Restructuring

12 Months Ended

Dec. 31, 2023

Restructuring and Related Activities [Abstract]

In September 2023, as a result of a review of current strategic priorities and resource allocation, we approved the Restructuring Plan intended to realign our operational focus to support our multi-year growth, scale the business, and improve our cost structure and operating margins. The Restructuring Plan included (i) an optimization of our workforce across multiple functions, (ii) a relocation of our Repair & Overhaul (“R&O”) department from our manufacturing and warehousing facility in Newark, Delaware, to Mexico, and (iii) a closure of a manufacturing, warehousing, research and development (“R&D”) facility in Sunnyvale, California (i.e., facility closure). We began executing the Restructuring Plan in September 2023 and expect these efforts to continue in subsequent quarters. The restructuring activities are expected to be completed in the first half of fiscal 2024, subject to local law and consultation requirements, as well as our business needs.

The determination of when we accrue for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. We account for one-time benefit arrangements in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”) and account for ongoing benefit arrangements in accordance with ASC 712, Nonretirement Postemployment Benefits. For involuntary termination benefits that are not provided under the terms of an ongoing benefit arrangement, the liability for the current fair value of expected future costs associated with a management-approved restructuring plan is recognized in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, employee termination costs are accrued when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. The restructuring charges that have been incurred but not yet paid are recorded in accrued expenses and other current liabilities in our consolidated balance sheets, as they are expected to be settled within the next twelve months. Other costs associated with restructuring or exit activities may include contract termination costs, relocation costs and impairments of long-lived assets, which are expensed in accordance with ASC 420 and ASC 360, Property, Plant and Equipment.

According to the Restructuring Plan, 74 full-time employees and 48 contractors were separated from the Company in September 2023. An additional 71 full-time employees and 8 contractors separated from the Company in October 2023. Both full-time employees and contractors who were impacted by the restructuring were eligible to receive severance benefits.

On October 28, 2023, we communicated to additional 61 full-time employees about their forthcoming separation from the Company on January 2, 2024. These employees are sent on paid leave from the communication date through January 2, 2024, and are eligible for one-time employee termination benefits represented by the base salary they earn through the term of the leave.

In fiscal 2023, we incurred $9.3 million in restructuring costs recorded as severance expenses of $5.3 million, facility closure costs of $2.6 million, and other restructuring costs of $1.4 million. We expect to incur another $7.6 million in restructuring costs in subsequent quarters, out of which we expect $3.5 million will relate to relocation costs, $3.3 million will relate to the facility closure costs, and $0.8 million will relate to other one-time employee termination benefits. However, the actual timing and amount of costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.

The following table presents our current liability as accrued for restructuring charges on our consolidated balance sheets. The table sets forth an analysis of the components of the restructuring charges and payments made against the accrual for the year ended December 31, 2023 (in thousands):


	Year Ended December 31, 2023
	Facility Closure		Severance		Other		Total

Balance at December 31, 2022	$	—	$	—	$	—	$	—
Restructuring accruals	2,611		5,306		1,249		9,166
Payments	(34)		(4,842)		(497)		(5,373)
Balance at December 31, 2023	$	2,577	$	464	$	752	$	3,793

Facility closure costs recorded in fiscal 2023 in accordance with ASC 420 related to the closure of a manufacturing, warehousing, R&D facility in Sunnyvale, California, which is planned to be consolidated with our manufacturing facility in Fremont, California. At December 31, 2023, $2.6 million of accrued facility closure costs were included in accrued expenses and other current liabilities in our consolidated balance sheets.

Severance expense recorded in fiscal 2023 in accordance with ASC 420 was a result of the separation of 145 full-time employees and 56 contractors associated with the Restructuring Plan. At December 31, 2023, $0.5 million of accrued severance-related costs were included in accrued expenses and other current liabilities in our consolidated balance sheets.

Other costs are represented by (1) $0.2 million of performance bonuses, (2) $0.2 million of stock-based compensation expense, and (3) $1.0 million of other one-time employee termination benefits. On December 31, 2023, $0.8 million of accrued other costs were included in accrued expenses and other current liabilities in our consolidated balance sheets, respectively.

The following table summarizes restructuring costs included in the accompanying consolidated statements of operations (in thousands):


	Year Ended December 31, 2023

Cost of product revenue	$	2,976
Cost of installation revenue	71
Cost of service revenue	521
Operating expenses:
Research and development	1,609
Sales and marketing	1,679
General and administrative	2,467
Total	$	9,323