Revenue

6 Months Ended

Jul. 04, 2021

Revenue From Contract With Customer [Abstract]

Revenue

(5) Revenue

Product Revenue

Revenue from contracts with customers is recognized when obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of the Company’s goods or services. The Company considers revenue to be earned when all of the following criteria are met: (i) the Company has a contract with a customer that creates enforceable rights and obligations; (ii) promised products or services are identified; (iii) the transaction price, or consideration the Company expects to receive for transferring the goods or providing services, is determinable; and (iv) the Company has transferred control of the promised items to the customer. A promise in a contract to transfer a distinct good or service to the customer is identified as a performance obligation. A contract’s transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The Company generates revenue primarily from the sale of IVD instruments, assays, reagents and other consumables, accessories and service contracts. The Company generally recognizes revenue when the customer obtains control of the products, which occurs at a point in time. For instruments, the Company generally recognizes revenue upon installation and customer acceptance. The Company has determined that the installation services do not constitute a separate performance obligation. For assays, reagents and

other consumables, the Company recognizes revenue upon shipment or delivery based on the contractual shipping terms of a contract. Service revenue is generally recognized over time using a time-based model, which is consistent with the pattern in which we provide the services.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company may also enter into transactions that involve multiple performance obligations, such as the sale of products and related services. For transactions with multiple performance obligations, the Company allocates the consideration to the deliverables by use of the relative standalone selling price method.

Variable consideration

The Company recognizes product revenues at the net sales price, which includes estimates of variable consideration related to rebates and volume discounts. Rights of return are generally not included in the Company’s arrangements with customers. Management’s estimates of rebates and discounts are determined using the expected value method and take into consideration historical experience, contractual and statutory requirements, and other relevant information, such as forecasted activity. These reserves reflect the Company’s best estimate of the amount of consideration to which it is entitled. The amount of variable consideration included in the net sales price is limited to the amount that is probable and not to result in a significant future reversal of cumulative revenue under the contract.

Reagent rental programs

A portion of the Company’s product revenue includes revenue earned under reagent rental programs which provides customers the right to use instruments at no separate cost to the customer in consideration for a multi-year agreement to purchase reagents, assays and consumables. For these arrangements, the contract consideration is allocated between the lease component related to the instruments and the non-lease component related to the reagents, assays and consumables based on the relative standalone prices for each component. Revenue is recognized when control has transferred for the reagents, assays and consumables. Costs related to product sales are recognized at time of delivery. The Company capitalizes the cost of the instrument within Property, plant and equipment, net and amortizes these amounts on a straight-line basis over the term of the minimum purchase agreement to Cost of revenue, excluding amortization of intangible assets. The Company’s reagent rental agreements may require the customers to commit to making minimum reagent purchases over the lease term, which is typically five years. In certain jurisdictions, the Company has concluded that these minimum purchase commitments represent legally enforceable rights pursuant to the lease. If a contract contains a legally enforceable minimum purchase commitment, the minimums are considered in-substance fixed lease payments and the Company will evaluate the probability of collecting the lease payments. If collection is probable, for operating leases, the lease payments will be recognized on a straight-line basis over the lease term. If collection is not probable, for reagent rental agreements classified as operating leases, the lease income recognized by the Company is limited to the lesser of the income that would be recognized on a straight-line basis over the lease term or the lease payments, including variable lease payments, that have been collected from the lessee. In certain other jurisdictions, the Company has concluded that the minimum purchase commitments within the Company’s reagent rental agreements are not legally enforceable and, therefore, the entire contract consideration is concluded to be variable. The Company recognizes the variable payments that relate to the lease component as rental income when the variability is resolved, and the underlying reagent sale occurs. Revenue earned under sales-type leases is recognized at the beginning of the lease, as well as a lease receivable and unearned interest associated with the lease.

Contract balances

Timing of revenue recognition may differ from timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing a customer (“contract asset”). Contract assets are included within Other current assets or Other assets in the Company’s unaudited consolidated balance sheet and are transferred to accounts receivable when the right to payment becomes unconditional. The balance of Contract assets recorded in the Company’s consolidated balance sheets were as follows:

	July 4, 2021		January 3, 2021
Other current assets	$	45.0	$	40.4
Other assets		2.4		2.4
Total contract assets	$	47.3	$	42.8

The contract asset balance consists of the following components:

• A customer supply agreement under which the difference between the timing of invoicing and revenue recognition resulted in a contract asset of $14.3 million and $15.1 million as of July 4, 2021 and January 3, 2021, respectively, of which $2.4 million was recorded in Other assets as of both July 4, 2021 and January 3, 2021.

• Contractual arrangements with certain customers under which the Company invoices the customers based on reportable results generated by its reagents; however, control of the goods transfers to the customers upon shipment or delivery of the products, as determined under the terms of the contract. Using the expected value method, the Company estimates the number of reagents that will generate a reportable result. The Company records the revenue upon shipment and an associated contract asset, and relieves the contract asset upon completion of the invoicing. The balance of the contract asset related to these arrangements was $32.8 million and $24.3 million as of July 4, 2021 and January 3, 2021, respectively.

• One of the Company’s contract manufacturing agreements that recognizes revenue as the products are manufactured. The balance of the contract asset related to this arrangement was $0.2 million and $3.4 million as of July 4, 2021 and January 3, 2021, respectively.

The Company reviews contract assets for expected credit losses resulting from the collectability of customer accounts. Expected losses are established based on historical losses, customer mix and credit policies, current economic conditions in customers’ country or industry, and expectations associated with reasonable and supportable forecasts. No credit losses related to contract assets were recognized during the fiscal quarter and six months ended July 4, 2021 and June 28, 2020, respectively.

The Company recognizes a contract liability when a customer pays an invoice prior to the Company transferring control of the goods or services (“contract liabilities”). The Company’s contract liabilities consist of deferred revenue primarily related to customer service contracts. The Company classifies deferred revenue as current or noncurrent based on the timing of the transfer of control or performance of the service. The balance of the Company’s current deferred revenue was $36.6 million and $35.5 million as of July 4, 2021 and January 3, 2021, respectively. The Company has one arrangement with a customer that is expected to be recognized beyond one year. The balance of the deferred revenue included in long-term liabilities was $6.0 million and $6.6 million as of July 4, 2021 and January 3, 2021, respectively, and was included in Other liabilities in the unaudited consolidated balance sheets. The amount of deferred revenue as of January 3, 2021 that was recorded in revenue during the fiscal six months ended July 4, 2021 was $26.8 million.

Disaggregation of revenue

The Company generates product revenue in the following lines of business:

• Clinical Laboratories—Focused on clinical chemistry and immunoassay instruments and tests to detect and monitor disease progression across a broad spectrum of therapeutic areas.

• Transfusion Medicine—Focused on (i) immunohematology instruments and tests used for blood typing to ensure patient-donor compatibility in blood transfusions, and (ii) donor screening instruments and tests used for blood and plasma screening for infectious diseases for customers primarily in the United States.

• Other Product Revenue—Includes revenues primarily from contract manufacturing.

The Company also enters into collaboration and license agreements pursuant to which the Company derives collaboration and royalty revenues. During the fiscal quarter ended September 27, 2020, the Company entered into two agreements with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the U.S. Department of Health and Human Services (“HHS”), for two awards of up to $13.6 million to develop and submit Emergency Use Authorizations and 510(k) applications to the U.S. Food and Drug Administration (“FDA”) for its COVID-19 antigen and antibody tests, respectively. An additional award was granted to the Company on April 16, 2021 for an amount up to $3.6 million to submit a 510(k) application for its COVID-19 antigen test. During the fiscal quarter and six months ended July 4, 2021, the Company recognized $1.8 million and $5.8 million, respectively, of grant revenue related to these grants based upon project milestones completed to date.

The following table summarizes Net revenue by line of business for the fiscal quarters and six months ended July 4, 2021 and June 28, 2020:

	Fiscal Quarter Ended				Fiscal Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Clinical Laboratories	$	323.3	$	260.3	$	657.3	$	516.6
Transfusion Medicine		162.4		125.9		323.8		273.9
Other Product Revenue		1.3		0.3		5.6		0.3
Total Product Revenue		487.0		386.5		986.7		790.8
Collaborations and Other Revenue		5.5		4.0		12.6		7.7
Net Revenue	$	492.5	$	390.5	$	999.3	$	798.5