SEC Filing | Myriad Genetics, Inc.

View:

mygn-20220930

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 30, 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: 0-26642

_________________________________________

MYRIAD GENETICS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________

Delaware

(State or other jurisdiction

of incorporation or organization)

320 Wakara Way, Salt Lake City, UT

(Address of principal executive offices)

87-0494517

(I.R.S. Employer Identification No.)

84108

(Zip Code)

Registrant's telephone number, including area code: (801) 584-3600

_________________________________________

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, $0.01 par value

MYGN

Nasdaq Global Select 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 x 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 x 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 x

As of October 27, 2022, the registrant had 81,033,816 shares of $0.01 par value common stock outstanding.

MYRIAD GENETICS, INC.

INDEX TO FORM 10-Q


		Page
	PART I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Loss ) for the three and nine months ended September 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

	PART II - Other Information

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	36

Item 6.	Exhibits	36

	Signatures	37

Table of Contents

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in millions)


	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	110.7	$	258.4
Marketable investment securities	82.5		81.4
Trade accounts receivable	102.2		91.3
Inventory	19.6		15.3
Prepaid taxes	17.8		18.4
Prepaid expenses and other current assets	19.5		20.0
Total current assets	352.3		484.8
Operating lease right-of-use assets	110.6		81.8
Long-term marketable investment securities	66.0		59.0
Property, plant, and equipment, net	67.5		43.5
Intangibles, net	370.8		404.1
Goodwill	236.5		239.2
Other assets	8.3		8.3
Total assets	$	1,212.0	$	1,320.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	29.6	$	29.6
Accrued liabilities	85.3		156.5
Current maturities of operating lease liabilities	14.0		13.0
Deferred revenues	0.2		5.2
Total current liabilities	129.1		204.3
Unrecognized tax benefits	27.9		27.9
Long-term deferred taxes	10.5		35.8
Noncurrent operating lease liabilities	123.3		79.3
Other long-term liabilities	4.6		5.6
Total liabilities	295.4		352.9
Commitments and contingencies
Stockholders’ equity:
Common stock, 80.9 million and 80.0 million shares outstanding at September 30, 2022 and December 31, 2021, respectively	0.8		0.8
Additional paid-in capital	1,251.0		1,226.3
Accumulated other comprehensive loss	(11.3)		(5.1)
Accumulated deficit	(323.9)		(254.2)
Total Myriad Genetics, Inc. stockholders’ equity	916.6		967.8
Non-controlling interest	—		—
Total stockholders' equity	916.6		967.8
Total liabilities and stockholders’ equity	$	1,212.0	$	1,320.7

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(in millions, except per share amounts)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenues:
Molecular diagnostic testing	$	156.4	$	167.3	$	500.6	$	505.6
Pharmaceutical and clinical services	—		—		—		24.2
Total revenue	156.4		167.3		500.6		529.8
Costs and expenses:
Cost of molecular diagnostic testing	50.4		47.8		148.1		139.9
Cost of pharmaceutical and clinical services	—		—		—		11.9
Research and development expense	20.5		18.8		62.0		61.4
Selling, general, and administrative expense	130.5		180.6		368.2		462.2
Goodwill and long-lived asset impairment charges	—		—		10.7		1.8
Total costs and expenses	201.4		247.2		589.0		677.2
Operating loss	(45.0)		(79.9)		(88.4)		(147.4)
Other income (expense):
Interest income	1.1		0.2		1.6		0.6
Interest expense	(0.8)		(1.1)		(2.3)		(6.1)
Other	0.5		120.6		0.6		139.3
Total other income (expense), net	0.8		119.7		(0.1)		133.8
Income (loss) before income tax	(44.2)		39.8		(88.5)		(13.6)
Income tax expense (benefit)	(9.1)		15.2		(18.8)		6.0
Net income (loss)	(35.1)		24.6		(69.7)		(19.6)
Net income (loss) attributable to non-controlling interest	—		—		—		—
Net income (loss) attributable to Myriad Genetics, Inc. stockholders	$	(35.1)	$	24.6	$	(69.7)	$	(19.6)
Net income (loss) per share:
Basic	$	(0.43)	$	0.31	$	(0.87)	$	(0.25)
Diluted	$	(0.43)	$	0.30	$	(0.87)	$	(0.25)
Weighted average shares outstanding:
Basic	80.7		78.8		80.4		77.3
Diluted	80.7		81.5		80.4		77.3

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(in millions)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss) attributable to Myriad Genetics, Inc. stockholders	$	(35.1)	$	24.6	$	(69.7)	$	(19.6)
Unrealized loss on available-for-sale debt securities, net of tax	(0.9)		(0.2)		(3.0)		(0.5)
Change in foreign currency translation adjustment, net of tax	(1.5)		(0.2)		(3.2)		(1.6)
Comprehensive income (loss)	(37.5)		24.2		(75.9)		(21.7)
Comprehensive income (loss) attributable to Myriad Genetics, Inc. stockholders	$	(37.5)	$	24.2	$	(75.9)	$	(21.7)

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(in millions)


	Common stock		Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Non-controlling interest		Myriad Genetics, Inc. Stockholders’ equity
BALANCES AT DECEMBER 31, 2020	$	0.8	$	1,109.5	$	(2.3)	$	(227.0)	$	—	$	881.0
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		26.0		—		—		—		26.0
Stock-based payment expense	—		9.0		—		—		—		9.0
Net loss	—		—		—		(39.5)		—		(39.5)
Other comprehensive loss, net of tax	—		—		(1.3)		—		—		(1.3)
BALANCES AT MARCH 31, 2021	$	0.8	$	1,144.5	$	(3.6)	$	(266.5)	$	—	$	875.2
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		23.5		—		—		—		23.5
Stock-based payment expense	—		8.9		—		—		—		8.9
Non-controlling interest	—		—		—		—		(0.1)		(0.1)
Net loss	—		—		—		(4.7)		—		(4.7)
Other comprehensive loss, net of tax	—		—		(0.4)		—		—		(0.4)
BALANCES AT JUNE 30, 2021	$	0.8	$	1,176.9	$	(4.0)	$	(271.2)	$	(0.1)	$	902.4
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		31.9		—		—		—		31.9
Stock-based payment expense	—		10.0		—		—		—		10.0
Net income	—		—		—		24.6		—		24.6
Other comprehensive loss, net of tax	—		—		(0.4)		—		—		(0.4)
BALANCES AT SEPTEMBER 30, 2021	$	0.8	$	1,218.8	$	(4.4)	$	(246.6)	$	(0.1)	$	968.5

BALANCES AT DECEMBER 31, 2021	$	0.8	$	1,226.3	$	(5.1)	$	(254.2)	$	—	$	967.8
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		(4.8)		—		—		—		(4.8)
Stock-based payment expense	—		10.1		—		—		—		10.1
Net loss	—		—		—		(20.5)		—		(20.5)
Other comprehensive loss, net of tax	—		—		(2.5)		—		—		(2.5)
BALANCES AT MARCH 31, 2022	$	0.8	$	1,231.6	$	(7.6)	$	(274.7)	$	—	$	950.1
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		2.3		—		—		—		2.3
Stock-based payment expense	—		10.4		—		—		—		10.4
Net loss	—		—		—		(14.1)		—		(14.1)
Other comprehensive loss, net of tax	—		—		(1.3)		—		—		(1.3)
BALANCES AT JUNE 30, 2022	$	0.8	$	1,244.3	$	(8.9)	$	(288.8)	$	—	$	947.4
Issuance of common stock under stock-based compensation plans, net of shares exchanged for withholding tax	—		(2.7)		—		—		—		(2.7)
Stock-based payment expense	—		9.4		—		—		—		9.4
Net loss	—		—		—		(35.1)		—		(35.1)
Other comprehensive loss, net of tax	—		—		(2.4)		—		—		(2.4)
BALANCES AT SEPTEMBER 30, 2022	$	0.8	$	1,251.0	$	(11.3)	$	(323.9)	$	—	$	916.6

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(in millions)


	Nine months ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to Myriad Genetics, Inc. stockholders	$	(69.7)	$	(19.6)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	39.0		49.5
Non-cash interest expense	1.1		1.3
Non-cash lease expense	8.6		9.8
Tenant improvement allowance received	8.6		—
Stock-based compensation expense	29.9		27.9
Deferred income taxes	(22.0)		(27.8)
Unrecognized tax benefits	0.1		1.5
Bad debt expense	1.3		0.2
Loss on inventory	—		6.5
Impairment of goodwill and long-lived assets	10.7		1.8
Gain on sale of assets	—		(162.0)
Changes in assets and liabilities:
Prepaid expenses and other current assets	0.4		(6.7)
Trade accounts receivable	(12.8)		(11.8)
Inventory	(4.4)		(1.6)
Prepaid taxes	0.5		108.0
Other assets	(0.5)		(3.6)
Accounts payable	(1.1)		(4.8)
Accrued expenses and other liabilities	(83.4)		79.9
Deferred revenues	(4.9)		(20.4)
Net cash provided by (used in) operating activities	(98.6)		28.1
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(30.7)		(14.6)
Proceeds from sale of assets	—		379.1
Purchases of marketable investment securities	(98.8)		(101.0)
Proceeds from maturities and sales of marketable investment securities	87.6		36.8
Net cash provided by (used in) investing activities	(41.9)		300.3
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued under stock-based compensation plans	3.9		90.0
Payment of tax withheld for common stock issued under stock-based compensation plans	(9.1)		(8.6)
Payment of contingent consideration recognized at acquisition	—		(3.3)
Fees associated with refinancing of revolving credit facility	(0.7)		(1.2)
Repayment of revolving credit facility	—		(226.4)
Net cash used in financing activities	(5.9)		(149.5)
Effect of foreign exchange rates on cash and cash equivalents	(1.3)		(0.7)
Net increase (decrease) in cash and cash equivalents	(147.7)		178.2
Cash and cash equivalents at beginning of the period	258.4		117.0
Cash and cash equivalents at end of the period	$	110.7	$	295.2

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.BASIS OF PRESENTATION

Myriad Genetics, Inc. and its subsidiaries (collectively, the “Company” or “Myriad”) is a leading genetic testing and precision medicine company dedicated to advancing health and well-being for all. Myriad provides insights that help people take control of their health and enable healthcare providers to better detect, treat, and prevent disease. Myriad develops and offers genetic tests that help assess the risk of developing disease or disease progression or guide treatment decisions across medical specialties. The Company generates revenue by performing molecular diagnostic tests and, prior to the sale of Myriad RBM, Inc. on July 1, 2021, by providing pharmaceutical services to the pharmaceutical and biotechnology industries and medical research institutions utilizing its multiplexed immunoassay technology. The Company currently operates as a single reporting segment. The Company’s principal executive office is located in Salt Lake City, Utah.

The accompanying Condensed Consolidated Financial Statements for the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements in accordance with GAAP. The Condensed Consolidated Financial Statements herein should be read in conjunction with the Company’s audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Operating results for the three and nine months ended September 30, 2022 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The Company has historically experienced seasonality in its testing business. The volume of testing is negatively impacted by the summer season, which is generally reflected in the quarter ended September 30. The quarter ended December 31 is generally strong as the Company typically experiences an increase in volumes from patients who have met their annual insurance deductible. In the quarters ended March 31, the Company has typically experienced a decrease in volumes due to the annual reset of patient deductibles.

Due to the COVID-19 global pandemic, including variants of COVID-19 (“COVID-19”), seasonality may not follow the same pattern as in prior years. Volumes and results of operations were impacted negatively in calendar year 2021 and early 2022 by COVID-19. As such, the Company’s year over year results may not be comparable. Management continues to monitor the impact of COVID-19 on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period's presentation. The reclassifications have no impact on the total assets, total liabilities, stockholders’ equity, cash flows from operations, or net loss for the period.

Table of Contents

2.REVENUE

Myriad primarily generates revenue by performing molecular diagnostic testing. Molecular diagnostic revenues are primarily derived from the following categories of products: Hereditary Cancer (myRisk, BRACAnalysis, BRACAnalysis CDx), Tumor Profiling (MyChoice CDx, Prolaris, and EndoPredict), Prenatal (Foresight and Prequel), and Pharmacogenomics (GeneSight). The Company previously provided pharmaceutical services and clinical services prior to the sale of Myriad RBM, Inc. in July 2021 and Privatklinik Dr. Robert Schindlbeck GmbH & Co. KG in February 2020, respectively. Prior to the sale of the Myriad myPath, LLC laboratory in May 2021 and the Myriad Autoimmune business in September 2021, the associated revenue from such businesses was included within Molecular diagnostic revenues. Revenue is recorded at the estimated transaction price. The Company has determined that the communication of test results or the completion of pharmaceutical and clinical services indicates transfer of control for revenue recognition purposes.

The following table presents detail regarding the composition of the Company’s total revenue by type and by U.S. versus rest of world (“RoW”):


	Three months ended September 30,
	2022						2021
(in millions)	U.S.		RoW		Total		U.S.		RoW		Total
Molecular diagnostic revenues:
Hereditary Cancer	$	60.2	$	10.3	$	70.5	$	68.2	$	11.2	$	79.4
Tumor Profiling	20.2		10.6		30.8		21.3		11.6		32.9
Prenatal	21.9		0.2		22.1		23.5		0.1		23.6
Pharmacogenomics	33.0		—		33.0		24.1		—		24.1
Autoimmune	—		—		—		7.3		—		7.3

Total molecular diagnostic revenue	135.3		21.1		156.4		144.4		22.9		167.3

Total revenue	$	135.3	$	21.1	$	156.4	$	144.4	$	22.9	$	167.3

	Nine months ended September 30,
	2022						2021
(in millions)	U.S.		RoW		Total		U.S.		RoW		Total
Molecular diagnostic revenues:
Hereditary Cancer	$	190.6	$	30.0	$	220.6	$	207.1	$	34.4	$	241.5
Tumor Profiling	61.4		35.5		96.9		63.4		31.0		94.4
Prenatal	86.7		0.6		87.3		76.3		0.4		76.7
Pharmacogenomics	95.5		—		95.5		64.3		—		64.3
Autoimmune	0.3		—		0.3		28.2		—		28.2
Other	—		—		—		0.5		—		0.5
Total molecular diagnostic revenue	434.5		66.1		500.6		439.8		65.8		505.6
Pharmaceutical and clinical services revenue	—		—		—		24.2		—		24.2
Total revenue	$	434.5	$	66.1	$	500.6	$	464.0	$	65.8	$	529.8

Table of Contents

The Company performs its obligation under a contract with a customer by processing diagnostic tests and communicating the test results to customers, in exchange for consideration from the customer. The Company has the right to bill its customers upon the completion of performance obligations and thus does not record contract assets. Occasionally, customers make payments prior to the Company’s performance of its contractual obligations. When this occurs, the Company records a contract liability as deferred revenue. During the fiscal year ended June 30, 2020, the Company received approximately $29.7 million in advance Medicare payments to provide relief from the economic impacts of COVID-19 on the Company. The advanced Medicare payments were applied against services performed beginning in April 2021 and continued until the funds previously received were fully earned, which occurred during the quarter ended March 31, 2022. A reconciliation of the beginning and ending balances of deferred revenue is shown in the table below:


	Nine months ended September 30,
(in millions)	2022		2021
Deferred revenue - beginning balance	$	5.2	$	32.7
Revenue recognized	(5.3)		(30.3)
Prepayments	0.3		10.1
Held for sale reclassification	—		(1.0)
Deferred revenue - ending balance	$	0.2	$	11.5

In accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company has elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within the next year. Furthermore, the Company has elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its agreements wherein the Company’s right to payment is in an amount that directly corresponds with the value of the Company’s performance to date.

In determining the transaction price, the Company includes an estimate of the expected amount of consideration as revenue. The Company applies this method consistently for similar contracts when estimating the effect of any uncertainty on an amount of variable consideration to which it will be entitled. An estimate of transaction price does not include any estimated amount of variable consideration that is constrained. In addition, the Company considers all the information (historical, current, and forecast) that is reasonably available to identify possible consideration amounts. In determining the expected value, the Company considers the probability of the variable consideration for each possible scenario. The Company also has significant experience with historical discount patterns and uses this experience to estimate transaction prices.

The estimate of revenue is affected by assumptions in payor behavior such as changes in payor mix, payor collections, current customer contractual requirements, and experience with collections from third-party payors. When assessing the total consideration for insurance carriers and patients, revenues are further constrained for estimated refunds. The Company reserves certain amounts in Accrued liabilities in the Company’s Condensed Consolidated Balance Sheets in anticipation of requests for refunds of payments made previously by insurance carriers, which are accounted for as reductions in revenues in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Cash collections for certain diagnostic tests delivered may differ from rates estimated, primarily driven by changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met, and settlements with third party payors. During the three and nine months ended September 30, 2022, the Company recognized $(5.3) million and $20.1 million in revenue, respectively, which resulted in a $(0.05) and $0.19 impact to earnings per share, respectively, for tests in which the performance obligation of delivering the tests results was met in prior periods. The changes were primarily driven by changes in the estimated transaction price.

The Company applies the practical expedient related to costs to obtain or fulfill a contract since the amortization period for such costs will be one year or less. Accordingly, no costs incurred to obtain or fulfill a contract have been capitalized. The Company also applies the practical expedient for not adjusting revenue recognized for the effects of the time value of money. This practical expedient has been elected because the Company collects very little cash from customers under payment terms and the vast majority of payment terms have a payback period of less than one year.

Table of Contents

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Substantially all of the Company’s accounts receivable are with companies in the healthcare industry, U.S. and state governmental agencies, and individuals. The Company does not believe that receivables due from U.S. and state governmental agencies, such as Medicare, represent a credit risk since the related healthcare programs are funded by the U.S. and state governments. The Company only has one payor, Medicare, which represents greater than 10% of its revenues. Revenues received from Medicare represented 15% and 14% of total revenue for the three and nine months ended September 30, 2022, respectively, and 17% of total revenue for each of the three and nine months ended September 30, 2021. Concentrations of credit risk are mitigated due to the number of the Company’s customers as well as their dispersion across many geographic regions. No payor accounted for more than 10% of accounts receivable at September 30, 2022 or December 31, 2021. The Company does not require collateral from its customers.

3.MARKETABLE INVESTMENT SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of security at September 30, 2022 and December 31, 2021 were as follows:


(in millions)	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
September 30, 2022
Cash and cash equivalents:
Cash	$	57.8	$	—	$	—	$	57.8
Cash equivalents	52.9		—		—		52.9
Total cash and cash equivalents	110.7		—		—		110.7
Available-for-sale:
Corporate bonds and notes	82.2		—		(1.9)		80.3
Municipal bonds	23.9		—		(0.4)		23.5
Federal agency issues	23.8		—		(0.7)		23.1
U.S. government securities	21.8		—		(0.2)		21.6
Total	$	262.4	$	—	$	(3.2)	$	259.2


(in millions)	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
December 31, 2021
Cash and cash equivalents:
Cash	$	195.2	$	—	$	—	$	195.2
Cash equivalents	63.2		—		—		63.2
Total cash and cash equivalents	258.4		—		—		258.4
Available-for-sale:
Corporate bonds and notes	105.7		0.1		(0.2)		105.6
Municipal bonds	16.1		—		—		16.1
Federal agency issues	6.8		—		—		6.8
U.S. government securities	11.9		—		—		11.9
Total	$	398.9	$	0.1	$	(0.2)	$	398.8

Table of Contents

Cash, cash equivalents, and maturities of debt securities classified as available-for-sale securities were as follows at September 30, 2022:


(in millions)	Amortized cost		Estimated fair value
Cash	$	57.8	$	57.8
Cash equivalents	52.9		52.9
Available-for-sale:
Due within one year	83.4		82.5
Due after one year through five years	68.3		66.0
Due after five years	—		—
Total	$	262.4	$	259.2

Additional information relating to fair value of marketable investment securities can be found in Note 4.

4.FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1—quoted prices in active markets for identical assets and liabilities.

Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.

Level 3—unobservable inputs.

All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For Level 2 securities, the Company uses a third party pricing service which provides documentation on an ongoing basis that includes, among other things, pricing information with respect to reference data, methodology, inputs summarized by asset class, pricing application and corroborative information. For Level 3 contingent consideration, the Company reassesses the fair value of expected contingent consideration and the corresponding liability each reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected earn out liability. This fair value measurement is considered a Level 3 measurement because the Company estimates projections during the expected measurement period of approximately 12.75 years, utilizing various potential pay-out scenarios. Probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn-out itself, the related projections, and the overall business. The contingent earn-out liabilities are classified as components of Accrued liabilities and Other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets. Changes to contingent consideration liabilities are reflected in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Operations. Changes to the unobservable inputs could have a material impact on the Company’s financial statements.

Table of Contents

The following table sets forth the fair value of the financial assets and liabilities that the Company re-measures on a regular basis:


(in millions)	Level 1		Level 2		Level 3		Total
September 30, 2022
Money market funds (a)	$	52.9	$	—	$	—	$	52.9
Corporate bonds and notes	—		80.3		—		80.3
Municipal bonds	—		23.5		—		23.5
Federal agency issues	—		23.1		—		23.1
U.S. government securities	—		21.6		—		21.6
Contingent consideration	—		—		(7.2)		(7.2)
Total	$	52.9	$	148.5	$	(7.2)	$	194.2

(a)Money market funds are primarily comprised of exchange traded funds and accrued interest.


(in millions)	Level 1		Level 2		Level 3		Total
December 31, 2021
Money market funds (a)	$	63.2	$	—	$	—	$	63.2
Corporate bonds and notes	—		105.6		—		105.6
Municipal bonds	—		16.1		—		16.1
Federal agency issues	—		6.8		—		6.8
U.S. government securities	—		11.9		—		11.9
Contingent consideration	—		—		(8.6)		(8.6)
Total	$	63.2	$	140.4	$	(8.6)	$	195.0