Document and Entity Information - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2018 |
Mar. 04, 2019 |
Jun. 30, 2018 |
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Document And Entity Information [Abstract] | |||
Entity Registrant Name | Sientra, Inc. | ||
Entity Central Index Key | 0001551693 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Shell Company | false | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Public Float | $ 442,698,000 | ||
Entity Common Stock, Shares Outstanding | 29,211,896 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | SIEN |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowances (in dollars) | $ 2,428 | $ 4,816 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 28,701,494 | 19,474,702 |
Common stock, shares outstanding | 28,628,767 | 19,401,975 |
Treasury stock, shares | 72,727 | 72,727 |
Consolidated Statements of Operations - USD ($) |
12 Months Ended | ||
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Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Income Statement [Abstract] | |||
Net sales | $ 68,126,000 | $ 36,542,000 | $ 20,734,000 |
Cost of goods sold | 26,822,000 | 14,171,000 | 6,880,000 |
Gross profit | 41,304,000 | 22,371,000 | 13,854,000 |
Operating expenses: | |||
Sales and marketing | 67,715,000 | 33,911,000 | 20,607,000 |
Research and development | 10,945,000 | 9,813,000 | 9,704,000 |
General and administrative | 42,418,000 | 31,537,000 | 21,959,000 |
Legal settlement | 10,000,000 | 1,618,000 | |
Total operating expenses | 121,078,000 | 85,261,000 | 53,888,000 |
Loss from operations | (79,774,000) | (62,890,000) | (40,034,000) |
Other income (expense), net: | |||
Interest income | 532,000 | 172,000 | 63,000 |
Interest expense | (3,428,000) | (1,232,000) | (98,000) |
Other income (expense), net | 39,000 | (95,000) | (36,000) |
Total other income (expense), net | (2,857,000) | (1,155,000) | (71,000) |
Loss before income taxes | (82,631,000) | (64,045,000) | (40,105,000) |
Income tax (benefit) expense | (4,000) | (17,000) | 61,000 |
Net loss | $ (82,627,000) | $ (64,028,000) | $ (40,166,000) |
Basic and diluted net loss per share attributable to common stockholders | $ (3.25) | $ (3.34) | $ (2.20) |
Weighted average outstanding common shares used for net loss per share attributable to common stockholders: | |||
Basic and diluted | 25,402,241 | 19,159,057 | 18,233,177 |
Formation and Business of the Company |
12 Months Ended | ||||||||||
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Dec. 31, 2018 | |||||||||||
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |||||||||||
Formation and Business of the Company |
(1) Formation and Business of the Company
Sientra, Inc. (“Sientra”, the “Company,” “we,” “our” or “us”), was incorporated in the State of Delaware on August 29, 2003 under the name Juliet Medical, Inc. and subsequently changed its name to Sientra, Inc. in April 2007. The Company acquired substantially all the assets of Silimed, Inc. on April 4, 2007. The purpose of the acquisition was to acquire the rights to the silicone breast implant clinical trials, related product specifications and pre-market approval, or PMA, assets. Following this acquisition, the Company focused on completing the clinical trials to gain FDA approval to offer its silicone gel breast implants in the United States. In March 2012, the Company announced it had received approval from the FDA for its portfolio of silicone gel breast implants, and in the second quarter of 2012 the Company began commercialization efforts to sell its products in the United States. The Company, based in Santa Barbara, California, is a medical aesthetics company that focuses on serving board-certified plastic surgeons and offers a portfolio of silicone shaped and round breast implants, scar management, tissue expanders, and body contouring products. In November 2014, the Company completed an initial public offering, or IPO, and its common stock is listed on the Nasdaq Stock Exchange under the symbol “SIEN.”
On June 11, 2017, Sientra entered into an Agreement and Plan of Merger, or the Merger Agreement, with miraDry (formerly Miramar Labs), pursuant to which Sientra commenced a tender offer to purchase all of the outstanding shares of miraDry’s common stock for (i) $0.3149 per share, plus (ii) the contractual right to receive one or more contingent payments upon the achievement of certain future sales milestones. The total merger consideration was $18.7 million in upfront cash and the contractual rights represent potential contingent payments of up to $14 million. The transaction, which closed on July 25, 2017, added the miraDry System to Sientra’s aesthetics portfolio.
The Company has engaged Vesta Intermediate Funding, Inc., or Vesta, a Lubrizol Lifesciences company, for the manufacture and supply of the Company’s breast implants. On March 14, 2017, the Company announced it had submitted a site-change pre-market approval, or PMA, supplement to the FDA for the manufacture of the Company’s PMA-approved breast implants at the Vesta manufacturing facility. On January 30, 2018, the Company announced the FDA has granted approval of the site-change supplement for the Company’s contract manufacturer, Vesta, to manufacture its silicone gel breast implants. In support of the move to the Vesta manufacturing facility, the Company also implemented new manufacturing process improvements which, in consultation with the FDA, required three (3) additional PMA submissions. In addition to approving the manufacturing site-change PMA supplement, the FDA approved the Company’s three (3) process enhancement submissions on January 10, 2018, January 19, 2018 and April 17, 2018.
On May 7, 2018, the Company completed an underwritten follow-on public offering of 7,407,408 shares of its common stock at $13.50 per share, as well as 1,111,111 additional shares of its common stock pursuant to the full exercise of the over-allotment option granted to the underwriters. Net proceeds to the Company were approximately $107.6 million after deducting underwriting discounts and commissions of $6.9 million and offering expenses of approximately $0.5 million.
There have been regulatory inquiries related to medical devices manufactured by Silimed Indústria de Implantes Ltda. (formerly, Silimed-Silicone e Instrumental Medico-Cirugio e Hospitalar Ltda.), or Silimed, the Company’s former sole source contract manufacturer for its silicone gel breast implants. Following extensive independent, third-party testing and analyses of its devices manufactured by Silimed, which tests indicated no significant safety concerns with the use of Silimed’s products, the Company lifted the temporary hold on the sale of such devices. While the Company continues to sell its remaining inventory of devices manufactured by Silimed, its existing manufacturing contract with Silimed expired on its terms in April 2017 and the Company did not renew the contract. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
(2) Summary of Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities which are subject to significant judgment and use of estimates include the allowance for doubtful accounts, sales return reserves, provision for warranties, valuation of inventories, recoverability of long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and finite lived intangible assets, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with stock-based compensation and other equity instruments.
Since the Company’s inception, it has incurred significant net operating losses and the Company anticipates that losses will continue in the near term. The Company expects its operating expenses will continue to grow as they expand operations. The Company will need to generate significant net sales to achieve profitability. To date, the Company has funded operations primarily with proceeds from the sales of preferred stock, borrowings under term loans, sales of products since 2012, and the proceeds from the sale of common stock in public offerings. The accompanying consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. At December 31, 2018, the Company had cash and cash equivalents of $86.9 million. Since inception, the Company has incurred recurring losses from operations and cash outflows from operating activities. During the years ended December 31, 2018, 2017 and 2016 the Company incurred net losses of $82.6 million, $64.0 million and $40.2 million, respectively. The Company used $56.2 million of cash in operations for the year ended December 31, 2018, $45.9 million for the year ended December 31, 2017 and $34.4 million for the year ended December 31, 2016. At December 31, 2018 and 2017 the Company had an accumulated deficit of $362.1 million and $279.5 million, respectively. The continuation of the Company as a going concern is dependent upon many factors including liquidity and the ability to raise capital. The Company received FDA approval of their PMA supplement on April 17, 2018 and was then able to access a $10.0 million term loan pursuant to an amendment to the credit agreement with MidCap Financial Trust, or MidCap. In addition, in February 2018, the Company entered into an At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, as sales agent pursuant to which the Company may sell, from time to time, through Stifel, shares of its common stock having an aggregate gross offering price of up to $50.0 million. As of December 31, 2018, the Company has not sold any common stock pursuant to the sales agreement. Further, on May 7, 2018, the Company completed a public offering of its common stock, raising approximately $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses.
The Company considers all highly liquid investments purchased with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist primarily of cash in checking accounts and interest-bearing money market accounts.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash and cash equivalents are deposited in demand accounts at a financial institution that management believes is creditworthy. The Company is exposed to credit risk in the event of default by this financial institution for cash and cash equivalents in excess of amounts insured by the Federal Deposit Insurance Corporation, or FDIC. Management believes that the Company’s investments in cash and cash equivalents are financially sound and have minimal credit risk and the Company has not experienced any losses on its deposits of cash and cash equivalents. The Company relies on a limited number of third-party manufacturers for the manufacturing and supply of its products. This could result in the Company not being able to acquire the inventory needed to meet customer demand, which would result in possible loss of sales and affect operating results adversely.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, customer deposits and sales return liability are reasonable estimates of their fair value because of the short maturity of these items. The fair value of the common stock warrant liability, deferred and contingent consideration are discussed in Note 2. The fair value of the debt is based on the amount of future cash flows associated with the instrument discounted using the Company’s market rate. At December 31, 2018, the carrying value of the long-term debt was not materially different from the fair value.
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The Company’s common stock warrant liabilities are carried at fair value determined according to the fair value hierarchy described above. The Company has utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model include fair value of the common stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. The warrants are valued using the fair value of common stock as of the measurement date. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends. As several significant inputs are not observable, the overall fair value measurement of the warrants is classified as Level 3. The Company assessed the fair value of the contingent consideration for future royalty payments related to the acquisition of BIOCORNEUM, the contingent consideration for future milestone payments for the acquisition of the tissue expander portfolio from SSP and the contingent consideration for the future milestone payments related to the acquisition of miraDry using a Monte-Carlo simulation model. Significant assumptions used in the measurement include future net sales for a defined term and the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):
The liability for common stock warrants and the current portion of contingent consideration is included in “accrued and other current liabilities” and the long-term liabilities for the contingent consideration are included in “deferred and contingent consideration” in the consolidated balance sheet. The following table provides a rollforward of the aggregate fair values of the Company’s common stock warrants and contingent consideration for which fair value is determined by Level 3 inputs (in thousands):
In connection with the acquisition of miraDry on July 25, 2017, contingent consideration of up to an aggregate of $14.0 million may be payable upon achieving certain future sales milestones and had a fair value of $12.7 million and $10.4 million at December 31, 2018 and 2017, respectively.
In connection with the acquisition of the tissue expander portfolio from Specialty Surgical Products, Inc., or SSP, on November 2, 2016, contingent consideration of up to an aggregate of $2.0 million is payable upon achieving certain future sales milestones and had a fair value of $1.0 million and $1.8 million at December 31, 2018 and 2017, respectively. For the period ended December 31, 2018, the Company achieved one of two milestones and made a payment of $1.0 million to SSP.
The Company recognizes changes in the fair value of the warrants in “other income (expense), net” in the consolidated statement of operations and changes in contingent consideration are recognized in “general and administrative” expense in the consolidated statement of operations.
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight‑line method over the estimated useful life of the asset, generally three to five years. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale of an asset, the cost and related accumulated depreciation or amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred.
Goodwill represents the excess of the purchase price over the fair value of net assets of purchased businesses. Goodwill is not amortized, but instead is subject to impairment tests on at least an annual basis and whenever circumstances suggest that goodwill may be impaired. After the acquisition of miraDry, management began evaluating the Company as two reporting units, Breast Products and miraDry. The Company’s annual test for impairment is performed as of October 1 of each fiscal year. The Company makes a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount from the qualitative assessment, the Company performs a quantitative analysis to compare the fair value of the reporting unit to its carrying amount. The Company recognizes impairment charges for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company’s fair value analysis of goodwill utilizes the income approach and market approach, which requires the use of estimates about a reporting unit’s future revenues and free cash flows, market multiples, enterprise value, control risk premiums, discount rates, terminal value and enterprise value to determine the estimated fair value. The Company’s future revenues and free cash flow assumptions are determined based upon actual results giving effect to management’s expected changes in operating results in future years. The market multiples, enterprise value, control risk premiums, discount rates and terminal value are based upon market participant assumptions using a defined peer group. Changes in these assumptions can materially affect these estimates. Thus, to the extent the market changes, discount rates increase significantly or the Company does not meet its projected performance, the Company could recognize impairments, and such impairments could be material. The Company performed its annual goodwill impairment test on October 1, 2018 for the Breast Products and miraDry reporting units. The miraDry reporting unit had a negative carrying value and $7.6 million of allocated goodwill. The Company performed a quantitative assessment and determined the fair value was greater than the carrying value. For the Breast Products reporting unit, the Company performed a qualitative analysis and determined fair value was more likely than not greater than carrying value. For the years ended December 31, 2018, 2017 and 2016 the Company did not record any goodwill impairment charges. The Company tests indefinite-lived intangible assets for impairment on at least an annual basis and whenever circumstances suggest the assets may be impaired. The Company’s annual test for impairment is performed as of October 1 of each fiscal year. If indicators of impairment are present, the Company evaluates the carrying value of the intangible assets in relation to estimates of future undiscounted cash flows. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to the difference. The Company also evaluates the remaining useful life of an indefinite-lived intangible asset to determine whether events and circumstances continue to support an indefinite useful life. For the years ended December 31, 2018, 2017 and 2016 the Company did not record any indefinite-lived intangible assets impairment charges. Judgments about the recoverability of purchased finite‑lived intangible assets are made whenever events or changes in circumstance indicate that impairment may exist. Each fiscal year the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstance warrant a revision to the remaining periods of amortization. Recoverability of finite‑lived intangible assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. The intangible asset is amortized to the consolidated statement of operations based on estimated cash flows generated from the intangible over its estimated life.
The Company’s management routinely considers whether indicators of impairment of long‑lived assets are present. If such indicators are present, management determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company will recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or other methods. If the assets determined to be impaired are to be held and used, the Company will recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset’s carrying value. The fair value of the asset will then become the asset’s new carrying value. There have been no impairments of long‑lived assets recorded during the years ended December 31, 2018, 2017 and 2016. The Company may record impairment losses in future periods if factors influencing its estimates change.
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date in the financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings.
Reportable segments represent components for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, who has been identified as the Chief Operating Decision Maker, or CODM, as defined by authoritative guidance on segment reporting, in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Based on the financial information presented to and reviewed by the CODM, the Company has determined that it has two reportable segments: Breast Products and miraDry.
The Company generates revenue primarily through the sale and delivery of promised goods or services to customers and recognizes revenue when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. Performance obligations typically include the delivery of promised products, such as breast implants, tissue expanders, BIOCORNEUM, miraDry Systems and bioTips, along with service-type warranties and deliverables under certain marketing programs. Other deliverables are sometimes promised, but are ancillary and insignificant in the context of the contract as a whole. Sales prices are documented in the executed sales contract, purchase order or order acknowledgement prior to the transfer of control to the customer. Customers may enter into a separate extended service agreement to purchase an extended warranty for miraDry products from the Company whereby the payment is due at the inception of the agreement. Typical payment terms are 30 days for Breast Products and direct sales of consumable miraDry products, and tend to be longer for capital sales of miraDry Systems and sales to miraDry distributors, but do not extend beyond one year. For delivery of promised products, control transfers and revenue is recognized upon shipment, unless the contractual arrangement requires transfer of control when products reach their destination, for which revenue is recognized once the product arrives at its destination. Revenue for extended service agreements are recognized ratably over the term of the agreements. The Company introduced its Platinum20 Limited Warranty Program, or Platinum20, in May 2018 on all OPUS breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. Platinum20 provides for financial assistance for revision surgeries and no-charge contralateral replacement implants upon the occurrence of certain qualifying events. The Company considers Platinum20 to have an assurance warranty component and a service warranty component. The assurance component is recorded as a warranty liability at the time of sale (as discussed in Note 2(s)). The Company considers the service warranty component as an additional performance obligation and defers revenue at the time of sale based on the relative estimated selling price, by estimating a standalone selling price using the expected cost plus margin approach for the performance obligation. Inputs into the expected cost plus margin approach include historical incidence rates, estimated replacement costs, estimated financial assistance payouts and an estimated margin. The liability for unsatisfied performance obligations under the service warranty as of December 31, 2018 was $0.4 million, of which $0.2 million is considered a short-term obligation and is included in “accrued and other current liabilities” and $0.3 million is considered a long-term obligation and is included in “warranty reserve and other long-term liabilities” on the consolidated balance sheet. The performance obligation is satisfied at the time that Platinum20 benefits are provided and are expected to be satisfied over the following 6 to 24 month period for financial assistance and 20 years for product replacement. Revenue recognized for the service warranty performance obligations for the year ended December 31, 2018 was immaterial. The Company also leverages a distributor network for selling the miraDry System internationally. The Company recognizes revenue when control of the goods or services is transferred to the distributors. Standard terms in these agreements do not allow for trial periods, right of return, refunds, payment contingent on obtaining financing or other terms that could impact the customer’s payment obligation. Contract liabilities are included in “accrued and other current liabilities” in the consolidated balance sheet. A portion of the Company’s revenue is generated from the sale of consigned inventory of breast implants maintained at doctor, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been implanted, not when the consigned products are delivered to the customer’s location. For Breast Products, with the exception of the Company’s BIOCORNEUM scar management products, the Company allows for the return of products from customers within six months after the original sale, which is accounted for as variable consideration. Reserves are established for anticipated sales returns based on the expected amount calculated with historical experience, recent gross sales and any notification of pending returns. The estimated sales return is recorded as a reduction of revenue and as a sales return liability in the same period revenue is recognized. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. The Company has established an allowance for sales returns of $6.0 million and $3.9 million as of December 31, 2018 and December 31, 2017, respectively, recorded as “sales return liability” on the consolidated balance sheet under Topic 606 as of December 31, 2018 and recorded in “accounts receivable, net of allowances,” at December 31, 2017 on the consolidated balance sheet, as indicated below in “Recently Adopted Accounting Standards.” Arrangements with Multiple Performance Obligations The Company has determined that the delivery of each unit of product in the Company’s revenue contracts with customers is a separate performance obligation. The Company’s revenue contracts may include multiple products or services, each of which is considered a separate performance obligation. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on observable prices or using an expected cost plus margin approach when an observable price is not available. The Company invoices customers once products are shipped or delivered to customers depending on the negotiated shipping terms. The Company defers the value of the service warranty revenue and recognizes it once the performance obligation has been met. Practical Expedients and Policy Election The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. The Company does not adjust accounts receivable for the effects of any significant financing components as customer payment terms are shorter than one year. The Company has elected to account for shipping and handling activities performed after a customer obtains control of the products as activities to fulfill the promise to transfer the products to the customer. Shipping and handling activities are largely provided to customers free of charge for the Breast Products segment. The associated costs were $1.3 million, $0.9 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. These costs are viewed as part of the Company’s marketing programs and are recorded as a component of sales and marketing expense in the consolidated statement of operations as an accounting policy election. For the miraDry segment, shipping and handling charges are typically billed to customers and recorded as revenue. The shipping and handling costs incurred are recorded as a component of cost of goods sold in the consolidated statement of operations. The associated costs were $0.4 million and $35,000 for the years ended December 31, 2018, and 2017 from the acquisition date July 25, 2017, respectively.
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability to collect from some of its customers. The allowances for doubtful accounts are based on the analysis of historical bad debts, customer credit‑worthiness, past transaction history with the customer, and current economic trends. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. The Company has established an allowance for doubtful accounts of $2.4 million and $0.9 million as of December 31, 2018 and 2017, respectively.
Inventories represent raw materials, work in process and finished goods that are recorded at the lower of cost or market on a first‑in, first‑out basis, or FIFO. The Company periodically assesses the recoverability of all inventories to determine whether adjustments for impairment or obsolescence are required. The Company evaluates the remaining shelf life and other general obsolescence and impairment criteria in assessing the recoverability of the Company’s inventory. The Company recognizes the cost of inventory transferred to the customer in cost of goods sold when revenue is recognized. At December 31, 2018 and 2017, approximately $1.4 million and $1.6 million, respectively, of the Company’s Breast Products segment inventory was held on consignment at doctors’ offices, clinics, and hospitals. The value and quantity at any one location is not significant.
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company operates in several tax jurisdictions and is subject to taxes in each jurisdiction in which it conducts business. To date, the Company has incurred cumulative net losses and maintains a full valuation allowance on its net deferred tax assets due to the uncertainty surrounding realization of such assets. However, the Company has deferred tax liabilities that cannot be considered sources of income to support the realization of the deferred tax assets, and has provided for tax expense (or benefit) and a corresponding deferred tax liability. Tax benefit for the year ended December 31, 2018 and 2017 was $4,000 and $17,000, respectively. Tax expense for the year ended December 31, 2016 was $0.1 million. The Company accounts for uncertain tax position in accordance with Account Standards Codification, or ASC, 740‑10, Accounting for Uncertainty in Income Taxes. The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of tax benefit might change as new information becomes available.
Research and development costs are charged to operating expenses as incurred. Research and development, or R&D, primarily consist of clinical expenses, regulatory expenses, product development, consulting services, outside research activities, quality control and other costs associated with the development of the Company’s products and compliance with Good Clinical Practices, or GCP, requirements. R&D expenses also include related personnel and consultant compensation and stock-based compensation expense.
Expenses related to advertising are charged to sales and marketing expense as incurred. Advertising costs were $1.3 million, $1.8 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.
The Company applies the fair value provisions of ASC 718, Compensation — Stock Compensation, or ASC 718. ASC 718 requires the recognition of compensation expense, using a fair‑value based method, for costs related to all employee share‑based payments, including stock options, restricted stock units, and the employee stock purchase plan. In the absence fo an observable market price for an award, ASC 718 requires companies to estimate the fair value of share‑based payment awards on the date of grant using an option‑pricing model. We estimate the fair value of our stock‑based awards to employees and directors using the Black‑Scholes option pricing model. The grant date fair value of a stock‑based award is recognized as an expense over the requisite service period of the award on a straight‑line basis. In addition, we use the Monte-Carlo simulation option-pricing model to determine the fair value of market-based awards. The Monte-Carlo simulation option-pricing model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair-value determination the possibility that the market condition may not be satisfied. Compensation costs related to these awards are recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. The option-pricing models require the input of subjective assumptions, including the risk‑free interest rate, expected dividend yield, expected volatility and expected term, among other inputs. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock‑based compensation expense could be materially different in the future. These assumptions are estimated as follows:
The following table presents the weighted‑average assumptions used to estimate the fair value of options granted during the periods presented:
The following table presents the weighted-average assumptions used to estimate the fair value of the stock purchase rights granted under the employee stock purchase plan:
The Company offers a product replacement and limited warranty program for the Company’s silicone gel breast implants, and a product warranty for the Company’s miraDry Systems and consumable bioTips. For silicone gel breast implant surgeries occurring prior to May 1, 2018, the Company provides lifetime replacement implants and up to $3,600 in financial assistance for revision surgeries, for covered rupture events that occur within ten years of the surgery date. The Company introduced its Platinum20 Limited Warranty Program in May 2018, covering OPUS silicone gel breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. The Company considers the program to have an assurance warranty component and a service warranty component. The service warranty component is discussed in Note 2(l) above. The assurance component is related to the lifetime no-charge contralateral replacement implants and up to $5,000 in financial assistance for revision surgeries, for covered rupture events that occur within twenty years of the surgery date. Under the miraDry warranty, the Company provides a standard product warranty for the miraDry System and bioTips, which the Company considers an assurance-type warranty. The following table provides a rollforward of the accrued warranties (in thousands):
The Company excluded the following potentially dilutive securities, outstanding as of December 31, 2018, 2017 and 2016 from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2018, 2017 and 2016 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718), to simplify the accounting for non-employee share-based payment transactions by expanding the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Under the new standard, most of the guidance on stock compensation payments to non-employees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees, and is effective for all public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company early adopted ASU 2018-07 in the third quarter of 2018 and there was no material impact on its consolidated financial statements from the adoption.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 in the first quarter of 2018 to all contracts using the modified retrospective method. The adoption of Topic 606 did not have a material impact on the Company’s historical net losses and, therefore, no adjustment was made to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In accordance with Topic 606 disclosure requirements, the impact of adoption on the Company’s consolidated balance sheet was as follows (in thousands):
Additionally, in accordance with Topic 606, the balance of breast product inventory estimated to be returned as of December 31, 2018 is included in the components of the Company’s inventory as “finished goods – right of return” in Note 4. Prior to the adoption of Topic 606, the inventory impact of estimated returns for breast products was included in the “finished goods” inventory balance and was not separately disclosed.
The adoption of Topic 606 did not have a material impact on the Company’s consolidated statement of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classifications of Certain Cash Receipts and Cash Payments (Topic 230). The standard update addresses eight specific cash flow issues not currently addressed by GAAP, with the objective of reducing the existing diversity in practice of how these cash receipts and payments are presented and classified in the statement of cash flows. The ASU requires a retrospective approach to adoption. The Company adopted the ASU in the first quarter of 2018. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows – Restricted Cash (Topic 230), which clarifies the presentation requirements of restricted cash within the statement of cash flows. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash and cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU requires a retrospective approach to adoption. The Company adopted the ASU in 2018 and the cash and cash equivalents at the beginning-of-period and end-of-period total amounts in our condensed consolidated statements of cash flows have been adjusted to include $0.3 million of restricted cash for the years ending December 31, 2018 and 2017.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. The standard adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a more specific definition of a business. The Company adopted the ASU in the first quarter of 2018 on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. The standard provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award to which an entity would be required to apply modification accounting under Accounting Standard Codification, or ASC, 718. The Company adopted the ASU in the first quarter of 2018 on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, amending certain aspects of the new leasing standard. The amendment allows an additional optional transition method whereby an entity records a cumulative effect adjustment to opening retained earnings in the year of adoption without restating prior periods. The Company will adopt this ASU on January 1, 2019 electing the optional transition method and the Company does not expect to record a cumulative effect adjustment to the opening accumulated deficit balance. The Company will also elect the package of practical expedients permitted under the transition guidance, which allows the Company to carry forward the historical lease classification, the assessment on whether a contract is or contains a lease, and the initial direct costs for any leases that exist prior to adoption of the new standard. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements, but believes the primary effect of adopting will be to record right-of-use assets and obligations for our leases currently classified as operating leases. See Note 11 for a summary of our undiscounted minimum rental commitments under operating leases as of December 31, 2018. In February 2018, the FASB issued ASU 2018-02, Income Taxes (Topic 740), which allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. Tax Cuts and Jobs Act to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company does not expect to elect to reclassify the income tax effects under ASU 2018-05, as it does not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements.
(v)Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation. |
Acquisitions |
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Acquisitions |
(3) Acquisitions
On June 11, 2017, Sientra entered into the Merger Agreement with miraDry, pursuant to which Sientra commenced a tender offer to purchase all of the outstanding shares of miraDry’s common stock for (i) $0.3149 per share, plus (ii) the contractual right to receive one or more contingent payments upon the achievement of certain future sales milestones. The total merger consideration was $18.7 million in upfront cash and the contractual rights represent potential contingent payments of up to $14 million. The transaction, which closed on July 25, 2017, or the Acquisition Date, added the miraDry System, the only FDA cleared device to reduce underarm sweat, odor and permanently reduce hair of all colors, to Sientra’s aesthetics portfolio. In connection with the acquisition, the Company recorded $3.1 million of professional fees for the year ended December 31, 2017, which are included in general and administrative expense. The aggregate preliminary acquisition date fair value of the consideration transferred was approximately $29.6 million, consisting of the following (in thousands):
The Company funded the cash consideration, including the debt payoff amount with cash on hand. The cash consideration included the payoff of miraDry’s existing term loan, or the Note Purchase Agreement dated January 27, 2017 and bridge loan, or the January 2017 Bridge Loan, including interest. The deferred consideration relates to cash held back to be used for either potential litigation-related expenses or for payments to certain former investors of miraDry, as defined in the Note Purchase Agreement dated January 27, 2017, one year following the Acquisition Date. Upon reaching one year, the deferred consideration has been classified as $0.4 million of legal settlement payable in the consolidated balance sheet and $0.6 million has offset legal fees paid that the Company had previously included in “prepaid expenses and other current assets” on the consolidated balance sheet. Contingent consideration of future cash payments of a maximum of $14.0 million represents the contractual right of certain former miraDry shareholders to receive one or more contingent payments upon achievement of certain future sales milestones and includes certain amounts due to investors related to the remaining balances on the January 2017 Bridge Note and accrued royalty obligations, with certain amounts held back for potential litigation-related expenses. The fair value of the contingent consideration at the acquisition date was determined using a Monte-Carlo simulation model. The inputs include the estimated amount and timing of future net sales, and a risk-adjusted discount rate. The inputs are significant inputs not observable in the market, which are referred to as Level 3 inputs and are further discussed in Note 2. The contingent consideration component is subject to the recognition of subsequent changes in fair value through general and administrative expense in the consolidated statement of operations.
In accordance with ASC 805, the Company has recorded the acquired assets (including identifiable intangible assets) and liabilities assumed at their respective fair value. The preliminary allocation of the total purchase price is as follows (in thousands):
Goodwill has been allocated to the miraDry reportable segment. The goodwill recognized is attributable primarily to the assembled workforce and additional market opportunities. Goodwill is not deductible for tax purposes.
A summary of the intangible assets acquired, estimated useful lives and amortization method is as follows (in thousands):
The Company retained an independent third-party appraiser to assist management in its valuation and the purchase price has been finalized. Unaudited Pro Forma Information
The following unaudited pro forma financial information presents combined results of operations as if miraDry had been acquired as of the beginning of fiscal year 2017. The pro forma information includes adjustments to amortization for intangible assets acquired, the purchase accounting effect on inventory acquired, interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges in connection with the acquisition and acquisition costs. The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the merger actually occurred at the beginning of fiscal year 2017 or of the results of future operations of the combined business. Consequently, actual results differ from the unaudited pro forma information presented below (in thousands, except per share amount):
On March 9, 2016, the Company entered into an asset purchase agreement with Enaltus LLC, or Enaltus, to acquire exclusive U.S. rights to BIOCORNEUM, an advanced silicone scar treatment marketed exclusively to physicians. The acquisition of BIOCORNEUM aligns with the Company’s business development objectives and adds a complementary product that serves the needs of its customers. In connection with the acquisition, the Company recorded $0.2 million of professional fees for the year ended, December 31, 2016 which is included in general and administrative expense. The consolidated financial statements for the years ended December 31, 2018, 2017 and 2016 include the results of operations of BIOCORNEUM from the date of acquisition. (c)Acquisition of Tissue Expander Portfolio from Specialty Surgical Products, Inc. On November 2, 2016, the Company entered into an asset purchase agreement with Specialty Surgical Products, Inc., or SSP, to acquire certain assets, consisting of the Dermaspan, Softspan, and AlloX2 tissue expanders, from SSP. The acquisition adds a complete portfolio of premium, differentiated tissue expanders and aligns with the Company’s business development plans for growth in the breast reconstruction market. In connection with the acquisition, the Company recorded $0.1 million of professional fees for the year ended December 31, 2016, which is included in general and administrative expense. The aggregate acquisition date fair value of the consideration transferred was approximately $6.0 million. The consolidated financial statements for the years ended December 31, 2018, 2017 and 2016 include the results of operations of the Dermaspan, Softspan, and AlloX2 tissue expanders from the date of acquisition. |
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Balance Sheet Components |
(4) Balance Sheet Components Inventories, net consist of the following (in thousands):
Property and equipment, net consist of the following (in thousands):
Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was $1.1 million, $0.9 million and $0.4 million, respectively.
Under the terms of the manufacturing agreement with Vesta, upon the commencement of Contract Year One (as defined in the agreement) which occurred following FDA-approval of all submissions related to the site-change PMA supplement for the Vesta manufacturing facility, Vesta was obligated to purchase the manufacturing equipment and tooling that Sientra had originally purchased for the manufacture of Sientra’s breast implant inventory at Vesta’s manufacturing facility. Vesta repurchased the equipment with a net book value of $2.7 million in the third quarter of 2018 through a reduction in the Company’s accounts payable balance owed to Vesta. Accrued and other current liabilities consist of the following:
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Long-Term Debt and Revolving Loan |
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Long-Term Debt and Revolving Loan |
(5) Long-Term Debt and Revolving Loan
On July 25, 2017, the Company entered into a Credit and Security Agreement, or the Term Loan Credit Agreement, and a Credit and Security Agreement, or the Revolving Credit Agreement with Midcap, and, together with the Term Loan Credit Agreement, the Credit Agreements, which replaced the Company’s then-existing Silicon Valley Bank Loan Agreement, or the SVB Loan Agreement.
Under the terms of the Term Loan Credit Agreement, as of July 25, 2017, MidCap funded $25.0 million to the Company, or the Closing Date Term Loan. MidCap also made available to the Company until March 31, 2018, a $10.0 million term loan, or the March 2018 Term Loan, subject to the satisfaction of certain conditions, including FDA certifications of the manufacturing facility operated by Vesta, and an additional $5.0 million term loan, subject to the satisfaction of certain conditions, including evidence that the Company’s Net Revenue for the past 12 months was greater than or equal to $75.0 million, as defined in the Term Loan Credit Agreement, collectively the Term Loans. On April 18, 2018, the Company amended the Term Loan Credit Agreement pursuant to which the parties agreed to adjust the date by which the Company must obtain FDA approval of its PMA supplement in order to access the March 2018 Term Loan until April 30, 2018. In April 2018, upon FDA approval of the Company’s PMA supplement, MidCap funded the $10.0 million March Term Loan. Under the Revolving Credit Agreement, MidCap made available to the Company a revolving line of credit, or the Revolving Loan. The amount of loans available to be drawn is based on a borrowing base equal to 85% of the net collectible value of eligible accounts receivable plus 40% of eligible finished goods inventory, or the Borrowing Base, provided that availability from eligible finished goods inventory does not exceed 20% of the Borrowing Base. The Company used a portion of the $25.0 million of proceeds from the Closing Date Term Loan to repay in full the Company’s then-existing indebtedness under its SVB Loan Agreement and to pay fees and expenses in connection with the foregoing and the Company intends to use the remainder of the proceeds for general corporate purposes.
Any indebtedness under the Term Loan Credit Agreement bears interest at a floating per annum rate equal to the LIBOR as reported by MidCap with a floor of 1.00%, which as of December 31, 2018 was 2.35%, plus 7.50%. The Term Loans have a scheduled maturity date of December 1, 2021, or the Maturity Date. Subject to an election to delay principal payments, the Company made monthly payments of accrued interest under the Term Loans from the funding date of the Term Loans, until December 31, 2018, to be followed by monthly installments of principal and interest through the Maturity Date. Under the terms of the Term Loan Credit Agreement, the Company had the option to extend the interest only period an additional six months to June 30, 2019 as long as the Company remains in compliance with the Term Loan Agreement. The Company has elected to extend the interest only period through June 30, 2019. The Company may prepay all of the Term Loans prior to its maturity date provided the Company pays MidCap a prepayment fee. The Company paid an origination fee of 0.50% of the Term Loans total amount of $40.0 million on the closing date. As of December 31, 2018, there was $35.0 million outstanding related to the Term Loans. As of December 31, 2018, the unamortized debt issuance costs on the Term Loans were approximately $0.1 million current portion and approximately $0.1 million long-term portion and are included as a reduction to debt on the consolidated balance sheet.
Any indebtedness under the Revolving Credit Agreement bears interest at a floating per annum rate equal to the LIBOR as reported by Midcap with a floor of 1.00%, plus 4.50%. The Company may make and repay borrowings from time to time under the Revolving Credit Agreement until the maturity of the facility on December 1, 2021. The Company is required to pay an annual collateral management fee of 0.50% on the outstanding balance, and an annual unused line fee of 0.50% of the average unused portion. The Company paid an origination fee of 0.50% of the Revolving Loan amount of $10.0 million on the closing date. The Company classifies the amounts borrowed under the Revolving Loan as short term because it is the Company's intention to use the line of credit to borrow and pay back funds over short periods of time. As of December 31, 2018, there were no borrowings outstanding related to the Revolving Loan. As of December 31, 2018, the unamortized debt issuance costs related to the Revolving Loan was approximately $0.1 million and was included in prepaid expenses and other current assets on the consolidated balance sheet.
The amortization of debt issuance costs for the years ended December 31, 2018 and 2017 was $0.2 million and $0.1 million, respectively, and was included in interest expense in the consolidated statements of operations.
The Credit Agreements includes customary affirmative and restrictive covenants and representations and warranties, including a financial covenant for minimum revenues, a financial covenant for minimum cash requirements, a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens, investments, distributions, collateral, mergers or acquisitions, taxes, and deposit accounts. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to any outstanding principal balances, and Midcap may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Credit Agreements. The Company’s obligations under the Credit Agreements are secured by a security interest in substantially all of the Company’s assets.
Future Principal Payments of Debt
The future schedule of principal payments for the outstanding Term Loans as of December 31, 2018 was as follows (in thousands):
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Goodwill and Other Intangible Assets, net |
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Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets, net |
(6) Goodwill and Other Intangible Assets, net
The Company has determined that it has two reporting units, Breast Products and miraDry, and evaluates goodwill for impairment at least annually on October 1st and whenever circumstances suggest that goodwill may be impaired. The changes in the carrying amount of goodwill during the years ended December 31, 2018 and 2017 were as follows (in thousands):
The Company conducted the annual goodwill impairment test in the fourth quarter of 2018 and 2017 and determined goodwill had not been impaired for the years ended December 31, 2018 and 2017.
The components of the Company’s other intangible assets consist of the following definite-lived and indefinite-lived assets (in thousands):
Amortization expense for the year ended December 31, 2018, 2017 and 2016 was $2.3 million, $2.2 million and $0.8 million, respectively. The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of December 31, 2018 (in thousands):
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
(7) Income Taxes The provision for income tax consists of the following:
Actual income tax expense differs from that obtained by applying the statutory federal income tax rate of 21% in 2018 and 34% in 2017 and 2016 to income before income taxes as follows (in thousands):
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Generally, the ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Based on all the relevant factors, a valuation allowance of $93.9 million has been established against deferred tax assets as of December 31, 2018 as management determined that it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences. Net deferred tax liabilities are recorded in warranties and other long-term liabilities in the consolidated balance sheet.
As of December 31, 2018, the Company had net operating loss carryforwards of approximately $305.0 million and $184.5 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal net operating loss carryforward begins expiring in 2027, and the state net operating loss carryforwards began expiring in 2017. It is possible that the Company will not generate taxable income in time to use these NOLs before their expiration. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change ”, the corporation's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. In general, an “ownership change” occurs if there is a cumulative change in a loss corporation’s ownership by 5% shareholders that exceeds 50 percentage points over a rolling three-year period. At December 31, 2018 the Company had research and development credit carryforwards of approximately $1.9 million and $2.6 million available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal credit carryforwards begin expiring in 2027 and the state credits carryforward indefinitely. At December 31, 2018, the Company had unrecognized tax benefits of approximately $1.1 million associated with the research and development credits. The Company does not anticipate that total unrecognized net tax benefits will significantly change over the next twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other (income) expense and interest expense, respectively, as necessary. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2018. The Company files U.S. federal, state, and international income tax returns in jurisdictions with varying statute of limitations. In general, the Company’s federal tax returns for 2015 to 2017 and state tax returns for 2014 to 2017 remain open for examination by the federal and state tax authorities, including net operating loss carryforwards to those years. |
Employee Benefit Plans |
12 Months Ended |
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Dec. 31, 2018 | |
Compensation And Retirement Disclosure [Abstract] | |
Employee Benefit Plans |
(8) Employee Benefit Plans In September 2016, the Company adopted a Section 401(k) Retirement Savings Plan for the benefit of eligible employees. All employees become eligible to participate in the plan the first of the month following their hire date and may contribute their pretax or after–tax salary, up to the Internal Revenue Service annual contribution limit. The Company makes contributions to the 401(k) plan under a safe harbor provision, whereby the Company contributes 3% of each participating employee’s annual compensation. The Company contributions vest immediately. The Company contributed and included in operating expense $0.7 million, $0.6 million and $0.1 million for the years ended December 31, 2018, 2017 and 2016 respectively. |
Stockholders' Equity |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity |
The Company’s Amended and Restated Certificate of Incorporation authorizes the Company to issue 210,000,000 shares of common and preferred stock, consisting of 200,000,000 shares of common stock with $0.01 par value and 10,000,000 shares of preferred stock with $0.01 par value. As of December 31, 2018, the Company had no preferred stock issued or outstanding.
On January 17, 2013, the Company entered into a Loan and Security Agreement, or the Original Term Loan Agreement, with Oxford Finance, LLC, or Oxford. On June 30, 2014, the Company entered into the Amended and Restated Loan and Security Agreement, or the Amended Term Loan Agreement, with Oxford. In connection with the Original Term Loan Agreement and the Amended Term Loan Agreement, the Company issued to Oxford (i) seven-year warrants in January 2013 to purchase shares of the Company’s common stock with a value equal to 3.0% of the tranche A, B and C term loan amounts and (ii) seven-year warrants in June 2014 to purchase shares of the Company’s common stock with a value equal to 2.5% of the tranche D term loan amount. The warrants have an exercise price per share of $14.671. As of December 31, 2018, there were warrants to purchase an aggregate of 47,710 shares of common stock outstanding.
In April 2007, the Company adopted the 2007 Equity Incentive Plan, or 2007 Plan. The 2007 Plan provides for the granting of stock options to employees, directors and consultants of the Company. Options granted under the 2007 Plan may either be incentive stock options or nonstatutory stock options. Incentive stock options, or ISOs, may be granted only to Company employees. Nonstatutory stock options, or NSOs, may be granted to all eligible recipients. A total of 1,690,448 shares of the Company’s common stock were reserved for issuance under the 2007 Plan. As of December 31, 2018, pursuant to the 2007 Plan, there were 411,466 options outstanding and no shares of common stock available for future grants. The Company’s board of directors adopted the 2014 Equity Incentive Plan, or 2014 Plan, in July 2014, and the stockholders approved the 2014 Plan in October 2014. The 2014 Plan became effective upon completion of the IPO on November 3, 2014, at which time the Company ceased granting awards under the 2007 Plan. Under the 2014 Plan, the Company may issue ISOs, NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards and other forms of stock awards, or collectively, stock awards, all of which may be granted to employees, including officers, non-employee directors and consultants of the Company and their affiliates. ISOs may be granted only to employees. A total of 1,027,500 shares of common stock were initially reserved for issuance under the 2014 Plan, subject to certain annual increases. As of December 31, 2018, pursuant to the 2014 Plan, there were 3,565,521 shares of common stock reserved and 22,118 shares of common stock available for future grants. Pursuant to a board-approved Inducement Plan, the Company may issue NSOs and restricted stock unit awards which may only be granted to new employees of the Company and their affiliates in accordance with NASDAQ Stock Market Rule 5635(c)(4) as an inducement material to such individuals entering into employment with the Company. As of December 31, 2018, inducement grants for 938,650 shares of common stock have been awarded, and 60,472 shares of common stock were reserved for future issuance under the Inducement Plan. Options under the 2007 Plan and the 2014 Plan may be granted for periods of up to ten years as determined by the Company’s board of directors, provided, however, that (i) the exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a more than 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. An NSO has no such exercise price limitations. NSOs under the Inducement Plan may be granted for periods of up to ten years as determined by the board of directors, provided, the exercise price will be not less than 100% of the estimated fair value of the shares on the date of grant. Options generally vest with 25% of the grant vesting on the first anniversary and the balance vesting monthly on a straight-lined basis over the requisite service period of three additional years for the award. The following summarizes all option activity under the 2007 Plan, 2014 Plan and Inducement Plan:
There were no stock options granted during the year ended December 31, 2018. The weighted average grant date fair value of stock options granted to employees and directors during the years ended December 31, 2017 and 2016 was $4.54 and $3.97 per share, respectively. Stock-based compensation expense for stock options for the years ended December 31, 2018, 2017 and 2016 was $1.6 million, $2.2 million and $1.7 million, respectively. Tax benefits arising from the disposition of certain shares issued upon exercise of stock options within two years of the date of grant or within one year of the date of exercise by the option holder, or Disqualifying Dispositions, provide the Company with a tax deduction equal to the difference between the exercise price and the fair market value of the stock on the date of exercise. As of December 31, 2018 there was $1.0 million of total unrecognized compensation cost related to stock options granted under the plans. The costs are expected to be recognized over a weighted average period of 1.33 years. The expense is recorded within the operating expense components in the consolidated statement of operations based on the employees receiving the awards. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised was $2.0 million, $3.1 million, and $3.0 million during the years ended December 31, 2018, 2017 and 2016, respectively. The expected term of employee stock options, risk‑free interest rate and volatility represents the weighted average, based on grant date period, which the stock options are expected to remain outstanding. The Company utilized the simplified method to estimate the expected term of the options pursuant to ASC Subtopic 718‑10 for all option grants to employees. The expected volatility is based upon historical volatilities of an index of a peer group because it is not practicable to make a reasonable estimate of the Company’s volatility. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected term of the option. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future. The Company records forfeitures when they occur. For purposes of financial accounting for stock‑based compensation, the Company has determined the fair values of its options based in part on the work of a third‑party valuation specialist. The determination of stock‑based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If the Company had made different assumptions, its stock‑based compensation expense, and its net loss could have been significantly different.
The Company has issued restricted stock unit awards, or RSUs, to employees and non-employees under the 2014 Plan and Inducement Plan. The RSUs issued to employees generally vest on a straight-line basis annually over a 3-year requisite service period. The RSUs issued to non-employees are generally for consulting services and generally vest either monthly or annually over the service term.
Activity related to RSUs is set forth below:
The weighted average grant date fair value of RSUs granted to employees and directors during the years ended December 31, 2018, 2017 and 2016 was $14.38, $9.19, and $8.21 per share, respectively. Stock-based compensation expense for RSUs for the years ended December 31, 2018, 2017 and 2016 was $11.7 million, $4.1 million and $1.2 million, respectively. As of December 31, 2018, there was $19.1 million total unrecognized compensation cost related to non-vested RSU awards. The cost is expected to be recognized over a weighted average period of 2.10 years.
The Company’s board of directors adopted the 2014 Employee Stock Purchase Plan, or ESPP, in July 2014, and the stockholders approved the ESPP in October 2014. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP provides offering periods not to exceed 27 months, and each offering period will include purchase periods, which will be the approximately six-month period commencing with one exercise date and ending with the next exercise date, except that the first offering period commenced on the first trading day following the effective date of the Company’s registration statement. Employees are able to purchase shares at 85% 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 exercise date. A total of 255,500 shares of common stock were initially reserved for issuance under the ESPP. The number of shares available for sale under the ESPP will be increased annually on the first day of each fiscal year, equal to the lesser of i) 1% of the total outstanding shares of the Company’s common stock as of the last day of the immediately preceding fiscal year; ii) 3,000,000 shares of common stock, or iii) such lesser amount as determined by the board of directors. As of December 31, 2018, the number of shares of common stock reserved for issuance under the ESPP was 964,569. During the year ended December 31, 2018, employees purchased 145,616 shares under the ESPP at a weighted average exercise price of $6.82 per share. During the year ended December 31, 2017, employees purchased 108,081 shares under the ESPP at a weighted average exercise price of $5.98 per share. As of December 31, 2018, the number of shares of common stock available for future issuance under the ESPP was 543,955. Stock-based compensation related to the ESPP for the years ended December 31, 2018, 2017 and 2016 was $0.6 million, $0.4 million, and $0.3 million, respectively. |
Segment Reporting and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting and Geographic Information |
(10) Segment Reporting and Geographic Information
The Company has two reportable segments: Breast Products and miraDry. The Breast Products segment focuses on sales of silicone gel breast implants, tissue expanders and scar management products under the brands Sientra, AlloX2, Dermaspan, Softspan and BIOCORNEUM. The miraDry segment focuses on sales of the miraDry System, consisting of a console and a handheld device which uses consumable single-use bioTips. These segments align with the Company’s principal target markets. On July 25, 2017, the Company acquired miraDry. See Note 3(a) – Acquisitions for additional details. miraDry has been included in the consolidated results of operations as of the Acquisition Date and financial performance of the acquired business is reported in the miraDry segment.
The Company’s CODM assesses the performance of each segment and allocates resources to those segments based on net sales and operating income (loss). Operating income (loss) by segment includes items that are directly attributable to each segment, including sales and marketing functions, as well as finance, information technology, human resources, legal and related corporate infrastructure costs, along with certain benefit-related expenses. There are no unallocated expenses for the two segments.
The following tables present the net sales, net operating loss and net assets by reportable segment for the periods presented (in thousands):
Net sales are attributed to geographic areas based on where the Company’s products are shipped. The following table presents the net sales by geographical region for the periods presented (in thousands):
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Commitments and Contingencies |
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Commitments And Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
(11) Commitments and Contingencies
In August 2013, the Company entered into a warehouse lease in Santa Barbara, California, commencing on September 1, 2013. This operating lease is used for additional general office, warehouse, and research and development. This lease has been renewed until January 2022. In March 2014, the Company entered into a 68-month lease agreement in Santa Barbara, California. The operating lease is for general office use only and commenced on July 1, 2014. The terms of the lease provide for rental payments on a graduated scale. In July 2018, the Company entered into a 42-month lease agreement in Carpinteria, California. The operating lease is used for research and development. In December 2013, the Company entered into a 62-month non-cancelable operating lease for its office building space in Santa Clara, California, commencing on March 1, 2014. In connection with the lease, the Company entered into a letter of credit, which is secured by a restricted cash balance of $0.3 million, included in other assets on the consolidated balance sheets. This lease was amended in October 2018, for an additional 62-month non-cancellable period starting in May 2019. The Company recognizes rent expense on a straight-line basis over the lease term in operating expenses within the consolidated statement of operations. Rent expense for the years ended December 31, 2018, 2017 and 2016 was $1.3 million, $1.1 million and $0.5 million, respectively. As of December 31, 2018, future minimum lease payments under all non‑cancelable operating leases are as follows (in thousands):
The Company has minimum purchase obligations under certain contracts with its manufacturers. As of December 31, 2018, minimum purchase obligations under all manufacturing contracts was approximately $6.0 million for the years ending December 31, 2019, 2020 and 2021, and approximately $2.0 million for the year ending December 31, 2022 and thereafter.
The Company is subject to claims and assessments from time to time 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. Class Action Shareholder Litigation In September 2016, the Company signed a memorandum of understanding, approved by the state court in May 2017, settling claims against the Company and certain of its officers and directors, and the underwriters associated with the Company’s follow-on public offering that closed on September 23, 2015 as defendants for allegedly false and misleading statements in the Company’s offering documents associated with the follow-on offering concerning its business, operations, and prospects. As a result of these developments, the Company determined a probable loss had been incurred and recognized a net charge to earnings of approximately $1.6 million within general and administrative expense within the consolidated statement of operations which was comprised of the loss contingency of approximately $10.9 million, net of expected insurance proceeds of approximately $9.4 million. In the first quarter of 2017, the Company received $9.3 million in insurance proceeds and paid the $10.9 million loss contingency. The remaining insurance proceeds receivable is classified as prepaid expenses and other current assets on the accompanying consolidated balance sheets. Silimed Litigation On July 27, 2017, the Company entered into a settlement agreement, or the Settlement Agreement, with Silimed pursuant to which, in exchange for a mutual release of claims and covenants not to sue or pursue certain litigation, Sientra paid Silimed a lump sum of $9.0 million in September 2017 and paid an additional $1.0 million in June 2018. In addition, should the Company enter into international markets using certain breast implant specifications, the Company has agreed to make royalty payments of $12.50 on each of its net sales of such products, up to a maximum royalty of $5.0 million. As a result of the settlement, the Company recorded $10.0 million for the year ended December 31, 2017 in legal settlement expense. miraDry Class Action Litigation On August 3, 2017, a lawsuit styled as a verified class action on the part of the former stockholders of miraDry was filed in the Court of Chancery for the State of Delaware against the former board of directors of miraDry, or the Defendants, alleging breach of their fiduciary duties in connection with the Company’s acquisition of miraDry. On August 30, 2017, the Defendants moved to dismiss the verified class action complaint for failure to state a claim upon which relief can be granted. On November 11, 2017 the parties notified the Court that they had reached an agreement to settle the matter pending completion of confirmatory discovery regarding the fairness of the settlement and obtaining approval from the court. Following a hearing, the Delaware Chancery Court approved the proposed settlement terms on January 15, 2019, with a modification to the amount of attorneys’ fees awarded to the plaintiffs’ attorneys. Under the terms of the settlement, in exchange for a full and final settlement and release of all claims, the Defendants (and/or their indemnitors and/or insurers) paid a settlement consideration of $0.4 million. The miraDry Merger Agreement contained a holdback amount expected to be used for the settlement and associated costs of the miraDry Class Action litigation. The holdback amount has been used to offset $0.6 million of legal fees and $0.4 million is included in “legal settlement payable” on the consolidated balance sheet as of December 31, 2018. |
Summary of Quarterly Financial Information (Unaudited) |
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Selected Quarterly Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Quarterly Financial Information (Unaudited) |
(12) Summary of Quarterly Financial Information (Unaudited) The following tables set forth our unaudited quarterly statements of operations data and our key metrics for each of the eight quarters ended December 31, 2018. We have prepared the quarterly data on a consistent basis with the audited financial statements included in this report. In the opinion of management, the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information should be read in conjunction with the audited financial statements and related notes included elsewhere in this report. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.
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Schedule II - Valuation And Qualifying Accounts |
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Valuation And Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule II - Valuation And Qualifying Accounts |
Sientra, Inc. Schedule II — Valuation and Qualifying Accounts December 31, 2018, 2017 and 2016 (In thousands)
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities which are subject to significant judgment and use of estimates include the allowance for doubtful accounts, sales return reserves, provision for warranties, valuation of inventories, recoverability of long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and finite lived intangible assets, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with stock-based compensation and other equity instruments. |
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Liquidity |
Since the Company’s inception, it has incurred significant net operating losses and the Company anticipates that losses will continue in the near term. The Company expects its operating expenses will continue to grow as they expand operations. The Company will need to generate significant net sales to achieve profitability. To date, the Company has funded operations primarily with proceeds from the sales of preferred stock, borrowings under term loans, sales of products since 2012, and the proceeds from the sale of common stock in public offerings. The accompanying consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. At December 31, 2018, the Company had cash and cash equivalents of $86.9 million. Since inception, the Company has incurred recurring losses from operations and cash outflows from operating activities. During the years ended December 31, 2018, 2017 and 2016 the Company incurred net losses of $82.6 million, $64.0 million and $40.2 million, respectively. The Company used $56.2 million of cash in operations for the year ended December 31, 2018, $45.9 million for the year ended December 31, 2017 and $34.4 million for the year ended December 31, 2016. At December 31, 2018 and 2017 the Company had an accumulated deficit of $362.1 million and $279.5 million, respectively. The continuation of the Company as a going concern is dependent upon many factors including liquidity and the ability to raise capital. The Company received FDA approval of their PMA supplement on April 17, 2018 and was then able to access a $10.0 million term loan pursuant to an amendment to the credit agreement with MidCap Financial Trust, or MidCap. In addition, in February 2018, the Company entered into an At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, as sales agent pursuant to which the Company may sell, from time to time, through Stifel, shares of its common stock having an aggregate gross offering price of up to $50.0 million. As of December 31, 2018, the Company has not sold any common stock pursuant to the sales agreement. Further, on May 7, 2018, the Company completed a public offering of its common stock, raising approximately $107.6 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses. |
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Cash and Cash Equivalents |
The Company considers all highly liquid investments purchased with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist primarily of cash in checking accounts and interest-bearing money market accounts. |
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Concentration of Credit and Supplier Risks |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash and cash equivalents are deposited in demand accounts at a financial institution that management believes is creditworthy. The Company is exposed to credit risk in the event of default by this financial institution for cash and cash equivalents in excess of amounts insured by the Federal Deposit Insurance Corporation, or FDIC. Management believes that the Company’s investments in cash and cash equivalents are financially sound and have minimal credit risk and the Company has not experienced any losses on its deposits of cash and cash equivalents. The Company relies on a limited number of third-party manufacturers for the manufacturing and supply of its products. This could result in the Company not being able to acquire the inventory needed to meet customer demand, which would result in possible loss of sales and affect operating results adversely. |
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Fair Value of Financial Instruments |
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, customer deposits and sales return liability are reasonable estimates of their fair value because of the short maturity of these items. The fair value of the common stock warrant liability, deferred and contingent consideration are discussed in Note 2. The fair value of the debt is based on the amount of future cash flows associated with the instrument discounted using the Company’s market rate. At December 31, 2018, the carrying value of the long-term debt was not materially different from the fair value. |
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Fair Value Measurements |
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The Company’s common stock warrant liabilities are carried at fair value determined according to the fair value hierarchy described above. The Company has utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model include fair value of the common stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. The warrants are valued using the fair value of common stock as of the measurement date. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends. As several significant inputs are not observable, the overall fair value measurement of the warrants is classified as Level 3. The Company assessed the fair value of the contingent consideration for future royalty payments related to the acquisition of BIOCORNEUM, the contingent consideration for future milestone payments for the acquisition of the tissue expander portfolio from SSP and the contingent consideration for the future milestone payments related to the acquisition of miraDry using a Monte-Carlo simulation model. Significant assumptions used in the measurement include future net sales for a defined term and the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):
The liability for common stock warrants and the current portion of contingent consideration is included in “accrued and other current liabilities” and the long-term liabilities for the contingent consideration are included in “deferred and contingent consideration” in the consolidated balance sheet. The following table provides a rollforward of the aggregate fair values of the Company’s common stock warrants and contingent consideration for which fair value is determined by Level 3 inputs (in thousands):
In connection with the acquisition of miraDry on July 25, 2017, contingent consideration of up to an aggregate of $14.0 million may be payable upon achieving certain future sales milestones and had a fair value of $12.7 million and $10.4 million at December 31, 2018 and 2017, respectively.
In connection with the acquisition of the tissue expander portfolio from Specialty Surgical Products, Inc., or SSP, on November 2, 2016, contingent consideration of up to an aggregate of $2.0 million is payable upon achieving certain future sales milestones and had a fair value of $1.0 million and $1.8 million at December 31, 2018 and 2017, respectively. For the period ended December 31, 2018, the Company achieved one of two milestones and made a payment of $1.0 million to SSP.
The Company recognizes changes in the fair value of the warrants in “other income (expense), net” in the consolidated statement of operations and changes in contingent consideration are recognized in “general and administrative” expense in the consolidated statement of operations. |
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Property and Equipment |
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight‑line method over the estimated useful life of the asset, generally three to five years. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale of an asset, the cost and related accumulated depreciation or amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred. |
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Goodwill and Other Intangible Assets |
Goodwill represents the excess of the purchase price over the fair value of net assets of purchased businesses. Goodwill is not amortized, but instead is subject to impairment tests on at least an annual basis and whenever circumstances suggest that goodwill may be impaired. After the acquisition of miraDry, management began evaluating the Company as two reporting units, Breast Products and miraDry. The Company’s annual test for impairment is performed as of October 1 of each fiscal year. The Company makes a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount from the qualitative assessment, the Company performs a quantitative analysis to compare the fair value of the reporting unit to its carrying amount. The Company recognizes impairment charges for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company’s fair value analysis of goodwill utilizes the income approach and market approach, which requires the use of estimates about a reporting unit’s future revenues and free cash flows, market multiples, enterprise value, control risk premiums, discount rates, terminal value and enterprise value to determine the estimated fair value. The Company’s future revenues and free cash flow assumptions are determined based upon actual results giving effect to management’s expected changes in operating results in future years. The market multiples, enterprise value, control risk premiums, discount rates and terminal value are based upon market participant assumptions using a defined peer group. Changes in these assumptions can materially affect these estimates. Thus, to the extent the market changes, discount rates increase significantly or the Company does not meet its projected performance, the Company could recognize impairments, and such impairments could be material. The Company performed its annual goodwill impairment test on October 1, 2018 for the Breast Products and miraDry reporting units. The miraDry reporting unit had a negative carrying value and $7.6 million of allocated goodwill. The Company performed a quantitative assessment and determined the fair value was greater than the carrying value. For the Breast Products reporting unit, the Company performed a qualitative analysis and determined fair value was more likely than not greater than carrying value. For the years ended December 31, 2018, 2017 and 2016 the Company did not record any goodwill impairment charges. The Company tests indefinite-lived intangible assets for impairment on at least an annual basis and whenever circumstances suggest the assets may be impaired. The Company’s annual test for impairment is performed as of October 1 of each fiscal year. If indicators of impairment are present, the Company evaluates the carrying value of the intangible assets in relation to estimates of future undiscounted cash flows. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to the difference. The Company also evaluates the remaining useful life of an indefinite-lived intangible asset to determine whether events and circumstances continue to support an indefinite useful life. For the years ended December 31, 2018, 2017 and 2016 the Company did not record any indefinite-lived intangible assets impairment charges. Judgments about the recoverability of purchased finite‑lived intangible assets are made whenever events or changes in circumstance indicate that impairment may exist. Each fiscal year the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstance warrant a revision to the remaining periods of amortization. Recoverability of finite‑lived intangible assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. The intangible asset is amortized to the consolidated statement of operations based on estimated cash flows generated from the intangible over its estimated life. |
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Impairment of Long-Lived Assets |
The Company’s management routinely considers whether indicators of impairment of long‑lived assets are present. If such indicators are present, management determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company will recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or other methods. If the assets determined to be impaired are to be held and used, the Company will recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset’s carrying value. The fair value of the asset will then become the asset’s new carrying value. There have been no impairments of long‑lived assets recorded during the years ended December 31, 2018, 2017 and 2016. The Company may record impairment losses in future periods if factors influencing its estimates change. |
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Business Combinations |
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date in the financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings. |
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Segment Reporting |
Reportable segments represent components for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, who has been identified as the Chief Operating Decision Maker, or CODM, as defined by authoritative guidance on segment reporting, in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Based on the financial information presented to and reviewed by the CODM, the Company has determined that it has two reportable segments: Breast Products and miraDry. |
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Revenue Recognition |
The Company generates revenue primarily through the sale and delivery of promised goods or services to customers and recognizes revenue when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. Performance obligations typically include the delivery of promised products, such as breast implants, tissue expanders, BIOCORNEUM, miraDry Systems and bioTips, along with service-type warranties and deliverables under certain marketing programs. Other deliverables are sometimes promised, but are ancillary and insignificant in the context of the contract as a whole. Sales prices are documented in the executed sales contract, purchase order or order acknowledgement prior to the transfer of control to the customer. Customers may enter into a separate extended service agreement to purchase an extended warranty for miraDry products from the Company whereby the payment is due at the inception of the agreement. Typical payment terms are 30 days for Breast Products and direct sales of consumable miraDry products, and tend to be longer for capital sales of miraDry Systems and sales to miraDry distributors, but do not extend beyond one year. For delivery of promised products, control transfers and revenue is recognized upon shipment, unless the contractual arrangement requires transfer of control when products reach their destination, for which revenue is recognized once the product arrives at its destination. Revenue for extended service agreements are recognized ratably over the term of the agreements. The Company introduced its Platinum20 Limited Warranty Program, or Platinum20, in May 2018 on all OPUS breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. Platinum20 provides for financial assistance for revision surgeries and no-charge contralateral replacement implants upon the occurrence of certain qualifying events. The Company considers Platinum20 to have an assurance warranty component and a service warranty component. The assurance component is recorded as a warranty liability at the time of sale (as discussed in Note 2(s)). The Company considers the service warranty component as an additional performance obligation and defers revenue at the time of sale based on the relative estimated selling price, by estimating a standalone selling price using the expected cost plus margin approach for the performance obligation. Inputs into the expected cost plus margin approach include historical incidence rates, estimated replacement costs, estimated financial assistance payouts and an estimated margin. The liability for unsatisfied performance obligations under the service warranty as of December 31, 2018 was $0.4 million, of which $0.2 million is considered a short-term obligation and is included in “accrued and other current liabilities” and $0.3 million is considered a long-term obligation and is included in “warranty reserve and other long-term liabilities” on the consolidated balance sheet. The performance obligation is satisfied at the time that Platinum20 benefits are provided and are expected to be satisfied over the following 6 to 24 month period for financial assistance and 20 years for product replacement. Revenue recognized for the service warranty performance obligations for the year ended December 31, 2018 was immaterial. The Company also leverages a distributor network for selling the miraDry System internationally. The Company recognizes revenue when control of the goods or services is transferred to the distributors. Standard terms in these agreements do not allow for trial periods, right of return, refunds, payment contingent on obtaining financing or other terms that could impact the customer’s payment obligation. Contract liabilities are included in “accrued and other current liabilities” in the consolidated balance sheet. A portion of the Company’s revenue is generated from the sale of consigned inventory of breast implants maintained at doctor, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been implanted, not when the consigned products are delivered to the customer’s location. For Breast Products, with the exception of the Company’s BIOCORNEUM scar management products, the Company allows for the return of products from customers within six months after the original sale, which is accounted for as variable consideration. Reserves are established for anticipated sales returns based on the expected amount calculated with historical experience, recent gross sales and any notification of pending returns. The estimated sales return is recorded as a reduction of revenue and as a sales return liability in the same period revenue is recognized. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. The Company has established an allowance for sales returns of $6.0 million and $3.9 million as of December 31, 2018 and December 31, 2017, respectively, recorded as “sales return liability” on the consolidated balance sheet under Topic 606 as of December 31, 2018 and recorded in “accounts receivable, net of allowances,” at December 31, 2017 on the consolidated balance sheet, as indicated below in “Recently Adopted Accounting Standards.” Arrangements with Multiple Performance Obligations The Company has determined that the delivery of each unit of product in the Company’s revenue contracts with customers is a separate performance obligation. The Company’s revenue contracts may include multiple products or services, each of which is considered a separate performance obligation. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on observable prices or using an expected cost plus margin approach when an observable price is not available. The Company invoices customers once products are shipped or delivered to customers depending on the negotiated shipping terms. The Company defers the value of the service warranty revenue and recognizes it once the performance obligation has been met. Practical Expedients and Policy Election The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. The Company does not adjust accounts receivable for the effects of any significant financing components as customer payment terms are shorter than one year. The Company has elected to account for shipping and handling activities performed after a customer obtains control of the products as activities to fulfill the promise to transfer the products to the customer. Shipping and handling activities are largely provided to customers free of charge for the Breast Products segment. The associated costs were $1.3 million, $0.9 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. These costs are viewed as part of the Company’s marketing programs and are recorded as a component of sales and marketing expense in the consolidated statement of operations as an accounting policy election. For the miraDry segment, shipping and handling charges are typically billed to customers and recorded as revenue. The shipping and handling costs incurred are recorded as a component of cost of goods sold in the consolidated statement of operations. The associated costs were $0.4 million and $35,000 for the years ended December 31, 2018, and 2017 from the acquisition date July 25, 2017, respectively. |
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Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability to collect from some of its customers. The allowances for doubtful accounts are based on the analysis of historical bad debts, customer credit‑worthiness, past transaction history with the customer, and current economic trends. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. The Company has established an allowance for doubtful accounts of $2.4 million and $0.9 million as of December 31, 2018 and 2017, respectively. |
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Inventories and Cost of Goods Sold |
Inventories represent raw materials, work in process and finished goods that are recorded at the lower of cost or market on a first‑in, first‑out basis, or FIFO. The Company periodically assesses the recoverability of all inventories to determine whether adjustments for impairment or obsolescence are required. The Company evaluates the remaining shelf life and other general obsolescence and impairment criteria in assessing the recoverability of the Company’s inventory. The Company recognizes the cost of inventory transferred to the customer in cost of goods sold when revenue is recognized. At December 31, 2018 and 2017, approximately $1.4 million and $1.6 million, respectively, of the Company’s Breast Products segment inventory was held on consignment at doctors’ offices, clinics, and hospitals. The value and quantity at any one location is not significant. |
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Income Taxes |
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company operates in several tax jurisdictions and is subject to taxes in each jurisdiction in which it conducts business. To date, the Company has incurred cumulative net losses and maintains a full valuation allowance on its net deferred tax assets due to the uncertainty surrounding realization of such assets. However, the Company has deferred tax liabilities that cannot be considered sources of income to support the realization of the deferred tax assets, and has provided for tax expense (or benefit) and a corresponding deferred tax liability. Tax benefit for the year ended December 31, 2018 and 2017 was $4,000 and $17,000, respectively. Tax expense for the year ended December 31, 2016 was $0.1 million. The Company accounts for uncertain tax position in accordance with Account Standards Codification, or ASC, 740‑10, Accounting for Uncertainty in Income Taxes. The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of tax benefit might change as new information becomes available. |
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Research and Development Expenditures |
Research and development costs are charged to operating expenses as incurred. Research and development, or R&D, primarily consist of clinical expenses, regulatory expenses, product development, consulting services, outside research activities, quality control and other costs associated with the development of the Company’s products and compliance with Good Clinical Practices, or GCP, requirements. R&D expenses also include related personnel and consultant compensation and stock-based compensation expense. |
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Advertising |
Expenses related to advertising are charged to sales and marketing expense as incurred. Advertising costs were $1.3 million, $1.8 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. |
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Stock-Based Compensation |
The Company applies the fair value provisions of ASC 718, Compensation — Stock Compensation, or ASC 718. ASC 718 requires the recognition of compensation expense, using a fair‑value based method, for costs related to all employee share‑based payments, including stock options, restricted stock units, and the employee stock purchase plan. In the absence fo an observable market price for an award, ASC 718 requires companies to estimate the fair value of share‑based payment awards on the date of grant using an option‑pricing model. We estimate the fair value of our stock‑based awards to employees and directors using the Black‑Scholes option pricing model. The grant date fair value of a stock‑based award is recognized as an expense over the requisite service period of the award on a straight‑line basis. In addition, we use the Monte-Carlo simulation option-pricing model to determine the fair value of market-based awards. The Monte-Carlo simulation option-pricing model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair-value determination the possibility that the market condition may not be satisfied. Compensation costs related to these awards are recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. The option-pricing models require the input of subjective assumptions, including the risk‑free interest rate, expected dividend yield, expected volatility and expected term, among other inputs. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock‑based compensation expense could be materially different in the future. These assumptions are estimated as follows:
The following table presents the weighted‑average assumptions used to estimate the fair value of options granted during the periods presented:
The following table presents the weighted-average assumptions used to estimate the fair value of the stock purchase rights granted under the employee stock purchase plan:
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Product Warranties |
The Company offers a product replacement and limited warranty program for the Company’s silicone gel breast implants, and a product warranty for the Company’s miraDry Systems and consumable bioTips. For silicone gel breast implant surgeries occurring prior to May 1, 2018, the Company provides lifetime replacement implants and up to $3,600 in financial assistance for revision surgeries, for covered rupture events that occur within ten years of the surgery date. The Company introduced its Platinum20 Limited Warranty Program in May 2018, covering OPUS silicone gel breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. The Company considers the program to have an assurance warranty component and a service warranty component. The service warranty component is discussed in Note 2(l) above. The assurance component is related to the lifetime no-charge contralateral replacement implants and up to $5,000 in financial assistance for revision surgeries, for covered rupture events that occur within twenty years of the surgery date. Under the miraDry warranty, the Company provides a standard product warranty for the miraDry System and bioTips, which the Company considers an assurance-type warranty. The following table provides a rollforward of the accrued warranties (in thousands):
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Net Loss Per Share |
The Company excluded the following potentially dilutive securities, outstanding as of December 31, 2018, 2017 and 2016 from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2018, 2017 and 2016 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.
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Recent Accounting Pronouncements |
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718), to simplify the accounting for non-employee share-based payment transactions by expanding the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Under the new standard, most of the guidance on stock compensation payments to non-employees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees, and is effective for all public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company early adopted ASU 2018-07 in the third quarter of 2018 and there was no material impact on its consolidated financial statements from the adoption.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 in the first quarter of 2018 to all contracts using the modified retrospective method. The adoption of Topic 606 did not have a material impact on the Company’s historical net losses and, therefore, no adjustment was made to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In accordance with Topic 606 disclosure requirements, the impact of adoption on the Company’s consolidated balance sheet was as follows (in thousands):
Additionally, in accordance with Topic 606, the balance of breast product inventory estimated to be returned as of December 31, 2018 is included in the components of the Company’s inventory as “finished goods – right of return” in Note 4. Prior to the adoption of Topic 606, the inventory impact of estimated returns for breast products was included in the “finished goods” inventory balance and was not separately disclosed.
The adoption of Topic 606 did not have a material impact on the Company’s consolidated statement of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classifications of Certain Cash Receipts and Cash Payments (Topic 230). The standard update addresses eight specific cash flow issues not currently addressed by GAAP, with the objective of reducing the existing diversity in practice of how these cash receipts and payments are presented and classified in the statement of cash flows. The ASU requires a retrospective approach to adoption. The Company adopted the ASU in the first quarter of 2018. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows – Restricted Cash (Topic 230), which clarifies the presentation requirements of restricted cash within the statement of cash flows. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash and cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU requires a retrospective approach to adoption. The Company adopted the ASU in 2018 and the cash and cash equivalents at the beginning-of-period and end-of-period total amounts in our condensed consolidated statements of cash flows have been adjusted to include $0.3 million of restricted cash for the years ending December 31, 2018 and 2017.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. The standard adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a more specific definition of a business. The Company adopted the ASU in the first quarter of 2018 on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. The standard provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award to which an entity would be required to apply modification accounting under Accounting Standard Codification, or ASC, 718. The Company adopted the ASU in the first quarter of 2018 on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, amending certain aspects of the new leasing standard. The amendment allows an additional optional transition method whereby an entity records a cumulative effect adjustment to opening retained earnings in the year of adoption without restating prior periods. The Company will adopt this ASU on January 1, 2019 electing the optional transition method and the Company does not expect to record a cumulative effect adjustment to the opening accumulated deficit balance. The Company will also elect the package of practical expedients permitted under the transition guidance, which allows the Company to carry forward the historical lease classification, the assessment on whether a contract is or contains a lease, and the initial direct costs for any leases that exist prior to adoption of the new standard. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements, but believes the primary effect of adopting will be to record right-of-use assets and obligations for our leases currently classified as operating leases. See Note 11 for a summary of our undiscounted minimum rental commitments under operating leases as of December 31, 2018. In February 2018, the FASB issued ASU 2018-02, Income Taxes (Topic 740), which allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. Tax Cuts and Jobs Act to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company does not expect to elect to reclassify the income tax effects under ASU 2018-05, as it does not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements. |
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Reclassifications |
(v)Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation. |
Summary of Significant Accounting Policies (Tables) |
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New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's Liabilities that are Measured at Fair Value on a Recurring Basis |
The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):
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Schedule of Aggregate Fair Values of the Company's Common Stock Warrants and Contingent Consideration for which Fair Value is Determined by Level 3 Inputs | The following table provides a rollforward of the aggregate fair values of the Company’s common stock warrants and contingent consideration for which fair value is determined by Level 3 inputs (in thousands):
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Schedule of Rollforward of the Accrued Warranties |
The following table provides a rollforward of the accrued warranties (in thousands):
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Schedule of net loss per share, basic and diluted |
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Schedule of potentially dilutive securities excluded from the computation of diluted net loss per share attributable to common stockholders |
The Company excluded the following potentially dilutive securities, outstanding as of December 31, 2018, 2017 and 2016 from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2018, 2017 and 2016 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.
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ASU 2014-09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact of Topic 606 Adoption on the Company's Consolidated Balance Sheet |
In accordance with Topic 606 disclosure requirements, the impact of adoption on the Company’s consolidated balance sheet was as follows (in thousands):
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Stock Option | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Employee Stock Options Estimated Using Black-Scholes Option Valuation Model |
The following table presents the weighted‑average assumptions used to estimate the fair value of options granted during the periods presented:
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Employee Stock Purchase Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Employee Stock Options Estimated Using Black-Scholes Option Valuation Model |
The following table presents the weighted-average assumptions used to estimate the fair value of the stock purchase rights granted under the employee stock purchase plan:
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Acquisitions (Tables) - miraDry |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Aggregate Preliminary Acquisition Date Fair Value of Consideration Transferred | The aggregate preliminary acquisition date fair value of the consideration transferred was approximately $29.6 million, consisting of the following (in thousands):
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Schedule of Allocation of the Fair Value of the Consideration Transferred by Major Class |
In accordance with ASC 805, the Company has recorded the acquired assets (including identifiable intangible assets) and liabilities assumed at their respective fair value. The preliminary allocation of the total purchase price is as follows (in thousands):
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Schedule of Intangible Assets Acquired |
A summary of the intangible assets acquired, estimated useful lives and amortization method is as follows (in thousands):
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Unaudited Pro Forma Information | The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the merger actually occurred at the beginning of fiscal year 2017 or of the results of future operations of the combined business. Consequently, actual results differ from the unaudited pro forma information presented below (in thousands, except per share amount):
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Balance Sheet Components (Tables) |
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Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories, net |
Inventories, net consist of the following (in thousands):
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Schedule of property and equipment, net |
Property and equipment, net consist of the following (in thousands):
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Schedule of accrued and other current liabilities |
Accrued and other current liabilities consist of the following:
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Long-Term Debt and Revolving Loan (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Future Principal Payments for Outstanding Term Loans |
The future schedule of principal payments for the outstanding Term Loans as of December 31, 2018 was as follows (in thousands):
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Goodwill and Other Intangible Assets, net (Tables) |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Carrying Amount of Goodwill |
The changes in the carrying amount of goodwill during the years ended December 31, 2018 and 2017 were as follows (in thousands):
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Components of Other Intangible Assets |
The components of the Company’s other intangible assets consist of the following definite-lived and indefinite-lived assets (in thousands):
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Schedule of Estimated Amortization Expense | The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of December 31, 2018 (in thousands):
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Provision for Income Tax |
The provision for income tax consists of the following:
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Schedule of Reconciliation of Actual Income Tax Expense Obtained by Applying Statutory Federal Income Tax Rate |
Actual income tax expense differs from that obtained by applying the statutory federal income tax rate of 21% in 2018 and 34% in 2017 and 2016 to income before income taxes as follows (in thousands):
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Schedule of Tax Effects of Temporary Differences and Carryforwards that Give Rise to Significant Portions of Deferred Tax Assets and Liabilities |
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
|
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Schedule of Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits |
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of option activity |
The following summarizes all option activity under the 2007 Plan, 2014 Plan and Inducement Plan:
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Summary of RSUs activity |
Activity related to RSUs is set forth below:
|
Segment Reporting and Geographic Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Sales, Net Operating Loss and Net Assets by Reportable Segment |
The following tables present the net sales, net operating loss and net assets by reportable segment for the periods presented (in thousands):
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Summary of Net Sales by Geographical Regions | The following table presents the net sales by geographical region for the periods presented (in thousands):
|
Commitments and Contingencies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||
Commitments And Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments under Non-cancelable Operating Leases |
As of December 31, 2018, future minimum lease payments under all non‑cancelable operating leases are as follows (in thousands):
|
Summary of Quarterly Financial Information (Unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Quarterly Financial Information (Unaudited) |
|
Summary of Significant Accounting Policies - Schedule of Company's Liabilities that are Measured at Fair Value on a Recurring Basis (Details) - Recurring - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value Measurements | ||
Fair value liability | $ 13,960 | $ 12,513 |
Warrants | ||
Fair Value Measurements | ||
Fair value liability | 113 | 194 |
Contingent Consideration Liability | ||
Fair Value Measurements | ||
Fair value liability | 13,847 | 12,319 |
Level 3 | ||
Fair Value Measurements | ||
Fair value liability | 13,960 | 12,513 |
Level 3 | Warrants | ||
Fair Value Measurements | ||
Fair value liability | 113 | 194 |
Level 3 | Contingent Consideration Liability | ||
Fair Value Measurements | ||
Fair value liability | $ 13,847 | $ 12,319 |
Summary of Significant Accounting Policies - Schedule of Aggregate Fair Values of the Company's Common Stock Warrants and Contingent Consideration for which Fair Value is Determined by Level 3 Inputs (Details) - Level 3 - Recurring $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Warrants | |
Fair values of the Company's liabilities determined by Level 3 inputs | |
Balance at beginning of the period | $ 194 |
Change in fair value | (81) |
Balance at the end of the period | 113 |
Contingent Consideration Liability | |
Fair values of the Company's liabilities determined by Level 3 inputs | |
Balance at beginning of the period | 12,319 |
Payments of contingent consideration | (1,000) |
Change in fair value | 2,528 |
Balance at the end of the period | $ 13,847 |
Summary of Significant Accounting Policies (PPE and Revenue) (Details1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-01-01 |
Dec. 31, 2018 |
---|---|
Product Replacement | |
Summary Of Significant Accounting Policies [Line Items] | |
Performance obligation satisfing period | 20 years |
Maximum | Financial Service | |
Summary Of Significant Accounting Policies [Line Items] | |
Performance obligation satisfing period | 24 months |
Minimum | Financial Service | |
Summary Of Significant Accounting Policies [Line Items] | |
Performance obligation satisfing period | 6 months |
Breast Products and Consumable miraDry products | |
Summary Of Significant Accounting Policies [Line Items] | |
Performance obligation satisfing period | 30 days |
MiraDry Systems | Maximum | |
Summary Of Significant Accounting Policies [Line Items] | |
Performance obligation satisfing period | 1 year |
Summary of Significant Accounting Policies - Schedule of Rollforward of the Accrued Warranties (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Beginning balance | $ 1,642 | $ 1,378 |
Acquired warranty liability | 137 | |
Warranty costs incurred during the period | (572) | (167) |
Changes in accrual related to warranties issued during the period | 891 | 301 |
Changes in accrual related to pre-existing warranties | (566) | (7) |
Ending Balance | $ 1,395 | $ 1,642 |
Summary of Significant Accounting Policies - Schedule of Net Loss Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Accounting Policies [Abstract] | |||||||||||
Net loss | $ (24,631) | $ (20,545) | $ (18,028) | $ (19,423) | $ (17,834) | $ (14,381) | $ (20,391) | $ (11,422) | $ (82,627) | $ (64,028) | $ (40,166) |
Weighted average common shares outstanding, basic and diluted | 25,402,241 | 19,159,057 | 18,233,177 | ||||||||
Net loss per share attributable to common stockholders | $ (0.86) | $ (0.72) | $ (0.73) | $ (0.99) | $ (0.92) | $ (0.74) | $ (1.07) | $ (0.61) | $ (3.25) | $ (3.34) | $ (2.20) |
Summary of Significant Accounting Policies - Schedule of Potentially Dilutive Securities Excluded from Computation of Diluted Net Loss Per Share Attributable to Common Stockholders (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Potentially dilutive securities | |||
Potentially dilutive securities | 1,673,488 | 1,915,337 | 2,105,006 |
Stock options to purchase common stock | |||
Potentially dilutive securities | |||
Potentially dilutive securities | 1,625,778 | 1,867,627 | 2,057,296 |
Warrants for the purchase of common stock | |||
Potentially dilutive securities | |||
Potentially dilutive securities | 47,710 | 47,710 | 47,710 |
Summary of Significant Accounting Policies - Schedule of Impact of Topic 606 Adoption on the Company's Consolidated Balance Sheet (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Assets | |||
Accounts receivable, net of allowances | $ 22,527 | $ 6,569 | |
Liabilities | |||
Sales return liability | 6,048 | ||
ASU 2014-09 | |||
Assets | |||
Accounts receivable, net of allowances | $ 10,475 | ||
Liabilities | |||
Sales return liability | 3,906 | ||
Total Adjustment | ASU 2014-09 | |||
Assets | |||
Accounts receivable, net of allowances | (6,048) | 3,906 | |
Liabilities | |||
Sales return liability | $ (6,048) | $ 3,906 |
Summary of Significant Accounting Policies - Schedule of Impact of Topic 606 Adoption on the Company's Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Assets | |||
Accounts receivable, net of allowances | $ 22,527 | $ 6,569 | |
Liabilities | |||
Sales return liability | 6,048 | ||
ASU 2014-09 | |||
Assets | |||
Accounts receivable, net of allowances | $ 10,475 | ||
Liabilities | |||
Sales return liability | 3,906 | ||
Total Adjustment | ASU 2014-09 | |||
Assets | |||
Accounts receivable, net of allowances | (6,048) | 3,906 | |
Liabilities | |||
Sales return liability | (6,048) | $ 3,906 | |
Amounts Under Previous Standards | ASU 2014-09 | |||
Assets | |||
Accounts receivable, net of allowances | $ 16,479 |
Acquisitions - Schedule of Aggregate Preliminary Acquisition Date Fair Value of Consideration Transferred (Details) - miraDry $ in Thousands |
Jun. 11, 2017
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Cash consideration at Acquisition Date (other than debt payoff) | $ 6,193 |
Cash consideration at Acquisition Date (debt payoff) | 12,467 |
Deferred consideration | 966 |
Contingent consideration | 9,946 |
Total purchase consideration | $ 29,572 |
Acquisitions - Schedule of Allocation of the Fair Value of the Consideration Transferred by Major Class (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
Jul. 25, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Fair value of the assets acquired | ||||
Goodwill | $ 12,507 | $ 12,507 | $ 4,878 | |
miraDry | ||||
Fair value of the assets acquired | ||||
Cash | $ 205 | |||
Accounts receivable, net | 2,091 | |||
Inventories, net | 7,064 | |||
Other current assets | 170 | |||
Property and equipment, net | 528 | |||
Goodwill | $ 7,600 | 7,629 | ||
Intangible assets | 14,800 | |||
Restricted cash | 305 | |||
Other assets | 12 | |||
Liabilities assumed: | ||||
Accounts payable | (908) | |||
Accrued and other current liabilities | (2,294) | |||
Other current liabilities | (30) | |||
Net assets acquired | $ 29,572 |
Acquisitions - Schedule of Intangible Assets Acquired (Details) - miraDry $ in Thousands |
Jul. 25, 2017
USD ($)
|
---|---|
Fair value of the assets acquired | |
Intangible assets | $ 14,800 |
Developed technology | |
Fair value of the assets acquired | |
Intangible assets | $ 3,000 |
Estimated useful life of asset | 15 years |
Amortization method | Accelerated |
Customer relationships | |
Fair value of the assets acquired | |
Intangible assets | $ 6,300 |
Estimated useful life of asset | 14 years |
Amortization method | Accelerated |
Distributor relationships | |
Fair value of the assets acquired | |
Intangible assets | $ 500 |
Estimated useful life of asset | 9 years |
Amortization method | Accelerated |
Trade name | |
Fair value of the assets acquired | |
Intangible assets | $ 5,000 |
Estimated useful life of asset | 15 years |
Amortization method | Accelerated |
Acquisitions - Unaudited Pro Forma Information (Details) - miraDry $ / shares in Units, $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
$ / shares
| |
Business Acquisition [Line Items] | |
Net sales | $ 46,747 |
Net loss | $ (74,110) |
Pro forma loss per share attributable to ordinary shares - basic and diluted | $ / shares | $ (3.96) |
Balance Sheet Components (Inventories) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Raw materials | $ 2,147 | $ 1,642 |
Work in progress | 2,110 | 3,956 |
Finished goods | 18,335 | 15,298 |
Finished goods - right of return | 1,493 | |
Inventory, net | $ 24,085 | $ 20,896 |
Balance Sheet Components (PPE) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2018 |
|
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | $ 5,033 | $ 6,804 | ||
Less accumulated depreciation | (2,497) | (2,041) | ||
Property and equipment, net | 2,536 | 4,763 | ||
Depreciation expense | 1,100 | 900 | $ 400 | |
Repurchase equipment | $ 2,700 | |||
Leasehold improvements | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | 402 | 402 | ||
Manufacturing equipment and toolings | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | 1,928 | 4,260 | ||
Computer equipment | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | 682 | 387 | ||
Software | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | 1,039 | 797 | ||
Office equipment | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | 156 | 142 | ||
Furniture and fixtures | ||||
Property Plant And Equipment [Line Items] | ||||
Property and equipment, gross | $ 826 | $ 816 |
Balance Sheet Components (Accrued liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued and other current liabilities | ||
Payroll and related expenses | $ 6,466 | $ 3,579 |
Accrued commissions | 5,321 | 3,297 |
Accrued equipment | 18 | 1,091 |
Deferred and contingent consideration, current portion | 7,645 | 977 |
Audit, consulting and legal fees | 703 | 920 |
Accrued sales and marketing expenses | 1,374 | 794 |
Other | 6,170 | 2,816 |
Total | $ 27,697 | $ 13,474 |
Long-Term Debt and Revolving Loan (Schedule of Future Principal Payments for Outstanding Term Loans) (Details) - Term Loans $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Line Of Credit Facility [Line Items] | |
2019 | $ 7,000 |
2020 | 14,000 |
2021 | 14,000 |
Total | $ 35,000 |
Goodwill and Intangible Assets (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018
USD ($)
ReportingUnit
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Goodwill And Intangible Assets Disclosure [Abstract] | |||
Number of reporting units | ReportingUnit | 2 | ||
Amortization expense | $ | $ 2.3 | $ 2.2 | $ 0.8 |
Goodwill and Intangible Assets - Schedule of Changes in Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Goodwill and intangible assets | |||
Goodwill | $ 19,156 | $ 26,785 | $ 26,785 |
Accumulated impairment losses | (14,278) | (14,278) | (14,278) |
Goodwill, net | 4,878 | 12,507 | 12,507 |
Goodwill acquired | 7,629 | ||
Breast Product | |||
Goodwill and intangible assets | |||
Goodwill | 19,156 | 19,156 | 19,156 |
Accumulated impairment losses | (14,278) | (14,278) | (14,278) |
Goodwill, net | 4,878 | 4,878 | 4,878 |
miraDry | |||
Goodwill and intangible assets | |||
Goodwill | 7,629 | 7,629 | |
Goodwill, net | $ 7,629 | $ 7,629 | |
Goodwill acquired | $ 7,629 |
Goodwill and Intangible Assets - Schedule of Estimated Amortization Expense (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Estimated amortization expense | |
2019 | $ 2,321 |
2020 | 2,209 |
2021 | 1,996 |
2022 | 1,762 |
Thereafter | 7,757 |
Total amortization | $ 16,045 |
Income Taxes - Schedule of Provision for Income Tax (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Deferred tax, Federal | $ 2,000 | $ (38,000) | $ 55,000 |
Deferred tax, State | (10,000) | 17,000 | 6,000 |
Deferred tax, Foreign | 4,000 | 4,000 | |
Income tax (benefit) expense | $ (4,000) | $ (17,000) | $ 61,000 |
Income Taxes - Schedule of Reconciliation of Actual Income Tax Expense Obtained by Applying Statutory Federal Income Tax Rate (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Reconciliation of actual income tax expense obtained by applying the statutory federal income tax rate | |||
Tax at federal statutory rate | $ (17,353,000) | $ (21,776,000) | $ (13,636,000) |
State, net of federal benefit | (5,999,000) | (2,637,000) | (1,321,000) |
Permanent items | 338,000 | 1,327,000 | 1,420,000 |
State rate change | 60,000 | (56,000) | 87,000 |
Change in federal statutory rate | 34,555,000 | ||
Change in valuation allowance | 23,053,000 | (11,274,000) | 13,502,000 |
Other | (103,000) | (156,000) | 9,000 |
Total | $ (4,000) | $ (17,000) | $ 61,000 |
Income Taxes - Schedule of Tax Effects of Temporary Differences and Carryforwards that Give Rise to Significant Portions of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred tax assets and liabilities | ||
Net operating loss carryforwards | $ 80,382 | $ 61,171 |
Research and development credits | 3,494 | 3,049 |
Accruals and reserves | 8,896 | 4,993 |
Intangibles | 4,599 | 5,605 |
Gross deferred tax assets | 97,371 | 74,818 |
Less valuation allowance | (93,904) | (71,075) |
Total deferred tax assets | 3,467 | 3,743 |
Depreciation | (15) | (18) |
Intangibles - deferred tax liability | (3,484) | (3,765) |
Total deferred tax liabilities | (3,499) | (3,783) |
Net deferred taxes | $ (32) | $ (40) |
Income Taxes - Schedule of Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ||
Balance at beginning of the period | $ 966 | $ 732 |
Additions based on acquisitions during the current year | 186 | |
Additions based on tax positions taken in the current year | 110 | 48 |
Balance at end of the period | $ 1,076 | $ 966 |
Employee Benefit Plans (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Compensation And Retirement Disclosure [Abstract] | |||
Company contribution (as a percent) | 3.00% | ||
Company contribution | $ 0.7 | $ 0.6 | $ 0.1 |
Stockholders' Equity (Details) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Stock other disclosures | ||
Common and preferred stock, shares authorized | 210,000,000 | |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Stockholders' Equity (Warrants) (Details) - $ / shares |
1 Months Ended | ||
---|---|---|---|
Jan. 17, 2013 |
Jun. 30, 2014 |
Dec. 31, 2018 |
|
Common Stock Warrants | |||
Aggregate number of common shares to purchase | 47,710 | ||
Oxford Finance, LLC | |||
Common Stock Warrants | |||
Exercise price (in dollars per share) | $ 14.671 | $ 14.671 | |
Tranche A, B and C loan | Oxford Finance, LLC | |||
Common Stock Warrants | |||
Warrant term | 7 years | ||
Percentage of term loan amounts | 3.00% | ||
Tranche D term loan | Oxford Finance, LLC | |||
Common Stock Warrants | |||
Warrant term | 7 years | ||
Percentage of term loan amounts | 2.50% |
Stockholders' Equity (Restricted Stock) (Details) - Restricted stock units - 2014 Plan - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Stockholders' Equity, other disclosures | |||
Requisite service period, annually | 3 years | ||
Granted | $ 14.38 | $ 9.19 | $ 8.21 |
Stock-based compensation expense | $ 11.7 | $ 4.1 | $ 1.2 |
Unrecognized compensation costs (in dollars) | $ 19.1 | ||
Weighted average period over which unrecognized compensation costs are expected to be recognized | 2 years 1 month 6 days | ||
Number of shares | |||
Balance at beginning of the period | 928,552 | 430,733 | |
Granted | 1,932,840 | 832,145 | |
Vested | (523,257) | (293,910) | |
Forfeited | (196,785) | (40,416) | |
Balance at end of the period | 2,141,350 | 928,552 | 430,733 |
Weighted average grant date fair value | |||
Balance at beginning of the period | $ 9.12 | $ 7.99 | |
Granted | 14.38 | 9.19 | $ 8.21 |
Vested | 10.40 | 7.75 | |
Forfeited | 12.26 | 8.47 | |
Balance at end of the period | $ 13.27 | $ 9.12 | $ 7.99 |
Segment Reporting and Geographic Information (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | Segment | 2 |
Segments unallocated expenses | $ | $ 0 |
Segment Reporting and Geographic Information - Summary of Net Sales and Net Operating Loss by Reportable Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | |||||||||||
Total net sales | $ 19,021 | $ 16,875 | $ 17,554 | $ 14,676 | $ 11,065 | $ 9,819 | $ 8,169 | $ 7,489 | $ 68,126 | $ 36,542 | $ 20,734 |
Total loss from operations | (79,774) | (62,890) | (40,034) | ||||||||
Total assets | 168,359 | 92,213 | 168,359 | 92,213 | |||||||
Breast Products | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Total net sales | 37,016 | 31,485 | 20,734 | ||||||||
Total loss from operations | (53,047) | (56,657) | $ (40,034) | ||||||||
Total assets | 130,149 | 59,365 | 130,149 | 59,365 | |||||||
miraDry | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Total net sales | 31,110 | 5,057 | |||||||||
Total loss from operations | (26,727) | (6,233) | |||||||||
Total assets | $ 38,210 | $ 32,848 | $ 38,210 | $ 32,848 |
Segment Reporting and Geographic Information - Summary of Net Sales by Geographical Regions (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | |||||||||||
Net sales | $ 19,021 | $ 16,875 | $ 17,554 | $ 14,676 | $ 11,065 | $ 9,819 | $ 8,169 | $ 7,489 | $ 68,126 | $ 36,542 | $ 20,734 |
North America | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 49,975 | 33,473 | $ 20,734 | ||||||||
International | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | $ 18,151 | $ 3,069 |
Commitments and Contingencies - Schedule of Future Minimum Lease Payments under Non-cancelable Operating Leases (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Future minimum lease payments | |
2019 | $ 1,325 |
2020 | 1,134 |
2021 | 1,060 |
2022 | 947 |
2023 and thereafter | 1,557 |
Total | $ 6,023 |
Summary of Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Selected Quarterly Financial Information [Abstract] | |||||||||||
Net sales | $ 19,021 | $ 16,875 | $ 17,554 | $ 14,676 | $ 11,065 | $ 9,819 | $ 8,169 | $ 7,489 | $ 68,126 | $ 36,542 | $ 20,734 |
Gross profit | 11,354 | 10,477 | 10,894 | 8,579 | 5,321 | 6,335 | 5,548 | 5,167 | 41,304 | 22,371 | 13,854 |
Net loss | $ (24,631) | $ (20,545) | $ (18,028) | $ (19,423) | $ (17,834) | $ (14,381) | $ (20,391) | $ (11,422) | $ (82,627) | $ (64,028) | $ (40,166) |
Net loss per share: | |||||||||||
Basic and diluted | $ (0.86) | $ (0.72) | $ (0.73) | $ (0.99) | $ (0.92) | $ (0.74) | $ (1.07) | $ (0.61) | $ (3.25) | $ (3.34) | $ (2.20) |
Schedule II - Valuation And Qualifying Accounts (Details) - Allowance for sales returns - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Valuation And Qualifying Accounts [Abstract] | |||
Balance at beginning of period | $ 3,906 | $ 3,908 | $ 660 |
Additions charged to costs and expenses | 70,608 | 48,098 | 33,797 |
Deductions | (68,466) | (48,100) | (30,549) |
Balance at end of period | $ 6,048 | $ 3,906 | $ 3,908 |