BillionToOne, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with our audited financial statements and related notes included elsewhere in this Annual Report. The following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report. See also the section titled “Special Note Regarding Forward-Looking Statements” in this Annual Report. A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2025 compared to the fiscal year ended December 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023 can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the final prospectus for our IPO dated as of November 5, 2025 and filed with the SEC pursuant to Rule 424(b)(4) on November 6, 2025. Overview BillionToOne is transforming healthcare by redefining molecular diagnostics. Our revolutionary single-molecule next-generation sequencing (smNGS) platform achieves what was once thought impossible-detecting and precisely quantifying genetic targets with single-molecule sensitivity. At the heart of this technological breakthrough lies our patented quantitative counting templates (QCTs), enabling measurements at the physical limit of detection-the single DNA molecule. This leap forward addresses a fundamental limitation in healthcare-the inability to detect sparse but clinically crucial disease signals in cell-free DNA (cfDNA). Founded with the mission to remove the fear of the unknown through powerful and accessible smNGS-based diagnostics, we have swiftly transitioned from an R&D-focused company to a proven commercial organization. Since launching UNITY, our first prenatal product in 2019, we have expanded our offerings first within prenatal genetics, and then to oncology diagnostics. To date, we have processed more than one million smNGS-based tests. Today, we test approximately 1 in 11 babies during pregnancy in the United States, a metric that is continuing to increase rapidly every year. UNITY is the first single-gene non-invasive prenatal test (sgNIPT) that uses cfDNA to provide fetal risk assessment for recessive conditions such as sickle cell disease (SCD) and cystic fibrosis (CF) without requiring a paternal sample or invasive procedures such as amniocentesis. Since then, we have expanded our UNITY offering to cover comprehensive prenatal genetic needs from a single maternal blood draw. In 2024, our unique fetal antigen tests resulted in national medical guideline changes, enabling us to position our tests as “the new standard in prenatal care,” further contributing to both test volume and average selling price (ASP) growth, as we leveraged the guideline changes to contract with more insurance companies. By detecting and identifying an extensive array of severe but actionable genetic disorders during pregnancy, we enable substantially better outcomes for newborns via earlier therapeutic and other clinical interventions. In the oncology setting, ultrasensitive tests with real-time insights are required to effectively detect, diagnose, and treat patients with a diverse range of mutations and solid tumor types across the cancer care continuum. In 2023, we successfully leveraged our smNGS platform to launch two complementary pan-cancer liquid biopsy tests - Northstar Select® and Northstar Response®. Our Northstar Select test is used to guide therapy selection and has been shown to detect over 50% more actionable solid tumor mutations than conventional liquid biopsies. Based on our knowledge of all widely available tests, Northstar Response is the only methylation-based assay that quantifies the amount of cancer (tumor burden) at the single molecule level without requiring a tissue biopsy, enabling real-time monitoring of patient response to therapy with unprecedented precision. Our Northstar tests give physicians extraordinary visibility into cancer profile and treatment response, enabling more informed and earlier treatment decisions that can fundamentally alter patient outcomes. Our business momentum is evidenced by our rapidly scaling commercial success and improving operational efficiency. Of over one million smNGS-based tests that we have processed since our initial launch, over 50% of them, or approximately 616,000 tests, were processed in the year ended December 31, 2025. 93 Table of Contents Our key performance metrics Our revenue is driven by selling and performing molecular diagnostic tests ordered by physicians and other providers. We generally bill the patients’ insurance carrier, Medicaid, Medicare, the patient, or a combination upon delivery of the test results. Our revenue is the function of two inputs: the number of tests ordered and the ASP that we can achieve through reimbursement. There is a flywheel effect between these two factors. The more tests that we process, the easier it becomes for us to contract with third-party payors and become an in-network provider. This increases our ASP for our tests, as the denial rate of our tests significantly decreases once we become an in-network provider. As we become an in-network provider, it becomes easier for our sales representatives to convince ordering providers to use our tests. We believe that the combined effects of ASP increases, cost of goods sold (COGS) decreases, and improved operational efficiency have been the main drivers of our ability to generate net income for the year ended December 31, 2025. Our total test volume, which represents the number of billable tests that we receive for processing during each period and which we also refer to as tests accessioned, grew to approximately 616,000 tests for the year ended December 31, 2025, compared to 410,000 and 272,000 for the years ended December 31, 2024 and December 31, 2023, respectively. In addition, our total delivered and billable test volume, which represents the number of billable tests for which we deliver a result to the ordering provider each period, grew to approximately 610,000 tests for the year ended December 31, 2025, compared to 405,000 and 264,000 delivered and billable tests for the years ended December 31, 2024 and December 31, 2023, respectively. Key factors affecting our results of operations and performance We believe certain factors have influenced, and will continue to influence, our operating performance and results of operations. While each of these factors presents significant opportunities for our business, they also pose important risks and challenges that we must successfully address to sustain and grow our business and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described under Part I, Item 1A “Risk Factors.” Market adoption and commercial success Our success and future growth depend on maintaining and expanding market acceptance and achieving commercial success in our prenatal and oncology product lines. This requires our sales teams to develop and maintain relationships with obstetricians, maternal-fetal medicine specialists, oncologists, and other providers. In addition, our sales teams must be able to convincingly communicate the clinical utility and value of our tests in enabling personalized patient care. The commercial success of our existing tests and any new tests we develop will depend upon factors such as clinical evidence supporting their effectiveness, inclusion in clinical practice guidelines, adoption by the medical community, favorable coverage by third-party payors, and our ability to differentiate our offerings in competitive markets. In addition, our ability to maintain and expand our sales and marketing capabilities to support increased adoption of our molecular diagnostic solutions will be another key factor to our success. Payor coverage, contracting, and more effective reimbursement operations Our ASPs and revenue depend heavily on our success in achieving and maintaining broad coverage and adequate reimbursement for our molecular diagnostic tests from third-party payors. Third-party reimbursement for our tests represented more than 90% of our revenue for the years ended December 31, 2025 and 2024, and we expect government and commercial third-party payors to continue to be our primary source of payments. Coverage and reimbursement by third-party payors, including commercial health insurers, managed care organizations, and government healthcare programs such as Medicare and Medicaid, can be limited and uncertain for the types of specialized molecular diagnostic tests we offer. Each payor makes its own determination as to whether to establish a policy to cover our tests as well as the amount it will reimburse for such tests. Payors make these determinations based on factors that include medical necessity, clinical utility, and cost-effectiveness. Reimbursement rates vary significantly by test-type, payor, and coverage determination. Historically, our market access and reimbursement teams have pursued strategies to increase our ASPs by expanding our payor coverage and reimbursement. We believe these strategies will continue to grow our ASPs over time. 94 Table of Contents Internalizing and strengthening our reimbursement capabilities and incorporating automation and AI to reimbursement operations We have invested in building a high-performing, specialized team dedicated to all aspects of reimbursement, including claims management, appeals, and payor relations. In July 2023, we transitioned from relying on third-party vendors to managing our reimbursement function in-house. This team’s expertise and commitment have enabled a more consistent, and accurate billing and appeal process, along with the rapid identification and resolution of reimbursement issues. In addition, we have integrated our internal systems end-to-end, automated many of the repetitive reimbursement procedures, and incorporated AI for significant efficiency improvements (e.g., using large language models (LLMs) to read, categorize, and react to thousands of correspondence items from insurance companies that we receive every day), allowing our team to significantly increase their productivity. This strategic move not only streamlines our operations and improves cash flow but also allows us to better advocate for the value of our diagnostic tests with payors by providing rapid feedback and responding proactively to evolving reimbursement trends. Relentless focus on reducing costs and increasing operational efficiency Our financial results depend upon our ability to support current and future levels of demand for our prenatal screening and oncology diagnostic tests while maintaining discipline around our cost structure. Historically, we have been able to grow the size of our operational team much more slowly than our test volume increases. This has led to significantly increased operational leverage and efficiencies on a per-test basis and has been a driver in improving our net income (loss) margin. We actively seek ways to continuously reduce our costs-per-test and improve our gross profit margin, long-term profitability, and return on investment. For example, we have reduced COGS per test through automation and optimization of laboratory workflows, successful negotiations with suppliers, and re-design and re-validation of assays with more optimized chemistry or higher-throughput sequencing. Nevertheless, as our test volumes grow, we have made and will continue to make significant investments in state-of-the-art infrastructure to support our growth. In 2023 we successfully expanded our laboratory operations from a single facility with 36,000 square feet in Menlo Park, CA by adding a second laboratory facility in Union City, CA with 90,000 square feet. To further support our growth beyond our current facilities, we have also entered a lease for the construction of 220,000 square feet of laboratory space in Austin, Texas with favorable terms and a tenant improvement package. We expect to occupy this facility in 2027, and open for processing commercial samples in 2028. Once the facility is fully utilized, we expect our potential testing capacity to be nearly triple our current capabilities. In addition, we must simultaneously enhance our customer service capabilities, improve our billing and administrative processes, expand our quality assurance programs, incorporate new laboratory equipment and automation, and implement new technology systems, all while maintaining competitive turnaround times. As such, our expenses may increase. In order to maintain cost discipline, we will continue to re-design and optimize our processes, integrate AI into our workflows, and increasingly automate both our laboratory and non-laboratory operations. We believe that our continued focus in optimization, automation, and AI for higher operational efficiencies will drive further productivity gains. Continued research and development and new product innovation We expect to maintain significant levels of investment in research and development as we continue to develop new molecular diagnostic assays, enhance existing tests, and expand our testing capabilities into new clinical applications within our prenatal screening and oncology diagnostics product lines. These investments include costs for new test development, costs to validate new assays or to improve current assays, clinical studies to demonstrate utility and support reimbursement efforts, and development costs for new testing methodologies and platforms. Our ability to develop new products, obtain regulatory approvals for such products when required, successfully launch new products into the market, and drive adoption by healthcare providers will continue to play a key role in our competitive position and financial results. We believe these investments are critical to maintaining our technological leadership, supporting physician adoption, and driving favorable coverage decisions by payors across both our prenatal and oncology product lines. 95 Table of Contents Key components of results of operations Revenue The majority of our revenue is derived from sales of our prenatal test, UNITY, and a smaller portion is derived from sales of our liquid biopsy oncology tests, Northstar. During the year ended December 31, 2025, 91% of our revenue was from our prenatal tests, 8% of our revenue was from our oncology tests, and 1% of our revenue was from clinical trial support services and other services. We market our products to health clinics and physicians or a combination of the insurance carrier and patient for fees. Revenue for tests is recognized when test results are delivered to the ordering physician. For many health clinics and physicians, the payment we ultimately receive depends upon the rate of reimbursement from insurance carriers. We may also negotiate rates with patients, if the patient is responsible for payment. Our efforts in obtaining reimbursement based on individual claims, including pursuing appeals or reconsiderations of claim denials, may take a substantial amount of time, and bills may not be paid for many months or, in some cases, ultimately may not receive payment. We expect our revenue to increase over time as we expand our sales efforts, introduce new products, and contract with more payors. In addition, positive reimbursement decisions from insurance carriers would eliminate much of the uncertainty around payment and increase our overall revenue growth from ordering physicians. Our clinical trial support and other services includes revenue from strategic partnerships with Johnson & Johnson that utilize our testing capabilities as part of a project to perform clinical trials and the development and commercialization of a companion diagnostic. Revenue from these strategic partnership agreements are recognized as services are performed and costs are incurred. Our revenue derived from these agreements has not been material to our results of operations. Cost of revenue Our cost of revenue consists primarily of expenses related to reagents and consumables, test kits, personnel-related expenses such as salaries, stock-based compensation expense and related benefits for its operations and support personnel, shipping costs, overhead allocations, depreciation expense, facilities-related expenses and other services used in connection with delivering our services. Gross profit and gross margin Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit has been, and may in the future be, influenced by several factors, including test volumes and prices paid for our tests, changes in materials and consumables costs, laboratory processing costs, personnel costs, shipping, and logistics costs. Operating expenses Research and development expenses Research and development expenses consist primarily of personnel-related expenses such as salaries, stock-based compensation expense and related benefits for our product development employees. Research and development expenses also include non-personnel costs such as materials and consumables used for research, clinical third-party services and consulting expenses, and an allocation of our general overhead expenses. These costs are expensed in the period they are incurred. We believe that continued investment in our products is important to our future growth and, as a result, we expect our research and development costs to increase in absolute dollars and moderately decline as a percentage of revenue over time if our revenue increases. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of personnel-related expenses such as salaries, stock-based compensation expense and related benefits for our sales, marketing, and general and administrative employees. Selling, general and administrative expenses also include our commission payments, marketing related expenses in promoting our brand and tests, and training costs for sales employees. All selling, general and administrative costs are expensed in the period as incurred. 96 Table of Contents We expect selling, general and administrative expenses to increase in absolute dollars as we increase our sales and marketing personnel, increase product offerings, grow our operations and incur additional expenses associated with operating as a public company. These expenses are associated with operating as a public company include expenses necessary to comply with the rules and regulations applicable to companies listed on NASDAQ and related compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations and other professional services. Other income (expense) Interest income Interest income consists of income earned on our short-term cash and cash equivalents which include money market funds. Interest expense Interest expense is attributable to our borrowing with Western Alliance Bank, including the amortization of the debt discount up until August 2024 when we repaid the debt in full. Interest on our finance leases is also recorded in interest expense. Net gain on extinguishment of debt Net gain on extinguishment of debt relates to the extinguishment of the Western Alliance Bank debt and 2022 Convertible Notes. We elected to prepay the outstanding amount of the Western Alliance Bank debt in August 2024 and wrote-off the unamortized debt issuance costs incurred before prepayment fees in connection with the extinguishment. The 2022 Convertible Notes were amended such that the 2022 Convertible Notes converted into a round of preferred equity not originally contemplated in the original agreement which we accounted for as a debt extinguishment. The gain on extinguishment consisted of the difference between the fair value of preferred equity received and the carrying amount of the 2022 Convertible Notes. Change in fair value of term loan Change in fair value of term loan relates to the Oberland Capital debt where we elected the fair value option under ASC 825 and is accounted for at fair value on a recurring basis. We also elected to record interest expense related to the Oberland Capital debt as change in fair value of term loan. Change in fair value of convertible notes Change in fair value of convertible notes relates to convertible debt where we elected the fair value option under ASC 825, and it is accounted for at fair value on a recurring basis. We also elected to record interest expense related to the convertible debt as change in fair value of convertible notes. Other expense, net Other expense, net is comprised of the change in fair value of our liabilities related to warrants for common stock and redeemable convertible preferred stock and various income or expense items of a non-recurring nature. Provision for income taxes Provision for income taxes consists of U.S. federal and state income taxes. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. We account for uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes . We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and only in an amount more likely than not to be sustained upon review by the tax authorities. Interest and penalties related to uncertain tax position are classified in the financial statements as income tax expense. 97 Table of Contents Results of operations The following table sets forth information derived from our statements of operations for each of the periods presented: Year Ended December 31, 2025 2024 2023 (in thousands) Revenue $ 305,112 $ 152,582 $ 71,729 Cost of revenue(1) 96,654 71,667 54,421 Gross profit 208,458 80,915 17,308 Operating expenses: Research and development(1) 49,384 36,596 22,414 Selling, general and administrative(1) 143,051 91,465 64,389 Total operating expenses 192,435 128,061 86,803 Income (loss) from operations 16,023 (47,146) (69,495) Other income (expense): Interest income 7,750 5,819 3,456 Interest expense (95) (2,386) (3,272) Net gain on extinguishment of debt - 7,289 - Change in fair value of term loan (8,509) (3,137) - Change in fair value of convertible notes - (835) (12,921) Other expense, net (7,410) (1,145) (442) Total other income (expense) (8,264) 5,605 (13,179) Income (loss) before provision for income taxes 7,759 (41,541) (82,674) Provision for income taxes 305 29 9 Net income (loss) $ 7,454 $ (41,570) $ (82,683) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2025 2024 2023 (in thousands) Cost of revenue $ 1,789 $ 1,183 $ 683 Research and development 3,951 2,341 1,450 Selling, general and administrative 10,175 4,838 2,721 Total stock-based compensation expense $ 15,915 $ 8,362 $ 4,854 98 Table of Contents The following table sets forth our statements of operations data expressed as a percentage of revenue: Year Ended December 31, 2025 2024 2023 Revenue 100 % 100 % 100 % Cost of revenue 32 % 47 % 76 % Gross profit 68 % 53 % 24 % Operating expenses: Research and development 16 % 24 % 31 % Selling, general and administrative 47 % 60 % 90 % Total operating expenses 63 % 84 % 121 % Income (loss) from operations 5 % (31) % (97) % Other income (expense): Interest income 3 % 4 % 5 % Interest expense — % (2) % (5) % Net gain on extinguishment of debt — % 5 % — % Change in fair value of term loan (3) % (2) % — % Change in fair value of convertible notes — % (1) % (18) % Other expense, net (2) % (1) % (1) % Total other income (expense) (2) % 3 % (19) % Income (loss) before provision for income taxes 3 % (28) % (116) % Provision for income taxes — % — % — % Net income (loss) 3 % (28) % (116) % Comparison of years ended December 31, 2025 and 2024 Revenue Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Revenue $ 305,112 $ 152,582 $ 152,530 100 % Revenue increased $152.5 million, or 100%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was driven primarily by a 51% increase in the total volume of delivered and billable tests to approximately 610,000 for the year ended December 31, 2025 from approximately 405,000 for the year ended December 31, 2024. The increase in revenue was also attributable to an increase in our Overall ASP of 35%. Overall ASP is the weighted average ASP across all of our prenatal and oncology products. It is computed by dividing revenue for our prenatal and oncology tests by the number of tests that are delivered and billable. The number of tests that are delivered and billable in a given period represents that number of billable tests for which we deliver a result to the ordering provider in such period. We derive our revenue primarily from the number of tests processed and results delivered to the ordering physician. All tests processed are accessioned in our laboratories. The increase in test volume was driven by higher volumes of our prenatal tests primarily as a result of expansion of our sales force for our prenatal products. In addition, volumes for both our Northstar Select and Northstar Response oncology tests increased as a result of expansion of our oncology sales force. The increase in our ASP per test was driven by several factors. For example, we increased the number of contracts 99 Table of Contents that we have with payors for our prenatal tests which drove increases in ASP during the year ended December 31, 2025 as compared to the prior year. In addition, during the second half of 2024 we began to benefit from a new proprietary PLA code for our prenatal tests; when utilized, the new PLA code is typically reimbursed at a higher rate than the codes for which we previously billed, which also contributed to an increase in ASP's during the year ended December 31, 2025 compared to the year ended December 31, 2024. We also benefited from an increased attachment and ordering rate of 22q11.2 micro deletion testing (our 22q test) in conjunction with our aneuploidy test and the resulting incremental reimbursement, and we benefited from more payors covering our RhD test. Furthermore, our ASP's for our Northstar Select oncology test increased as Medicare began to reimburse for this test during the first quarter of 2025, and we began to bill for our Northstar Response oncology test for the first time at the beginning of 2025. We believe our plans to continue to expand our field sales force for our prenatal products and oncology products will benefit our test volumes. In addition, we believe our Overall ASP will benefit from the opportunity to enter into contracts with additional payors for our prenatal tests, as well as the coverage decision by MolDx in the first quarter of 2025 for Northstar Select, which should continue to result in lower denial rates by Medicare Advantage payors. We plan to submit additional dossiers to MolDX for coverage evaluations for Northstar Response, which, if successful, would significantly increase our Northstar Response ASP's in the future. Cost of revenue Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Cost of revenue $ 96,654 $ 71,667 $ 24,987 35 % Cost of revenue increased $25.0 million, or 35%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to an increase of $16.9 million in expenses associated with testing samples and supplies used in processing tests, phlebotomy, and related shipping costs, driven by a higher volume of tests processed; and an increase of $8.0 million in labor and consulting related expenses, including stock-based compensation, which were driven by higher test volumes and an increase in product support. Gross profit and gross margin Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Gross profit $ 208,458 $ 80,915 $ 127,543 158 % Gross margin 68 % 53 % Gross profit increased $127.5 million, or 158%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to an increase in the number of tests processed and a higher Overall ASP in conjunction with a lower Overall Cost-Per-Test as we continued to actively reduce variable expenses and increase efficiency from our fixed costs. Overall Cost Per Test is the weighted average cost per test across all of our prenatal and oncology products. It is computed by dividing cost of goods sold for our prenatal and oncology tests by the number of tests that are accessioned. The number of tests that are accessioned in a given period represents the number of billable tests that we receive for processing during such period. We refer to this number as our “Total Test Volume.” Gross margin increased to 68% for the year ended December 31, 2025 from 53% for the year ended December 31, 2024 for the reasons described above. 100 Table of Contents The increase in our Overall ASP contributed to approximately 86% of the improvement in our gross profit margin for the year ended December 31, 2025. In addition, as part of our long-term strategy we are focused on reducing costs per test for each of our offerings, which if successful will result in a reduction in our Overall Cost Per Test. A decrease in our Overall Cost Per Test contributed to approximately 14% of the improvement in our gross profit margin for the year ended December 31, 2025. For the year ended December 31, 2025 and 2024, our cost of goods sold consisted of variable costs of 57% and 54%, respectively, and fixed costs of 43% and 46%, respectively. The increase in variable costs was attributable primarily to an increase in test volume from prenatal testing, partially offset by targeted costs reduction efforts and efficiencies gained in in our lab from the increased test volume in both prenatal and oncology testing. We anticipate that cost initiatives and leveraging fixed costs should continue to reduce our Overall Cost Per Test. Operating expenses Research and development expenses Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Research and development $ 49,384 $ 36,596 $ 12,788 35 % Research and development expenses increased $12.8 million, or 35%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to a $10.1 million increase in personnel costs, which included a $1.6 million increase in stock-based compensation expense, and a $3.2 million increase in materials, equipment expenses and overhead allocations. This was partially offset by a $0.3 million decrease in expense related to clinical studies, and a $0.2 million decrease in consulting and other costs. The increase was primarily driven by a net increase in our R&D headcount of 31 employees during the year ended December 31, 2025 as compared to the year ended December 31, 2024 to support our product development and innovation efforts. Selling, general and administrative expenses Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Selling, general and administrative $ 143,051 $ 91,465 $ 51,586 56 % Selling, general and administrative expenses increased $51.6 million, or 56%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to a $40.6 million increase in salaries, commissions and related expenditures, which included a $5.2 million increase in stock- based compensation expense, a $5.3 million increase in facilities and other costs, a $5.2 million increase in professional fees and a $0.4 million increase in marketing costs. These increases were driven by a net increase of 105 employees during the year ended December 31, 2025 as compared to the year ended December 31, 2024 to support our sales, marketing and corporate strategies. 101 Table of Contents Other income (expense) Interest income Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Interest income $ 7,750 $ 5,819 $ 1,931 33 % Interest income increased $1.9 million, or 33%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to a higher average balance of cash and cash equivalents, compared to the prior year, due to the proceeds from our IPO. Interest expense Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Interest expense $ (95) $ (2,386) $ 2,291 (96 %) Interest expense decreased $2.3 million, or 96%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was attributable to the payoff of the Western Alliance Bank debt; the principal on this debt was no longer outstanding during the year ended December 31, 2025. The Western Alliance Bank debt was replaced by the Oberland Capital debt in August 2024. The Oberland Capital debt is accounted for using the fair value method and interest expense related to the Oberland Capital debt was recorded in the change in fair value of term loan. Net gain on extinguishment of debt Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Net gain on extinguishment of debt $ — $ 7,289 $ (7,289) (100 %) Net gain on extinguishment of debt was $7.3 million for the year ended December 31, 2024. This was due to an $8.6 million gain on extinguishment of the 2022 Convertible Notes due to a modification of the class of preferred stock into which the 2022 Convertible Notes ultimately converted in May 2024. This amount was partially offset by a $1.3 million loss on extinguishment of the Western Alliance Bank debt in August 2024. We did not record an extinguishment of debt during the year ended December 31, 2025. Change in fair value of term loan Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Change in fair value of term loan $ (8,509) $ (3,137) $ (5,372) 171 % 102 Table of Contents Change in fair value of term loan increased $5.4 million, or 171% for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was due to a change in fair value of the Oberland Capital debt of $5.7 million, primarily driven by changes in the overall market resulting in lower interest rates, and interest expense of $4.1 million, which includes revenue participation payments associated with the Oberland Capital debt. We made a policy election to include interest expense related to the Oberland Capital debt in the change in fair value of term loan. Change in fair value of convertible notes Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Change in fair value of convertible notes $ — $ (835) $ 835 (100 %) Change in fair value of convertible notes decreased $0.8 million, or 100%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was due to a change in fair value of the 2022 Convertible Notes that were extinguished in 2024. Other expense, net Year Ended December 31, Change 2025 2024 ($) % (in thousands, except percentage) Other expense, net $ (7,410) $ (1,145) $ (6,265) 547 % Other expense, net increased $6.3 million, or 547%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, which was primarily driven by increases in the fair value of our common stock warrant liability of $6.7 million and redeemable convertible preferred stock warrant liability of $0.6 million. In connection with our IPO, the redeemable convertible preferred stock warrants became warrants to purchase common stock. Upon exercise of the common stock warrants, the Company performed a final fair value adjustment of the warrant at the time of the exercise. Non-GAAP financial measures We use certain non-GAAP financial measures to supplement our financial statements, which are presented in accordance with GAAP. These non-GAAP financial measures include EBITDA, Adjusted EBITDA, non-GAAP income (loss) from operations, and non-GAAP net income (loss). We use these non-GAAP financial measures for financial and operational decision-making and as a means to assist us in evaluating period-to-period comparisons. By excluding the impact of certain items that we believe do not directly reflect our underlying operations, we are of the opinion that EBITDA, Adjusted EBITDA, non-GAAP income (loss) from operations and non-GAAP net income (loss) provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and forecasting. These metrics also provide investors and other users of our financial information with additional tools to compare business performance across companies and periods, while eliminating the effects of items that may vary for different companies for reasons unrelated to core operating performance. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures. 103 Table of Contents EBITDA We define EBITDA as net income (loss) adjusted for income taxes, interest income, interest expense, and depreciation and amortization expense. A reconciliation of net income (loss), the most directly comparable GAAP financial measure, to EBITDA is presented below: Year Ended December 31, 2025 2024 2023 (in thousands) Net income (loss) $ 7,454 $ (41,570) $ (82,683) Provision for income taxes 305 29 9 Interest (income) (7,750) (5,819) (3,456) Interest expense 95 2,386 3,272 Depreciation and amortization 6,910 7,040 5,874 EBITDA $ 7,014 $ (37,934) $ (76,984) Adjusted EBITDA We define Adjusted EBITDA as net income (loss) adjusted for income taxes, interest income, interest expense, depreciation and amortization expense, and certain other items which include significant non-cash items events that are highly variable, significant in size, and that we do not believe are indicative of ongoing or future business operations, which include: stock-based compensation expense; net gain on extinguishment of debt; change in fair value of term loan; change in value of convertible notes; and change in fair value of warrant liabilities. A reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA is presented below: Year Ended December 31, 2025 2024 2023 (in thousands) Net income (loss) $ 7,454 $ (41,570) $ (82,683) Provision for income taxes 305 29 9 Interest (income) (7,750) (5,819) (3,456) Interest expense 95 2,386 3,272 Depreciation and amortization 6,910 7,040 5,874 Stock-based compensation expense 15,915 8,362 4,854 Net (gain) on extinguishment of debt — (7,289) — Change in fair value of term loan 8,509 3,137 — Change in fair value of convertible notes — 835 12,921 Change in fair value of warrant liabilities 7,364 964 440 Adjusted EBITDA $ 38,802 $ (31,925) $ (58,769) Non-GAAP income (loss) from operations We define non-GAAP income (loss) from operations as income (loss) from operations presented in accordance with GAAP, adjusted to exclude stock-based compensation expense. 104 Table of Contents A reconciliation of income (loss) from operations, the most directly comparable GAAP financial measure, to non-GAAP income (loss) from operations is presented below: Year Ended December 31, 2025 2024 2023 (in thousands) Income (loss) from operations $ 16,023 $ (47,146) $ (69,495) Stock-based compensation expense 15,915 8,362 4,854 Non-GAAP income (loss) from operations $ 31,938 $ (38,784) $ (64,641) Non-GAAP net income (loss) We monitor non-GAAP net income (loss) for planning and performance measurement purposes. We define non-GAAP net income (loss) as net income (loss) reported on our statements of operations, excluding the impact of stock-based compensation expense, net gain on extinguishment of debt, change in fair value of term loan, change in fair value of convertible notes and change in fair value of warrant liabilities. We exclude fair value adjustments related to debt, which can fluctuate significantly and do not directly reflect our underlying operations. Our calculation of non-GAAP net income (loss) does not currently include the tax effects of the stock-based compensation expense adjustment because such tax effects have not been material to date. A reconciliation of net income (loss), the most directly comparable GAAP financial measure, to non-GAAP net income (loss) is presented below: Year Ended December 31, 2025 2024 2023 (in thousands) Net income (loss) $ 7,454 $ (41,570) $ (82,683) Stock-based compensation expense 15,915 8,362 4,854 Net (gain) on extinguishment of debt — (7,289) — Change in fair value of term loan 8,509 3,137 — Change in fair value of convertible notes — 835 12,921 Change in fair value of warrant liabilities 7,364 964 440 Non-GAAP net income (loss) $ 39,242 $ (35,561) $ (64,468) Liquidity and capital resources Since our inception, prior to our IPO, we financed our operations primarily through the issuance of convertible notes, redeemable convertible preferred stock, debt, and cash generated from the sale of our products. As of December 31, 2025, our principal sources of liquidity were cash and cash equivalents of $496.0 million and working capital of $512.6 million. On November 7, 2025, we closed our IPO of our Class A common stock. The total net proceeds received were approximately $286.9 million after deducting underwriting discounts, commissions and offering expenses payable by us. Cash and cash equivalents are comprised of cash held in sweep accounts, checking accounts, lock-box accounts and money market funds. Our principal use of cash is to fund operations and invest in research and development to support our growth. We have generated significant losses from operations and negative cash flows from operating activities in the past as reflected in our accumulated deficit of $274.7 million as of December 31, 2025, though we did have positive income from operations and positive cash flows in the year ended December 31, 2025, we may be unable to sustain positive income from operations and positive cash flows in future periods. We believe that our current cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months. Our future capital requirements, however, will depend on many factors, including our growth rate, the timing and 105 Table of Contents extent of our sales and marketing and research and development expenditures, the continuing market acceptance of our products, and the use of cash to fund potential mergers or acquisitions. In the event that additional financing is required from outside sources, we may seek to raise additional funds through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be adversely affected. Oberland Capital note purchase agreement We have a debt facility with availability of up to $140.0 million, issuable in four separate tranches, pursuant to a Note Purchase Agreement, dated as of August 2, 2024, by and among us, the purchasers party thereto, and BWCB SA LLC (an entity affiliated with Oberland Capital), as purchaser’s agent. The advanced principal accrues interest at a rate of 8% per annum. The first tranche of $50.0 million was advanced on August 5, 2024, with a maturity date of August 5, 2031, interest-only payments through August 5, 2031 and a lump sum payment due on August 5, 2031. The lump sum payment includes all of the outstanding principal plus a payment that would generate an internal rate of return (IRR) for the purchasers of 10% over the seven year term of the loan. The term loan advances are secured by a lien on our assets. We are required to sell a tranche of notes in the amount of $30.0 million prior to March 31, 2026 as we achieved the revenue and gross margin thresholds triggering this obligation on June 30, 2025 based on our results for the first half of 2025. The thresholds triggering this tranche are trailing six-month revenue of at least $112.5 million and a trailing six-month gross margin of at least 45%. The terms of this tranche are identical to those of the first $50.0 million tranche. We have the option at any time to prepay all of the then-outstanding notes, and Oberland Capital has the option to redeem the notes upon a change in control, an event of default, or maturity. The repayment amount of the note shall equal (1) 130% of the principal amount if the payment is made within 24 months of issuance; (2) 145% of the principal amount if the payment is made within 36 months of issuance; (3) if the payment is made within 48 months, an amount that would generate an IRR for the purchasers of 12.25%; (4) if the payment is made within 60 months of issuance, an amount that would generate an IRR for the purchasers of 11.75%; (5) if the payment is made thereafter but prior to maturity, an amount that would generate an IRR for the purchasers of 11.25%; and (6) if the payment is made at maturity, an amount that would generate an IRR for the purchasers of 10.0%. Beginning with the fiscal quarter ended March 31, 2025, excluding any fiscal quarter in which our aggregate cash and cash equivalents is greater than 1.1 times the aggregate principal amount of the notes issued under the Note Purchase Agreement, we are required to maintain trailing six-month net revenue based on a schedule that gradually increases up to $120.0 million after the year ending December 31, 2026, and a trailing six-month gross margin (as defined in the Note Purchase Agreement) of not less than 30%. As of December 31, 2025, we were in compliance with all financial covenants in the agreement. The Note Purchase Agreement also contains a revenue participation provision, under which, for any fiscal quarter, 0.01% of net revenue for such fiscal quarter (up to $100.0 million of net revenue for each fiscal year) per each $1.0 million principal amount of the notes will be payable to Oberland Capital. The revenue participation payments are additional financing costs of the loan and are included in the computation of the internal rate of return measures described in the preceding paragraph. Beginning with the fiscal year beginning January 1, 2025, we are required to make revenue participation payments under the Note Purchase Agreement. 106 Table of Contents Cash flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2025 2024 2023 (in thousands) Net cash provided by (used in) operating activities $ 24,595 $ (41,375) $ (53,672) Net cash provided by (used in) investing activities (8,922) (5,433) 82,838 Net cash provided by financing activities 288,825 141,017 13,405 Operating activities Net cash provided by operating activities during the year ended December 31, 2025 was $24.6 million. Net income of $7.5 million included $39.2 million in non-cash charges primarily resulting from $15.9 million of stock-based compensation, $6.9 million of depreciation and amortization, $5.0 million of amortization of operating right-of-use assets, and aggregate $10.7 million of change in fair value of the common stock warrant liability and term loan. Operating assets had outflows of $28.0 million primarily resulting from a $16.9 million increase in accounts receivable, $8.8 million increase in inventory, and $2.3 million increase in prepaid expenses and other current assets. Operating liabilities had inflows of $5.9 million primarily resulting from an aggregate $4.4 million increase in accounts payable and accrued expense and other current liabilities balances, aggregate $5.3 million increase in accrued commissions, compensation and employee benefits and $0.7 million increase in deferred revenue, offset by a $4.4 million decrease in operating lease liabilities. Net cash used in operating activities during the year ended December 31, 2024 was $41.4 million. Net loss of $41.6 million included $17.0 million in non-cash charges primarily resulting from $8.4 million of stock-based compensation, $7.0 million of depreciation and amortization, $4.6 million amortization of operating right-of-use assets, and aggregate $3.2 million of change in fair value of the common stock warrant liability, term loan and convertible notes, offset by the $7.3 million gain on extinguishment of debt. Operating assets had outflows of $21.1 million primarily resulting from $15.6 million increase in accounts receivable due to higher product sales and timing of customer payments, $4.0 million increase in other non-current assets, prepaid expenses and current assets and $1.5 million increase in inventory due to build up for anticipated demand. Operating liabilities had inflows of $4.3 million primarily resulting from, $6.8 million increase in accrued commissions, compensation and employee benefits due to increased employee headcount and increased sales which increased commissions and bonuses and $1.6 million increase in accounts payable and accrued expenses due to increase testing volumes and timing of payments, offset by a $3.8 million decrease in operating lease liabilities. Investing activities Net cash used in investing activities during the year ended December 31, 2025 was $8.9 million primarily due to purchases of property and equipment. Net cash used in investing activities during the year ended December 31, 2024 was $5.4 million primarily due to purchases of property and equipment. Financing activities Net cash provided by financing activities during the year ended December 31, 2025 was $288.8 million primarily due to proceeds from our IPO, net of underwriting discounts and commissions, of $292.0 million, and $3.1 million in proceeds from exercise of stock options, net of repurchases, offset by $4.6 million of payments of deferred offering costs and $1.8 million in principal payments on finance lease liabilities. Net cash provided by financing activities during the year ended December 31, 2024 was $141.0 million primarily due to $130.0 million in proceeds from issuance of series d redeemable convertible preferred stock, net of issuance costs, $49.8 million in proceeds from issuance of debt, net, and $1.1 million in proceeds from exercise 107 Table of Contents of stock options, net of repurchases, partially offset by $36.7 million repayment of debt upon extinguishment and related exit fee, $2.4 million in principal payments on finance lease liabilities, and $0.5 million in repurchase of common stock outstanding. Contractual obligations and commitments Operating lease commitments. Our operating lease commitments primarily include our labs and corporate offices. As of December 31, 2025, we had fixed lease payment obligations of $67.8 million, with $9.1 million to be paid within 12 months and the remainder thereafter. Finance lease commitments. Our finance lease commitments primarily relate to equipment used in our labs. As of December 31, 2025, we had fixed lease payment obligations of $0.9 million, with $0.5 million to be paid within 12 months and the remainder thereafter. Off-balance sheet arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical accounting estimates We prepare our financial statements in conformity with GAAP. The preparation of financial statements in conformity with GAAP required certain estimates and assumptions to be made that may affect our financial statements. Accounting policies that have a significant impact on our results are described in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K. The accounting policies discussed in this section are those that we consider to be the most critical. We consider an accounting policy to be critical if the policy is subject to a material level of judgment and if changes in those judgments are reasonably likely to materially impact our results. We base our estimates and judgments on reasonably available information. Our estimates and assumptions may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates and such differences may be material to the financial statements. We continue to monitor and assess our critical estimates in light of developments, and as new events occur and additional information is obtained, our estimates may change materially in future periods. Revenue We generate revenue primarily from our prenatal and oncology testing services, which are referred to as testing services or test results. We consider the patient as our customer, that requests our test service through their physician. Test results are the single performance obligation being provided to customers. Testing service revenue is recognized at a point in time when test results are delivered to the ordering physician. We generally bill an insurance carrier, Medicaid, Medicare or the patient or a combination upon delivery of test results. test results. The amount of revenue recognized reflects the consideration we expect to be entitled to receive in exchange for the test results. We recognize revenue upon transfer of control of promised goods and services in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods and services. Under ASC 606, Revenue from Contracts with Customers (ASC 606), we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when, or as, a performance obligation is satisfied. We recognize revenue applying estimated consideration to be received for the performance obligations delivered to customers and their representatives. In accordance with ASC 606, we apply the constraint on variable consideration and include such amounts in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue will not occur when the associated uncertainty is resolved. 108 Table of Contents We apply the expected value method of estimating variable consideration. The total consideration we expect to collect in exchange for our products is an estimate and is largely variable in nature. Consideration includes reimbursement from both patients and insurance carriers. We establish variable consideration by considering historical payment trends for tests delivered, test reimbursement disallowances, and contractual arrangements in place, among other factors, which is adjusted for current expectations. Current expectations of cash collections factor in changes in reimbursement rate trends, historical events not expected to recur, and future known changes such as anticipated contractual pricing changes or changes to insurance coverage. We also consider hindsight, where applicable, in estimates established for variable consideration and update those estimates when actual experience supports doing so. In establishing variable consideration, we consider payors with similar reimbursement characteristics together. We monitor cash collections against the estimated variable consideration over the expected cash collection period and any difference is recognized as an adjustment to estimated revenues after such estimated cash collection period has closed. We enter into contracts with third-party payors including insurance carriers, Medicaid and Medicare to set the pricing for tests provided to patients. Due to the nature of these third-party payor contract arrangements, the total consideration we expect to collect for test results is variable as they are dependent on the terms negotiated with the third-party payor. The predominance of our revenue is derived from payments by third-party insurance carriers. Additionally, we entered into an agreement with Johnson & Johnson in 2023 to utilize our testing capabilities as part of a project to perform a clinical trial. This arrangement involved the performance of testing and related regulatory consulting services. Revenue for this contract is primarily recognized proportionally as services are performed. Revenue derived from this contract is not material to our results of operations. Stock-based compensation We measure stock-based compensation expense for all stock-based payment awards based on the estimated fair value of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes Model. The model requires us to make assumptions and judgments about the variable inputs used in the Black-Scholes Model, including expected term, the volatility of our common stock, and assumed risk-free interest rate. Stock-based compensation is recognized net of actual forfeitures on a straight-line basis over the requisite service period of the awards. We account for forfeitures as they occur. We have granted awards to employees that vest based on continued service (service conditions). Stock-based compensation expense is recognized on a straight-line basis over the service period. Common stock valuations Prior to the completion of the IPO, there was no public market for the Company's common stock. Accordingly, the fair value of the common stock underlying our stock-based awards has historically been determined by our Board of Directors, with input from management and contemporaneous third-party valuations. We believe that our Board of Directors has the relevant experience and expertise to determine the fair value of our common stock. Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our Board of Directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors include: • the results of contemporaneous valuations performed at periodic intervals by a third-party valuation firm; • the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock; • the prices of our redeemable convertible preferred stock and common stock sold to investors in arms-length transactions; • our actual operating and financial performance and estimated trends and prospects for our future performance; • our stage of development; • the likelihood of achieving a liquidity event, such as an initial public offering, direct listing, or sale of our company, given prevailing market conditions; • the lack of marketability involving securities in a private company; • the market performance of comparable publicly traded companies; and • U.S. and global capital market conditions. 109 Table of Contents In valuing our common stock, the fair value of our business was determined using various valuation methods, including combinations of the income approach and the market approach with input from management. The income approach involves applying an appropriate risk-adjusted discount rate to projected cash flows based on forecasted revenue and costs. The market approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple was determined, which was applied to our operating results to estimate the enterprise value of our company. Once the enterprise value was determined under the market approach, we derived the equity value of our company and used a hybrid method that considered both an option pricing model (OPM) and the probability weighted expected return method (PWERM) to allocate that value among the various classes of securities to arrive at the fair value of the common stock. The OPM is based on the Black-Scholes-Merton option valuation model, which allows for the identification for a range of possible future outcomes, each with an associated probability. The OPM is appropriate to use when the range of possible future outcomes is difficult to predict and thus creates highly speculative forecasts. PWERM involves a forward-looking analysis of the possible future outcomes of the enterprise including an IPO as well as non-IPO market-based outcomes. After the equity value is determined and allocated to the various classes of shares, a discount for lack of marketability (DLOM) is applied to arrive at the fair value of ordinary shares. A DLOM is applied based on the theory that as an owner of a private company stock, the stockholder has limited opportunities to sell this stock and any such sale would involve significant transaction costs, thereby reducing overall fair market value. In addition, we also considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange. Factors considered include transaction volume, timing, whether the transactions occurred among unrelated parties, and whether the transaction involved investors with access to our financial information. Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock. After the completion of the IPO, our Board of Directors determines the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the date of grant. Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions. Recent accounting pronouncements See Note 2 of our financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding recently issued accounting pronouncements. Emerging growth company status We are an “emerging growth company” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this exemption from new or revised accounting standards until the earlier of the date we (i) qualify for treatment as an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided for emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.