Nevro(NVRO) - 2022 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of Nevro Corp Item 1. Condensed Consolidated Financial Statements (unaudited) This section provides Nevro Corp.'s unaudited condensed consolidated financial statements and accompanying notes for the periods ended March 31, 2022 and 2021 Condensed Consolidated Balance Sheets This section presents the condensed consolidated balance sheets as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :--------- | | Total current assets | $490,379 | $531,204 | $(40,825) | -7.68% | | Total assets | $532,879 | $574,544 | $(41,665) | -7.25% | | Total current liabilities | $70,324 | $82,203 | $(11,879) | -14.45% | | Long-term debt | $185,953 | $151,310 | $34,643 | 22.89% | | Total liabilities | $292,493 | $270,928 | $21,565 | 7.96% | | Total stockholders' equity | $240,386 | $303,616 | $(63,230) | -20.83% | - The decrease in total current assets was primarily driven by a reduction in short-term investments from $327,300 thousand to $274,200 thousand and accounts receivable from $70,500 thousand to $63,100 thousand[8] - Long-term debt significantly increased by 22.89% from December 31, 2021, to March 31, 2022, primarily due to adjustments from the adoption of ASU 2020-06, which reclassified the 2025 Notes wholly as debt[8][26][72] Condensed Consolidated Statements of Operations and Comprehensive Loss This section presents the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Revenue | $87,842 | $88,610 | $(768) | -0.87% | | Cost of revenue | $28,750 | $26,316 | $2,434 | 9.25% | | Gross profit | $59,092 | $62,294 | $(3,202) | -5.14% | | Research and development | $12,536 | $11,534 | $1,002 | 8.69% | | Sales, general and administrative | $79,325 | $73,272 | $6,053 | 8.26% | | Loss from operations | $(32,769) | $(22,512) | $(10,257) | 45.56% | | Interest expense | $(1,603) | $(6,547) | $4,944 | -75.52% | | Net loss | $(34,325) | $(29,561) | $(4,764) | 16.12% | | Net loss per share, basic and diluted | $(0.98) | $(0.85) | $(0.13) | 15.29% | - Revenue saw a slight decrease of 0.87% year-over-year, while cost of revenue increased by 9.25%, leading to a 5.14% decrease in gross profit and a reduction in gross margin from 70% to 67%[10][125][126] - Operating expenses increased significantly, with R&D up 8.69% and SG&A up 8.26%, contributing to a 45.56% increase in loss from operations[10][127][128] - Interest expense decreased substantially by 75.52% due to the adoption of ASU 2020-06, which eliminated the amortization of debt discounts related to the conversion feature of the 2025 Notes, and the settlement of 2021 Notes[10][131] Condensed Consolidated Statements of Stockholders' Equity This section presents the condensed consolidated statements of stockholders' equity for the three months ended March 31, 2022 and 2021 | Metric | December 31, 2021 (in thousands) | Adjustments from ASU 2020-06 (in thousands) | March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------------------ | :---------------------------- | | Additional Paid-In Capital | $928,138 | $(48,340) | $886,451 | | Accumulated Deficit | $(624,193) | $13,995 | $(644,523) | | Total Stockholders' Equity | $303,616 | $(34,345) | $240,386 | - The adoption of ASU 2020-06 on January 1, 2022, significantly impacted stockholders' equity, resulting in a $48,300 thousand reduction in additional paid-in capital and a $14,000 thousand reduction in the beginning balance of accumulated deficit[13][26] - Stock-based compensation contributed $13,400 thousand to additional paid-in capital for the three months ended March 31, 2022[13] Condensed Consolidated Statements of Cash Flows This section presents the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Net cash used in operating activities | $(28,418) | $(6,871) | $(21,547) | 313.59% | | Net cash provided by investing activities | $50,067 | $50,342 | $(275) | -0.55% | | Net cash provided by financing activities | $(6,753) | $(1,470) | $(5,283) | 359.39% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $14,761 | $41,940 | $(27,179) | -64.80% | | Cash, cash equivalents and restricted cash at end of period | $50,077 | $87,143 | $(37,066) | -42.53% | - Net cash used in operating activities increased significantly by 313.59% year-over-year, primarily due to higher net losses and unfavorable changes in accounts payable, accrued liabilities, and prepaid expenses[17][138] - Cash provided by investing activities remained relatively stable, driven by proceeds from maturities of short-term investments offsetting purchases of new investments[17][139] - Net cash used in financing activities increased substantially, mainly due to higher minimum tax withholdings paid on behalf of employees for net share settlement[17][141] Notes to Condensed Consolidated Financial Statements This section provides detailed notes accompanying the condensed consolidated financial statements, explaining accounting policies and specific financial items 1. Summary of Significant Accounting Policies This section outlines the significant accounting policies used in preparing the interim financial statements, including recent accounting pronouncements - The interim financial statements are unaudited and prepared in accordance with U.S. GAAP, including all normal recurring adjustments necessary for fair presentation[20] - The Company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective method, which simplifies accounting for convertible instruments by eliminating separate equity components for conversion features and impacts diluted EPS calculation[25][26] Cumulative Effect of ASU 2020-06 Adoption on Balance Sheet (January 1, 2022) | Account | Balance at Dec 31, 2021 (in thousands) | Adjustments Due to ASU 2020-06 (in thousands) | Balance at Jan 1, 2022 (in thousands) | | :---------------------- | :------------------------------------- | :-------------------------------------------- | :------------------------------------ | | Long term debt | $151,310 | $34,345 | $185,655 | | Additional paid-in capital | $928,138 | $(48,340) | $879,798 | | Accumulated deficit | $(624,193) | $13,995 | $(610,198) | 2. Revenue This section details the company's revenue breakdown by geography and discusses the contribution of new product indications Revenue by Geography (Three Months Ended March 31) | Geography | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | Change (%) | | :---------- | :------------------ | :------------------ | :-------------------- | :--------- | | United States | $73,214 | $74,737 | $(1,523) | -2.04% | | International | $14,628 | $13,873 | $755 | 5.44% | | Total revenue | $87,842 | $88,610 | $(768) | -0.87% | - The United States accounted for 83% of total revenue in Q1 2022, a slight decrease from 84% in Q1 2021[29] - Revenue from Painful Diabetic Neuropathy (PDN) represented 7% of worldwide permanent implant procedures, generating approximately $6,000 thousand in Q1 2022, following FDA approval in July 2021[29] 3. Lease Accounting This section provides information on the company's operating lease arrangements, including terms, discount rates, and maturity schedules - The Company has operating leases for office space, manufacturing facilities, warehouses, R&D facilities, and equipment[30] Operating Lease Terms and Discount Rates | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Weighted-average remaining lease term | 3.98 years | 4.20 years | | Weighted-average discount rate | 7.0% | 7.0% | Operating Lease Liabilities Maturity (March 31, 2022) | Year | Operating Leases (in thousands) | | :--------- | :------------------------------ | | 2022 (remaining) | $4,345 | | 2023 | $6,019 | | 2024 | $6,201 | | 2025 | $2,849 | | 2026 | $405 | | Thereafter | $1,978 | | Total lease payments | $21,797 | | Less: Interest | $(2,848) | | Present value of lease liabilities | $18,949 | 4. Fair Value Measurements This section details the fair value measurements of financial instruments, categorizing them by valuation input levels - Cash equivalents (money market funds) are classified as Level 1, while short-term investments (agency bonds, corporate notes, treasury bonds) are classified as Level 1 or Level 2[32] Financial Instruments Measured at Fair Value (March 31, 2022) | Asset Type | Level 1 (in thousands) | Level 2 (in thousands) | Total (in thousands) | | :------------------ | :--------------------- | :--------------------- | :------------------- | | Money market funds | $28,796 | — | $28,796 | | Agency bonds | — | $32,514 | $32,514 | | Corporate notes | — | $20,196 | $20,196 | | Treasury bonds | $221,461 | — | $221,461 | | Total assets | $250,257 | $52,710 | $302,967 | - The fair value of the 2.75% convertible senior notes due 2025 was $204,000 thousand as of March 31, 2022, classified as Level 2[34] 5. Balance Sheet Components This section provides a detailed breakdown of key balance sheet components, including cash, inventories, property and equipment, and accrued liabilities Cash and Cash Equivalents (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $49,471 | $34,710 | | Money market funds | $28,796 | $9,562 | Inventories (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :--------------- | :------------- | :---------------- | | Raw materials | $42,079 | $50,160 | | Finished goods | $48,509 | $43,357 | | Total inventories | $90,588 | $93,517 | - Inventory write-downs totaled $1,100 thousand for the three months ended March 31, 2022, compared to $1,500 thousand for the same period in 2021[39] Property and Equipment, Net (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Total gross property and equipment | $44,987 | $43,319 | | Accumulated depreciation and amortization | $(24,150) | $(22,655) | | Property and equipment, net | $20,837 | $20,664 | Accrued Liabilities (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Accrued payroll and related expenses | $26,459 | $30,957 | | Accrued professional fees | $2,785 | $6,547 | | Accrued interest | $2,609 | $1,305 | | Total accrued liabilities | $38,326 | $45,517 | 6. Commitments and Contingencies This section outlines the company's operating lease commitments, warranty obligations, and ongoing legal proceedings, including patent infringement cases - The Company has operating leases for office space in Redwood City, CA (expiring May 2025), warehouse space (extended to May 2025), and a manufacturing facility in Costa Rica (expiring June 2031)[43][45][46] Warranty Obligations (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $664 | $699 | | Provision for warranty | $715 | $695 | | Utilization | $(927) | $(543) | | Ending balance | $452 | $851 | - A $20,000 thousand loss contingency related to the Delaware I patent infringement case with Boston Scientific was accrued as of March 31, 2022, following a jury finding of infringement and willful infringement of one patent[49][59][63] - The Company is involved in ongoing patent infringement litigations with Boston Scientific (Delaware II and III), Stimwave (settled with permanent injunction), and Nalu Medical (settled favorably)[56][62][64][65] 7. Debt This section details the company's debt instruments, including the 2021 and 2025 Notes, and the impact of ASU 2020-06 on their accounting - The 2021 Notes matured on June 1, 2021, and were settled by paying $172,500 thousand in principal and issuing 682,912 shares of common stock[67] - The 2025 Notes, with an aggregate principal of $189,800 thousand and a 2.75% interest rate, are convertible into common stock at an initial conversion price of $105.00 per share[69][70] - The adoption of ASU 2020-06 on January 1, 2022, resulted in accounting for the 2025 Notes wholly as debt, reversing the previous separation into liability and equity components, and reducing the effective interest rate from 10.2% to 3.5%[72][74] Net Carrying Amount of 2025 Notes Liability Component (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Principal | $189,750 | $189,750 | | Unamortized discount | — | $(35,079) | | Unamortized issuance cost | $(3,797) | $(3,361) | | Net carrying amount | $185,953 | $151,310 | Interest Expense Related to 2021 and 2025 Notes (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Contractual interest expense | $1,305 | $2,059 | | Amortization of debt discount | — | $4,006 | | Amortization of debt issuance costs | $298 | $481 | | Total interest expense | $1,603 | $6,546 | 8. Net Loss Per Share This section presents the calculation of net loss per share and identifies potentially dilutive securities excluded due to the net loss position Net Loss Per Share (Three Months Ended March 31) | Metric | 2022 | 2021 | | :------------------------------------ | :--- | :--- | | Net loss, basic and diluted (in thousands) | $(34,325) | $(29,561) | | Weighted average shares (in thousands) | 35,074 | 34,634 | | Net loss per share, basic and diluted | $(0.98) | $(0.85) | - Due to the Company's net loss position, diluted net loss per common share is the same as basic net loss per common share for all periods presented, as potentially dilutive securities would be anti-dilutive[78] Potentially Dilutive Securities Excluded from EPS (March 31) | Security Type | 2022 (shares) | 2021 (shares) | | :--------------------------------------- | :------------ | :------------ | | Unreleased restricted stock | 1,691,713 | 1,186,059 | | Options to purchase common stock | 688,762 | 775,956 | | Convertible senior notes | 1,807,141 | 3,597,174 | | Warrants related to convertible senior notes | 1,807,141 | 3,597,174 | | Total | 5,994,757 | 9,156,363 | 9. Employee Benefit Plans This section describes the company's employee benefit plans, including the 401(k) plan and the Employee Stock Purchase Plan (ESPP) - The Company's 401(k) plan includes matching contributions, with an expense of $2,300 thousand for Q1 2022, up from $2,200 thousand in Q1 2021[80] - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares at a discount, with 1,567,514 shares available for future purchase as of March 31, 2022[81][82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Nevro Corp.'s financial condition, operational results, and key factors impacting performance, including liquidity and capital resources Special note regarding forward-looking statements This section cautions that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from those discussed[84] - The Company undertakes no obligation to update forward-looking statements, except as required by law[85] Overview This section introduces Nevro Corp. as a medical device company focused on chronic pain treatment, highlighting its key products and strategic initiatives - Nevro Corp. is a global medical device company focused on chronic pain treatment, commercializing the Senza® spinal cord stimulation (SCS) system with proprietary paresthesia-free 10 kHz Therapy[86] - The 10 kHz Therapy has received FDA approval for back and leg pain, painful diabetic neuropathy (PDN) in July 2021, and expanded labeling for non-surgical refractory back pain (NSRBP) in January 2022[86][87] Quarterly Revenue Trends (in millions) | Quarter | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | | :-------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | U.S. sales | $75.3 | $51.0 | $90.9 | $94.6 | $74.7 | $85.0 | $78.1 | $88.4 | $73.2 | | International sales | $12.2 | $5.4 | $17.5 | $15.1 | $13.9 | $17.3 | $15.2 | $14.3 | $14.6 | | Total sales revenue | $87.5 | $56.4 | $108.5 | $109.7 | $88.6 | $102.3 | $93.2 | $102.8 | $87.8 | - The Company has an accumulated deficit of $644,500 thousand as of March 31, 2022, and plans significant investments in U.S. commercial infrastructure (including a PDN sales organization) and R&D[89] - Nevro is vertically integrating assembly of IPGs and peripherals in a Costa Rica facility, expected to be completed by mid-2022, to mitigate reliance on third-party manufacturers and improve gross margins[90] Important Factors Affecting our Results of Operations This section discusses key external and internal factors influencing the company's operational results, including market conditions, regulatory approvals, and strategic investments - The COVID-19 pandemic continues to negatively impact operations and revenues due to unpredictable demand for elective procedures, facility closures, and patient hesitancy, with the global SCS therapy market decreasing by 5% to 10% in 2021[91][92] - Success depends on physician awareness and acceptance of Senza products, including the latest Senza Omnia and the newly approved PDN and NSRBP indications, requiring significant marketing and sales force investment[97][98] - Reimbursement and coverage decisions by third-party payors are critical; while Medicare covers chronic back/leg pain, coverage for PDN and NSRBP is more limited, though UnitedHealthcare and Noridian (Medicare MAC) have begun to cover PDN[99][100][101] - Maintaining high inventory levels for complex products and lengthy manufacturing lead times expose the Company to risks of obsolescence and impairment charges, totaling $1,100 thousand in Q1 2022[103] - Ongoing investment in R&D and clinical trials (e.g., SENZA-PDN, SENZA-NSRBP studies) is crucial for expanding indications, product enhancements, and demonstrating efficacy, safety, and cost-effectiveness[104] - Significant investment is being made in building a U.S. sales organization, including a dedicated PDN referral sales force, which is a lengthy process requiring recruitment and training[105] - Access to hospital facilities requires lengthy purchasing contract negotiations with hospitals or Group Purchasing Organizations (GPOs), and in Europe, competitive bidding processes[106] Critical Accounting Policies, Significant Judgments and Use of Estimates This section discusses the critical accounting policies, significant judgments, and estimates used in preparing the financial statements - The financial statements are prepared using U.S. GAAP, requiring management to make estimates and judgments that affect reported amounts[107] - The Company adopted ASU 2020-06 on January 1, 2022, which simplifies accounting for convertible instruments[107] - No other significant material changes to critical accounting policies were made during the three months ended March 31, 2022[108] Components of Results of Operations This section breaks down the various components contributing to the company's results of operations, including revenue, cost of revenue, and operating expenses - Revenue is primarily generated from sales to hospitals and outpatient medical facilities through a direct sales force, recognized at the point of implantation or shipment for volume discounts[109][110] - Revenue fluctuates quarterly due to selling price variations, geographical mix, foreign currency exchange rates, and industry seasonality (lower in Q1/Q3, higher in Q4)[111][112] - Cost of revenue includes component acquisition, manufacturing overhead, royalties, scrap, inventory impairment, and distribution costs, impacting gross margin which is also affected by average sales price and manufacturing cost reduction[113][114][115] - Operating expenses comprise R&D (personnel, product design, clinical trials) and SG&A (sales/marketing personnel, commissions, administrative, legal, marketing, travel), with personnel costs being the most significant component[116][117][118] - Interest income is from investments, while interest expense is from outstanding debt and amortization of debt discount/issuance costs[121] - Other income (expense), net, primarily consists of foreign currency transaction gains and losses[122] - Provision for income taxes includes foreign and state income taxes, with a full valuation allowance maintained for U.S. deferred tax assets due to net operating losses[123] - Allowance for doubtful accounts is estimated based on historical bad debt experience, customer creditworthiness, and economic trends[124] Consolidated Results of Operations This section presents a detailed analysis of the company's consolidated financial performance, including revenue, gross profit, operating expenses, and net loss Revenue, Cost of Revenue, Gross Profit and Gross Margin (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $87,842 | $88,610 | $(768) | -0.87% | | Cost of revenue | $28,750 | $26,316 | $2,434 | 9.25% | | Gross profit | $59,092 | $62,294 | $(3,202) | -5.14% | | Gross margin | 67% | 70% | -3% | | - The decrease in gross margin was primarily due to increased costs of manufactured product components and costs associated with establishing the manufacturing facility in Costa Rica[126] Operating Expenses (Three Months Ended March 31) | Operating Expense | 2022 (in thousands) | % of Total Revenue | 2021 (in thousands) | % of Total Revenue | Change (in thousands) | | :------------------------ | :------------------ | :----------------- | :------------------ | :----------------- | :-------------------- | | Research and development | $12,536 | 14% | $11,534 | 13% | $1,002 | | Sales, general and administrative | $79,325 | 90% | $73,272 | 83% | $6,053 | | Total operating expenses | $91,861 | 105% | $84,806 | 96% | $7,055 | - R&D expense increased by $1.0 million (9%) due to higher personnel costs, while SG&A expense increased by $6.1 million (8%) driven by personnel costs, travel, PDN referral sales force, and software costs, partially offset by decreased legal expenses[127][128] Interest and Tax Items (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :------------------------ | :------------------ | :------------------ | :-------------------- | | Interest income | $143 | $297 | $(154) | | Interest expense | $(1,603) | $(6,547) | $4,944 | | Other income (expense), net | $85 | $(457) | $542 | | Provision for income taxes | $181 | $342 | $(161) | - Interest expense decreased significantly due to the adoption of ASU 2020-06 and the settlement of the 2021 Notes[131] Liquidity, Capital Resources and Plan of Operations This section assesses the company's liquidity, capital resources, and future operational plans, including anticipated expenditures and funding strategies - As of March 31, 2022, the Company had $323,600 thousand in cash, cash equivalents, and short-term investments, expected to fund operations for at least the next 12 months[134] - Future expenditures are anticipated for commercial infrastructure, sales force, R&D for product development and clinical trials, and ongoing intellectual property lawsuits[134] - The Company may seek additional funds through equity or debt financings, with capital requirements dependent on factors like COVID-19 impact, commercialization costs, R&D, IP litigation, and market acceptance[135] Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(28,418) | $(6,871) | | Net cash provided by investing activities | $50,067 | $50,342 | | Net cash provided by financing activities | $(6,753) | $(1,470) | | Net decrease in cash, cash equivalents and restricted cash | $14,761 | $41,940 | - Net cash used in operating activities increased significantly due to net losses and changes in working capital, while investing activities provided cash from short-term investment maturities[138][139] Contractual Obligations and Commitments This section outlines the company's significant contractual obligations and commitments, including operating leases and purchase agreements - Operating lease obligations include principal offices (Redwood City, CA, expiring May 2025), warehouse space (extended to May 2025), and a manufacturing facility in Costa Rica (expiring June 2031)[142][143][144][145] Contractual Obligations as of March 31, 2022 (in millions) | Obligation Type | Remainder of 2022 | 2023-2025 | 2025 (Principal & Interest) | | :------------------------ | :---------------- | :-------- | :-------------------------- | | Minimum annual purchase commitments | $8.9 | $18.4 | | | Service agreement | $2.5 | $2.5 | | | License agreement | | $0.2 | | | 2025 Notes (Interest) | $5.2 | $5.2 | | | 2025 Notes (Principal & Interest) | | | $192.4 | Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of March 31, 2022 - As of March 31, 2022, the Company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes in market risk exposures related to interest rates, market prices, and foreign currency exchange since December 31, 2021 - Market risk exposures related to interest rates, market prices, and foreign currency exchange have not materially changed since December 31, 2021[150] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[152] - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report[153] PART II—OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section incorporates by reference detailed legal proceedings information from Note 6 of the Condensed Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 6, Commitments and Contingencies, of the Condensed Consolidated Financial Statements[155] Item 1A. Risk Factors This section advises readers to consider risk factors from the Annual Report on Form 10-K, which could materially affect business and financial results - Readers should carefully consider the risk factors outlined in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities during the period[157] - There was no use of proceeds to report for the period[158] Item 3. Defaults Upon Senior Securities This section indicates no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[159] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the registrant - Mine safety disclosures are not applicable to the registrant[160] Item 5. Other Information This section indicates that no other information is reported - No other information is reported[161] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, debt instruments, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, various Indentures and Forms of Convertible Senior Notes, and certifications from the CEO and CFO[162][165] - XBRL Instance Document, Taxonomy Extension Schema, Calculation, Definition, and Label Linkbase Documents are also filed as exhibits[165] SIGNATURES This section contains the required signatures of the principal executive and financial officers, certifying the report - The report is signed by D. Keith Grossman, Chief Executive Officer, and Roderick H. MacLeod, Chief Financial Officer, on May 4, 2022[168]