10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ____________________________________________________________________________

FORM 10-Q

  ____________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-10961

 ____________________________________________________________________________ 

QUIDEL CORPORATION

(Exact name of registrant as specified in its charter)

  ____________________________________________________________________________

Delaware	94-2573850
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9975 Summers Ridge Road, San Diego, California 92121

(Address of principal executive offices, including zip code)

(858) 552-1100

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	QDEL	The NASDAQ Stock Market

____________________________________________________________________________ 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒

As of July 30, 2021, 41,632,759 shares of the registrant’s common stock were outstanding.

INDEX

 

PART I—FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	3
Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020	4
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020	5
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	6
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	7
Notes to Consolidated Financial Statements	8
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4. Controls and Procedures	26
PART II—OTHER INFORMATION
ITEM 1. Legal Proceedings	27
ITEM 1A. Risk Factors	27
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 3. Defaults Upon Senior Securities	27
ITEM 4. Mine Safety Disclosures	27
ITEM 5. Other Information	27
ITEM 6. Exhibits	28
Signatures	29

2

PART I    FINANCIAL INFORMATION

ITEM 1.    Financial Statements

QUIDEL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value; unaudited)

	June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	593,224	$	489,941
Accounts receivable, net	46,216		497,688
Inventories	218,506		113,798
Prepaid expenses and other current assets	59,741		40,975
Total current assets	917,687		1,142,402
Property, plant and equipment, net	251,045		110,481
Right-of-use assets	134,870		100,544
Goodwill	337,027		337,032
Intangible assets, net	109,537		122,431
Deferred tax asset	44,151		44,762
Other non-current assets	13,335		13,512
Total assets	$	1,807,652	$	1,871,164
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	99,562	$	86,316
Accrued payroll and related expenses	16,559		34,781
Income taxes payable	6,585		127,788
Operating lease liabilities	8,952		7,799
Contingent consideration	5,845		5,987
Deferred consideration	41,898		42,000
Other current liabilities	29,866		32,290
Total current liabilities	209,267		336,961
Operating lease liabilities - non-current	135,660		100,706
Deferred consideration - non-current	34,611		73,951
Other non-current liabilities	17,035		26,843
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000 shares authorized; none issued or outstanding at June 30, 2021 and December 31, 2020	—		—
Common stock, $0.001 par value per share; 97,500 shares authorized; 41,633 and 42,290 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	42		42
Additional paid-in capital	267,890		388,121
Accumulated other comprehensive income (loss)	1,019		(431)
Retained earnings	1,142,128		944,971
Total stockholders’ equity	1,411,079		1,332,703
Total liabilities and stockholders’ equity	$	1,807,652	$	1,871,164

See accompanying notes.

3

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data; unaudited)

 

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Total revenues	$	176,610	$	201,754	$	551,948	$	376,407
Cost of sales	70,424		53,003		143,803		112,665
Gross profit	106,186		148,751		408,145		263,742
Research and development	22,614		20,970		45,918		37,349
Sales and marketing	38,100		27,567		72,333		58,305
General and administrative	21,138		15,679		40,645		30,011
Acquisition and integration costs	1,028		872		1,754		2,786
Total operating expenses	82,880		65,088		160,650		128,451
Operating income	23,306		83,663		247,495		135,291
Interest and other expense, net	(1,623)		(3,467)		(4,005)		(6,274)
Income before income taxes	21,683		80,196		243,490		129,017
Provision for income taxes	2,610		12,544		46,333		21,128
Net income	$	19,073	$	67,652	$	197,157	$	107,889
Basic earnings per share	$	0.46	$	1.61	$	4.74	$	2.56
Diluted earnings per share	$	0.45	$	1.55	$	4.64	$	2.48
Shares used in basic per share calculation	41,691		42,117		41,622		42,086
Shares used in diluted per share calculation	42,374		43,746		42,475		43,574

See accompanying notes.

4

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands; unaudited)

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	19,073	$	67,652	$	197,157	$	107,889
Other comprehensive income (loss)
Changes in cumulative translation adjustment, net of tax	331		265		(509)		200
Changes in unrealized (losses) gains from cash flow hedges:
Net unrealized (losses) gains on derivative instruments	(235)		(138)		106		269
Reclassification of net realized losses (gains) on derivative instruments included in net income	761		(195)		1,853		(337)
Total change in unrealized gains (losses) from cash flow hedges, net of tax	526		(333)		1,959		(68)
Comprehensive income	$	19,930	$	67,584	$	198,607	$	108,021

See accompanying notes.

5

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands; unaudited)

	Common Stock
	Shares	Par		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders’ equity
Balance at December 31, 2020	42,290	$	42	$	388,121	$	(431)	$	944,971	$	1,332,703
Issuance of common stock under equity compensation plans	409	1		6,373		—		—		6,374
Stock-based compensation expense	—	—		5,889		—		—		5,889
Tax withholdings related to vesting of stock-based awards	(156)	—		(33,929)		—		—		(33,929)
Other comprehensive gain, net of tax	—	—		—		593		—		593
Net income	—	—		—		—		178,084		178,084
Balance at March 31, 2021	42,543	43		366,454		162		1,123,055		1,489,714
Issuance of common stock under equity compensation plans	59	—		494		—		—		494
Stock-based compensation expense	—	—		5,846		—		—		5,846
Tax withholdings related to vesting of stock-based awards	(12)	—		(1,467)		—		—		(1,467)
Repurchases of common stock	(957)	(1)		(103,437)		—		—		(103,438)
Other comprehensive gain, net of tax	—	—		—		857		—		857
Net income	—	—		—		—		19,073		19,073
Balance at June 30, 2021	41,633	$	42	$	267,890	$	1,019	$	1,142,128	$	1,411,079

	Common Stock
	Shares	Par		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Total stockholders’ equity
Balance at December 31, 2019	41,868	$	42	$	425,557	$	(463)	$	134,684	$	559,820
Issuance of common stock under equity compensation plans	153	—		3,571		—		—		3,571
Stock-based compensation expense	—	—		3,325		—		—		3,325
Tax withholdings related to vesting of stock-based awards	(25)	—		(1,954)		—		—		(1,954)
Other comprehensive gain, net of tax	—	—		—		200		—		200
Net income	—	—		—		—		40,237		40,237
Balance at March 31, 2020	41,996	42		430,499		(263)		174,921		605,199
Issuance of common stock under equity compensation plans	203	—		3,287		—		—		3,287
Stock-based compensation expense	—	—		4,665		—		—		4,665
Issuance of shares in exchange for Convertible Senior Notes	2	—		48		—		—		48
Derivative liabilities - Convertible Senior Notes elected to settle in cash	—	—		(26,180)		—		—		(26,180)
Tax withholdings related to vesting of stock-based awards	(5)	—		(716)		—		—		(716)
Repurchases of common stock	(247)	—		(42,178)		—		—		(42,178)
Other comprehensive loss, net of tax	—	—		—		(68)		—		(68)
Net income	—	—		—		—		67,652		67,652
Balance at June 30, 2020	41,949	$	42	$	369,425	$	(331)	$	242,573	$	611,709

6

QUIDEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands; unaudited)
	Six Months Ended  June 30,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	197,157	$	107,889
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other	27,191		24,237
Stock-based compensation expense	11,674		9,008
Amortization of debt discount and deferred issuance costs	202		433
Change in fair value of acquisition contingencies	101		848
Accretion of interest on deferred consideration	2,558		3,612
Net change in operating lease right-of-use assets and liabilities	1,781		129
Change in deferred tax assets and liabilities	611		(21)
Change in fair value of derivative liabilities - Convertible Senior Notes	—		1,084
Payment of accreted interest on contingent and deferred consideration	(8,157)		—
Changes in assets and liabilities:
Accounts receivable	451,094		(16,450)
Inventories	(104,796)		(34,501)
Prepaid expenses and other current and non-current assets	(19,927)		(3,791)
Accounts payable	(10,124)		9,414
Accrued payroll and related expenses	(16,124)		4,974
Income taxes payable	(126,010)		17,056
Other current and non-current liabilities	202		(3,744)
Net cash provided by operating activities:	407,433		120,177
INVESTING ACTIVITIES:
Acquisitions of property, equipment and intangibles	(153,536)		(13,388)
Proceeds from government assistance allocated to fixed assets	23,263		—
Net cash used for investing activities:	(130,273)		(13,388)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock	4,866		6,091
Payments on finance lease obligation	(128)		(228)
Payments of tax withholdings related to vesting of stock-based awards	(35,396)		(2,670)
Repurchases of common stock	(103,438)		(42,178)
Principal payments of acquisition contingent consideration	(4,730)		(6,034)
Principal payments of deferred consideration	(35,143)		(42,000)
Net cash used for financing activities:	(173,969)		(87,019)
Effect of exchange rates on cash	92		44
Net increase in cash and cash equivalents	103,283		19,814
Cash and cash equivalents, beginning of period	489,941		52,775
Cash and cash equivalents, end of period	$	593,224	$	72,589
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Initial measurement of derivative liabilities – Convertible Senior Notes	$	—	$	26,180
Purchase of property, equipment and intangibles by incurring current liabilities	$	31,164	$	2,175
Capital expenditures to be reimbursed under a government contract	$	13,619	$	—
Reduction of other current liabilities upon issuance of restricted share units	$	2,001	$	767
Extinguishment of Convertible Senior Notes through issuance of stock	$	—	$	48

See accompanying notes.

7

Quidel Corporation

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of Quidel Corporation and its subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.

The information at June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, is unaudited. For further information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s 2020 Annual Report on Form 10-K. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year.

For 2021 and 2020, the Company’s fiscal year will end or has ended on January 2, 2022 and January 3, 2021, respectively. For 2021 and 2020, the Company’s second quarter ended on July 4, 2021 and June 28, 2020, respectively. For ease of reference, the calendar quarter end dates are used herein. The three and six-month periods ended June 30, 2021 and 2020 each included 13 and 26 weeks, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant Accounting Policies

During the six months ended June 30, 2021, there have been no changes to our significant accounting policies as described in our 2020 Annual Report on Form 10-K.

Note 2. Computation of Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted EPS is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested restricted stock units (“RSUs”) and, for the 2020 periods, the 3.25% Convertible Senior Notes. Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method.

8

The following table reconciles net income and the weighted-average shares used in computing basic and diluted earnings per share (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Numerator:
Net income used for basic earnings per share	$	19,073	$	67,652	$	197,157	$	107,889
Interest expense on Convertible Senior Notes, net of tax	—		179		—		360
Net income used for diluted earnings per share	$	19,073	$	67,831	$	197,157	$	108,249
Basic weighted-average common shares outstanding	41,691		42,117		41,622		42,086
Dilutive potential shares issuable from Convertible Senior Notes	—		392		—		401
Dilutive potential shares issuable from stock options and unvested RSUs	683		1,237		853		1,087
Diluted weighted-average common shares outstanding	42,374		43,746		42,475		43,574
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	197		—		133		1

Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.

Potentially dilutive shares from the Convertible Senior Notes in 2020 were determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Senior Notes were assumed to be converted and the resulting common shares were included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Senior Notes was added back to net income. The Convertible Senior Notes had a dilutive impact when the average market price of the Company’s common stock exceeded the applicable conversion price of the notes. The Senior Convertible Notes became convertible on March 31, 2018 and matured on December 15, 2020.

9

Note 3. Balance Sheet Account Details    

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories consisted of the following (in thousands):

	June 30, 2021		December 31, 2020
Raw materials	$	103,794	$	58,264
Work-in-process (materials, labor and overhead)	40,373		31,359
Finished goods (materials, labor and overhead)	74,339		24,175
Total inventories	$	218,506	$	113,798

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Other receivables	$	39,400	$	15,442
Unbilled receivables	—		16,041
Prepaid expenses	14,284		7,335
Other	6,057		2,157
Total prepaid expenses and other current assets	$	59,741	$	40,975

Unbilled receivables as of December 31, 2020 primarily consisted of receivables arising from unbilled milestone achievements for capital expenditures to be reimbursed under the National Institute of Health (“NIH”) contract. As of June 30, 2021, the Company had achieved and billed for all milestones under the NIH contract. Amounts not collected as of June 30, 2021 are included in other receivables. Since inception and as of June 30, 2021, the Company has collected $42.0 million of the $65.0 million total contract value.

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Customer incentives and rebates	$	13,969	$	15,663
Deferred revenue	2,553		3,733
Accrued other taxes payable	2,421		2,157
Derivative liabilities	597		3,061
Other	10,326		7,676
Total other current liabilities	$	29,866	$	32,290

Note 4. Income Taxes

The Company calculates its interim income tax provision in accordance with Accounting Standards Codification (“ASC”) 270, Interim Reporting, and ASC 740, Accounting for Income Taxes (together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.

The Company recognized income tax provisions of $2.6 million in relation to income before taxes of $21.7 million and $12.5 million in relation to income before taxes of $80.2 million resulting in effective tax rates of 12% and 16% for the three months ended June 30, 2021 and 2020, respectively. The Company’s 12% and 16% effective tax rates for the three months ended June 30, 2021 and 2020, respectively, differed from the federal statutory rate of 21% primarily due to the discrete impact

10

of excess tax deductions from stock based compensation, the benefit from research and development (“R&D”) credits and the benefit from corporate deductions attributable to Foreign Derived Intangible Income (“FDII”), the benefits of which are offset by the income tax owed in U.S. For the six months ended June 30, 2021 and 2020, respectively, the Company recognized income tax provision of $46.3 million and $21.1 million, in relation to income before taxes of $243.5 million and $129.0 million. The Company’s 19% and 16% effective tax rates for the six months ended June 30, 2021 and 2020, respectively, differed from the federal statutory rate of 21% primarily due to the discrete impact of excess tax deductions from stock based compensation, the benefit from R&D credits and the benefit from corporate deductions attributable to FDII, the benefits of which are offset by the income tax owed in U.S. states, all in relation to income before taxes as described above.

The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credits, the Company’s federal tax years from 2012 and forward are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and forward are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.

Note 5. Revolving Credit Facility

The Company has a $175.0 million Revolving Credit Facility under a credit agreement expiring on August 31, 2023 of which no amounts were outstanding as of June 30, 2021. Loans will bear interest at a rate equal to (i) the London Interbank Offered Rate (“LIBOR”) plus the “applicable rate” or (ii) the “base rate” (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus one-half of one percent, (c) LIBOR plus one percent, and (d) one percent) plus the “applicable rate.” The applicable rate is determined in accordance with a pricing grid based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) ranging from 1.75% to 2.50% per annum for LIBOR rate loans and from 0.75% to 1.50% per annum for base rate loans. In addition, the Company pays a commitment fee on the unused portion of the Credit Agreement based on the Company’s Consolidated Leverage Ratio ranging from 0.15% to 0.30% per annum in accordance with the pricing grid.

The Revolving Credit Facility is guaranteed by certain material domestic subsidiaries of the Company (the “Guarantors”) and is secured by liens on substantially all of the assets of the Company and the Guarantors, excluding real property and certain other types of excluded assets, and contains affirmative and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things, limitations on asset sales, mergers, indebtedness, liens, dividends and other distributions, investments and transactions with affiliates. The Credit Agreement contains two financial covenants: (i) maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter of 3.50 to 1.00, which ratio may be increased to 4.50 to 1.00 in case of certain qualifying acquisitions; and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. The Company was in compliance with all financial covenants as of June 30, 2021.

Interest expense recognized, including amortization of deferred issuance cost, was $0.1 million and $0.3 million for the three and six months ended June 30, 2021 and $0.2 million and $0.4 million for the three and six months ended June 30, 2020.

Note 6. Stockholders’ Equity

Issuances of Common Stock

A summary of the status of stock option activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average exercise price per share
Outstanding at December 31, 2020	760	$	46.95
Granted	47	254.00
Exercised	(70)	39.37
Outstanding at June 30, 2021	737	$	60.95

11

A summary of the status of restricted stock unit activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average grant date fair value
Non-vested December 31, 2020	878	$	59.60
Granted	106	204.50
Vested	(387)	45.48
Forfeited	(3)	131.72
Non-vested at June 30, 2021	594	$	94.16

During the six months ended June 30, 2021, the Company issued 10,948 shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”).

Stock-Based Compensation

The expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Cost of sales	$	643	$	435	$	1,159	$	693
Research and development	893		866		1,927		1,508
Sales and marketing	1,556		1,341		2,960		2,638
General and administrative	2,754		2,488		5,628		4,169
Total stock-based compensation expense	$	5,846	$	5,130	$	11,674	$	9,008

As of June 30, 2021, total unrecognized compensation expense was $46.1 million, which is expected to be recognized over a weighted-average period of approximately 2.0 years.

The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.

	Six Months Ended  June 30,
	2021		2020
Risk-free interest rate	0.42	%	1.34	%
Expected option life (in years)	5.01		5.14
Volatility rate	53	%	39	%
Dividend rate	0	%	0	%
Weighted-average grant date fair value	$115.78		$28.39

The fair value of RSUs is determined based on the closing market price of the Company’s common stock on the grant date. The weighted-average fair value of RSUs granted during the six months ended June 30, 2021 and 2020 was $204.50 and $85.34, respectively.

Compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the three and six months ended June 30, 2021 or 2020.

Note 7. Industry and Geographic Information

The Company operates in one reportable segment. Sales to customers outside of the U.S. represented $147.0 million (27%) and $96.8 million (26%) of total revenue for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and December 31, 2020, net accounts receivable due from foreign customers were $22.2 million and $18.6 million, respectively.

12

The Company had sales to individual customers in excess of 10% of total revenues, as follows:

	Six Months Ended  June 30,
	2021		2020
Customer:
A	18	%	19	%
B	11	%	19	%
C	9	%	10	%
Total:	38	%	48	%

As of June 30, 2021 and December 31, 2020, net accounts receivable from customers with balances due in excess of 10% of total accounts receivable totaled $9.1 million and $411.7 million, respectively.

Consolidated total revenues by product category for the six months ended June 30, 2021 and 2020 were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Rapid Immunoassay	$	60,070	$	80,606	$	297,740	$	176,536
Cardiometabolic Immunoassay	71,666		54,191		138,218		108,092
Molecular Diagnostic Solutions	34,456		55,177		94,719		63,540
Specialized Diagnostic Solutions	10,418		11,780		21,271		28,239
Total revenues	$	176,610	$	201,754	$	551,948	$	376,407

Note 8. Commitments and Contingencies

Leases

We lease administrative, research and development, sales and marketing and manufacturing facilities and certain equipment under various non-cancelable lease agreements. Facility leases generally provide for periodic rent increases, and may contain clauses for rent escalation, renewal options or early termination.

Summers Ridge Lease — The Company leases three of the four buildings that are located on the Summers Ridge Property in San Diego, California with an initial term through January 2033 with options to extend the lease for two additional five-year terms upon satisfaction of certain conditions, which have not been included in the determination of the lease term. The lease is subject to must-take provisions related to one additional building, which will have the same lease term as the three buildings originally leased. The remaining building is subject to the expiration of the lease with its current tenant in October 2022, subject to an option to renew for a two-year period.

McKellar Court Lease — During 1999, the Company completed a sale and leaseback transaction of its San Diego facility at McKellar Court to a partnership for which the Company is a limited partner. The partnership is deemed to be a variable interest entity (VIE). The Company is not, however, the primary beneficiary of the VIE as it does not have the power to direct the activities of the partnership and does not have the obligation to absorb losses or receive benefits of the partnership that could potentially be significant to the partnership. The Company made lease payments to the partnership of approximately $0.5 million the six months ended June 30, 2021.

Rutherford Lease — During January 2021, the Company entered into a lease agreement for a manufacturing facility in Carlsbad, California and recorded a right-of-use asset and a corresponding lease liability of $39.4 million. The initial lease term is 15 years with options to extend the lease for two additional five-year periods.

Litigation and Other Legal Proceedings

In Beckman Coulter, Inc. v. Quidel Corporation, which was filed in the Superior Court for the County of San Diego,

13

California, on November 27, 2017, Beckman Coulter, Inc. (“Beckman Coulter”) alleged that a provision of an agreement between Quidel and Beckman Coulter violated state antitrust laws. Our acquisition of the B-type Naturietic Peptide assay business (“BNP Business”) in October 2017 consisted of assets and liabilities relating to a contractual arrangement with Beckman Coulter (the “BNP Supply Agreement”) for the supply of antibodies and other inputs related to, and distribution of, the Triage® B-type Naturietic Peptide Test (“BNP Test”) for the Beckman Coulter Access Family of Immunoassay Systems. In the lawsuit, Beckman Coulter asserted that an exclusivity provision violated certain state antitrust laws and was unenforceable. From the inception of the lawsuit, the lawsuit was subject to numerous motions, rulings, appellate reviews and opinions. The matter was scheduled for trial starting April 15, 2022. On July 24, 2021, the Company and Beckman Coulter entered into a Master Agreement (the “Master Agreement”) pursuant to which, among other matters, Quidel’s business of selling and distributing the BNP Test for the BNP Business will be transitioned to Beckman Coulter. Concurrent with entering into the Master Agreement, Quidel and Beckman Coulter entered into a Settlement Agreement to resolve all disputes relating to the existing BNP Supply Agreement, among other matters. On August 3, 2021, the lawsuit was dismissed with prejudice. See Note 11 for further discussion of the agreements with Beckman Coulter.

From time to time, the Company is involved in other litigation and proceedings, including matters related to product liability claims, commercial disputes and intellectual property claims, as well as regulatory, employment, and other claims related to our business. The Company accrues for legal claims when, and to the extent that, amounts associated with the claims become probable and are reasonably estimable. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. For those matters as to which we are not able to estimate a possible loss or range of loss, we are not able to determine whether the loss will have a material adverse effect on our business, financial condition or results of operations or liquidity. No accrual has been recorded as of June 30, 2021 and December 31, 2020 related to such matters as they are not probable and/or reasonably estimable. 

Management believes that all such current legal actions, in the aggregate, will not have a material adverse effect on the Company. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows. The Company also maintains insurance, including coverage for product liability claims, in amounts that management believes are appropriate given the nature of its business.

Note 9. Fair Value Measurements

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the following periods (in thousands):

	June 30, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	200,013	$	—	$	—	$	200,013	$	200,003	$	—	$	—	$	200,003
Derivative assets	—		361		—		361		—		24		—		24
Total assets measured at fair value	$	200,013	$	361	$	—	$	200,374	$	200,003	$	24	$	—	$	200,027
Liabilities:
Derivative liabilities	$	—	$	597	$	—	$	597	$	—	$	3,061	$	—	$	3,061
Contingent consideration	—		—		5,967		5,967		—		—		11,896		11,896
Deferred consideration	—		76,509		—		76,509		—		115,951		—		115,951
Total liabilities measured at fair value	$	—	$	77,106	$	5,967	$	83,073	$	—	$	119,012	$	11,896	$	130,908

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 categories of the fair value hierarchy during the three and six-month period ended June 30, 2021 and the year ended December 31, 2020.

Cash equivalents consist of funds held in money market accounts that are valued using quoted prices in active markets for identical instruments. Derivative financial instruments are measured based on observable inputs that are corroborated by market data. Observable inputs include broker quotes, daily market foreign currency rates and forward pricing curves.

In connection with the acquisition of the BNP Business, the Company has an annual installment payment payable in 2022 of up to $48.0 million and an annual installment payment of $40.0 million payable in 2023 remaining as of June 30, 2021. The

14

fair value of the payments treated as deferred consideration is calculated based on the net present value of cash payments using an estimated borrowing rate based on a quoted price for a similar liability. The fair value of the payments treated as contingent consideration is calculated using a discounted probability weighted valuation model. Discount rates used in such calculation is a significant assumption that is not observed in the market and, therefore, the resulting fair value represents a Level 3 measurement. The discount rate of 2.9% used as of June 30, 2021 was based on estimated borrowing rate for a similar liability.

Changes in estimated fair value of contingent consideration liabilities from December 31, 2020 through June 30, 2021 were as follows (in thousands):

	Contingent consideration liabilities (Level 3 measurement)
Balance at December 31, 2020	$	11,896
Cash payments	(6,030)
Change in estimated fair value, recorded in general and administrative expenses	101
Balance at June 30, 2021	$	5,967

Note 10. Foreign Currency Hedges

In the normal course of business, the Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. As part of its strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses designated cash flow hedges in the form of foreign currency forward contracts to mitigate the impact of foreign currency translation on transactions that are denominated primarily in the Euro and the Chinese Yuan. The Company also uses non-designated forward contracts to hedge non-functional currency denominated balance sheet assets. Hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions are formally documented. The Company does not use any derivative financial instruments for trading or other speculative purposes.

Such forward foreign currency contracts are carried at fair value in prepaid expenses and other current assets or other current liabilities depending on the unrealized gain or loss position of the hedged contract as of the balance sheet date. Changes in the value of the derivatives are recorded to other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the derivative no longer qualifies as a highly effective hedge. The cash flows from derivatives treated as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the item being hedged.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current currency exchange rates at each respective date. We generally enter into master netting arrangements, which reduces credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their net fair values. We did not have any derivative instruments with credit-risk related contingent features that would require us to post collateral.

The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of June 30, 2021 and December 31, 2020 (in thousands):

	June 30, 2021				December 31, 2020
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	3,481	$	158	$	—	$	—
Other current liabilities	$	7,173	$	588	$	38,435	$	2,819
Non-designated forward contracts:
Prepaid expenses and other current assets	$	16,430	$	203	$	18,160	$	24
Other current liabilities	$	1,442	$	9	$	23,120	$	242

15

Note 11. Subsequent Events

On July 24, 2021, the Company and Beckman Coulter entered into a Master Agreement pursuant to which, among other matters, Quidel’s business of selling and distributing the BNP Test for the BNP Business will be transitioned to Beckman Coulter. Pursuant to the Master Agreement, on a country by country basis, the Company will discontinue offering its Triage® BNP assay and Beckman Coulter will offer its own branded BNP assay to the market. Prior to Beckman Coulter introducing its own branded product to the market, in certain countries, the Company will grant Beckman Coulter exclusive rights to distribute the Triage® BNP assay in such countries. The parties are targeting the initial commercial transition, including in the US, to be completed by late August 2021. Prior to the initial commercial transition to Beckman Coulter, Quidel will continue to operate the Triage® BNP Business.

As consideration for the arrangements during each of calendar years 2022 through and including 2029, Quidel will receive a minimum payment of $70 million and a maximum payment of $75 million. Such maximum payments will be pro-rated for 2021, based on the period commencing on the date of the initial commercial transition to Beckman Coulter, through December 31, 2021.

In addition, the parties entered into other related agreements under the Master Agreement, including a Transition Services Agreement, pursuant to which the parties will provide various transitional services, a Supply Agreement for the supply by Quidel of the Quidel antibody and other components used in the manufacture of the BNP assay, and a Distribution Agreement, granting Beckman Coulter the right to sell and distribute the Triage® BNP assay as described above.

Concurrent with entering into the Master Agreement, Quidel and Beckman Coulter entered into a Settlement Agreement to resolve all disputes relating to the existing BNP Supply Agreement, among other matters. See further discussion in Note 8 under the heading Litigation and Other Legal Proceedings.

16

ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Quarterly Report, all references to “we,” “our” and “us” refer to Quidel Corporation and its subsidiaries.

Future Uncertainties and Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws that involve material risks, assumptions and uncertainties. Many possible events or factors could affect our future financial results and performance, such that our actual results and performance may differ materially from those that may be described or implied in the forward-looking statements. As such, no forward-looking statement can be guaranteed. Differences in actual results and performance may arise as a result of a number of factors including, without limitation: the impact of the novel virus (COVID-19) global pandemic; competition; our development of new technologies, products and markets; our reliance on sales of our influenza and COVID-19 diagnostic tests; our reliance on a limited number of key distributors; the financial soundness of our customers and suppliers; acceptance of our products among physicians and other healthcare providers; the reimbursement system currently in place and future changes to that system; our ability to meet demand for our products; interruptions or shortages in our supply of raw materials and other components; costs and disruptions from failures in our information technology and storage systems and our exposure to data corruption, cyber-based attacks, security breaches and privacy violations; international risks, including but not limited to, compliance with product registration requirements, compliance with legal requirements, tariffs, exposure to currency exchange fluctuations and foreign currency exchange risk, longer payment cycles, lower selling prices and greater difficulty in collecting accounts receivable, reduced protection of intellectual property rights, social, political and economic instability, increased financial accounting and reporting burdens and complexities, taxes, and diversion of lower priced international products into U.S. market; worldwide political and social uncertainty, including tariffs, trade wars or social tensions; our development, acquisition and protection of proprietary technology rights; intellectual property risks, including but not limited to, infringement litigation, loss of our Emergency Use Authorization from the U.S. Food and Drug Administration (the “FDA”) for our COVID-19 products; failures or delays in receipt of new product reviews or related to currently-marketed products by FDA or other regulatory authorities or loss of any previously received regulatory approvals or clearances or other adverse actions by regulatory authorities; funding and compliance risks relating to government contracts, including the ability to meet key deliverables and milestones under our NIH RADx ATP contract; product defects; compliance with government regulations relating to the handling, storage and disposal of hazardous substances; our ability to identify and successfully acquire and integrate potential acquisition targets; our need for additional funds to finance our capital or operating needs; competition for and loss of management and key personnel; our exposure to claims and litigation that could result in significant expenses and could ultimately result in an unfavorable outcome for us; business risks not covered by insurance; changes in tax rates and exposure to additional tax liabilities or assessments; and provisions in our charter documents and Delaware law that might delay or impede stockholder actions with respect to business combinations or similar transactions. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “might,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “goal,” “project,” “strategy,” “future,” and similar words, although some forward-looking statements are expressed differently. Forward-looking statements in this Quarterly Report include, among others, statements concerning: our outlook for the remainder of 2021 including the sources of expected growth and the sustainability of demand for COVID-19 testing; our initiatives for the remainder of 2021, including research and development activities and emphasis and our production capacity expansion; the expected timing of commencement of operations at our Carlsbad facility; that we expect to continue to make substantial expenditures for research and development activities; the nature and amount of projected capital expenditures for the remainder of 2021 and our source of funds for such expenditures; the sufficiency of our liquidity and capital resources, including the impact of COVID-19 thereon; our strategy, goals, initiatives and objectives; our strategy, exposure to, and defenses against, claims and litigation; the sufficiency of our liquidity and our short-term needs for capital; that we may incur additional debt or issue additional equity; and our intention to continue to evaluate technology, product lines and acquisition and licensing opportunities. The risks described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, and elsewhere herein and in reports and registration statements that we file with the Securities and Exchange Commission (the “SEC”) from time to time, should be carefully considered. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to publicly release the results of any revision or update of these forward-looking statements, whether as a result of new information, future events or otherwise.

The following should be read in conjunction with the Consolidated Financial Statements and Notes thereto beginning on page 3 of this Quarterly Report.

17

Overview

We have a leadership position in the development, manufacturing and marketing of rapid diagnostic testing solutions. We separate these into our four product categories: rapid immunoassay, cardiometabolic immunoassay, molecular diagnostic solutions and specialized diagnostic solutions. We currently sell our products directly to end users and distributors, in each case, for professional use in physician offices, hospitals, clinical laboratories, reference laboratories, urgent care clinics, leading universities, retail clinics, pharmacies and wellness screening centers. More recently, we have begun to reach significant new markets as we introduced our QuickVue At-Home OTC COVID-19 Test for reopening schools, and for health departments, employers, entertainment centers and many other locations. We market our products through a network of distributors and through a direct sales force. We operate in one business segment that develops, manufactures and markets our products globally.

Impact of COVID-19 Pandemic

Events surrounding the SARS-CoV-2 virus that emerged in late 2019 and the ensuing global pandemic has had a dramatic impact on businesses globally and our business as well. The severity and duration of the pandemic and economic repercussions of the virus and government actions in response to the pandemic remain uncertain and will ultimately depend on many factors, including the speed of global dissemination and effectiveness of the vaccination and containment efforts throughout the world, the duration and spread of the virus as well as potential seasonality, variants or new outbreaks.

In the United States, federal, state, and local government directives and policies have been put in place to manage public health concerns and address the economic impacts, including reduced business activity, increased unemployment, and overall uncertainty presented by this new healthcare challenge. Similar actions have been taken by governments around the world. While all our sites are currently operational globally, our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or as a result of the pandemic. To mitigate risks, we continue to evaluate the extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.

New SARS-CoV-2 Diagnostic Products

As a leader in point-of-care diagnostics and with established expertise in respiratory infectious disease products, we are well-positioned to respond to the COVID-19 pandemic. We work closely with national and local governments, agencies, and industry partners to develop, manufacture and supply critical diagnostic products to support testing initiatives to help curb the spread of the SARS-CoV-2 virus. In particular, we developed new molecular and antigen products to diagnose the SARS-CoV-2 virus. We have experienced exceptional demand for such products. In response, we committed significant resources toward the expansion of our production capacity.

We expect demand for our molecular and antigen assays and instruments to continue for the near-term, especially in the United States. At the same time, we also have observed decreased demand for certain of our other diagnostic products in connection with customers closing or decreasing their operations and/or patients deferring treatment. The extent to which COVID-19 will impact demand for our products depends on future developments, which are highly uncertain and very difficult to predict, including new information that may emerge concerning the severity of the coronavirus, regulatory changes in any of the markets in which we serve, impact of new SARS-CoV-2 variants and actions to contain and treat its impacts, including the vaccination programs now being implemented.

Operations and Employee Safety

While many governments implemented lockdown and shelter-in-place orders, requiring non-essential businesses to shut down operations, our business is deemed “essential” and we continued to operate, manufacture and distribute products to customers. We implemented preparedness plans designed to help protect the safety of our employees and maintain operational continuity with an emphasis on manufacturing, product distribution and product development during this crisis. To date, we have been able to maintain our operations without significant interruption and have been able to develop and quickly scale manufacturing capacity for new products related to the COVID-19 pandemic.

To mitigate the pandemic’s impact, we implemented preventative protocols intended to help safeguard our on-site employees and maintain business continuity. These measures have created additional burdens on our infrastructure and information technology systems and may result in decreased productivity and increased operating costs. However, the various responses we have put in place have to date resulted in limited disruption to our normal business operations.

18

Supply Chains

As a result of the COVID-19 pandemic, we have seen delays in receipts for certain raw materials and components for our products. Such delays can result in disruption to our business operations. In response, we have increased safety stock of certain critical components and finished goods for which we have seen extraordinary demand. We are continuously evaluating our supply chain to identify potential gaps and take steps intended to ensure continuity. We have considered potential political, legal or regulatory actions that could be taken as a result of the pandemic in jurisdictions where we manufacture, source or distribute products that could impact our supply of products to our customers or the availability of raw materials and components from our suppliers. We cannot currently predict the frequency, duration or scope of these government actions and any supply disruptions, and the availability of various products is dependent on our suppliers, their location and the extent to which they are impacted by the COVID-19 pandemic, among other factors. We are proactively working with manufacturers, industry partners and government agencies to help meet the needs of our customers during the pandemic.

Our inventory levels may fluctuate due to supply chain variability in conjunction with larger and more frequent customer orders. In response, we have added alternate suppliers for certain critical components and instruments, increased inventory of raw materials needed in our operations, increased manufacturing capacity and continue to explore opportunities for further expansion in our Athens, Ohio and San Diego, California facilities. In January 2021, we significantly expanded our capacity by entering into a long-term lease for an additional manufacturing facility in Carlsbad, California. This facility is expected to begin operations in the second half of 2021.

We are seeking to minimize the impact of delays and secure allocations of vital raw materials to meet demand for our products. However, dependent on the mitigation efforts and vaccination roll outs, we may continue to experience some sort of interruption to our supply chains, and such an interruption could materially affect our ability to timely manufacture and distribute our products and unfavorably impact our results of operations depending on the nature and duration of such interruption.

Outlook

Our financial performance and results of operations will depend on future developments and other factors that are highly uncertain, continuously evolving and cannot be predicted, including the duration of the COVID-19 outbreak, the severity and continuation of outbreak surges, actions to contain the spread of the virus such as mask wearing, social distancing and vaccination efforts globally, and the impact of these and other factors on testing demand. While we have seen a decrease in demand from the extremely high levels experienced in the fourth quarter of 2020, we continue to believe that for at least the remainder of 2021, some level of COVID-19 testing demand is sustainable. We believe this ongoing testing will be required as communities attempt a return to more normal practices in schools, the workplace and entertainment venues. With respect to our core products, we anticipate revenue growth for these products for the second half of 2021, assuming normalized respiratory season.

We expect to continue to invest heavily in research and development activities for our next generation immunoassay and molecular platforms, as well as additional assays to be launched on our current platforms. Additionally, we are making substantial investments in the expansion of our production capacity, while initially to address the testing demand driven by the COVID-19 pandemic, longer-term we expect this capacity to provide increased flexibility to address opportunities for new products and to address new markets globally. We intend to continue our focus on prudently managing our business and delivering improved financial results, while at the same time striving to introduce new products into the market and maintain our emphasis on research and development investments for longer term growth. Finally, we expect to continue to evaluate strategic opportunities to acquire new product lines, technologies and companies.

19

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

Total Revenues

The following table compares total revenues for the three months ended June 30, 2021 and 2020 (in thousands, except percentages):

	Three Months Ended June 30,				Increase (Decrease)
	2021		2020		$		%
Rapid Immunoassay	$	60,070	$	80,606	$	(20,536)	(25)	%
Cardiometabolic Immunoassay	71,666		54,191		17,475		32	%
Molecular Diagnostic Solutions	34,456		55,177		(20,721)		(38)	%
Specialized Diagnostic Solutions	10,418		11,780		(1,362)		(12)	%
Total revenues	$	176,610	$	201,754	$	(25,144)	(12)	%

For the three months ended June 30, 2021, total revenue decreased to $176.6 million from $201.8 million in the prior period. The Rapid Immunoassay and Molecular Diagnostic Solutions categories were the largest contributors to revenue decline, driven primarily by decreased demand for the Sofia SARS Antigen assay and Lyra SARS-CoV-2 assays. This was partially offset by increased sales of the QuickVue SARS Antigen and Solana SARS assays. Cardiometabolic Immunoassay sales increased $17.5 million as COVID-19 restrictions have begun to lift globally and sales are returning to pre-pandemic levels. Currency exchange rate impact for the quarter was favorable by $2.8 million, which had a 1.6% impact on the growth rate.

Gross Profit

Gross profit decreased to $106.2 million, or 60% of revenue for the three months ended June 30, 2021, compared to $148.8 million, or 74% of revenue for the three months ended June 30, 2020. The decreased gross profit was driven by lower selling prices for our SARS products and unfavorable product mix due to lower demand for SARS products and increased demand for Cardiometabolic Immunoassay products. Increases in supply chain and other indirect manufacturing costs also contributed to lower gross profit in the period. Gross margin declined as compared to last year due to the same factors.

Operating Expenses

The following table compares operating expenses for the three months ended June 30, 2021 and 2020 (in thousands, except percentages):

	Three Months Ended June 30,
	2021				2020
	Operating expenses		As a % of total revenues		Operating expenses		As a % of total revenues		Increase (Decrease)
									$		%
Research and development	$	22,614	13	%	$	20,970	10	%	$	1,644	8	%
Sales and marketing	$	38,100	22	%	$	27,567	14	%	$	10,533	38	%
General and administrative	$	21,138	12	%	$	15,679	8	%	$	5,459	35	%
Acquisition and integration costs	$	1,028	1	%	$	872	—	%	$	156	18	%

Research and Development Expense

Research and development expense for the three months ended June 30, 2021 was heavily focused on Savanna instrument and cartridge development and clinical work, Sofia Serology and Gastrointestinal assay chemicals and next generation platform development. Research and development expenses increased from $21.0 million to $22.6 million due primarily to increased spending on the Savanna instrument and cartridge development in preparation for clinical trials.

20

Research and development expenses include direct external costs such as fees paid to third-party contractors and consultants, and internal direct and indirect costs such as compensation and other expenses for research and development personnel, supplies and materials, clinical trials and studies, facility costs and depreciation.

Sales and Marketing Expense

Sales and marketing expense for the three months ended June 30, 2021 increased from $27.6 million to $38.1 million due primarily to higher product promotional spend associated with the launch of the QuickVue At Home OTC COVID-19 Test, as well as increased travel and meetings as COVID-19 related travel restrictions ease.

General and Administrative Expense

General and administrative expense for the three months ended June 30, 2021 increased from $15.7 million to $21.1 million compared with the prior year due to increased spend on IT projects and higher compensation costs driven by increased headcount to support the growth of the business.

Acquisition and Integration Costs

Acquisition and integration costs were $1.0 million and $0.9 million for the three months ended June 30, 2021 and 2020, respectively, primarily related to the evaluation of new business development opportunities.

Interest and Other Expense, Net

Interest and other expense, net primarily relates to accretion of interest on the deferred consideration, coupon and accretion of interest related to our Convertible Senior Notes and interest and amortization of deferred financing costs associated with our Credit Agreement. Interest and other expense, net for the three months ended June 30, 2021 decreased from $3.5 million to $1.6 million compared with the prior year due primarily to the maturity of the Company’s Convertible Senior Notes in December 2020, including an unfavorable $1.1 million change in fair value of derivative liabilities associated with a Convertible Senior Notes conversion. Additionally, interest expense decreased due to lower deferred consideration liability outstanding during 2021.

Income Taxes

The Company recognized income tax provisions of $2.6 million in relation to income before taxes of $21.7 million and $12.5 million in relation to income before taxes of $80.2 million resulting in effective tax rates of 12% and 16% for the three months ended June 30, 2021 and 2020, respectively. The lower tax expense for the three months ended June 30, 2021 compared to the same period in the prior year is primarily a result of lower pre-tax profits.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Total Revenues

The following table compares total revenues for the six months ended June 30, 2021 and 2020 (in thousands, except percentages):

	Six Months Ended  June 30,				Increase (Decrease)
	2021		2020		$		%
Rapid Immunoassay	$	297,740	$	176,536	$	121,204	69	%
Cardiometabolic Immunoassay	138,218		108,092		30,126		28	%
Molecular Diagnostic Solutions	94,719		63,540		31,179		49	%
Specialized Diagnostic Solutions	21,271		28,239		(6,968)		(25)	%
Total revenues	$	551,948	$	376,407	$	175,541	47	%

For the six months ended June 30, 2021, total revenue increased to $551.9 million from $376.4 million in the prior year. The Rapid Immunoassay category was the largest contributor to revenue growth, driven by sales of the Sofia SARS Antigen assays. Molecular Diagnostic Solutions sales grew $31.2 million over prior year, driven by the sales of Lyra SARS-CoV-2 assays. Cardiometabolic Immunoassay sales increased $30.1 million as COVID-19 restrictions have begun to lift and sales

21

return to pre-pandemic levels. The decrease in Specialized Diagnostic Solutions sales was driven primarily by a decline in demand for the cell culture respiratory products as there was no cold and flu season in the first quarter of 2021. Currency exchange rate impact for the first half was favorable by $4.8 million, which had a 1.7% impact on the growth rate.

Gross Profit

Gross profit increased to $408.1 million, or 74% of revenue for the six months ended June 30, 2021, compared to $263.7 million, or 70% of revenue for the six months ended June 30, 2020. The increased gross profit was due to higher sales volumes in the current period as well as improved product mix driven by continued demand for our SARS assays. The gains were partially offset by higher indirect manufacturing costs. Gross margin improved as compared to the same period in the prior year driven primarily by improved product mix.

Operating Expenses

The following table compares operating expenses for the six months ended June 30, 2021 and 2020 (in thousands, except percentages):

	Six Months Ended June 30,
	2021				2020
	Operating expenses		As a % of total revenues		Operating expenses		As a % of total revenues		Increase (Decrease)
									$		%
Research and development	$	45,918	8	%	$	37,349	10	%	$	8,569	23	%
Sales and marketing	$	72,333	13	%	$	58,305	15	%	$	14,028	24	%
General and administrative	$	40,645	7	%	$	30,011	8	%	$	10,634	35	%
Acquisition and integration costs	$	1,754	—	%	$	2,786	1	%	$	(1,032)	(37)	%

Research and Development Expense

Research and development expense for the six months ended June 30, 2021 increased from $37.3 million to $45.9 million. Development costs for the year primarily consisted of spending on the Savanna instrument and cartridge and Sofia SARS and QuickVue At Home OTC COVID-19 Test. Increases over prior year were driven primarily by Savanna development in preparation for clinical trials.

Research and development expenses include direct external costs such as fees paid to third-party contractors and consultants, and internal direct and indirect costs such as compensation and other expenses for research and development personnel, supplies and materials, clinical trials and studies, facility costs and depreciation.

Sales and Marketing Expense

Sales and marketing expense for the six months ended June 30, 2021 increased $14.0 million to $72.3 million compared with the prior year, primarily due to product promotional spend associated with the launch of QuickVue At Home OTC COVID-19 Test, higher compensation costs driven by increased headcount and increased travel, meeting and trade show costs as COVID-19 related travel restrictions ease.

General and Administrative Expense

General and administrative expense for the six months ended June 30, 2021 increased from $30.0 million to $40.6 million compared with the prior year due to increased spend on IT projects and higher compensation costs driven by increased headcount to support the growth of the business.

Acquisition and Integration Costs

Acquisition and integration costs of $1.8 million and $2.8 million for the six months ended June 30, 2021 and 2020, respectively, primarily related to the evaluation of new business development opportunities.

22

Other Expense, net

Interest and other expense, net primarily relates to accretion of interest on the deferred consideration, coupon and accretion of interest related to our Convertible Senior Notes and interest and amortization of deferred financing costs associated with our Credit Agreement. Interest and other expense, net for the six months ended June 30, 2021 decreased from $6.3 million to $4.0 million compared with the prior year due primarily to the maturity of the Company’s Convertible Senior Notes in December 2020, including an unfavorable $1.1 million change in fair value of derivative liabilities associated with Convertible Senior Notes conversion in the second quarter of 2020. Additionally, interest expense decreased due to lower deferred consideration liability outstanding during 2021.

Income Taxes

For the six months ended June 30, 2021 and 2020, the Company recognized income tax provision of $46.3 million and $21.1 million, respectively, in relation to income before taxes of $243.5 million and $129.0 million. The higher tax expense for the six months ended June 30, 2021 compared to the same period in the prior year is a result of higher pre-tax profits, as well as a proportional decrease in tax deductions from stock-based compensation.

Liquidity and Capital Resources

As of June 30, 2021 and December 31, 2020, the principal sources of liquidity consisted of the following (in thousands): 

	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	593,224	$	489,941
Amount available to borrow under the Revolving Credit Facility	$	175,000	$	175,000
Working capital including cash and cash equivalents	$	708,420	$	805,441

As of June 30, 2021, we had $593.2 million in cash and cash equivalents, a $103.3 million increase from December 31, 2020. Our cash requirements fluctuate as a result of numerous factors, such as cash generated from operations, progress in research and development or capital expansion projects and integration activities. In addition, we intend to continue to evaluate candidates for new product lines, company or technology acquisitions or technology licensing. If we decide to proceed with any such transactions, we may need to incur additional debt or issue additional equity to successfully complete the transactions.

Our primary source of liquidity, other than our holdings of cash and cash equivalents, has been cash flows from operations and our Revolving Credit Facility. Cash generated from operations provides us with the financial flexibility we need to meet normal operating, investing and financing needs. We do not currently expect the impacts of the COVID-19 pandemic to adversely affect our liquidity and capital resources or our ability to meet financial commitments. We anticipate that our current cash and cash equivalents, together with cash provided by operating activities will be sufficient to fund our near-term capital and operating needs for at least the next 12 months.

Normal operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our primary short-term needs for capital, which are subject to change, include expenditures related to:

•acquisitions of equipment and other fixed assets in support and expansion of our manufacturing facility expansion;

•the continued advancement of research and development efforts;

•support of commercialization efforts related to our current and future products, including support of our direct sales force and field support resources;

•interest on and repayments of our deferred consideration, contingent consideration and lease obligations; and

•potential strategic acquisitions and investments.

The Amended and Restated Credit Agreement provides us with a Revolving Credit Facility of $175.0 million and there is no balance outstanding as of June 30, 2021. The Revolving Credit Facility matures on August 31, 2023. See Note 5 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report for further discussion of the Revolving Credit Facility.

23

In connection with the acquisition of the BNP Business, the Company has an annual installment payment payable in 2022 of up to $48.0 million and an annual installment payment of $40.0 million payable in 2023. As of June 30, 2021, these payments are recorded at fair value as contingent consideration of $5.8 million and deferred consideration of $76.5 million.

On December 12, 2018, our Board of Directors authorized a stock repurchase program to purchase up to $50.0 million of the Company’s shares of common stock. On August 28, 2020, we announced an amendment to the stock repurchase program to purchase an additional $150.0 million of our shares of common stock through August 28, 2022 and as of June 30, 2021, the Company had approximately $52.9 million available under the repurchase program.

We expect our revenue and operating expenses will significantly impact our cash management decisions. Our future capital requirements and the adequacy of our available funds to service our long-term debt and to fund working capital expenditures and business development efforts will depend on many factors, including:

•our ability to realize revenue growth from our new technologies and create innovative products in our markets;

•our ability to manage our recent significant growth and facility expansions;

•outstanding debt and covenant restrictions;

•our ability to leverage our operating expenses to realize operating profits as we grow revenue;

•competing technological and market developments; and

•our entry into strategic collaborations with other companies or acquisitions of other companies or technologies to enhance or complement our product and service offerings.

Cash Flow Summary

	Six Months Ended  June 30,
(In thousands)	2021		2020
Net cash provided by operating activities:	$	407,433	$	120,177
Net cash used for investing activities:	(130,273)		(13,388)
Net cash used for financing activities:	(173,969)		(87,019)
Effect of exchange rates on cash	92		44
Net increase in cash and cash equivalents	$	103,283	$	19,814

Cash provided by operating activities of $407.4 million during the six months ended June 30, 2021 reflects net income of $197.2 million and adjustments of $36.0 million primarily associated with depreciation, amortization, stock-based compensation and the payment of accretion of interest on deferred consideration. In addition, the company realized a net working capital contribution of $174.1 million primarily driven by a decrease in accounts receivable, partially offset by a decrease in income taxes payable and an increase in product inventory. For the six months ended June 30, 2020, cash provided by operating activities of $120.2 million reflects net income of $107.9 million and non-cash adjustments of $39.3 million primarily associated with depreciation, amortization, stock-based compensation and accretion of interest on deferred consideration. Partially offsetting these inflows was a net working capital use of cash of $23.3 million driven by increases in accounts receivable and product inventory, partially offset by an increase in income taxes payable.

Our investing activities used $130.3 million during the six months ended June 30, 2021 primarily related to investments in manufacturing equipment and building improvements, Sofia, Solana and Triage instruments available for lease and purchases of scientific equipment, partially offset by government proceeds received to fund such investments. Our investing activities used $13.4 million during the six months ended June 30, 2020 primarily related to payments for manufacturing equipment, computer equipment, building improvements, and Sofia, Solana and Triage instruments available for lease.

We are currently planning approximately $120 million in capital expenditures for the remainder of 2021. The primary purpose for our capital expenditures is to invest in manufacturing capacity expansion, to acquire Savanna, Sofia, Solana and Triage instruments, to acquire scientific equipment, to purchase or develop information technology and to implement facility improvements. We plan to fund the capital expenditures with the cash on our balance sheet.

Cash used by financing activities was $174.0 million during the six months ended June 30, 2021 primarily related to repurchases of common stock of $103.4 million, payments of tax withholdings for vesting of stock-based awards of $35.4 million, and payment on deferred and contingent consideration of $39.9 million, partially offset by proceeds from issuance of common stock under ESPP and stock option exercises of $4.9 million. Cash used by financing activities was $87.0 million during the six months ended June 30, 2020 primarily related to repurchases of common stock of $42.2 million, payment on

24

deferred and contingent consideration of $48.0 million, and payments of tax withholdings for vesting of stock-based awards of $2.7 million, partially offset by proceeds from issuance of common stock under ESPP and stock option exercises of $6.1 million.

Seasonality

Sales of our respiratory products are subject to, and significantly affected by, the seasonal demands of the cold and flu seasons, prevalent during the fall and winter. As a result of these seasonal demands, we typically experience lower sales volume in the second and third quarters of the calendar year, and typically have higher sales in the first and fourth quarters of the calendar year. Historically, sales of our influenza products have varied from year to year based, in large part, on the severity, length and timing of the onset of the cold and flu season. The COVID-19 pandemic combined with no flu season diminished the seasonal effects for our influenza products in the first half of 2021.

Off-Balance Sheet Arrangements

At June 30, 2021 and December 31, 2020, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those related to reserves for contractual rebates, goodwill and intangibles and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A comprehensive discussion of our critical accounting policies and management estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020. There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2021.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Under our current policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates.

Our current investment policy with respect to our cash and cash equivalents focuses on maintaining acceptable levels of interest rate risk and liquidity. Although we continually evaluate our placement of investments, our cash equivalents as of June 30, 2021 consisted primarily of prime money market funds. The funds provide daily liquidity and may be subject to interest rate risk and fall in value if market interest rates increase. We do not expect our operating results or cash flows to be affected to any significant degree by a sudden change in market interest rates.

Foreign Currency Exchange Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany balances with foreign subsidiaries and transactions denominated in currencies other than a location’s functional currency.

25

During the six months ended June 30, 2021, total revenues were $551.9 million, of which approximately $96.6 million in revenue was denominated in currencies other than the U.S. dollar. We believe constant currency and constant currency change rate enhance the comparison of our financial performance from period-to-period, and to that of our competitors. Constant currency revenue excludes the impact from foreign currency fluctuations, which was favorable $4.8 million for the six months ended June 30, 2021, and is calculated by translating current period revenues using prior period exchange rates, net of any hedging effect recognized in the current period. Constant currency revenue change (expressed as a percentage) is calculated by determining the change in current period constant currency revenues over prior period revenues.

The major currencies to which our revenues are exposed are the Euro and the Chinese Yuan. A 100-basis point move in the average exchange rates (assuming a simultaneous and immediate 100 basis point change for the relevant period) would have resulted in an increase or decrease in our reported revenue for the six months ended June 30, 2021 as follows (in thousands):

	Six Months Ended  June 30,
Currency	2021
Chinese Yuan	$	2,092
Euro	$	1,754

Our foreign currency management policy permits the use of derivative instruments, such as forward contracts, to reduce volatility in our results of operations resulting from foreign exchange rate fluctuations. We do not enter into foreign currency derivative instruments for trading purposes or to engage in speculative activity. See further discussion in Note 10 to the Notes to the Consolidated Financial Statements for additional information related to such forward contracts, which information is incorporated herein by reference.

ITEM 4.    Controls and Procedures

Evaluation of disclosure controls and procedures: We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2021 at a reasonable assurance level to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in internal control over financial reporting: There was no change in our internal control over financial reporting during the quarter ended June 30, 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

26

PART II OTHER INFORMATION

ITEM 1.    Legal Proceedings

The information set forth in the section entitled “Litigation and Other Legal Proceedings” under Note 8 to the Notes to the Consolidated Financial Statements, included in Part I, Item I of this Quarterly Report, is incorporated herein by reference.

ITEM 1A.    Risk Factors

There has been no material change in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. For a detailed description of our risk factors, refer to Item IA, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The table below sets forth information regarding repurchases of our common stock by us during the three months ended June 30, 2021.

Period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans  or programs (2)
April 4, 2021 - May 2, 2021	4,982	$	130.01	—	$	156,313,465
May 3, 2021 - May 30, 2021	4,233	120.26		—	156,313,465
May 31, 2021 - July 4, 2021	959,875	108.08		957,239	52,894,442
Total	969,090	$	108.25	957,239	$	52,894,442

(1) Includes shares surrendered, if any, to the Company to satisfy the payment of minimum tax withholding obligations.

(2) On December 18, 2018, the Company announced a stock repurchase program to repurchase up to $50.0 million of the Company’s shares of common stock, which was authorized by the Board of Directors (the “Board”) on December 12, 2018. On August 28, 2020, the Board authorized an increase of an additional $150.0 million to the Company’s existing stock repurchase program authorization, which was announced on September 1, 2020. The Board also extended the repurchase authorization through August 28, 2022. During the three months ended June 30, 2021, the Company repurchased 957,239 shares of outstanding common stock under this program for approximately $103.4 million.

ITEM 3.    Defaults Upon Senior Securities

None.

ITEM 4.    Mine Safety Disclosures

Not applicable.

ITEM 5.    Other Information

None.

27

ITEM 6.    Exhibits

3.1	Restated Certificate of Incorporation of Quidel Corporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010.)
3.2	Certificate of Amendment to the Restated Certificate of Incorporation of Quidel Corporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on May 6, 2015.)
3.3	Amended and Restated Bylaws of Quidel Corporation, as of November 9, 2020. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on November 13, 2020.)
4.1	Certificate of Designations of Series C Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010.)
10.1	Amendment No. 2 to Amended and Restated Credit Agreement, by and among the Company, as Borrower, and Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, dated as of May 7, 2021. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 12, 2021.)
10.2	Master Agreement, dated as of July 24, 2021, by and among Quidel Corporation, Quidel Cardiovascular, Inc., and Beckman Coulter, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on July 26, 2021.)
31.1*	Certification by Principal Executive Officer of Quidel Corporation pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by Principal Financial Officer of Quidel Corporation pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications by Principal Executive Officer and Principal Financial Officer of Quidel Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (included as Exhibit 101).

_________________________

* Filed herewith.

** Furnished herewith.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 5, 2021	QUIDEL CORPORATION
	/s/ DOUGLAS C. BRYANT
	Douglas C. Bryant
	President and Chief Executive Officer (Principal Executive Officer)
	/s/ RANDALL J. STEWARD
	Randall J. Steward
	Chief Financial Officer (Principal Financial Officer)

29

Exhibit Index

 

Exhibit Number
3.1	Restated Certificate of Incorporation of Quidel Corporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010.)
3.2	Certificate of Amendment to the Restated Certificate of Incorporation of Quidel Corporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on May 6, 2015.)
3.3	Amended and Restated Bylaws of Quidel Corporation, as of November 9, 2020. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on November 13, 2020.)
4.1	Certificate of Designations of Series C Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010.)
10.1	Amendment No. 2 to Amended and Restated Credit Agreement, by and among the Company, as Borrower, and Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, dated as of May 7, 2021. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 12, 2021.)
10.2	Master Agreement, dated as of July 24, 2021, by and among Quidel Corporation, Quidel Cardiovascular, Inc., and Beckman Coulter, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on July 26, 2021.)
31.1*	Certification by Principal Executive Officer of Quidel Corporation pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by Principal Financial Officer of Quidel Corporation pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications by Principal Executive Officer and Principal Financial Officer of Quidel Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (included as Exhibit 101).

___________________________

* Filed herewith.

** Furnished herewith.

30

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas C. Bryant, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Quidel Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2021

/s/ DOUGLAS C. BRYANT

Douglas C. Bryant

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Randall J. Steward, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Quidel Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2021

/s/ RANDALL J. STEWARD

Randall J. Steward

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certifications by the Principal Executive Officer and Principal Financial Officer of Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Each of the undersigned hereby certifies, in his capacity as an officer of Quidel Corporation, a Delaware corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

•the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2021

/s/ DOUGLAS C. BRYANT

Douglas C. Bryant

President and Chief Executive Officer

(Principal Executive Officer)

/s/ RANDALL J. STEWARD

Randall J. Steward

Chief Financial Officer

(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Jul. 30, 2021
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	0-10961
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-2573850
Entity Address, Address Line One	9975 Summers Ridge Road
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	858
Local Phone Number	552-1100
Title of 12(b) Security	Common Stock, $0.001 Par Value
Trading Symbol	QDEL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Registrant Name	QUIDEL CORPORATION
Entity Central Index Key	0000353569
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		41,632,759

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 593,224	$ 489,941
Accounts receivable, net	46,216	497,688
Inventories	218,506	113,798
Prepaid expenses and other current assets	59,741	40,975
Total current assets	917,687	1,142,402
Property, plant and equipment, net	251,045	110,481
Right-of-use assets	134,870	100,544
Goodwill	337,027	337,032
Intangible assets, net	109,537	122,431
Deferred tax asset	44,151	44,762
Other non-current assets	13,335	13,512
Total assets	1,807,652	1,871,164
Current liabilities:
Accounts payable	99,562	86,316
Accrued payroll and related expenses	16,559	34,781
Income taxes payable	6,585	127,788
Operating lease liabilities	8,952	7,799
Contingent consideration	5,845	5,987
Deferred consideration	41,898	42,000
Other current liabilities	29,866	32,290
Total current liabilities	209,267	336,961
Operating lease liabilities - non-current	135,660	100,706
Deferred consideration - non-current	34,611	73,951
Other Liabilities, Noncurrent	17,035	26,843
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000 shares authorized; none issued or outstanding at June 30, 2021 and December 31, 2020	0	0
Common stock, $0.001 par value per share; 97,500 shares authorized; 41,633 and 42,290 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	42	42
Additional paid-in capital	267,890	388,121
Accumulated other comprehensive income (loss)	1,019	(431)
Retained earnings	1,142,128	944,971
Total stockholders’ equity	1,411,079	1,332,703
Total liabilities and stockholders’ equity	$ 1,807,652	$ 1,871,164
Preferred stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Common stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	97,500,000	97,500,000
Common stock, shares issued (in shares)	41,633,000	42,290,000
Common stock, shares outstanding (in shares)	41,633,000	42,290,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	97,500,000	97,500,000
Common stock, shares issued (in shares)	41,633,000	42,290,000
Common stock, shares outstanding (in shares)	41,633,000	42,290,000

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Total revenues	$ 176,610	$ 201,754	$ 551,948	$ 376,407
Cost of sales	70,424	53,003	143,803	112,665
Gross profit	106,186	148,751	408,145	263,742
Research and development	22,614	20,970	45,918	37,349
Sales and marketing	38,100	27,567	72,333	58,305
General and administrative	21,138	15,679	40,645	30,011
Acquisition and integration costs	1,028	872	1,754	2,786
Total operating expenses	82,880	65,088	160,650	128,451
Operating income	23,306	83,663	247,495	135,291
Interest and other expense, net	(1,623)	(3,467)	(4,005)	(6,274)
Income before income taxes	21,683	80,196	243,490	129,017
Provision for income taxes	2,610	12,544	46,333	21,128
Net income	$ 19,073	$ 67,652	$ 197,157	$ 107,889
Basic earnings per share	$ 0.46	$ 1.61	$ 4.74	$ 2.56
Diluted earnings per share	$ 0.45	$ 1.55	$ 4.64	$ 2.48
Shares used in basic per share calculation	41,691	42,117	41,622	42,086
Shares used in diluted per share calculation	42,374	43,746	42,475	43,574

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 19,073	$ 67,652	$ 197,157	$ 107,889
Other comprehensive income (loss)
Changes in cumulative translation adjustment, net of tax	331	265	(509)	200
Net unrealized (losses) gains on derivative instruments	(235)	(138)	106	269
Reclassification of net realized losses (gains) on derivative instruments included in net income	761	(195)	1,853	(337)
Total change in unrealized gains (losses) from cash flow hedges, net of tax	526	(333)	1,959	(68)
Comprehensive income	$ 19,930	$ 67,584	$ 198,607	$ 108,021

XML

Consolidated Statements of Stockholders' Equity Statement - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional paid-in capital	Accumulated other comprehensive income (loss)	Retained earnings
Balance (in shares) at Dec. 31, 2019		41,868
Balance at Dec. 31, 2019	$ 559,820	$ 42	$ 425,557	$ (463)	$ 134,684
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under equity compensation plans (in shares)		153
Issuance of common stock under equity compensation plans	3,571	$ 0	3,571
Stock-based compensation expense	3,325		3,325
Repurchases of common stock (in shares)		(25)
Tax withholdings related to vesting of stock-based awards	(1,954)		(1,954)
Other comprehensive gain, net of tax				200
Net income	40,237				40,237
Balance (in shares) at Mar. 31, 2020		41,996
Balance at Mar. 31, 2020	605,199	$ 42	430,499	(263)	174,921
Balance (in shares) at Dec. 31, 2019		41,868
Balance at Dec. 31, 2019	559,820	$ 42	425,557	(463)	134,684
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	107,889
Balance (in shares) at Jun. 30, 2020		41,949
Balance at Jun. 30, 2020	611,709	$ 42	369,425	(331)	242,573
Balance (in shares) at Mar. 31, 2020		41,996
Balance at Mar. 31, 2020	605,199	$ 42	430,499	(263)	174,921
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under equity compensation plans (in shares)		203
Issuance of common stock under equity compensation plans	3,287		3,287
Stock-based compensation expense	4,665		4,665
Issuance of shares in exchange for Convertible Senior Notes (in shares)		2
Issuance of shares in exchange for Convertible Senior Notes	48	$ 0	48
Repurchases of common stock (in shares)		(5)
Tax withholdings related to vesting of stock-based awards	(42,178)
Repurchases of common stock			(42,178)
Repurchases of common stock (in shares)		(247)
Derivative liabilities - Convertible Senior Notes elected to settle in cash	(26,180)		(26,180)
Tax withholdings related to vesting of stock-based awards	(716)		(716)
Other comprehensive gain, net of tax	(68)			(68)
Net income	67,652				67,652
Balance (in shares) at Jun. 30, 2020		41,949
Balance at Jun. 30, 2020	611,709	$ 42	369,425	(331)	242,573
Balance (in shares) at Dec. 31, 2020		42,290
Balance at Dec. 31, 2020	1,332,703	$ 42	388,121	(431)	944,971
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under equity compensation plans (in shares)		409
Issuance of common stock under equity compensation plans	6,374	$ 1	6,373
Stock-based compensation expense	5,889		5,889
Tax withholdings related to vesting of stock-based awards (in shares)		(156)
Tax withholdings related to vesting of stock-based awards	(33,929)		(33,929)
Other comprehensive gain, net of tax				593
Net income	178,084				178,084
Balance (in shares) at Mar. 31, 2021		42,543
Balance at Mar. 31, 2021	1,489,714	$ 43	366,454	162	1,123,055
Balance (in shares) at Dec. 31, 2020		42,290
Balance at Dec. 31, 2020	1,332,703	$ 42	388,121	(431)	944,971
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	197,157
Balance (in shares) at Jun. 30, 2021		41,633
Balance at Jun. 30, 2021	1,411,079	$ 42	267,890	1,019	1,142,128
Balance (in shares) at Mar. 31, 2021		42,543
Balance at Mar. 31, 2021	1,489,714	$ 43	366,454	162	1,123,055
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under equity compensation plans (in shares)		59
Issuance of common stock under equity compensation plans	494	$ 0	494
Stock-based compensation expense	5,846		5,846
Repurchases of common stock (in shares)		(12)
Tax withholdings related to vesting of stock-based awards		$ (1)
Repurchases of common stock	(103,438)		(103,437)
Repurchases of common stock (in shares)		(957)
Tax withholdings related to vesting of stock-based awards	(1,467)		(1,467)
Other comprehensive gain, net of tax	857			857
Net income	19,073				19,073
Balance (in shares) at Jun. 30, 2021		41,633
Balance at Jun. 30, 2021	$ 1,411,079	$ 42	$ 267,890	$ 1,019	$ 1,142,128

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
OPERATING ACTIVITIES:
Net income	$ 197,157	$ 107,889
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other	27,191	24,237
Stock-based compensation expense	11,674	9,008
Amortization of debt discount and deferred issuance costs	202	433
Change in fair value of acquisition contingencies	101	848
Accretion of interest on deferred consideration	2,558	3,612
Net change in operating lease right-of-use assets and liabilities	1,781	129
Change in deferred tax assets and liabilities	611	(21)
Change in fair value of derivative liabilities - Convertible Senior Notes	0	1,084
Payment of accreted interest on contingent and deferred consideration	(8,157)	0
Changes in assets and liabilities:
Accounts receivable	451,094	(16,450)
Inventories	(104,796)	(34,501)
Prepaid expenses and other current and non-current assets	(19,927)	(3,791)
Accounts payable	(10,124)	9,414
Accrued payroll and related expenses	(16,124)	4,974
Income taxes payable	(126,010)	17,056
Other current and non-current liabilities	202	(3,744)
Net cash provided by operating activities:	407,433	120,177
INVESTING ACTIVITIES:
Acquisitions of property, equipment and intangibles	(153,536)	(13,388)
Proceeds from government assistance allocated to fixed assets	23,263	0
Net cash used for investing activities:	(130,273)	(13,388)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock	4,866	6,091
Payments on finance lease obligation	(128)	(228)
Payments of tax withholdings related to vesting of stock-based awards	(35,396)	(2,670)
Repurchases of common stock	(103,438)	(42,178)
Principal payments of acquisition contingent consideration	(4,730)	(6,034)
Principal payments of deferred consideration	(35,143)	(42,000)
Net cash used for financing activities:	(173,969)	(87,019)
Effect of exchange rates on cash	92	44
Net increase in cash and cash equivalents	103,283	19,814
Cash and cash equivalents, beginning of period	489,941	52,775
Cash and cash equivalents, end of period	593,224	72,589
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Initial measurement of derivative liabilities – Convertible Senior Notes	0	26,180
Purchase of property, equipment and intangibles by incurring current liabilities	31,164	2,175
Consideration Received for Capital Expenditures Paid but Not yet Incurred	13,619	0
Reduction of other current liabilities upon issuance of restricted share units	2,001	767
Debt Conversion, Converted Instrument, Amount	$ 0	$ 48

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of Quidel Corporation and its subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.

The information at June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, is unaudited. For further information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s 2020 Annual Report on Form 10-K. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year.

For 2021 and 2020, the Company’s fiscal year will end or has ended on January 2, 2022 and January 3, 2021, respectively. For 2021 and 2020, the Company’s second quarter ended on July 4, 2021 and June 28, 2020, respectively. For ease of reference, the calendar quarter end dates are used herein. The three and six-month periods ended June 30, 2021 and 2020 each included 13 and 26 weeks, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant Accounting Policies

During the six months ended June 30, 2021, there have been no changes to our significant accounting policies as described in our 2020 Annual Report on Form 10-K.

XML

Computation of Earnings Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Computation of Earnings Per Share

Computation of Earnings Per ShareBasic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted EPS is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested restricted stock units (“RSUs”) and, for the 2020 periods, the 3.25% Convertible Senior Notes. Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method.

The following table reconciles net income and the weighted-average shares used in computing basic and diluted earnings per share (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Numerator:
Net income used for basic earnings per share	$	19,073	$	67,652	$	197,157	$	107,889
Interest expense on Convertible Senior Notes, net of tax	—		179		—		360
Net income used for diluted earnings per share	$	19,073	$	67,831	$	197,157	$	108,249
Basic weighted-average common shares outstanding	41,691		42,117		41,622		42,086
Dilutive potential shares issuable from Convertible Senior Notes	—		392		—		401
Dilutive potential shares issuable from stock options and unvested RSUs	683		1,237		853		1,087
Diluted weighted-average common shares outstanding	42,374		43,746		42,475		43,574
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	197		—		133		1

Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.

Potentially dilutive shares from the Convertible Senior Notes in 2020 were determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Senior Notes were assumed to be converted and the resulting common shares were included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Senior Notes was added back to net income. The Convertible Senior Notes had a dilutive impact when the average market price of the Company’s common stock exceeded the applicable conversion price of the notes. The Senior Convertible Notes became convertible on March 31, 2018 and matured on December 15, 2020.

XML

Balance Sheet Account Details

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Account Details

Balance Sheet Account Details    

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories consisted of the following (in thousands):

	June 30, 2021		December 31, 2020
Raw materials	$	103,794	$	58,264
Work-in-process (materials, labor and overhead)	40,373		31,359
Finished goods (materials, labor and overhead)	74,339		24,175
Total inventories	$	218,506	$	113,798

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Other receivables	$	39,400	$	15,442
Unbilled receivables	—		16,041
Prepaid expenses	14,284		7,335
Other	6,057		2,157
Total prepaid expenses and other current assets	$	59,741	$	40,975

Unbilled receivables as of December 31, 2020 primarily consisted of receivables arising from unbilled milestone achievements for capital expenditures to be reimbursed under the National Institute of Health (“NIH”) contract. As of June 30, 2021, the Company had achieved and billed for all milestones under the NIH contract. Amounts not collected as of June 30, 2021 are included in other receivables. Since inception and as of June 30, 2021, the Company has collected $42.0 million of the $65.0 million total contract value.

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Customer incentives and rebates	$	13,969	$	15,663
Deferred revenue	2,553		3,733
Accrued other taxes payable	2,421		2,157
Derivative liabilities	597		3,061
Other	10,326		7,676
Total other current liabilities	$	29,866	$	32,290

XML

Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company calculates its interim income tax provision in accordance with Accounting Standards Codification (“ASC”) 270, Interim Reporting, and ASC 740, Accounting for Income Taxes (together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.

The Company recognized income tax provisions of $2.6 million in relation to income before taxes of $21.7 million and $12.5 million in relation to income before taxes of $80.2 million resulting in effective tax rates of 12% and 16% for the three months ended June 30, 2021 and 2020, respectively. The Company’s 12% and 16% effective tax rates for the three months ended June 30, 2021 and 2020, respectively, differed from the federal statutory rate of 21% primarily due to the discrete impact

of excess tax deductions from stock based compensation, the benefit from research and development (“R&D”) credits and the benefit from corporate deductions attributable to Foreign Derived Intangible Income (“FDII”), the benefits of which are offset by the income tax owed in U.S. For the six months ended June 30, 2021 and 2020, respectively, the Company recognized income tax provision of $46.3 million and $21.1 million, in relation to income before taxes of $243.5 million and $129.0 million. The Company’s 19% and 16% effective tax rates for the six months ended June 30, 2021 and 2020, respectively, differed from the federal statutory rate of 21% primarily due to the discrete impact of excess tax deductions from stock based compensation, the benefit from R&D credits and the benefit from corporate deductions attributable to FDII, the benefits of which are offset by the income tax owed in U.S. states, all in relation to income before taxes as described above. The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credits, the Company’s federal tax years from 2012 and forward are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and forward are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.

XML

Debt

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Debt

Revolving Credit Facility

The Company has a $175.0 million Revolving Credit Facility under a credit agreement expiring on August 31, 2023 of which no amounts were outstanding as of June 30, 2021. Loans will bear interest at a rate equal to (i) the London Interbank Offered Rate (“LIBOR”) plus the “applicable rate” or (ii) the “base rate” (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus one-half of one percent, (c) LIBOR plus one percent, and (d) one percent) plus the “applicable rate.” The applicable rate is determined in accordance with a pricing grid based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) ranging from 1.75% to 2.50% per annum for LIBOR rate loans and from 0.75% to 1.50% per annum for base rate loans. In addition, the Company pays a commitment fee on the unused portion of the Credit Agreement based on the Company’s Consolidated Leverage Ratio ranging from 0.15% to 0.30% per annum in accordance with the pricing grid.

The Revolving Credit Facility is guaranteed by certain material domestic subsidiaries of the Company (the “Guarantors”) and is secured by liens on substantially all of the assets of the Company and the Guarantors, excluding real property and certain other types of excluded assets, and contains affirmative and negative covenants that are customary for credit agreements of this nature. The negative covenants include, among other things, limitations on asset sales, mergers, indebtedness, liens, dividends and other distributions, investments and transactions with affiliates. The Credit Agreement contains two financial covenants: (i) maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter of 3.50 to 1.00, which ratio may be increased to 4.50 to 1.00 in case of certain qualifying acquisitions; and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. The Company was in compliance with all financial covenants as of June 30, 2021.

Interest expense recognized, including amortization of deferred issuance cost, was $0.1 million and $0.3 million for the three and six months ended June 30, 2021 and $0.2 million and $0.4 million for the three and six months ended June 30, 2020

XML

Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Issuances of Common Stock

A summary of the status of stock option activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average exercise price per share
Outstanding at December 31, 2020	760	$	46.95
Granted	47	254.00
Exercised	(70)	39.37
Outstanding at June 30, 2021	737	$	60.95

A summary of the status of restricted stock unit activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average grant date fair value
Non-vested December 31, 2020	878	$	59.60
Granted	106	204.50
Vested	(387)	45.48
Forfeited	(3)	131.72
Non-vested at June 30, 2021	594	$	94.16

During the six months ended June 30, 2021, the Company issued 10,948 shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”).

Stock-Based Compensation

The expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Cost of sales	$	643	$	435	$	1,159	$	693
Research and development	893		866		1,927		1,508
Sales and marketing	1,556		1,341		2,960		2,638
General and administrative	2,754		2,488		5,628		4,169
Total stock-based compensation expense	$	5,846	$	5,130	$	11,674	$	9,008

As of June 30, 2021, total unrecognized compensation expense was $46.1 million, which is expected to be recognized over a weighted-average period of approximately 2.0 years.

The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.

	Six Months Ended  June 30,
	2021		2020
Risk-free interest rate	0.42	%	1.34	%
Expected option life (in years)	5.01		5.14
Volatility rate	53	%	39	%
Dividend rate	0	%	0	%
Weighted-average grant date fair value	$115.78		$28.39

The fair value of RSUs is determined based on the closing market price of the Company’s common stock on the grant date. The weighted-average fair value of RSUs granted during the six months ended June 30, 2021 and 2020 was $204.50 and $85.34, respectively.

Compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the three and six months ended June 30, 2021 or 2020.

XML

Industry and Geographic Information

6 Months Ended

Jun. 30, 2021

Industry And Geographic Information [Abstract]

Industry and Geographic Information

Industry and Geographic InformationThe Company operates in one reportable segment. Sales to customers outside of the U.S. represented $147.0 million (27%) and $96.8 million (26%) of total revenue for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and December 31, 2020, net accounts receivable due from foreign customers were $22.2 million and $18.6 million, respectively.

The Company had sales to individual customers in excess of 10% of total revenues, as follows:

	Six Months Ended  June 30,
	2021		2020
Customer:
A	18	%	19	%
B	11	%	19	%
C	9	%	10	%
Total:	38	%	48	%

As of June 30, 2021 and December 31, 2020, net accounts receivable from customers with balances due in excess of 10% of total accounts receivable totaled $9.1 million and $411.7 million, respectively.

Consolidated total revenues by product category for the six months ended June 30, 2021 and 2020 were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Rapid Immunoassay	$	60,070	$	80,606	$	297,740	$	176,536
Cardiometabolic Immunoassay	71,666		54,191		138,218		108,092
Molecular Diagnostic Solutions	34,456		55,177		94,719		63,540
Specialized Diagnostic Solutions	10,418		11,780		21,271		28,239
Total revenues	$	176,610	$	201,754	$	551,948	$	376,407

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

We lease administrative, research and development, sales and marketing and manufacturing facilities and certain equipment under various non-cancelable lease agreements. Facility leases generally provide for periodic rent increases, and may contain clauses for rent escalation, renewal options or early termination.

Summers Ridge Lease — The Company leases three of the four buildings that are located on the Summers Ridge Property in San Diego, California with an initial term through January 2033 with options to extend the lease for two additional five-year terms upon satisfaction of certain conditions, which have not been included in the determination of the lease term. The lease is subject to must-take provisions related to one additional building, which will have the same lease term as the three buildings originally leased. The remaining building is subject to the expiration of the lease with its current tenant in October 2022, subject to an option to renew for a two-year period.

McKellar Court Lease — During 1999, the Company completed a sale and leaseback transaction of its San Diego facility at McKellar Court to a partnership for which the Company is a limited partner. The partnership is deemed to be a variable interest entity (VIE). The Company is not, however, the primary beneficiary of the VIE as it does not have the power to direct the activities of the partnership and does not have the obligation to absorb losses or receive benefits of the partnership that could potentially be significant to the partnership. The Company made lease payments to the partnership of approximately $0.5 million the six months ended June 30, 2021.

Rutherford Lease — During January 2021, the Company entered into a lease agreement for a manufacturing facility in Carlsbad, California and recorded a right-of-use asset and a corresponding lease liability of $39.4 million. The initial lease term is 15 years with options to extend the lease for two additional five-year periods.

Litigation and Other Legal Proceedings

In Beckman Coulter, Inc. v. Quidel Corporation, which was filed in the Superior Court for the County of San Diego,

California, on November 27, 2017, Beckman Coulter, Inc. (“Beckman Coulter”) alleged that a provision of an agreement between Quidel and Beckman Coulter violated state antitrust laws. Our acquisition of the B-type Naturietic Peptide assay business (“BNP Business”) in October 2017 consisted of assets and liabilities relating to a contractual arrangement with Beckman Coulter (the “BNP Supply Agreement”) for the supply of antibodies and other inputs related to, and distribution of, the Triage® B-type Naturietic Peptide Test (“BNP Test”) for the Beckman Coulter Access Family of Immunoassay Systems. In the lawsuit, Beckman Coulter asserted that an exclusivity provision violated certain state antitrust laws and was unenforceable. From the inception of the lawsuit, the lawsuit was subject to numerous motions, rulings, appellate reviews and opinions. The matter was scheduled for trial starting April 15, 2022. On July 24, 2021, the Company and Beckman Coulter entered into a Master Agreement (the “Master Agreement”) pursuant to which, among other matters, Quidel’s business of selling and distributing the BNP Test for the BNP Business will be transitioned to Beckman Coulter. Concurrent with entering into the Master Agreement, Quidel and Beckman Coulter entered into a Settlement Agreement to resolve all disputes relating to the existing BNP Supply Agreement, among other matters. On August 3, 2021, the lawsuit was dismissed with prejudice. See Note 11 for further discussion of the agreements with Beckman Coulter.

From time to time, the Company is involved in other litigation and proceedings, including matters related to product liability claims, commercial disputes and intellectual property claims, as well as regulatory, employment, and other claims related to our business. The Company accrues for legal claims when, and to the extent that, amounts associated with the claims become probable and are reasonably estimable. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. For those matters as to which we are not able to estimate a possible loss or range of loss, we are not able to determine whether the loss will have a material adverse effect on our business, financial condition or results of operations or liquidity. No accrual has been recorded as of June 30, 2021 and December 31, 2020 related to such matters as they are not probable and/or reasonably estimable. 

Management believes that all such current legal actions, in the aggregate, will not have a material adverse effect on the Company. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows. The Company also maintains insurance, including coverage for product liability claims, in amounts that management believes are appropriate given the nature of its business.

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the following periods (in thousands):

	June 30, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	200,013	$	—	$	—	$	200,013	$	200,003	$	—	$	—	$	200,003
Derivative assets	—		361		—		361		—		24		—		24
Total assets measured at fair value	$	200,013	$	361	$	—	$	200,374	$	200,003	$	24	$	—	$	200,027
Liabilities:
Derivative liabilities	$	—	$	597	$	—	$	597	$	—	$	3,061	$	—	$	3,061
Contingent consideration	—		—		5,967		5,967		—		—		11,896		11,896
Deferred consideration	—		76,509		—		76,509		—		115,951		—		115,951
Total liabilities measured at fair value	$	—	$	77,106	$	5,967	$	83,073	$	—	$	119,012	$	11,896	$	130,908

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 categories of the fair value hierarchy during the three and six-month period ended June 30, 2021 and the year ended December 31, 2020.

Cash equivalents consist of funds held in money market accounts that are valued using quoted prices in active markets for identical instruments. Derivative financial instruments are measured based on observable inputs that are corroborated by market data. Observable inputs include broker quotes, daily market foreign currency rates and forward pricing curves.

In connection with the acquisition of the BNP Business, the Company has an annual installment payment payable in 2022 of up to $48.0 million and an annual installment payment of $40.0 million payable in 2023 remaining as of June 30, 2021. The

fair value of the payments treated as deferred consideration is calculated based on the net present value of cash payments using an estimated borrowing rate based on a quoted price for a similar liability. The fair value of the payments treated as contingent consideration is calculated using a discounted probability weighted valuation model. Discount rates used in such calculation is a significant assumption that is not observed in the market and, therefore, the resulting fair value represents a Level 3 measurement. The discount rate of 2.9% used as of June 30, 2021 was based on estimated borrowing rate for a similar liability.

Changes in estimated fair value of contingent consideration liabilities from December 31, 2020 through June 30, 2021 were as follows (in thousands):

	Contingent consideration liabilities (Level 3 measurement)
Balance at December 31, 2020	$	11,896
Cash payments	(6,030)
Change in estimated fair value, recorded in general and administrative expenses	101
Balance at June 30, 2021	$	5,967

XML

Derivatives and Hedging

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Foreign Currency Hedges

In the normal course of business, the Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. As part of its strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses designated cash flow hedges in the form of foreign currency forward contracts to mitigate the impact of foreign currency translation on transactions that are denominated primarily in the Euro and the Chinese Yuan. The Company also uses non-designated forward contracts to hedge non-functional currency denominated balance sheet assets. Hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions are formally documented. The Company does not use any derivative financial instruments for trading or other speculative purposes.

Such forward foreign currency contracts are carried at fair value in prepaid expenses and other current assets or other current liabilities depending on the unrealized gain or loss position of the hedged contract as of the balance sheet date. Changes in the value of the derivatives are recorded to other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the derivative no longer qualifies as a highly effective hedge. The cash flows from derivatives treated as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the item being hedged.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current currency exchange rates at each respective date. We generally enter into master netting arrangements, which reduces credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their net fair values. We did not have any derivative instruments with credit-risk related contingent features that would require us to post collateral.

The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of June 30, 2021 and December 31, 2020 (in thousands):

	June 30, 2021				December 31, 2020
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	3,481	$	158	$	—	$	—
Other current liabilities	$	7,173	$	588	$	38,435	$	2,819
Non-designated forward contracts:
Prepaid expenses and other current assets	$	16,430	$	203	$	18,160	$	24
Other current liabilities	$	1,442	$	9	$	23,120	$	242

XML

Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On July 24, 2021, the Company and Beckman Coulter entered into a Master Agreement pursuant to which, among other matters, Quidel’s business of selling and distributing the BNP Test for the BNP Business will be transitioned to Beckman Coulter. Pursuant to the Master Agreement, on a country by country basis, the Company will discontinue offering its Triage® BNP assay and Beckman Coulter will offer its own branded BNP assay to the market. Prior to Beckman Coulter introducing its own branded product to the market, in certain countries, the Company will grant Beckman Coulter exclusive rights to distribute the Triage® BNP assay in such countries. The parties are targeting the initial commercial transition, including in the US, to be completed by late August 2021. Prior to the initial commercial transition to Beckman Coulter, Quidel will continue to operate the Triage® BNP Business.

As consideration for the arrangements during each of calendar years 2022 through and including 2029, Quidel will receive a minimum payment of $70 million and a maximum payment of $75 million. Such maximum payments will be pro-rated for 2021, based on the period commencing on the date of the initial commercial transition to Beckman Coulter, through December 31, 2021.

In addition, the parties entered into other related agreements under the Master Agreement, including a Transition Services Agreement, pursuant to which the parties will provide various transitional services, a Supply Agreement for the supply by Quidel of the Quidel antibody and other components used in the manufacture of the BNP assay, and a Distribution Agreement, granting Beckman Coulter the right to sell and distribute the Triage® BNP assay as described above.

Concurrent with entering into the Master Agreement, Quidel and Beckman Coulter entered into a Settlement Agreement to resolve all disputes relating to the existing BNP Supply Agreement, among other matters. See further discussion in Note 8 under the heading Litigation and Other Legal Proceedings.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements of Quidel Corporation and its subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.

The information at June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, is unaudited. For further information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s 2020 Annual Report on Form 10-K. Operating results for any quarter are historically seasonal in nature and are not necessarily indicative of the results expected for the full year.

For 2021 and 2020, the Company’s fiscal year will end or has ended on January 2, 2022 and January 3, 2021, respectively. For 2021 and 2020, the Company’s second quarter ended on July 4, 2021 and June 28, 2020, respectively. For ease of reference, the calendar quarter end dates are used herein. The three and six-month periods ended June 30, 2021 and 2020 each included 13 and 26 weeks, respectively.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Regulatory Accounting

Significant Accounting Policies

During the six months ended June 30, 2021, there have been no changes to our significant accounting policies as described in our 2020 Annual Report on Form 10-K.

XML

Computation of Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table reconciles net income and the weighted-average shares used in computing basic and diluted earnings per share (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Numerator:
Net income used for basic earnings per share	$	19,073	$	67,652	$	197,157	$	107,889
Interest expense on Convertible Senior Notes, net of tax	—		179		—		360
Net income used for diluted earnings per share	$	19,073	$	67,831	$	197,157	$	108,249
Basic weighted-average common shares outstanding	41,691		42,117		41,622		42,086
Dilutive potential shares issuable from Convertible Senior Notes	—		392		—		401
Dilutive potential shares issuable from stock options and unvested RSUs	683		1,237		853		1,087
Diluted weighted-average common shares outstanding	42,374		43,746		42,475		43,574
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	197		—		133		1

Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.

XML

Balance Sheet Account Details (Tables)

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Inventory

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories consisted of the following (in thousands):

	June 30, 2021		December 31, 2020
Raw materials	$	103,794	$	58,264
Work-in-process (materials, labor and overhead)	40,373		31,359
Finished goods (materials, labor and overhead)	74,339		24,175
Total inventories	$	218,506	$	113,798

Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Other receivables	$	39,400	$	15,442
Unbilled receivables	—		16,041
Prepaid expenses	14,284		7,335
Other	6,057		2,157
Total prepaid expenses and other current assets	$	59,741	$	40,975

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

	June 30, 2021		December 31, 2020
Customer incentives and rebates	$	13,969	$	15,663
Deferred revenue	2,553		3,733
Accrued other taxes payable	2,421		2,157
Derivative liabilities	597		3,061
Other	10,326		7,676
Total other current liabilities	$	29,866	$	32,290

XML

Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Share-based Payment Arrangement, Option, Activity

A summary of the status of stock option activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average exercise price per share
Outstanding at December 31, 2020	760	$	46.95
Granted	47	254.00
Exercised	(70)	39.37
Outstanding at June 30, 2021	737	$	60.95

Schedule of Nonvested Share Activity

A summary of the status of restricted stock unit activity for the six months ended June 30, 2021 is as follows (in thousands, except price data):

	Shares	Weighted-average grant date fair value
Non-vested December 31, 2020	878	$	59.60
Granted	106	204.50
Vested	(387)	45.48
Forfeited	(3)	131.72
Non-vested at June 30, 2021	594	$	94.16

Compensation Expense Related to Stock-Based Compensation Plans

The expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Cost of sales	$	643	$	435	$	1,159	$	693
Research and development	893		866		1,927		1,508
Sales and marketing	1,556		1,341		2,960		2,638
General and administrative	2,754		2,488		5,628		4,169
Total stock-based compensation expense	$	5,846	$	5,130	$	11,674	$	9,008

Estimated Fair Value of Each Stock Option Award

The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.

	Six Months Ended  June 30,
	2021		2020
Risk-free interest rate	0.42	%	1.34	%
Expected option life (in years)	5.01		5.14
Volatility rate	53	%	39	%
Dividend rate	0	%	0	%
Weighted-average grant date fair value	$115.78		$28.39

XML

Industry and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2021

Industry And Geographic Information [Abstract]

Sales to Individual Customers in Excess of 10% of Total Revenues

The Company had sales to individual customers in excess of 10% of total revenues, as follows:

	Six Months Ended  June 30,
	2021		2020
Customer:
A	18	%	19	%
B	11	%	19	%
C	9	%	10	%
Total:	38	%	48	%

Net Revenues by Product Category

Consolidated total revenues by product category for the six months ended June 30, 2021 and 2020 were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended  June 30,
	2021		2020		2021		2020
Rapid Immunoassay	$	60,070	$	80,606	$	297,740	$	176,536
Cardiometabolic Immunoassay	71,666		54,191		138,218		108,092
Molecular Diagnostic Solutions	34,456		55,177		94,719		63,540
Specialized Diagnostic Solutions	10,418		11,780		21,271		28,239
Total revenues	$	176,610	$	201,754	$	551,948	$	376,407

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Liabilities Measured at Fair Value on Recurring Basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the following periods (in thousands):

	June 30, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	200,013	$	—	$	—	$	200,013	$	200,003	$	—	$	—	$	200,003
Derivative assets	—		361		—		361		—		24		—		24
Total assets measured at fair value	$	200,013	$	361	$	—	$	200,374	$	200,003	$	24	$	—	$	200,027
Liabilities:
Derivative liabilities	$	—	$	597	$	—	$	597	$	—	$	3,061	$	—	$	3,061
Contingent consideration	—		—		5,967		5,967		—		—		11,896		11,896
Deferred consideration	—		76,509		—		76,509		—		115,951		—		115,951
Total liabilities measured at fair value	$	—	$	77,106	$	5,967	$	83,073	$	—	$	119,012	$	11,896	$	130,908

Changes in Estimated Fair Value of Contingent Consideration Liabilities

Changes in estimated fair value of contingent consideration liabilities from December 31, 2020 through June 30, 2021 were as follows (in thousands):

	Contingent consideration liabilities (Level 3 measurement)
Balance at December 31, 2020	$	11,896
Cash payments	(6,030)
Change in estimated fair value, recorded in general and administrative expenses	101
Balance at June 30, 2021	$	5,967

XML

Derivatives and Hedging (Tables)

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Assets at Fair Value

The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of June 30, 2021 and December 31, 2020 (in thousands):

	June 30, 2021				December 31, 2020
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	3,481	$	158	$	—	$	—
Other current liabilities	$	7,173	$	588	$	38,435	$	2,819
Non-designated forward contracts:
Prepaid expenses and other current assets	$	16,430	$	203	$	18,160	$	24
Other current liabilities	$	1,442	$	9	$	23,120	$	242

XML

Summary of Significant Accounting Policies (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
Contract Consideration	$ 65,000

XML

Computation of Earnings Per Share - Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Dilutive Securities Included And Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income	$ 19,073	$ 178,084	$ 67,652	$ 40,237	$ 197,157	$ 107,889
Interest expense on Convertible Senior Notes, net of tax	0		179		0	360
Net income used for diluted earnings per share	$ 19,073		$ 67,831		$ 197,157	$ 108,249
Basic weighted-average common shares outstanding	41,691		42,117		41,622	42,086
Dilutive potential shares issuable from Convertible Senior Notes	0		392		0	401
Dilutive potential shares issuable from stock options and unvested RSUs	683		1,237		853	1,087
Diluted weighted-average common shares outstanding	42,374		43,746		42,475	43,574
Potentially dilutive shares excluded from calculation due to anti-dilutive effect					133	1
Stock options
Dilutive Securities Included And Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	197		0

XML

Computation of Earnings Per Share - Additional information (Details)	Jun. 30, 2021
Convertible Senior Notes | 3.25% Convertible Senior Notes due 2020 | Convertible Senior Notes
Debt Instrument [Line Items]
Stated interest rate	3.25%

XML

Balance Sheet Account Details Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventory, Net [Abstract]
Raw materials	$ 103,794	$ 58,264
Work-in-process (materials, labor and overhead)	40,373	31,359
Finished goods (materials, labor and overhead)	74,339	24,175
Total inventories	$ 218,506	$ 113,798

XML

Balance Sheet Account Details Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Prepaid Expense and Other Assets, Current [Abstract]
Other receivables	$ 39,400	$ 15,442
Income taxes receivable	14,284	7,335
Other	6,057	2,157
Total prepaid expenses and other current assets	59,741	40,975
Unbilled Contracts Receivable	0	$ 16,041
Contract Consideration	65,000
Contract Consideration Received	$ 42,000

XML

Balance Sheet Account Details Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Other Liabilities Disclosure [Abstract]
Customer incentives and rebates	$ 13,969	$ 15,663
Deferred revenue	2,553	3,733
Accrued other taxes payable	2,421	2,157
Derivative liabilities	597	3,061
Other	10,326	7,676
Total other current liabilities	$ 29,866	$ 32,290

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 2,610	$ 12,544	$ 46,333	$ 21,128
Income before income taxes	$ 21,683	$ 80,196	$ 243,490	$ 129,017
Effective income tax rate	12.00%	16.00%	19.00%	16.00%

XML

Debt (Details)		3 Months Ended		6 Months Ended
	Aug. 31, 2018 USD ($) covenant	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity	$ 175,000,000.0
Commitment fee percentage	0.15%
Commitment fee percentage on unused capacity	0.30%
Number of financial covenants | covenant	2
Ratio of indebtedness to net capital	3.50
Consolidated fixed charge coverage ratio	1.25
Maximum
Debt Instrument [Line Items]
Ratio of indebtedness to net capital	4.50
Base Rate | Minimum
Debt Instrument [Line Items]
Stated interest rate	0.75%
Base Rate | Maximum
Debt Instrument [Line Items]
Stated interest rate	1.50%
London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate				1.00%
London Interbank Offered Rate (LIBOR) | Minimum
Debt Instrument [Line Items]
Stated interest rate	1.75%
London Interbank Offered Rate (LIBOR) | Maximum
Debt Instrument [Line Items]
Stated interest rate	2.50%
Fed Funds Effective Rate Overnight Index Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate				0.005%
Revolving Credit Facility
Debt Instrument [Line Items]
Interest expense, debt		$ 100,000	$ 200,000	$ 300,000	$ 400,000

XML

Stockholders' Equity Stock-Based Compensation - Summary of Status of Stock Option Activity (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Shares
Stock options outstanding, beginning (in shares) | shares	760
Granted (in shares) | shares	47
Exercised (in shares) | shares	(70)
Stock options outstanding, ending (in shares) | shares	737
Weighted-average exercise price per share
Stock options outstanding beginning, weighted average exercise price (in USD per share) | $ / shares	$ 46.95
Stock options granted, weighted average exercise price (in USD per share) | $ / shares	254.00
Stock options exercised, weighted average exercise price (in USD per share) | $ / shares	39.37
Stock options outstanding ending, weighted average exercise price (in USD per share) | $ / shares	$ 60.95

XML

Stockholders' Equity Stock-Based Compensation - Summary of Status of Stock Awards Activity (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Shares
Restricted stock outstanding, non-vested, beginning (in shares) | shares	878
Granted (in shares) | shares	106
Vested (in shares) | shares	(387)
Forfeited (in shares) | shares	(3)
Restricted stock outstanding, non-vested, ending (in shares) | shares	594
Weighted-average grant date fair value
Restricted stock outstanding, non-vested, beginning, weighted average fair value (in USD per share) | $ / shares	$ 59.60
Restricted stock granted, weighted average fair value (in USD per share) | $ / shares	204.50
Restricted stock vested, weighted average fair value (in USD per share) | $ / shares	45.48
Restricted stock forfeited, weighted average far value (in USD per share) | $ / shares	131.72
Restricted stock outstanding, non-vested, ending, weighted average fair value (in USD per share) | $ / shares	$ 94.16

XML

Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued in connection with employee stock purchase plan (in shares)	10,948,000
Restricted stock granted, weighted average fair value (in USD per share)	$ 204.50
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 46.1
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected weighted-average period of recognition for unrecognized compensation expense	2 years
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted, weighted average fair value (in USD per share)	$ 204.50	$ 85.34

XML

Stockholders' Equity - Compensation Expense Related to Stock-Based Compensation Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 5,846	$ 5,130	$ 11,674	$ 9,008
Cost of sales
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	643	435	1,159	693
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	893	866	1,927	1,508
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	1,556	1,341	2,960	2,638
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 2,754	$ 2,488	$ 5,628	$ 4,169

XML

Stockholders' Equity - Estimated Fair Value of Each Stock Option Award (Details) - $ / shares	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Equity [Abstract]
Risk-free interest rate	0.42%	1.34%
Expected option life (in years)	5 years 3 days	5 years 1 month 20 days
Volatility rate	53.00%	39.00%
Dividend rate	0.00%	0.00%
Weighted-average grant date fair value of stock options granted (in USD per share)	$ 115.78	$ 28.39

XML

Industry and Geographic Information - Additional Information (Details) $ in Millions	6 Months Ended
	Jun. 30, 2021 USD ($) segment	Jun. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Revenue, Major Customer [Line Items]
Number of reportable segments | segment	1
Customer Concentration Risk | Non-US
Revenue, Major Customer [Line Items]
Sales to customers outside the U.S.	$ 147.0	$ 96.8
Customer Concentration Risk | Sales | Non-US
Revenue, Major Customer [Line Items]
Percentage of risk concentration by major customer	27.00%	26.00%
Geographic Concentration Risk | Non-US
Revenue, Major Customer [Line Items]
Accounts receivable	$ 22.2		$ 18.6
Credit Concentration Risk
Revenue, Major Customer [Line Items]
Accounts receivable	$ 9.1		$ 411.7

XML

Industry and Geographic Information - Sales to Individual Customers in Excess of 10% of Total Revenues (Details) - Sales - Customer Concentration Risk	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Customer One [Member]
Revenue, Major Customer [Line Items]
Sales percentage	18.00%	19.00%
Customer B
Revenue, Major Customer [Line Items]
Sales percentage	11.00%	19.00%
Customer C
Revenue, Major Customer [Line Items]
Sales percentage	9.00%	10.00%
Total:
Revenue, Major Customer [Line Items]
Sales percentage	38.00%	48.00%

XML

Industry and Geographic Information Industry and Geographic Information - Revenue by Category (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Disaggregation of Revenue [Line Items]
Total revenues	$ 176,610	$ 201,754	$ 551,948	$ 376,407
Rapid Immunoassay
Disaggregation of Revenue [Line Items]
Total revenues	60,070	80,606	297,740	176,536
Cardiometabolic Immunoassay
Disaggregation of Revenue [Line Items]
Total revenues	71,666	54,191	138,218	108,092
Specialized Diagnostic Solutions
Disaggregation of Revenue [Line Items]
Total revenues	10,418	11,780	21,271	28,239
Molecular Diagnostic Solutions
Disaggregation of Revenue [Line Items]
Total revenues	$ 34,456	$ 55,177	$ 94,719	$ 63,540

XML

Commitments and Contingencies (Details) $ in Thousands		6 Months Ended
	Jan. 05, 2018 building option	Jun. 30, 2021 USD ($)	Jan. 31, 2021 renewal_term
Other Ownership Interests [Line Items]
Sale leaseback transaction, number of buildings | building	3
Number of buildings | building	4
Lessee, sale leaseback, option to extend | option	2
Option to extend, term		5 years
Renewal term		2 years
Rutherford
Other Ownership Interests [Line Items]
Renewal term			5 years
Operating leases | $		$ 39,400
Lessee, operating lease, term of contract			15 years
Number of renewal terms | renewal_term			2
Partnership, McKellar San Diego Facility
Other Ownership Interests [Line Items]
Lease payments | $		$ 500

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Assets:
Total assets measured at fair value	$ 200,374	$ 200,027
Liabilities:
Derivative liabilities	597	3,061
Total liabilities measured at fair value	83,073	130,908
Money Market Funds, at Carrying Value	200,013	200,003
Derivative
Assets:
Derivative assets	361	24
Liabilities:
Derivative liabilities	597	3,061
Contingent consideration
Liabilities:
Total liabilities measured at fair value	5,967	11,896
Deferred consideration
Liabilities:
Total liabilities measured at fair value	76,509	115,951
Level 1
Assets:
Total assets measured at fair value	200,013	200,003
Liabilities:
Total liabilities measured at fair value	0	0
Money Market Funds, at Carrying Value	200,013	200,003
Level 1 | Derivative
Assets:
Derivative assets	0	0
Liabilities:
Derivative liabilities	0	0
Level 1 | Contingent consideration
Liabilities:
Total liabilities measured at fair value	0	0
Level 1 | Deferred consideration
Liabilities:
Total liabilities measured at fair value	0	0
Level 2
Assets:
Total assets measured at fair value	361	24
Liabilities:
Total liabilities measured at fair value	77,106	119,012
Money Market Funds, at Carrying Value	0	0
Level 2 | Derivative
Assets:
Derivative assets	361	24
Liabilities:
Derivative liabilities	597	3,061
Level 2 | Contingent consideration
Liabilities:
Total liabilities measured at fair value	0	0
Level 2 | Deferred consideration
Liabilities:
Total liabilities measured at fair value	76,509	115,951
Level 3
Assets:
Total assets measured at fair value	0	0
Liabilities:
Total liabilities measured at fair value	5,967	11,896
Money Market Funds, at Carrying Value	0	0
Level 3 | Derivative
Assets:
Derivative assets	0	0
Liabilities:
Derivative liabilities	0	0
Level 3 | Contingent consideration
Liabilities:
Total liabilities measured at fair value	5,967	11,896
Level 3 | Deferred consideration
Liabilities:
Total liabilities measured at fair value	$ 0	$ 0

XML

Fair Value Measurements - Additional Information (Details) $ in Millions	Jun. 30, 2021 USD ($)
Consideration B | BNP Business
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Installment payment in 2021	$ 48.0
Installment payment in 2022	48.0
Installment payment in 2023	$ 40.0
Measurement Input, Discount Rate
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Discount rate	0.029

XML

Fair Value Measurements - Changes in Estimated Fair Value of Contingent Consideration Liabilities (Details) - Level 3 - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value	$ 5,967	$ 11,896
Cash payments	(6,030)
Change in estimated fair value, recorded in general and administrative expenses	$ 101

XML

Derivatives and Hedging - Foreign Currency (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Designated as Hedging Instrument | Cash Flow Hedging
Derivatives, Fair Value [Line Items]
Derivative Liability, Notional Amount	$ 7,173	$ 38,435
Derivative Liability, Fair Value, Gross Liability	588	2,819
Prepaid expenses and other current assets | Designated as Hedging Instrument | Cash Flow Hedging
Derivatives, Fair Value [Line Items]
Notional Amount	3,481	0
Derivative Asset, Fair Value, Gross Asset	158	0
Prepaid expenses and other current assets | Not Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Notional Amount	16,430	18,160
Derivative Liability, Notional Amount	1,442	23,120
Derivative Liability, Fair Value, Gross Liability	9	242
Derivative Asset, Fair Value, Gross Asset	$ 203	$ 24

XML

Subsequent Events (Details) - Subsequent Event	Jul. 24, 2021 USD ($)
Minimum
Subsequent Event [Line Items]
Master agreement, annual payment	$ 70,000,000
Maximum
Subsequent Event [Line Items]
Master agreement, annual payment	$ 75,000,000