Tandem Diabetes Care(US:TNDM)2024-05-02 20:12Part I Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Tandem Diabetes Care, Inc. as of March 31, 2024 Condensed Consolidated Balance Sheets Total assets slightly decreased to $941.0 million, liabilities increased to $698.0 million due to convertible notes Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $735,193 | $747,989 | | Total assets | $941,045 | $952,658 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $192,971 | $195,258 | | Convertible senior notes, net - long-term | $347,497 | $285,035 | | Total liabilities | $697,981 | $639,026 | | Total stockholders' equity | $243,064 | $313,632 | | Total liabilities and stockholders' equity | $941,045 | $952,658 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Sales increased to $191.7 million, with net loss significantly reduced to $42.7 million, due to the absence of a prior R&D charge Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Sales | $191,674 | $169,383 | | Gross profit | $94,672 | $82,907 | | Operating loss | $(41,678) | $(127,817) | | Net loss | $(42,715) | $(123,873) | | Net loss per share - basic and diluted | $(0.65) | $(1.92) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $8.0 million, with financing activities providing $13.6 million, stabilizing cash Summary of Cash Flows (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,996) | $(18,326) | | Net cash used in investing activities | $(5,056) | $(26,329) | | Net cash provided by (used in) financing activities | $13,586 | $(541) | | Net increase (decrease) in cash and cash equivalents | $111 | $(44,755) | | Cash and cash equivalents at end of period | $58,979 | $127,762 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, Tandem Choice revenue, debt financing, segment reporting, and legal proceedings - The Tandem Choice program, which provided a material right for customers to upgrade to the Tandem Mobi pump, resulted in deferred revenue of $31.5 million as of March 31, 2024, with eligibility for the program ending in February 2024293132 - In March 2024, the company issued $316.3 million of 1.50% Convertible Senior Notes due 2029 and used a portion of the proceeds to repurchase $246.7 million of its existing 2025 notes, resulting in a $1.3 million loss on debt extinguishment585960 Revenue by Geographic Region (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | United States | $129,761 | $131,242 | | Outside the United States | $61,913 | $38,141 | | Total Sales | $191,674 | $169,383 | - The company is defending against a putative securities class action lawsuit and two shareholder derivative cases related to alleged false and misleading statements about sales trends and financial forecasts102103 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 results, highlighting 13% sales growth, Tandem Mobi launch, and narrowed net loss - The company's strategy is to offer flexibility and choice in insulin delivery systems through a portfolio of pumps (t:slim X2, Tandem Mobi), applications, and insights114122 - Future technology pipeline includes the t:slim X3, a tubeless option for the Mobi pump, the Sigi Patch Pump, extended wear infusion sets, and advancements in the Control-IQ algorithm123124126127128 Q1 2024 vs Q1 2023 Results of Operations (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total sales | $191,674 | $169,383 | | Gross profit | $94,672 | $82,907 | | Gross margin | 49% | 49% | | Operating loss | $(41,678) | $(127,817) | | Net loss | $(42,715) | $(123,873) | - Sales outside the U.S. grew 62% to $61.9 million, while U.S. sales slightly decreased by 1% to $129.8 million, with international growth attributed to recovery from a distributor transition149151 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk disclosures, primary exposure to fixed-rate convertible notes mitigating interest rate risk - There were no material changes to the company's quantitative and qualitative disclosures about market risk during the three months ended March 31, 2024171 - The company's $357.0 million in convertible senior notes bear a fixed interest rate of 1.50% per year, so the company is not subject to interest rate risk on this debt172 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material changes in internal control - Based on an evaluation as of March 31, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level174 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting176 Part II Other Information Item 1. Legal Proceedings This section refers to Note 13 for legal matters, primarily a securities class action and two shareholder derivative cases - Details on legal proceedings are provided in Note 13 of the financial statements, which discusses a securities class action lawsuit and two related shareholder derivative cases179102103 Item 1A. Risk Factors This section outlines material risks including operating losses, insulin pump reliance, competition, reimbursement, and regulatory challenges - Business Risks: The company has a history of significant operating losses ($994.5 million accumulated deficit) and relies heavily on sales of its insulin pump products, facing intense competition from major medical device companies like Insulet and Medtronic193197205 - Market & Reimbursement Risks: Failure to secure or retain adequate coverage and reimbursement from third-party payors could adversely affect business, with new challenges arising from the multi-channel strategy for the Mobi pump through the pharmacy channel213215 - Operational & Supply Chain Risks: The company depends on a limited number of third-party suppliers for critical components and products, exposing it to risks of supply disruption, quality issues, and cost fluctuations238240 - Privacy & Security Risks: The business is subject to stringent data privacy laws (e.g., GDPR, HIPAA, CCPA) and cybersecurity threats, where failure to protect sensitive data could lead to significant fines, litigation, and reputational harm274291 - Regulatory & Legal Risks: The company's products are subject to extensive regulation by the FDA and other global authorities, with non-compliance potentially leading to recalls, fines, or withdrawal of approvals, and ongoing patent litigation with Roche in Europe320313314 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On March 5, 2024, the company repurchased 1,106,806 shares at $27.105 per share, part of a $30.0 million buyback plan Common Stock Repurchase - March 2024 | Date | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 5, 2024 | 1,106,806 | $27.105 | - The stock repurchase was part of a plan to buy back up to $30.0 million of common stock from purchasers of the 2029 Notes in privately negotiated transactions370 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including the 2029 Convertible Notes indenture and CEO/CFO certifications - Key exhibits filed include the indenture for the 1.50% Convertible Senior Notes due 2029 and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act373