Balance Sheet Components

3 Months Ended

Mar. 31, 2020

Balance Sheet Components

Balance Sheet Components

6. Balance Sheet Components

Property and Equipment, net

The Company’s property and equipment consisted of the following:

		March 31,		December 31,
	Useful Life	2020		2019
		(in thousands)
Machinery and equipment	3-5 years	$	41,634	$	36,414
Furniture and fixtures	3 years		1,376		1,376
Computer equipment	3 years		1,796		1,828
Capitalized software held for internal use	3 years		6,480		5,917
Leasehold improvements	Lesser of useful life or lease term		11,746		11,556
Construction-in-process			7,037		7,716
			70,069		64,807
Less: Accumulated depreciation and amortization			(43,351)		(41,524)
Total Property and Equipment, net		$	26,718	$	23,283

During the three months ended March 31, 2020, the increase in net property in equipment was due to purchases of new equipment for our laboratory located in Texas to expand testing capabilities, offset by depreciation expense of $1.8 million recorded in the three months ended March 31, 2020. The Company did not incur an impairment charge in the first quarter of 2020.

Other Assets

In August 2017, the Company entered into the 2017 Term Loan with OrbiMed (as described in Note 10, Debt) and issued 300,000 shares of its common stock in exchange for OrbiMed’s initial and remaining funding commitments. In April 2019, the Company issued an additional 25,000 shares of its common stock to OrbiMed for extending the expiration date to draw the unused borrowing capacity until December 31, 2019. The Company previously classified $1.2 million out of the total debt issuance costs in noncurrent assets for the unused borrowing capacity of $50.0 million. The debt discount was amortized on a straight-line basis over the remaining term of the loan. Since the option to draw the unused borrowing capacity has expired as of March 2020, the Company reclassed $0.9 million—the unamortized portion of debt issuance cost previously classified in noncurrent assets—to long-term debt financing. Accordingly, as of March 31, 2020, total unamortized remaining in noncurrent assets was zero.

As of March 31, 2020, other assets also included long-term advances to BGI Genomics of $10.0 million for future sequencing equipment and services. Furthermore, other assets include additional consideration estimated at $3.1 million in connection with the sale of Evercord, which represent the amount Natera is entitled to receive from the buyer as a percentage of collections on the transferred accounts receivable as part of the sale (i.e., receivables from third-party buyer). The consideration decreased from $4.7 million as of December 31, 2019 due to $0.5 million of net collections from the

buyer and $1.2 million credit loss expense on the additional consideration. The credit loss expense was determined based on a recent collectability assessment of the accounts receivables transferred to the buyer on the disposal date.

Accrued Compensation

The Company’s accrued compensation consisted of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Accrued paid time off	$	1,912	$	1,850
Accrued commissions		6,997		5,767
Accrued bonuses		2,017		5,710
Other accrued compensation		5,027		2,761
Total accrued compensation	$	15,953	$	16,088

Other Accrued Liabilities

The Company’s other accrued liabilities consisted of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Reserves for refunds to insurance carriers	$	11,599	$	9,410
Accrued charges for outsourced testing		6,051		8,408
Testing and laboratory materials from suppliers		7,821		4,301
Marketing and corporate affairs		2,136		2,957
Legal, audit and consulting fees		5,055		2,873
Accrued shipping charges		209		305
Sales tax payable		1,412		1,691
Accrued specimen service fees		1,066		2,269
Clinical trials and studies		1,157		1,092
Operating lease liabilities, current portion		5,947		5,739
Fixed asset purchases		643		1,482
Other accrued expenses		7,297		8,516
Total other accrued liabilities	$	50,393	$	49,043

Reserves for refunds to insurance carriers include overpayments from and amounts to be refunded to insurance carriers, and additional amounts that the Company estimates for potential refund requests during the period. When the Company releases these previously accrued amounts, they are recognized as product revenues in the statements of operations and comprehensive loss.

The following table summarizes the reserve balance and activities for refunds to insurance carriers:

	March 31,		March 31,
	2020		2019
	(in thousands)
Beginning balance	$	9,410	$	10,012
Additional reserves		4,684		2,504
Reserves released		(2,495)		(1,465)
Ending balance	$	11,599	$	11,051
Released into revenue	$	1,027	$	478