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Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Liquidity and Capital Resources
Liquidity and Capital Resources
The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $353.2 million at March 31, 2021. As of March 31, 2021, the Company had cash, cash equivalents and marketable securities of $374.3 million.
CMS Accelerated and Advance Payment Program for Medicare Providers
On March 27, 2020 the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Pursuant to the CARES Act, the Centers for Medicare & Medicaid Services (CMS”) expanded its Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic. CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submitted a request to the appropriate Medicare Administrative Contractor and met the required qualifications. During April 2020, the Company received an advance payment from CMS of approximately $20.5 million, and recorded the payment as Deferred revenue - CMS advance payment on the Company's condensed consolidated balance sheet.
During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and repaid the entire amount in January 2021. The Company recorded the amount as Refund liability - CMS advance payment on the condensed consolidated balance sheet as of December 31, 2020. Refer to Note 8, Balance Sheet Components, for further explanation.
CARES Act Provider Relief Fund for Medicare Providers
Pursuant to the CARES Act, the U.S. Department of Health & Human Services (“HHS”) distributed an initial tranche of $30.0 billion in funds to healthcare providers that received Medicare fee-for-service (FFS”) reimbursements in 2019. These payments to healthcare providers are not loans and will not be required to be repaid. As a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. Due to the recent enactment of legislation and absence of definitive guidance, there is a high degree of uncertainty around the CARES Act’s implementation and the Company continues to assess the impact on its business. Furthermore, HHS has indicated that it, along with the Office of Inspector General, will be closely monitoring and auditing providers to ensure that recipients comply with the terms and conditions of relief programs and to prevent fraud and abuse. All providers will be subject to civil and criminal penalties for any deliberate omissions, misrepresentations or falsifications of any information given to HHS. Providers will be distributed a portion of the initial $30.0 billion of funds based on their share of total Medicare FFS reimbursements made by the U.S. in 2019. During April 2020, the Company received a payment of approximately $4.8 million representing its portion of the initial tranche of funds, recorded in other income (expense), net on the condensed consolidated statements of operations.
The Company is complying with the key terms and provisions of the CARES Act Provider Relief Fund, which includes, among other things, the requirement that the Company maintain appropriate records and cost documentation. The Company has registered with HHS to submit financial data indicating the use of the funds the Company received pursuant to the CARES Act Provider Relief Fund. The Company will be notified by HHS when the Provider Relief Fund Reporting Portal is open for reporting on the use of Provider Relief Fund payments.
Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and follow the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain notes and other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of the Company’s financial information. The condensed consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements as of that date but does not include all of the financial information required by U.S. GAAP for complete financial statements. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
Changes in Presentation
Correction to Presentation
The presentation of certain prior period amounts within the accompanying condensed consolidated statements of operations have been corrected, including creating separate line items for the presentation of cost of testing services, cost of product and cost of digital and other, which were previously reported, in aggregate, in total cost of revenue of $12.4 million for the three months ended March 31, 2020. These corrections had no effect on loss from operations, loss before taxes, or net loss. The Company evaluated these corrections, considering both qualitative and quantitative factors, and concluded they are immaterial to previously issued financial statements.
Use of Estimates
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to transaction price estimates used for testing services revenue; standalone fair value of digital revenue performance obligations; accrued expenses for clinical studies; inventory valuation; the fair value of issued common stock warrants and embedded derivatives; the fair value of assets and liabilities acquired in a business combination or an assets acquisition (including identifiable intangible assets acquired); the fair value of contingent consideration recorded in connection with a business combination; the grant date fair value assumptions used to estimate stock-based compensation expense; income taxes; impairment of long-lived assets and indefinite-lived assets (including goodwill); and legal contingencies. Actual results could differ from those estimates.
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of Credit Risk and Other Risks and Uncertainties
For the three months ended March 31, 2021 and 2020, approximately 60% and 53%, respectively, of total revenue was derived from Medicare.
As of March 31, 2021 and December 31, 2020, approximately 31% and 28%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable on either March 31, 2021 or December 31, 2020.
Marketable Securities
Marketable Securities
The Company considers all highly liquid investments in securities with a maturity of greater than three months at the time of purchase to be marketable securities. As of March 31, 2021, the Company’s marketable securities consisted of corporate debt securities with maturities of greater than three months but less than twelve months at the time of purchase. These marketable securities are classified as current assets on the condensed consolidated balance sheet.
The Company classifies its marketable securities as held-to-maturity at the time of purchase and reevaluates such designation at each balance sheet date. The Company has the positive intent and ability to hold these marketable securities to maturity. Marketable securities are carried at amortized cost and are adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income (expense), net on the condensed consolidated statements of operations. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on marketable securities are included in interest income (expense), net. The cost of securities sold will be determined using specific identification.
Leases
Leases
Effective January 1, 2019, the Company adopted Accounting Standard Codification (“ASC”) Topic 842, Leases using the optional transition method and applied the standard only to leases that existed at that date. The Company determines if an arrangement is or contains a lease at contract inception. A right-of-use (“ROU”) asset, representing the underlying asset during the lease term, and a lease liability, representing the payment obligation arising from the lease, are recognized on the condensed consolidated balance sheet at lease commencement based on the present value of the payment obligation. For operating leases, expense is recognized on a straight-line basis over the lease term. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet.
The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.
As of March 31, 2021, the Company’s leases had remaining terms of 0.21 years to 7.92 years, some of which include options to extend the lease term.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In October 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-10, Codification Improvements, which contains amendments that improve the consistency of the ASC by including all disclosure guidance in the appropriate Disclosure Section (Section 50). The FASB provided transition guidance for all the amendments in this ASU. The amendments in Sections B and C (Section A has been removed) of this ASU are effective for annual periods beginning after December 15, 2020 for public business entities. Early application of the amendments in this ASU is permitted for public business entities for any annual or interim period for which financial statements have not been issued. The amendments in this ASU should be applied retrospectively. The Company adopted the standard on January 1, 2021. The adoption of the new standard did not have an impact on the Company's condensed consolidated financial statements and disclosures.