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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve material risks and uncertainties. This discussion should be read in conjunction with the section entitled “Future Uncertainties and Forward-Looking Statements” on page 4 and the “Risk Factors” starting on page 26 of this Annual Report. In addition, our discussion of QuidelOrtho’s financial condition and results of operation

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s in this Item 7 should be read in conjunction with our Consolidated Financial Statements and the related Notes included elsewhere in this Annual Report.

Overview

Our mission is to develop and manufacture intelligent diagnostic solutions that transform the power of diagnostics into a healthier future for everyone. Our expertise in immunoassay and molecular testing, clinical chemistry and transfusion medicine helps clinicians and patients make better informed decisions across the globe. Our global infrastructure and commercial reach support our customers across more than 130 countries and territories with quality diagnostics, a broad test portfolio and market-leading service. We operate globally with manufacturing facilities in the U.S. and U.K. and with sales centers, administrative offices and warehouses located throughout the world.

We currently sell our products directly to end users through a direct sales force and through a network of distributors, for professional use in physician offices, hospitals, clinical laboratories, reference laboratories, urgent care clinics, leading universities, retail clinics, pharmacies, wellness screening centers, other POC settings, blood banks and donor centers, as well as for individual, non-professional, OTC use. We reached significant new markets as we introduced our QuickVue At-Home OTC COVID-19 test for at-home consumer use, school districts, health departments and many other locations.

Beginning in the second quarter of 2022, in connection with the Combinations and in order to manage our business to better align with the market dynamics of the specific geographic regions in which we operate, we changed the manner in which we review our performance and allocate resources. As a result, we changed from one reportable segment to the following three geographically-based reportable segments: North America; EMEA; and China. Latin America, Japan and Asia Pacific are immaterial operating segments that are not considered reportable segments and are included in “Other.” We generate our revenue primarily in the following business units: Labs, Transfusion Medicine, Point of Care and Molecular Diagnostics.

For fiscal year 2022, Total revenues increased by 92% to $3,266.0 million as compared to the prior year. Currency exchange rates had an unfavorable impact of 300 basis points on our growth rate. For fiscal year 2021, Total revenues increased by 2% to $1,698.6 million as compared to the prior year. Currency exchange rates had a minimal impact on the growth rate. Our revenues can be highly concentrated over a small number of products. For fiscal years 2022, 2021 and 2020, sales of our COVID-19 products accounted for approximately 44%, 75% and 70% of our Total revenues, respectively. For fiscal years 2022, 2021 and 2020, sales of our influenza products accounted for 11%, 4% and 8% of our Total revenues, respectively. Two of our customers, including one of our distributors, exceeded 10% of our Total revenues for fiscal year 2022. In fiscal year 2021, one distributor exceeded 10% of our Total revenues. In fiscal year 2020, four of our distributors exceeded 10% of our Total revenues.

Recent Developments

On May 27, 2022, pursuant to the BCA, Quidel and Ortho consummated the Combinations and each of Quidel and Ortho became a wholly owned subsidiary of QuidelOrtho. For additional information about the Combinations, see Note 1 under the section “Organization and Business” and Note 2 under the section “Business Combination” to the Consolidated Financial Statements.

The Combinations were completed for total consideration of approximately $4.3 billion (which is based on the May 26, 2022 closing price of $99.60 per share of Quidel common stock), including $1.7 billion of cash, funded through cash on our balance sheet and incremental borrowings. The Combinations have been accounted for as a business combination using the acquisition method of accounting in conformity with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

Commencing from the closing date of the Combinations, our financial statements include the assets, liabilities, operating results and cash flows of Ortho. The revenues related to Ortho are included in the Labs and Transfusion Medicine business units and the results of operations are included within each of our reportable segments, as described in Note 5 to the Consolidated Financial Statements.

Impact of the COVID-19 Pandemic

The healthcare challenge and other impacts surrounding the SARS-CoV-2 virus that emerged in late 2019 and the ensuing global pandemic have presented significant business uncertainty and had a dramatic impact on businesses globally, including ours. As the COVID-19 pandemic reaches an endemic state, the degree to which it continues to impact our business operations, strategy, financial condition and results of operations will depend on future developments that are uncertain and difficult to predict. Although COVID-19 infection rates and severity have decreased recently, the occurrence, spread, severity and duration of any new outbreaks or resurgences, including the emergence and spread of new variants of COVID-19, actions taken to contain the resurgences or variants, and economic repercussions of the virus remain uncertain. We continue to evaluate the nature and extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.

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SARS-CoV-2 Diagnostic Products

As a leader in POC diagnostics and with established expertise in respiratory infectious disease products, we were and remain well-positioned to respond to the COVID-19 pandemic. We have and continue to 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, including resurgences and variants. In particular, we developed molecular and antigen products to diagnose the SARS-CoV-2 virus. We also committed significant resources toward the expansion of our production capacity to manufacture and supply these products. We have experienced significant volatility in demand for these products since their launch, with periods of significant demand and periods where we experienced dramatic decreases in demand. At the same time, we also have observed fluctuating demand for certain of our other diagnostic products. Demand for our products to identify the SARS-CoV-2 virus has fluctuated in line with a range of factors, including the prevalence of the SARS-CoV-2 virus and its variants, the supply of COVID-19 tests generally, the purchasing activity of government entities, and the dissemination and effectiveness of vaccinations. The extent to which COVID-19 will continue to impact demand for our products depends on these and future developments, which are highly uncertain and difficult to predict, including new information that may emerge concerning the severity of COVID-19 resurgences, regulatory changes in any of the markets in which we serve, the impact of new SARS-CoV-2 variants and actions to contain and treat their impact.

Operations and Employee Safety

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. However, pandemic-related lockdowns and other responses to the pandemic in a number of countries have adversely impacted, and for some continue to adversely impact, our business operations in those countries. For example, lockdowns in China have impacted our business operations in that country. The adverse impacts of these measures were not material to our results of operations for the fiscal year ended January 1, 2023. We continue to monitor potential further impacts from these measures and the other issues noted above regarding our business.

As a result of the COVID-19 pandemic, we have implemented steps to protect our employees. Our office-based work sites in the U.S. are subject to operating restrictions consistent with applicable health guidelines.

Supply Chains

As a result of the COVID-19 pandemic and other macroeconomic and geopolitical conditions, including inflationary pressures, general economic slowdown or a recession, rising interest rates, foreign exchange rate volatility and changes in monetary policy, we have experienced shortages and delays in receiving certain raw materials and other components for our products and have experienced logistics and distribution challenges, as well as challenges in labor availability and rising labor costs, all of which have affected our ability to fulfill customer orders, including instrument placements, on a timely basis. Supply chain, production, logistics and distribution challenges, including shortages of raw materials and components, cost inflation, shipping delays, labor availability constraints and rising labor costs, have impacted, and we expect will continue for some period of time to impact, our results of operations.

Some of our raw materials are available from a limited number of sources. During 2022, we encountered some increasing pressures on raw material pricing. To mitigate these supply chain challenges, we are (i) partnering with suppliers to invest in additional capacity and raw material inventory, (ii) diversifying our supply base, where possible, to minimize reliance on a single source of supply for key raw materials and components and (iii) creating redundancy in our global supply chain. In addition, we routinely evaluate our supply chain for potential gaps and continue to take other steps intended to help address continuity. In our distribution operations, we are investing in automation capabilities to help improve accuracy and timeliness of customer shipments.

We continue to monitor these developments, as well as other international developments, including the Russia-Ukraine conflict, rising tensions between China and Taiwan and localization efforts, and the impact of such factors on our business. We cannot currently predict the frequency, duration or scope of these supply, production, logistics, distribution and labor disruptions and challenges. However, we proactively work with our suppliers, manufacturers, distributors, industry partners and government agencies to address these challenges in our efforts to meet the needs of our customers. Despite our mitigation efforts, such disruptions and challenges have and could further 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 challenges.

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 occurrence, spread, severity and duration of any new outbreaks and resurgences of COVID-19, the emergence and spread of new variants of COVID-19, and the ongoing supply, production and logistics challenges.

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Demand for our COVID-19 testing products declined in the second half of 2022 compared to both the first half of 2022 and the second half of 2021, which may indicate the beginning of a transition to an endemic environment. For 2023, we expect demand for our COVID-19 testing products to fluctuate and pricing pressures to continue as a result of a number of factors, including increased supply, emergence and spread of new variants, effectiveness of global containment efforts and other mitigation efforts. However, in light of our experience to date with the virus and the emergence and impact of new variants, we believe some level of COVID-19 testing may continue for some period of time, even as communities return to more normal practices. We would expect any such normalized demand to continue to experience fluctuations, which may be significant. With respect to our core products, excluding respiratory products, we anticipate revenue growth for 2023.

Because our business environment is highly competitive, our long-term growth and profitability will depend in part on our ability to retain and grow our current customers and attract new customers through developing and delivering new and improved products and services that meet our customers’ needs and expectations, including with respect to product performance, product offerings, cost, automation and other work-flow efficiency. As a result, we expect to continue to maintain our emphasis on R&D investments for longer term growth, including for our next generation platforms and assays, as well as additional assays to be launched on our current platforms. In addition, we expect to continue to evaluate strategic opportunities to expand our product lines and services, production capabilities, technologies and geographic footprint and address other business challenges and opportunities.

While the revenues and financial results from our COVID-19 products are uncertain, 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 and services into the market.

Results of Operations

Comparison of fiscal years ended 2022, 2021 and 2020

Our fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31. Fiscal years 2022 and 2021 were 52 weeks and fiscal year 2020 was 53 weeks.

Revenues

The following table compares Total revenues by business unit for fiscal years 2022, 2021 and 2020:

Fiscal Year Ended

Transfusion Medicine 393.8 — — N/A N/A

For fiscal year 2022, Total revenues increased to $3,266.0 million from $1,698.6 million for the prior year. The increases in Labs and Transfusion Medicine were primarily related to new revenues from the Combinations. The Point of Care business unit contributed to revenue growth, driven primarily by an increase of $586.1 million in sales of QuickVue SARS Antigen assays, partially offset by lower sales of Sofia assays and $46.7 million lower BNP sales due to the transition of the BNP Business to Beckman. The decrease in revenues related to the transition of the BNP Business did not materially impact our gross profit. Molecular Diagnostics sales decreased by $103.8 million, driven primarily by lower demand and pricing of the Lyra SARS Antigen assay. Currency exchange rate had an unfavorable impact of approximately 300 basis points on the growth rate for fiscal year 2022.

For fiscal year 2021, Total revenues increased to $1,698.6 million from $1,661.7 million for the prior year. The Point of Care business unit was the largest contributor to revenue growth, driven by sales of the QuickVue SARS Antigen assay. Additionally, sales of our other products within our Point of Care business unit increased over the prior year as COVID-19 restrictions began to be lifted and sales of our Triage products approached pre-pandemic levels. Growth in our Triage business was partially offset by lower revenues recognized for the Beckman BNP products due to the transition of this business to Beckman in August 2021. Molecular Diagnostics sales decreased by $22.5 million, driven primarily by decreased pricing for the Lyra SARS Antigen assay, partially offset by higher sales of the Solana SARS Antigen assay. The decrease in Labs sales over the prior year was driven by lower sales of our cell culture products, primarily due to the lack of a respiratory season in early 2021. Favorable currency exchange rate impact for fiscal year 2021 had a minimal impact on the growth rate.

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Cost of Sales, Excluding Amortization of Intangible Assets

Cost of sales, excluding amortization of intangible assets, increased to $1,330.0 million, or 40.7% of Total revenues, for fiscal year 2022, compared to $420.3 million, or 24.7% of Total revenues, for fiscal year 2021. The increase in cost of sales, excluding amortization of intangible assets, was driven primarily by a large increase in sales of QuickVue SARS Antigen assays in 2022, as well as new product sales in the Labs and Transfusion Medicine business units as a result of the Combinations. We also recorded $60.6 million of expense related to the amortization of the inventory fair value adjustment related to the Combinations during fiscal year 2022. There were also increases in supply chain and other indirect manufacturing costs, which were only partially offset by increased absorption driven by higher production volumes.

Cost of sales, excluding amortization of intangible assets, increased to $420.3 million, or 24.7% of Total revenues, for fiscal year 2021, compared to $305.4 million, or 18.4% of Total revenues, for fiscal year 2020. The increase in cost of sales, excluding amortization of intangible assets, was driven primarily by a shift in product mix from Sofia SARS products to QuickVue SARS products and lower selling prices for our SARS products in fiscal year 2021. Increases in supply chain and other indirect manufacturing costs were more than offset by increased absorption driven by higher production volumes.

Operating Expenses

The following table summarizes operating expenses for fiscal years 2022, 2021 and 2020:

Fiscal Year Ended

Other operating expense, net 12.3 0.4 % — — % — — %

Selling, Marketing and Administrative Expenses

Selling, marketing and administrative expenses for fiscal year 2022 increased by $381.4 million, or 159.2%, to $621.0 million from $239.6 million for the prior year, driven primarily by the Combinations which contributed $326.5 million in increased expense, freight expense due to higher sales volume and expedited shipping, product promotional spend associated with the QuickVue At-Home OTC COVID-19 test, professional fees and employee-related costs.

Selling, marketing and administrative expenses for fiscal year 2021 increased by $58.9 million, or 32.6%, to $239.6 million from $180.7 million for the prior year, driven primarily by higher freight expense from greater shipment volumes, higher promotional spending associated with the launch of the QuickVue At-Home OTC COVID-19 test, higher labor costs and increased travel and meeting costs as COVID-19 related travel restrictions eased, partially offset by reduced bad debt expense. The increase was also related to higher compensation costs from increased headcount to support the growth of the business experienced during fiscal year 2021, and higher charitable contributions and stock compensation expense.

Research and Development Expense

Research and development expense for fiscal year 2022 increased by $94.8 million, or 99.1%, to $190.5 million from $95.7 million for the prior year, primarily due to the Combinations which contributed $86.0 million in increased expense, as well as increased costs related to SARS, Sofia and Savanna projects, and increased costs related to compensation driven by increased headcount and clinical trials.

Research and development expense for fiscal year 2021 increased by $11.4 million, or 13.5%, to $95.7 million from $84.3 million for the prior year, primarily due to increased costs related to the Savanna and QuickVue OTC projects, partially offset by decreased spending on Sofia projects. We also incurred higher labor, materials and clinical trials costs as a result of the COVID-19 product development.

Amortization of Intangible Assets

Amortization of intangible assets for fiscal years 2022, 2021 and 2020 was $132.5 million, $27.4 million and $27.3 million, respectively. The increase in amortization expense in fiscal year 2022 compared to the prior year periods was primarily due to the Combinations.

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Acquisition and Integration Costs

Acquisition and integration costs were $136.0 million, $9.6 million and $3.7 million for fiscal years 2022, 2021 and 2020, respectively. The increase in costs in fiscal year 2022 was primarily due to transaction and integration-related costs attributable to the Combinations. Costs in the prior year periods were primarily related to the evaluation of new business development opportunities, including the Combinations.

Other Operating Expense, Net

Other operating expense, net was $12.3 million for fiscal year 2022, which was related to the profit share expense for our Joint Business with Grifols acquired in connection with the Combinations.

Non-operating Expenses

The following table summarizes non-operating expenses, net for fiscal years 2022, 2021 and 2020:

Fiscal Year Ended

Interest expense, net $ 75.7 $ 5.8 $ 8.5 N/M (31.8) %

Loss on extinguishment of debt 24.0 — 10.4 N/M (100.0) %

Other expense (income), net 8.1 (0.1) 1.1 N/M N/M

* N/M - Not meaningful

Interest Expense, Net

Interest expense, net was $75.7 million, $5.8 million and $8.5 million for fiscal years 2022, 2021 and 2020, respectively. The increase in interest expense, net in fiscal year 2022 compared to the prior year periods was primarily related to the new Term Loan under the Credit Agreement entered into in connection with the Combinations. See Note 8 to the Consolidated Financial Statements for more information related to our Term Loan.

Interest expense, net prior to the Combinations primarily related to accretion of interest on the deferred consideration, coupon and accretion of interest related to our 3.25% Convertible Senior Notes due 2020 (“Convertible Notes”) (in fiscal year 2020) and interest and amortization of deferred financing costs associated with our previous credit agreement. Interest expense, net for fiscal year 2021 decreased to $5.8 million from $8.5 million for the prior year. The decrease compared to the prior year was primarily due to the maturity of our Convertible Notes in December 2020 and lower deferred consideration liability outstanding during fiscal year 2021.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $24.0 million for fiscal year 2022, and was related to the extinguishment of the senior notes and former term loans and the revolving credit facility of Ortho in connection with the Combinations.

Loss on extinguishment of debt was $10.4 million for fiscal year 2020, and was 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.

Other Expense (Income), Net

Other expense (income), net was $8.1 million, $(0.1) million and $1.1 million for fiscal years 2022, 2021 and 2020, respectively. Other expense, net in fiscal year 2022 compared to income in fiscal year 2021 was primarily related to net foreign currency losses and loss on investment, partially offset by fair value gains in interest rate caps. Other expense, net during fiscal year 2020 was primarily related to an unfavorable change in fair value of derivative liabilities associated with the Convertible Notes conversion in fiscal year 2020.

Income Taxes

For fiscal years 2022 and 2021, we recognized income tax provisions of $187.2 million in relation to income before taxes of $735.9 million, and $196.1 million in relation to income before taxes of $900.3 million, respectively, resulting in effective tax rates of 25.4% and 21.8%, respectively. The lower tax expense for fiscal year 2022 compared to the prior year was primarily due to a decrease in pre-tax profits and state taxes, foreign income taxed at rates other than the applicable U.S. rate, and an increased deduction for foreign derived intangible income (FDII), partially offset by increases in non-deductible executive compensation, Global Intangible Low-Taxed Income and acquisition-related costs.

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We recognized an income tax provision of $196.1 million, resulting in an effective tax rate of 21.8% for fiscal year 2021. This effective tax rate is comparable to the effective tax rate of 22.1% for fiscal year 2020. In both years, the effective tax rate differed from the federal statutory rate of 21% due to increases from the state tax provision, slightly offset by tax benefits from the foreign-derived intangible income deduction, excess stock-based compensation deductions and federal and state research credits.

Indemnification Assets

On January 16, 2014, Ortho entered into a stock and asset purchase agreement of (i) certain assets and liabilities and (ii) all of the equity interests and substantially all of the assets and liabilities of certain entities, which, together with their subsidiaries, comprised the Ortho business from Johnson & Johnson. The agreement generally provided that Johnson & Johnson retained all income tax liabilities accrued as of the date of the acquisition, including reserves for unrecognized tax benefits. The indemnification receivable from Johnson & Johnson totaled $16.8 million as of January 1, 2023 and is included as a component of Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheet. We recorded $0.4 million of interest and penalties during fiscal year 2022.

Segment Results

In the quarter ended July 3, 2022, following the completion of the Combinations, we changed the manner in which we evaluate performance and allocate resources. As a result, we began to operate under three geographically-based reportable segments: North America; EMEA; and China. Our operations in Latin America, Japan and Asia Pacific are immaterial operating segments that are not considered reportable segments and are included in “Other.” In the fourth quarter of 2022, we revised the internal allocation of certain global costs primarily between the North America segment and Corporate to better align costs that impact us as a whole. Prior periods have been revised to align with the current period presentation.

The key indicators that we monitor are as follows:

•Total revenues — This measure is discussed in the section entitled “Results of Operations.”

•Adjusted EBITDA — Adjusted EBITDA by reportable segment is used by our management to measure and evaluate the internal operating performance of our reportable segments. It is also the basis for calculating certain management incentive compensation programs. We believe that this measurement is useful to investors as a way to analyze the underlying trends in our core business, including at the segment level, consistently across the periods presented and to evaluate performance under management incentive compensation programs. Adjusted EBITDA consists of Net income before Interest expense, net, Provision for (benefit from) income taxes and depreciation and amortization and eliminates (i) certain non-operating income or expense items, and (ii) impacts of certain noncash, unusual or other items that are included in net income and that we do not consider indicative of our ongoing operating performance. See Note 5 to the Consolidated Financial Statements for a reconciliation of Adjusted EBITDA by reportable segment to Income before provision for income taxes.

North America

Total revenues and Adjusted EBITDA for North America were as follows:

Fiscal Year Ended

Total revenues were $2,536.5 million for fiscal year 2022, compared to Total revenues of $1,500.2 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $607.3 million to Total revenues. The remaining increase of $429.0 million was driven primarily by increased demand for the QuickVue SARS Antigen assays and non-SARS related rapid tests, partially offset by a decrease in revenues for the Sofia SARS Antigen assay.

Total revenues were $1,500.2 million for fiscal year 2021, compared to Total revenues of $1,460.7 million for fiscal year 2020. The increase of $39.5 million was driven primarily by increased demand for the QuickVue SARS Antigen assays, offset by a decrease in revenues for the Sofia SARS Antigen assay.

Adjusted EBITDA was $1,614.6 million for fiscal year 2022, compared to Adjusted EBITDA of $1,028.5 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $260.7 million to Adjusted EBITDA. The remaining increase of $325.4 million was driven primarily by increased revenues, partially offset by increased distribution and selling costs.

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Adjusted EBITDA was $1,028.5 million for fiscal year 2021, compared to Adjusted EBITDA of $1,205.2 million for fiscal year 2020. The decrease of $176.7 million was driven primarily by increased distribution and selling costs.

EMEA

Total revenues and Adjusted EBITDA for EMEA were as follows:

Fiscal Year Ended

Total revenues were $206.8 million for fiscal year 2022, compared to Total revenues of $69.6 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $146.2 million to Total revenues. The remaining decrease of $9.0 million was primarily driven by lower Point of Care revenues due to lower BNP sales from the transition of the BNP Business to Beckman.

Total revenues were $69.6 million for fiscal year 2021, compared to Total revenues of $92.9 million for fiscal year 2020. During fiscal year 2021, Total revenues decreased by $23.3 million, primarily due to lower Molecular Diagnostics and Point of Care revenues, driven by lower Lyra SARS Antigen assay sales.

Adjusted EBITDA was $31.7 million for fiscal year 2022, compared to Adjusted EBITDA of $28.1 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $18.1 million to Adjusted EBITDA. The remaining decrease of $14.5 million was driven primarily by lower revenues and increased selling costs.

Adjusted EBITDA was $28.1 million for fiscal year 2021, compared to Adjusted EBITDA of $55.5 million for fiscal year 2020. During fiscal year 2021, Adjusted EBITDA decreased $27.4 million, driven primarily by lower revenues.

China

Total revenues and Adjusted EBITDA for China were as follows:

Fiscal Year Ended

Total revenueswere $220.0 million for fiscal year 2022, compared to Total revenues of $58.0 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $161.3 million to Total revenues. The remaining increase of $0.7 million was primarily driven by increased Point of Care revenues, partially offset by lower BNP sales due to the transition of the BNP Business to Beckman.

Total revenueswere $58.0 million for fiscal year 2021, compared to Total revenues of $62.4 million for fiscal year 2020. The decrease of $4.4 million was primarily due to decreased Point of Care revenues, driven by lower BNP sales due to the transition of the BNP Business to Beckman.

Adjusted EBITDA was $104.1 million for fiscal year 2022, compared to Adjusted EBITDA of $24.1 million for fiscal year 2021. During fiscal year 2022, the Combinations were the primary driver of the increase, which contributed $80.7 million to Adjusted EBITDA.

Adjusted EBITDA was $24.1 million for fiscal year 2021, compared to Adjusted EBITDA of $30.5 million for fiscal year 2020. During fiscal year 2021, Adjusted EBITDA decreased $6.4 million, driven primarily by lower revenues.

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Other

Total revenues and Adjusted EBITDA for Other, which includes our Latin America, Japan and Asia Pacific operating segments, were as follows:

Fiscal Year Ended

Total revenues were $302.7 million for fiscal year 2022, compared to Total revenues of $70.8 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $250.5 million to Total revenues. The remaining decrease of $18.6 million was primarily due to lower Point of Care revenues, driven primarily by lower demand for QuickVue SARS Antigen and Sofia assays.

Total revenues were $70.8 million for fiscal year 2021, compared to Total revenues of $45.7 million for fiscal year 2020. During fiscal year 2021, Total revenues increased $25.1 million, primarily due to higher Point of Care revenues, driven by higher demand for QuickVue SARS Antigen and Sofia assays.

Adjusted EBITDA was $92.7 million for fiscal year 2022, compared to Adjusted EBITDA of $43.0 million for fiscal year 2021. During fiscal year 2022, the impact of the Combinations contributed $62.9 million to Adjusted EBITDA. The remaining decrease of $13.2 million was driven primarily by lower revenues.

Adjusted EBITDA was $43.0 million for fiscal year 2021, compared to Adjusted EBITDA of $28.0 million for fiscal year 2020. During fiscal year 2021, Adjusted EBITDA increased $15.0 million, driven primarily by higher revenues.

Liquidity and Capital Resources

As of January 1, 2023 and January 2, 2022, the principal sources of liquidity consisted of the following:

(Dollars in millions) January 1,2023 January 2,2022

Cash and cash equivalents $ 292.9 $ 802.8

Marketable securities, current 52.1 25.7

Marketable securities, non-current 21.0 37.9

Total cash, cash equivalents and marketable securities $ 366.0 $ 866.4

Amount available to borrow under the Revolving Credit Facility $ 786.9 $ 175.0

As of January 1, 2023, we had $292.9 million in Cash and cash equivalents, a $509.9 million decrease from January 2, 2022. Our cash requirements fluctuate as a result of numerous factors, including cash generated from operations, progress in R&D, capital expansion projects and acquisition and business development activities. On May 27, 2022, we completed the Combinations for total consideration of $4,291.1 million (which is based on the May 26, 2022 closing price of $99.60 per share of Quidel common stock), including $1,747.7 million of cash, net of cash and restricted cash acquired, funded through cash on our balance sheet and incremental borrowings. The incremental borrowings, described below, were also used to repay substantially all of Ortho’s then-outstanding indebtedness. We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.

Debt Capitalization

On May 27, 2022, we entered into the Credit Agreement by and among us, as borrower, Bank of America, as administrative agent and swing line lender, and the other Lenders party thereto. Pursuant to the Credit Agreement and in connection with the consummation of the Combinations, the Lenders provided us with a $2,750.0 million Term Loan and a $750.0 million Revolving Credit Facility. Effective August 4, 2022, pursuant to the Increase Joinder No. 1 to the Credit Agreement, the Revolving Credit Facility was increased by $50.0 million to $800.0 million. The Financing is guaranteed by the Guarantors and is secured by liens on substantially all of our and the Guarantors’ assets, excluding real property and certain other types of excluded assets. Loans under the Credit Agreement will bear interest at a rate per annum equal to the Term SOFR or Base Rate plus the Applicable Rate (each as defined in the Credit Agreement). As of January 1, 2023, letters of credit issued under the

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Revolving Credit Facility totaled $13.1 million, which reduced the available amount under the Revolving Credit Facility to $786.9 million.

The Term Loan is subject to quarterly amortization of the principal amount on the last business day of each of our fiscal quarters (commencing on September 30, 2022). The required quarterly payments are 1.875% of the aggregate initial principal amount of the Term Loan through the fiscal second quarter of 2024, and 1.250% thereafter. The final remaining principal installment is due on the maturity date. The Term Loan and the Revolving Credit Facility will mature on May 27, 2027. We must prepay loans outstanding under the Credit Agreement in an amount equal to the Net Cash Proceeds from (i) certain property dispositions and (ii) the receipt of certain other amounts not in the ordinary course of business, such as certain insurance proceeds and condemnation awards, in each case, if not reinvested within a specified time period as contemplated in the Credit Agreement.

The Credit Agreement 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, investments and transactions with affiliates. The Credit Agreement contains two financial covenants: (i) a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of each fiscal quarter of (a) 4.50 to 1.00 for the Initial Measurement Period, (b) 4.00 to 1.00 for the first four fiscal quarters ending after the Initial Measurement Period and (c) 3.50 to 1.00 for each fiscal quarter thereafter; and (ii) a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters. We were in compliance with the financial covenants as of January 1, 2023.

The Credit Agreement was entered into in connection with the Combinations in order to fund a portion of the cash portion of the purchase price as well as to repay substantially all of Ortho’s then-outstanding indebtedness. See Note 2 to the Consolidated Financial Statements for further discussion of the Combinations. In connection with the closing of the Combinations, Quidel terminated its previous $175.0 million revolving credit facility and related credit agreement on May 27, 2022, which did not have an outstanding balance.

In connection with the acquisition of the BNP Business, we had an annual installment payment of $48.0 million payable in 2022 and will have an annual installment payment of $40.0 million payable in 2023. As of January 1, 2023, the remaining payment was recorded at fair value as contingent consideration of $0.1 million and deferred consideration of $39.3 million.

In connection with the Combinations, the Company acquired a receivables purchase agreement (the “RPA”), entered into on June 11, 2021, by and among Ortho-Clinical Diagnostics US FinanceCo I, LLC (“Ortho FinanceCo I”), a wholly owned receivables financing subsidiary of the Company, Wells Fargo Bank, N.A., as administrative agent (the “Agent”), Ortho-Clinical Diagnostics, Inc. (“Ortho,” the “Master Servicer”), and certain Purchasers, as amended on July 20, 2022 (the “RPA Amendment”). Under the RPA, Ortho FinanceCo I may sell receivables in amounts up to a $75.0 million limit, subject to certain conditions, including that, at any date of determination, the aggregate capital paid to Ortho FinanceCo I does not exceed a “capital coverage amount,” equal to an adjusted net receivables pool balance minus a required reserve. Ortho FinanceCo I has guaranteed the prompt payment of the sold receivables, and to secure the prompt payment and performance of such guaranteed obligations, Ortho FinanceCo I has granted a security interest to the Agent, for the benefit of the Purchasers, in all assets of Ortho FinanceCo I. Ortho, in its capacity as Master Servicer under the RPA, is responsible for administering and collecting the receivables and has made customary representations, warranties, covenants and indemnities. The Company has also provided a performance guaranty for the benefit of Ortho FinanceCo I to cause the due and punctual performance by Ortho of its obligations as Master Servicer. The RPA Amendment resulted in a net 50 basis-point reduction of fees and revision of the base interest rate from 1-month LIBOR to 1-month SOFR.

Stock Repurchases

On August 17, 2022, the Board authorized the Stock Repurchase Program, allowing the Company to repurchase up to $300.0 million of its common stock through August 17, 2024. The Stock Repurchase Program does not obligate the Company to acquire any specific number of shares. Under the Stock Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act, as part of accelerated stock repurchases and other methods. The timing, manner, price and amount of any repurchases are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. For the fiscal year ended January 1, 2023, the Company repurchased 953,468 shares of outstanding common stock under the Stock Repurchase Program for approximately $74.3 million. The repurchased shares were retired and returned to the status of authorized but unissued shares of our common stock. As of January 1, 2023, we had approximately $225.7 million available under the Stock Repurchase Program.

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Cash Flow Summary

Fiscal Year Ended

Net cash provided by operating activities: $ 885.3 $ 805.9 $ 629.7

Net cash used for investing activities: (1,644.2) (319.5) (63.3)

Net cash provided by (used for) financing activities: 252.0 (173.1) (130.3)

Effect of exchange rates on cash (2.0) (0.4) 1.0

Fiscal Year Ended January 1, 2023

Cash provided by operating activities was $885.3 million for fiscal year 2022, and reflected net income of $548.7 million and non-cash adjustments of $389.8 million, primarily associated with depreciation and amortization, stock-based compensation expense, deferred income taxes, loss on extinguishment of debt and amortization of the inventory fair value step up initially recorded in connection with the Combinations. In addition, we benefited from collections on accounts receivables, which contributed $150.2 million to Cash provided by operating activities, partially offset by net cash outflows related to inventories, prepaid and other current and non-current assets and liabilities as well as income taxes payable and other current and non-current liabilities.

Cash used for investing activities was $1,644.2 million for fiscal year 2022, and was primarily related to the Combinations. We purchased $140.9 million of property, equipment, investments and intangibles and received $18.4 million of proceeds from government assistance allocated to fixed assets. We also purchased $63.7 million and sold $53.4 million of marketable securities during fiscal year 2022. See Note 2 to the Consolidated Financial Statements for further discussion regarding the Combinations.

Cash provided by financing activities was $252.0 million for fiscal year 2022, and was primarily related to proceeds from long-term borrowings, net of debt issuance costs of $2,734.5 million, payments on long-term borrowings and extinguishment costs of $2,388.3 million, repurchases of common stock of $74.3 million and payments of $37.7 million for contingent and deferred consideration.

Fiscal Year Ended January 2, 2022

Cash provided by operating activities was $805.9 million for fiscal year 2021, and reflected net income of $704.2 million and non-cash adjustments of $104.5 million, primarily associated with depreciation and amortization, stock-based compensation expense and accretion of interest on deferred consideration. Partially offsetting these inflows was a net working capital use of cash of $30.7 million, primarily driven by an increase in product inventory associated with the increased demand due to the COVID-19 pandemic and a decrease in income taxes payable, partially offset by a decrease in accounts receivable.

Cash used for investing activities was $319.5 million for fiscal year 2021, and was primarily related to investments in manufacturing equipment, building improvements, Sofia, Solana and Triage instruments available for lease and scientific equipment, partially offset by government proceeds received to fund such investments. Additionally, we purchased $67.4 million of available-for-sale securities and sold $3.8 million of our available-for-sale securities during 2021.

Cash used for financing activities was $173.1 million for fiscal year 2021, and was primarily related to repurchases of common stock of $103.5 million, payments of tax withholdings for vesting of stock-based awards of $37.1 million, and the payment of deferred and contingent consideration of $39.8 million, partially offset by proceeds of $7.6 million from the issuance of common stock under the ESPP and pursuant to stock option exercises.

Fiscal Year Ended January 3, 2021

Cash provided by operating activities was $629.7 million for fiscal year 2020, and reflected net income of $810.3 million and non-cash adjustments of $70.6 million, primarily associated with depreciation and amortization, stock-based compensation expense, deferred taxes, loss on extinguishment of debt and accretion of interest on deferred consideration. Partially offsetting these inflows was a net working capital use of cash of $251.2 million primarily driven by increases in accounts receivable and product inventory, partially offset by increases in income taxes payable and accounts payable.

Cash used for investing activities was $63.3 million for fiscal year 2020, and was primarily related to investments in manufacturing equipment, Sofia, Solana and Triage instruments available for lease, building improvements and purchases of scientific equipment.

Cash used for financing activities was $130.3 million for fiscal year 2020, and was primarily related to repurchases of common stock of $43.7 million, payment of Convertible Notes and derivative liability of $43.4 million, payments of deferred

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consideration of $42.0 million and acquisition contingent consideration of $6.0 million, partially offset by proceeds of $9.6 million from the issuance of common stock under the ESPP and pursuant to stock option exercises.

Liquidity Outlook

Short-term Liquidity Outlook

Our primary source of liquidity, other than our holdings of Cash and cash equivalents, has been cash flows from operations. Cash generated from operations provides us with the financial flexibility we need to meet normal operating, investing and financing needs. We anticipate that our current Cash and cash equivalents, together with cash provided by operating activities and amounts available under our Revolving Credit Facility, 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, R&D and capital expenditures. Our primary short-term needs for capital, which are subject to change, include expenditures related to:

•interest on and repayments of our long-term borrowings, deferred consideration, contingent consideration and lease obligations;

•acquisitions of equipment and other fixed assets in support of our manufacturing facility expansion;

•the continued advancement of R&D efforts;

•our integration of the Ortho business arising from the Combinations;

•support of commercialization efforts related to our current and future products, including support of our direct sales force and field support resources; and

•potential strategic acquisitions and investments.

Due to the risks inherent in the product development process, we are unable to estimate with meaningful certainty the costs we will incur in the continued development of our product candidates for commercialization. Our R&D costs may be substantial as we move product candidates into preclinical and clinical trials and advance our existing product candidates into later stages of development.

The primary purposes of our capital expenditures are to invest in manufacturing capacity expansion, acquire certain of our instruments,acquire scientific equipment, purchase or develop IT and implement facility improvements. We plan to fund the capital expenditures with the cash on our balance sheet.

We are focused on expanding the number of instruments placed in the field and solidifying long-term contractual relationships with customers. In order to achieve this goal, in certain jurisdictions where it is permitted, we have leveraged a reagent rental model that has been recognized as more attractive to certain customers. In this model, we lease, rather than sell, instruments to our customers. Over the term of the contract, the purchase price of the instrument is embedded in the price of the assays and reagents. Going forward, we intend to increase the number of reagent rental placements in developed markets, a strategy that we believe is beneficial to our commercial goals because it lowers our customers’ upfront capital costs and therefore allows purchasing decisions to be made at the lab manager level. For these same reasons, the reagent rental model also benefits our commercial strategy in emerging markets. We believe that the shift in our sales strategy will grow our installed base, thereby increasing sales of higher-margin assays, reagents and other consumables over the life of the customer contracts and enhancing our recurring revenue and cash flows. During fiscal year 2022, we transferred $73.7 million of instrument inventories from Inventories to Property, plant and equipment, net, further increasing our investment in property, plant and equipment.

Long-term Liquidity Outlook

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 successfully integrate the recently acquired Ortho business and realize cross-selling revenue synergies;

•our ability to realize revenue growth from our new technologies and create innovative products in our markets;

•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.

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Contractual Obligations

Principal payments required on our long-term debt outstanding as of January 1, 2023 are $207.5 million in fiscal year 2023, $310.2 million in fiscal years 2024 to 2025 and $2,131.2 million in fiscal years 2026 to 2027. See Note 8 to our Consolidated Financial Statements for further discussion of long-term debt. Interest payments required on long-term debt outstanding as of January 1, 2023 are $172.5 million in fiscal year 2023, $258.1 million in fiscal years 2024 to 2025 and $149.7 million in fiscal years 2026 to 2027. Future interest payments include commitment fees on the unused portion of the Revolving Credit Facility and interest payments on our Term Loan. Future interest payments assume January 1, 2023 interest rates will prevail throughout all periods. Actual interest payment amounts may differ in the future based on changes in market interest rates.

As of January 1, 2023, estimated contractual obligations for operating lease payments were $256.5 million, with $32.7 million due in fiscal year 2023, $55.5 million in fiscal years 2024 to 2025, $45.4 million in fiscal years 2026 to 2027 and $122.9 million in fiscal year 2028 and thereafter. The amounts reflect future minimum lease obligations on facilities and equipment under operating leases in place as of January 1, 2023. See Note 9 to our Consolidated Financial Statements for further discussion of operating leases.

We are committed to making annual deferred and contingent consideration payments related to the acquisition of the BNP Business of up to $48 million. The remaining obligation as of January 1, 2023 was $40 million, which is expected to be paid in fiscal year 2023.

In connection with the Combinations, the Company assumed certain defined benefit plan obligations and acquired related plan assets for employees of non-U.S. subsidiaries. We expect to make contributions of $2.0 million to our defined benefit plans in fiscal year 2023. The amount of any contributions is dependent on the future economic environment and investment returns, and we are unable to reasonably estimate pension contributions beyond fiscal year 2023. See Note 15 to our Consolidated Financial Statements for further discussion of our defined benefit plans.

As of January 1, 2023, we had approximately $247.8 million of purchase obligations, which include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including (i) fixed or minimum quantities to be purchased, (ii) fixed, minimum or variable price provisions and (iii) the approximate timing of the transaction, as well as amounts for planned inventory purchases under contractual arrangements. We expect the majority of the payments related to these purchase obligations to be made during fiscal year 2023.

We have entered into various licensing agreements, which largely require payments based on product sales, as well as the achievement of specific milestones. Royalty and license expenses under these various royalty and licensing agreements collectively totaled $1.1 million, $2.0 million and $2.4 million as of January 1, 2023, January 2, 2022 and January 3, 2021, respectively.

As of January 1, 2023, we had approximately $40.0 million of liabilities associated with uncertain tax positions. We cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities, nor the amount of the final cash settlement as of January 1, 2023. See Note 6 to our Consolidated Financial Statements for further discussion of uncertain tax positions.

Recent Accounting Pronouncements

Information about recently adopted and proposed accounting pronouncements is included in Note 1 to our Consolidated Financial Statements set forth in Part II, Item 8 of this Annual Report.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“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 disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to reserve for contractual rebates, goodwill and intangible assets and income taxes. We base our estimates on historical experience and on 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 under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

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Reserve for Contractual Rebates

We record revenues primarily from product sales. These revenues are recorded net of rebates that are estimated at the time of sale, and are largely driven by various customer program offerings, including special pricing agreements and promotions. Rebates are calculated based on historical experience, estimated distributor inventory balances, contractual and statutory requirements and other relevant information, and are recorded as a reduction of sales with offsets to trade accounts receivable. The allowance for contractual rebates involves estimating adjustments to revenue based on a high volume of data including inputs from third-party sources. In addition, the determination of such adjustments includes estimating rebate percentages which are dependent on estimated end-user sales mix and customer contractual terms, which vary across customers, the related balance of which was $40.0 million of our rebate reserves at January 1, 2023. Our total rebate reserve was $73.5 million at January 1, 2023.

Goodwill and Intangible Assets

The useful lives of intangible assets with definite lives are based on the expected number of years the asset will generate revenue or otherwise be used by us and the related amortization is based on the straight-line method. Goodwill, which has an indefinite life, is not amortized but instead is tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include:

•the asset’s ability to continue to generate income from operations and positive cash flow in future periods;

•any volatility or significant decline in our stock price and market capitalization compared to our net book value;

•loss of legal ownership or title to an asset;

•significant changes in our strategic business objectives and utilization of our assets; and

•the impact of significant negative industry or economic trends.

If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

For goodwill, the entity has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The quantitative impairment test compares the fair value of a reporting unit with the carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is recorded. We completed our annual evaluation for impairment of goodwill as of October 2, 2022 and determined that no impairment existed.

Income Taxes

Significant judgment is required in determining our provision for income taxes, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning opportunities. As of January 1, 2023, we had a valuation allowance of $251.3 million, which represents the portion of our deferred tax assets that management believes is not more likely than not to be realized. We will continue to assess the need for a valuation allowance on our deferred tax assets by evaluating both positive and negative evidence that may exist.

We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained during an audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe that we have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcome of examinations by tax authorities in determining the adequacy of our provision for income taxes. See Note 6 to our Consolidated Financial Statements for more information on income taxes.

Accounting for Business Combinations

Under the acquisition method of accounting, the cost of an acquired business is assigned to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of the estimated fair values at the date of acquisition. We assess fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using a variety of methods including, but not limited to, an income

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approach and a market approach, such as the estimation of future cash flows of the acquired business and current selling prices of similar assets. These valuations require us to make estimates and assumptions, especially with respect to intangible assets.

Fair value of the assets acquired and liabilities assumed, including intangible assets, in-process research and development (“IPR&D”), and contingent payments, are measured based on the assumptions and estimations with regards to variable factors such as the amount and timing of future cash flows for the asset or liability being measured, appropriate risk-adjusted discount rates, nonperformance risk, or other factors that market participants would consider. Upon acquisition, we determine the estimated economic lives of the acquired intangible assets for amortization purposes, which are based on the underlying expected cash flows of such assets. When applicable, adjustments to inventory are based on the fair market value of inventory and are recognized into income based on the period in which the underlying inventory is sold. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that is not individually identified and separately recognized. Actual results may vary from projected results and assumptions used in the fair value assessments.

If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in the Consolidated Statements of Income.

Inventories

We periodically review inventory for both potential obsolescence and potential declines in anticipated selling prices. In this review, we make assumptions about the future demand for and market value of the inventory and based on these assumptions estimate the amount of any obsolete, unmarketable, slow moving or overvalued inventory. We write down the value of our inventories by an amount equal to the difference between the cost of the inventory and the net realizable value. If actual market conditions are less favorable than those projected by management at the time of the assessment, however, additional inventory write-downs may be required, which could reduce our earnings.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our business and financial results are affected by fluctuations in world financial markets, including interest rates and currency exchange rates. We manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We have policies governing our use of derivative instruments, and we do not enter into financial instruments for trading or speculative purposes.

Interest Rate Risk

We are subject to interest rate market risk in connection with our long-term debt. Our principal interest exposure relates to outstanding amounts under our Credit Agreement. Our Credit Agreement provides for variable rate borrowings of up to $2,750.0 million under the Term Loan and $800.0 million under the Revolving Credit Facility. Assuming facilities under the Credit Agreement are fully drawn, each one-eighth percentage point increase or decrease in the applicable interest rates would correspondingly change our interest expense on our outstanding borrowings under the Credit Agreement by approximately $4.3 million per year before considering the impact of derivative instruments. For further discussion of the risks related to our Credit Agreement, see “Risk Factors—Corporate Finance Risks—Our substantial indebtedness could adversely affect our financial condition, limit our ability to raise additional capital to fund our operations and prevent us from fulfilling our obligations under our indebtedness” in Part I, Item 1A, “Risk Factors” of this Annual Report.

We selectively use derivative instruments to reduce market risk associated with changes in interest rates. The use of derivatives is intended for hedging purposes only, and we do not enter into derivative instruments for speculative purposes.

We have entered into an interest rate swap agreement, which fixed a portion of the variable interest due on our variable rate debt. Under the terms of the agreement, we will pay a fixed rate of 1.58% and receive a variable rate of interest based on the USD-SOFR rate from the counterparty, which is reset every month through December 31, 2023. As of January 1, 2023, the notional amount of the interest rate swap was $500.0 million.

In the fourth quarter of 2022, we entered into interest rate swap contracts, commencing on December 30, 2022, with a total notional value of $1.3 billion through December 29, 2023 and $1.8 billion subsequently, to hedge future interest rate exposures on variable rate debt, including the Revolving Credit Facility and Term Loan. During the fourth quarter of 2022, we terminated our non-designated $1.0 billion notional value 3.428% interest rate cap.

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 January 1, 2023 consisted

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primarily of government money market funds and other high credit quality debt securities. 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 exchange risk by virtue of our international 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. We derived approximately 25% of our Total revenues for the fiscal year ended January 1, 2023, from operations outside the U.S. For translation of operations in non-U.S. Dollar currencies, the local currency of most entities is the functional currency. Foreign exchange effects from the translation of our balance sheet resulted in a comprehensive loss of $69.8 million for the fiscal year ended January 1, 2023. Foreign exchange effects from the translation of our balance sheet were not material during the fiscal year ended January 2, 2022. Adjustments resulting from the re-measurement of transactions denominated in foreign currencies other than the functional currency of our subsidiaries are expensed as incurred.

In the majority of our jurisdictions, we earn revenue and incur costs in the currency used in such jurisdiction. We incur significant costs in foreign currencies, including Brazilian Real, British Pound, Chinese Yuan/Renminbi, Euro, Indian Rupee, Japanese Yen, Mexican Peso, and the Swiss Franc. As a result, movements in exchange rates cause our revenue and expenses to fluctuate, impacting our profitability and cash flows. Future business operations and opportunities, including the continued expansion of our business outside North America, may further increase the risk that cash flows resulting from these activities may be adversely affected by changes in currency exchange rates.

Like many multi-national companies, we have exposure to the British Pound. We are negatively impacted by a lower British Pound exchange rate from translation impact when compared to the U.S. Dollar, but we also benefit from expenses denominated in British Pound, as well as some cross-border transactions at a lower exchange rate. The magnitude of the impact is dependent on our business volumes in the U.K., forward contract hedge positions, cross currency volume and the exchange rate.

Additionally, in order to fund the purchase price for the assets and capital stock of certain non-U.S. entities, a combination of equity contributions and intercompany loans were utilized to capitalize certain non-U.S. subsidiaries. In many instances, the intercompany loans are denominated in currencies other than the functional currency of the affected subsidiaries. Where intercompany loans are not a component of permanently invested capital of the affected subsidiaries, increases or decreases in the value of the subsidiaries’ functional currency against other currencies will affect our results of operations. During the fiscal year ended January 1, 2023, we recorded net foreign currency exchange loss of $6.0 million. Net foreign currency exchange impact was not material for the fiscal year ended January 2, 2022. The foreign currency gains/losses in each period primarily consist of unrealized gains/losses related to intercompany loans denominated in currencies other than the functional currency of the affected subsidiaries. We may enter into derivative instruments to manage our foreign currency exposure on these intercompany loans in the future.

We have entered into foreign currency forward contracts to manage our foreign currency exposures on foreign currency denominated firm commitments and forecasted foreign currency denominated intercompany and third-party transactions. We had forward contracts outstanding with total notional amount of $1,023.3 million as of January 1, 2023, with maturity dates through December 2023. Foreign currency forward contracts that qualified and were designated for hedge accounting are recorded at their fair value as of January 1, 2023 and the unrealized loss of $7.9 million is reported as a component of Other comprehensive income (loss), all of which is expected to be reclassified to earnings in the next 12 months. Actual gains (losses) upon settlement will be recognized in earnings, within the line item impacted, during the estimated time in which the transactions are incurred. Actual gains upon settlement recognized in earnings during the fiscal year ended January 1, 2023 were $3.5 million. Actual losses/gains upon settlement recognized in earnings during the fiscal year ended January 2, 2022 were not material.

See Note 14 to our Consolidated Financial Statements for additional information related to such forward contracts, which information is incorporated herein by reference.

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Item 8. Financial Statements and Supplementary Data

Index of Consolidated Financial Statements and Schedule

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 72

Consolidated Balance Sheets 75

Consolidated Statements of Income 76

Consolidated Statements of Comprehensive Income 77

Consolidated Statements of Stockholders’ Equity 78

Consolidated Statements of Cash Flows 79

Notes to Consolidated Financial Statements 80

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of QuidelOrtho Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of QuidelOrtho Corporation (the Company) as of January 1, 2023 and January 2, 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 1, 2023 and January 2, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2023, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Reserve for contractual rebates

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

San Diego, California

February 23, 2023

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QUIDELORTHO CORPORATION

CONSOLIDATED BALANCE SHEETS

(In millions, except par value)

ASSETS

Current assets:

Cash and cash equivalents $ 292.9 $ 802.8

Marketable securities 52.1 25.7

Prepaid expenses and other current assets 252.1 35.0

Property, plant and equipment, net 1,339.0 349.2

Marketable securities 21.0 37.9

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued payroll and related expenses 139.2 40.4

Current portion of borrowings 207.5 0.3

Deferred tax liability 213.2 —

Commitments and contingencies (Note 12)

Stockholders’ equity:

Accumulated other comprehensive (loss) income (67.6) 0.4

Total liabilities and stockholders’ equity $ 8,855.8 $ 2,430.4

See accompanying notes.

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QUIDELORTHO CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

Fiscal Year Ended

Cost of sales, excluding amortization of intangibles 1,330.0 420.3 305.4

Acquisition and integration costs 136.0 9.6 3.7

Other operating expenses 12.3 — —

Loss on extinguishment of debt 24.0 — 10.4

Other expense (income), net 8.1 (0.1) 1.1

Weighted-average shares outstanding - basic 56.8 42.1 42.1

Weighted-average shares outstanding - diluted 57.4 42.9 43.6

See accompanying notes.

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QUIDELORTHO CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

Fiscal Year Ended

Other comprehensive income (loss)

Changes in cumulative translation adjustment, net of tax (69.8) (1.6) 2.5

Changes in unrealized losses from investments, net of tax (0.4) (0.1) —

Changes from pension and other post-employment benefits, net of tax 0.7 — —

Changes in unrealized gains (losses) from cash flow hedges, net of tax:

Net unrealized gains (losses) on derivative instruments 6.7 0.1 (3.0)

See accompanying notes.

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QUIDELORTHO CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

Common Stock

Issuance of common stock under equity compensation plans 0.5 — 10.4 — — 10.4

Stock-based compensation expense — — 19.0 — — 19.0

Issuance of shares in exchange for Convertible Notes 0.2 — 7.2 — — 7.2

Tax impact from the conversion of Convertible Notes — — 0.1 — — 0.1

Tax withholdings related to vesting of stock-based awards — (4.3) (4.3)

Repurchases of common stock (0.3) — (43.7) — — (43.7)

Issuance of common stock under equity compensation plans 0.6 — 9.6 — — 9.6

Stock-based compensation expense — — 22.7 — — 22.7

Repurchases of common stock (1.0) — (103.5) — — (103.5)

Other comprehensive income, net of tax — — — 0.8 — 0.8

Issuance of common stock under equity compensation plans 0.7 — 30.8 — — 30.8

Stock-based compensation expense — — 45.1 — — 45.1

Repurchases of common stock (1.0) — (74.3) — — (74.3)

Other comprehensive loss, net of tax — — — (68.0) — (68.0)

See accompanying notes.

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QUIDELORTHO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Fiscal Year Ended

OPERATING ACTIVITIES:

Stock-based compensation expense 48.4 25.4 21.0

Net change in operating lease right-of-use assets and liabilities 18.4 3.0 0.4

Loss on extinguishment of debt 24.0 — 10.4

Unwind inventory fair value adjustment 60.6 — —

Changes in assets and liabilities:

Prepaid expenses and other current and non-current assets (26.2) (13.3) (14.3)

Accrued payroll and related expenses 18.2 5.0 16.0

Other current and non-current liabilities (75.2) 27.9 14.2

INVESTING ACTIVITIES

Proceeds from government assistance allocated to fixed assets 18.4 36.9 1.6

Purchases of marketable securities (63.7) (67.4) —

Proceeds from sale of marketable securities 53.4 3.8 —

Net cash used for investing activities (1,644.2) (319.5) (63.3)

FINANCING ACTIVITIES

Proceeds from issuance of common stock 26.4 7.6 9.6

Proceeds from long-term borrowings, net of debt issuance costs 2,734.5 — —

Payments on long-term borrowings and extinguishment costs (2,388.3) (0.3) (0.5)

Principal payments of acquisition contingent consideration (4.2) (4.7) (6.0)

Principal payments of deferred consideration (33.5) (35.1) (42.0)

Payment on Convertible Senior Note and Derivative Liability — — (43.4)

Net cash provided by (used for) financing activities 252.0 (173.1) (130.3)

Effect of exchange rates on cash (2.0) (0.4) 1.0

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for interest $ 95.1 $ — $ 0.5

Cash paid during the period for income taxes $ 264.8 $ 235.6 $ 109.9

Capital expenditures to be reimbursed under a government contract $ — $ — $ 15.9

Transfer of instrument inventories to fixed assets $ 73.7 $ — $ —

Extinguishment of Convertible Notes through issuance of stock $ — $ — $ 7.2

See accompanying notes.

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QuidelOrtho Corporation

Notes to Consolidated Financial Statements

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Organization and Business

On May 27, 2022, pursuant to the BCA, Quidel and Ortho consummated the Combinations and each of Quidel and Ortho became a wholly owned subsidiary of QuidelOrtho. As a result of the Combinations, QuidelOrtho became the successor issuer to Quidel. The results of operations of Ortho have been included in the Company’s Consolidated Financial Statements from the date of acquisition. See Note 2 for further information regarding the Combinations.

The Company’s mission is to develop and manufacture intelligent diagnostic solutions that transform the power of diagnostics into a healthier future for everyone. The Company’s expertise in immunoassay and molecular testing, clinical chemistry and transfusion medicine helps clinicians and patients make better informed decisions across the globe. The Company’s global infrastructure and commercial reach support its customers across more than 130 countries and territories with quality diagnostics, a broad test portfolio and market-leading service. The Company operates globally with manufacturing facilities in the U.S. and U.K. and with sales centers, administrative offices and warehouses located throughout the world.

Basis of Presentation

The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).

Accounting Periods

The Company follows the concept of a fiscal year that ends on the Sunday nearest to the end of the month of December, and fiscal quarters that end on the Sunday nearest to the end of the months of March, June, and September. For fiscal years 2022, 2021 and 2020, the Company’s fiscal years ended on January 1, 2023, January 2, 2022 and January 3, 2021, respectively. Fiscal years 2022 and 2021 were 52 weeks and fiscal year 2020 was 53 weeks.

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. The estimates and underlying assumptions can impact all elements of the financial statements, including, but not limited to, accounting for deductions from revenues (e.g. rebates, sales allowances, and discounts), receivable and inventory valuations, fixed asset valuations, useful lives, impairment of goodwill and tangible and intangible assets, the fair value of assets acquired and liabilities assumed in a business combination and related purchase price allocation, long-term employee benefit obligations, income taxes, environmental matters, litigation and allocations of costs. Estimates are based on historical experience, complex judgments, facts and circumstances available at the time and various other assumptions that are believed to be reasonable under the circumstances but are inherently uncertain and unpredictable. Actual results could differ from those estimates.

Reclassifications

Certain prior period amounts were reclassified to conform to the current period presentation, including the separate presentation of Amortization of intangible assets and Interest expense, net, the combination of Selling, marketing and administrative expense, and reclassification of Other current liabilities and Other liabilities, which did not change the reported amounts of Total current liabilities or Total liabilities. Cost of sales, excluding amortization of intangibles for fiscal years 2021 and 2020 excludes $7.4 million and $7.4 million, respectively, of intangibles amortization expense, formerly included in Cost of sales, which has been reclassified to Amortization of intangible assets. Selling, marketing and administrative expense for fiscal years 2021 and 2020 excludes $20.0 million and $19.9 million, respectively, of intangibles amortization expense, formerly included in Sales and marketing expense, which has been reclassified to Amortization of intangible assets. The reclassifications did not have an impact on net assets, Operating income, Net income, Basic or Diluted earnings per share, or cash flows.

Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers cash equivalents to be highly liquid investments with a maturity at the date of purchase of three months or less. They are carried at cost plus accrued interest, which approximates fair value because of the short-term maturity of these

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instruments. Cash equivalents include money market funds and debt securities of high quality institutions. Cash balances may exceed government insured limits in certain jurisdictions.

Marketable Securities

The Company invests excess cash balances in investment-grade corporate debt securities, asset-backed securities and U.S. Treasury securities. The Company seeks to diversify investments and limits the amount of investment concentrations for individual institutions, maturities and investment types. These marketable securities are classified as available-for-sale and, accordingly, such securities are recorded at fair value. Unrealized gains and losses that are deemed temporary are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. If any adjustment to fair value reflects a significant decline in the value of the security, the Company evaluates the extent to which the decline is determined to be other-than-temporary and would mark the security to market through a charge to its Consolidated Statements of Income. Marketable securities are classified as non-current when maturities are one year or more.

Accounts Receivable and Allowance for Credit Losses and Concentration of Credit Risk

The Company sells its products directly to physician offices, hospitals, clinical laboratories, reference laboratories, urgent care clinics, leading universities, retail clinics, pharmacies, wellness screening centers, other POC settings, blood banks and donor centers, as well as to individual, non-professional OTC customers, and other distributors in the U.S. and internationally (see Note 4). The Company periodically assesses the financial strength of these customers and establishes reserves for anticipated losses when necessary, which historically have not been material. The Company establishes a reserve based on historical losses, the age of receivables, customer mix and credit policies, current economic conditions in customers’ country or industry, and expectations associated with reasonable and supportable forecasts, and specific allowances for large or risky accounts. Amounts later determined to be uncollectible are charged or written off against this allowance. The balance of accounts receivable is net of reserves of $89.1 million and $52.4 million at January 1, 2023 and January 2, 2022, respectively, of which the reserve related to contract rebates was $73.5 million and $40.3 million, respectively.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, marketable securities and trade accounts receivable.

Credit losses are identified when cash flows received are not expected to be sufficient to recover the amortized cost basis of a security. In the event of a credit loss, only the amount associated with the credit loss is recognized in operating results, with the amount of loss relating to other factors recorded in accumulated other comprehensive income (loss).

The Company performs credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary, but generally requires no collateral. Credit quality is monitored regularly by reviewing credit history. The Company believes that the concentration of credit risk in its trade accounts receivables is moderated by its credit evaluation process, relatively short collection terms, the high level of credit worthiness of its customers, and letters of credit issued on the Company’s behalf. Potential credit losses are limited to the gross value of accounts receivable.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. The Company reviews the components of its inventory periodically for excess, obsolete and impaired inventory and records a reduction to the carrying value when identified.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated over the estimated useful lives of the assets using the straight-line method as follows:

Asset type Useful life

Building and building improvements 7-47 years

Machinery and equipment 3-15 years

Customer leased instruments 3-8 years

Computer software 3-5 years

Amortization of leasehold improvements is computed on the straight-line method over the shorter of the lease term or the estimated useful lives of the related assets.

When assets are surrendered, retired, sold or otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the accounts and included in determining gain or loss on such disposals. Maintenance and repairs are expensed as incurred; major replacements and improvements that extend the useful life are capitalized.

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Goodwill

Goodwill represents the excess of purchase price over the fair values of underlying net assets acquired in an acquisition. The Company assesses goodwill for impairment at the reporting unit level on an annual basis, or whenever events or changes in circumstances occur that indicate that the fair value of a reporting unit is below its carrying amount. Beginning in 2022, the Company changed its annual impairment assessment date from December 31 to the first day of the fourth quarter of the fiscal year.

In connection with the Combinations, the manner in which the chief operating decision maker (“CODM”) reviews the Company’s performance and allocates resources changed, resulting in six operating segments: North America, EMEA, China, Latin America, Japan and Asia Pacific. North America, EMEA and China are the Company’s reportable segments; Latin America, Japan and Asia Pacific are immaterial operating segments that are not considered reportable segments and are included in “Other.” The Company concluded each of these six operating segments is considered a reporting unit for the purpose of allocating goodwill and performing the annual goodwill impairment assessment. Prior to the Combinations, the Company operated as a single reportable segment with one reporting unit.

When testing goodwill for impairment, the Company first has an option to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that impairment exists. Such qualitative factors may include the following: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant entity-specific events. In the event the qualitative assessment indicates that an impairment is more likely than not, the Company would be required to perform a quantitative impairment test. Under the quantitative goodwill impairment test, the evaluation of impairment involves comparing the current fair value of each reporting unit to its carrying value, including goodwill. The Company estimates the fair value of its reporting units by using forecasts of discounted future cash flows and peer market multiples. If the fair value of a reporting unit is less than its carrying value, impairment will be recognized in the amount by which the carrying value exceeds the fair value.

For fiscal year 2022, the Company performed a qualitative goodwill impairment assessment as of the beginning of the fiscal fourth quarter to assess for potential impairment. Based on the qualitative impairment assessment performed by the Company, it was concluded that it is not more likely than not that the fair value of the Company’s reporting units is less than their carrying amounts, and therefore no further impairment testing was necessary.

Intangible Assets

Intangible assets are recorded at cost and amortized on a straight-line basis over their estimated useful lives, except for indefinite-lived intangibles such as goodwill. Software development costs associated with software to be leased or otherwise marketed are expensed as incurred until technological feasibility has been established. After technological feasibility is established, software development costs are capitalized and amortized on a straight-line basis over the estimated product life.

Long-lived Assets

The process of evaluating the potential impairment of long-lived assets, such as property, plant and equipment and intangible assets, is subjective and requires judgment. The Company reviews long-lived assets for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying value of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Convertible Debt

The Company accounts for convertible debt instruments that may be settled in cash upon conversion (including combination settlement of cash equal to the “principal portion” and delivery of the “share amount” in excess of the conversion value over the principal portion in shares of common stock and/or cash) by separating the liability and equity components of the instruments in a manner that reflects the Company’s nonconvertible debt borrowing rate. The Company determines the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If no similar debt instrument exists, the Company estimates fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatilities. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions are judgmental in nature and could have a significant impact on the determination of the debt component, and the associated non-cash interest expense. During fiscal year 2020, the remaining aggregate principal amount of the Company’s Convertible Notes was settled or matured.

Revenue Recognition

The Company records revenues primarily from product sales. These revenues are recorded net of rebates and other discounts. These rebates and discounts are estimated at the time of sale, and are largely driven by various customer program offerings,

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including special pricing agreements, promotions and other volume-based incentives. Rebates and discounts are calculated based on historical experience, estimated discounting levels and estimated distributor inventory balances and recorded as a reduction of sales with offsets to accounts receivable and other current liabilities, respectively.

Transaction price for a contract represents the amount to which we are entitled in exchange for providing goods and services to the customer. Transaction price does not include amounts subject to uncertainties unless it is probable that there will be no significant reversal of revenue when the uncertainty is resolved. Revenue is recognized when control of the products is transferred to the customers in an amount that reflects the consideration the Company expects to receive from the customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract and the contract price, allocating the contract price to the distinct performance obligations in the contract and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. A performance obligation is considered to be satisfied once the control of a product is transferred to the customer or the service is provided to the customer, meaning the customer has the ability to use and obtain the benefit of the goods or service.

During fiscal years 2022 and 2021, the Company generated a portion of its revenue from sales of the QuickVue At-Home OTC COVID-19 tests to retail customers. The Company estimates the transaction price for revenue from sales to retail customers based on historical experience and current trends to evaluate when uncertainties related to right of return provisions are resolved. As of January 1, 2023 and January 2, 2022, due to a lack of history on which to base an estimate of products to be returned from the retailers, the Company established a reserve based on an estimate of total inventory remaining at our retailers which was subject to return.

A portion of product sales includes revenues for diagnostic kits, which are utilized on leased instrument systems under the Company’s “reagent rental” program. The reagent rental program provides customers the right to use the instruments at no separate cost to the customer in consideration for a multi-year agreement to purchase annual minimum amounts of consumables (“reagents” or “diagnostic kits”). When an instrument is placed with a customer under a reagent rental agreement, the Company retains title to the equipment and it remains capitalized on the Company’s Consolidated Balance Sheets as property, plant and equipment, net. The instrument is depreciated on a straight-line basis over the lesser of the lease term or life of the instrument. Depreciation expense is recorded in cost of sales included in the Consolidated Statements of Income. Instrument and consumables under the reagent rental agreements are deemed two distinct performance obligations. Though the instrument and consumables do not have any use to customers without one another, they are not highly interdependent because they do not significantly affect each other. The Company would be able to fulfill its promise to transfer the instrument even if its customers did not purchase any consumables and the Company would be able to fulfill its promise to provide the consumables even if customers acquired instruments separately. The contract price is allocated between these two performance obligations based on the relative standalone selling prices. The instrument is considered an operating lease and revenue allocated to the instrument was not material for fiscal years 2022, 2021 and 2020.

Government Assistance

During fiscal year 2020, the Company entered into a contract with the National Institutes of Health (“NIH”), through its newly launched Rapid Acceleration of Diagnostics - Advanced Technology Platforms initiative, to support the Company’s expansion of its manufacturing capacity for its diagnostic assays that test for the SARS-CoV-2 antigen. The contract originally provided for consideration to the Company of up to $65.0 million and had a performance period of one year, which began in July 2020. During 2021, the Company entered into several amendments to the contract, which added additional deliverables and milestones, as well as extended the performance period. The contract and amendments included key deliverables and milestones that directly supported the upgrade and addition of new manufacturing lines, as well as the outfitting of the new distribution center. The Company also provided instruments and assays to NIH. There were no refund provisions under the contract.

Consideration from the contract was allocated to each deliverable identified within the contract using a relative fair value allocation method and recognized when there was reasonable assurance the Company would meet the milestones and receive the consideration. Consideration allocated to the delivery of instruments and assays was recognized in accordance with the Company’s existing revenue recognition policy described above. Consideration that related to capital expenditures was recorded as a reduction to the carrying value of such assets and amortized over the useful life of the assets. Consideration allocated to the remainder of the contract was recorded as reductions to the related expense. As of January 2, 2022, the Company had achieved and collected payments for all milestones under the NIH contract.

In connection with the Combinations, the Company acquired a previously established agreement between Ortho and the Biomedical Advanced Research and Development Authority (“BARDA”), a division of HHS, which provides funding for Ortho to build manufacturing space and production support equipment to increase COVID-19 assay production capacity, as well as to build a manufacturing facility to produce certain analyzers needed to support COVID-19 testing. Amounts received from BARDA under this grant are recorded as a reduction to the carrying value of the related assets. A portion of the grant is

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for purposes of reimbursement of certain general and administrative expenses related to the project, which are not capitalized as part of the equipment constructed in connection with the project and are recorded as a reduction to the related expense. The Company received $18.4 million during fiscal year 2022, which was recorded as a reduction to the carrying value of the related assets.

Research and Development Costs

Research and development costs are charged to operations as incurred. Upfront and milestone payments made to third parties in connection with R&D collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties at or subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the related product. Amounts capitalized for such payments are included in other intangibles, net of accumulated amortization.

The Company enters into collaborative arrangements to develop and commercialize intellectual property. These arrangements typically involve two (or more) parties who are active participants in the collaboration and are exposed to significant risks and rewards dependent on the commercial success of the activities. These collaborations usually involve various activities by one or more parties, including R&D, marketing and selling and distribution. Often, these collaborations require upfront, milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development. Amounts due from collaborative partners related to development activities are generally reflected as a reduction of research and development expense because the performance of contract development services is not central to the Company’s operations.

Product Shipment Costs

Product shipment costs are included in Selling, marketing and administrative expense in the accompanying Consolidated Statements of Income. Shipping and handling costs were $104.9 million, $29.3 million and $14.2 million for fiscal years 2022, 2021 and 2020, respectively.

Advertising Costs

Advertising costs are expensed as incurred and included in Selling, marketing and administrative expense in the accompanying Consolidated Statements of Income. Advertising costs were $26.8 million, $13.7 million and $1.1 million for fiscal years 2022, 2021 and 2020, respectively.

Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company’s policy is to recognize the interest expense and penalties related to income tax matters as a component of the income tax provision.

The Company does not intend to permanently reinvest earnings of foreign subsidiaries at this time. As such, the Company provides for income taxes and foreign withholding taxes, where applicable, on undistributed earnings. Any repatriation of undistributed earnings would be done at little or no tax cost.

Fair Value of Financial Instruments

The Company uses the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires that the valuation of assets and liabilities subject to fair value measurements be classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

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Stock-based Compensation

Stock-based compensation, comprised of stock options, restricted stock units (“RSUs”) and restricted stock awards to employees and directors, is measured at fair value on the grant date. Compensation expense is recognized over the requisite service period, which is generally the vesting period, and includes an estimate of the awards that will be forfeited, and an estimate of the level of performance the Company will achieve for performance-based awards.

Leases

Lease liabilities represent the obligation to make lease payments and right-of-use (“ROU”) assets represent the right to use the underlying asset during the lease term. Lease liabilities and ROU assets are recognized at the commencement date of the lease based on the present value of lease payments over the lease term at the commencement date. When the implicit rate is unknown, an incremental borrowing rate based on the information available at the commencement date is used in determining the present value of the lease payments. Options to extend or terminate the lease are included in the determination of the lease term when it is reasonably certain that the Company will exercise such options.

For certain classes of assets, the Company accounts for lease and non-lease components as a single lease component. Variable lease payments, including those related to changes in the consumer price index, are recognized in the period in which the obligation for those payments is incurred and are not included in the measurement of the ROU assets or lease liabilities. Short-term leases are excluded from the calculation of the ROU assets and lease liabilities.

Operating leases are included in ROU assets, operating lease liabilities and operating lease liabilities non-current in the Consolidated Balance Sheets.

Comprehensive Income

Comprehensive income includes unrealized gains and losses that are related to cumulative translation adjustments; unrealized gains and losses on marketable securities; changes in unamortized pension and post-employment actuarial gains and losses; and changes in the fair value of derivatives that are designated and qualify as cash flow hedging instruments excluded from the Consolidated Statements of Income.

Business Combinations

The cost of an acquired business is assigned to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of the estimated fair values at the date of acquisition. The Company assesses fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using a variety of methods including, but not limited to, an income approach and a market approach, such as the estimation of future cash flows of the acquired business and current selling prices of similar assets. Fair value of the assets acquired and liabilities assumed, including intangible assets, IPR&D, and contingent payments, are measured based on the assumptions and estimations with regards to variable factors such as the amount and timing of future cash flows for the asset or liability being measured, appropriate risk-adjusted discount rates, nonperformance risk, or other factors that market participants would consider. Upon acquisition, the Company determines the estimated economic lives of the acquired intangible assets for amortization purposes, which are based on the underlying expected cash flows of such assets. When applicable, adjustments to inventory are based on the fair market value of inventory and are recognized into income based on the period in which the underlying inventory is sold. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that is not individually identified and separately recognized. Actual results may vary from projected results and assumptions used in the fair value assessments.

Defined Benefit Plans and Other Post-Employment Benefits

In connection with the Combinations, the Company assumed Ortho’s defined benefit plans in certain countries and a retiree healthcare reimbursement plan for certain U.S. employees. Defined benefit plans specify an amount of pension benefit that an employee will receive on retirement, usually dependent on factors such as age, years of service and compensation. The net obligation with respect to defined benefit plans is calculated separately for each plan by estimating the amount of the future benefits that employees have earned in return for their service in the current and prior periods. These benefits are then discounted to determine the present value of the obligations and are then adjusted for the impact of any unamortized prior service costs. The net obligation is then determined with reference to the fair value of the plan assets (if any). The discount rate used is the yield on bonds that are denominated in the currency in which the benefits will be paid and that have maturity dates approximating the terms of the obligations. The calculations are performed by qualified actuaries using the projected unit credit method.

Recent Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board issued guidance which was codified in Accounting Standards Update 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts

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with Customers. Under the 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. For public business entities, 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 Consolidated Financial Statements.

Note 2. Business Combination

On May 27, 2022, pursuant to the BCA, Quidel and Ortho consummated the Combinations and each of Quidel and Ortho became a wholly owned subsidiary of QuidelOrtho. As a result of the Combinations, QuidelOrtho became the successor issuer to Quidel. The Combinations have been accounted for as a business combination using the acquisition method of accounting in conformity with ASC Topic 805, Business Combinations, with Quidel considered the accounting and the legal acquirer.The Combinations enhance the Company’s revenue profile and expand the Company’s geographic footprint and product diversity.

The Combinations were completed for a total consideration of approximately $4.3 billion, which included the fair value of equity issued based on the May 26, 2022 closing price of $99.60 per share of Quidel common stock. Former Ortho shareholders received $7.14 in cash and 0.1055 shares of QuidelOrtho common stock for each Ortho ordinary share. The total purchase consideration was calculated as follows (in millions, except value per share data and Ortho Exchange Ratio):

Total Ortho shares subject to exchange 237.487

Ortho Exchange Ratio 0.1055

QuidelOrtho shares issued 25.055

Fair value of stock consideration $ 2,495.5

Fair value of replacement equity awards (1) 47.9

Total purchase consideration $ 4,291.1

The Company funded the cash portion of the purchase price with cash on its balance sheet and a portion of the Term Loan (as defined in Note 8) proceeds from the Financing (as defined in Note 8). See Note 8 for further information regarding the Company’s debt.

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The components of the preliminary purchase price allocation on the closing date of the Combinations are as follows:

Cash and cash equivalents $ 234.5 $ — $ 234.5

Accrued payroll and related expenses (80.7) (0.4) (81.1)

Long-term borrowings, including current portion (1) (2,268.4) — (2,268.4)

Other current and non-current liabilities (351.0) (21.5) (372.5)

Total purchase consideration $ 4,291.1 $ — $ 4,291.1

(1) Immediately following the closing of the Combinations, the Company repaid long-term borrowings assumed, which consisted of $1,608.4 million aggregate principal amount related to Ortho’s Dollar Term Loan and Euro Term Loan Facilities, $240.0 million aggregate principal amount of 7.375% Senior Notes due 2025 and $405.0 million aggregate principal amount of 7.250% Senior Notes due 2028. The 7.375% and 7.250% Senior Notes were fully discharged following the Combinations. The Company recorded a $23.5 million loss on extinguishment in connection with the Combinations, representing the difference between the reacquisition value, inclusive of $35.9 million of redemption premium, and the net carrying value of the extinguished debt.

The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations, and the Company’s estimates and assumptions are subject to change for income tax matters. The Company expects to finalize the valuation as soon as practicable, but no later than one year after the closing date of the Combinations. The measurement period adjustments in the six months ended January 1, 2023 primarily resulted from completing valuations of real estate, personal property and intangible assets and revising the valuation of income tax liabilities. The related impact to net earnings that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date is immaterial to the Consolidated Financial Statements.

Inventories acquired included raw materials, work in progress and finished goods. Inventories were recorded at their estimated fair values. Inventories were valued at the estimated selling price less the estimated costs to be incurred to complete and sell the inventories, the associated margins on these activities and holding costs. A step-up in the value of inventory of $61.7 million was recorded in connection with the Combinations. The step-up value was recorded in Cost of sales, excluding amortization of intangibles in the Consolidated Statements of Income as the inventory was sold to customers, and was fully recognized by the end of fiscal year 2022. In fiscal year 2022, $60.6 million of the fair value step-up of inventory was recognized in the Consolidated Statements of Income.

Goodwill represents the excess of the total purchase consideration over the estimated fair value of the net assets acquired, and is primarily attributable to synergies which are expected to expand the Company’s revenue profile and product diversity, as well as Ortho’s assembled workforce. Goodwill is not deductible for tax purposes. The preliminary assignment of goodwill by reportable segment as of the closing date of the Combinations is as follows (in millions):

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The following table sets forth the amounts assigned to the identifiable intangible assets acquired (in millions, except years):

Intangible Asset Amortization Period Fair Value of Assets Acquired

Customer relationships 20 years $ 1,907.0

Developed technology 15 years 888.0

The fair value of customer relationships was estimated using the Multi-Period Excess Earnings Method, which is a form of the income approach. Significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset, contributory asset charges and the applicable tax rate, and (ii) the discount rate.

The fair value of developed technology and trademarks was estimated using the Relief from Royalty Method, which is another form of the income approach. Significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset, the probability of use of the asset, the royalty rate and the applicable tax rate, and (ii) the discount rate.

Intangible assets are amortized on a straight-line basis over the amortization periods noted above, which reflects the estimated useful life of the underlying assets.

For fiscal year 2022, the Company incurred $46.9 million of transaction costs related to the Combinations, which primarily consisted of financial advisory, legal, accounting and valuation-related expenses. These expenses were recorded in Acquisition and integration costs in the Consolidated Statements of Income.

The following supplemental pro forma financial information shows the combined results of operations of the Company as if the Combinations had occurred on January 4, 2021, the beginning of the periods presented:

Fiscal Year Ended

This supplemental pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the Combinations been completed at the beginning of fiscal year 2021. In addition, the supplemental pro forma financial information is not a projection of the Company’s future results of operations, nor does it reflect the expected realization of any synergies or cost savings associated with the Combinations. The supplemental pro forma financial information includes adjustments for:

•incremental intangible assets amortization expense to be incurred of $19.6 million and $45.5 million for fiscal years 2022 and 2021, respectively, based on the preliminary fair values of the identifiable intangible assets acquired;

•incremental cost of sales related to the fair value step-up of inventory which is reflected by an adjustment to decrease expense by $60.6 million for fiscal year 2022 and an adjustment to increase expense by $61.7 million for fiscal year 2021;

•decreases in interest expense of $11.2 million and $34.9 million for fiscal years 2022 and 2021, respectively, associated with the issuance of debt to finance the Combinations and to repay Ortho’s then-outstanding indebtedness, including the net impact of the removal of the amortization of the discount on Ortho’s indebtedness and the change in amortization of deferred financing fees;

•the removal of $50.3 million of loss on extinguishment of debt from Ortho’s financial results for fiscal year 2022 and the reclassification of $24.0 million of loss on extinguishment of debt incurred during fiscal year 2022 to fiscal year 2021;

•the reclassification of $12.8 million of expense related to the accelerated vesting of certain stock awards of Ortho’s former chief executive officer from fiscal year 2022 to fiscal year 2021; and

•tax impacts related to the above adjustments.

From the closing date of the Combinations through January 1, 2023, the acquired results of operations of Ortho contributed total revenues of $1,165.2 million and net loss of $126.2 million to the Company’s consolidated results, which included amortization of acquired intangible assets of $104.7 million and recognition in Cost of sales, excluding amortization of intangibles of the fair value step-up of inventory of $60.6 million.

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Note 3. Computation of Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of shares of common stock outstanding. Diluted EPS is computed based on the sum of the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares of common stock consist of shares issuable from stock options, unvested RSUs and restricted stock. Potentially dilutive shares of common stock from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares from the Convertible Notes are determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Notes are assumed to be converted and the resulting common shares are included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Notes is added back to net income. The Convertible Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The Convertible Notes became convertible on March 31, 2018 and matured on December 15, 2020.

The following table reconciles net income and the weighted-average shares used in computing basic and diluted EPS in the respective periods:

Fiscal Year Ended

Numerator:

Net income used for basic earnings per share $ 548.7 $ 704.2 $ 810.3

Interest expense on Convertible Notes, net of tax — — 0.4

Denominator:

Basic weighted-average shares of common stock outstanding 56.8 42.1 42.1

Dilutive potential shares issuable from Convertible Notes — — 0.3

Diluted weighted-average shares of common stock outstanding 57.4 42.9 43.6

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.

Note 4. Revenue

Contract Balances

Timing of revenue recognition may differ from timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing a customer (a “contract asset”). Contract assets are included within Prepaid expenses and other current assets or Other assets in the Company’s Consolidated Balance Sheets and are transferred to accounts receivable when the right to payment becomes unconditional. The balance of contract assets recorded in the Company’s Consolidated Balance Sheets as of January 1, 2023 was $49.6 million and was included in Prepaid expenses and other current assets.

The contract asset balance as of January 1, 2023 consisted of the following components, all of which related to agreements acquired by the Company in connection with the Combinations; therefore, no balance existed at January 2, 2022:

•a customer supply agreement under which the difference between the timing of invoicing and revenue recognition resulted in a contract asset of $6.8 million;

•contractual arrangements with certain customers under which the Company invoices the customers based on reportable results generated by its reagents; however, control of the goods transfers to the customers upon shipment or delivery of the products, as determined under the terms of the contract. Using the expected value method, the Company estimates the number of reagents that will generate a reportable result. The Company records the revenue upon shipment and an associated contract asset, and relieves the contract asset upon completion of the invoicing. The balance of the contract asset related to these arrangements was $38.5 million as of January 1, 2023 and was recorded in Prepaid expenses and other current assets; and

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•one of the Company’s contract manufacturing agreements that recognizes revenue as the products are manufactured. The balance of the contract asset related to this arrangement was $4.3 million as of January 1, 2023.

The Company reviews contract assets for expected credit losses resulting from the collectability of customer accounts. Expected losses are established based on historical losses, customer mix and credit policies, current economic conditions in customers’ country or industry, and expectations associated with reasonable and supportable forecasts. No credit losses related to contract assets were recognized during fiscal year 2022.

The Company recognizes a contract liability when a customer pays an invoice prior to the Company transferring control of the goods or services (“contract liabilities”). The Company’s contract liabilities consist of deferred revenue primarily related to customer service contracts. The Company classifies deferred revenue as current or non-current based on the timing of the transfer of control or performance of the service. The balance of the Company’s current deferred revenue was $76.4 million as of January 1, 2023, and $1.9 million as of January 2, 2022. The Company has one arrangement with a customer where the revenue is expected to be recognized beyond one year. The balance of the deferred revenue included in long-term liabilities was $9.4 million as of January 1, 2023 and was included in Other liabilities in the Consolidated Balance Sheets. There was no deferred revenue included in long-term liabilities as of January 2, 2022.

Joint Business with Grifols

In connection with the Combinations, the Company acquired the Joint Business between Ortho and Grifols, under which Ortho and Grifols agreed to pursue a collaboration relating to Ortho’s Hepatitis and HIV diagnostics business. The governance of the Joint Business is shared through a supervisory board made up of equal representation by Ortho and Grifols, which is responsible for all significant decisions relating to the Joint Business that are not exclusively assigned to either Ortho or Grifols, as defined in the Grifols Agreement. The Company’s portion of the pre-tax net profit shared under the Joint Business was $18.6 million during fiscal year 2022. This included the Company’s portion of the pre-tax net profit of $11.1 million during fiscal year 2022 on sales transactions with third parties where the Company is the principal. The Company recognized revenues, cost of sales, excluding amortization of intangibles, and operating expenses, on a gross basis on these sales transactions in their respective lines in the Consolidated Statements of Income. The Company’s portion of the pre-tax net profit also included revenue of $7.5 million from collaboration and royalty agreements during fiscal year 2022, which is presented on a net basis within Total revenues.

Disaggregation of Revenue

Following the Combinations, the Company reorganized its former product categories into four business units. Revenues from the Company’s former Specialized Diagnostic Solutions product category have been included in a new Labs business unit. The Company’s former Rapid Immunoassay and Cardiometabolic Immunoassay product categories now represent its Point of Care business unit. The Molecular Diagnostics business unit represents the former Molecular Diagnostic Solutions product category. In addition, the Company added a Transfusion Medicine business unit.

The following table summarizes Total revenues by business unit:

Fiscal Year Ended

Transfusion Medicine 393.8 — —

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Concentration of Revenue and Credit Risk

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

Fiscal Year Ended

Customer:

As of January 1, 2023 and January 2, 2022, customers with balances due in excess of 10% of Accounts receivable, net totaled $161.9 million and $267.3 million, respectively. For fiscal years 2022, 2021 and 2020, sales of COVID-19 products accounted for 44%, 75% and 70% of Total revenues, respectively. For fiscal years 2022, 2021 and 2020, sales of influenza products accounted for 11%, 4% and 8% of Total revenues, respectively.

Note 5. Segment and Geographic Information

In connection with the Combinations, the manner in which the CODM reviews the Company’s performance and allocates resources changed, resulting in three geographically-based reportable segments: North America; EMEA; and China. Although all three segments are engaged in the marketing, distribution and sale of diagnostic instruments and assays for hospitals, retailers, distributors, laboratories and/or blood and plasma centers worldwide, each region is managed separately to better align with the market dynamics of the specific geographic region. Latin America, Japan and Asia Pacific are immaterial operating segments that are not considered reportable segments and are included in “Other.” Previously, the Company operated as a single reportable segment. Prior periods have been revised to align with the current period presentation.

Total revenues by reportable segment are as follows:

Fiscal Year Ended

Beginning in the second quarter of 2022, in connection with the Combinations, the basis by which the Company measures segment profit or loss changed to Adjusted EBITDA in order to manage the Company’s business to better align with the market dynamics of the specific geographic regions in which the Company operates. In the fourth quarter of 2022, the Company revised the internal allocation of certain global costs primarily between the North America segment and Corporate to better align costs that impact the Company as a whole. Prior periods have been revised to align with the current period presentation.

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The following table sets forth Adjusted EBITDA by segment and the reconciliations to Income before provision for income taxes for fiscal years 2022, 2021 and 2020:

Fiscal Year Ended

Depreciation and amortization (283.6) (52.7) (48.8)

Acquisition and integration costs (136.0) (9.6) (3.7)

Interest expense, net (75.7) (5.8) (8.5)

Unwind inventory fair value adjustment (60.6) — —

Loss on extinguishment of debt (24.0) — (10.4)

(Loss) gain on investments (5.8) 1.5 —

Amortization of deferred cloud computing implementation costs (5.4) (3.7) (1.1)

Employee compensation charges and other costs (3.7) — —

Impairment of long-lived assets (2.8) — —

EU medical device regulation transition costs (2) (1.5) — —

Tax indemnification expense (0.3) — —

Change in fair value of acquisition contingencies (0.1) (0.2) (1.4)

Derivative mark-to-market gain (loss) 4.4 — (1.1)

Income before provision for income taxes $ 735.9 $ 900.3 $ 1,040.3

(1) Primarily consists of costs related to executive and staff functions, including certain finance, human resources, manufacturing and IT functions, which benefit the Company as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. The Company’s corporate function also includes debt and stock-based compensation associated with all employee stock-based awards.

(2) Represents incremental consulting costs and R&D manufacturing site costs to align compliance of Ortho’s existing, on-market products that were previously registered under the European In Vitro Diagnostics Directive regulatory framework with the requirements under the EU’s In Vitro Diagnostic Regulation, which generally apply from May 2022 onwards.

The CODM does not review capital expenditures, total depreciation and amortization or assets by segment, and therefore this information has been excluded as it does not comprise part of management’s key performance metrics.

The following presents long-lived assets (excluding intangible assets) and total net revenue by geographic territory:

Long-lived Assets as of Total Revenues for Fiscal Year

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Note 6. Income Taxes

Significant components of the provision for income taxes were as follows:

Fiscal Year Ended

Current:

Deferred:

Total deferred provision (benefit) (41.4) 2.6 (4.2)

The Company’s income before income taxes was subject to taxes in the following jurisdictions for the following periods:

Fiscal Year Ended

Significant components of the Company’s deferred tax assets and deferred tax liabilities as of January 1, 2023 and January 2, 2022 are shown below:

Deferred tax assets:

Intangible assets — 2.2

Allowance for returns and discounts 45.9 28.3

Inventory reserve 34.1 6.4

Stock-based compensation 14.6 9.2

Tax loss and credit carryforwards 565.3 10.8

Research & development expenses 50.7 —

Employee related obligations 19.9 5.5

Total deferred tax assets 798.0 95.9

Valuation allowance for deferred tax assets (251.3) (2.3)

Total deferred tax assets, net of valuation allowance 546.7 93.6

Deferred tax liabilities:

Right-of-use assets (43.8) (30.1)

Intangible assets (590.2) (0.9)

Property, plant and equipment (109.5) (42.5)

Total deferred tax liabilities (743.5) (73.5)

Net deferred tax assets (liabilities) $ (196.8) $ 20.1

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. For the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021, the Company has demonstrated positive cumulative pre-tax book income. Such objective positive evidence allowed the

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Company to consider other subjective evidence, such as the Company’s projections for future profitability, to determine the realizability of its deferred tax assets.

The valuation allowance of $251.3 million as of January 1, 2023 represents the portion of the deferred tax asset that management could not conclude was more likely than not to be realized. The Company’s valuation allowance relates primarily to the realization of recorded tax benefits on tax loss carryforwards from operations in Luxembourg and certain U.S. state jurisdictions. The amount of the deferred tax assets considered realizable could be adjusted in the future based on changes in available positive and negative evidence.

As of January 1, 2023, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $879.8 million, of which $473.0 million are subject to expiration through 2037 and $406.8 million are not subject to expiration. In addition, the Company has state NOLs of approximately $530.1 million, which will expire in years 2023 through 2042. As of January 1, 2023, the Company had U.S. federal research credit carryforwards of $14.2 million and federal foreign tax credits of $3.4 million, which will begin to expire in 2034 and 2028, respectively. In addition, the Company had state research credits of $5.9 million, of which none expire, and state business credit carryforwards of $25.6 million, which will begin to expire in 2029. As of January 1, 2023, the Company had $543.8 million of NOL carryforwards in certain non-U.S. jurisdictions, net of uncertain tax positions. Of these, $339.1 million have no expiration and the remaining $204.7 million will expire in years through 2042.

Pursuant to Internal Revenue Code Sections 382 and 383, the Company’s use of its NOL and tax credit carryforwards may be limited as a result of cumulative changes in ownership of more than 50% over a three-year period. As a result of an ownership change that occurred in the second quarter of fiscal year 2022, the Company may be limited in its ability to utilize its NOL carryforwards and certain other attributes, starting the ownership change date.

The reconciliation of income tax computed at the federal statutory rate to the provision for income taxes from continuing operations was as follows:

Fiscal Year Ended

State tax expense, net of federal tax 29.3 30.1 30.3

Foreign income taxed at rates other than the applicable U.S. rate (27.5) — —