COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Leases

Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:


	Nine Months Ended September 30,
(In thousands)	2024			2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	28,658		$	29,212
Operating cash flows from finance leases	991			559
Finance cash flows from finance leases	4,890			2,545
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17,860		$	2,097
Right-of-use assets obtained in exchange for new finance lease liabilities	15,995			4,940
Weighted-average remaining lease term - operating leases (in years)	7.58			7.00
Weighted-average remaining lease term - finance leases (in years)	3.08			2.99
Weighted-average discount rate - operating leases	6.55		%	6.50		%
Weighted-average discount rate - finance leases	6.71		%	7.32		%

As of September 30, 2024 and December 31, 2023, the Company’s right-of-use assets from operating leases are $122.5 million and $143.7 million, respectively, which are reported in operating lease right-of-use assets in the Company’s condensed consolidated balance sheets. As of September 30, 2024, the Company has outstanding operating lease obligations of $189.9 million, of which $27.2 million is reported in operating lease liabilities, current portion and $162.7 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding operating lease obligations of $190.4 million, of which $29.4 million is reported in operating lease liabilities, current portion and $161.1 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets.

In the third quarter of 2024, the Company recorded an impairment charge of $18.7 million, which consisted of a right-of-use asset of $11.8 million and associated leasehold improvements of $6.9 million relating to one of its domestic facilities that will be vacated in the fourth quarter of 2024 as a result of a change in strategic priorities. The Company used the income approach, under which the recoverability of the assets was measured by comparing the carrying amount of the asset to future undiscounted, pre-tax cash flows generated by the assets held. The fair value of the assets was determined using discounted cash flows, and the impairment charge recorded represents the difference between the carrying value and fair value of the impaired assets. The impairment charge recorded is included in impairment of long-lived assets in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2024.

As of September 30, 2024 and December 31, 2023, the Company’s right-of-use assets from finance leases are $21.6 million and $11.3 million, respectively, which are reported in other long-term assets, net in the Company’s condensed consolidated balance sheets. As of September 30, 2024, the Company has outstanding finance lease obligations of $22.7 million, of which $7.9 million is reported in other current liabilities and $14.8 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding finance lease obligations of $11.9 million, of which $4.4 million is reported in other current liabilities and $7.5 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets.

Legal Matters

In addition to commitments and obligations incurred in the ordinary course of business, from time to time the Company may be subject to a variety of claims and legal proceedings, including legal actions for damages, governmental investigations and other matters. The Company has also instituted, and may in the future institute, additional legal proceedings to enforce its rights and seek remedies, such as monetary damages, injunctive relief and declaratory relief.

The Company accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such accrued costs reflect the Company’s best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, that they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.

As of the date of this Quarterly Report on Form 10-Q, amounts accrued for legal proceedings and regulatory matters were not material. The Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of, or development in, legal and/or regulatory proceedings.

Refer to the Company’s 2023 Form 10-K for detailed disclosures on legal matters that were settled in 2023.

Intellectual Property Litigation Matters

In May 2023, after receiving a cease-and-desist letter from the Company regarding its patent infringement, Geneoscopy Inc. (“Geneoscopy”) requested a reexamination of the Company’s U.S. Patent No. 11,634,781 (the “’781 Patent”) by the United States Patent and Trademark Office (the “USPTO”). Upon completion of the reexamination in October 2023, the USPTO rejected Geneoscopy’s challenge. In November 2023, the Company filed suit against Geneoscopy in the United States District Court for the District of Delaware, alleging that certain of Geneoscopy’s products infringe the ‘781 Patent and seeking unspecified monetary damages and injunctive relief (the “’781 Action”) and in May 2024, the Company filed a second complaint against Geneoscopy alleging infringement of the Company’s U.S. Patent No. 11,970,746 (the “’746 Patent”), which has been consolidated with the ’781 Action. On June 28, 2024, Geneoscopy filed counterclaims against the Company challenging the validity of the patents at issue and alleging breach of contract, misappropriation of trade secrets, unfair competition, and other violations of state and federal law seeking unspecified monetary damages and injunctive relief, which were amended on August 16, 2024. On July 16, 2024, the Company filed a motion for preliminary injunction seeking an order prohibiting Geneoscopy from selling its infringing Colosense test in the United States. On August 8, 2024, Geneoscopy filed a motion to stay pending inter partes review of the ‘781 Patent, which is fully briefed. On August 30, 2024, the Company filed a motion to dismiss the amended counterclaim, which is fully briefed. On September 3, 2024, the Court entered a stipulated order for briefing and expedited discovery for the Company’s preliminary injunction motion. On September 27, 2024, Geneoscopy filed its opposition to the Company’s motion for preliminary injunction, and the parties are currently engaged in expedited discovery. Briefing for the Company’s motion for preliminary injunction will be complete by the end of November 2024.

In January 2024, Geneoscopy petitioned the USPTO to institute an inter partes review (“IPR”) challenging the validity of the ‘781 Patent before the Patent Trial and Appeals Board (“PTAB”). On July 26, 2024, the PTAB notified the Company that it decided to institute review. The Company filed its Patent Owner Response on October 25, 2024, and the parties are currently engaged in discovery. The Company intends to defend the validity of the ‘781 Patent, and a final decision of that review will be made on or before July 30, 2025.

On August 20, 2024, Geneoscopy filed a petition for inter partes review of the ‘746 Patent before the PTAB. The Company’s Patent Owner Preliminary Response is due November 27, 2024. The PTAB is expected to decide on or before February 27, 2025, whether it will institute the IPR. If the IPR is instituted, the Company intends to defend the validity of the ‘746 Patent, and a final decision of that review will be made on or before February 27, 2026.