BALANCE SHEET COMPONENTS

3 Months Ended

Mar. 31, 2024

Inventory, net

Our inventory, net, consisted of the following components:


(in thousands)	March 31, 2024		December 31, 2023
Purchased materials	$	24,632	$	20,168
Work in process	26,298		23,436
Finished goods	16,413		13,072
Inventory, net	$	67,343	$	56,676

Goodwill and Intangible Assets

Goodwill

We had goodwill of $462.3 million as of March 31, 2024 and December 31, 2023. 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 2023, noting no impairment.

Intangible Assets

Intangible assets include acquired in-process research and development ("IPR&D") of $55.0 million as a result of the Apton acquisition in August 2023. The IPR&D will remain on our Consolidated Balance Sheet as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development activities. During the development period following the acquisition, IPR&D is not amortized, but instead is tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Upon completion of the development, we will amortize the asset over the life of the product or record an impairment charge if the asset is determined to be impaired. We performed our annual assessment of IPR&D in the third quarter of 2023 in connection with the completion of the IPR&D acquired through the acquisition of Omniome, noting no impairment.

In addition to IPR&D, definite-lived intangible assets included the following:


		As of March 31, 2024						As of December 31, 2023
(in thousands, except years)	Estimated Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	15	$	411,179	$	(16,048)	$	395,131	$	411,179	$	(9,195)	$	401,984
Customer relationships	2	360		(360)		—		360		(360)		—
Total		$	411,539	$	(16,408)	$	395,131	$	411,539	$	(9,555)	$	401,984

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


Remainder of 2024	$	20,559
2025	27,412
2026	27,412
2027	27,412
2028	27,412
2029 and thereafter	264,924
Total	$	395,131

Amortization of intangible assets is included within our cost of revenue if the costs and expenses related to the intangible assets are attributable to revenue generating activities. Amortization expense for intangible assets that are not directly related to sales generating activities are amortized to operating expenses. For developed technology intangible assets that are utilized in both revenue generating activities and in research and development activities, we allocate the amortization expense between cost of revenue and operating expenses. The definite-lived intangible assets are amortized using the straight-line method over their estimated useful lives.

We review definite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets.

Deferred Revenue

As of March 31, 2024, we had a total of $23.4 million of deferred revenue, $17.3 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae Corporation ("Invitae") and deferred service contract revenues. Refer to Note 3 – Invitae Collaboration, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2023 for more information. The deferred revenue, non-current balance of $6.1 million primarily relates to deferred service contract revenues and is scheduled to be recognized in the next 6 years. Revenue recorded in the three months ended March 31, 2024 includes $3.2 million that was included in deferred revenue as of December 31, 2023.

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. Warranties are recorded as part of accrued expenses on the Condensed Consolidated Balance Sheets and warranty expense is recorded as a component of cost of product revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss. There were no material changes in estimates for the periods presented below.

Changes in the reserve for product warranties were as follows for the periods indicated:


	Three Months Ended March 31,
(in thousands)	2024		2023
Balance at beginning of period	$	4,681	$	1,651
Additions charged to cost of product revenue	1,600		604
Repairs and replacements	(2,161)		(631)
Balance at end of period	$	4,120	$	1,624

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 24th month and before the 43rd 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 March 31, 2024, the carrying value of term loans outstanding was $0.2 million, recorded as part of other liabilities, current on the Condensed Consolidated Balance Sheet. Interest expense was not material for the three months ended March 31, 2024, and was included as part of interest expense in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The following table presents the future principal payments on the term loans (in thousands):


Remainder of 2024	$	152
Total	$	152