swav-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________________

FORM 10-Q

___________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ___________

Commission File Number: 001-38829

___________________________________________________

Shockwave Medical, Inc.

(Exact Name of Registrant as Specified in its Charter)

___________________________________________________


Delaware			27-0494101
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5403 Betsy Ross Drive Santa Clara, California			95054
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (510) 279-4262

___________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class of securities	Trading symbol(s)	Name of each national exchange and principal U.S. market for the securities
Shockwave Medical, Inc., common stock, par value $0.001 per share	SWAV	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 2, 2023, the registrant had 36,626,211 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements relating to our expectations, projections, beliefs, and prospects, which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “might,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they may relate to future expectations around growth, strategy, and anticipated trends in our business, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements are only predictions based on our current expectations, estimates, assumptions, and projections about future events and are applicable only as of the dates of such statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our ability to design, develop, manufacture and market innovative products to treat patients with challenging medical conditions, particularly in peripheral artery disease, coronary artery disease and aortic stenosis;

•our ability to successfully execute our commercialization strategy for our approved or cleared products;

•our expected future growth, including growth in international sales;

• the size and growth potential of the markets for our products, and our ability to serve those markets;

•the rate and degree of market acceptance of our products;

•coverage and reimbursement for procedures performed using our products;

•the performance of third parties in connection with the development of our products, including third-party suppliers;

•the impact of government laws and regulatory developments in the United States and foreign countries;

•our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;

•our ability to scale our organizational culture of cooperative product development and commercial execution;

•the expected benefits of our recent acquisition of Neovasc Inc., a corporation existing under the Canada Business Corporations Act;

•the development, regulatory approval, efficacy and commercialization of competing products;

•our ability to develop and maintain our corporate infrastructure, including our internal controls;

•our estimates regarding expenses, future financial performance and capital requirements;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others; and

•the impact of macroeconomic conditions, including inflation, rising interest rates, instability in the global banking system and volatile market conditions, and global events, including the COVID-19 pandemic, on our operations, financial results, liquidity and capital resources, sales, expenses, supply chain, manufacturing, research and development activities, clinical trials and employees.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions and other factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance or achievements

expressed or implied by the forward-looking statements, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, together with any updates in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. There may also be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Except to the extent required by law, we undertake no obligation to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)


	March 31, 2023		December 31, 20221

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	280,932	$	156,586
Short-term investments	135,929		147,907
Accounts receivable, net	84,309		71,366
Inventory	83,256		75,112
Prepaid expenses and other current assets	6,399		8,292
Total current assets	590,825		459,263
Operating lease right-of-use assets	31,623		32,365
Property and equipment, net	54,057		48,152
Equity method investment	2,689		3,512
Deferred tax assets	97,941		97,568
Other assets	6,112		5,229
TOTAL ASSETS	$	783,247	$	646,089
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	11,050	$	6,721
Debt, current portion	80,000		—
Accrued liabilities	49,640		55,375
Lease liability, current portion	1,308		1,278
Total current liabilities	141,998		63,374
Lease liability, noncurrent portion	34,058		34,928
Debt, noncurrent portion	24,231		24,198
Related party contract liability, noncurrent portion	12,273		12,273
TOTAL LIABILITIES	212,560		134,773
STOCKHOLDERS’ EQUITY:
Preferred stock	—		—
Common stock	37		36
Additional paid-in capital	568,705		548,960
Accumulated other comprehensive loss	(367)		(867)
Retained earnings (accumulated deficit)	2,312		(36,813)
TOTAL STOCKHOLDERS’ EQUITY	570,687		511,316
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	783,247	$	646,089

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 The condensed consolidated balance sheet as of December 31, 2022 is derived from the audited consolidated financial statements as of that date.

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended March 31,
	2023		2022
Revenue:
Product revenue	$	161,066	$	93,631
Cost of revenue:
Cost of product revenue	21,066		12,890
Gross profit	140,000		80,741
Operating expenses:
Research and development	26,971		17,019
Sales and marketing	54,011		35,961
General and administrative	19,204		12,389
Total operating expenses	100,186		65,369
Income from operations	39,814		15,372
Loss from equity method investment	(823)		(47)
Interest expense	(636)		(297)
Other income (expense), net	2,382		(310)
Net income before taxes	40,737		14,718
Income tax provision	1,612		197
Net income	$	39,125	$	14,521
Unrealized gain (loss) on available-for-sale securities	505		(815)
Adjustment for net gain realized and included in other income	(5)		—
Total comprehensive income	$	39,625	$	13,706
Net income per share
Basic	$	1.07	$	0.41
Diluted	$	1.03	$	0.39
Shares used in computing net income per share
Basic	36,427,263		35,587,337
Diluted	37,979,448		37,623,477

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
	Shares	Amount
Balance — December 31, 2022	36,235,546	$	36	$	548,960	$	(867)	$	(36,813)	$	511,316
Exercise of stock options	77,230	1		319		—		—		320
Unrealized gain on available-for-sale securities, net of tax	—	—		—		505		—		505
Net gain reclassified from accumulated other comprehensive income	—	—		—		(5)		—		(5)
Issuance of common stock under employee stock purchase plan	19,124	—		3,092		—		—		3,092
Issuance of common stock in connection with vesting of restricted stock units	257,624	—		—		—		—		—
Taxes withheld on net settled vesting of restricted stock units	(19)	—		(3)		—		—		(3)
Stock-based compensation	—	—		16,337		—		—		16,337
Net income	—	—		—		—		39,125		39,125
Balance — March 31, 2023	36,589,505	$	37	$	568,705	$	(367)	$	2,312	$	570,687


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance — December 31, 2021	35,444,472	$	35	$	494,806	$	(202)	$	(252,809)	$	241,830
Exercise of stock options	54,913	1		390		—		—		391
Unrealized loss on available-for-sale securities	—	—		—		(815)		—		(815)
Issuance of common stock under employee stock purchase plan	14,172	—		2,135		—		—		2,135
Issuance of common stock in connection with vesting of restricted stock units	210,835	—		—		—		—		—
Taxes withheld on net settled vesting of restricted stock units	(31)	—		(6)		—		—		(6)
Stock-based compensation	—	—		9,767		—		—		9,767
Net income	—	—		—		—		14,521		14,521
Balance — March 31, 2022	35,724,361	$	36	$	507,092	$	(1,017)	$	(238,288)	$	267,823

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHOCKWAVE MEDICAL, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	39,125	$	14,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,708		953
Loss from equity method investment	823		47
Stock-based compensation	15,967		9,510
Non-cash lease expense	748		767
Amortization of premium and discount on available-for-sale securities	(718)		210
Loss on write down of fixed assets	11		—
Deferred income taxes	(547)		—
Amortization of debt issuance costs	33		153
Foreign currency remeasurement	(689)		—
Changes in operating assets and liabilities:
Accounts receivable	(13,004)		(10,407)
Inventory	(7,757)		(10,090)
Prepaid expenses and other current assets	1,896		600
Other assets	(861)		(119)
Accounts payable	4,734		4,911
Accrued and other current liabilities	(6,661)		(9,051)
Lease liabilities	(846)		(68)
Net cash provided by operating activities	33,962		1,937
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities	(21,130)		(42,128)
Proceeds from maturities of available-for-sale securities	34,500		18,000
Purchase of property and equipment	(7,188)		(3,286)
Net cash provided by (used in) investing activities	6,182		(27,414)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of taxes withheld on net settled vesting of restricted stock units	(3)		(6)
Proceeds from stock option exercises	320		391
Proceeds from issuance of common stock under employee stock purchase plan	3,092		2,135
Proceeds from debt financing, net of issuance costs	80,000		—
Net cash provided by financing activities	83,409		2,520
Effect of exchange rate changes on cash and cash equivalents	792		—
Net increase (decrease) in cash, cash equivalents and restricted cash	124,345		(22,957)
Cash, cash equivalents and restricted cash at beginning of period	158,302		90,874
Cash, cash equivalents and restricted cash equivalents at end of period	$	282,647	$	67,917
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	424	$	144
Income tax paid	$	322	$	78
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchases included in accounts payable and accrued liabilities	$	6,162	$	3,159

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Basis of Presentation

Shockwave Medical, Inc. (the “Company”) was incorporated on June 17, 2009. The Company is primarily engaged in the development of Intravascular Lithotripsy (“IVL”) technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular and heart valve disease. Built on a balloon catheter platform, the IVL technology uses lithotripsy to disrupt both superficial and deep vascular calcium, while minimizing soft tissue injury, and an integrated angioplasty balloon to dilate blockages at low pressures, restoring blood flow.

In 2016, the Company began commercial and manufacturing operations, and began selling catheters based on the IVL technology. The Company’s headquarters are in Santa Clara, California. The Company is located and operates primarily in the United States and has eleven wholly-owned foreign subsidiaries as of March 31, 2023. The unaudited condensed financial statements include the accounts of Shockwave Medical, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

As of March 31, 2023, the Company had cash, cash equivalents and short-term investments of $416.9 million, which are available to fund future working capital requirements, investments, acquisitions, or repayments of credit facilities. The Company believes that its cash, cash equivalents, and short-term investments as of March 31, 2023, will be sufficient for the Company to continue as a going concern for at least 12 months from the date the unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”). The Company’s future capital requirements will depend on many factors, including its growth rate, the timing and extent of its spending to support research and development activities, and the timing and cost of establishing additional sales and marketing capabilities and the scope.

Risk and Uncertainties

The Company is subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including inflation, rising interest rates, and instability in the global banking system, geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, supply chain disruptions and the remaining effects of the COVID-19 pandemic. The Company is closely monitoring the impact of these factors on all aspects of its business, including the impacts on its customers, patients, employees, suppliers, vendors, business partners and distribution channels.

In particular, while the Company has not experienced material disruptions in its supply chain to date, the Company has been and continues to be impacted by disruptions in the operations of certain of its third-party suppliers, resulting in increased lead-times, higher component costs and lower allocations for the purchase of some components. In certain cases, the Company has incurred higher logistical expenses. The Company is continuing to work closely with its manufacturing partners and suppliers to source key components and maintain appropriate inventory levels to meet customer demand.

The Company’s future results of operations and liquidity could be adversely impacted by a variety of factors, including those discussed in the section titled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023 (the “2022 Annual Report”), together with any updates in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q. As of the date of issuance of these condensed consolidated financial statements, the extent to which the current macroeconomic environment and the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity, or results of operations remains uncertain.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

cash flows. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the 2022 Annual Report.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated statements of cash flows:


	March 31, 2023		March 31, 2022
	(in thousands)
Cash and cash equivalents	$	280,932	$	66,252
Restricted cash	1,715		1,665
Total cash, cash equivalents, and restricted cash	$	282,647	$	67,917

Restricted cash as of March 31, 2023 and December 31, 2022 relates to letters of credit established for real property leases relating to the Company’s office buildings, and is recorded as other assets on the condensed consolidated balance sheets.

See Note 12 for a discussion of the Company’s subsequent payments related to the acquisition of Neovasc, Inc. and the repayment of the credit drawn on March 16, 2023 under the Credit Agreement.

Equity Method Investments

Entities which the Company has significant influence over activities of the entity, but does not control, are accounted for under the equity method of accounting in accordance with Topic 323, Investments - Equity Method and Joint Ventures. The Company’s carrying value in the equity method investment is reported as equity method investment on the Company’s consolidated balance sheets. The Company records its proportionate share of the underlying income or loss which is recognized in earnings or loss from the equity method investment. The Company eliminates a portion of intra-entity profit to the extent the goods sold by the Company have not yet been sold through by the equity method investee to an end customer at the end of the reporting period. The profit earned by the Company from the equity method investee for items not yet sold through is eliminated through equity method earnings or loss which is recognized in income (loss) from equity method investment.

The Company assesses its equity method investment for impairment when events or circumstances suggest that the carrying amount of the investment may be impaired. The Company considers all available evidence in assessing whether a decline in fair value is other than temporary. If the decline in fair value is determined to be other than temporary, the difference between the carrying amount of the investment and estimated fair value is recognized as an impairment charge.

Revenue

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, Revenue from Contracts with Customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

Product Revenue

The Company records product revenue primarily from the sale of its IVL catheters. The Company sells its products to hospitals, primarily through direct sales representatives, as well as through distributors in selected international markets. Additionally, a portion of the Company’s revenue is generated through a consignment model under which inventory is maintained at hospitals.

Product revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

For products sold through direct sales representatives, control is transferred upon delivery to customers. For products sold to distributors internationally and products sold to customers that utilize stocking orders, control is transferred upon shipment or delivery to the customer’s named location, based on the contractual shipping terms. For consignment inventory, control is transferred at the time the IVL catheters are consumed in a procedure. The Company has elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfillment activity, and not a separate performance obligation.

The Company may provide for the use of an IVL generator and connector cable under an agreement to customers at no charge to facilitate use of the IVL catheters. These agreements generally do not contain contractually enforceable minimum commitments and are generally cancellable by either party with 30 days notice.

License Revenue

For arrangements that contain a license of the Company’s functional intellectual property with a customer, the Company considers whether the license grant is distinct from other performance obligations in the arrangement. A license grant of functional intellectual property is generally considered to be capable of being distinct if a customer can benefit from the license on its own or together with other readily available resources. License revenue for licenses of functional intellectual property is recognized at a point in time when the Company satisfies its performance obligation of transferring the license to the customer.

Consideration received in advance of the satisfaction of a performance obligation is recognized as a contract liability. No license revenues were recognized for the three months ended March 31, 2023 and 2022.

Stock-Based Compensation

The Company accounts for share-based payments at fair value. The fair value of stock options is measured using the Black-Scholes option-pricing model. For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for stock-based compensation awards is the date of grant and the expense is recognized on a straight-line basis, over the vesting period. For share-based awards that vest upon the satisfaction of a performance target, the related compensation cost is recognized over the requisite service period based on the expected achievement of the performance target. The Company accounts for forfeitures as they occur.

SHOCKWAVE MEDICAL, INC.

Notes to Condensed Consolidated Financial Statements

3. Financial Instruments and Fair Value Measurements

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
U.S. Treasury securities	$	95,282	$	—	$	—	$	95,282
Money market funds	10,070		—		—		10,070
Commercial paper	—		8,139		—

SEC Form 10-Q filed by ShockWave Medical Inc.