CASTLE BIOSCIENCES INC 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. As of December 31, 2024, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework) . Based on this assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective based on those criteria. Our independent registered public accounting firm, KPMG LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2024, as stated in its attestation report contained in Item 15 of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 95 Table of Contents Item 9B. Other Information. Securities Trading Plans of Directors and Executive Officers On November 11, 2024 , Derek Maetzold , our Chief Executive Officer , adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 301,404 shares of our common stock, less the number of shares withheld to cover tax withholding obligations in connection with the vesting and settlement of outstanding RSUs and PSUs, and less any shares that are sold under his previous arrangement. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement will be from February 24, 2025 through August 13, 2025 . On November 18, 2024 , Frank Stokes , our Chief Financial Officer , adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of up to 100% of the shares of our common stock issued upon the settlement of 14,617 outstanding RSUs, less the number of shares withheld to cover tax withholding obligations in connection with the vesting and settlement of such RSUs. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement will be from February 18, 2025 through December 31, 2026 or earlier if all transactions under the trading arrangement are completed. No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as defined in Regulation S-K Item 408, during the last fiscal quarter. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 96 Table of Contents PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K since we intend to file our definitive proxy statement for our 2025 Annual Meeting of Stockholders (the “Proxy Statement”) pursuant to Regulation 14A of the Exchange Act, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information to be included in the Proxy Statement is incorporated herein by reference. Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item is to be included in the Proxy Statement as follows: • The information relating to our executive officers is to be included in the section entitled “Executive Officers,” • The information relating to our directors and nominees for director is to be included in the section entitled “Proposal 1: Election of Directors,” • The information relating to our audit committee and audit committee financial expert is to be included in the section entitled “Information Regarding the Board of Directors and Corporate Governance,” and • If required, the information regarding delinquent reports under Section 16(a) of the Exchange Act is to be included in the section entitled “Delinquent Section 16(a) Reports.” Such information is to be included in the Proxy Statement and is incorporated herein by reference. The information required by Item 408(b) of Regulation S-K will be set forth in the section captioned “ Insider Trading Arrangements and Policies ” in our Proxy Statement and is incorporated herein by reference. We have adopted a written Code of Business Conduct and Ethics (“Ethics Code”) that applies to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Ethics Code is available on our website at www.CastleBiosciences.com. If we ever were to amend or waive any provision that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations, if any, with respect to any such waiver or amendment by posting such information on our website, rather than by filing a Current Report on Form 8-K. Item 11. Executive Compensation. The information required by this item is to be included in the Proxy Statement under the section entitled “Executive Compensation” and is incorporated herein by reference, provided that the information required by Item 402(x) of Regulation S-K shall be set forth in the section headed “Policies and practices related to the grant of certain equity awards close in time to the release of material nonpublic information” in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item with respect to equity compensation plans is to be included in the Proxy Statement under the section entitled “Equity Compensation Plan Information” and the information required by this item with respect to security ownership of certain beneficial owners and management is to be included in the Proxy Statement under the section entitled “Security Ownership of Certain Beneficial Owners and Management” and in each case is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is to be included in the Proxy Statement under the section entitled “Transactions with Related Persons and Indemnifications—Related Person Transactions Policy and Procedures” and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. Our independent registered public accounting firm is KPMG LLP , Houston, TX , PCAOB ID: 185 . The information required by this item is to be included in the Proxy Statement under the section entitled “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” and is incorporated herein by reference. 97 Table of Contents PART IV Item 15. Exhibit and Financial Statement Schedules. (a)(1) Financial Statements. The consolidated financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1 . (a)(2) Financial Statement Schedules. All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto. (a)(3) Exhibits. The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report on Form 10-K. Exhibit Index Exhibit Number Description of document 2.1^† Agreement and Plan of Merger, dated October 18, 2021, by and among the Company, Space Merger Sub, Inc., Cernostics, Inc., and Shareholder Representative Services LLC, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, as amended, originally filed with the SEC on December 6, 2021. 2.2^† Agreement and Plan of Merger, dated April 4, 2022, by and among the Registrant, AltheaDx, Inc., Acorn Merger Sub, Inc. and Fortis Advisors LLC, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2022. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3. 2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019. 3.2 Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019. 4.1 Description of securities registered under Section 12 of the Exchange Act, incorporated by reference to Exhibit 4.1 of the Registrant's Annual Report on Form 10-K filed with the SEC on March 10, 2020. 4.2 Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 4.3 Sixth Amended and Restated Investors’ Rights Agreement, dated July 12, 2019, by and among the Registrant and certain of its stockholders, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.1+ Form of Indemnity Agreement by and between the Registrant and its directors and officers, incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.2+ Castle Biosciences, Inc. 2008 Stock Plan, incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.3+ Forms of Stock Option Agreement, Exercise Notice and Investment Representation Statement under the 2008 Stock Plan, incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.4+ Castle Biosciences, Inc. 2018 Equity Incentive Plan, as amended, incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.5+ Forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the 2018 Equity Incentive Plan, incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.6+ Castle Biosciences, Inc. 2019 Equity Incentive Plan, incorporated by reference to Exhibit 99.3 of the Registrant’s Registration Statement on Form S-8 (File No. 333-232884), originally filed with the SEC on July 29, 2019. 98 Table of Contents Exhibit Number Description of document 10.7+ Forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the 2019 Equity Incentive Plan, incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.8+ Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the 2019 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2020. 10.9+ Castle Biosciences, Inc. 2019 Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.10+ Form of Director Agreement by and between the Registrant and certain of its directors, incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.11+ Castle Biosciences, Inc. 2022 Inducement Plan, incorporated by reference to Exhibit 99.1 of the Registrant’s Registration Statement on Form S-8 (File No. 333-275881), filed with the SEC on December 4, 2023. 10.12+ Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the Castle Biosciences, Inc. 2022 Inducement Plan, incorporated by reference to Exhibit 10.12 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2023. 10.13+ Forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the Castle Biosciences, Inc. 2022 Inducement Plan, incorporated by reference to Exhibit 10.13 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2023. 10.14+ Non-Employee Director Compensation Policy, as amended effective May 31, 2024 , incorporated by reference to Exhibit 10. 1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 5, 2024 . 10.15+ Amended and Restated Executive Employment Agreement, dated September 20, 2012, as amended, by and between the Registrant and Derek J. Maetzold, incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.16+ Offer Letter Agreement, dated November 9, 2017, by and between the Registrant and Frank Stokes, incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.17+ Executive Employment Agreement, dated September 15, 2008, as amended, by and between the Registrant and Kristen Oelschlager, incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2021. 10.18+ Executive Employment Agreement, dated October 1, 2008, as amended, by and between the Registrant and Tobin Juvenal, incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2021. 10.19+ Castle Biosciences, Inc. Retirement Policy, incorporated by reference to Exhibit 10.16 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2023. 10.20+† Castle Biosciences, Inc. Severance and Change in Control Plan, incorporated by reference to Exhibit 10.20 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2024. 10.21+ Amended Participation Agreement, dated April 1, 2024, by and between the Company and Tobin Juvenal, incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2024. 10.22+ Amended Participation Agreement, dated April 1, 2024, by and between the Company and Kristen Oelschlager, incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2024. 10.23+ Amended Participation Agreement, dated April 2, 2024, by and between the Company and Derek Maetzold, incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2024. 10.24+ Amended Participation Agreement, dated April 2, 2024, by and between the Company and Frank Stokes, incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2024. 10.25 Standard Office Lease, dated as of October 5, 2015, by and between the Registrant and Merced Restart Phoenix Investors II, LLC, incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 99 Table of Contents Exhibit Number Description of document 10.26 First Amendment to Lease, dated December 4, 2018, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.15 of the Registrant's Annual Report on Form 10-K, filed with the SEC on March 10, 2020. 10.27 Second Amendment to Standard Office Lease, dated December 16, 2019, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. 10.28 Third Amendment to Standard Office Lease, dated November 29, 2021, by and between the Company and Alturas Siete, I, LLC, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 3, 2021. 10.29† Fourth Amendment to Standard Office Lease, dated March 11, 2022, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 17, 2022. 10.30† Fifth Amendment to Standard Office Lease, dated October 24, 2022, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.25 of the Registrant’s Current Report on Form 10-K filed with the SEC on February 28, 2023. 10.31 Standard Office Lease, dated December 16, 2019, by and between the Registrant and Alturas Siete, II, LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. 10.32 First Amendment to Standard Office Lease, dated February 16, 2021, by and between the Registrant and Alturas Siete II, LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2021. 10.33 Second Amendment to Standard Office Lease, dated November 29, 2021, by and between the Company and Alturas Siete, II, LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 3, 2021. 10.34 Third Amendment to Standard Office Lease, dated February 9, 2023, by and between the Registrant and Alturas Siete, II, LLC, incorporated by reference to Exhibit 10.29 of the Registrant’s Annual Report on Form 10-K filed with the SEC on February 28, 2023. 10.35 Fourth Amendment to Standard Office Lease, dated April 18, 2023 by and between the Registrant and Alturas Siete II, LLC, incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10 2023. 10.36 Commercial Lease, dated December 17, 2019, by and between the Registrant and Tannos Land Holding III, LLC, incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. 10.37 First Amendment to Commercial Lease, dated November 13, 2020, by and between the Registrant and Tannos Land Holdings III, LLC, incorporated by reference to Exhibit 10.23 of the Registrant's Annual Report on Form 10-K filed with the SEC on March 11, 2021. 10.38 Second Amendment to Commercial Lease, executed December 15, 2022, by and between the Registrant and Tannos Land Holdings III, LLC, incorporated by reference to Exhibit 10.32 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2023. 10.39† Lease Agreement, dated April 1, 2022, by and between the Registrant and ACA Concourse East Unit 3 LLC, incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 9, 2022. 10.40#† First Amendment to Lease Agreement, dated March 26, 2024 by and between the Registrant and ACA Concourse East Unit 3 LLC, incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2024. 10.41 Confirmation of Amendment Provisions, dated as of August 8, 2024, to the Lease Agreement, dated April 1, 2022, by and between the Registrant and ACA Concourse East Unit 3 LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 4, 2024. 10.42 Purchase Sale Agreement of Land, dated Jul 10, 2023, by and between the Registrant and Hal B. Boone, incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2023. 10.43 First Amendment to Purchase Sale Agreement of Land, dated October 4, 2023, by and between the Registrant and Hal B. Boone, incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2023. 100 Table of Contents Exhibit Number Description of document 10.44† Second Amendment to Purchase Sale Agreement of Land, dated January 9, 2024, by and between the Registrant and Hal B. Boone, incorporated by reference to Exhibit 10.38 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2024. 10.45# Exclusive License Agreement, dated as of November 14, 2009, by and between the Registrant and The Washington University, incorporated by reference to Exhibit 10.17 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. 10.46# Loan and Security Agreement, dated March 26, 2024, by and among the Registrant and Silicon Valley Bank, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 27, 2024. 19.1* Insider Trading Policy 21.1* Subsidiaries of the Registrant. 23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm. 31.1* Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. 31.2* Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. 32.1** Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act, and 18 U.S.C. Section 1350. 97.1+ Castle Biosciences, Inc. Incentive Compensation Recoupment Policy, incorporated by reference to Exhibit 97.1 of the Registrant's Annual Report on Form 10-K filed with the SEC on February 28, 2024. 101.INS* Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase. 104* Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101). _____________________________________ * Filed herewith ** Furnished herewith. + Indicates management contract or compensatory plan. # Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”) because the Company has determined that the information is not material and is the type that the Company treats as private or confidential. † Certain schedules or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished. ^ Pursuant to Item 601(b)(2) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”) because the Company has determined that the information is not material and is the type that the Company treats as private or confidential. Item 16. Form 10-K Summary. None. 101 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CASTLE BIOSCIENCES, INC. Date: February 27, 2025 By: /s/ Derek J. Maetzold Derek J. Maetzold President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. SIGNATURE TITLE DATE /s/ Derek J. Maetzold President, Chief Executive Officer and Director February 27, 2025 (Derek J. Maetzold) ( Principal Executive Officer ) /s/ Frank Stokes Chief Financial Officer February 27, 2025 (Frank Stokes) ( Principal Financial and Accounting Officer ) /s/ Daniel M. Bradbury Chairperson of the Board of Directors February 27, 2025 (Daniel M. Bradbury) /s/ Kimberlee S. Caple Member of the Board of Directors February 27, 2025 (Kimberlee S. Caple) /s/ G. Bradley Cole Member of the Board of Directors February 27, 2025 (G. Bradley Cole) /s/ Rodney Cotton Member of the Board of Directors February 27, 2025 (Rodney Cotton) /s/ Ellen Goldberg Member of the Board of Directors February 27, 2025 (Ellen Goldberg) /s/ Miles D. Harrison Member of the Board of Directors February 27, 2025 (Miles D. Harrison) /s/ Tiffany P. Olson Member of the Board of Directors February 27, 2025 (Tiffany P. Olson) 102 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 4 Consolidated Statements of Operations for the Years Ended December 31, 202 4, 2023, and 2022 F- 5 Consolidated Statements of Comprehensive Income ( Loss ) for the Years Ended December 31, 2024, 2023 , and 2022 F- 6 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 202 3, and 2022 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 , 2023 , and 2022 F- 8 Notes to the Consolidated Financial Statements F-10 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Castle Biosciences, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Castle Biosciences, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F-2 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Measurement of test revenue As discussed in Notes 2 and 3 of the consolidated financial statements, test revenue is recognized when the performance obligation is satisfied, upon delivery of the test report. The amount of revenue recognized reflects the amount of consideration to which the Company expects to be entitled and considers the effects of variable consideration. The measurement of test revenue is determined by contractually established rates as well as historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of the Company’s past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as the judgment and actions of third parties. The Company reported net revenues of $332.1 million for the year ended December 31, 2024, a portion of which related to test revenue. We identified the evaluation of the measurement of test revenue as a critical audit matter. Evaluating the measurement of test revenue, specifically the estimation of the amount of test revenue expected to be collectible related to commercial payors and certain others, required especially complex and subjective auditor judgment. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the estimation of the expected collectible test revenue related to commercial payors and certain others. This included controls related to management’s review of the assumptions and inputs used in the determination of test revenue expected to be collectible from commercial payors and certain others. For a selection of tests, we evaluated certain historical data inputs that are used in management’s model to estimate test revenue expected to be collectible by comparing the data from the model to physician test requisition forms, proof of delivery, and cash collection activity. These data inputs included collection activity, amounts of historical claims, insurance payor categories, test dates, test types, claim aging categories, and revenue recognition dates. In addition, we inquired of the individuals who are responsible for monitoring and tracking the status of anticipated collections to understand the progress of these activities and any impact to management’s estimates. /s/ KPMG LLP We have served as the Company’s auditor since 2018. Houston, Texas February 27, 2025 F-3 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2024 2023 ASSETS Current Assets Cash and cash equivalents $ 119,709 $ 98,841 Marketable investment securities 173,421 144,258 Accounts receivable, net 51,218 38,302 Inventory 8,135 7,942 Prepaid expenses and other current assets 7,671 6,292 Total current assets 360,154 295,635 Long-term accounts receivable, net 918 1,191 Property and equipment, net 51,122 25,433 Operating lease assets 11,584 12,306 Goodwill and other intangible assets, net 106,229 117,335 Other assets – long-term 1,228 1,440 Total assets $ 531,235 $ 453,340 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 6,901 $ 10,268 Accrued compensation 32,555 28,945 Operating lease liabilities 1,665 1,137 Current portion of long-term debt 278 — Other accrued and current liabilities 7,993 7,317 Total current liabilities 49,392 47,667 Long-term debt 9,745 — Noncurrent operating lease liabilities 14,345 14,173 Noncurrent finance lease liabilities 311 25 Deferred tax liability 1,607 206 Total liabilities 75,400 62,071 Commitments and Contingencies (Note 13) Stockholders’ Equity Preferred stock, $ 0.001 par value; 10,000,000 shares authorized as of December 31, 2024 and 2023; no shares issued and outstanding as of December 31, 2024 and 2023. — — Common stock, $ 0.001 par value; 200,000,000 authorized as of December 31, 2024 and 2023; 28,483,195 and 27,410,532 shares issued and outstanding as of December 31, 2024 and 2023, respectively. 28 27 Additional paid-in capital 655,703 609,477 Accumulated deficit ( 200,126 ) ( 218,371 ) Accumulated other comprehensive income 230 136 Total stockholders’ equity 455,835 391,269 Total liabilities and stockholders’ equity $ 531,235 $ 453,340 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2024 2023 2022 NET REVENUES $ 332,069 $ 219,788 $ 137,039 OPERATING EXPENSES AND OTHER OPERATING INCOME Cost of sales (exclusive of amortization of acquired intangible assets) 60,205 44,982 32,009 Research and development 52,041 53,618 44,903 Selling, general and administrative 200,047 180,152 143,003 Amortization of acquired intangible assets 11,106 9,013 8,266 Change in fair value of contingent consideration — — ( 18,287 ) Total operating expenses, net 323,399 287,765 209,894 Operating income (loss) 8,670 ( 67,977 ) ( 72,855 ) Interest income 12,916 10,623 3,968 Changes in fair value of trading securities 555 — — Interest expense ( 577 ) ( 11 ) ( 17 ) Income (loss) before income taxes 21,564 ( 57,365 ) ( 68,904 ) Income tax expense (benefit) 3,319 101 ( 1,766 ) Net income (loss) $ 18,245 $ ( 57,466 ) $ ( 67,138 ) Earnings (loss) per share: Basic $ 0.66 $ ( 2.14 ) $ ( 2.58 ) Diluted $ 0.62 $ ( 2.14 ) $ ( 2.58 ) Weighted-average shares outstanding: Basic 27,776 26,802 26,054 Diluted 29,255 26,802 26,054 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31, 2024 2023 2022 Net income (loss) $ 18,245 $ ( 57,466 ) $ ( 67,138 ) Other comprehensive income (loss): Net unrealized gain (loss) on debt securities held as available-for-sale 94 517 ( 381 ) Comprehensive income (loss) $ 18,339 $ ( 56,949 ) $ ( 67,519 ) The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount BALANCE, JANUARY 1, 2022 25,378,520 $ 25 $ 505,482 $ ( 93,767 ) $ — $ 411,740 Stock-based compensation expense — — 36,321 — — 36,321 Exercise of common stock options 148,735 1 832 — — 833 Issuance of common stock from vested restricted stock units and payment of employees’ taxes 183,887 — ( 1,688 ) — — ( 1,688 ) Issuance of common stock under the employee stock purchase plan 78,652 — 2,352 — — 2,352 Issuance of common stock in acquisition of business 763,887 1 17,110 — — 17,111 Net unrealized loss on marketable investment securities — — — — ( 381 ) ( 381 ) Net loss — — — ( 67,138 ) — ( 67,138 ) BALANCE, DECEMBER 31, 2022 26,553,681 $ 27 $ 560,409 $ ( 160,905 ) $ ( 381 ) $ 399,150 Stock-based compensation expense — — 51,219 — — 51,219 Exercise of common stock options 71,525 — 269 — — 269 Issuance of common stock from vested restricted stock units and payment of employees’ taxes 645,454 — ( 5,134 ) — — ( 5,134 ) Issuance of common stock under the employee stock purchase plan 139,872 — 2,714 — — 2,714 Net unrealized gain on marketable investment securities — — — — 517 517 Net loss — — — ( 57,466 ) — ( 57,466 ) BALANCE, DECEMBER 31, 2023 27,410,532 $ 27 $ 609,477 $ ( 218,371 ) $ 136 $ 391,269 Stock-based compensation expense — — 50,320 — — 50,320 Exercise of common stock options 135,875 — 2,017 — — 2,017 Issuance of common stock from vested restricted stock units, performance stock units and payment of employees’ taxes 769,100 — ( 8,762 ) — — ( 8,762 ) Issuance of common stock under the employee stock purchase plan 167,688 1 2,651 — — 2,652 Net unrealized gain on marketable investment securities — — — — 94 94 Net income — — — 18,245 — 18,245 BALANCE, DECEMBER 31, 2024 28,483,195 $ 28 $ 655,703 $ ( 200,126 ) $ 230 $ 455,835 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 OPERATING ACTIVITIES Net income (loss) $ 18,245 $ ( 57,466 ) $ ( 67,138 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 15,997 12,330 10,543 Stock-based compensation expense 50,320 51,219 36,321 Change in fair value of contingent consideration — — ( 18,287 ) Change in fair value of trading securities ( 555 ) — — Deferred income taxes 1,401 ( 223 ) ( 1,877 ) Accretion of discounts on marketable investment securities ( 6,685 ) ( 5,491 ) ( 1,368 ) Other 268 635 158 Change in operating assets and liabilities: Accounts receivable ( 12,643 ) ( 14,930 ) ( 6,218 ) Prepaid expenses and other current assets ( 1,142 ) ( 435 ) ( 1,224 ) Inventory ( 193 ) ( 3,962 ) ( 1,680 ) Operating lease assets 1,322 ( 258 ) 991 Other assets 262 ( 330 ) 618 Accounts payable ( 4,372 ) 5,707 582 Operating lease liabilities ( 1,289 ) 852 ( 608 ) Accrued compensation 3,610 4,587 8,495 Other accrued and current liabilities 320 2,139 ( 963 ) Net cash provided by (used in) operating activities 64,866 ( 5,626 ) ( 41,655 ) INVESTING ACTIVITIES Purchases of marketable investment securities ( 205,729 ) ( 189,075 ) ( 134,689 ) Proceeds from maturities of marketable investment securities 183,900 186,500 — Purchases of property and equipment ( 28,326 ) ( 13,621 ) ( 5,632 ) Proceeds from sale of property and equipment 18 13 195 Acquisition of business, net of cash and cash equivalents acquired — — ( 26,966 ) Asset acquisitions, net of cash and cash equivalents acquired — — 547 Net cash used in investing activities ( 50,137 ) ( 16,183 ) ( 166,545 ) FINANCING ACTIVITIES Proceeds from exercise of common stock options 2,017 269 833 Payment of employees’ taxes on vested restricted stock units ( 8,762 ) ( 5,134 ) ( 1,688 ) Proceeds from contributions to the employee stock purchase plan 2,981 2,709 2,492 Repayment of principal portion of finance lease liabilities ( 97 ) ( 142 ) ( 122 ) Proceeds from issuance of term debt 10,000 — — Net cash provided by (used in) financing activities 6,139 ( 2,298 ) 1,515 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents CASTLE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (in thousands) Years Ended December 31, 2024 2023 2022 NET CHANGE IN CASH AND CASH EQUIVALENTS 20,868 ( 24,107 ) ( 206,685 ) Beginning of year 98,841 122,948 329,633 End of year $ 119,709 $ 98,841 $ 122,948 SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR: Interest $ 434 $ 11 $ 16 Income taxes $ 2,503 $ 198 $ 120 DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued purchases of property and equipment $ 2,231 $ 1,226 $ 1,396 Property and equipment acquired with tenant improvement allowance $ 1,389 $ 1,281 $ 51 Operating lease assets obtained in exchange for lease obligations $ 607 $ 1,547 $ 6,075 Decrease in operating lease assets with corresponding change in lease liabilities $ ( 7 ) $ — $ — Finance lease assets obtained in exchange for lease obligations $ 218 $ — $ — Common stock issued in acquisition of business $ — $ — $ 17,111 The accompanying notes are an integral part of these consolidated financial statements. F-9 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Description of Business Castle Biosciences, Inc. (the ‘‘Company,” “we,” “us” or “our”) was incorporated in the state of Delaware on September 12, 2007. We are a commercial-stage diagnostics company focused on providing clinicians and their patients with personalized, clinically actionable information to inform treatment decisions and improve health outcomes. We are based in Friendswood, Texas (a suburb of Houston, Texas) and our laboratory operations are conducted at our facilities located in Phoenix, Arizona and Pittsburgh, Pennsylvania. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Castle Biosciences, Inc. and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’). All intercompany accounts and transactions have been eliminated in consolidation. In connection with preparing consolidated financial statements for each annual and interim reporting period, the Company is required to evaluate whether there are conditions or events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Substantial doubt exists when conditions and events, considered in aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans and actions that have not been fully implemented as of the date that the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both: (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued; and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued. We have a history of recurring net losses and negative cash flows and as of December 31, 2024, we had an accumulated deficit of $ 200.1 million. We believe our $ 119.7 million of cash and cash equivalents, and $ 173.4 million of marketable investment securities as of December 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 consolidated financial statements were issued. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include revenue recognition, the valuation of stock-based compensation, assessing future tax exposure and the realizability of deferred tax assets, the useful lives and recoverability of long-lived assets, the goodwill impairment test, the valuation of acquired intangible assets and the valuation of contingent consideration and other contingent liabilities. We base these estimates on historical and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions. Segment Reporting Operating segments are components of an enterprise engaging in business activities from which it may recognize revenues and incur expenses, where discrete financial information is available, and where its operating results are regularly reviewed by the public entity's chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess its performance. A CODM may be an individual or a F-10 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) decision-making group. A reportable segment consists of one or more operating segments. For additional information on our segment reporting, see Note 17. Cash and Cash Equivalents including Concentrations of Credit Risk Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds, which are not insured by the Federal Deposit Insurance Corporation (“FDIC”), that are primarily invested in short-term U.S. government obligations. Cash deposits at financial institutions may exceed the amount of insurance provided by the FDIC. Management believes that we are not exposed to significant credit risk on our cash deposits due to the financial position of the financial institutions in which deposits are held. Marketable Investment Securities Our marketable investment securities are comprised of debt and equity securities. All debt securities are recognized in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, Investments-Debt Securities (“ASC 320”). Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. All debt securities are classified as available-for-sale (“AFS”) and are recorded at fair value in accordance with ASC 320. We recognize the unrealized gains and losses related to changes in fair value as a separate component of accumulated other comprehensive income (loss) within total stockholders’ equity, net of any related deferred income tax effects, on the consolidated balance sheets. Premiums or discounts from par value are amortized over the life of the underlying investment and are included in interest income in the consolidated statements of operations. Realized gains and losses on available-for-sale securities, if any, are calculated at the individual security level and are included in interest income in the consolidated statements of operations. Impairments of available-for-sale debt securities, if any, are recorded in the consolidated statements of operations. Our equity securities consist of investments in shares of common stock which are listed and traded on the Nasdaq Global Market. All trading securities are recognized in accordance with ASC Topic 321, Investments-Equity Securities and reported at their readily determinable fair values as quoted by market exchanges where changes in fair value are included in changes in fair value of trading securities in the consolidated statements of operations. All changes in a marketable security’s fair value are reported in earnings as they occur, as such, the sale of our trading securities does not necessarily give rise to a significant gain or loss. Investments in equity securities are classified as either current or long-term depending upon management’s intentions. See Notes 5 and 12 for further details. Revenue Recognition In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we follow a five-step process to recognize revenues: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied. We have determined that we have a contract with the patient when the treating clinician orders the test. Our contracts generally contain a single performance obligation, which is the delivery of the test report, and we satisfy our performance obligation at a point in time upon the delivery of the test report to the treating clinician, at which point we can bill for the report. The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration. See Note 3 for further details. Accounts Receivable and Allowance for Credit Losses We classify accounts receivable balances that are expected to be paid more than one year from the consolidated balance sheet date as noncurrent assets. The estimated timing of payment utilized as a basis for classification as noncurrent is determined by analyses of historical payor-specific payment experience, adjusted for known factors that are expected to change the timing of future payments. We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected. Management’s estimates are typically based on historical loss information adjusted for current conditions. We generally do not perform evaluations of customers’ financial condition and generally do not require collateral. Historically, our credit losses have not been significant. The allowance for credit losses was zero as of December 31, 2024 and 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. F-11 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Inventory We carry inventories of test supplies in our laboratory facilities. The inventories are carried at the lower of weighted average cost and net realizable value and expensed through cost of sales as the supplies are used. 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 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. Intangible Assets Our intangible assets, which are comprised primarily of acquired developed technology, are considered to be finite-lived and are amortized on a straight-line basis over their estimated useful lives. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment. We test goodwill for impairment in the fourth quarter of each fiscal year and when events, or changes in circumstances, indicate that it may be impaired. Events and changes in circumstances indicating that goodwill may be impaired include sustained declines in the price of our common stock, increased competition, changes in macroeconomic developments, unfavorable government or regulatory developments and changes in coverage or reimbursement conditions. Goodwill is tested for impairment at the reporting until level where goodwill is held. Testing begins with completion of an optional qualitative assessment. If the qualitative assessment suggests that impairment is more likely than not, quantitative testing is conducted. If the qualitative assessment is bypassed, we proceed directly to quantitative testing. Quantitative testing consists of comparing the carrying value of goodwill to its estimated fair value. Impairment of goodwill is the condition that exists when the carrying value exceeds its fair value. Amounts by which carrying value exceed fair value, up to the total amount of goodwill allocated to the reporting unit, are recognized as an impairment loss in the consolidated statements of operations. Long-Lived Assets We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total of estimated future undiscounted cash flows, expected to result from the use of the asset and its eventual disposition, are less than the carrying amount. Impairment, if any, would be calculated based on the excess of the carrying amount of the long-lived asset over the long-lived asset’s fair value. There were no impairment charges recognized during the years ended December 31, 2024, 2023 and 2022. Acquisitions We assess acquisitions under ASC Topic 805, Business Combinations (“ASC 805”) , to determine whether a transaction represents the acquisition of assets or a business combination. Under this guidance, we apply a two-step model. The first step involves a screening test where we evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or a group of similar assets. If the screening test is met, we account for the set as an asset acquisition. If the screening test is not met, we apply the second step of the model to determine if the set meets the definition of a business based on the guidance in ASC 805. If so, the transaction is treated as a business combination. Otherwise, it is treated as an asset acquisition. Asset acquisitions are accounted for by allocating the cost of the acquisition, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis without recognition of goodwill. Business combinations F-12 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) are accounted for using the acquisition method. Under the acquisition method, goodwill is measured as a residual amount equal to the fair value of the consideration transferred less the net recognized fair value of the identifiable assets acquired and the liabilities assumed, as of the acquisition date, and transaction costs are expensed as incurred. Contingent Consideration Under the terms of business combinations or asset acquisitions, we may be required to pay additional contingent consideration if specified future events occur or if certain conditions are met. In a business combination, in accordance with ASC 805, contingent consideration is recorded at fair value as of the acquisition date and classified as liabilities or equity based on applicable U.S. GAAP. For contingent consideration classified as liabilities, we remeasure the contingent consideration at fair value each period with changes in fair value recorded in the statements of operations each period. For contingent consideration in transactions that are not business combinations, we apply U.S. GAAP. With respect to additional contingent consideration that must or may be settled by issuance of a variable number of shares, we account for the contingent consideration as a liability in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). In accordance with ASC 480, we record the contingent consideration initially and subsequently at fair value with changes in fair value recorded in the statements of operations each period. Contingent consideration is classified as current or noncurrent in the consolidated balance sheets based on the contractual timing of future settlement. For additional information on the contingent consideration, see Notes 6 and 12. Leases We account for leases in accordance with ASC Topic 842, Leases (“ ASC 842”) . We categorize leases at their commencement as either operating or finance leases based on the criteria in ASC 842. Under ASC 842, we record right-of-use (“ROU”) assets and lease liabilities for each lease arrangement identified, except that we have elected the short-term lease exemption for all leases with a term of 12 months or less. Lease liabilities are recorded at the present value of future lease payments discounted using our incremental borrowing rate for the lease established at the commencement date and ROU assets are measured at the amount of the lease liability plus any initial direct costs, less any lease incentives received before commencement. For our operating leases, we recognize a single lease cost over the lease term on a straight-line basis. We have elected the practical expedient of not separating nonlease components from lease components in all leases. See Note 11 for details on our leases. Cost of Sales (exclusive of amortization of acquired intangible assets) Cost of sales is expensed as incurred and includes material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical records, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Research and Development Research and development (“R&D”) costs are charged to operations as incurred. Advance payments for goods and services that will be used in future R&D activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform R&D services on behalf of us will be expensed as services are rendered or when the milestone is achieved. R&D costs include, but are not limited to, payroll and personnel-related expenses, stock-based compensation expense, materials, laboratory supplies, and consulting costs. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses are attributable to sales, marketing, executive, finance and accounting, legal and human resources functions. These expenses consist of personnel costs (including salaries, employee benefit costs, bonuses and stock-based compensation expenses), customer services expenses, direct marketing expenses, educational and promotional expenses, market research, audit and legal expenses, and consulting. We expense all SG&A costs as incurred. F-13 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accrued Compensation We accrue for liabilities under discretionary employee and executive bonus plans. Our estimated compensation liabilities are based on progress against corporate objectives approved by our board of directors, compensation levels of eligible individuals and target bonus percentage levels. Our board of directors reviews and evaluates the performance against these objectives and ultimately determines the actual achievement levels attained. 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 December 31, 2024 and 2023, we accrued approximately $ 23.3 million and $ 21.7 million, respectively, for liabilities associated with these bonus plans. These amounts are classified as current or noncurrent accrued liabilities in the balance sheets based on the expected timing of payment. Retirement Plan We have an Internal Revenue Code (“IRC”) Section 401(k) profit sharing plan (the “Plan”) for eligible employees. The Plan is funded by employee contributions and provides for discretionary contributions in the form of matching and/or profit-sharing contributions. For the years ended December 31, 2024, 2023, and 2022 we provided a discretionary matching contribution of $ 5.5 million, $ 4.6 million, and $ 3.5 million respectively. The higher amount for the year ended December 31, 2024 primarily reflects an increase in the number of employees compared to the years ended December 31, 2023 and 2022. Income Taxes We use the asset and liability method of accounting for income taxes. Current income taxes are recognized for the estimated taxes payable or refundable on tax returns for the current year. Deferred income taxes arise from the recognition of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. We consider all evidence, both positive and negative, with respect to our net operating loss (“NOL”) carryforwards, expected levels of pre-tax financial statement income (loss), taxable income (benefit), liquidity, and prudent and reasonable tax planning strategies when evaluating whether the temporary differences will be realized. In projecting future taxable income (loss), we begin with budgeted pre-tax income (loss) adjusted for estimated taxable and non-taxable items. The assumptions about future taxable income (loss) require significant judgment and are consistent with the plans and estimates we use to manage our businesses. A valuation allowance is established when it is more likely than not that some portion of the deferred tax asset will not be realized. The evaluation of a valuation allowance considers the character of the taxable income, ordinary income versus capital income. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for unrecognized tax benefits is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. The effect of a change in tax rates is recognized in the period of enactment. If we were to be levied interest and penalties by the Internal Revenue Service, these amounts would be recognized as a component of income tax expense in the consolidated statement of operations. Our policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of tax expense. Stock-Based Compensation Stock-based compensation expense for equity instruments is measured based on the grant-date fair value of the awards. For stock option awards, and purchase rights made under the 2019 Employee Stock Purchase Plan (the “ESPP”), the fair value is estimated on the date of grant using the Black-Scholes option-pricing valuation model. For restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), the fair value is equal to the closing price of our common stock on the date of grant. For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For stock options and RSUs, the requisite service period is generally the award’s vesting period (typically four years ). PSUs vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. Share-based awards falling into the scope of the 2023 Retirement Policy are accounted F-14 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) for as a modification of existing awards under ASC Topic 718, Compensation – Stock Compensation. The modifications do not result in recognition of incremental compensation cost however, do result in a new estimate of the requisite service period, which we reassess at each balance sheet date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date. Forfeitures are accounted for as they occur. 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 loss plus net unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss). CARES Act Payroll Tax Deferral The CARES Act permitted employers to defer the payment of the employer share of social security taxes due for the period beginning March 27, 2020 and ending December 31, 2020. Of the amounts deferred, 50% were required to be paid by December 31, 2021 and the remaining 50% were required to be paid by December 31, 2022. We began deferring payment of the employer share of social security taxes in May 2020. Of the $ 0.6 million originally deferred, 50% was repaid during the year ended December 31, 2021 and the remaining $ 0.3 million of such taxes were repaid during the year ended December 31, 2022. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance was effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption was permitted. The guidance was applied retrospectively to all periods presented in the financial statements, unless it was impracticable. We have adopted the guidance under this ASU 2023-07 on a retrospective basis with an effective date January 1, 2022. For additional information on our segment reporting, see Note 17. Accounting Pronouncements Yet to be Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures ("ASU 2023-09"), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40)—Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses (“ASU 2024-03”), which specifies additional disclosure requirements. The amendments in ASU 2024-03 require disclosure about the composition of certain income expense line items, such as purchases of inventory, employee compensation, and other expenses, as well as disclosure about selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures. W e have evaluated all other recently issued, but not yet effective, accounting pronouncements and do not believe that these accounting pronouncements will have any material impact on the consolidated financial statements or disclosures upon adoption. 3. Revenue All of our revenues from contracts with customers are associated with the provision of testing services. Our revenues are primarily attributable to our DecisionDx®-Melanoma test for cutaneous melanoma and our DecisionDx®-SCC test for cutaneous squamous cell carcinoma (“SCC”). We also provide a test for patients diagnosed with Barrett’s esophagus (“BE”), the TissueCypher® test, a test for patients with suspicious pigmented F-15 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) lesions, MyPath® Melanoma and DiffDx®-Melanoma, and a test for uveal melanoma (“UM”), DecisionDx®-UM. We also began offering a pharmacogenomics (“PGx”) testing service focused on mental health, IDgenetix®, following a business combination completed in April 2022. Information on the disaggregation of revenues is included below. Once we satisfy our performance obligations and bill for the service, the timing of the collection of payments may vary based on the payment practices of the third-party payor and the existence of contractually established reimbursement rates. The payments for our services are primarily made by third-party payors, including Medicare and commercial health insurance carriers. Certain contracts contain a contractual commitment of a reimbursement rate that differs from our list prices. However, absent a positive coverage policy, with or without a contractually committed reimbursement rate, with a commercial carrier or governmental program, our diagnostic tests may or may not be paid by these entities. In addition, patients do not enter into direct agreements with us that commit them to pay any portion of the cost of the tests in the event that their insurance provider declines to reimburse us. We may pursue, on a case-by-case basis, reimbursement from such patients in the form of co-payments and co-insurance, in accordance with the contractual obligations that we have with the insurance carrier or health plan. These situations may result in a delay in the collection of payments. The Medicare claims that are covered by Medicare are generally paid at a rate established on Medicare’s Clinical Laboratory Fee Schedule or by the respective Medicare contractor within 30 days from receipt. Medicare claims that were either submitted to Medicare prior to the LCD or other coverage commencement date or are not covered but meet the definition of being medically reasonable and necessary pursuant to the controlling Section 1862(a)(1)(A) of the Social Security Act are generally appealed and may ultimately be paid at the first (termed ‘‘redetermination’’), second (termed ‘‘reconsideration’’) or third level of appeal ( de novo hearing with an Administrative Law Judge). A successful appeal at any of these levels may result in prompt payment. 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. 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. Such variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. Variable consideration may be constrained and excluded from the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor. Accordingly, in such situations revenues are recognized on the basis of actual cash collections. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Included in revenues for the years ended December 31, 2024, 2023, and 2022 were $ 1.8 million of net negative revenue adjustments, $ 4.5 million of net negative revenue adjustments, and $ 2.0 million 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 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 SG&A expenses as incurred due to the short duration of our contracts. Contract balances consisted solely of accounts receivable (both current and noncurrent) as of December 31, 2024 and 2023. F-16 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Disaggregation of Revenues The table below provides the disaggregation of revenue by type (in thousands): Years Ended December 31, 2024 2023 2022 Dermatologic (1) $ 256,996 $ 183,375 $ 124,809 Non-Dermatologic (2) 75,073 36,413 12,230 Total net revenues $ 332,069 $ 219,788 $ 137,039 (1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma) (2) Consists of TissueCypher, DecisionDx-UM and IDgenetix. We have presented disaggregated net revenues included in our single reportable segment in the table above. The characteristics for each test in our single segment are similar, with each test having a single performance obligation. Our CODM is the single individual responsible for managing our segment and reviews consolidated results and budgets in assessing performance and in allocated resources. See Note 17 for additional information about our reportable segment. Payor Concentration We rely upon reimbursements from third-party government payors (primarily Medicare) and private-payor insurance companies to collect accounts receivable related to sales of our tests. Our significant third-party payors and their related revenues as a percentage of total revenues and accounts receivable balances were as follows: Percentage of Revenues Percentage of Accounts Receivable (current) Percentage of Accounts Receivable (noncurrent) Year Ended December 31, As of December 31, As of December 31, 2024 2023 2022 2024 2023 2024 2023 Medicare 47 % 49 % 53 % 18 % 20 % * * Payor A 15 % 14 % 12 % 19 % 19 % 15 % 15 % Payor B * * * 20 % 10 % 12 % 11 % * Less than 10% 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. 4. Earnings (loss) Per Share Basic earnings (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 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. However, potentially dilutive shares are excluded from the computation of diluted loss per share when their effect is antidilutive. F-17 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table shows the computation of basic and diluted earnings (loss) per share for the following year ended December 31, 2024, 2023, and 2022 (in thousands, except per share data): Years Ended December 31, Numerator: 2024 2023 2022 Net income (loss) $ 18,245 $ ( 57,466 ) $ ( 67,138 ) Denominator: Weighted-average common shares outstanding, basic 27,776 26,802 26,054 Assumed exercise of stock options 457 — — Assumed vesting of RSUs 858 — — Assumed vesting of PSUs 144 — — Assumed issuance of shares under the ESPP 20 — — Weighted-average common shares outstanding, diluted 29,255 26,802 26,054 Earnings (loss) per share: Basic $ 0.66 $ ( 2.14 ) $ ( 2.58 ) Diluted $ 0.62 $ ( 2.14 ) $ ( 2.58 ) Due to the Company reporting a net loss attributable to common stockholders for years ended December 31, 2023, and 2022, 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 years ended December 31, 2024, 2023, and 2022 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): Years Ended December 31, 2024 2023 2022 Stock options 2,445 3,319 3,521 RSUs and PSUs 531 3,350 1,650 ESPP 160 330 146 Total 3,136 6,999 5,317 In addition, in connection with our acquisition of AltheaDx, Inc. (“AltheaDx”) in April 2022, no such shares were determined to have been issued and were excluded from the calculation of diluted income (loss) per share because none of the applicable conditions have been met during the earnout periods and based on the final valuation of the contingent consideration as required in the definitive agreement to acquire AltheaDx. See Notes 6 and 12 for additional information. F-18 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Marketable Investment Securities Marketable investment securities consisted of the following (in thousands): As of December 31, 2024 2023 Trading securities (1) $ 3,555 $ — Debt securities 169,866 144,258 Marketable investment securities $ 173,421 $ 144,258 (1) We had no trading securities as of December 31, 2023. Trading securities We recognized $ 0.6 million in gains, all of which were unrealized, on our trading securities for the year ended December 31, 2024. We recognized no gains or losses for the years ended December 31, 2023 and 2022. Debt securities The following tables present our debt securities (in thousands): December 31, 2024 Amortized Cost Unrealized Estimated Fair Value Gains Losses U.S. government securities $ 169,636 $ 244 $ ( 14 ) $ 169,866 Total $ 169,636 $ 244 $ ( 14 ) $ 169,866 December 31, 2023 Amortized Cost Unrealized Estimated Fair Value Gains Losses U.S. government securities $ 144,122 $ 143 $ ( 7 ) $ 144,258 Total $ 144,122 $ 143 $ ( 7 ) $ 144,258 Although our U.S. government securities are available to be sold to meet operating needs or otherwise, these securities are generally held through maturity. We classify all investments as current assets, as these are readily available for use in current operations. 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 debt securities for the years ended December 31, 2024, 2023, and 2022. We evaluated our U.S. government securities under the available-for-sale debt securities impairment model guidance and determined our investment portfolio is comprised of low-risk, investment grade securities. 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. Unrealized losses were immaterial for the years ended December 31, 2024, 2023, and 2022. In addition, there were no attributable credit risks, and no credit-related or noncredit-related impairment losses recognized, for the years ended December 31, 2024, 2023 and 2022. The allowance for credit losses was zero as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, 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 the consolidated balance sheets. As of December 31, 2024 and 2023 the accrued interest receivable balance was immaterial. Additional information relating to the fair value of marketable investment securities can be found in Note 12. F-19 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Acquisition AltheaDx, Inc. On April 26, 2022, we completed the acquisition of 100 % of the equity interests in AltheaDx which offers the IDgenetix test that focuses on mental health. We acquired AltheaDx for $ 30.5 million in cash and $ 17.1 million in common stock issued, for total consideration of $ 47.6 million. The fair value of assets acquired and liabilities assumed primarily consisted of finite-lived intangible assets of $ 35.0 million, goodwill of $ 10.7 million, cash and cash equivalents of $ 3.5 million and deferred tax liabilities of $ 1.7 million. We concluded that the transaction represents a business combination under ASC 805. The financial results of AltheaDx have been included in the consolidated financial statements since the date of the acquisition. The amount of revenue attributable to AltheaDx included in the consolidated statements of operations from the acquisition date through December 31, 2022 was $ 0.9 million. The loss attributable to AltheaDx included in the consolidated statements of operations from the acquisition date through December 31, 2022 was approximately $ 12.4 million. This amount did not reflect transaction costs from the acquisition or the effects of the valuation allowance reduction discussed in Note 16. Transaction costs associated with the acquisition were $ 1.7 million for the year ended December 31, 2022 and were recognized as expenses, included in SG&A expenses in the consolidated statements of operations. In connection with the acquisition of AltheaDx, we also agreed to pay up to an additional $ 75.0 million in cash and common stock in connection with the achievement of certain milestones based on 2022, 2023, and 2024 commercial milestones for the IDgenetix test (the “AltheaDx Earnout Payments”). Achievement of milestones required to receive additional payment of cash and issuance of stock were not met during the years ended December 31, 2024, 2023 and 2022 and as such, no payments were made during the same periods. As of December 31, 2024, no future obligations exist relating to AltheaDx Earnout Payments and the contingent consideration period had ended. Contingent consideration liability associated with the AltheaDx Earnout Payments was zero as of the April 26, 2022 date of acquisition and remained unchanged through the ending of the milestone performance period on December 31, 2024. Our calculations of the consideration transferred and the purchase price allocation for the acquisition of AltheaDx were finalized as of December 31, 2022. During the measurement period, we recorded adjustments to accrued liabilities, income taxes, intangible assets, contingent consideration and the resulting goodwill after finalizing our valuation of these items. F-20 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the acquisition-date fair value of the consideration transferred, summarizes the final allocation of the fair values of assets acquired and liabilities assumed in the acquisition of AltheaDx, and includes measurement period adjustments recorded during 2022 (in thousands, except for shares): April 26, 2022 (as initially reported) Measurement Period Adjustments April 26, 2022 (as adjusted) Consideration Transferred Cash $ 30,510 $ ( 8 ) $ 30,502 Common stock ( 763,887 shares) 17,111 — 17,111 Contingent consideration 1,528 ( 1,528 ) — Total consideration transferred $ 49,149 $ ( 1,536 ) $ 47,613 Fair Value Allocation Cash and cash equivalents $ 3,536 $ — $ 3,536 Accounts receivable 302 — 302 Inventory 279 — 279 Prepaid expenses and other current assets 262 — 262 Property and equipment 314 — 314 Intangible asset 37,000 ( 2,000 ) 35,000 Other assets – long-term 12 — 12 Accounts payable ( 231 ) — ( 231 ) Accrued compensation ( 380 ) — ( 380 ) Other accrued and current liabilities ( 532 ) 119 ( 413 ) Deferred tax liabilities ( 1,819 ) 147 ( 1,672 ) Other liabilities ( 88 ) — ( 88 ) Net identifiable assets acquired 38,655 ( 1,734 ) 36,921 Goodwill 10,494 198 10,692 Total fair value of net assets assumed $ 49,149 $ ( 1,536 ) $ 47,613 The fair value of the common stock issued was measured using the April 26, 2022 closing price of $ 22.40 per share, as reported by the Nasdaq Global Market. A portion of the upfront cash and stock consideration was held in escrow following closing to secure indemnification claims, if any, and were released during the year ended December 31, 2023. During the fourth quarter of 2022, we reversed losses originally recorded during the second and third quarters of 2022 that were associated with the remeasurement of contingent consideration before finalizing the valuation. Also during the fourth quarter of 2022, we recorded an immaterial adjustment to reduce the amortization expense associated with the intangible asset. The goodwill, which is not deductible for income tax purposes, was primarily attributable to potential future growth opportunities and the organized workforce. The intangible asset is comprised of developed technology with an estimated useful life of 15 years and is being amortized on a straight-line basis. See Note 8 for additional information on the useful life of IDgenetix developed technology. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information for the year ended December 31, 2022 combines our historical financial results and the results of AltheaDx, assuming that the companies were combined as of January 1, 2022, and includes adjustments for amortization expense from the acquired intangible assets and additional stock-based compensation expense. Non-recurring pro forma adjustments consist of acquisition-related transaction F-21 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) costs of $ 1.7 million and an income tax benefit of $ 1.6 million, both assumed to have been recognized during the year ended December 31, 2022 and therefore removed from the year ended December 31, 2022. The following unaudited pro forma financial information (in thousands) is for informational purposes only and is not necessarily indicative of (i) the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2022 or (ii) the results of operations that are expected in future periods: Pro Forma Data Year Ended December 31, 2022 Net revenues $ 137,591 Net loss $ ( 72,819 ) Related Parties Derek J. Maetzold, our President and Chief Executive Officer (“CEO”), and a member of our board of directors, and Daniel M. Bradbury, the Chairperson of our board of directors, each served on the board of directors of AltheaDx until the acquisition of AltheaDx was completed, were direct or indirect beneficial owners of AltheaDx securities and received consideration in connection with our acquisition of AltheaDx. Further, Frank Stokes, our Chief Financial Officer; Tobin W. Juvenal, our Chief Commercial Officer; Kristen Oelschlager, our Chief Operating Officer and certain immediate family members of Mr. Maetzold and Ms. Oelschlager were direct or indirect beneficial owners of AltheaDx securities and received consideration in the transaction. Our entry into the definitive agreement to acquire AltheaDx was approved by our board of directors based upon the unanimous recommendation of a special transaction committee comprised entirely of independent members of our board of directors without any financial interest in AltheaDx or any conflict of interest with respect to the acquisition of AltheaDx. As of December 31, 2024, the milestone period ended, no future obligations existing relating to AltheaDx Earnout Payments, and contingent consideration liability was zero . The named related parties did not receive additional contingent consideration over the duration of the milestone and contingent consideration period. See Note 12 for additional information on fair value measurement of contingent consideration liability. 7. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): As of December 31, 2024 2023 Land (1) $ 7,245 $ — Lab equipment 23,633 16,472 Leasehold improvements 14,616 9,990 Computer equipment 5,306 4,060 Furniture and fixtures 3,541 2,385 Construction-in-progress 9,614 637 Total 63,955 33,544 Less accumulated depreciation ( 12,833 ) ( 8,111 ) Property and equipment, net $ 51,122 $ 25,433 (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. F-22 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Depreciation expense was recorded in the consolidated statements of operations as follows (in thousands): Years Ended December 31, 2024 2023 2022 Cost of sales (exclusive of amortization of acquired intangible assets) $ 2,950 $ 1,758 $ 874 Research and development 354 330 337 Selling, general and administrative 1,587 1,229 1,067 Total $ 4,891 $ 3,317 $ 2,278 8. Goodwill and Other Intangible Assets, Net Goodwill We had a single reporting unit where all goodwill was allocated for the years ended December 31, 2024, 2023 and 2022. No impairment charges were recorded against goodwill for the years ended December 31, 2024, 2023 and 2022. The balance of our goodwill, net zero accumulated impairments, was $ 10.7 million as of December 31, 2024 and 2023. We had a single reportable segment consisting of a single operating segment where the operating segment and the single reporting unit where the same for the years ended December 31, 2024, 2023, and 2022. See Note 17 for additional information on our reportable segment. We conducted annual impairment testing of goodwill in the fourth quarter which indicated the fair value of our reporting unit exceeded its carrying value by 117 % and therefore no impairment was indicated. To measure the fair value of our single reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Other Intangible Assets, Net Our other intangible assets, net consist of the following (in thousands): As of December 31, 2024 Gross carrying value Accumulated amortization Net Weighted-Average Remaining Life (in years) Developed technology $ 125,317 $ ( 29,996 ) $ 95,321 8.0 Assembled workforce 563 ( 347 ) 216 1.9 Total other intangible assets, net $ 125,880 $ ( 30,343 ) $ 95,537 As of December 31, 2023 Gross carrying value Accumulated amortization Net Weighted-Average Remaining Life (in years) Developed technology $ 125,317 $ ( 19,003 ) $ 106,314 12.2 Assembled workforce 563 ( 234 ) 329 2.9 Total other intangible assets, net $ 125,880 $ ( 19,237 ) $ 106,643 F-23 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The estimated future aggregate amortization expense as of December 31, 2024 was as follows (in thousands): Years Ending December 31, 2025 $ 33,358 2026 6,672 2027 6,569 2028 6,587 2029 6,569 Thereafter 35,782 Total $ 95,537 On December 1, 2024, we revised the estimated remaining useful life of our IDgenetix developed technology intangible asset from approximately 12 years to 13 months, where the useful life is expected to end on December 31, 2025. The change in estimate resulted in our recognition of an additional $ 2.1 million in expense from amortization of acquired intangible assets, reducing net income by the same amount, for the fourth quarter and year ended December 31, 2024. The change in estimate is expected to increase expense from amortization of acquired intangible assets by approximately $ 24.3 million for the year ended December 31, 2025. Amortization expense of intangible assets was $ 11.1 million, $ 9.0 million, and $ 8.3 million for the years ended December 31, 2024, 2023, and 2022, respectively. 9. Other Accrued and Current Liabilities Other accrued and current liabilities consisted of the following (in thousands): As of December 31, 2024 2023 Clinical studies $ 2,580 $ 3,475 Accrued service fees 2,338 1,939 ESPP contributions 1,225 896 Accrued taxes 1,076 401 Other 774 606 Total $ 7,993 $ 7,317 10 . Long-Term Debt We had no debt as of December 31, 2023. Our long-term debt as of December 31, 2024 is presented in the table below (in thousands): As of December 31, 2024 Term debt $ 10,200 Unamortized discount ( 177 ) Total debt, net 10,023 Less: Current portion of long-term debt ( 278 ) Total long-term debt $ 9,745 F-24 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Future maturities of principal amounts on long-term debt as of December 31, 2024 were as follows (in thousands): Years Ending December 31, 2025 $ 278 2026 3,333 2027 3,333 2028 3,056 Total $ 10,000 2024 Loan and Security Agreement On March 26, 2024 (the ‘‘Closing Date’’), we entered into a Loan and Security Agreement (the ‘‘2024 LSA”), by and between us, our wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’). The 2024 LSA provides for (i) on the Closing Date, $ 10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the ‘‘2024 Term Loan’’ section below), and (ii) from the Closing Date until March 31, 2025, an additional line of credit of $ 25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in the ‘‘2024 Credit Line’’ section below) at our option. The obligations under the 2024 LSA are secured by substantially all of our assets, excluding intellectual property, the real property held by us, and are subject to certain other exceptions and limitations. We have the right to prepay the 2024 LSA in whole, subject to a prepayment fee of approximately 1.50 % if prepaid prior to March 26, 2026. Amounts repaid under the 2024 LSA may not be reborrowed. In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. 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 December 31, 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. The Term Loans are interest only from the Closing Date through November 30, 2025, which may be extended at our option through November 30, 2026 as long as no event of default under the 2024 LSA has occurred. After the end of the interest only period, we are required to pay equal monthly installments of principal through the maturity date of November 1, 2028. We are also obligated to make an additional final payment of 2.00 % of the aggregate original principal amounts of Term Loans advanced by the Lender, due at the earlier of the maturity date or date the Term Loans are repaid in full. 2024 Term Loan On the Closing Date, we drew $ 10.0 million in Term Loans under the terms and provisions of the 2024 LSA. We are obligated to make a final payment of $ 0.2 million under the terms of the 2024 LSA final payment provisions. 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 December 31, 2024, no payment on principal has been made. As of December 31, 2024, the weighted average effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19 %. 2024 Credit Line We have a $ 25.0 million line of credit under the terms and provisions of the 2024 LSA available from the Closing Date until March 31, 2025. Amounts repaid under the 2024 Credit Line may not be reborrowed. As of December 31, 2024, no draws had been made on the 2024 Credit Line. Interest Expense on Long-Term Debt We recognized $ 0.5 million of interest expense for year ended December 31, 2024, the components of which included $ 0.7 million interest expense on long term debt less $ 0.2 million capitalized interest. There was no interest expense on long term debt or capitalized interest for the years ended December 31, 2023 and 2022. F-25 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Leases Operating Leases We lease office space in Friendswood, Texas (the “Friendswood Lease”) for use as our corporate headquarters. The Friendswood Lease commenced in late 2020 under a 60-month term and a renewal option for one additional five-year term. We lease two facilities in Phoenix, Arizona for laboratory and office space. For both leases, the current terms end in 2033 with options to renew for two additional five-year terms. We lease general office and laboratory facilities in Pittsburgh Pennsylvania (the “Pittsburgh Lease”). The Pittsburgh Lease commenced in late 2022 under a term of 10.5 years, and with a five-year renewal option and an early termination clause. On August 1, 2024, we amended our Pittsburgh Lease to take early possession of additional square footage under an expansion provision in the original contract at an earlier date than provided for under the original agreement. The expansion option provided us with 23,821 additional square feet, most of which will be dedicated laboratory space, in exchange for an incremental increase in our fixed monthly payments. The amendment did not change the end date under the original lease term, or provide any additional options not already provided for under the original agreement. We evaluated the amendment under ASC Topic 842, Leases, and determined that it constituted a modification to an existing contract and assessed the classification remained an operating lease. Following the modification, our obligations for the remaining lease term increased and we used $ 1.3 million of lease incentives for leasehold improvements. As of December 31, 2024, we had no remaining credits for leasehold improvements under this contract. In our remeasurement, we recognized an additional $ 0.6 million in operating lease assets in exchange for an equal amount of additional lease liabilities. We have not included the optional renewal periods in the measurement of the lease obligations because it is not reasonably certain that we will exercise these renewal options. Our other operating leases primarily consist of office equipment. Finance Lease We lease office printers and other office equipment (the “Finance Leases”) for use across our facilities. The Finance Leases commenced in June 2024 under a 64-month term, with an automatic one year extension that becomes effective unless we provide advanced notice of our intent not to extend the term, and a cash lease incentive of $ 0.2 million. We currently do not expect to extend the term after the original term ends. Discount Rates We discount our lease obligations using our incremental borrowing rate at the commencement date of the lease or as of the effective date of a lease modification. The incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. As of March 26, 2024, we had outstanding borrowings under the 2024 LSA and referred to the interest rate of such debt for use as our incremental borrowing rate. Prior to having outstanding borrowing under the 2024 LSA, we primarily considered industry data, our credit rating and the lease term to determine our incremental borrowing rate. F-26 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Lease Balances and Costs Lease balances reflected in the consolidated balance sheet were as follows (in thousands): As of December 31, Lease Balance Classification 2024 2023 Lease Assets Operating Operating lease assets $ 11,584 $ 12,306 Finance Property and equipment, net $ 222 $ 91 Lease Liabilities Current Operating Operating lease liabilities $ 1,665 $ 1,137 Finance Other accrued and current liabilities $ 101 $ 71 Noncurrent Operating Noncurrent operating lease liabilities $ 14,345 $ 14,173 Finance Noncurrent finance lease liabilities $ 311 $ 25 Lease costs included in the consolidated statement of operations were as follows (in thousands): Years Ended December 31, Lease Cost 2024 2023 2022 Operating lease cost (1) $ 2,933 $ 2,625 $ 1,997 Finance lease cost Amortization of lease assets 87 141 129 Interest on finance lease liabilities 23 11 16 Short-term lease cost 6 108 477 Total lease cost $ 3,049 $ 2,885 $ 2,619 (1) Includes variable lease cost of $ 0.4 million, $ 0.3 million, and $ 0.4 million for the years ended December 31, 2024, 2023, and 2022 respectively. Other Information Supplemental cash flow information for lease activities included in the consolidated statements of cash flows were as follows (in thousands): Years Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 2,657 $ 1,723 $ 1,283 Operating cash flows from interest paid on finance leases $ 20 $ 11 $ 16 Financing cash flows from finance leases $ 97 $ 142 $ 122 F-27 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Information regarding the weighted-average lease term and weighted-average discount rate is presented below: As of December 31, 2024 2023 Weighted-average remaining lease term (years) Operating leases 8.5 9.1 Finance leases 4.5 1.3 Weighted-average discount rate Operating leases 8.4 % 8.0 % Finance leases 8.4 % 7.4 % Future maturities for operating lease and finance lease liabilities as of December 31, 2024 were as follows (in thousands): Operating Leases Finance Leases Years Ending December 31, 2025 $ 2,948 $ 128 2026 2,399 98 2027 2,443 98 2028 2,494 98 2029 2,544 73 Thereafter 9,929 — Total lease payments 22,757 495 Less: Interest component ( 6,747 ) ( 83 ) Present value of lease payments $ 16,010 $ 412 Undiscounted future lease payments for leases that had not yet commenced as of December 31, 2024 was zero . 12. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used in measuring fair value. There are three levels to the fair value hierarchy based on the reliability of inputs, as follows: Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions. Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. 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. F-28 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO 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 December 31, 2024 and 2023 (in thousands): As of December 31, 2024 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets Money market funds (1) $ 114,091 $ — $ — $ 114,091 U.S. government securities (2) $ 169,866 $ — $ — $ 169,866 Trading securities (2) $ 3,555 $ — $ — $ 3,555 Liabilities Term Debt (3) $ — $ 10,023 $ — $ 10,023 As of December 31, 2023 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets Money market funds (1) $ 89,308 $ — $ — $ 89,308 U.S. government securities (2) $ 144,258 $ — $ — $ 144,258 (1) Classified as “Cash and cash equivalents” in the consolidated balance sheets. (2) Classified as “Marketable investment securities” in the consolidated balance sheets. (3) Classified as “Current portion of long-term debt” and “Long term debt” in the consolidated balance sheets. Contingent Consideration In connection with our acquisition of Cernostics in December 2021, we recorded a liability for contingent consideration that was payable based on the achievement of certain commercial milestones relating to the year ending December 31, 2022 (“Cernostics Earnout Payments”). There were no Cernostics Earnout Payments that became payable because the commercial milestones were not achieved during the earnout period and the final valuation of the contingent consideration was assessed to be zero as of December 31, 2022, resulting in a loss of $ 18.3 million associated with the change in fair value of the contingent consideration. In connection with our acquisition of AltheaDx, we agreed to pay contingent consideration of up to $ 75.0 million relating to the AltheaDx Earnout Payments, as discussed further in Note 6. The portions of the AltheaDx Earnout Payments associated with the commercial milestones for the years ended December 31, 2024, 2023 and 2022 were $ 20.0 million, $ 37.5 million (contained a 2022 catch-up provision for additional payment up to $ 17.5 million) and $ 35.0 million, respectively, and were not paid at each of these milestone events due to the applicable commercial milestones not being met. 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 final valuation for the contingent consideration as of the date of acquisition was assessed to be zero and resulted in a measurement period adjustment. See Note 6 for additional information on the measurement period adjustment. There were no AltheaDx Earnout Payments that became payable because the commercial milestones were not achieved during the earnout periods and the final valuation of the contingent consideration was assessed to be zero as of December 31, 2024. F-29 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) No gains or losses were recorded associated with changes in fair value during the years ended December 31, 2024, 2023, and 2022. The contingent consideration liability was remeasured at fair value at each reporting period taking into account any updated assumptions or changes in circumstances. Any changes in the fair value were recorded as gains or losses in the consolidated statement of operations. A measurement period adjustment was recognized in the fourth quarter of 2022 to reverse the preliminary valuation of the contingent consideration and losses recorded during the interim period. 13. Commitments and Contingencies From time to time, we may be involved in legal proceedings arising in the ordinary course of business. We believe there is no threatened litigation or litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows. On February 1, 2024, we received a Subpoena from the Department of Health and Human Services, Office of Inspector General, seeking documents and information concerning claims submitted for payment under federal healthcare programs. The Subpoena requested that we produce documents relating primarily to interactions with medical providers and billing to government-funded healthcare programs for our tests. The time period covered by the Subpoena is January 1, 2015 through February 1, 2024. We are continuing to cooperate with the government’s request and are in the process of responding to the Subpoena. We are unable to predict what action, if any, might be taken in the future by the Department of Health and Human Services, Office of Inspector General, or any other governmental authority as a result of the matters related to this Subpoena. No claims have been made against us at this time. 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. We are unable to predict the outcome and are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome. 14. Stockholders’ Equity Capital Stock The Company’s Amended and Restated Certificate of Incorporation, dated July 29, 2019, authorizes the Company to issue up to 200,000,000 shares of common stock with a par value of $ 0.001 per share. The Company is also authorized to issue up to 10,000,000 shares of preferred stock with a par value of $ 0.001 per share. No dividends were declared or paid during the years ended December 31, 2024 or 2023. 15. Stock Incentive Plans and Stock-Based Compensation Equity Incentive Plans On July 24, 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). As of December 31, 2024, there were 791,974 shares remained available for grant under the 2019 Plan. 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. Under this provision, effective January 1, 2025, an additional 1,424,159 shares became available under the 2019 Plan. Prior to adopting the 2019 Plan, we had adopted the 2008 Stock Plan (the “2008 Plan”) on September 6, 2008 and the 2018 Stock Plan (the “2018 Plan”) on August 15, 2018. No additional shares have been issued from each respective plan following the chronological adoption of each succeeding plan. Our stock incentive plans provide for the granting of awards to employees, directors, and consultants. Available awards under our incentive plans include options to purchase common stock as well as RSU, PSUs, and other equity-based awards providing recipients the right to receive common shares. Inducement Plan On December 22, 2022, our board of directors approved the 2022 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the granting of awards as 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. 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 F-30 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) a bona fide period of non-employment with us. As of December 31, 2024, there were 191,156 shares available for grant under the Inducement Plan. Options Granted Under our Plans Our 2019 Plan and Inducement Plan provide for the granting of options in form of incentive stock options (“ISO”) and non-statutory stock options (“NSOs”). ISOs may only be granted to our employees and employee-directors. NSOs may be granted to our employees, employee-directors, nonemployee directors, and consultants. Options may be granted for terms up to ten years from the date of grant, as determined by the board of directors; provided, however, that with respect to an ISO granted to a person who owns stock representing more than 10 % of the voting power of all classes of stock of ours, the terms shall be for no more than five years from the date of grant. The exercise price of options granted must be no less than 100 % of the fair market value of the shares on the date of grant, provided, however, that with respect to an ISO granted to an employee who at the time of grant of such options owns stock representing more than 10 % of the voting power of all classes of stock of ours, the exercise price shall not be less than 110 % of the fair market value of the shares on the date of grant. Options generally vest over four years (generally 25 % after one year and monthly thereafter), subject to the option holder’s continued service with us. We issue new shares to satisfy option exercises. Stock Options Stock option activity under our stock plans for the years ended December 31, 2024, 2023, and 2022 is set forth below: Weighted-Average Stock Options Outstanding Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) Balance as of January 1, 2022 3,586,688 $ 34.75 Granted 263,645 $ 22.35 Exercised ( 148,735 ) $ 5.59 Forfeited/Cancelled ( 281,758 ) $ 34.08 Balance as of December 31, 2022 3,419,840 $ 35.11 Granted 170 $ 25.06 Exercised ( 71,525 ) $ 3.77 Forfeited/Cancelled ( 139,506 ) $ 44.87 Balance as of December 31, 2023 3,208,979 $ 35.38 Granted 3,379 $ 71.22 Exercised ( 135,875 ) $ 14.85 Forfeited/Cancelled ( 86,720 ) $ 39.74 Balance as of December 31, 2024 2,989,763 $ 36.23 5.5 $ 11,709 Exercisable at December 31, 2024 2,819,446 $ 35.88 5.5 $ 11,684 Restricted Stock Units RSUs represent the right to receive shares of our common stock at a specified future date, subject to vesting. Our RSUs generally vest annually from the grant date in four equal installments subject to the holder’s continued service with us. We issue new shares of common stock upon the vesting of RSUs. F-31 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes our RSU activity for the years ended December 31, 2024, 2023, and 2022: Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Balance as of January 1, 2022 1,050,174 $ 44.31 Granted 2,988,107 $ 23.15 Vested (1) ( 257,708 ) $ 45.14 Forfeited/Cancelled ( 302,651 ) $ 27.12 Balance as of December 31, 2022 3,477,922 $ 27.56 Granted 549,296 $ 17.92 Vested (1) ( 901,547 ) $ 28.85 Forfeited/Cancelled ( 320,596 ) $ 25.62 Balance as of December 31, 2023 2,805,075 $ 25.48 Granted 1,708,028 $ 22.37 Vested (1) ( 982,403 ) $ 27.68 Forfeited/Cancelled ( 334,476 ) $ 21.79 Balance as of December 31, 2024 3,196,224 $ 23.52 (1) The aggregate number of shares withheld upon vesting for employee tax obligations was 281,275 , 254,197 , and 73,821 for the years ended December 31, 2024, 2023 and 2022, respectively. Performance-Based Restricted Stock Units PSUs represent the right to receive shares of our common stock contingent upon the achievement of certain financial performance measures. We issue new shares of common stock upon the vesting of PSUs. On August 9, 2024 (the “Initial Vesting Date”), the Board certified that the revenue goal for the PSUs granted on December 23, 2022 (“2022 PSUs”) was achieved. Therefore, 50 % of the 2022 PSUs were vested and we immediately recognized approximately $ 0.1 million of stock-based compensation related to this performance metric. The remaining 50 % of the 2022 PSUs are all subject to time-based vesting and will vest in full on the one-year anniversary of the Initial Vesting Date. F-32 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes our PSU activity for the year ended December 31, 2024: Performance-Based Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Balance as of January 1, 2022 — $ — Granted 196,033 $ 23.23 Vested — $ — Forfeited/Cancelled — $ — Balance as of December 31, 2022 196,033 $ 23.23 Granted — $ — Vested — $ — Forfeited/Cancelled — $ — Balance as of December 31, 2023 196,033 $ 23.23 Granted 177,513 $ 21.23 Vested (1) ( 98,018 ) $ 23.23 Forfeited/Cancelled — $ — Balance as of December 31, 2024 275,528 $ 21.94 (1) The aggregate number of shares withheld upon vesting for employee tax obligations was 30,046 for the year ended December 31, 2024 . Retirement Policy In January 2023, our board of directors approved a retirement policy (the “Retirement Policy”) that provides for acceleration of a portion of unvested awards granted to and held by certain eligible employees upon meeting age, service and notice requirements. No shares vested under this policy during the years ended December 31, 2024 and 2023. Employee Stock Purchase Plan The ESPP became effective July 24, 2019. Offerings under the ESPP are generally 24 months in length with four six-month purchase periods unless terminated earlier, as described below. Eligible employees who enroll in an offering are able to purchase shares of our common stock at a discount through payroll deductions, subject to certain limitations. The purchase price of the shares of common stock is the lesser of (i) 85 % of the fair market value of such shares on the offering date and (ii) 85 % of the fair market value of such shares on the purchase date. A new offering begins approximately every six months . Offerings are concurrent, but in the event the fair market value of a share of common stock on the first day of any purchase period during an offering (the “New Offering”) is less than or equal to the fair market value of a share of common stock on the offering date for an ongoing offering (the “Ongoing Offering”), then the Ongoing Offering terminates immediately following the purchase of shares on the purchase date immediately preceding the New Offering and the participants in the terminated Ongoing Offering are automatically enrolled in the New Offering. In such case, we account for this event as a modification of the Ongoing Offering. Notwithstanding the above, our board of directors (or an authorized committee thereof) may modify the terms of or suspend any future offerings prior to their commencement. As of December 31, 2024, 1,046,680 shares remained available for issuance under the ESPP. The ESPP provides for certain automatic increases in the number of shares of common stock reserved for issuance, which resulted in an additional 284,831 shares becoming available under the ESPP effective January 1, 2025. We issue new shares to satisfy the ESPP purchases. F-33 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Determining Fair Value - Summary of Assumptions We use the closing price of our common stock on the date of grant to determine the fair value of RSUs and PSUs. We use the Black-Scholes option pricing model to estimate the fair value of stock options and purchase rights granted under the ESPP at the date of grant, start of the offering or other relevant measurement date. Set forth below is a description of the significant assumptions used in the option pricing model: • Expected term . The expected term is the period of time that granted options are expected to be outstanding. For stock options, we have set the expected term using the simplified method based on the weighted average of both the period to vesting and the period to maturity for each option, as we have concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate the expected term. For the ESPP, the expected term is the period of time from the offering date to the purchase date. • Expected volatility . Previously, because of the limited period of time our stock had been traded in an active market, we calculated expected volatility by using the historical stock prices of a group of similar companies looking back over the estimated life of the option or the ESPP purchase right and averaging the volatilities of these companies. In the third quarter of 2021, we adjusted this calculation to include our own stock price on a relative basis to the peer group in the calculation of expected volatility, as our common stock had been traded in an active market for more than two years. • Risk-free interest rate . We base the risk-free interest rate used in the Black-Scholes valuation model on the market yield in effect at the time of option grant and at the offering date for the ESPP, provided from the Federal Reserve Board’s Statistical Releases and historical publications from the Treasury constant maturities rates for the equivalent remaining terms. • Dividend yield . We have not paid, and do not have plans to pay, cash dividends. Therefore, we use an expected dividend yield of zero in the Black-Scholes option valuation model. The fair value of our common stock is also an assumption used to determine the fair value of stock options. The fair value of our common stock is the closing selling price per share of its common stock as reported on the Nasdaq Global Market on the date of grant or other relevant determination date. We use the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or any other measurement date. The following table sets forth the assumptions used to determine the fair value of stock options: Years Ended December 31, 2024 2023 2022 Average expected term (years) 5.0 5.0 5.8 Expected stock price volatility 80.20 % - 80.20 % 75.57 % - 76.01 % 68.34 % - 75.02 % Risk-free interest rate 4.39 % - 4.39 % 3.57 % - 3.57 % 1.54 % - 4.21 % Dividend yield — % — % — % The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP: Years Ended December 31, 2024 2023 2022 Average expected term (years) 1.2 1.3 1.3 Expected stock price volatility 59.85 % - 105.39 % 72.80 % - 130.95 % 62.98 % - 91.78 % Risk-free interest rate 3.82 % - 5.14 % 4.74 % - 5.33 % 0.60 % - 3.45 % Dividend yield — % — % — % F-34 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value and Intrinsic Value For the years ended December 31, 2024, 2023, and 2022 the weighted-average grant date fair value of stock options was $ 9.23 , $ 15.99 , and $ 14.34 per option, respectively, and the weighted-average grant date fair value of the purchase rights granted under the ESPP was $ 12.66 , $ 11.43 , and $ 16.79 per share, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2024, 2023, and 2022 was $ 1.7 million, $ 1.3 million, and $ 3.7 million, respectively. The aggregate intrinsic value of shares issued under the ESPP was $ 1.0 million , $ 0.5 million, and $ 0.5 million during the years ended December 31, 2024, 2023, and 2022, respectively. The aggregate fair value of RSUs that vested during the years ended December 31, 2024, 2023, and 2022 was $ 27.7 million , $ 18.1 million, and $ 5.9 million, respectively. Stock-Based Compensation Expense Stock-based compensation expense is included in the consolidated statements of operations as follows (in thousands): Years Ended December 31, 2024 2023 2022 Cost of sales (exclusive of amortization of acquired intangible assets) $ 5,529 $ 4,938 $ 3,755 Research and development 9,598 10,119 7,635 Selling, general and administrative 35,193 36,162 24,931 Total stock-based compensation expense $ 50,320 $ 51,219 $ 36,321 As of December 31, 2024, the total unrecognized stock-based compensation cost related to outstanding awards was $ 71.1 million, which is expected to be recognized over a weighted-average period of 2.2 years. The total unrecognized compensation cost will be adjusted for forfeitures in future periods as they occur. Included in total stock-based compensation expense for the years ended December 31, 2024 and 2023 is $ 0.7 million and $ 1.6 million, respectively, from the accelerated recognition of expense for modifications of awards falling in scope of the Retirement Policy. The Retirement Policy was adopted in January 2023, so there was no accelerated recognition of stock-based compensation expense for the year ended December 31, 2022. No tax benefits related to stock-based compensation expense were recorded in the consolidated statements of operations during the years ended December 31, 2024, 2023, and 2022 due to the valuation allowance on net deferred tax assets. 16. Income Taxes The components of income tax expense (benefit) are as follows (in thousands): Years Ended December 31, 2024 2023 2022 Current tax expense U.S. federal $ 663 $ — $ — State and local 1,255 324 111 Total current 1,918 324 111 Deferred tax benefit U.S. federal 1,622 33 ( 1,626 ) State and local ( 221 ) ( 256 ) ( 251 ) Total deferred 1,401 ( 223 ) ( 1,877 ) Total income tax expense (benefit) $ 3,319 $ 101 $ ( 1,766 ) F-35 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The differences between income taxes expected at the U.S. federal statutory rate (21%) and the reported income tax expense (benefit) are summarized as follows (in thousands): Years Ended December 31, 2024 2023 2022 Pre-tax income (loss) $ 21,564 $ ( 57,365 ) $ ( 68,904 ) U.S. federal taxes at statutory rate 4,528 ( 12,046 ) ( 14,470 ) State income taxes 683 925 ( 3,751 ) R&D tax credit ( 3,381 ) ( 2,186 ) ( 1,814 ) Change in valuation allowance ( 4,469 ) 5,207 17,075 Stock-based compensation 1,528 4,323 3,323 Non-deductible officers’ compensation 2,651 2,377 1,326 Change in fair value of contingent consideration — — ( 3,840 ) Transaction costs — — 359 Permanent differences 1,712 1,474 — Other 67 27 26 Income tax expense (benefit) $ 3,319 $ 101 $ ( 1,766 ) Significant components of deferred tax assets and liabilities are as follows (in thousands): As of December 31, 2024 2023 Deferred tax assets: NOL carryforwards $ 31,782 $ 47,162 Accrued liabilities 7,301 6,466 Capitalized R&D costs 15,485 9,915 Lease liabilities 3,774 3,511 Stock-based compensation 5,128 4,416 R&D tax credit 9,747 8,025 Other — 4 Total deferred tax assets 73,217 79,499 Less valuation allowance ( 50,536 ) ( 55,028 ) Deferred tax assets, net $ 22,681 $ 24,471 Deferred tax liabilities: Prepaid expenses $ ( 185 ) $ ( 182 ) Property and equipment ( 6,374 ) ( 4,662 ) Intangible assets ( 14,986 ) ( 17,003 ) ROU assets ( 2,558 ) ( 2,799 ) Other ( 185 ) ( 31 ) Total deferred tax liabilities ( 24,288 ) ( 24,677 ) Net deferred tax liability $ ( 1,607 ) $ ( 206 ) As of December 31, 2024, we had federal NOL carryforwards of approximately $ 129.4 million of which $ 52.9 million will begin to expire in 2031 if not utilized to offset taxable income, and $ 76.5 million may be carried forward indefinitely. Future changes in ownership, as defined by Section 382 of the IRC, could limit the amount of NOL carryforwards used in any one year. As of December 31, 2024, we had state NOL carryforwards of approximately $ 86.5 million, which begin to expire in 2028 if not utilized to offset state taxable income. As of December 31, 2024, F-36 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) we had R&D tax credit carryforwards of $ 9.7 million, which includes $ 0.9 million of state credits, which will begin to expire in 2034 if not utilized to offset federal income tax. In general, under Section 382 and 383 of the IRC, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain tax credits, to offset future taxable income and tax. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders changes by more than 50 percentage points over such stockholders’ lowest percentage of ownership during the testing period (generally three years). We performed a Section 382 analysis from inception through the year ended December 31, 2024 and concluded we had experienced an ownership change in 2011, 2014 and 2020. These changes in ownership did not result in the expiration of any NOLs or R&D credits. However, future changes in ownership may further limit our ability to utilize our NOL carryforwards and R&D tax credit carryforwards. We have also performed Section 382 analyses with respect to the NOLs we obtained in our acquisitions of Cernostics and AltheaDx. Based on changes in ownership that have occurred, $ 36.3 million of NOLs are expected to expire unused as a result of Section 382 limitations. As of December 31, 2024 and 2023, we placed a valuation allowance of $ 50.5 million and $ 55.0 million, respectively, against our net deferred tax asset balance, as we have determined that it is more likely than not that they will not be realized. The valuation allowance as of December 31, 2024 and 2023 was primarily related to NOL and R&D tax credit carryforwards that more likely than not, will expire unused. The net change in total valuation allowance for each of the years ended December 31, 2024, 2023 and 2022 was a decrease of $ 4.5 million, an increase of $ 5.1 million, and an increase of $ 32.2 million, respectively. During the year ended December 31, 2022, in connection with the acquisition of AltheaDx, we recorded additional net deferred tax liability of $ 1.7 million, primarily due to book-tax differences related to the acquired intangible assets. As a result of these additional deferred tax liabilities, we determined that $ 1.6 million of our valuation allowance should be reduced, which was reflected in our income tax benefit for the year ended December 31, 2022. We assessed whether we had any significant uncertain tax positions related to open tax years and concluded there were none. Accordingly, no reserve for uncertain tax positions has been recorded as of December 31, 2024 and 2023. We are generally no longer subject to tax examinations for U.S. federal income tax purposes for fiscal years prior to 2021 and fiscal years prior to 2020 for multiple state jurisdictions. However, since we have been in an NOL position since 2008 until recently, our 2008 to 2020 federal tax returns and our 2008 to 2019 state tax returns are potentially subject to examination adjustments to the extent of those NOL carryforwards. No material amounts of tax-related interest or penalties were recorded during the years ended December 31, 2024, 2023, and 2022. 17. Segment and Related Information The Company derives revenues through the delivery of test reports for our molecular diagnostic tests. Clinicians use the results from these tests to aid in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus, uveal melanoma, and in the treatment of mental health conditions. All of our operations are located within the United States and our business is focused on the U.S. market. Budgets and financial information for net revenues are maintained and are regularly reviewed for each of our tests but expense information is not maintained and readily available below the consolidated results of operations level of aggregation. We have a single reportable segment consisting of a single operating segment where our CEO is our CODM, which aligns with how our business is organized and is managed. The accounting policies and measurements of income before income taxes and discontinued operations for the consolidated financial statements and the reportable segment are the same. The CODM assesses segment performance using actual-to-actual and actual-to-budget variance analysis for segment net revenues, significant segment expenses, and net income to assess segment performance and in deciding how to allocate resources. F-37 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2024, 2023 and 2022, the measures of segment profit and loss for of our single reportable segment were as follows (in thousands): Years ended December 31, 2024 2023 2022 Net revenues from external customers (1) $ 332,069 $ 219,788 $ 137,039 Significant segment expenses: Personnel costs 189,883 172,248 134,557 Organizational and business development costs 44,178 39,481 31,894 Inventory usage 19,930 15,475 9,859 Clinical studies and publication costs 9,951 11,924 8,997 Professional services 10,476 7,496 10,070 Other segment items 39,406 30,630 8,800 Segment profit (loss) $ 18,245 $ ( 57,466 ) $ ( 67,138 ) (1) For information on disaggregation of segment revenue by type and information about payor concentration, see Note 3. Significant segment expenses Personnel costs Personnel costs consist of salaries and wages, bonuses, employee benefits, stock-based compensation expense, and payroll taxes. Personnel costs are a significant portion of operating expenses and are a component of cost of sales, research and development expense, and selling and general administrative expense. Our CODM considers this information injunction with test report deliveries in assessing budgeted and actual operational performance and in allocating resources. Organizational and business development costs Organizational and business development costs include expense incurred for travel, transportation, meals and lodging, training, and conference and venue fees and are a component of cost of sales, research and development expense, and selling and general administrative expense. Our CODM considers this information in their assessment of operating expense results and in planning and budgeting for future corporate development activities. Inventory usage Inventory usage is the expense incurred through direct materials used in processing our tests, and are significant component of our cost of sales. Our CODM considers this information injunction with test report deliveries in assessing budgeted and actual operational performance and in allocating resources. Clinical studies and publication costs Clinical studies and publication costs include expenses incurred through our pipeline initiatives as well as in gathering evidence to support the clinical validity and utility of our existing test portfolio. Our CODM considers this information in their assessment of research and development results and in planning and budgeting activities. Professional services Professional services include expenses incurred for legal and advisory services across our business as well as expenses incurred for services provided by our independent auditors. Professional service expenses are a component of cost of sales, research and development expense, and selling and general administrative expense. Our CODM considers this information in their assessment of operating expense results and in planning and budgeting activities. F-38 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Other segment items Other segment items include all other operating expenses types to included IT service and software licensing costs, fixed and variable expenses incurred for leasing of facilities and equipment, depreciation and amortization, changes in fair value of contingent consideration, gain or losses on disposal of fixed assets in the routine course of business, fair value adjustment for trading securities, realized gains or losses on investment securities, administrative costs, expense for use of prepaids to include insurance premiums and warranties for lab equipment, public company costs (less audit fees), interest and other non-operating income, and income tax expense or benefits. Our CODM does not individually review budgets or results for these activities. Other amounts included in the measure of segment profit or loss for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands): Years ended December 31, 2024 2023 2022 Interest income $ 12,916 $ 10,623 $ 3,968 Interest expense 577 11 17 Depreciation and amortization 15,997 12,330 10,543 Income tax expense (benefit) 3,319 101 ( 1,766 ) Stock-based compensation expense 50,320 51,219 36,321 Changes in fair value of trading securities 555 — — Change in fair value of contingent consideration — — ( 18,287 ) Total assets for our reportable segment were located in the United States and were $ 531.2 million and $ 453.3 million as of December 31, 2024 and 2023, respectively. Expenditures for additions to long-lived assets were $ 29.3 million, $ 13.5 million, and $ 7.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. F-39