What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-02 · 210 added, 134 removed, 487 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

ASSETS (unaudited)

21 unchanged sentences

Noncurrent operating lease liabilities 13,645 14,173

Noncurrent finance lease liabilities 312 25

Deferred tax liability — 206

Other liabilities 16 25

Total liabilities 63,419 62,071

2 unchanged sentences

Preferred stock, $ 0.001 par value per share;

10,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

no shares issued and outstanding as of March 31, 2024 and December 31, 2023

10,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

no shares issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.001 par value per share;

200,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

27,585,669 and 27,410,532 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

200,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

27,711,024 and 27,410,532 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 636,022 609,477

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

NET REVENUES $ 87,002 $ 50,138 $ 159,976 $ 92,175

5 unchanged sentences

Total operating expenses, net 81,990 71,295 160,435 144,854

Operating loss ( 5,471 ) ( 31,522 )

Operating income (loss) 5,012 ( 21,157 ) ( 459 ) ( 52,679 )

Interest income 3,144 2,399 6,140 4,735

Interest expense ( 270 ) ( 3 ) ( 284 ) ( 7 )

Loss before income taxes ( 2,489 ) ( 29,190 )

Income tax expense 45 14

Net loss $ ( 2,534 ) $ ( 29,204 )

Loss per share, basic and diluted $ ( 0.09 ) $ ( 1.10 )

Weighted-average shares outstanding, basic and diluted 27,485 26,607

Income (loss) before income taxes 7,886 ( 18,761 ) 5,397 ( 47,951 )

Income tax (benefit) expense ( 1,034 ) 16 ( 989 ) 30

Net income (loss) $ 8,920 $ ( 18,777 ) $ 6,386 $ ( 47,981 )

Earnings (loss) per share:

Basic $ 0.32 $ ( 0.70 ) $ 0.23 $ ( 1.80 )

Diluted $ 0.31 $ ( 0.70 ) $ 0.22 $ ( 1.80 )

Weighted-average shares outstanding:

Basic 27,646 26,733 27,566 26,670

Diluted 28,738 26,733 28,542 26,670

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Three Months Ended

Net loss $ ( 2,534 ) $ ( 29,204 )

June 30, Six Months Ended

2024 2023 2024 2023

Net income (loss) $ 8,920 $ ( 18,777 ) $ 6,386 $ ( 47,981 )

Other comprehensive (loss) income:

Net unrealized (loss) gain on marketable investment securities ( 61 ) ( 8 ) ( 308 ) 237

Comprehensive loss $ ( 2,781 ) $ ( 28,959 )

Comprehensive income (loss) $ 8,859 $ ( 18,785 ) $ 6,078 $ ( 47,744 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

18 unchanged sentences

— $ — 26,686,201 $ 27 $ 575,367 $ ( 190,109 ) $ ( 136 ) $ 385,149

Stock-based compensation expense — — — — 12,849 — — 12,849

Exercise of common stock options — — 15,606 — 89 — — 89

Issuance of common stock from vested restricted stock units and payment of employees’ taxes — — 82,201 — ( 534 ) — — ( 534 )

Net unrealized loss on marketable investment securities — — — — — — ( 8 ) ( 8 )

Net loss — — — — — ( 18,777 ) — ( 18,777 )

BALANCE, JUNE 30, 2023

— $ — 26,784,008 $ 27 $ 587,771 $ ( 208,886 ) $ ( 144 ) $ 378,768

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Preferred Stock Common Stock Additional

Capital Accumulated

Deficit Accumulated

Other Comprehensive (Loss) income Total

Stockholders’

Shares Amount Shares Amount

BALANCE, JANUARY 1, 2024

4 unchanged sentences

Issuance of common stock under the employee stock purchase plan — — 111,241 1 1,707 — — 1,708

Net unrealized gain on marketable investment securities — — — — — — ( 247 ) ( 247 )

Net unrealized loss on marketable investment securities — — — — — — ( 247 ) ( 247 )

Net loss — — — — — ( 2,534 ) — ( 2,534 )

1 unchanged sentence

— $ — 27,585,669 $ 28 $ 623,450 $ ( 220,905 ) $ ( 111 ) $ 402,462

Stock-based compensation expense — — — — 13,179 — — 13,179

Exercise of common stock options — — 1,779 — 8 — — 8

Issuance of common stock from vested restricted stock units and payment of employees’ taxes — — 123,576 — ( 615 ) — — ( 615 )

Net unrealized loss on marketable investment securities — — — — — — ( 61 ) ( 61 )

Net income — — — — — 8,920 — 8,920

BALANCE, JUNE 30, 2024

— $ — 27,711,024 $ 28 $ 636,022 $ ( 211,985 ) $ ( 172 ) $ 423,893

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

OPERATING ACTIVITIES

Net loss $ ( 2,534 ) $ ( 29,204 )

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss) $ 6,386 $ ( 47,981 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 6,688 5,932

2 unchanged sentences

Accretion of discounts on marketable investment securities ( 3,422 ) ( 2,282 )

Other 179 211

Change in operating assets and liabilities:

8 unchanged sentences

Other accrued and current liabilities 68 2,047

Net cash used in operating activities

Net cash provided by (used in) operating activities

17,163 ( 29,225 )

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(in thousands)

Three Months Ended

Six Months Ended

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Accrued purchases of property and equipment $ 2,148 $ 728

Operating lease assets obtained in exchange for lease obligations $ — $ 485

Decrease in operating lease assets with corresponding change in lease liabilities $ ( 7 ) $ —

Finance lease assets obtained in exchange for lease obligations $ 166 $ —

Property and equipment acquired with tenant improvement allowance $ — $ 1,236

12 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

We have a history of recurring net losses and negative cash flows and as of March 31, 2024, we had an accumulated deficit of $ 220.9 million.

We believe our $ 82.9 million of cash and cash equivalents and $ 156.3 million of marketable investment securities as of March 31, 2024, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

We have a history of recurring net losses and negative cash flows and as of June 30, 2024, we had an accumulated deficit of $ 212.0 million.

We believe our $ 85.6 million of cash and cash equivalents and $ 174.1 million of marketable investment securities as of June 30, 2024, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024;

the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of stockholders’ equity, each for the three months ended March 31, 2024 and 2023;

and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of March 31, 2024, the results of our consolidated operations for the three months ended March 31, 2024 and 2023 and our consolidated cash flows for the three months ended March 31, 2024 and 2023.

The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited.

The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

The accompanying condensed consolidated balance sheet as of June 30, 2024;

the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of stockholders’ equity, each for the three and six months ended June 30, 2024 and 2023;

and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of June 30, 2024, the results of our consolidated operations for the three and six months ended June 30, 2024 and 2023 and our consolidated cash flows for the six months ended June 30, 2024 and 2023.

The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2024 and 2023 are also unaudited.

The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

The balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date.

39 unchanged sentences

Historically, our credit losses have not been significant given our application of the constraint to variable consideration.

The allowance for credit losses was zero as of March 31, 2024 and December 31, 2023.

The allowance for credit losses was zero as of June 30, 2024 and December 31, 2023.

Adjustments for implicit price concessions attributable to variable consideration, as discussed below, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between five and ten years .

Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease.

Our leasehold improvements primarily relate to our office and laboratory facilities in Friendswood, Texas, Phoenix, Arizona and Pittsburgh, Pennsylvania, and are generally being depreciated through the end of the lease terms in 2025 and 2033, respectively.

Maintenance and repairs are charged to expense as incurred, and material improvements are capitalized.

Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at which

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

point the capitalized interest costs are amortized using the straight-line method over the estimated useful life of the underlying asset.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination.

4 unchanged sentences

2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, by comparing the fair value of the reporting unit to

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

its carrying value, including the goodwill.

Simplifying the Test for Goodwill Impairment, by comparing the fair value of the reporting unit to its carrying value, including the goodwill.

If the carrying value exceeds the fair value, we recognize an impairment loss for the amount by which the carrying value exceeds fair value, up to the total amount of goodwill allocated to the reporting unit.

6 unchanged sentences

We also accrue for liabilities under employee sales incentive bonus plans with accruals based on performance achieved to date compared to established targets.

As of March 31, 2024 and December 31, 2023, we accrued approximately $ 6,574,000 and $ 21,706,000 , respectively, for liabilities associated with these bonus plans.

As of June 30, 2024 and December 31, 2023, we accrued approximately $ 12,573,000 and $ 21,706,000 , respectively, for liabilities associated with these bonus plans.

These amounts are classified as current or noncurrent accrued liabilities in the unaudited condensed consolidated balance sheets based on the expected timing of payment.

13 unchanged sentences

Forfeitures are accounted for as they occur.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Comprehensive loss is made up of net loss plus net unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss).

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Comprehensive income (loss) is made up of net income (loss) plus net

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss).

Accounting Pronouncements Yet to be Adopted

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Early adoption is permitted.

The guidance is applied retrospectively to all

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

periods presented in the financial statements, unless it is impracticable.

The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable.

We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures.

16 unchanged sentences

In the absence of Medicare coverage, contractually established reimbursements rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions.

Variable consideration attributable to these price concessions is measured at the expected value using the ‘‘most likely amount’’ method under ASC 606.

Variable consideration attributable to these price concessions is measured at

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the expected value using the ‘‘most likely amount’’ method under ASC 606.

The amounts are estimated using historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties.

4 unchanged sentences

Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues.

Included in revenues for the three months ended March 31, 2024 and 2023 were $ 1,656,000 of net positive revenue adjustments and $ 1,336,000 of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.

These amounts include (i) adjustments for actual

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Included in revenues for the three months ended June 30, 2024 and 2023 were $ 363,000 of net positive revenue adjustments and $ 88,000 of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration.

Included in revenues for the six months ended June 30, 2024 and 2023 were $ 959,000 of net positive and $ 1,705,000 of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration.

These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Because our contracts with customers have an expected duration of one year or less, we have elected the practical expedient in ASC 606 to not disclose information about our remaining performance obligations.

Any incremental costs to obtain contracts are recorded as selling, general and administrative expenses as incurred due to the short duration of our contracts.

Contract balances consisted solely of accounts receivable (both current and noncurrent) as of March 31, 2024 and December 31, 2023.

Contract balances consisted solely of accounts receivable (both current and noncurrent) as of June 30, 2024 and December 31, 2023.

Disaggregation of Revenues

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Dermatologic (1)

1 unchanged sentence

Non-Dermatologic (2)

18,174 7,108 31,813 13,234

Total net revenues $ 87,002 $ 50,138 $ 159,976 $ 92,175

1 unchanged sentence

(2) Consists of TissueCypher Barrett’s Esophagus Test, DecisionDx-UM and IDgenetix.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Payor Concentration

2 unchanged sentences

Percentage of Revenues

Three Months Ended March 31, Percentage of

Six Months Ended

June 30, Percentage of

Accounts Receivable

3 unchanged sentences

(noncurrent) as of

2024 2023 March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

2024 2023 June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

Medicare 48 % 49 % 23 % 20 % * *

3 unchanged sentences

There were no other third-party payors that individually accounted for more than 10% of our total revenue or accounts receivable for the periods shown in the table above.

Loss Per Share

Basic loss per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period.

Diluted loss per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options, vesting of RSUs and PSUs or purchases under the ESPP.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period.

Diluted earnings (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options, vesting of RSUs and PSUs or purchases under the ESPP.

The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents.

Contingently issuable PSU awards are included in the computation of diluted loss per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period.

Contingently issuable PSU awards are included in the computation of diluted earnings (loss) per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period.

However, potentially dilutive shares are excluded from the computation of diluted loss per share when their effect is antidilutive.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Because we reported a net loss for all periods presented, all potentially dilutive securities are antidilutive and are excluded from the computation of diluted loss per share for such periods.

The table below provides the weighted-average number of potential common shares associated with outstanding securities not included in our calculation of diluted loss per share for the three months ended March 31, 2024 and 2023 because to do so would be antidilutive or, in the case of PSUs, the applicable performance conditions have not yet been met (in thousands):

The following table shows the computation of basic and diluted earnings (loss) per share for the following three and six months ended June 30, 2024 and 2023 (in thousands, except per share data):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income (loss) $ 8,920 $ ( 18,777 ) $ 6,386 $ ( 47,981 )

Weighted-average common shares outstanding, basic 27,646 26,733 27,566 26,670

Assumed exercise of stock options 440 — 441 —

Assumed vesting of RSUs 546 — 427 —

Assumed vesting of PSUs 98 — 98 —

Assumed issuance of shares under the ESPP 8 — 10 —

Weighted-average common shares outstanding, diluted 28,738 26,733 28,542 26,670

Earnings (loss) per share:

Basic $ 0.32 $ ( 0.70 ) $ 0.23 $ ( 1.80 )

Diluted $ 0.31 $ ( 0.70 ) $ 0.22 $ ( 1.80 )

Due to the Company reporting a net loss attributable to common stockholders for the three and six months ended June 30, 2023, all potentially dilutive securities are antidilutive and are excluded from the computations of diluted loss per share.

The table below provides the weighted-average number of potential common shares associated with outstanding securities not included in our calculation of diluted earnings (loss) per share for the three and six months ended June 30, 2024 and 2023 because to do so would be antidilutive.

With regard to the PSUs, we assume that the associated performance targets will be met at the target level of performance for purposes of calculating diluted net income per common share until such time that it is probable that actual performance will be above or below target (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Stock options 2,487 3,326 2,493 3,357

RSUs and PSUs 892 3,562 877 3,589

ESPP 216 309 233 294

Total 3,595 7,197 3,603 7,240

1 unchanged sentence

(“AltheaDx”) in April 2022, we may be required to issue shares of our common stock to satisfy the contingent consideration obligations, pending the outcome of certain commercial and regulatory milestones, as required by the definitive agreement to acquire AltheaDx.

For purposes of calculating diluted loss per share, no such shares were assumed to have been issued because none of the applicable conditions have been met to date.

For purposes of calculating diluted earnings (loss) per share, no such shares were assumed to have been issued because none of the applicable conditions have been met to date.

See Note 10 for additional information.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Marketable Investment Securities

The following tables present our available-for-sale debt securities (in thousands):

March 31, 2024

June 30, 2024

Amortized Cost Unrealized Estimated Fair Value

8 unchanged sentences

The cost of securities sold is determined based on the specific identification method for purposes of recording gains and losses.

There were no realized gains or losses on sales of investments for the three months ended March 31, 2024 and 2023.

There were no realized gains or losses on sales of investments for the three and six months ended June 30, 2024 and 2023.

We evaluated our investment portfolio under the available-for-sale debt securities impairment model guidance and determined our investment portfolio is comprised of low-risk, investment grade securities.

As of March 31, 2024, unrealized losses on our available-for-sale investments are not attributed to credit risk.

As of June 30, 2024, unrealized losses on our available-for-sale investments are not attributed to credit risk.

We believe that an allowance for credit losses is unnecessary because the unrealized losses on certain of our marketable investment securities are due to market factors.

No credit-related or noncredit-related impairment losses were recorded for the three months ended March 31, 2024 and 2023.

The allowance for credit losses was zero as of March 31, 2024 and December 31, 2023.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, 2024, all of our available-for-sale debt securities had contractual maturities of one year or less.

No credit-related or noncredit-related impairment losses were recorded for the three and six months ended June 30, 2024 and 2023.

The allowance for credit losses was zero as of June 30, 2024 and December 31, 2023.

As of June 30, 2024, all of our available-for-sale debt securities had contractual maturities of one year or less.

Accrued interest receivable is included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, the accrued interest receivable balance was immaterial.

As of June 30, 2024 and December 31, 2023, the accrued interest receivable balance was immaterial.

Additional information relating to the fair value of marketable investment securities can be found in Note 10.

1 unchanged sentence

Property and equipment, net consisted of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Lab equipment (2)

8 unchanged sentences

Property and equipment, net $ 38,638 $ 25,433

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) On February 9, 2024, we purchased approximately 23 acres of land in Friendswood, Texas for purpose of developing a commercial office building to be used as our future corporate headquarters.

(2) As of March 31, 2024 and December 31, 2023, includes lab equipment under finance lease of $ 369 thousand and accumulated depreciation of $ 313 thousand and $ 278 thousand, respectively.

(2) As of June 30, 2024 and December 31, 2023, includes lab equipment under finance lease of $ 369 thousand and accumulated depreciation of $ 323 thousand and $ 278 thousand, respectively.

(3) As of June 30, 2024, includes computer equipment under finance lease of $ 166 thousand and accumulated depreciation of $ 3 thousand.

As of December 31, 2023, includes no computer equipment under finance lease.

Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Cost of sales (exclusive of amortization of acquired intangible assets) $ 637 $ 405 $ 1,292 $ 700

3 unchanged sentences

Goodwill and Other Intangible Assets, Net

The balance of our goodwill was $ 10.7 million as of March 31, 2024 and December 31, 2023.

There were no accumulated impairments of goodwill as of March 31, 2024 or December 31, 2023.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The balance of our goodwill was $ 10.7 million as of June 30, 2024 and December 31, 2023.

There were no accumulated impairments of goodwill as of June 30, 2024 or December 31, 2023.

Other Intangible Assets, Net

Our other intangible assets, net consist of the following (in thousands):

March 31, 2024

June 30, 2024

Gross carrying value Accumulated amortization Net Weighted-Average Remaining Life (in years)

7 unchanged sentences

Total other intangible assets, net $ 125,880 $ ( 19,237 ) $ 106,643

Amortization expense of intangible assets was $ 2.2 million for the three months ended March 31, 2024 and the three months ended March 31, 2023 .

Amortization expense of intangible assets was $ 2.2 million and $ 4.5 million for the three and six months ended June 30, 2024, respectively, and $ 2.2 million and $ 4.5 million for the three and six months ended June 30, 2023, respectively .

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Accrued and Current Liabilities

Other accrued and current liabilities consisted of the following (in thousands):

March 31, 2024 December 31, 2023

Accrued service fees $ 3,358 $ 2,097

June 30, 2024 December 31, 2023

Clinical studies $ 2,947 $ 3,475

Accrued service fees 2,610 2,097

ESPP contributions 937 896

3 unchanged sentences

We had no debt as of December 31, 2023.

Our long-term debt as of March 31, 2024 is presented in the table below (in thousands):

March 31, 2024

Our long-term debt as of June 30, 2024 is presented in the table below (in thousands):

June 30, 2024

Term debt $ 10,200

3 unchanged sentences

Total $ 10,008

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future maturities of principal amounts on long-term debt as of March 31, 2024 are as follows (in thousands):

Borrowings under our 2024 LSA approximate their fair value as the interest rate is variable and reflects market rates (Level 2 instrument).

As of June 30, 2024, the carrying amount of borrowings under our 2024 LSA, exclusive of unamortized discount, and their estimated fair value were $ 10.2 million.

Future maturities of principal amounts on long-term debt as of June 30, 2024 are as follows (in thousands):

Years Ending December 31,

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Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA.

Should we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required.

As of March 31, 2024, we were in compliance with this covenant.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required.

As of June 30, 2024, we were in compliance with all of the covenants.

The 2024 LSA bears interest at a floating rate equal to the greater of (a) the WSJ Prime Rate plus 0.25 % or (b) 6.00 % per annum.

6 unchanged sentences

A discount on debt equal to this obligation was recorded on the draw date and is being amortized as additional interest expense using the effective interest method over the term of the debt.

As of March 31, 2024, the effective interest rate for all outstanding debt under the 2024 Term Loan was 9.03 %.

As of June 30, 2024, no payment on principal has been made.

As of June 30, 2024, the effective interest rate for all outstanding debt under the 2024 Term Loan was 9.03 %.

2024 Credit Line

1 unchanged sentence

Amounts repaid under the 2024 Credit Line may not be reborrowed.

As of March 31, 2024, no draws had been made on the line of credit.

As of June 30, 2024, no draws had been made on the line of credit.

Interest Expense on Long-Term Debt

During the three months ended March 31, 2024, we recorded interest expense of $ 12,000 on long-term debt.

During the three months ended March 31, 2023, no long-term debt was outstanding and no interest expense incurred.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below shows the components of interest expense for the three and six months ended June 30, 2024 (in thousands):

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Interest expense on long term debt $ 228 $ 241

Capitalized interest ( 12 ) ( 12 )

Total $ 216 $ 229

There was no interest expense on long term debt or capitalized interest for the three and six months ended June 30, 2023.

Fair Value Measurements

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Accordingly, the fair value estimates disclosed, or amounts recorded, may not be indicative of the amount that we or holders of the instruments could realize in a current market exchange.

The table below provides information, by level within the fair value hierarchy, of our financial assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):

As of March 31, 2024

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below provides information, by level within the fair value hierarchy, of our financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):

As of June 30, 2024

Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs

20 unchanged sentences

(3) Current portion, if any, classified as “Other accrued and current liabilities” in the unaudited condensed consolidated balance sheets.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent Consideration

2 unchanged sentences

The AltheaDx Earnout Payments included a 2022 catch-up provision for additional payment of up to $ 17.5 million that expired in 2023.

Therefore, as of March 31, 2024, we have a potential payment obligation of up to $ 20.0 million with respect to the remaining commercial milestones for 2024.

If the settlement of the remaining portion of the AltheaDx Earnout Payments would have occurred on March 31, 2024, no amounts would have been due because no commercial milestones had been achieved as of such date.

Therefore, as of June 30, 2024, we have a potential payment obligation of up to $ 20.0 million with respect to the remaining commercial milestones for 2024.

If the settlement of the remaining portion of the AltheaDx Earnout Payments would have occurred on June 30, 2024, no amounts would have been due because no commercial milestones had been achieved as of such date.

The contingent consideration was classified as a Level 3 fair value measurement due to the use of significant unobservable inputs and a Monte Carlo simulation to determine its fair value.

The Monte Carlo simulation uses projections of the commercial milestones for the applicable period as well as the corresponding targets and approximate timing of payment based on the terms of the arrangement.

The valuation of the AltheaDx contingent consideration was zero as of March 31, 2024 and December 31, 2023, and no gains or losses were recorded associated with changes in fair value during the three months ended March 31, 2024 and 2023.

The valuation of the AltheaDx contingent consideration was zero as of June 30, 2024 and December 31, 2023, and no gains or losses were recorded associated with changes in fair value during the three and six months ended June 30, 2024 and 2023.

The contingent consideration liability is remeasured at fair value at each reporting period taking into account any updated assumptions or changes in circumstances.

Any changes in the fair value are recorded as gains or losses in our unaudited condensed consolidated statement of operations.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

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No claims have been made against us at this time.

This inquiry, and any potential resulting claim asserted against us, with or without merit, could be time-consuming, expensive to address and divert management’s attention and other resources.

These claims also could subject us to significant liability for damages and harm our reputation.

Any potential claims could subject us to significant liability for damages and harm our reputation.

Our insurance and indemnities may not cover all claims that may be asserted against us.

4 unchanged sentences

The 2019 Plan provides for automatic annual increases to the number of shares authorized for issuance, equal to 5 % of our common shares outstanding as of the immediately preceding year end, through January 1, 2029.

As of March 31, 2024, 386,932 shares remained available for grant under the 2019 Plan.

As of June 30, 2024, 353,485 shares remained available for grant under the 2019 Plan.

On December 22, 2022, our board of directors approved the 2022 Inducement Plan (the “Inducement Plan”).

Our Inducement Plan provides for the grant of RSU awards and other stock awards made as an inducement material to the grantee’s entering into employment with us to the extent such grantee was not previously an employee of ours or is entering into employment following a bona fide period of non-employment with us.

As of March 31, 2024, there were 414,842 shares available for grant under the Inducement Plan.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2024, there were 292,473 shares available for grant under the Inducement Plan.

Stock Options

Stock option activity under our stock plans for the three months ended March 31, 2024 is set forth below:

Stock option activity under our stock plans for the six months ended June 30, 2024 is set forth below:

Weighted-Average

8 unchanged sentences

Forfeited/Cancelled ( 25,758 ) $ 41.19

Balance as of March 31, 2024 3,172,130 $ 35.54 6.3 $ 9,814

Exercisable at March 31, 2024

Balance as of June 30, 2024 3,162,376 $ 35.55 6.0 $ 9,011

Exercisable at June 30, 2024

2,798,447 $ 34.29 5.9 $ 8,987

3 unchanged sentences

We issue new shares of common stock upon the vesting of RSUs.

The following table summarizes our RSU activity for the three months ended March 31, 2024:

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our RSU activity for the six months ended June 30, 2024:

Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value

4 unchanged sentences

Forfeited/Cancelled ( 76,466 ) $ 21.16

Balance as of March 31, 2024

Balance as of June 30, 2024

3,993,875 $ 24.11

(1) The aggregate number of shares withheld upon vesting for employee tax obligations was 22,656 for the three months ended March 31, 2024.

(1) The aggregate number of shares withheld upon vesting for employee tax obligations was 51,519 for the six months ended June 30, 2024.

Performance-Based Restricted Stock Units

1 unchanged sentence

We issue new shares of common stock upon the vesting of PSUs.

The following table summarizes our PSU activity for the three months ended March 31, 2024:

The following table summarizes our PSU activity for the six months ended June 30, 2024:

Performance-Based Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value

3 unchanged sentences

Forfeited/Cancelled — $ —

Balance as of March 31, 2024

Balance as of June 30, 2024

373,546 $ 22.28

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Retirement Policy

2 unchanged sentences

The modification did not result in any incremental compensation cost.

However, the adoption of the of the policy resulted in a new estimate of the requisite service period for certain awards, which we reassess at each balance sheet date.

In connection with the Retirement Policy, we accelerated the recognition of compensation expense of $ 0.2 million and $ 0.7 million during the three months ended March 31, 2024 and 2023, respectively.

However, the adoption of the policy resulted in a new estimate of the requisite service period for certain awards, which we reassess at each balance sheet date.

In connection with the Retirement Policy, we accelerated the recognition of compensation expense of $ 0.4 million and $ 0.4 million during the three months ended June 30, 2024 and 2023, respectively, and accelerated the recognition of compensation expense of $ 0.6 million and $ 1.1 million for the six months ended June 30, 2024 and 2023, respectively.

Employee Stock Purchase Plan

The ESPP provides for certain automatic increases in the number of shares of common stock reserved for issuance, which resulted in an additional 274,105 shares becoming available under the ESPP effective January 1, 2024.

During the three months ended March 31, 2024, we issued 111,241 shares of common stock pursuant to scheduled purchases under the ESPP.

As of March 31, 2024, 1,103,127 shares remained available for issuance under the ESPP.

During the six months ended June 30, 2024, we issued 111,241 shares of common stock pursuant to scheduled purchases under the ESPP.

As of June 30, 2024, 1,103,127 shares remained available for issuance under the ESPP.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Determining Fair Value - Summary of Assumptions

1 unchanged sentence

The following table sets forth the assumptions used to determine the fair value of stock options:

Three Months Ended

Average expected term (years) 5.0 5.8

Expected stock price volatility 75.57 % - 76.01 %

68.34 % - 76.01 %

Risk-free interest rate 3.57 % - 3.57 %

1.54 % - 4.21 %

Dividend yield — % — %

Six Months Ended

Average expected term (years) N/A 5.0

Expected stock price volatility N/A 75.75 % - 76.01 %

Risk-free interest rate N/A 3.57 % - 3.57 %

Dividend yield N/A — %

The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP:

Three Months Ended

Six Months Ended

Average expected term (years) 1.3 1.3

6 unchanged sentences

We use the closing price of our common stock on the date of grant to determine the fair value of RSUs and PSUs.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation Expense

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,401 $ 1,202 $ 2,715 $ 2,474

2 unchanged sentences

Total stock-based compensation expense $ 13,179 $ 12,849 $ 25,854 $ 26,374

For the three months ended March 31, 2023, the weighted-average grant date fair value of stock options granted was $ 17.39 per option.

For the six months ended June 30, 2023, the weighted-average grant date fair value of stock options granted was $ 15.99 per option.

There were no stock options granted for the same period in 2024.

For the three months ended March 31, 2024 and 2023, the weighted-average grant date fair value of the purchase rights granted under the ESPP was $ 11.17 and $ 11.00 per share, respectively.

As of March 31, 2024, the total unrecognized stock-based compensation cost related to outstanding awards was $ 103,100,000 , which is expected to be recognized over a weighted-average period of 2.5 years.

For the six months ended June 30, 2024 and 2023, the weighted-average grant date fair value of the purchase rights granted under the ESPP was $ 11.17 and $ 11.00 per share, respectively.

As of June 30, 2024, the total unrecognized stock-based compensation cost related to outstanding awards was $ 94,633,000 , which is expected to be recognized over a weighted-average period of 2.4 years.

The total unrecognized compensation cost will be adjusted for forfeitures in future periods as they occur.

Our effective income tax rate was 11.0 % for the three months ended March 31, 2024, and was immaterial for the three months ended March 31, 2023.

The effective rate for the the three months ended March 31, 2024

differed from our federal statutory rate of 21% primarily due to t he tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Our effective income tax rate was ( 13.1 )% and ( 18.3 )% for the three and six months ended June 30, 2024, respectively.

Our effective income tax rate was immaterial for the three and six months ended June 30, 2023, respectively.

The effective rate for the three and six months ended June 30, 2024 and 2023 differed from our federal statutory rate of 21% primarily due to the tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements