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Balance Sheet Components | 6 Months Ended
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Jun. 30, 2018
Balance Sheet Related Disclosures [Abstract] |
Balance Sheet Components | 4. Balance sheet components Cash, cash equivalents and marketable securities The Company considers all short-term highly liquid investments with a maturity of three months or less to be cash equivalents. Cash equivalents are recorded at cost plus accrued interest, which is considered adjusted cost, and approximates fair value. Certificates of deposit and agency mortgage-backed securities are included in cash equivalents and marketable securities based on the maturity date of the security. Short-term investments are included in marketable securities in the current period presentation. The Company considers investments with maturities greater than three months, but less than one year, to be marketable securities. Investments are classified as available-for-sale and are reported at fair value with unrealized gains or losses, if any, reported, net of tax, in accumulated other comprehensive income (loss). All income generated and realized gains or losses from investments are recorded to other income (expense). The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Credit losses and other-than-temporary impairments are declines in fair value that are not expected to recover and are charged to other income (expense), net. Cash, cash equivalents and marketable securities consist of the following:
|  | June 30, |  |  | December 31, |
Cash and cash equivalents |  | 2018 |  |  | 2017 |
Cash |  | $ | 45,660 |  |  | $ | 46,237 |
Money market accounts |  |  | 120,684 |  |  |  | 93,430 |
Certificates of deposit |  |  | — |  |  |  | 490 |
Corporate bonds |  |  | — |  |  |  | 2,796 |
Total cash and cash equivalents |  | $ | 166,344 |  |  | $ | 142,953 |
Marketable securities |  |  |  |  |  |  |  |
Certificates of deposit |  | $ | 1,475 |  |  | $ | 10,516 |
Corporate bonds |  |  | 18,114 |  |  |  | 17,972 |
Agency mortgage-backed securities |  |  | — |  |  |  | 2,004 |
U.S. Treasury securities |  |  | 22,479 |  |  |  | 499 |
Total marketable securities |  | $ | 42,068 |  |  | $ | 30,991 |
Accounts receivable and allowance for bad debts, returns, and adjustments Accounts receivable are customer obligations due under normal sales and rental terms. The Company performs credit evaluations of the customers’ financial condition and generally does not require collateral. The allowance for doubtful accounts is maintained at a level that, in management’s opinion, is adequate to absorb potential losses related to accounts receivable and is based upon the Company’s continuous evaluation of the collectability of outstanding balances. Management’s evaluation takes into consideration such factors as past bad debt experience, economic conditions and information about specific receivables. The Company’s evaluation also considers the age and composition of the outstanding amounts in determining their net realizable value. The allowance for doubtful accounts is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in earnings in the periods in which they become known. This allowance is increased by bad debt provisions charged to bad debt expense, net of recoveries, in operating expense and is reduced by direct write-offs. The Company generally does not allow returns from providers for reasons not covered under its standard warranty. Therefore, provision for sales returns applies primarily to direct-to-consumer sales. This reserve is calculated based on actual historical return rates under the Company’s 30-day return program and is applied to the related sales revenue for the last month of the quarter reported. The Company also records an allowance for rental revenue adjustments which is recorded as a reduction of rental revenue and net rental accounts receivable balances. These adjustments result from contractual adjustments, audit adjustments, untimely claims filings, or billings not paid due to another provider performing same or similar functions for the patient in the same period, all of which prevent billed revenue from becoming realizable. The allowance is based on historical revenue adjustments as a percentage of rental revenue billed and unbilled during the related period. When recording the allowance for doubtful accounts, the bad debt expense account (general and administrative expense account) is charged; when recording allowance for sales returns, the sales returns account (contra sales revenue account) is charged; and when recording the allowance for rental reserve adjustments, the rental revenue adjustments account (contra rental revenue account) is charged. As of June 30, 2018 and December 31, 2017, included in accounts receivable on the consolidated balance sheets were earned but unbilled receivables of $1,251 and $1,470, respectively. These balances reflect gross unbilled receivables prior to any allowances for adjustments and write-offs. The Company consistently applies its allowance estimation methodology from period-to-period. The Company’s best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known, the Company adjusts its assumptions accordingly to change its estimate of the allowance. Gross accounts receivable balance concentrations by major category as of June 30, 2018 and December 31, 2017 were as follows:
|  | June 30, |  |  | December 31, |
Gross accounts receivable |  | 2018 |  |  | 2017 |
Rental (1) |  | $ | 5,451 |  |  | $ | 6,236 |
Business-to-business & other receivables (2) |  |  | 35,943 |  |  |  | 28,474 |
Total gross accounts receivable |  | $ | 41,394 |  |  | $ | 34,710 |
Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of June 30, 2018 and December 31, 2017 were as follows:
|  | June 30, |  |  | December 31, |
Net accounts receivable |  | 2018 |  |  | 2017 |
Rental (1) |  | $ | 3,240 |  |  | $ | 4,212 |
Business-to-business & other receivables (2) |  |  | 34,232 |  |  |  | 27,232 |
Total net accounts receivable |  | $ | 37,472 |  |  | $ | 31,444 |
(1) | Rental includes Medicare, Medicaid/other government, private insurance and patient pay.
(2) | Business-to-business receivables included one customer with a gross accounts receivable balance of $10,763 and $10,394 as of June 30, 2018 and December 31, 2017, respectively. This customer received extended payment terms through a direct financing plan offered. The Company also has a credit insurance policy in place, which allocated up to $18,000 in coverage as of June 30, 2018 and allocated up to $12,000 in coverage as of December 31, 2017 for this customer with a $400 deductible and 10% retention.
The following tables set forth the accounts receivable allowances as of June 30, 2018 and December 31, 2017:
|  | June 30, |  |  | December 31, |
Allowances - accounts receivable |  | 2018 |  |  | 2017 |
Doubtful accounts |  | $ | 1,356 |  |  | $ | 1,415 |
Rental revenue adjustments |  |  | 1,081 |  |  |  | 947 |
Sales returns |  |  | 1,485 |  |  |  | 904 |
Total allowances - accounts receivable |  | $ | 3,922 |  |  | $ | 3,266 |
Concentration of credit risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. At times, cash account balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation (FDIC). However, management believes the risk of loss to be minimal. The Company performs periodic evaluations of the relative credit standing of these institutions and has not experienced any losses on its cash and cash equivalents to date. The Company has entered into hedging relationships with a single counterparty to offset the forecasted Euro-based revenues. The credit risk has been reduced due to a net settlement arrangement whereby the Company is allowed to net settle transactions with a single net amount payable by one party to the other. Concentration of customers and vendors The Company primarily sells its products to traditional home medical equipment providers, distributors, and resellers in the United States and in foreign countries on a credit basis. The Company also sells its products direct-to-consumers on a primarily prepayment basis. One single customer represented more than 10% of the Company’s total revenue for the six months ended June 30, 2018 and June 30, 2017. Two customers with accounts receivable balances of $10,763 and $6,484, respectively, each represented more than 10% of the Company’s net accounts receivable balance as of June 30, 2018, and two customers with accounts receivable balances of $10,394 and $6,459, respectively, each represented more than 10% of the Company’s net accounts receivable balance as of December 31, 2017. The Company currently purchases raw materials from a limited number of vendors, which resulted in a concentration of three major vendors. The three major vendors supply the Company with raw materials used to manufacture the Company’s products. For the six months ended June 30, 2018, the Company’s three major vendors accounted for 20.2%, 13.8%, and 9.3%, respectively, of total raw material purchases. For the six months ended June 30, 2017, the Company’s three major vendors accounted for 18.6%, 14.6% and 9.8%, respectively, of total raw material purchases. A portion of revenue is earned from sales outside the United States. Approximately 76.0% and 75.4% of the non-U.S. revenue for the three months ended June 30, 2018 and June 30, 2017, respectively, were invoiced in Euros. Approximately, 76.4% and 73.9% of the non-U.S. revenue for the six months ended June 30, 2018 and June 30, 2017, respectively, were invoiced in Euros. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the three and six months ended June 30, 2018 and June 30, 2017 is as follows:
|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
U.S. revenue |  | $ | 76,479 |  |  | $ | 49,202 |  |  | $ | 138,624 |  |  | $ | 90,279 |
Non-U.S. revenue |  |  | 20,759 |  |  |  | 14,919 |  |  |  | 37,665 |  |  |  | 26,342 |
Total revenue |  | $ | 97,238 |  |  | $ | 64,121 |  |  | $ | 176,289 |  |  | $ | 116,621 |
Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using a standard cost method, including material, labor and manufacturing overhead, whereby the standard costs are updated at least quarterly to reflect approximate actual costs using the first-in, first-out (FIFO) method. The Company records adjustments at least quarterly to inventory for potentially excess, obsolete, slow-moving or impaired items. The Company recorded noncurrent inventory related to inventories that are expected to be realized or consumed after one year of $312 and $644 as of June 30, 2018 and December 31, 2017, respectively. Noncurrent inventories are primarily related to raw materials purchased in bulk to support long-term expected repairs to reduce costs and are classified in other assets. Inventories that are considered current consist of the following:
|  | June 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |
Raw materials and work-in-progress |  | $ | 22,866 |  |  | $ | 16,324 |
Finished goods |  |  | 5,145 |  |  |  | 2,917 |
Less: reserves |  |  | (604 | ) |  |  | (399 | )
Inventories |  | $ | 27,407 |  |  | $ | 18,842 |
Property and equipment Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the assets’ estimated useful lives as follows:
Rental equipment |  | 1.5-5 years
Manufacturing equipment and tooling |  | 2-5 years
Computer equipment and software |  | 2-3 years
Furniture and equipment |  | 3-5 years
Leasehold improvements |  | Lesser of estimated useful life or remaining lease term
Expenditures for additions, improvements and replacements are capitalized and depreciated to a salvage value of $0. Repair and maintenance costs on rental equipment are included in cost of rental revenue on the consolidated statements of comprehensive income. Repair and maintenance expense, which includes labor, parts and freight, for rental equipment was $630 and $694 for the three months ended June 30, 2018 and June 30, 2017, respectively, and $1,190 and $1,345 for the six months ended June 30, 2018 and June 30, 2017, respectively. Included within property and equipment is construction in process, primarily related to the design and engineering of tooling, jigs and other machinery. In addition, this item also includes computer software or development costs that have been purchased but have not completed the final configuration process for implementation into the Company’s systems. These items have not been placed in service; therefore, no depreciation or amortization was recognized for these items in the respective periods. Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the three and six months ended June 30, 2018 and June 30, 2017, respectively.
|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Rental equipment |  | $ | 1,966 |  |  | $ | 2,522 |  |  | $ | 4,131 |  |  | $ | 5,211 |
Other property and equipment |  |  | 551 |  |  |  | 470 |  |  |  | 1,081 |  |  |  | 958 |
Total depreciation and amortization |  | $ | 2,517 |  |  | $ | 2,992 |  |  | $ | 5,212 |  |  | $ | 6,169 |
Property and equipment and rental equipment with associated accumulated depreciation are summarized below for June 30, 2018 and December 31, 2017, respectively.
|  | June 30, |  |  | December 31, |
Property and equipment |  | 2018 |  |  | 2017 |
Rental equipment, net of allowances of $764 and $754, respectively |  | $ | 46,638 |  |  | $ | 49,349 |
Other property and equipment |  |  | 19,677 |  |  |  | 15,219 |
Property and equipment |  |  | 66,315 |  |  |  | 64,568 |
Accumulated depreciation |  |  |  |  |  |  |  |
Rental equipment |  |  | 33,822 |  |  |  | 34,754 |
Other property and equipment |  |  | 10,521 |  |  |  | 9,711 |
Accumulated depreciation |  |  | 44,343 |  |  |  | 44,465 |
Property and equipment, net |  |  |  |  |  |  |  |
Rental equipment, net of allowances of $764 and $754, respectively |  |  | 12,816 |  |  |  | 14,595 |
Other property and equipment |  |  | 9,156 |  |  |  | 5,508 |
Property and equipment, net |  | $ | 21,972 |  |  | $ | 20,103 |
Long-lived assets The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360 — Property, Plant, and Equipment. In accordance with ASC 360, long-lived assets to be held are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. The Company periodically reviews the carrying value of long-lived assets to determine whether or not impairment to such value has occurred. No impairments were recorded during the three months or six months ended June 30, 2018 and June 30, 2017. Goodwill The changes in the carrying amount of goodwill for the six months ended June 30, 2018 were as follows:
Balance as of December 31, 2017 |  | $ | 2,363 |
Translation adjustment |  |  | (59 | )
Balance as of June 30, 2018 |  | $ | 2,304 |
Intangible assets There were no impairments recorded related to the Company’s intangible assets during the three months or six months ended June 30, 2018 and June 30, 2017. Amortization expense for intangible assets for the three months ended June 30, 2018 and June 30, 2017 was $299 and $125, respectively, and for the six months ended June 30, 2018 and June 30, 2017 was $597 and $152, respectively. The following tables represent the net carrying values of intangible assets as of the respective dates:
|  | Average |  |  |  |  |  |  |  |  |  |  |  |
|  | estimated |  | Gross |  |  |  |  |  |  |  |  |
|  | useful lives |  | carrying |  |  | Accumulated |  |  |  |  |
June 30, 2018 |  | (in years) |  | amount |  |  | amortization |  |  | Net amount |
Licenses |  | 10 |  | $ | 185 |  |  | $ | 146 |  |  | $ | 39 |
Patents and websites |  | 5 |  |  | 4,173 |  |  |  | 1,304 |  |  |  | 2,869 |
Customer relationships |  | 4 |  |  | 1,402 |  |  |  | 409 |  |  |  | 993 |
Non-compete agreement |  | 2.3 |  |  | 233 |  |  |  | 91 |  |  |  | 142 |
Commercials |  | 2-3 |  |  | 303 |  |  |  | 253 |  |  |  | 50 |
Total |  |  |  | $ | 6,296 |  |  | $ | 2,203 |  |  | $ | 4,093 |
|  | Average |  |  |  |  |  |  |  |  |  |  |  |
|  | estimated |  | Gross |  |  |  |  |  |  |  |  |
|  | useful lives |  | carrying |  |  | Accumulated |  |  |  |  |
December 31, 2017 |  | (in years) |  | amount |  |  | amortization |  |  | Net amount |
Licenses |  | 10 |  | $ | 185 |  |  | $ | 137 |  |  | $ | 48 |
Patents and websites |  | 5 |  |  | 4,173 |  |  |  | 959 |  |  |  | 3,214 |
Customer relationships |  | 4 |  |  | 1,437 |  |  |  | 240 |  |  |  | 1,197 |
Non-compete agreement |  | 3 |  |  | 240 |  |  |  | 52 |  |  |  | 188 |
Commercials |  | 2-3 |  |  | 303 |  |  |  | 233 |  |  |  | 70 |
Total |  |  |  | $ | 6,338 |  |  | $ | 1,621 |  |  | $ | 4,717 |
Annual estimated amortization expense for intangibles for each of the succeeding fiscal years is summarized as follows:
|  | June 30, 2018 |
Remaining 6 months of 2018 |  | $ | 617 |
2019 |  |  | 1,126 |
2020 |  |  | 1,022 |
2021 |  |  | 783 |
2022 |  |  | 545 |
Thereafter |  |  | — |
|  | $ | 4,093 |
Current liabilities Accounts payable and accrued expenses as of June 30, 2018 and December 31, 2017 consisted of the following:
|  | June 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |
Accounts payable |  | $ | 17,823 |  |  | $ | 9,541 |
Accrued inventory (in-transit and unvouchered receipts) and trade payables |  |  | 9,519 |  |  |  | 7,252 |
Accrued purchasing card liability |  |  | 2,567 |  |  |  | 2,381 |
Accrued franchise, sales and use taxes |  |  | 491 |  |  |  | 479 |
Other accrued expenses |  |  | 774 |  |  |  | 973 |
Accounts payable and accrued expenses |  | $ | 31,174 |  |  | $ | 20,626 |
Accrued payroll as of June 30, 2018 and December 31, 2017 consisted of the following:
|  | June 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |
Accrued bonuses |  | $ | 3,592 |  |  | $ | 3,086 |
Accrued wages and other payroll related items |  |  | 2,685 |  |  |  | 1,746 |
Accrued vacation |  |  | 1,767 |  |  |  | 1,338 |
Accrued employee stock purchase plan deductions |  |  | 1,064 |  |  |  | 707 |
Accrued payroll |  | $ | 9,108 |  |  | $ | 6,877 |

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- Definition The entire disclosure for supplemental balance sheet disclosures, including descriptions and amounts for assets, liabilities, and equity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -URI http://asc.fasb.org/topic&trid=2122208 + Details
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