Adopted Accounting Standards
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes— Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This new standard removes certain exceptions for recognizing deferred taxes of foreign investments, the incremental approach to performing intraperiod allocation, and calculating income taxes for year-to-date interim period losses when such losses exceed anticipated full year losses. The standard also adds guidance to reduce complexity in certain areas, including accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in goodwill tax basis, enacted tax law changes impact during interim periods, and allocation of taxes to members of a consolidated group which are not subject to tax. The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements during the three months ended March 31, 2021.
Marketable Investments Marketable InvestmentsThe Company’s marketable investments have been classified and accounted for as available-for-sale.
v3.21.1
Investments and Fair Value of Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Schedule of Marketable Investments The following table presents the Company’s marketable investments as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021
Securities with net gains or losses in accumulated other comprehensive income (loss)    
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $4,247 $$— $— $4,249 
U.S. agency and government sponsored securities4,548 — — 4,555 
U.S. states and municipalities47,283 148 (6)— 47,425 
Corporate bonds130,411 396 (59)— 130,748 
Total$186,489 $553 $(65)$— $186,977 

December 31, 2020
Securities with net gains or losses in accumulated other comprehensive income (loss)
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance
 for
 Credit Loss
Fair Value
Commercial paper $4,242 $$— $— $4,246 
U.S. agency and government sponsored securities7,846 11 — — 7,857 
U.S. states and municipalities47,934 162 (1)— 48,095 
Corporate bonds134,298 669 (3)— 134,964 
Total$194,320 $846 $(4)$— $195,162 
Schedule of the Fair Value of Marketable Investments in an Unrealized Loss Position for Less than Twelve Months
The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than twelve months or for twelve months or more as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. states and municipalities$3,590 $(6)$— $— $3,590 $(6)
Corporate bonds32,127 (59)— — 32,127 (59)
Total$35,717 $(65)$— $— $35,717 $(65)

December 31, 2020
Less than 12 months12 months or moreTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. states and municipalities1,408 (1)— — 1,408 (1)
Corporate bonds$12,552 $(3)$— $— $12,552 $(3)
Total$13,960 $(4)$— $— $13,960 $(4)
Schedule of Contractual Maturities of Marketable Investments
The following table presents the contractual maturities of the Company’s marketable investments as of March 31, 2021 (in thousands):
March 31, 2021
 Amortized CostFair Value
Due in less than one year$100,191 $100,403 
Due in one to five years86,298 86,574 
Total$186,489 $186,977 
Schedule of Fair Value of Assets and Liabilities
The following tables set forth the Company’s financial assets measured at fair value by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020 (in thousands):
 As of March 31, 2021
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds$11,056 $— $— $11,056 
Marketable investments:
Commercial paper— 4,249 — 4,249 
U.S. agency and government sponsored securities— 4,555 — 4,555 
U.S. states and municipalities— 47,425 — 47,425 
Corporate bonds— 130,748 — 130,748 
Total$11,056 $186,977 $— $198,033 

 As of December 31, 2020
 Level 1Level 2Level 3Fair Value
Financial Assets
Cash equivalents:
Money market funds33,054 — — 33,054 
Marketable investments:
Commercial paper— 4,246 — 4,246 
U.S. agency and government sponsored securities— 7,857 — 7,857 
U.S. states and municipalities— 48,095 — 48,095 
Corporate bonds— 134,964 — 134,964 
Total$33,054 $195,162 $— $228,216 
Schedule of Fair Value of Contingent Consideration Obligation
The following table summarizes the changes in fair value of the contingent consideration obligation for the three months ended March 31, 2020 (in thousands):
Fair Value of Contingent Consideration
Balance at December 31, 2019$1,206 
Payments of contingent consideration liabilities(1,186)
Changes in fair value— 
Foreign currency remeasurement(20)
Balance at March 31, 2020$— 
v3.21.1
Balance Sheet Components Balance Sheet Components (Tables)
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Inventories
The following table shows the components of inventories as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Raw materials$58,816 $45,341 
Work in process20,853 22,099 
Finished goods165,652 152,087 
Inventories$245,321 $219,527 
Schedule of Accrued Liabilities
The following table shows the components of accrued liabilities as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Payroll and employee-related cost$57,234 $50,083 
Accrued expenses13,213 9,246 
Sales return provision1,470 9,812 
Product warranty3,314 2,896 
Other acquisition-related costs(1)
3,000 3,000 
Other accrued liabilities11,983 10,758 
Total accrued liabilities$90,214 $85,795 
(1) Amount consists of a contingent liability related to an anti-dilution provision from the asset acquisition of MVI Health Inc. (“MVI”) in 2018.
Schedule of Estimated Product Warranty Accrual
The following table shows the changes in the Company’s estimated product warranty accrual, included in accrued liabilities, as of March 31, 2021 and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Balance at the beginning of the period$2,896 $2,318 
Accruals of warranties issued775 1,589 
Settlements of warranty claims(357)(1,011)
Balance at the end of the period$3,314 $2,896 
v3.21.1
Intangible Assets Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2021
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Schedule of indefinite-lived intangible assets
The following tables present details of the Company’s acquired finite-lived intangible assets, as of March 31, 2021 and December 31, 2020 (in thousands, except weighted-average amortization period):
As of March 31, 2021Weighted-Average Amortization PeriodGross Carrying AmountAccumulated AmortizationNet
Customer relationships15.0 years$6,991 $(1,748)$5,243 
Trade secrets and processes20.0 years5,256 (854)4,402 
Other