GLAUKOS Corp

Organization and Business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic pharmaceutical and medical technology company focused on developing novel dropless platform therapies and commercializing associated products for the treatment of glaucoma, corneal disorders, and retinal diseases. The Company first developed Micro-Invasive Glaucoma Surgery (MIGS) as an alternative to the traditional glaucoma treatment paradigm, launching its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a rare corneal disorder, keratoconus, that was approved by the United States (U.S.) Food and Drug Administration (FDA) in 2016. In 2024, the Company commenced commercial launch activities foriDose TRand* *began commercializing the product in a controlled manner in February 2024. The Company is developing a portfolio of platforms to support ongoing pharmaceutical and medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of glaucoma, corneal disorders such as keratoconus, dry eye and refractive vision correction, and retinal diseases such as neovascular age-related macular degeneration, diabetic macular edema and retinal vein occlusion.

The accompanying consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Liquidity

For the year ended December 31, 2024, the Company incurred a net loss of $146.4 million, used $61.3 million of cash for operating activities and, as of December 31, 2024, had an accumulated deficit of $745.4 million. The Company has made and expects to continue to make significant investments in its global sales force and commercial infrastructure, marketing programs, research and development activities, clinical studies and general and administrative organization.

The Company plans to fund its operations, capital funding and other liquidity needs using existing cash and investments and, to the extent available, cash generated from commercial operations. The Company’s existing cash and investments include the net proceeds from unwind agreements with certain financial institutions (Option Counterparties) relating to a portion of the capped call transactions (Capped Call Unwind Agreements).

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Recent Developments

On June 14, 2024, the Company announced it had entered into separate, privately negotiated exchange agreements (Exchange Agreements) with certain holders of its 2.75% Convertible Senior Notes due 2027 (Convertible Notes), pursuant to which the Company agreed, subject to customary closing conditions, to repurchase an aggregate of $230.0 million principal amount of Convertible Notes for aggregate consideration consisting of a number of shares of the Company’s common stock, par value $0.001 per share, to be determined over an averaging period commencing on June 14, 2024, and cash in lieu of fractional shares and in respect of accrued interest on the Convertible Notes (Convertible Notes Exchange). On June 28, 2024, the Company closed the transactions contemplated by the Exchange

Agreements, and the holders exchanged $230.0 million in aggregate principal amount of the Convertible Notes for consideration consisting of an aggregate of 4,253,423 shares of the Company’s common stock, and cash in lieu of fractional shares and in respect of accrued interest on the Convertible Notes. The Company accounted for the Convertible Notes Exchange as an induced conversion based on the nature of the conversion offer and the period of time it was offered. The Company accounted for the Convertible Notes Exchange by expensing the fair value of the common shares that were issued in excess of the original terms of the Convertible Notes. The Company reduced the balance of the Convertible Notes on the consolidated balance sheets by $226.7 million, which is comprised of the reduction in Convertible Notes principal of $230.0 million, less $3.3 million in unamortized debt issuance costs. The Company also recognized a non-cash inducement charge of $17.4 million and direct transaction costs of $0.6 million recorded within charges associated with convertible senior notes on the consolidated statements of operations and increased additional paid-in capital on the consolidated balance sheets of $244.1 million.

On October 4, 2024, the Company issued a notice of redemption (the Redemption Notice) for the remaining $57.5 million aggregate principal amount outstanding of its Convertible Notes as of such date. Pursuant to the Redemption Notice, on December 16, 2024, the Company redeemed $57.5 million aggregate principal amount outstanding of Convertible Notes that had not been converted prior to such date at a redemption price equal to 100% of the principal amount of such Convertible Notes (Redemption Price) together with accrued and unpaid interest from December 1, 2024 up to and excluding December 16, 2024. On December 16, 2024, the Redemption Price became due and payable upon each Convertible Note redeemed and interest thereon ceased to accrue as of such date. The Convertible Notes called for redemption were subject to conversion by holders into shares of common stock of the Company (Common Stock) pursuant to physical settlement. The conversion rate for the Convertible Notes was 17.8269 shares of Common Stock per $1,000 principal amount, plus additional shares of 0.3501 per $1,000 principal amount. The Convertible Notes were therefore convertible into 18.1770 shares of Common Stock per $1,000 principal amount surrendered for conversion thereunder.

On December 2, 2024, the Company entered into unwind agreements with Option Counterparties relating to its Capped Call Unwind Agreements that were previously entered into by the Company with such Option Counterparties in connection with the issuance of its Convertible Notes in an aggregate principal amount of $287.5 million. The Capped Call Unwind Agreements related to a portion of capped call transactions corresponding tofifty percent of the number of shares of the Company’s common stock initially underlying the Convertible Notes. Pursuant to the Capped Call Unwind Agreements, the Option Counterparties delivered to the Company approximately $53.2 million, which amount was determined based upon the volume-weighted average price per share of the Company’s common stock during the averaging period from December 3, 2024 through December 5, 2024.

On March 7, 2024, the Company issued $5.0 million of its common stock and paid approximately $5.1 million in cash in connection with the acquisition of 100% of the outstanding equity interests in a clinical stage biopharma company (the Seller) focused on developing novel therapeutics for rare ophthalmic diseases, including all related patents and patent applications, technology and know-how. The Company accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business, and the acquisition costs are recorded within acquired in-process research and development on the consolidated statement of operations. Under the terms of the agreement, if these proprietary technologies are commercialized, the Company may have to make potential payments of up to $51.0 million upon the achievement of certain event-based development milestones, potential payments of up to $150.0 million upon the achievement of certain commercial sales-based milestones should annual net sales of a licensed product eventually exceed various levels, and up to a low double digit royalty on net sales. Furthermore, because the firsttwo development milestones are payable in either cash or Company shares at the Company’s sole discretion, the Company has accrued a liability measured at fair value in the amount of $1.6 million related to thesetwo milestones, which is classified as other liabilities within the consolidated balance sheets, as the contingent consideration is not expected to be paid within the next twelve months. See alsoNote 4, Fair Value Measurements for additional details regarding this contingent consideration.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions used in the preparation of the accompanying consolidated financial statements under different assumptions and conditions.

The Company’s consolidated financial statements as of and for the year ended December 31, 2024 reflect the Company’s estimates of the impact of the macroeconomic environment, including the impact of inflation, supply shortages or delays, changes in supply and demand, foreign exchange rate fluctuations and other conditions which have led to disruptions in commerce and pricing stability. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of December 31, 2024.

Segments

The Company hasone business activity and operates asone operating segment: the development and commercialization of ophthalmic therapies designed to treat glaucoma, corneal disorders and retinal diseases. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company’s chief operating decision-maker (CODM), its Chief Executive Officer, reviews consolidated operating results for the purpose of allocating resources and evaluating financial performance.

Variable Interest Entities

The Company has a variable interest in a variable interest entity based on its $5.0 million convertible promissory note outstanding as of December 31, 2024. The convertible promissory note bears interest on the outstanding principal at the rate of 5.0% per annum, and the outstanding principal and interest is convertible into preferred stock or capital stock under certain circumstances. The Company concluded it is not the primary beneficiary of the variable interest entity. The Company does not have the power to direct the activities of the variable interest entity that most significantly impact its economic performance, does not have the obligation to absorb losses that could potentially be significant to the variable interest entity, and does not have the right to receive benefits that could potentially be significant to the variable interest entity. The Company evaluates its relationships with the variable interest entity on an ongoing basis to determine whether it would be considered the primary beneficiary.

Cash, Cash Equivalents, Restricted Cash and Short-term Investments

The Company invests its excess cash in marketable securities, including U.S. treasury securities, bank certificates of deposit, municipal bonds, corporate notes and asset-backed securities. For financial reporting purposes, liquid investment instruments purchased with an original maturity of three months or less are considered to be cash equivalents. Cash and cash equivalents are recorded at face value or cost, which approximates fair market value. The Company maintains cash balances in the U.S. in excess of amounts insured by the Federal Deposit Insurance Commission. Investments are stated at fair value as determined by quoted market prices. Investments are considered available for sale and, accordingly, unrealized gains and losses are included in accumulated other comprehensive loss within stockholders’ equity.

The Company’s entire investment portfolio, except for restricted cash, is considered to be available for use in current operations and, accordingly, all such investments are stated at fair value using quoted market prices and

classified as current assets, although the stated maturity of individual investments may be one year or more beyond the balance sheet date. The Company did not have any trading securities or restricted investments at December 31, 2024 or December 31, 2023.

Realized gains and losses and declines in value, if any, judged to be other-than-temporary on available for sale securities, are reported in other expense, net. When securities are sold, any associated unrealized gain or loss previously reported as a separate component of stockholders’ equity is reclassified out of stockholders’ equity and recorded in the statements of operations in the period sold using the specific identification method. Accrued interest and dividends from investments are included in other expense, net. The Company periodically reviews its available for sale securities for other than temporary declines in fair value below the cost basis, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that equate to the amount reported in the consolidated statement of cash flows as of December 31, 2024, December 31, 2023 and December 31, 2022 (in thousands):

Concentration of Credit Risk and Significant Customers

Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash, cash equivalents, short-term investments and accounts receivable. The Company maintains deposits in federally insured financial institutions in the U.S. in excess of federally insured limits and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding investment instruments and their maturities which are designed to maintain preservation of principal and liquidity. The Company believes that the concentration of credit risk in its accounts receivable is mitigated by its credit evaluation process, relatively short collection terms and the level of credit worthiness of its customers. During the years ended 2024, 2023 and 2022, none of the Company’s customers accounted for more than 10% of revenues.

Accounts Receivable

The Company primarily sells its products directly to ambulatory surgery centers, hospitals, and physician private practices, with distributors being used in certain international locations where the Company does not have a direct commercial presence. The Company is exposed to credit losses primarily through sales of its products to its customers.

The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and expected future economic and market conditions and periodic evaluation of customers’ receivables balances. Management estimates the adequacy of the allowance by using relevant available information, from internal and external sources, relating to past events, current conditions and forecasts. Historical credit loss experience provides the basis for estimation of expected credit losses and are adjusted as necessary using the relevant information available. The allowance for credit losses is measured on a collective basis when similar risk characteristic exists. The Company has identified one portfolio segment based on evaluation of the following risk characteristics: geographic regions, product lines, default rates and customer specific factors.

Additionally, specific allowance amounts may be established to record the appropriate provision for customers that have a higher probability of non-payment. The Company writes off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. The Company’s allowance for credit losses represents management’s estimate of current expected credit losses and totaled approximately $1.1 million and $1.2 million as of

December 31, 2024 and December 31, 2023, respectively, and there were immaterial bad-debt write offs during the years ended December 31, 2024 and December 31, 2023.

As of December 31, 2024 and December 31, 2023 the Company evaluated the current and expected future economic and market conditions surrounding the macroeconomic environment, including the impact of inflation, supply shortages or delays, changes in supply and demand, labor shortages and turnover, foreign exchange rate fluctuations and other conditions, as it relates to collectability of its accounts receivable and determined the estimate of expected credit losses was not materially impacted. The Company will continue to re-evaluate the estimate of credit losses related to the current macroeconomic environment in conjunction with its assessment of expected credit losses in subsequent periods.

Additionally, no customers accounted for more than 10% of net accounts receivable as of December 31, 2024 or December 31, 2023.

Inventory

Inventory is valued at the lower of cost or net realizable value with cost being determined on a first-in, first-out basis. The Company periodically reviews inventory for potential impairment, estimated losses from obsolescence, material expirations or unmarketable inventory or excess inventory and writes down the cost of inventory to net realizable value at the time such determinations are made. Net realizable value is determined using the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.

Property and Equipment, Net

Property and equipment is recorded at cost. Depreciation of property and equipment is generally provided using the straight-line method over the estimated useful lives of the assets, which range from three tofive years. Leasehold improvements are amortized over their estimated useful life or the related lease term, whichever is shorter. Maintenance and repairs are expensed as incurred.

All long-lived assets are reviewed for impairment in value when changes in circumstances indicate that an asset or asset group’s carrying value may not be recoverable, based upon undiscounted future operating cash flows to be derived from their use, and appropriate losses are recognized and reflected in current earnings to the extent the carrying amount of an asset exceeds its estimated fair value, determined by the use of appraisals, discounted cash flow analyses or comparable fair values of similar assets. The Company didnot record any impairment charges for the year ended December 31, 2024, December 31, 2023 or December 31, 2022.

Intangible Assets

Intangible assets with finite-lives include developed technology and customer relationships, which are amortized on a straight-line basis over their estimated useful lives, which range from four toeleven years. The Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset group’s carrying value. If the affected intangible assets are not recoverable, management estimates the fair value of the assets and record an impairment loss if the carrying value of the assets exceeds the fair value.

Indefinite-lived intangible assets are comprised of acquired in-process research and development (IPR&D) assets and are not amortized, but instead tested for impairment until the successful completion and commercialization, or abandonment, of the associated research and development efforts, at which point the IPR&D assets are either amortized over their estimated useful lives or written-off immediately.

Refer toNote 6, Intangible Assets and Goodwill for more information on the Company’s intangible assets.

Goodwill

Goodwill represents the excess of the cost over the fair value of net assets acquired from business combinations. If the Company determines the carrying value of a reporting unit exceeds its fair value, an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. The Company hasone reporting unit and tests for impairment annually, on October 1. In addition to that test, the Company regularly assesses if an event or indicator of impairment has occurred which would require interim impairment testing. The Company’s annual impairment test did not result in any impairment, and the Company has not identified any indicators of impairment through December 31, 2024 and consequently, no impairment charge was recorded during the year.

Refer toNote 6, Intangible Assets and Goodwill for more information on the Company’s goodwill.

Fair Value of Financial Instruments

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

The valuation of assets and liabilities is subject to fair value measurements using a three-tiered approach and fair value measurements are classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the years presented.

Leases

The Company determines if an arrangement is a lease at inception. As a lessee, right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company estimates the incremental borrowing rate based on its debt, prevailing financial market conditions, peer company credit analyses, and management judgment. Operating and financing lease right-of-use assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The lease terms used to calculate the right-of-use asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as amortization expense on right-of-use lease assets

and interest expense using the accelerated interest method of recognition. Leases with an initial term of 12 months or less are expensed and not recorded on the consolidated balance sheets.

Revenue Recognition

The Company derives its revenue from sales of its products in the United States and internationally. Customers are primarily comprised of ambulatory surgery centers, hospitals and physician private practices, with independent distributors being used in certain international locations where the Company does not have a direct commercial presence.

The Company concluded thatone performance obligation exists for the majority of its contracts with customers which is to deliver products in accordance with the Company’s normal delivery times. Revenue is recognized when this performance obligation is satisfied, which is the point in time when the Company considers control of a product to have transferred to the customer. Revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those products or services. The Company has determined the transaction price to be the invoice price, net of adjustments that reduce revenue, which includes estimates of volume-based rebates, rebates for government pricing programs, variable consideration for certain product returns and warranty replacements, and other discounts and incentives that reduce revenue.

The Company recognizes revenue when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer. This requires management to perform an assessment related to the probability of collecting the consideration. The assessment can contain judgment when it is performed for customers with declining credit conditions or those with no history or a limited history of product sales with the Company.

The Company offers volume-based rebate agreements to certain customers and, if earned by the customer, the Company provides a rebate (usually in the form of a credit memo) at the contract’s conclusion, if earned by the customer. In such cases, the transaction price is allocated between the Company’s delivery of product and the issuance of a rebate at the contract’s conclusion for the customer to utilize on prospective purchases. The performance obligation to issue a customer’s rebate, if earned, is transferred over time and the Company’s method of measuring progress is the output method, whereby the progress is measured by the estimated rebate earned to date over the total rebate estimated to be earned over the contract period. The provision for volume-based rebates is estimated based on customers' contracted rebate programs and the customers’ projected sales levels.

Non-volume-based rebates consist primarily of rebates for government pricing programs, which were estimated using the expected value method, based upon a range of possible outcomes for the estimated number of actual claims invoices we expect to receive. The Company applies this estimate to the respective period’s sales to determine the rebate accrual and related expense. This estimate is evaluated regularly to ensure that the historical trends are as current as practicable. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue.

The Company regularly monitors its customer rebate programs to ensure the rebate allowance is fairly stated. The Company’s rebate allowance is included in accrued liabilities in the consolidated balance sheets.

Customers are not granted specific rights of return; however, the Company may permit returns of certain products from customers if such product is returned in a timely manner and in good condition. The Company generally provides a warranty on its products forone year from the date of shipment, and offers an extended warranty for its KXL systems. Any product found to be defective or out of specification will be replaced or serviced at no charge during the warranty period. Estimated allowances for sales returns and warranty replacements are recorded at the time of sale of the product and are estimated based upon the historical patterns of product returns matched against sales, and an evaluation of specific factors that may increase the risk of product returns. Product returns and warranty replacements to date have been consistent with amounts reserved or accrued and have not been significant. If actual results vary from the Company’s estimates, the Company will adjust these estimates in the period such variances become known.

Shipping and Handling Costs

All shipping and handling costs are expensed as incurred and are charged to selling, general and administrative expense. Charges to customers for shipping and handling are credited to selling, general and administrative expense.

Advertising Costs

All advertising costs are expensed as incurred. Advertising costs incurred during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 were approximately $3.6 million, $3.4 million and $2.5 million, respectively.

Income Taxes

Income taxes are accounted for using a liability approach. This requires the recognition of deferred tax assets and liabilities for the differences between the financial statement and tax basis of the Company’s assets and liabilities, NOLs, and tax credit carryovers using tax rates in effect for the year in which the differences are expected to reverse. The Company records a valuation allowance against a portion of deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized. Management has considered estimated taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. Based upon the weight of available positive and negative evidence, which includes the Company’s historical operating performance and limited potential to utilize NOL and tax credit carryforwards, the Company has determined that it is more likely than not that the future realization of all or some of the deferred tax assets will not be achieved and a portion of its deferred tax assets should be offset by a valuation allowance. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes increases or decreases, respectively, in the period such determination is made.

The Company is required to file federal and state income tax returns in the United States. The Company also files income tax returns in the foreign countries in which its subsidiaries operate. The preparation of these income tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid.

Additionally, the Company follows an accounting standard addressing the accounting for uncertainty in income taxes that prescribes rules for recognition, measurement, and classification in the consolidated financial statements of tax positions taken or expected to be taken in a tax return.

Research and Development Expenses

Major components of research and development expense include personnel costs, preclinical studies, clinical trials and related clinical product manufacturing, materials and supplies, and fees paid to consultants. Research and development costs are expensed as goods are received or services are rendered. Costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use are also expensed as incurred.

At each financial reporting date, the Company accrues the estimated unpaid costs of clinical study activities performed during a period by third party clinical sites with whom the Company has agreements that provide for fees based upon the quantities of subjects enrolled and clinical evaluation visits that occur over the life of the study. The cost estimates are determined based upon a review of the agreements and data collected by internal and external clinical personnel as to the status of enrollment and subject visits, and are based upon the facts and circumstances known to the Company at each financial reporting date. If the actual performance of activities varies from the assumptions used in the cost estimates, the accruals are adjusted accordingly. There have been no material adjustments to the Company’s prior period accrued estimates for clinical trial activities through December 31, 2024.

Stock-Based Compensation

The Company recognizes compensation expense for all stock-based awards granted to employees and nonemployees, including members of its board of directors, based on the grant date fair value of the award.

For stock-based awards with service conditions, the fair value of the awards is amortized on a straight-line basis over the requisite service period in which the awards are expected to vest. For stock-based awards with performance vesting conditions, stock-based compensation is recognized when it is considered probable that the performance conditions will be satisfied. At each reporting period, the Company re-assesses the probability of the achievement of the performance vesting conditions. Any change in stock-based compensation resulting from an adjustment in the vesting is treated as a cumulative catch-up in the period of adjustment.

Software Costs

The Company capitalizes certain software development costs incurred for internal use projects when it is determined that it is probable that the project will be completed, the software will be used to perform the function intended, and the preliminary project stage is completed. Once capitalized projects are ready for their intended use, they are amortized using the straight-line method over the estimated useful life, which is generally 3 years. These capitalized costs are included in property and equipment, net within the consolidated balance sheets and are not significant for the period presented.

Comprehensive Loss

All components of comprehensive loss, including net loss, are reported in the consolidated financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities and foreign currency translation adjustments.

Foreign Currency

Assets and liabilities are translated into the reporting currency using the exchange rates in effect on the consolidated balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the period, which is the result of the income statement translation process. Revenue and expense accounts are translated using the daily average exchange rates during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other comprehensive loss in the accompanying consolidated statements of stockholders’ equity.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for potentially dilutive common stock equivalents.

For periods when the Company realizes a net loss, no potentially dilutive common stock equivalents are included in the calculation of weighted average number of dilutive common stock equivalents as the effect of applying the treasury stock method is considered anti-dilutive.

For periods when the Company realizes net income, diluted net income per share is calculated by dividing the net income by the weighted average number of common shares plus the sum of the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury stock method or if-converted method for convertible instruments. Common stock equivalents are comprised of stock options, outstanding and unvested RSUs under the Company’s incentive compensation plans and shares issuable under the Company’s Employee Stock Purchase Plan (ESPP) and as of December 31, 2023 and December 31, 2022, shares convertible pursuant to the Convertible Notes.

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (weighted outstanding common stock equivalent shares, in thousands):

The Company has 5,000,000 of authorized preferred stock issuable, and there isno preferred stock outstanding as of December 31, 2024 and December 31, 2023. Each share of common stock is entitled toone vote.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07,Improvements to Reportable Segments Disclosures.While ASU 2023-07 requires incremental disclosures, it does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine reportable segments. This ASU is effective for all public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis and while adoption as of December 31, 2024 did not impact the Company’s consolidated financial statements, the required disclosure updates are included inNote 13. Business Segment Information.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid by jurisdiction. The ASU is effective for public business entities’ annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently finalizing its evaluation of the impact of adopting this pronouncement; however the Company currently does not believe the adoption will have a material impact on its consolidated financial statements.

**Note 3.**Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, and any significant deterioration in economic conditions.

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest expense in the consolidated statements of operations through an allowance for credit losses. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive loss. Unrealized losses on available-for-sale debt securities as of December 31, 2024 and December 31, 2023 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Further, the Company does not intend to sell these investments prior to maturity and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis. Accordingly, the Company did not record an allowance for credit losses with these investments as of December 31, 2024 and December 31, 2023.

Accounts Receivable, Net

Accounts receivable consisted of the following (in thousands):

Inventory

Inventory consisted of the following (in thousands):

For the year ended December 31, 2024, the Company recorded a write-down charge of $4.4 million associated with product line optimizations which was recorded against inventory and prepaid assets and other assets in the accompanying consolidated balances sheets, and within cost of sales in the accompanying consolidated statements of operations. No inventory write-downs were recognized for the year ended December 31, 2023.

Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

Depreciation and amortization expense related to property and equipment was $10.1 million, $7.3 million and $6.6 million for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands).

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

U.S. government agency bonds, U.S. treasury securities, bank certificates of deposit, commercial paper, municipal bonds, corporate notes and asset-backed securities are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), the Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust and Deferred Compensation Plan liability consist of company-owned life insurance policies (COLIs) and the pricing on these investments can be independently evaluated. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from third party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

The Company recorded a contingent consideration liability upon the asset acquisition described in Recent Developments withinNote 1, Organization and Basis of Presentation above. The contingent consideration is measured at fair value and is based on significant inputs not observable in the market which includes the probability and timing of achieving certain future milestones, and to a lesser extent, an applicable discount rate and Glaukos’ credit rating. This represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes a market participant would make. The Company assesses these estimates on an ongoing basis as it obtains additional data impacting the assumptions. During the year ended December 31, 2024, the contingent consideration liability increased from $1.4 million to $1.6 million, with the change in the fair value of contingent consideration related to updated assumptions and estimates recognized within the consolidated statements of operations.

There wereno transfers between levels within the fair value hierarchy during the periods presented.

The Companydid not have any assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of December 31, 2023.

Convertible Senior Notes

As of December 31, 2023, the fair value of the Convertible Notes was $444.0 million. The fair value was determined on the basis of the market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. SeeNote 8, Convertible Senior Notes for additional information.

The Company has operating and finance leases for facilities and certain equipment.

The Company’s leases have non-cancelable lease terms of approximatelyone year tothirteen years, some of which include options toextend the leases for up toten years. The exercise of lease renewal options is at the Company’s sole discretion. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for common area maintenance, landlord incentives and/or inflation.

The Company’s office building lease in Aliso Viejo, California (Aliso Facility) isone property containing three existing office buildings, comprising approximately 160,000 rentable square feet of space, which was accounted for as a finance lease. The term of the Aliso Facility commenced on April 1, 2019 for expense recognition and continues forthirteen years. The lease agreement contains an option to extend the lease fortwo additional five year periods at market rates.

The Company also leasestwo adjacent buildings, two office suites and a warehouse located in San Clemente, California and a facility in Burlington, Massachusetts. The total leased square footage of the San Clemente facilities equals approximately 120,000 and thetwo most significant leases expire on May 31, 2030 and May 31, 2035. Each of thesetwo leases contain an option to extend the lease forone additional five-year period at market rates. The total leased square footage of the Burlington facility is approximately 60,000 square feet, and the lease expires on July 31, 2033. The Burlington facility lease contains an option to extend the lease forone additional five-year period at market rates.

The Company’s remaining foreign subsidiaries’ leased office and warehouse space totals less than 35,000 square feet.

The following table presents the maturity of the Company’s operating and finance lease liabilities within the consolidated balance sheets:

Note: As the implicit rates in the Company’s leases are not readily available, the incremental borrowing rate was determined based on the information available at commencement date in determining the present value of lease payments.

For the year ended December 31, 2024 and December 31, 2023, the components of operating and finance lease expenses were as follows:

(a)Includes short-term leases, which are not significant.

The following table presents the maturity of the Company’s operating and finance lease liabilities as of December 31, 2024:

The weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating and finance leases as of December 31, 2024 and December 31, 2023 were:

Supplemental cash flow information related to the Company’s operating and finance leases was as follows:

Intangible assets

Effective March 17, 2023, the Company entered into a sales agreement (Sales Agreement) with Celanese Canada ULC (Celanese) under which Celanese will make available and supply to the Company certain raw materials used to create a nanoporous membrane utilized in theiDose TR, and authorized the Company to reference its Drug Master File (DMF) with respect to such raw materials, which is required for the Company to commercializeiDose TR. The term of the Sales Agreement isfour years after theiDose TR launch date in February 2024. In exchange for the ability to obtain future raw materials and the rights related to the DMF, the Company is subject to minimum compensation payments over four years of $6.3 million and potential additional royalties based on a percentage of sales of theiDose TR product. The Company recognized an intangible asset related to the minimum compensation payments at fair value of $5.2 million upon the date of acquisition, which was determined to be theiDose TR launch date. The $5.2 million is included in Intangible assets, net on the consolidated balance sheets and will be amortized to cost of sales over

its useful life offour years, which is the initial term of the Sales Agreement. A member of the Celanese board of directors also sits on the board of directors of the Company.

For the year ended December 31, 2024, amortization expense related to the Company’s finite-lived intangible assets was approximately $22.2 million and $2.5 million, recorded in cost of sales and sales, general and administrative expenses, respectively, in the consolidated statements of operations. For each of the years ended December 31, 2023 and December 31, 2022, amortization expense related to the Company’s finite-lived intangible assets was approximately $22.1 million and $2.8 million, recorded in cost of sales and selling, general and administrative expenses, respectively, in the consolidated statement of operations.

Goodwill

The following table presents the composition of the Company’s intangible assets and goodwill (in thousands):

As of December 31, 2024, expected amortization expense for unamortized finite-lived intangible assets for the next five years and thereafter is as follows (in thousands):

Actual amortization expense to be reported in future periods could differ from these estimates as a result of asset impairments, acquisitions, or other facts and circumstances.

Note 7. Revenue from Contracts with Customers

Disaggregation of Revenue

The Company’s revenues disaggregated by product category and geography, for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 were as follows (in thousands):

Contract Balances

Contract Assets

Amounts are recorded as accounts receivable when the Company’s right to consideration becomes unconditional. Payment terms on invoiced amounts are typically between 30 –60 days for glaucoma and corneal health products, though extended payment terms have been offered as part of theiDose TR commercial launch during 2024. However, the Company does not consider any significant financing components in customer contracts given the expected time between transfer of the promised products and the payment of the associated consideration is less thanone year. As of December 31, 2024 and December 31, 2023, substantially all amounts included in accounts receivable, net on the consolidated balance sheets are related to contracts with customers.

Aside from the aforementioned contract assets, the Company does not have any contract assets given that the Company does not have any unbilled receivables and sales commissions on products are expensed within selling, general and administrative expenses within the consolidated statement of operations when incurred as any incremental cost of obtaining contracts with customers would have an amortization period of less thanone year.

Contract Liabilities

Contract liabilities reflect consideration received from customers’ purchases allocated to the Company’s future performance obligations.

The Company has a performance obligation to issue a volume-based rebate to customers who may be eligible for such rebate at the conclusion of their contract term. This performance obligation is transferred over time and the Company’s method of measuring progress is the output method, whereby the progress is measured by the estimated rebate earned to date over the total rebate estimated to be earned over the contract period.

Additionally, effective in the first quarter 2024, certain sales of the Company’s pharmaceutical products are subject to rebates under the Medicaid Drug Rebate Program (MDRP). The rebate accrual calculation requires management to estimating the volume of net sales that will be subject to these rebates. There can be significant time-lag in receiving rebate notices from each state (generally, several months or longer after a sale is recognized). Estimated MDRP rebates are recorded as a reduction of revenue in the period the related sale is recognized.

The Company’s total volume-based and MDRP allowances are included in accrued liabilities in the consolidated balance sheets and estimated rebates accrued were $8.0 million and $8.9 million as of December 31, 2024 and December 31, 2023, respectively, as detailed below:

During the years ended December 31, 2024 and December 31, 2023, the Company did not recognize any revenue related to material changes in transaction prices regarding its contracts with customers and did not recognize any material changes in revenue related to amounts included in contract liabilities at the beginning of the period.

The Company’s net sales within a fiscal year may be impacted seasonally, as demand for U.S. ophthalmic procedures is typically softer in the first quarter and stronger in the fourth quarter of a given year.

**Note 8.**Convertible Senior Notes

The Company accounted for its convertible senior notes as a single unit of accounting, a liability, because the Company concluded that there were no material conversion features that require bifurcation as a derivative and its convertible debt instruments were not issued at a substantial premium.

In June 2020, the Company issued $287.5 million in aggregate principal amount of Convertible Notes pursuant to an indenture dated June 11, 2020, between the Company and Wells Fargo Bank, National Association, as trustee (the Indenture), in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes were senior unsecured obligations of the Company and bore interest at a rate of 2.75% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. In connection with issuing the Convertible Notes, the Company received $242.2 million in proceeds, after deducting fees and offering expenses and paying the cost of the capped call transactions described below.

In June 2024 the Company executed a Convertible Notes Exchange whereby certain investors exchanged $230.0 million in aggregate principal of Convertible Notes held for an aggregate of 4,253,423 shares of the Company’s common stock, leaving $57.5 million aggregate principal of remaining Convertible Notes outstanding. Then on October 4, 2024, the Company issued a notice of redemption (the Redemption Notice) for all remaining $57.5 million aggregate principal outstanding of its Convertible Notes to be redeemed on December 16, 2024 (the Redemption Date) for the principal amount together with accrued and unpaid interest. The Redemption Notice triggered a right to conversion by holders, at their election, into shares of common stock of the Company (Common Stock) pursuant to physical settlement at any time prior to the Redemption Date. The conversion rate for the Convertible Notes was 17.8269 shares of Common Stock per $1,000 principal amount, plus additional shares of 0.3501 per $1,000 principal amount, thus totaling 18.1770 shares of Common Stock per $1,000 principal amount surrendered for conversion thereunder.

Between the issuance of the Redemption Notice and the Redemption Date, holders of Convertible Notes totaling approximately $57.4 million of outstanding principal amount elected to convert, resulting in the issuance of 1,044,066 shares of the Company’s common stock. On December 16, 2024, the remaining approximately $0.1 million of outstanding principal amount was redeemed, along with accrued and unpaid interest, for cash.

Interest expense relating to the Convertible Notes in the consolidated statements of operations for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 are summarized as follows (in thousands):

The effective interest rate on the Convertible Notes for the year ended December 31, 2024 was 2.1% and was 3.2% for the years ended December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023 the Convertible Notes on the consolidated balance sheets represented the carrying amount of the liability component of the Convertible Notes, net of unamortized debt issuance costs, which are summarized as follows (in thousands):

Capped Call Transactions

Inconnection with the offering of the Convertible Notes, in June 2020 the Company entered into privately negotiated capped call transactions with certain financial institutions (the Option Counterparties) and used an aggregate$35.7 million of the net proceeds from the Convertible Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Convertible Notes or at the Company’s election (subject to certain conditions) offset any cash payments the Company is required to make in excess of the aggregate principal amount of converted Convertible Notes, as the case may be, with such reduction or offset subject to a cap based on the cap price. The cap price of the capped call transactions is initially$86.30 per share, which represented a premium of 100% over the last reported sale price of the Company’s common stock on June 8, 2020, and is subject to certain adjustments under the terms of the capped call transactions. The capped calls have an initial strike price of approximately$56.10 per share, subject to certain adjustments, which corresponds to the conversion option strike price in the Convertible Notes. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes (or approximately 5.1 million shares of the Company’s common stock).

The capped call transactions are separate transactions that the Company entered into with the Option Counterparties, are not part of the terms of the Convertible Notes and will not change the holders’ rights under the Convertible Notes. As the capped call transactions meet certain accounting criteria, the cost of the capped call transactions of$35.7 million was recorded as a reduction in additional paid-in capital in the consolidated balance sheets and will not be remeasured to fair value as long as the accounting criteria continue to be met.

On December 2, 2024, the Company entered into Capped Call Unwind Agreements with certain of the Option Counterparties to unwind 50% of the capped call transactions. Under the terms of the Unwind Agreements, there was athree-day unwinding period, referred to as the Volume-Weighted Average Price (VWAP) period, before the cash settlement was delivered. At the time of signing the Unwind Agreements, the Company recognized a derivative asset at its fair value of$53.9 million, reflecting the initial cash settlement value based on the VWAP as of the signing date, with a corresponding entry recorded to additional paid-in capital in the consolidated balance sheets.

During thethree-day VWAP period, fluctuations in the Company’s stock price resulted in a remeasurement loss on the derivative asset of$0.7 million, which was recorded within other expense, net in the consolidated statements of operations. On December 6, 2024, the Capped Call Unwind Agreements were settled and the Company received$53.2 million in cash, at which point the derivative asset was derecognized.

The remaining outstanding 50% of the capped call transaction will not be remeasured to fair value as long as the accounting criteria continue to be met.

The Company hasthree stock-based compensation plans (collectively, the Stock Plans) —** **the 2011 Stock Plan (the 2011 Stock Plan), the Amended and Restated 2015 Omnibus Incentive Compensation Plan (the 2024 Stock Plan) and the Employee Stock Purchase Program (ESPP). The 2024 Stock Plan permits grants of stock options and restricted stock unit (RSU) awards. The Company no longer grants any awards under the 2011 Stock Plan.

The purpose of these Stock Plans is to provide incentives to employees, directors and nonemployee consultants. The maximum term of any stock options granted under the Stock Plans is 10 years. For employees and nonemployees, time-based stock options generally vest 25% on the first anniversary of the original vesting date, with the balance vesting monthly or annually over the remaining three years. Stock options are granted at exercise prices at least equal to the fair value of the underlying stock at the date of the grant.

For employees and nonemployees, generally, time-based RSU awards vest 25% on each of the first, second, third andfourth anniversaries of the grant date and in certain cases, vest one year after grant date.

The Compensation, Nominating and Governance Committee (Compensation Committee) has approved the grant of performance-based equity awards (PBEAs) to the Company’s named executive officers and certain other senior level employees pursuant to the 2024 Stock Plan and include performance-based stock options and performance-based RSUs. These PBEAs will only vest upon the Compensation Committee’s determination that the corresponding, pre-defined Company operational goals were satisfied.

The ESPP permits eligible employees to purchase shares of the Company’s common stock, using contributions made via payroll deductions of up to 15% of their earnings, at a price per share equal to 85% of the lower of the stock’s fair market value on the offering date or the purchase date of a given ESPP offering period. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

As of January 1, 2025, the Company has reserved an aggregate of 25.8 million shares of common stock for issuance under the 2024 Stock Plan, and 4.7 million shares of common stock for issuance under the ESPP.

Valuation and Expense Recognition of Stock-Based Awards

The Company accounts for the measurement and recognition of compensation expense for all share-based awards made to the Company’s employees and nonemployees based on the estimated fair value of the awards.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of time-based and performance-based stock options and look back options included as part of the ESPP. The determination of fair value using the Black-Scholes option-pricing model is affected by the estimated fair market value per share of the Company’s common stock as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and expected option life and generally requires significant management judgment to determine.

Fair value of common stock. The Company has used the daily closing market prices in the determination of the fair value of its common stock.

*Expected volatility.*The Company based the expected volatility on the historic volatility of its common stock.

Risk-free interest rate. The risk-free interest rate is equal to the U.S. Treasury Note interest rate for the comparable term for the expected option life as of the valuation date. If the expected option life is between the U.S. Treasury Note rates of two published terms, then the risk-free interest rate is based on the straight-line interpolation between the U.S. Treasury Note rates of the two published terms as of the valuation date.

Expected dividend yield. The expected dividend yield is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.

Expected term. The Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term, and therefore it uses the simplified method for estimating the expected term of stock option grants. Under this approach, the weighted-average expected term is presumed to be the average of the vesting term and the contractual term of the option.

Forfeiture rate. The Company reduces share-based compensation expense for estimated forfeitures. Forfeitures are estimated at the time of grant based on historical experience, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Stock Options

Time-based stock options

The following table summarizes time-based stock option activity under the Stock Plans:

The weighted average estimated grant date fair value per share of time-based stock options granted during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $50.10, $27.07 and $25.43, respectively.

The total fair value of time-based stock options that vested during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $6.9 million, $3.7 million and $3.6 million, respectively.

As of December 31, 2024 unamortized stock-based compensation expense attributable to time-based stock options was $7.3 million and is to be recognized over the stock options’ remaining vesting terms of approximately 4.0 years (2.4 years on a weighted average basis).

The fair value of each time-based option award is estimated on the date of grant using a Black-Sholes option pricing model applying the assumptions noted in the following table. The weighted average assumptions used to estimate the fair value of options granted to employees and non-employees were as follows:

Performance-based stock options

The following table summarizes performance-based stock option activity under the Stock Plans:

Intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the fair value per share of the common stock on the date of exercise.

The weighted average estimated grant date fair value per share of performance-based stock options granted during the years ended December 31, 2023 and December 31, 2022 was $27.21 and $27.33, respectively. No performance-based stock options were granted during 2024.

The total fair value of performance-based stock options that vested during the years ended December 31, 2024 December 31, 2023 and December 31, 2022 was $2.1 million, $2.4 million and $0.4 million, respectively.

As of December 31, 2024 unamortized stock-based compensation expense attributable to performance-based stock options was $0.3 million and is to be recognized over the stock options’ remaining vesting terms of approximately less thanone year (0.9 years on a weighted average basis).

The fair value of each performance-based option award is estimated on the date of grant using a Black-Sholes option pricing model applying the assumptions noted in the following table. The weighted average assumptions used to estimate the fair value of options granted to employees and non-employees were as follows:

Restricted Stock Units

The fair value of RSU awards made to employees and nonemployees is equal to the closing market price of the Company’s common stock on the grant date.

Time-based RSUs

The following table summarizes the activity of unvested time-based RSUs under the Stock Plans during the years ended December 31, 2024, December 31, 2023 and December 31, 2022:

The total fair value of time-based RSUs that vested during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $30.7 million, $25.0 million and $19.5 million, respectively.

As of December 31, 2024 unamortized stock-based compensation expense attributable to time-based RSUs was $65.7 million and is to be recognized over the RSU’s remaining vesting terms of approximately 4.0 years (2.6 years on a weighted average basis).

Performance-based RSUs

The following table summarizes the activity of unvested performance-based RSUs under the Stock Plans during the years ended December 31, 2024, December 31, 2023 and December 31, 2022:

The total fair value of performance-based RSUs that vested during the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $4.1 million, $4.4 million and $1.6 million, respectively.

As of December 31, 2024 unamortized stock-based compensation expense attributable to performance-based RSUs was $1.2 million and is to be recognized over the RSU’s remaining vesting terms of approximately less thanone year (0.8 years on a weighted average basis).

All Share-Based Compensation Arrangements

The following table summarizes the allocation of stock-based compensation related to both time-based and performance-based stock options and RSUs in the accompanying consolidated statements of operations (in thousands):

In the years ended December 31, 2024, December 31, 2023, and December 31, 2022, the related tax (expense)/benefit was $20.0 million, $5.3 million and $(0.5) million, respectively, relating to stock-based compensation.

The total stock-based compensation cost capitalized in inventory was not significant for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.

United States and foreign (loss) income before income taxes was as follows (in thousands):

The income tax provision was as follows (in thousands):

The reconciliations of the U.S. federal statutory tax expense to the combined effective tax provision are as follows:

Significant components of the Company’s net deferred tax assets at December 31, 2024 and December 31, 2023 are as follows (in thousands):

Based on the weight of available evidence, management has established a valuation allowance for a portion of its deferred tax assets which it expects will not be realized on a more likely than not basis. The net increase in the valuation allowance was $50.7 million in 2024.

As of December 31, 2024, the Company had approximately $527.5 million, $437.0 million and $6.5 million of NOL carryforwards for federal, state and foreign purposes, respectively. Portions of federal NOL carryforwards incurred prior to 2018 will expire annually, if unused, while $322.8 million will not expire but can only be used to offset 80 percent of federal taxable income. Additionally, portions of state and foreign NOL carryforwards will expire annually, if unused.

As of December 31, 2024, the Company had federal and state R&D credit carryforwards of approximately $48.2 million and $28.6 million, respectively. Portions of federal and $4.6 million of state credits will expire annually, if unused, while $24.0 million of state credits carry forward indefinitely. Additionally, as of December 31, 2024, the Company had California economic development credit carryforwards of $3.0 million. These economic development credits can only be used to offset California taxable income and begin to expire in 2028, if unused.

Utilization of some NOL and tax credit carryforwards will be subject to annual limitations under IRC Section 382 and Section 383 due to several ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL, tax credit carryforwards, and other deferred tax assets that can be utilized to offset future taxable income and/or income tax liabilities. In general, ownership changes as defined by IRC Section 382 result from a greater than 50 percent change in the ownership of the Company’s stock among certain shareholders over a three-year period.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 excluding interest and penalties, is as follows (in thousands):

As of December 31, 2024, approximately $2.0 million of unrecognized tax benefits would reduce the Company’s annual effective tax rate if recognized.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of its income tax provision. The accrued interest and penalties associated with uncertain tax positions as of December 31, 2024, December 31, 2023 and December 31, 2022 were not material. Approximately $0.6 million of the Company’s unrecognized tax benefits are expected to reverse over the next 12 months.

Due to the Company’s NOL carryforwards, its U.S. income tax returns are open to examination by the Internal Revenue Service and other state taxing jurisdictions for years beginning in 2005.

There areno cumulative earnings in the Company’s foreign subsidiaries as of December 31, 2024 that would be subject to U.S. income tax or foreign withholding tax. The Company plans to indefinitely reinvest any future earnings of its foreign subsidiaries.

Note 11. Employee Benefits

Defined Contribution Plan

The Company sponsors a defined contribution plan pursuant to section 401(k) of the U.S. Internal Revenue Code that allows participating employees to contribute up to 100% of their salary, to an annual maximum of $23,000 in 2024, $22,500 in 2023, and $20,500 in 2022 ($30,500, $30,000 and $27,000 in 2024, 2023 and 2022, respectively, for employees over the age of 50). Through December 31, 2024, the Company has only made “qualified nonelective contributions” to maintain compliance with IRS regulations.

During the years ended December 31, 2024, December 31, 2023 and December 31, 2022, the Company contributed a $0.50 match for every $1.00 contributed by a participating employee up to 6% of plan-eligible earnings, with such Company contributions becoming fully vested when participating employees reach the 3-year anniversary from their date of hire, giving credit for past service. For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, Company contributions totaled approximately $3.2 million, $2.9 million and $2.5 million, respectively.

Deferred Compensation Plan

Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), eligible senior level employees are permitted to make elective deferrals of compensation to which they will become entitled in the future. The Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust consist of COLIs. The fair value of the Deferred Compensation Plan liability, included in other liabilities on the consolidated balance sheets, was approximately $14.6 million and $11.3 million as of December 31, 2024 and December, 31, 2023 respectively, and the cash surrender value of the COLIs, included in deposits and other assets on the consolidated balance sheets, which reflects the underlying assets at fair value, was approximately $14.7 million and $11.6 million as of December 31, 2024 and December 31, 2023, respectively.

Secured Letters of Credit

The Company has a letter of credit that is related to its Aliso Facility. The letter of credit is secured with an amount of cash held in a restricted account of approximately $4.5 million and $5.6 million as of December 31, 2024 and December 31, 2023, respectively. Beginning May 2022, and on each twelve-month anniversary thereafter, the letter of credit will be reduced by 20% until the letter of credit amount has been reduced to $2.0 million.

The Company has other irrevocable standby letters of credit secured with approximately $0.2 million of cash in a restricted account.

Purchase Commitment

As of December 31, 2024, the Company had noncancelable, firm purchase commitments of $1.5 million due beyond one year.

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require it to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by corporate law. The Company also has directors’ and officers’ insurance.

The Company hasone business activity and operates asone operating segment: the development and commercialization of ophthalmic therapies designed to treat glaucoma, corneal disorders and retinal diseases. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company’s revenues disaggregated by revenue and product category are included inNote 7, Revenue from Contracts with Customers. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.