Balance Sheet Components

12 Months Ended

Dec. 31, 2022

NOTE 6. BALANCE SHEET COMPONENTS

Inventory, Net

Inventory, net, consisted of the following components:



	December 31,
(in thousands)	2022		2021
Purchased materials	$	24,139	$	7,993
Work in process		14,062		8,611
Finished goods		12,180		7,995
Inventory, net	$	50,381	$	24,599

Property and Equipment, Net

Property and equipment, net, consisted of the following components:



	December 31,
(in thousands)	2022		2021
Laboratory equipment and machinery	$	38,998	$	31,534
Leasehold improvements		34,129		31,114
Computer equipment		18,438		15,059
Software		6,879		5,578
Furniture and fixtures		3,426		3,202
Construction in progress		4,698		2,303
Total		106,568		88,790
Less: Accumulated depreciation		(64,988)		(56,286)
Property and equipment, net	$	41,580	$	32,504

Construction in progress consists of capitalizable costs that have been incurred for the construction of long-lived assets, and is primarily comprised of amounts that will be classified as lab equipment.

Depreciation expense during the years ended December 31, 2022, 2021, and 2020 was $9.5 million, $7.2 million, and $6.4 million, respectively.

Goodwill and intangible Assets

Goodwill

As of December 31, 2022 and 2021, the goodwill balance was $410.0 million. Goodwill is reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment for goodwill impairment in the second quarter of 2022, noting no impairment.

Acquired Intangible Assets

Intangible assets include acquired IPR&D of $400 million as a result of the Omniome acquisition in September 2021. As of December 31, 2022, the research and development project had not been completed or abandoned and, therefore, the IPR&D intangible asset is not currently subject to amortization. IPR&D is reviewed for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment for IPR&D impairment in the fourth quarter of 2022, noting no impairment.

In addition to IPR&D, we had the following acquired definite-lived intangible assets as of December 31, 2022 (in thousands, except years):



	Estimated	Gross				Net
	Useful Life	Carrying		Accumulated		Carrying
	(in years)	Amount		Amortization		Amount
Developed technology	15	$	11,179	$	(1,039)	$	10,140
Customer relationships	2		360		(255)		105
Total		$	11,539	$	(1,294)	$	10,245

Amortization expense of intangibles was $0.9 million and $0.4 million for the years ended December 31, 2022 and 2021, respectively. We had no amortization expense of intangibles for the year ended December 31, 2020.

The estimated future amortization expense of acquisition-related intangible assets with definite lives is estimated as follows (in thousands):



2023	$	853
2024		745
2025		745
2026		745
2027		746
2028 and thereafter		6,411
Total	$	10,245

Accrued Expenses

Accrued expenses consisted of the following components:



	December 31,
(in thousands)	2022		2021
Salaries and benefits	$	17,432	$	25,282
Accrued interest payable		5,100		5,100
Accrued purchase commitments		3,705		—
Accrued product development costs		2,326		1,936
Accrued professional services and legal fees		1,005		1,640
Inventory accrual		332		108
Warranty accrual		1,651		594
Other		1,045		1,601
Accrued expenses	$	32,596	$	36,261

Product Warranties

We generally provide a one-year warranty on instruments. In addition, we provide a limited warranty on consumables. At the time revenue is recognized, an accrual is established for estimated warranty costs based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. There were no material changes in estimates for the periods presented below.

Changes in the reserve for product warranties were as follows:



	Years Ended December 31,
(in thousands)	2022		2021
Balance at beginning of period	$	594	$	161
Additions charged to cost of product revenue		3,199		2,120
Repairs and replacements		(2,142)		(1,687)
Balance at end of period	$	1,651	$	594

Deferred Revenue

As of December 31, 2022, we had a total of $32.3 million of deferred revenue, $30.5 million of which was recorded as deferred revenue, current and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae as described in Note 3. Invitae Collaboration. The deferred revenue, non-current balance of $1.8 million primarily relates to deferred service contract revenues and is scheduled to be recognized in the next 6 years. Revenue recorded in the year ended December 31, 2022 includes $13.0 million of previously deferred revenue that was included in deferred revenue, current as of December 31, 2021.

Term Loans

In connection with the acquisition of Omniome, we acquired $1.3 million in short-term debt and $3.0 million in long-term debt relating to a term loan facility that Omniome obtained in April 2020. Borrowings on the term loan facility were used to fund Omniome’s purchases of equipment, which serves as collateral. Each term loan has a term of 43 months and bears a fixed interest rate of approximately 17% annually. The fee for the elective option to prepay all, but not less than all, of the borrowed amounts at any time after the 24^th month and before the 43^rd month after the commencement date, is 4% of the outstanding loan balance. Payments are made in equal monthly installments including principal and interest.

As of December 31, 2022, the carrying value of term loans outstanding was $2.3 million. The related long-term portion of $0.5 million was recorded as part of other liabilities, non-current and the short-term portion of $1.8 million was recorded as part of other liabilities, current on the Consolidated Balance Sheet. The interest expense was $0.6 million for the year ended December 31, 2022, which was included as part of interest expense in the Consolidated Statement of Operations and Comprehensive (Loss) Income.
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As of December 31, 2022, the future principal payments remaining on term loans was the following:



(in thousands)
2023	$	1,842
2024		490
Total	$	2,332

Other Liabilities, Current

Other liabilities, current, consisted of the following components:


	December 31,
(in thousands)	2022		2021
Accrued Employee Stock Purchase Plan	$	3,638	$	3,598
Short-term loan		1,842		1,608
Other		1,753		553
Other liabilities, current	$	7,233	$	5,759