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 ~~September~~March 3031, ~~2021~~2022


☐			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 April 28, 2022, 41,848,256 shares of the registrant’s common stock were outstanding.

INDEX

PART I—FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020			3
Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021			3
Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020			4
Consolidated Statements of Income for the three months ended March 31, 2022 and 2021			4
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020			5
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021			5
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020			6
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021			6
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020			8
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021			7
Notes to Consolidated Financial Statements			98
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1816
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			2622
ITEM 4. Controls and Procedures			2723
PART II—OTHER INFORMATION
ITEM 1. Legal Proceedings			2824
ITEM 1A. Risk Factors			2824
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			2824
ITEM 3. Defaults Upon Senior Securities			2824
ITEM 4. Mine Safety Disclosures			2824
ITEM 5. Other Information			2824
ITEM 6. Exhibits			2925
Signatures			3026

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

QUIDEL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value; unaudited)

	September 30,2021		December 31,2020
	March 31,2022		December 31,2021
ASSETS
Current assets:
Cash and cash equivalents	$	~~578~~1,~~447~~275,536	$	~~489~~802,~~941~~751
Accounts receivable, net	335,560		497,688
Marketable securities	44,270		25,758
Inventories	196,976		113,798
Accounts receivable, net	569,817		377,969
Prepaid expenses and other current assets	38,082		40,975
Inventories	181,388		198,765
Total current assets	1,149,065		1,142,402
Prepaid expenses and other current assets	42,639		35,067
Property, plant and equipment, net	319,949		110,481
Total current assets	2,113,650		1,440,310
Right-of-use assets	132,227		100,544
Property, plant and equipment, net	364,248		349,202
Goodwill	337,023		337,032
Marketable securities, non-current	20,726		37,852
Intangible assets, net	105,696		122,431
Right-of-use assets	125,059		127,622
Deferred tax asset	43,994		44,762
Goodwill	337,017		337,021
Other non-current assets	18,428		13,512
Intangible assets, net	91,584		98,655
Total assets	$	2,106,382	$	1,871,164
Deferred tax asset	20,232		20,089
Other non-current assets	20,609		19,623
Total assets	$	3,093,125	$	2,430,374
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	82157,~~698~~472	$	86101,~~316~~492
Accrued payroll and related expenses	3027,~~149~~820		3440,~~781~~385
Income taxes payable	71205,~~993~~240		~~127~~66,~~788~~945
Operating lease liabilities	9,~~618~~715		710,~~799~~039
Contingent consideration	5,~~835~~957		5,~~987~~986
Deferred consideration	41,~~922~~970		4241,~~000~~945
Other current liabilities	5444,~~873~~482		3256,~~290~~728
Total current liabilities	~~297~~492,~~088~~656		~~336~~323,~~961~~520
Operating lease liabilities - non-current	~~133~~135,~~212~~668		~~100~~128,~~706~~556
Deferred consideration - non-current	3537,~~545~~448		7336,~~951~~491
Other non-current liabilities	6,470		26,843
Contingent consideration - non-current	87		87
Other non-current liabilities	12,344		12,358
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000 shares authorized; none issued or outstanding at September 30, 2021 and December 31, 2020	—		—
Preferred stock, $0.001 par value per share; 5,000 shares authorized; none issued or outstanding at March 31, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value per share; 97,500 shares authorized; 41,672 and 42,290 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	42		42
Common stock, $0.001 par value per share; 97,500 shares authorized; 41,846 and 41,686 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	42		42
Additional paid-in capital	~~275~~285,~~325~~508		~~388~~279,~~121~~768
Accumulated other comprehensive income (loss)	820		(431)
Accumulated other comprehensive income	239		355
Retained earnings	12,~~357~~129,~~880~~133		~~944~~1,~~971~~649,197
Total stockholders’ equity	12,~~634~~414,~~067~~922		1,~~332~~929,~~703~~362
Total liabilities and stockholders’ equity	$	23,~~106~~093,~~382~~125	$	12,~~871~~430,~~164~~374

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data; unaudited)

	Three Months EndedSeptember 30,				Nine Months Ended September 30,
			Three Months EndedMarch 31,
	2021		2020		2021		2020
					2022		2021
Total revenues	$	~~509,736~~	$	~~476,058~~	$	1,~~061~~002,~~684~~259	$	~~852~~375,~~465~~338
Cost of sales	~~136,328~~		~~92,439~~		~~280~~262,~~131~~301		~~205~~73,~~104~~379
Gross profit	~~373,408~~		~~383,619~~		~~781~~739,~~553~~958		~~647~~301,~~361~~959
Research and development	~~23,676~~		~~21,448~~		6926,~~594~~368		5823,~~797~~304
Sales and marketing	~~46,778~~		~~37,413~~		~~119~~65,~~111~~388		9534,~~718~~233
General and administrative	~~21,113~~		~~16,410~~		6124,~~758~~508		4619,~~421~~507
Acquisition and integration costs	—		~~389~~		13,~~754~~037		~~3,175~~726
Total operating expenses	~~91,567~~		~~75,660~~		~~252~~119,~~217~~301		~~204~~77,~~111~~770
Operating income	~~281,841~~		~~307,959~~		~~529~~620,~~336~~657		~~443~~224,~~250~~189
Other expense, net
Interest and other expense, net					29		2,382
Interest and other expense, net	(347)		(1,797)		(4,352)		(8,071)
Income before income taxes					620,628		221,807
Loss on extinguishment of debt	—		(10,384)		—		(10,384)
Provision for income taxes					140,692		43,723
Total other expense, net	(347)		(12,181)		(4,352)		(18,455)
Net income					$	479,936	$	178,084
Income before income taxes	281,494		295,778		524,984		424,795
Basic earnings per share					$	11.46	$	4.19
Provision for income taxes	65,742		63,510		112,075		84,638
Diluted earnings per share					$	11.31	$	4.09
Net income	$	215,752	$	232,268	$	412,909	$	340,157
Shares used in basic per share calculation					41,875		42,510
Basic earnings per share	$	5.17	$	5.52	$	9.91	$	8.08
Shares used in diluted per share calculation					42,449		43,533
Diluted earnings per share	$	5.08	$	5.33	$	9.72	$	7.82
Shares used in basic per share calculation	41,728		42,105		41,657		42,093
Shares used in diluted per share calculation	42,463		43,596		42,471		43,582

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands; unaudited)

	Three Months EndedSeptember 30,				Nine Months Ended September 30,
			Three Months EndedMarch 31,
	2021		2020		2021		2020
					2022		2021
Net income	$	~~215,752~~	$	~~232,268~~	$	~~412~~479,~~909~~936	$	~~340~~178,~~157~~084
Other comprehensive income (loss)
Changes in cumulative translation adjustment, net of tax	~~(651)~~		~~837~~		~~(1,160)~~155		~~1,037~~(840)
Changes in unrealized (losses) gains from cash flow hedges:
Changes in unrealized losses from investments, net of tax					(402)		—
Net unrealized (losses) gains on derivative instruments	(14)		(1,468)		93		(1,200)
Changes in unrealized gains (losses) from cash flow hedges:
Reclassification of net realized losses (gains) on derivative instruments included in net income	466		71		2,319		(265)
Net unrealized gains on derivative instruments					154		341
Total change in unrealized gains (losses) from cash flow hedges, net of tax	452		(1,397)		2,412		(1,465)
Reclassification of net realized (gains) losses on derivative instruments included in net income					(23)		1,092
Comprehensive income	$	215,553	$	231,708	$	414,161	$	339,729
Total change in unrealized gains (losses) from cash flow hedges, net of tax					131		1,433
Comprehensive income					$	479,820	$	178,677

See accompanying notes.

QUIDEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands; unaudited)

	Common Stock			Additionalpaid-incapital		Accumulatedothercomprehensiveincome (loss)		Retainedearnings		Totalstockholders’equity
	Shares	Par		~~Additionalpaid-incapital~~		~~Accumulatedothercomprehensiveincome (loss)~~		~~Retainedearnings~~		~~Totalstockholders’equity~~
Balance at December 31, 2020	42,290	$	42	$	388,121	$	(431)	$	944,971	$	1,332,703
Balance at December 31, 2021	41,686	$	42	$	279,768	$	355	$	1,649,197	$	1,929,362
Issuance of common stock under equity compensation plans	~~409~~223	1—		6,~~373~~377		—		—		6,~~374~~377
Stock-based compensation expense	—	—		56,~~889~~178		—		—		56,~~889~~178
Tax withholdings related to vesting of stock-based awards	(~~156~~63)	—		(336,~~929~~815)		—		—		(336,~~929~~815)
Other comprehensive gain, net of tax	—	—		—		593		—		593
Other comprehensive loss, net of tax	—	—		—		(116)		—		(116)
Net income	—	—		—		—		~~178~~479,~~084~~936		~~178~~479,~~084~~936
Balance at March 31, 2021	42,543	43		366,454		162		1,123,055		1,489,714
Balance at March 31, 2022	41,846	$	42	$	285,508	$	239	$	2,129,133	$	2,414,922
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
Issuance of common stock under equity compensation and benefit plans	44	—		2,444		—		—		2,444
Stock-based compensation expense	—	—		5,605		—		—		5,605
Tax withholdings related to vesting of stock-based awards	(5)	—		(614)		—		—		(614)
Other comprehensive loss, net of tax	—	—		—		(199)		—		(199)
Net income	—	—		—		—		215,752		215,752
Balance at September 30, 2021	41,672	$	42	$	275,325	$	820	$	1,357,880	$	1,634,067


	Common Stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders’ equity
	Shares	Par
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

See accompanying notes.

	Common Stock
QUIDEL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands; unaudited)
	Shares		Par		Additionalpaid-incapital		Accumulatedothercomprehensive loss		Retainedearnings		Totalstockholders’equity
	Three Months EndedMarch 31,
Balance at December 31, 2019	41,868		$	42	$	425,557	$	(463)	$	134,684	$	559,820
	2022		2021
Issuance of common stock under equity compensation plans	153		—		3,571		—		—		3,571
OPERATING ACTIVITIES:
Stock-based compensation expense	—		—		3,325		—		—		3,325
Net income	$	479,936	$	178,084
Tax withholdings related to vesting of stock-based awards	(25)		—		(1,954)		—		—		(1,954)
Adjustments to reconcile net income to net cash provided by operating activities:
Other comprehensive gain, net of tax	—		—		—		200		—		200
Depreciation, amortization and other	16,782		12,705
Net income	—		—		—		—		40,237		40,237
Stock-based compensation expense	7,432		5,828
Balance at March 31, 2020	41,996		42		430,499		(263)		174,921		605,199
Amortization of deferred financing costs	101		101
Issuance of common stock under equity compensation plans	203		—		3,287		—		—		3,287
Accretion of interest on deferred consideration	982		1,451
Stock-based compensation expense	—		—		4,665		—		—		4,665
Net change in operating lease right-of-use assets and liabilities	9,351		794
Issuance of shares in exchange for Convertible Senior Notes	2		—		48		—		—		48
Change in deferred tax assets and liabilities	(89)		446
Derivative liabilities - Convertible Senior Notes elected to settle in cash	—		—		(26,180)		—		—		(26,180)
Changes in assets and liabilities:
Tax withholdings related to vesting of stock-based awards	(5)		—		(716)		—		—		(716)
Accounts receivable	(191,452)		427,052
Repurchases of common stock	(247)		—		(42,178)		—		—		(42,178)
Inventories	17,355		(61,134)
Other comprehensive loss, net of tax	—		—		—		(68)		—		(68)
Prepaid expenses and other current and non-current assets	(7,291)		(13,811)
Net income	—		—		—		—		67,652		67,652
Accounts payable	52,592		(3,860)
Balance at June 30, 2020	41,949		42		369,425		(331)		242,573		611,709
Accrued payroll and related expenses	(10,944)		(16,054)
Issuance of common stock under equity compensation and benefit plans	88		—		2,733		—		—		2,733
Income taxes payable	138,384		41,386
Stock-based compensation expense	—		—		5,021		—		—		5,021
Other current and non-current liabilities	(12,167)		12,469
Issuance of shares in exchange for Convertible Senior Notes	14		—		460		—		—		460
Net cash provided by operating activities:	500,972		585,457
Tax withholdings related to vesting of stock-based awards	(4)		—		(871)		—		—		(871)
INVESTING ACTIVITIES:
Repurchases of common stock	(10)		—		(1,513)		—		—		(1,513)
Acquisitions of property, equipment, investments and intangibles	(22,402)		(78,291)
Other comprehensive gain, net of tax	—		—		—		(560)		—		(560)
Proceeds from government assistance allocated to fixed assets	—		13,722
Net income	—		—		—		—		232,268		232,268
Purchases of marketable securities	(15,937)		—
Balance at September 30, 2020	42,037		$	42	$	375,255	$	(891)	$	474,841	$	849,247
Proceeds from sale of marketable securities	13,669		—
Net cash used for investing activities:	(24,670)		(64,569)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock	3,527		4,373
Payments on finance lease obligation	(91)		(62)
Payments of tax withholdings related to vesting of stock-based awards	(6,815)		(33,929)
Principal payments of acquisition contingent consideration	(29)		(30)
Net cash used for financing activities:	(3,408)		(29,648)
Effect of exchange rates on cash	(109)		(129)
Net increase in cash and cash equivalents	472,785		491,111
Cash and cash equivalents, beginning of period	802,751		489,941
Cash and cash equivalents, end of period	$	1,275,536	$	981,052
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Purchase of property, equipment and intangibles by incurring current liabilities	$	13,714	$	7,284
Capital expenditures to be reimbursed under a government contract	$	—	$	12,622
Reduction of other current liabilities upon issuance of restricted share units	$	2,850	$	2,001

QUIDEL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands; unaudited)
	Nine Months Ended September 30,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	412,909	$	340,157
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other	39,983		36,614
Stock-based compensation expense	18,679		14,561
Amortization of debt discount and deferred issuance costs	303		615
Change in fair value of acquisition contingencies	101		848
Accretion of interest on deferred consideration	3,515		5,026
Net change in operating lease right-of-use assets and liabilities	2,642		167
Change in deferred tax assets and liabilities	768		(441)
Change in fair value of derivative liabilities - Convertible Senior Notes	—		1,084
Payment of accreted interest on contingent and deferred consideration	(8,157)		—
Loss on extinguishment of debt	—		10,384
Changes in assets and liabilities:
Accounts receivable	161,535		(258,216)
Inventories	(83,333)		(36,949)
Prepaid expenses and other current and non-current assets	(15,228)		(5,080)
Accounts payable	(3,461)		19,561
Accrued payroll and related expenses	(3,903)		10,078
Income taxes payable	(67,703)		51,814
Other current and non-current liabilities	25,842		409
Net cash provided by operating activities:	484,492		190,632
INVESTING ACTIVITIES:
Acquisitions of property, equipment, investments and intangibles	(260,399)		(36,112)
Proceeds from government assistance allocated to fixed assets	36,881		—
Net cash used for investing activities:	(223,518)		(36,112)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock	7,310		8,824
Payments on finance lease obligation	(193)		(353)
Payments of tax withholdings related to vesting of stock-based awards	(36,010)		(3,541)
Repurchases of common stock	(103,438)		(43,691)
Principal payments of acquisition contingent consideration	(4,740)		(6,043)
Principal payments of deferred consideration	(35,142)		(42,000)
Payment on Convertible Senior Note and Derivative Liability	—		(43,416)
Net cash used for financing activities:	(172,213)		(130,220)
Effect of exchange rates on cash	(255)		472
Net increase in cash and cash equivalents	88,506		24,772
Cash and cash equivalents, beginning of period	489,941		52,775
Cash and cash equivalents, end of period	$	578,447	$	77,547
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Purchase of property, equipment and intangibles by incurring current liabilities	$	7,681	$	3,536
Reduction of other current liabilities upon issuance of restricted share units	$	2,001	$	767
Extinguishment of Convertible Senior Notes through issuance of stock	$	—	$	508

See accompanying notes.

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” or “Quidel”) 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 ~~September~~March 3031, ~~2021~~2022, and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021, is unaudited. For further information, refer to the Company’s Consolidated Financial Statements and notes thereto for the year ended December 31, ~~2020~~2021 included in the Company’s ~~2020~~2021 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~~2022 and ~~2020~~2021, the Company’s fiscal year will end or has ended on January 21, ~~2022~~2023 and January 32, ~~2021~~2022, respectively. For ~~2021~~2022 and ~~2020~~2021, the Company’s ~~third~~first quarter ended on ~~October~~April 3, ~~2021~~2022 and ~~September~~April 274, ~~2020~~2021, respectively. For ease of reference, the calendar quarter end dates are used herein. The three ~~and nine~~-month periods ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021 each included 13 ~~and 39~~ weeks~~, respectively~~.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related 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.

Recent Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board issued guidance codified in Accounting Standards Update 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under new guidance, an acquirer is required to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company early adopted the guidance during the first quarter of 2022 with no material impact to the Company’s consolidated financial statements.

Significant Accounting Policies

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, there have been no changes to our significant accounting policies as described in our ~~2020~~2021 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, and unvested restricted stock units (“RSUs”) ~~and, for the 2020 periods, the 3~~.~~25%~~ ~~Convertible Senior Notes (“Convertible 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 presents the calculation of the weighted-average shares used in computing basic and diluted EPS (in thousands):

	Three Months EndedSeptember 30,				Nine Months Ended September 30,
			Three Months EndedMarch 31,
	2021		2020		2021		2020
					2022		2021
Numerator:
Basic weighted-average common shares outstanding					41,875		42,510
Net income used for basic earnings per share	$	215,752	$	232,268	$	412,909	$	340,157
Dilutive potential shares issuable from stock options and unvested RSUs					574		1,023
Interest expense on Convertible Senior Notes, net of tax	—		107		—		457
Diluted weighted-average common shares outstanding					42,449		43,533
Net income used for diluted earnings per share	$	215,752	$	232,375	$	412,909	$	340,614
Potentially dilutive shares excluded from calculation due to anti-dilutive effect					352		96
Basic weighted-average common shares outstanding	41,728		42,105		41,657		42,093
Dilutive potential shares issuable from Convertible Senior Notes	—		218		—		340
Dilutive potential shares issuable from stock options and unvested RSUs	735		1,273		814		1,149
Diluted weighted-average common shares outstanding	42,463		43,596		42,471		43,582
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	177		7		147		4

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.

For the 2020 periods, potentially dilutive shares from the Convertible Notes were determined using the if-converted method. Under the provisions of the if-converted method, the Convertible 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 Notes was added back to net income. The Convertible 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 Convertible Notes became convertible on March 31, 2018 and matured on December 15, 2020.

Note 3. Balance Sheet Account Details

Marketable securities

The following is a summary of marketable securities (in thousands):


	March 31, 2022				December 31, 2021
	Amortized Cost		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Losses		Fair Value
Corporate bonds	$	36,844	$	(326)	$	36,518	$	22,344	$	(28)	$	22,316
Commercial paper	2,197		—		2,197		—		—		—
Corporate asset-backed securities	5,591		(36)		5,555		3,443		(1)		3,442
Total marketable securities, current	44,632		(362)		44,270		25,787		(29)		25,758
Corporate bonds, non-current	12,741		(242)		12,499		26,761		(83)		26,678
Corporate asset-backed securities, non-current	8,320		(93)		8,227		11,197		(23)		11,174
Total marketable securities	$	65,693	$	(697)	$	64,996	$	63,745	$	(135)	$	63,610

Inventories

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

	September 30,2021		December 31,2020
	March 31,2022		December 31,2021
Raw materials	$	~~109~~93,~~015~~276	$	58103,~~264~~159
Work-in-process (materials, labor and overhead)	4328,~~169~~150		3136,~~359~~091
Finished goods (materials, labor and overhead)	4459,~~792~~962		2459,~~175~~515
Total inventories	$	~~196~~181,~~976~~388	$	~~113~~198,~~798~~765

Prepaid Expenses and Other Current Assets

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

	September 30,2021		December 31,2020
	March 31,2022		December 31,2021
Other receivables	$	1520,~~033~~144	$	15,~~442~~879
Unbilled receivables	—		16,041
Prepaid expenses	17,438		14,598
Prepaid expenses	19,003		7,335
Other	5,057		4,590
Other	4,046		2,157
Total prepaid expenses and other current assets	$	42,639	$	35,067
Total prepaid expenses and other current assets	$	38,082	$	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. Amounts billed but not collected as of December 31, 2020 were included in other receivables. As of September 30, 2021, the Company had achieved and collected payments for all milestones under the NIH contract.9

Other Current Liabilities

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

	September 30,2021		December 31,2020
	March 31,2022		December 31,2021
Customer incentives and rebates	$	1113,~~483~~471	$	15,~~663~~916
Deferred revenue	187,~~728~~750		31,~~733~~922
Accrued other taxes payable	46,~~403~~996		210,~~157~~218
Derivative liabilities	442		3,061
Payables under transition services agreements	1,071		10,927
Payables under transition services agreements	5,455		—
Other	15,194		17,745
Other	14,362		7,676
Total other current liabilities	$	44,482	$	56,728
Total other current liabilities	$	54,873	$	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.

For the three months ended ~~September 30~~March 31, ~~2021~~2022 and ~~2020~~2021, the Company recognized income tax provisions of $65140.7 million in relation to income before taxes of $~~281~~620.56 million and $6343.57 million in relation to income before taxes of $~~295~~221.8 million, respectively, resulting in effective tax rates of 23% and 2120%, respectively. As compared to the federal statutory rate of 21%, the effective tax rates in both periods were impacted primarily by income taxes owed in US states. For the ~~nine~~three months ended ~~September 30~~March 31, 2021, ~~and~~this ~~2020,~~was partially offset by benefits from the ~~Company~~discrete ~~recognized~~impact ~~income~~of excess tax ~~provisions~~deductions offrom ~~$112.1~~stock-based ~~million~~compensation, inwhich ~~relation~~was immaterial to ~~income~~the ~~before~~effective ~~taxes~~tax ofrate ~~$525.0~~in the three months ended March 31, 2022.

11The 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 US 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.

million and $84.6 million in relation to income before taxes of $424.8 million, respectively, resulting in effective tax rates of 21% and 20%, respectively. As compared to the federal statutory rate of 21%, all periods were primarily impacted by income taxes owed in U.S. states, partially offset by benefits from the discrete impact of excess tax deductions from stock-based compensation.

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 aan Amended and Restated Credit Agreement (the “Credit Agreement”) expiring on August 31, 2023 of which no amounts were outstanding as of ~~September~~March 3031, ~~2021~~2022. 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 (0.50%), (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 ~~September~~March 3031, ~~2021~~2022.

Interest expense recognized, including amortization of deferred issuance cost, was $0.32 million ~~and~~for ~~$0.6~~each ~~million~~of ~~for~~ the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and $02021.~~2 million and $0.6 million for the three and nine months ended September 30, 2020.~~

Note 6. Stockholders’ Equity

Issuances of Common Stock

A summary of the status of stock option activity for the three months ended March 31, 2022 is as follows (in thousands, except price data):

	Shares	Weighted-~~average~~averageexercise ~~exercise~~priceper ~~price per~~ share
Outstanding at December 31, 2020	760	$	46.95
Outstanding at December 31, 2021	722	$	62.71
Granted	58135	~~232~~103.7506
Exercised	(8340)	3836.9200
Outstanding at September 30, 2021	735	$	62.58
Forfeited	(14)	110.68
Outstanding at March 31, 2022	803	$	69.98

A summary of the status of RSU activity for the three months ended March 31, 2022 is as follows (in thousands, except price data):


	Shares	Weighted-average grant date fair value
Non-vested December 31, 2021	587	$	95.81
Granted	313	103.60
Vested	(156)	77.83
Forfeited	(27)	100.98
Non-vested at March 31, 2022	717	$	102.94

	Shares	Weighted-averagegrant date fair value
Non-vested December 31, 2020	878	$	59.60
Granted	113	200.05
Vested	(399)	48.41
Forfeited	(5)	122.58
Non-vested at September 30, 2021	587	$	93.70

During the three months ended March 31, 2022, the Company issued 26,426 shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”).

During the nine months ended September 30, 2021, the Company issued 29,948 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 EndedSeptember 30,				Nine Months Ended September 30,
			Three Months EndedMarch 31,
	2021		2020		2021		2020
					2022		2021
Cost of sales	$	~~909~~	$	~~539~~	$	~~2,068~~649	$	~~1,232~~516
Research and development	~~1,369~~		~~1,032~~		31,~~296~~124		21,~~540~~034
Sales and marketing	~~1,736~~		~~1,580~~		41,~~696~~760		41,~~218~~404
General and administrative	~~2,991~~		~~2,402~~		83,~~619~~529		62,~~571~~874
Total stock-based compensation expense	$	7,005	$	5,553	$	18,679	$	14,561
Acquisition and integration costs					370		—
Total stock-based compensation expense					$	7,432	$	5,828

As of ~~September~~March 3031, ~~2021~~2022, total unrecognized compensation expense was $4266.57 million, which is expected to be recognized over a weighted-average period of approximately 12.86 years.

	Nine Months Ended September 30,
	2021		2020
Risk-free interest rate	0.48	%	1.20	%
Expected option life (in years)	4.99		5.13
Volatility rate	54	%	40	%
Dividend rate	0	%	0	%
Weighted-average grant date fair value	$106.55		$35.28

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.

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 nine months ended September 30, 2021 and 2020 was $200.05 and $97.33, respectively.


	Three Months Ended March 31,
	2022		2021
Risk-free interest rate	1.63	%	0.42	%
Expected option life (in years)	4.91		5.01
Volatility rate	58	%	53	%
Dividend rate	0	%	0	%
Weighted-average grant date fair value	$51.79		$115.78

~~Compensation~~The ~~expense~~fair ~~capitalized~~value toof ~~inventory~~RSUs ~~and~~is ~~compensation~~determined ~~expense~~based ~~related~~on to the ~~ESPP~~closing ~~were~~market ~~not~~price ~~material~~of ~~for~~the Company’s common stock on the ~~three~~grant ~~and~~date. ~~nine~~The weighted-average fair value of RSUs granted during the three months ended ~~September~~March 3031, 2022 and 2021 orwas ~~2020~~$103.60 and $238.20, respectively.

Compensation expense capitalized to inventory and compensation expense related to the ESPP were not material for the three months ended March 31, 2022 or 2021.

Note 7. Industry and Geographic Information

The Company operates in one reportable segment. Sales to customers outside of the United States represented $~~196~~95.01 million (189%) and $~~140~~86.56 million (1623%) of total revenues for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021, respectively. As of ~~September~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, net accounts receivable due from foreign customers were $3270.63 million and $1853.65 million, respectively. For the three months ended March 31, 2022 and 2021, sales of COVID-19 products accounted for 83% and 72% of total revenue, respectively. For the three months ended March 31, 2022 and 2021, sales of influenza products accounted for 9% and 4% of total revenue, respectively.

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


	Three Months Ended March 31,
	2022		2021
Customer:
A	38	%	—	%
B	14	%	22	%
C	8	%	12	%

Total:	60	%	34	%

	Nine Months Ended September 30,
	2021		2020
Customer:
A	27	%	25	%
B	11	%	18	%
C	10	%	11	%
Total:	48	%	54	%

As of March 31, 2022 and December 31, 2021, net accounts receivable from customers with balances due in excess of 10% of total accounts receivable totaled $468.2 million and $267.3 million, respectively.

Consolidated total revenues by product category for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

As of September 30, 2021 and December 31, 2020, net accounts receivable from customers with balances due in excess of 10% of total accounts receivable totaled $205.6 million and $411.7 million, respectively.


	Three Months Ended March 31,
		2022		2021
Rapid Immunoassay		$	892,810	$	237,670
Cardiometabolic Immunoassay		50,153		66,552
Molecular Diagnostic Solutions		45,989		60,263
Specialized Diagnostic Solutions		13,307		10,853
Total revenues		$	1,002,259	$	375,338

	Three Months EndedSeptember 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Rapid Immunoassay	$	378,721	$	337,042	$	676,461	$	513,578
Cardiometabolic Immunoassay	64,790		64,810		203,008		172,902
Molecular Diagnostic Solutions	54,834		62,993		149,553		126,533
Specialized Diagnostic Solutions	11,391		11,213		32,662		39,452
Total revenues	$	509,736	$	476,058	$	1,061,684	$	852,465

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 10165 McKellar Court, L.P. (“McKellar LP” or the “partnership”) for which the Company was the limited partner. McKellar LP owned the real property and improvements located at 10165 McKellar Court (the “McKellar Property”). The partnership was deemed to be a variable interest entity (“VIE”). The Company was not, however, the primary beneficiary of the VIE as it did not have the power to direct the activities of the partnership and did not have the obligation to absorb losses or receive benefits of the partnership that could potentially be significant to the partnership. The Company’s primary use of the McKellar Property is for manufacturing and administrative offices.

On August 17, 2021, a wholly owned subsidiary of the Company purchased the general partner’s interest (the “GP interest”) in McKellar LP for a net purchase price of $28.9 million, which was acquired using cash on hand. As a result of the purchase of the GP interest, the partnership is now a wholly owned subsidiary of the Company. The partnership continues to be a VIE for which the Company is now the primary beneficiary. The Company accounted for the GP interest as an asset acquisition and recorded building and land with a total value of $28.9 million. Prior to the purchase date, the Company was leasing the McKellar Property through 2030, with options to extend for two additional five‐year periods. As a result of the

Company’s purchase of the GP interest in McKellar LP, the Company no longer makes lease payments for the McKellar Property. Prior to the acquisition, the Company made lease payments to the partnership of approximately $0.6 million during the nine months ended September 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

InFrom ~~Beckman~~time ~~Coulter~~to time, ~~Inc.~~the v.Company ~~Quidel~~is ~~Corporation,~~involved ~~which~~in ~~was~~litigation ~~filed~~and inother ~~the~~legal ~~Superior~~proceedings, ~~Court~~including ~~for~~matters ~~the~~related ~~County~~to ofproduct ~~San~~liability ~~Diego~~claims, ~~California,~~commercial ondisputes ~~November~~and ~~27,~~intellectual ~~2017~~property claims, ~~Beckman~~as ~~Coulter~~well as regulatory, ~~Inc.~~employment, ~~(“Beckman~~and ~~Coulter”)~~other ~~alleged~~claims ~~that~~related ato ~~provision~~our ofbusiness. anThe ~~agreement~~Company ~~between~~accrues ~~Quidel~~for ~~and~~legal ~~Beckman~~claims ~~Coulter~~when, ~~violated~~and ~~state~~to ~~antitrust~~the ~~laws.~~extent ~~Our~~that, ~~acquisition~~amounts ofassociated with the ~~B-type~~claims ~~Naturietic~~become ~~Peptide~~probable ~~assay~~and ~~business~~are ~~(“BNP~~reasonably ~~Business”)~~estimable. inThe ~~October~~actual ~~2017~~costs ~~consisted~~ of ~~assets~~resolving ~~and~~legal ~~liabilities~~claims ~~relating~~may tobe asubstantially ~~contractual~~higher ~~arrangement~~or ~~with~~lower ~~Beckman~~than ~~Coulter (~~the ~~“BNP~~amounts ~~Supply~~accrued ~~Agreement”)~~ for ~~the~~those ~~supply~~claims. ofFor ~~antibodies~~those ~~and~~matters ~~other~~as ~~inputs related~~ to, ~~and~~which ~~distribution~~we ~~of,~~are ~~the~~not ~~Triage®~~able ~~B-type~~to ~~Naturietic~~estimate ~~Peptide~~a ~~Test~~possible ~~(“BNP~~loss ~~Test”)~~or ~~for~~range ~~the~~of ~~Beckman~~loss, ~~Coulter~~we ~~Access~~are ~~Family~~not ofable ~~Immunoassay~~to ~~Systems.~~determine Inwhether the ~~lawsuit,~~loss ~~Beckman~~will ~~Coulter~~have ~~asserted~~a ~~that~~material anadverse ~~exclusivity~~effect ~~provision~~on ~~violated~~our ~~certain~~business, ~~state~~financial ~~antitrust~~condition ~~laws~~or ~~and~~results ~~was unenforceable. From the inception~~ of ~~the~~operations ~~lawsuit,~~or ~~the~~liquidity. ~~lawsuit~~No accrual ~~was~~has ~~subject~~been torecorded ~~numerous~~as ~~motions~~of March 31, ~~rulings,~~2022 ~~appellate~~and ~~reviews~~December 31, ~~and~~2021 ~~opinions.~~related ~~The~~to ~~matter~~such ~~was~~matters ~~scheduled~~as ~~for~~they ~~trial~~are ~~starting~~not ~~April~~probable ~~15,~~and/or ~~2022.~~reasonably estimable.

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.

As consideration for the arrangements during each of calendar years 2022 through and including 2029, Quidel will receive a minimum payment of $70.0 million and a maximum payment of $75.0 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 Test, and a Distribution Agreement, granting Beckman Coulter the right to sell and distribute the BNP Test as described above.

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 September 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):

	September 30, 2021								December 31, 2020
	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	200,002	$	—	$	—	$	200,002	$	200,003	$	—	$	—	$	200,003
Cash equivalents	$	204,603	$	4,857	$	—	$	209,460	$	204,672	$	6,649	$	—	$	211,321
Derivative assets	—		167		—		167		—		24		—		24
Marketable securities	—		64,996		—		64,996		—		63,610		—		63,610
Total assets measured at fair value	$	200,002	$	167	$	—	$	200,169	$	200,003	$	24	$	—	$	200,027
Derivative assets	—		257		—		257		—		84		—		84
Total assets measured at fair value	$	204,603	$	70,110	$	—	$	274,713	$	204,672	$	70,343	$	—	$	275,015
Liabilities:
Derivative liabilities	$	—	$	~~442~~29	$	—	$	~~442~~29	$	—	$	~~3,061~~269	$	—	$	~~3,061~~269
Contingent consideration	—		—		56,~~957~~044		56,~~957~~044		—		—		116,~~896~~073		116,~~896~~073
Deferred consideration	—		7779,~~467~~418		—		7779,~~467~~418		—		~~115~~78,~~951~~436		—		~~115~~78,~~951~~436
Total liabilities measured at fair value	$	—	$	7779,~~909~~447	$	56,~~957~~044	$	8385,~~866~~491	$	—	$	~~119~~78,~~012~~705	$	116,~~896~~073	$	~~130~~84,~~908~~778

There were no transfers of assets or liabilities ~~between~~into ~~Level~~or 1,out ~~Level~~of ~~2 and~~ Level 3 ~~categories~~ of the fair value hierarchy during the three ~~and nine~~-month ~~periods~~period ended ~~September~~March 3031, ~~2021~~2022 and the year ended December 31, ~~2020~~2021.

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.13

InCash ~~connection~~equivalents ~~with~~consist ~~the acquisition~~ of ~~the~~funds ~~BNP~~held ~~Business, the Company has an annual installment payment payable~~ in ~~2022~~money ofmarket upaccounts tothat ~~$48.0 million~~are ~~and~~valued anusing ~~annual~~quoted ~~installment~~prices ~~payment of $40.0 million payable~~ in ~~2023~~active ~~remaining~~markets asfor ofidentical ~~September 30,~~instruments ~~2021.~~and ~~The~~highly ~~fair~~liquid ~~value~~corporate ofdebt ~~the~~securities ~~payments~~with ~~treated~~maturities aswithin ~~deferred~~three ~~consideration~~months isfrom ~~calculated based on the net present value of cash payments using an estimated borrowing rate based on a quoted price for a similar liability~~purchase. ~~The~~Marketable ~~fair~~securities ~~value~~consist of ~~the~~investment-grade ~~payments~~corporate ~~treated~~debt assecurities, ~~contingent~~corporate ~~consideration~~asset-backed issecurities ~~calculated~~and ~~using~~commercial ~~a discounted probability weighted valuation model~~paper. ~~Discount~~Derivative ~~rates~~financial ~~used~~instruments ~~in such calculation~~ are abased ~~significant~~on ~~assumption~~observable inputs that are ~~not~~corroborated ~~observed~~by ~~in the~~ market ~~and, therefore, the resulting fair value represents a Level 3 measurement~~data. ~~The~~Observable ~~discount~~inputs ~~rate~~include ofbroker ~~2.9% used as of September 30~~quotes, ~~2021~~daily ~~was~~market ~~based~~foreign oncurrency anrates ~~estimated~~and ~~borrowing~~forward ~~rate~~pricing ~~for a similar liability~~curves.

	Contingent consideration liabilities(Level 3 measurement)
Balance at December 31, 2020	$	11,896
Cash payments	(6,040)
Change in estimated fair value, recorded in general and administrative expenses	101
Balance at September 30, 2021	$	5,957

In connection with the acquisition of the B-type Natriuretic Peptide (“BNP”) assay business (“BNP Business”) from Alere Inc., the Company will pay annual installments of up to $48.0 million each year through April 2023. 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 are a significant assumption that are not observed in the market and, therefore, the resulting fair value represents a Level 3 measurement.

Changes in estimated fair value of contingent consideration liabilities from December 31, 2021 through March 31, 2022 were as follows (in thousands):


	Contingent consideration liabilities (Level 3 measurement)
Balance at December 31, 2021	$	6,073
Cash payments	(29)

Balance at March 31, 2022	$	6,044

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.

16Such foreign currency forward 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.

~~strategies~~The notional principal amounts for ~~undertaking~~outstanding derivative instruments provide one measure of the ~~hedge~~transaction ~~transactions~~volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. Credit risk represents the Company’s gross exposure to potential accounting loss on derivative instruments that are ~~formally~~outstanding ~~documented~~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. The Company generally enters into master netting arrangements that reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their net fair values. The Company does not ~~use~~have any derivative ~~financial~~ instruments ~~for~~with ~~trading~~credit-risk orrelated ~~other~~contingent ~~speculative~~features ~~purposes~~that would require it to post collateral.

The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of March 31, 2022 and December 31, 2021 (in thousands):

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.


	March 31, 2022				December 31, 2021
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	4,593	$	219	$	—	$	84
Other current liabilities	$	2,409	$	29	$	17,629	$	139

Non-designated forward contracts:
Prepaid expenses and other current assets	$	22,548	$	38	$	—	$	—
Other current liabilities	$	—	$	—	$	15,809	$	130

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 reduce 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.14

	September 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	$	6,341	$	167	$	—	$	—
Other current liabilities	$	6,752	$	255	$	38,435	$	2,819
Non-designated forward contracts:
Prepaid expenses and other current assets	$	—	$	—	$	18,160	$	24
Other current liabilities	$	15,405	$	187	$	23,120	$	242

Note 11. Pending Business Combination

17On December 22, 2021, the Company entered into a Business Combination Agreement (the “BCA”) with Ortho Clinical Diagnostics Holdings plc (“Ortho”), Coronado Topco, Inc. (“Topco”), Orca Holdco, Inc. (“US Holdco Sub”), Laguna Merger Sub, Inc. (“US Merger Sub”) and Orca Holdco 2, Inc. (“US Holdco Sub 2”). Under the terms of the BCA, the Company is entering into a business combination with Ortho under Topco, a new holding company (the “Combinations”). The Combinations are expected to be implemented by way of (i) a scheme of arrangement to be undertaken by Ortho under Part 26 of the UK Companies Act 2006 (the “Ortho Scheme”), pursuant to which each issued and outstanding share of Ortho (the “Ortho Shares”) will be acquired by a nominee of Topco, such that Ortho will become a wholly owned subsidiary of Topco, and (ii) a merger (the “Quidel Merger”) of US Merger Sub with and into the Company immediately following consummation of the Ortho Scheme, with the Company surviving the merger as a wholly owned subsidiary of Topco.

At the effective time of the Ortho Scheme, each Ortho Share will be acquired by a nominee on behalf and for the benefit of Topco in exchange for 0.1055 shares of common stock of Topco (the “Topco Shares”) and $7.14 in cash. At the effective time of the Quidel Merger, each share of the Company’s common stock (each, a “Quidel Share”) will be converted into the right to receive one Topco Share. Ortho will be acquired for total consideration of approximately $4.3 billion (which is based on the April 26, 2022 closing price of $100.12 per Quidel Share), including $1.7 billion of cash, funded through cash on the Company’s balance sheet and expected incremental borrowings. Following the closing of the Combinations, Ortho’s current net debt of $2.0 billion is expected to continue to be outstanding. The Combinations are expected to be completed in the second quarter of 2022.

If the Combinations are completed, Ortho shareholders are expected to own approximately 38% of Topco on a fully diluted basis and the Company’s stockholders are expected to own approximately 62% of Topco on a fully diluted basis, based on the respective capitalizations of Ortho and the Company as of the date of the BCA. The parties intend to list the Topco Shares to be issued in the Combinations on Nasdaq.

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 Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that are not statements of historical fact, including without limitation certain statements under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors” and located elsewhere herein regarding industry prospects and our results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “will,” “should,” “might,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “goal,” “project,” “strategy,” “future,” and similar words are intended to identify forward-looking statements. Our business is subject to a number of risks, including those discussed under Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Item IA, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, that could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations.

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

Overview

Our primary mission is to advance diagnostics to improve human health. 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, as well as for individual, non-professional, over-the-counter (“OTC”) use. 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 a direct sales force. We operate in one business segment that develops, manufactures and markets our products globally.

For the three months ended March 31, 2022, total revenues increased 167% to $1,002.3 million as compared to the same period in the prior year, and currency exchange rates had a minimal impact on growth rate. Our revenues can be highly concentrated over a small number of products. For the three months ended March 31, 2022 and 2021, sales of our COVID-19 products accounted for 83% and 72% of our total revenue, respectively. For the three months ended March 31, 2022 and 2021, sales of our influenza products accounted for 9% and 4% of our total revenue, respectively. Additionally, a significant portion of our total revenue is from a relatively small number of customers. Approximately 60% and 34% of our total revenue for the three months ended March 31, 2022 and 2021, respectively, were related to sales to our three largest customers.

Recent Developments

On December 22, 2021, we entered into the BCA with Ortho, Topco, US Holdco Sub, US Merger Sub and US Holdco Sub 2. Under the terms of the BCA, we are entering into the Combinations with Ortho under Topco, a new holding company. The Combinations are expected to be implemented by way of (i) the Ortho Scheme, pursuant to which each issued and outstanding Ortho share will be acquired by a nominee of Topco, such that Ortho will become a wholly owned subsidiary of Topco, and (ii) the Quidel Merger immediately following consummation of the Ortho Scheme, with us surviving the merger as a wholly owned subsidiary of Topco.

At the effective time of the Ortho Scheme, each Ortho Share will be acquired by a nominee on behalf and for the benefit of Topco in exchange for 0.1055 Topco Shares and $7.14 in cash. At the effective time of the Quidel Merger, each Quidel Share will be converted into the right to receive one Topco Share. Ortho will be acquired for total consideration of approximately $4.3 billion (which is based on the April 26, 2022 closing price of $100.12 per Quidel Share), including $1.7 billion of cash, funded through cash on our balance sheet and expected incremental borrowings. Following the closing of the Combinations, Ortho’s current net debt of $2.0 billion is expected to continue to be outstanding. The Combinations are expected to be completed in the second quarter of 2022.

If the Combinations are completed, Ortho shareholders are expected to own approximately 38% of Topco on a fully diluted basis and our stockholders are expected to own approximately 62% of Topco on a fully diluted basis, based on Ortho’s capitalization and our capitalization as of the date of the BCA. The parties intend to list the Topco Shares to be issued in the Combinations on Nasdaq. For additional information about the pending Combinations and the preliminary unaudited pro forma financial information, see Topco’s prospectus, filed with the Securities and Exchange Commission (the “SEC”) on April 11, 2022.

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~~were ~~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~~facilities ~~are~~remain ~~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 were and remain 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.

18We 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 fluctuating demand for certain of our other diagnostic products. 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 COVID-19, regulatory changes in any of the markets in which we serve, impact of new SARS-CoV-2 variants and actions to contain and treat their impact, including the vaccination programs that have been implemented.

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 fluctuating demand for certain of our other diagnostic products. 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 (“IT”) 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.17

Supply Chains

As a result of the COVID-19 pandemic, and other economic and geopolitical conditions, we have seen delays in ~~receipts~~receiving ~~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 help 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~~continue to proactively ~~working~~work with manufacturers, industry partners and government agencies to help meet the needs of our customers during ~~the~~these ~~pandemic~~supply chain constraints.

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.~~and ~~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 began operations in October 2021~~facilities.

We are seeking to minimize the impact of delays and secure allocations of vital raw materials to meet demand for our products. However, ~~dependent~~despite onour ~~the~~ mitigation efforts ~~and vaccination roll outs~~, we may continue to experience ~~some~~interruptions ~~sort of interruption~~ to our supply chains, and such aninterruptions ~~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~~interruptions.

Outlook

Our financial performance and results of operations will depend on future developments and other factors that are highly uncertain, continuously evolving and unpredictable, including the duration, severity and continuation of outbreak surges of the COVID-19 pandemic, and actions to contain the spread of the virus such as ~~mask wearing, social distancing and~~ vaccination efforts globally,. ~~and~~While ~~the~~demand ~~impact~~for ~~of these and other factors on~~ COVID-19 testing ~~demand.~~can ~~While~~fluctuate dramatically, as we have seen ~~fluctuations~~ in ~~COVID-19 testing demand~~2021, we ~~continue to~~ believe ~~that for at least the remainder of 2021,~~ some level of COVID-19 testing demand will be sustainable through at least 2022. We believe some level of ongoing COVID-19 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 fourth quarter of 2021~~, assuming a 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 this expansion was to address the testing demand driven by the COVID-19 pandemic, in the long-term, we expect this expansion to provide increased flexibility to address opportunities for new products and new markets globally. We intend to continue our focus on prudently managing our business and delivering improved financial results (excluding the effects of revenues from COVID-19 products), 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.

WeThree ~~expect~~months toended ~~continue~~March ~~to invest heavily in research and development activities for our next generation immunoassay and molecular platforms~~31, as2022 ~~well~~compared ~~as additional assays~~ to ~~be launched on our current platforms. Additionally, we are making substantial investments in~~ the ~~expansion~~three ofmonths ~~our~~ended ~~production~~March ~~capacity. While initially this expansion was to address the testing demand driven by the COVID-19 pandemic~~31, in2021 the long-term, we expect this expansion to provide increased flexibility to address opportunities for new products and 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.

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

Total Revenues

The following table compares total revenues for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

	Three Months EndedSeptember 30,				Increase (Decrease)
	Three Months EndedMarch 31,				Increase (Decrease)
	2021		2020		$		%
	2022		2021		$		%
Rapid Immunoassay	$	~~378~~892,~~721~~810	$	~~337~~237,~~042~~670	$	41655,~~679~~140	12276	%
Cardiometabolic Immunoassay	6450,~~790~~153		6466,~~810~~552		(2016,399)		—-25	%
Molecular Diagnostic Solutions	5445,~~834~~989		6260,~~993~~263		(814,~~159~~274)		~~(13)~~-24	%
Specialized Diagnostic Solutions	1113,~~391~~307		1110,~~213~~853		~~178~~2,454		223	%
Total revenues	$	~~509~~1,~~736~~002,259	$	~~476~~375,~~058~~338	$	33626,~~678~~921	7167	%

For the three months ended September 30, 2021, total revenues increased to $509.7 million from $476.1 million for the same period in the prior year. The Rapid Immunoassay category was the largest contributor to revenue growth, driven primarily by demand for the QuickVue SARS Antigen assays. Molecular Diagnostic Solutions sales decreased $8.2 million driven primarily by decreased pricing for the Lyra® SARS Antigen assay, partially offset by sales of the Solana® SARS Antigen assay. Currency exchange rate impact for the quarter ended September 30, 2021 was favorable by $1.0 million, which had a 0.1% impact on the growth rate.18

For the three months ended March 31, 2022, total revenues increased to $1,002.3 million from $375.3 million for the same period in the prior year. The Rapid Immunoassay category was the largest contributor to revenue growth, primarily driven by an increase of $652.6 million in sales of QuickVue SARS Antigen assays. Cardiometabolic Immunoassay sales decreased by $16.4 million largely driven by lower BNP sales due to the transition of the BNP Business to Beckman Coulter, Inc. Molecular Diagnostic Solutions sales decreased by $14.3 million driven primarily by decreased pricing on the Lyra® Antigen assay. The increase in Specialized Diagnostic Solutions sales was driven primarily by increased demand for cell culture respiratory products in 2022 as there was no cold and flu season in the first quarter of 2021. For the three months ended March 31, 2022 and 2021, sales of our influenza products were $89.1 million and $16.4 million, respectively. Currency exchange rate impact for the three months ended March 31, 2022 was unfavorable by $1.0 million, which had a 1.7% impact on the growth rate.

Gross Profit

Gross profit ~~decreased~~increased to $~~373~~740.40 million, or 7374% of revenue for the three months ended ~~September~~March 3031, ~~2021~~2022, compared to $~~383~~302.60 million, or 8180% of revenue for the three months ended ~~September~~March 3031, ~~2020~~2021. The ~~decreased~~increased gross profit was ~~driven~~due byto ahigher ~~shift~~sales volumes in the current period, partially offset by changes in product mix and lower selling prices for our SARS products. Increases in supply chain and other indirect manufacturing costs ~~also~~were ~~contributed~~offset toby ~~lower~~increased ~~gross~~absorption ~~profit~~driven inby ~~the~~higher ~~current~~production ~~period~~volumes. Gross margin for the three months ended ~~September~~March 3031, ~~2021~~2022 declined as compared to the same period in the prior year ~~due~~driven toprimarily ~~the~~by ~~same~~product ~~factors~~mix and lower selling prices.

Operating Expenses

The following table compares operating expenses for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

	Three Months EndedSeptember 30,
	Three Months Ended March 31,
	2021				2020
	2022				2021
	Operatingexpenses		As a % oftotal revenues		Operatingexpenses		As a % oftotal revenues		Increase (Decrease)
									$		%
Research and development	$	2326,~~676~~368	53	%	$	2123,~~448~~304	56	%	$	23,~~228~~064	1013	%
Sales and marketing	$	4665,~~778~~388	97	%	$	3734,~~413~~233	89	%	$	931,~~365~~155	2591	%
General and administrative	$	2124,~~113~~508	42	%	$	1619,~~410~~507	35	%	$	45,~~703~~001	2926	%
Acquisition and integration costs	$	—3,037	—0	%	$	~~389~~726	—0	%	$	~~(389)~~2,311	~~(100)~~318	%

Research and Development Expense

Research and development expense for the three months ended ~~September~~March 3031, ~~2021~~2022 was heavily focused on Savanna instrument and cartridge development and clinical work. Other key areas included development of the QuickVue OTC assay and the related software applications that enhance the user experience, Sofia® serology and gastrointestinal assays and the next generation platform. Research and development expense increased to $2326.74 million from $2123.43 million for the same period in the prior year, primarily due to increased ~~spending~~costs onrelated to the Savanna® ~~instrument~~development, ~~and~~partially ~~cartridge~~offset ~~development~~by inlower ~~support~~spending ofon ~~U.S.~~QuickVue ~~clinical~~OTC ~~trials~~assays and Sofia® projects.

Research and development expense includes 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 ~~September~~March 3031, ~~2021~~2022 increased to $4665.84 million from $3734.42 million for the same period in the prior year, primarily driven by higher freight expense due to higher sales volume, higher product promotional spend associated with the ~~launch of the~~ QuickVue At-Home OTC COVID-19 Test, ~~as well as increased freight expense~~ and higher compensation costs driven by increased headcount ~~and improved performance in the quarter, partially offset by a decrease in bad debt expense~~.

General and Administrative Expense

General and administrative expense for the three months ended ~~September~~March 3031, ~~2021~~2022 increased to $2124.15 million from $1619.45 million for the same period in the prior year primarily due to ~~increased spend on IT projects and~~ higher compensation costs driven by ~~increased~~improved ~~headcount~~performance toduring ~~support~~ the ~~growth~~current ~~of the business~~period.

Acquisition and Integration Costs

Acquisition and integration costs ~~decreased~~of by$3.0 million and $0.47 million for the three months ended ~~September~~March 3031, ~~2021~~2022 ~~compared~~and to2021, ~~the~~respectively, ~~same~~primarily ~~period~~related into the ~~prior~~pending ~~year~~Combinations with Ortho.

Interest and Other Expense, Net

~~The~~Interest ~~following~~and ~~table~~other ~~compares~~expense, ~~Other~~net primarily relates to accretion of interest on deferred consideration and interest and amortization of deferred financing costs associated with our Credit Agreement. Interest and other expense, net, for the three months ended ~~September~~March 3031, ~~2021~~2022 ~~and~~decreased ~~2020~~by ($2.4 million compared to the same period in ~~thousands~~the prior year, ~~except~~primarily ~~percentages):~~due to decreased interest expense as a result of a lower deferred consideration liability outstanding in 2022 compared to 2021.

	Three months ended September 30,				Increase (decrease)
	2021		2020		$		%
Interest and other expense, net	$	(347)	$	(1,797)	$	(1,450)	(81)	%
Loss on extinguishment of debt	—		(10,384)		(10,384)		(100)	%
Total other expense, net	$	(347)	$	(12,181)	$	(11,834)	(97)	%

Interest and other expense, net primarily relates to accretion of interest on the deferred consideration, coupon and accretion of interest related to our Convertible Notes (in the 2020 period) and interest and amortization of deferred financing costs associated with our Credit Agreement. Interest and other expense, net for the three months ended September 30, 2021 decreased to $0.3 million from $1.8 million for the same period in the prior year, primarily due to the maturity of the Company’s Convertible Notes in December 2020, including an unfavorable $1.1 million change in fair value of derivative liabilities associated with a Convertible Notes conversion in the second quarter of 2020. Additionally, interest expense decreased due to lower deferred consideration liability outstanding during 2021. Loss on extinguishment of debt of $10.4 million for the three months ended September 30, 2020 related to the extinguishment of $5.9 million in aggregate principal amount of the Convertible Notes, which were converted and settled in cash during the period.

Income Taxes

For the three months ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021, the Company recognized income tax provisions of $65140.7 million in relation to income before taxes of $~~281~~620.56 million and $6343.57 million in relation to income before taxes of $~~295~~221.8 million, respectively, resulting in effective tax rates of 23% and 2120%, respectively. The higher tax expense for the three months ended March 31, 2022 compared to the same period in the prior year is primarily a result of a proportionate increase in pre-tax profits, as well as a decrease in tax deductions from stock-based compensation.

ended September 30, 2021 compared to the same period in the prior year is primarily a result of an increase in state taxes owed and a decrease in tax deductions from stock-based compensation proportionate to pre-tax profits.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Total Revenues

	Nine Months Ended September 30,				Increase (Decrease)
	2021		2020		$		%
Rapid Immunoassay	$	676,461	$	513,578	$	162,883	32	%
Cardiometabolic Immunoassay	203,008		172,902		30,106		17	%
Molecular Diagnostic Solutions	149,553		126,533		23,020		18	%
Specialized Diagnostic Solutions	32,662		39,452		(6,790)		(17)	%
Total revenues	$	1,061,684	$	852,465	$	209,219	25	%

For the nine months ended September 30, 2021, total revenues increased to $1,061.7 million from $852.5 million for the same period in the prior year. The Rapid Immunoassay category was the largest contributor to revenue growth, driven by sales of the QuickVue SARS Antigen and Sofia SARS Antigen assays, partially offset by lower influenza assay sales. Molecular Diagnostic Solutions sales increased $23.0 million, driven by the sales of Lyra SARS-CoV-2 and Solana SARS-CoV-2 assays. Cardiometabolic Immunoassay sales increased $30.1 million as COVID-19 restrictions began to be lifted and sales started to return to pre-pandemic levels. The decrease in Specialized Diagnostic Solutions sales was driven primarily by a decline in demand for cell culture respiratory products as there was no cold and flu season in the first quarter of 2021. Currency exchange rate impact for the nine months ended September 30, 2021 was favorable by $5.9 million, which had a 0.8% impact on the growth rate.

Gross Profit

Gross profit increased to $781.6 million, or 74% of revenue for the nine months ended September 30, 2021, compared to $647.4 million, or 76% of revenue for the nine months ended September 30, 2020. The increased gross profit was due to higher sales volumes in the current period, partially offset by unfavorable product mix, lower selling prices for our SARS products and increased supply chain and other indirect manufacturing costs. Gross margin for the nine months ended September 30, 2021 declined as compared to the same period in the prior year driven primarily by product mix and lower selling prices.

Operating Expenses

	Nine Months Ended September 30,
	2021				2020
	Operatingexpenses		As a % oftotal revenues		Operatingexpenses		As a % oftotal revenues		Increase (Decrease)
									$		%
Research and development	$	69,594	7	%	$	58,797	7	%	$	10,797	18	%
Sales and marketing	$	119,111	11	%	$	95,718	11	%	$	23,393	24	%
General and administrative	$	61,758	6	%	$	46,421	5	%	$	15,337	33	%
Acquisition and integration costs	$	1,754	0	%	$	3,175	0	%	$	(1,421)	(45)	%

Research and Development Expense

Research and development expense for the nine months ended September 30, 2021 increased to $69.6 million from $58.8 million for the same period in the prior year. Development costs for the current period primarily consisted of spending on the

Savanna instrument and cartridge, QuickVue OTC assay and the related software applications that enhance the user experience and Sofia SARS and gastrointestinal assays. The increase was driven primarily by the Savanna development and spending on clinical trials.

Sales and Marketing Expense

Sales and marketing expense for the nine months ended September 30, 2021 increased to $119.1 million from $95.7 million for the same period in the prior year, primarily due to higher product promotional spend associated with the launch of the 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 eased.

General and Administrative Expense

General and administrative expense for the nine months ended September 30, 2021 increased to $61.8 million from $46.4 million for the same period in 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 $3.2 million for the nine months ended September 30, 2021 and 2020, respectively, primarily related to the evaluation of new business development opportunities.

Other Expense, net

The following table compares Other expense, net, for the nine months ended September 30, 2021 and 2020 (in thousands,

except percentages):

	Nine months ended September 30,				Increase (decrease)
	2021		2020		$		%
Interest and other expense, net	$	(4,352)	$	(8,071)	$	(3,719)	(46)	%
Loss on extinguishment of debt	—		(10,384)		(10,384)		(100)	%
Total other expense, net	$	(4,352)	$	(18,455)	$	(14,103)	(76)	%

Interest and other expense, net primarily relates to accretion of interest on the deferred consideration, coupon and accretion of interest related to our Convertible Notes (in the 2020 period) and interest and amortization of deferred financing costs associated with our Credit Agreement. Interest and other expense, net for the nine months ended September 30, 2021 decreased to $4.4 million from $8.1 million for the same period in the prior year, primarily due to the maturity of the Company’s Convertible Notes in December 2020, including an unfavorable $1.1 million change in fair value of derivative liabilities associated with a Convertible Notes conversion in the second quarter of 2020. Additionally, interest expense decreased due to lower deferred consideration liability outstanding during 2021. Loss on extinguishment of debt of $10.4 million for the nine months ended September 30, 2020 related to the extinguishment of $5.9 million in aggregate principal amount of the Convertible Notes, which were converted and settled in cash during the period.

Income Taxes

For the nine months ended September 30, 2021 and 2020, the Company recognized income tax provisions of $112.1 million in relation to income before taxes of $525.0 million and $84.6 million in relation to income before taxes of $424.8 million, respectively, resulting in effective tax rates of 21% and 20%, respectively. The higher tax expense for the nine months ended September 30, 2021 compared to the same period in the prior year is a result of an increase in state taxes owed and a decrease in tax deductions from stock-based compensation proportionate to pre-tax profits.

Liquidity and Capital Resources

	September 30,2021		December 31,2020
Cash and cash equivalents	$	578,447	$	489,941
Amount available to borrow under the Revolving Credit Facility	$	175,000	$	175,000
Working capital including cash and cash equivalents	$	851,977	$	805,441

As of March 31, 2022 and December 31, 2021, the principal sources of liquidity consisted of the following (in thousands):

As of September 30, 2021, we had $578.4 million in cash and cash equivalents, a $88.5 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. 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 equity to successfully complete the transactions.


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	1,275,536	$	802,751
Marketable securities, current	44,270		25,758
Marketable securities, non-current	20,726		37,852
Total cash, cash equivalents and marketable securities	$	1,340,532	$	866,361
Amount available to borrow under the Revolving Credit Facility	$	175,000	$	175,000
Working capital including cash and cash equivalents and marketable securities, current	$	1,620,994	$	1,116,790

~~Our~~As ~~primary sources~~ of ~~liquidity~~March 31, ~~other~~2022, ~~than~~we ~~our~~had ~~holdings~~$1,275.5 ofmillion in cash and cash equivalents, ~~have~~a ~~been~~$472.8 ~~cash~~million ~~flows~~increase from ~~operations~~December 31, ~~and~~2021 ~~our~~driven ~~Revolving~~primarily ~~Credit~~by ~~Facility.~~cash ~~Cash~~ generated from operations. ~~provides~~Our uscash ~~with~~requirements ~~the~~fluctuate ~~financial~~as ~~flexibility~~a weresult ~~need~~of tonumerous ~~meet~~factors, ~~normal~~such ~~operating~~as cash generated from operations, ~~investing~~progress in research and ~~financing~~development, ~~needs.~~capital Weexpansion doprojects ~~not~~and ~~currently~~acquisition ~~expect~~and ~~the~~business ~~impacts~~development ofactivities. On December 22, 2021, we entered into the ~~COVID-19~~BCA, ~~pandemic~~pursuant to ~~adversely~~which ~~affect~~we ~~our~~will ~~liquidity~~be ~~and~~entering ~~capital~~into ~~resources~~the orCombinations ~~our~~with ~~ability~~Ortho tounder ~~meet~~Topco, ~~financial~~a ~~commitments~~new holding company. WeOrtho ~~anticipate~~will ~~that~~be ~~our~~acquired ~~current~~for ~~cash~~total ~~and~~consideration ~~cash~~of ~~equivalents~~approximately $4.3 billion (which is based on the April 26, ~~together~~2022 ~~with~~closing ~~cash~~price ~~provided~~of by$100.12 ~~operating~~per ~~activities~~Quidel ~~will~~Share), beincluding ~~sufficient~~$1.7 billion toof ~~fund~~cash, funded through cash on our ~~near-term~~balance ~~capital~~sheet and ~~operating~~expected ~~needs~~incremental ~~for~~borrowings. atFollowing ~~least~~the closing of the ~~next~~Combinations, 12Ortho’s ~~months~~current net debt of $2.0 billion is expected to continue to be outstanding.

~~Normal~~Our ~~operating~~primary ~~needs~~source ~~include~~of ~~the~~liquidity, ~~planned~~other ~~costs~~than toour ~~operate~~holdings ~~our~~of ~~business~~cash and cash equivalents, ~~including~~has ~~amounts~~been ~~required~~cash flows from operations. Cash generated from operations provides us with the financial flexibility we need to ~~fund~~meet ~~working~~normal ~~capital~~operating, investing and ~~capital~~financing ~~expenditures~~needs. ~~Our~~We ~~primary~~do ~~short~~not currently expect the impacts of the COVID-~~term~~19 ~~needs~~pandemic ~~for~~to adversely affect our liquidity and capital, ~~which~~resources ~~are~~or ~~subject~~our ability to ~~change~~meet financial commitments. We anticipate that our current cash and cash equivalents, ~~include~~together ~~expenditures~~with ~~related~~cash provided by operating activities and incremental borrowings 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, research and development, 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 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 September 30, 2021. The Revolving Credit Facility matures on August 31, 2023. See Note 5 to the Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report for further discussion of the Revolving Credit Facility.20

InThe ~~connection~~Credit ~~with~~Agreement ~~the~~provides ~~acquisition~~us ofwith ~~the~~a ~~BNP~~Revolving ~~Business,~~Credit ~~the~~Facility ~~Company has an annual installment payment~~ of $48175.0 million ~~payable~~and inthere ~~2022~~was ~~and~~no anbalance ~~annual~~outstanding ~~installment~~as ~~payment~~ of ~~$40~~March 31, 2022.0 ~~million~~The ~~payable~~Revolving inCredit ~~2023.~~Facility Asmatures ofon ~~September 30,~~August ~~2021~~31, ~~these~~2023. ~~payments~~See ~~were~~Note 5 ~~recorded~~to atthe ~~fair~~Consolidated ~~value~~Financial asStatements ~~contingent~~in ~~consideration~~Part I, Item 1 of ~~$5.8~~this ~~million~~Quarterly ~~and~~Report ~~deferred~~for ~~consideration~~further discussion of ~~$77.5~~the ~~million~~Revolving Credit Facility.

OnIn ~~December~~connection ~~12,~~with ~~2018,~~the ~~our~~acquisition ~~Board~~ of ~~Directors (~~the ~~“Board”)~~BNP ~~authorized a stock repurchase program~~Business, ~~allowing~~ the Company tohas ~~repurchase~~an upannual toinstallment payment of $5048.0 million ofpayable ~~its~~in ~~common~~2022 ~~stock.~~and ~~On August 28, 2020, the Board approved~~ an ~~amendment~~annual toinstallment ~~the~~payment ~~stock repurchase program that authorized repurchases~~ of ~~an additional~~ $~~150~~40.0 million ofpayable ~~the~~in ~~Company’s common stock through August 28, 2022~~2023. As of ~~September~~March 3031, ~~2021~~2022, ~~the~~these ~~Company~~payments ~~had~~were ~~approximately~~recorded at fair value as contingent consideration of $525.9 million ~~available~~and ~~under~~deferred ~~the~~consideration ~~stock~~of ~~repurchase~~$79.4 ~~program~~million.

WeOn ~~expect~~December 12, 2018, our ~~revenue~~Board ~~and~~of ~~operating~~Directors ~~expenses~~(the ~~will~~“Board”) ~~significantly~~authorized ~~impact~~a ~~our~~stock ~~cash~~repurchase ~~management~~program, ~~decisions.~~allowing ~~Our~~the ~~future~~Company ~~capital~~to ~~requirements~~repurchase ~~and~~up ~~the~~to ~~adequacy~~$50.0 million of ~~our~~its ~~available~~common ~~funds~~stock. toOn ~~service~~August ~~our~~28, ~~long-term~~2020, ~~debt~~the ~~and~~Board approved an amendment to ~~fund~~the ~~working~~stock ~~capital~~repurchase ~~expenditures~~program ~~and~~that ~~business~~authorized ~~development~~repurchases ~~efforts~~of ~~will~~an ~~depend~~additional on$150.0 million ~~many~~of ~~factors~~our common stock through August 28, ~~including:~~2022. As of March 31, 2022, we had approximately $52.9 million available under the stock repurchase program.

Our future capital requirements and the adequacy of our available funds to service any long-term debt outstanding 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

	Nine Months Ended September 30,
	Three Months EndedMarch 31,
(In thousands)	~~2021~~2022		~~2020~~2021
Net cash provided by operating activities:	$	~~484~~500,~~492~~972	$	~~190~~585,~~632~~457
Net cash used for investing activities:	(~~223~~24,~~518~~670)		(3664,~~112~~569)
Net cash used for financing activities:	(~~172~~3,~~213~~408)		(~~130~~29,~~220~~648)
Effect of exchange rates on cash	(~~255~~109)		~~472~~(129)
Net increase in cash and cash equivalents	$	88472,~~506~~785	$	24491,~~772~~111

Cash provided by operating activities of $~~484~~501.50 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 reflects net income of $~~412~~479.9 million and non-cash adjustments of $5734.86 million primarily associated with depreciation, amortization, stock-based compensation, net change in operating lease right-of-use assets and liabilities, and accretion of interest on deferred consideration. In addition, the Company realized a net working capital ~~contribution~~use of $~~12.~~1.4 million primarily driven by aan ~~decrease~~increase in accounts receivable, partially offset by aan ~~decrease~~increase in income taxes payable and anaccounts ~~increase in product inventory~~payable. For the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, cash provided by operating activities of $~~190~~585.65 million reflects net income of $~~340~~178.21 million and non-cash adjustments of $6821.93 million primarily associated with depreciation, amortization, stock-based compensation and accretion of interest on deferred consideration. ~~Partially~~In ~~offsetting~~addition, ~~these~~we ~~inflows~~realized ~~was~~ a net working capital ~~use~~increase of ~~cash of~~ $~~218~~373.86 million driven by ~~increases~~a decrease in accounts receivable ~~and product inventory~~, partially offset by anincreases ~~increase~~ in ~~income~~product ~~taxes~~inventory.

Our investing activities used $~~223~~24.57 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 primarily related to investments in manufacturing equipment, ~~and~~ building improvements, Sofia, Solana® and Triage® instruments available for lease and ~~purchases of~~ scientific equipment. Additionally, ~~partially~~we ~~offset~~purchased by$15.9 ~~government~~million ~~proceeds~~and ~~received~~sold to$13.7 ~~fund~~million ~~such~~of ~~investments~~available-for-sale securities during the three months ended March 31, 2022. Our investing activities used $3664.16 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 primarily related to ~~payments~~investments ~~for~~in manufacturing equipment, ~~computer~~Sofia, ~~equipment~~Solana and Triage instruments available for lease, building improvements, and ~~Sofia~~scientific equipment, ~~Solana~~partially ~~and~~offset ~~Triage~~by ~~instruments~~government ~~available~~proceeds ~~for~~received ~~lease~~to fund such investments.

We are currently planning approximately $45127.06 million in capital expenditures for the remainder of ~~2021~~2022. The primary purposes for our capital expenditures are to invest in manufacturing capacity expansion, acquire Savanna, Sofia, Solana and Triage instruments, acquire scientific equipment, purchase or develop ITinformation technology and implement facility improvements. We plan to fund the capital expenditures with the cash on our balance sheet.

Cash used by financing activities was $~~172~~3.24 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 primarily related to ~~repurchases of common stock of $103.4 million,~~ payments of tax withholdings for vesting of stock-based awards of $366.08 million, ~~and payment on deferred and contingent consideration of $39.9 million,~~ partially offset by proceeds of $7.3.5 million from the issuance of common stock under the ESPP and pursuant to stock option exercises. Cash used by financing activities was $~~130~~29.26 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 primarily related to ~~repurchases of common stock of $43.7 million, payment on deferred and contingent consideration of $48.0 million, and~~ payments of tax withholdings for vesting of stock-based awards of $333.59 million, partially offset by proceeds ~~of $8.8 million~~ from the issuance of common stock ~~under~~of ~~the~~$4.4 ~~ESPP and pursuant to stock option exercises~~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. The COVID-19 pandemic and impact of sales of our COVID-19 products combined with a very mild flu season diminished the seasonal effects in the first quarter of 2022. 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. ~~In the first half of 2021, the COVID-19 pandemic combined with the absence of a flu season diminished the seasonal effects for our influenza products.~~

25Recent Accounting Pronouncements

~~Off-Balance~~Information ~~Sheet~~about ~~Arrangements~~recently adopted and proposed accounting pronouncements is included in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report under the heading “Recent Accounting Pronouncements” and is incorporated herein by reference.

AtCritical ~~September 30,~~Accounting 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. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.Estimates

~~Critical~~Our ~~Accounting~~discussion ~~Policies~~and analysis of our financial condition and ~~Estimates~~results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP. 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, we evaluate our estimates, including those related to reserves for contractual rebates, goodwill and intangible assets and income taxes. We base our estimates on historical experience and 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.

~~Our~~A comprehensive discussion ~~and analysis~~ of our ~~financial~~critical ~~condition~~accounting ~~and~~estimates ~~results of operations~~ is ~~based~~included ~~on our Consolidated Financial Statements, which have been prepared~~ in ~~accordance~~“Management’s ~~with~~Discussion ~~GAAP. The preparation of these financial statements requires us to make estimates~~ and ~~judgments~~Analysis ~~that affect the reported amounts~~ of ~~assets,~~Financial ~~liabilities,~~Condition ~~revenues~~ and ~~expenses,~~Results ~~and related disclosures~~ of ~~contingent~~Operations” ~~assets~~in ~~and~~our ~~liabilities.~~Annual OnReport an on~~-going~~ ~~basis,~~Form ~~management~~10-K ~~evaluates~~for ~~its~~the ~~estimates,~~year ~~including~~ended ~~those related to reserves for contractual rebates~~December 31, ~~goodwill~~2021. ~~and~~There ~~intangibles~~were ~~and~~no ~~income~~material ~~taxes.~~changes Weto ~~base~~ our ~~estimates~~critical onaccounting ~~historical~~estimates ~~experience~~during the ~~and~~three ~~various~~months ~~other~~ended ~~assumptions~~March ~~that we believe are reasonable under the circumstances~~31, ~~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~~2022. ~~Actual results may differ from these estimates.~~

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 nine months ended September 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 investments, our cash equivalents as of ~~September~~March 3031, ~~2021~~2022 consisted primarily of prime money market funds. These funds provide daily liquidity and may be subject to interest rate risk and decrease 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 the functional currency of the local jurisdiction.

For the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, total revenues were $1,~~061~~002.73 million, of which approximately $~~127~~74.50 million were denominated in currencies other than the ~~U.S.~~US dollar. We believe constant currency revenue and the related constant currency fluctuation rate, which are non-GAAP measures, enhance the comparison of our financial results from period-to-period and to that of our competitors because they present our operating performance without the effect of exchange rate variances. Constant currency revenue excludes the impact from foreign currency fluctuations, which was ~~favorable~~unfavorable by $51.90 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, and is calculated by (i) translating current period revenues using prior period exchange rates and (ii) excluding any hedging effect recognized in the current period. The constant currency fluctuation rate (expressed as a percentage) is calculated by determining the change in current period constant currency revenue compared to prior period revenue.

2622

The major currencies to which our revenues are exposed are the Canadian Dollar, 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 three months ended March 31, 2022 as follows (in thousands):

	Nine Months Ended September 30,
	Three Months EndedMarch 31,
Currency	~~2021~~2022
Chinese Yuan	$	3,345
Canadian Dollar	$	6,004
Euro	$	3,030
Chinese Yuan	892
Euro	1,218

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 Note 10 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 Exchange Act. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~September~~March 3031, ~~2021~~2022 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 rules and forms of the ~~Securities and Exchange Commission (the “~~SEC”).

Changes in internal control over financial reporting: There was no change in our internal control over financial reporting during the quarter ended ~~September~~March 3031, ~~2021~~2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2723

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 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~~2021. For a detailed description of our risk factors, refer to Part I, Item IA, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021.

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 March 31, 2022.

Period	Total numberof sharespurchased (1)	Averageprice paidper share		Total numberof shares purchasedas part of publiclyannounced plans or programs	Approximate dollarvalue of shares thatmay yet bepurchasedunder the plans or programs (2)
July 5, 2021 - August 1, 2021	180	$	126.80	—	$	52,894,442
January 3, 2022 - January 30, 2022	28,723	$	114.99	—	$	52,894,442
August 2, 2021 - August 29, 2021	1,773	121.78		—	52,894,442
January 31, 2022 - February 27, 2022	25,412	99.58		—	52,894,442
August 30, 2021 - October 3, 2021	2,570	146.01		—	52,894,442
February 28, 2022 - April 3, 2022	9,016	109.26		—	52,894,442
Total	463,~~523~~151	$	~~135~~107.7597	—	$	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 common stock, which was authorized by 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 stock repurchase program through August 28, 2022.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

2824

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, effective as of May 5, 2015. (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						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.) +
10.1(1)						Form of Change in Control Agreement. (Incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2021.)
10.2(1)						2022 Cash Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.3(1)						2022 Annual Equity Incentive Plan Grants to the Registrant’s Executive Officers. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.4(1)						Form of Success Fee Letter. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.5(1)						Form of Integration and Retention Bonus Letter. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.6(1)						Amendment to Individual Retirement Program for Randall Steward, dated February 1, 2022. (Incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 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~~Registrant's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2021~~2022, 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~~Registrant's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2021~~2022, formatted in Inline XBRL (included as Exhibit 101).

_________________________

(1)Indicates a management plan or compensatory plan or arrangement.

* Filed herewith.

** Furnished herewith.

+ The schedules and similar attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Quidel agrees to furnish copies of any such schedules or similar attachments to the SEC upon request. In addition, certain provisions of this exhibit have been redacted because Quidel customarily treats the redacted information as private or confidential and the omitted information is not material. Quidel agrees to promptly provide to the SEC on a supplemental basis an unreacted copy of the exhibit. 25

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: November 4, 2021			QUIDEL CORPORATION
Date: May 4, 2022			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)

3026

Exhibit Index

ExhibitNumber
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, effective as of May 5, 2015. (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						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.) +
10.1(1)						Form of Change in Control Agreement. (Incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2021.)
10.2(1)						2022 Cash Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.3(1)						2022 Annual Equity Incentive Plan Grants to the Registrant’s Executive Officers. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.4(1)						Form of Success Fee Letter. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.5(1)						Form of Integration and Retention Bonus Letter. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on February 4, 2022.)
10.6(1)						Amendment to Individual Retirement Program for Randall Steward, dated February 1, 2022. (Incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 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~~Registrant's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2021~~2022, 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~~Registrant's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2021~~2022, formatted in Inline XBRL (included as Exhibit 101).

___________________________

(1)Indicates a management plan or compensatory plan or arrangement.

* Filed herewith.

** Furnished herewith.

Filing Compare · QUIDEL CORP /DE/