What changed in this filing

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Item 1. Financial Statements

2025-05-05 compared with 2024-11-04 · 275 added, 326 removed, 419 unchanged (59% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

ASSETS (unaudited)

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Total current assets 349,388 360,154

Long-term marketable investment securities 5,570 —

Long-term accounts receivable, net 1,000 918

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Operating lease liabilities 1,435 1,665

Current portion of long-term debt 1,111 278

Other accrued and current liabilities 8,369 7,993

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Preferred stock, $ 0.001 par value per share;

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

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

10,000,000 shares authorized as of March 31, 2025 and December 31, 2024;

no shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value per share;

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

27,975,808 and 27,410,532 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

200,000,000 shares authorized as of March 31, 2025 and December 31, 2024;

28,844,937 and 28,483,195 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 666,120 655,703

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

NET REVENUES $ 87,988 $ 72,974

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Total operating expenses, net 115,916 78,445

Operating income (loss) 5,079 ( 9,640 ) 4,620 ( 62,319 )

Operating loss ( 27,928 ) ( 5,471 )

Interest income 3,099 2,996

Changes in fair value of trading securities ( 1,425 ) —

Interest expense ( 17 ) ( 14 )

Income (loss) before income taxes 8,282 ( 6,873 ) 13,679 ( 54,824 )

Income tax expense 6,013 32 5,024 62

Net income (loss) $ 2,269 $ ( 6,905 ) $ 8,655 $ ( 54,886 )

Earnings (loss) per share:

Basic $ 0.08 $ ( 0.26 ) $ 0.31 $ ( 2.05 )

Diluted $ 0.08 $ ( 0.26 ) $ 0.30 $ ( 2.05 )

Weighted-average shares outstanding:

Basic 27,840 26,834 27,659 26,725

Diluted 29,401 26,834 28,838 26,725

Loss before income taxes ( 26,271 ) ( 2,489 )

Income tax (benefit) expense ( 423 ) 45

Net loss $ ( 25,848 ) $ ( 2,534 )

Loss per share, basic and diluted $ ( 0.90 ) $ ( 0.09 )

Weighted-average shares outstanding, basic and diluted 28,609 27,485

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

CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income (loss) $ 2,269 $ ( 6,905 ) $ 8,655 $ ( 54,886 )

Other comprehensive income:

Net unrealized gain on marketable investment securities 645 73 337 310

Comprehensive income (loss) $ 2,914 $ ( 6,832 ) $ 8,992 $ ( 54,576 )

Net loss $ ( 25,848 ) $ ( 2,534 )

Other comprehensive loss:

Net unrealized loss on marketable investment securities ( 99 ) ( 247 )

Comprehensive loss $ ( 25,947 ) $ ( 2,781 )

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

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

Net unrealized gain on marketable investment securities — — — — 245 245

Net loss — — — ( 29,204 ) — ( 29,204 )

BALANCE, MARCH 31, 2023

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

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

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

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

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

Net loss — — — ( 2,534 ) — ( 2,534 )

BALANCE, JUNE 30, 2023

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

Stock-based compensation expense — — 13,043 — — 13,043

Exercise of common stock options 3,656 — 13 — — 13

Issuance of common stock from vested restricted stock units and payment of employees’ taxes 40,142 — ( 271 ) — — ( 271 )

Issuance of common stock under the employee stock purchase plan 62,682 — 1,062 — — 1,062

Net unrealized gain on marketable investment securities — — — — 73 73

Net loss — — — ( 6,905 ) — ( 6,905 )

BALANCE, SEPTEMBER 30, 2023

BALANCE, MARCH 31, 2024

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

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

CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Other Comprehensive (Loss) income Total

Stockholders’

Shares Amount

BALANCE, JANUARY 1, 2025

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28,844,937 $ 29 $ 666,120 $ ( 225,974 ) $ 131 $ 440,306

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

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

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

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

Net income — — — 8,920 — 8,920

BALANCE, JUNE 30, 2024

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

Stock-based compensation expense — — 13,027 — — 13,027

Exercise of common stock options 90,378 — 1,571 — — 1,571

Issuance of common stock from vested restricted stock units and payment of employees’ taxes 117,959 — ( 1,294 ) — — ( 1,294 )

Issuance of common stock under the employee stock purchase plan 56,447 — 944 — — 944

Net unrealized gain on marketable investment securities — — — — 645 645

Net income — — — 2,269 — 2,269

BALANCE, SEPTEMBER 30, 2024

27,975,808 $ 28 $ 650,270 $ ( 209,716 ) $ 473 $ 441,055

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

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(in thousands)

Nine Months Ended

September 30,

Three Months Ended

OPERATING ACTIVITIES

Net income (loss) $ 8,655 $ ( 54,886 )

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

Net loss $ ( 25,848 ) $ ( 2,534 )

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

Depreciation and amortization 29,764 3,340

Stock-based compensation expense 11,179 12,675

Change in fair value of trading securities 1,425 —

Deferred income taxes ( 770 ) —

Accretion of discounts on marketable investment securities ( 1,435 ) ( 1,699 )

Other 208 284

Change in operating assets and liabilities:

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Other accrued and current liabilities 1,141 73

Net cash provided by (used in) operating activities

40,501 ( 24,213 )

Net cash used in operating activities ( 6,036 ) ( 6,835 )

INVESTING ACTIVITIES

Purchases of property and equipment ( 20,759 ) ( 9,828 )

Proceeds from sale of property and equipment 11 10

Purchases of marketable investment securities ( 48,431 ) ( 60,754 )

Proceeds from maturities of marketable investment securities 36,300 50,200

Purchases of debt securities classified as held-to-maturity ( 5,569 ) —

Purchases of property and equipment ( 4,740 ) ( 9,152 )

Proceeds from sale of property and equipment 9 5

Net cash used in investing activities ( 22,431 ) ( 19,701 )

( 55,907 ) ( 8,511 )

FINANCING ACTIVITIES

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Proceeds from issuance of term debt — 10,000

Net cash provided by financing activities

Net cash (used in) provided by financing activities ( 1,553 ) 10,644

NET CHANGE IN CASH AND CASH EQUIVALENTS ( 30,020 ) ( 15,892 )

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(in thousands)

Nine Months Ended

September 30,

Three Months Ended

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Accrued purchases of property and equipment $ 3,217 $ 699

Operating lease assets obtained in exchange for lease obligations $ 607 $ 499

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

Finance lease assets obtained in exchange for lease obligations $ 44 $ —

Property and equipment acquired with tenant improvement allowance $ 1,389 $ 1,281

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

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All intercompany accounts and transactions have been eliminated in consolidation.

We have a history of recurring net losses and negative cash flows and as of September 30, 2024, we had an accumulated deficit of $ 209.7 million.

We believe our $ 95.0 million of cash and cash equivalents and $ 184.8 million of marketable investment securities as of September 30, 2024, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

We have a history of recurring net losses and negative cash flows and as of March 31, 2025, we had an accumulated deficit of $ 226.0 million.

We believe our $ 89.7 million of cash and cash equivalents and $ 185.5 million of marketable investment securities as of March 31, 2025, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

Unaudited Interim Financial Information

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

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

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

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

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

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

The accompanying condensed consolidated balance sheet as of March 31, 2025;

the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of stockholders’ equity, each for the three months ended March 31, 2025 and 2024;

and the condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of March 31, 2025, the results of our consolidated operations for the three months ended March 31, 2025 and 2024 and our consolidated cash flows for the three months ended March 31, 2025 and 2024.

The financial data and other information disclosed in these notes related to the three months ended March 31, 2025 and 2024 are also unaudited.

The results for the three months ended March 31, 2025 are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim periods, or any future year or period.

The balance sheet as of December 31, 2024 included herein was derived from the audited financial statements as of that date.

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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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 decision-making group.

A reportable segment consists of one or more operating segments.

For additional information on our segment reporting, see Note 14.

Cash and Cash Equivalents including Concentrations of Credit Risk

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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 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 and are recorded at fair value in accordance with 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.

Debt securities that are classified as available-for-sale (“AFS”) 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 loss within total stockholders’ equity, net of any related deferred income tax effects, on our condensed consolidated balance sheets.

Premiums or discounts from par value are amortized to interest income over the life of the underlying investment.

Realized gains and losses on available-for-sale securities are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations.

Impairments of available-for-sale debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations.

Long-term debt securities that are classified as held-to-maturity (“HTM”) are reported at amortized cost with ASC 320.

Premiums or discounts from par value are amortized to interest income over the life of the underlying investment and are included in interest income in the consolidated statements of operations.

Realized gains and losses on AFS and HTM debt securities, if any, are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations.

Impairments of AFS or HTM debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations.

See Notes 5 and 10 for further details.

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 10 for further details.

Revenue Recognition

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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.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected.

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We generally do not perform evaluations of customers’ financial condition and generally do not require collateral.

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

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

Historically, our credit losses have not been significant.

The allowance for credit losses was zero as of March 31, 2025 and December 31, 2024.

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.

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

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

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

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

In accordance with ASC Topic 350, Intangibles—Goodwill and Other , our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that it may be impaired.

We perform annual impairment reviews of our goodwill balance during the fourth quarter of each fiscal year.

We may perform a qualitative assessment to determine if it is necessary to perform a quantitative impairment test.

If we determine that a quantitative impairment test is necessary, we apply the guidance in Accounting Standards Update (“ASU”) No.

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

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

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

We did not incur any goodwill impairment losses in any of the periods presented.

Factors that could result in a future impairment of goodwill include 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 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.

Accrued Compensation

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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 September 30, 2024 and December 31, 2023, we accrued approximately $ 17.9 million and $ 21.7 million, respectively, for liabilities associated with these bonus plans.

As of March 31, 2025 and December 31, 2024, we accrued approximately $ 7.6 million and $ 23.3 million, respectively, for liabilities associated with these bonus plans.

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

Stock-Based Compensation

Stock-based compensation expense for equity instruments issued to employees is measured based on the grant-date fair value of the awards.

The fair value of employee stock options and offerings under the 2019 Employee Stock Purchase Plan (the “ESPP”) are estimated on the date of grant using the Black-Scholes option-pricing valuation model.

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 options and RSUs, the requisite service period is generally the award’s vesting period (typically four years ).

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements.

In these cases, the requisite service period takes into consideration the employee’s retirement eligibility, and is reassessed at each reporting date.

Share-based awards falling into the scope of the 2023 Retirement Policy are accounted 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 income (loss) plus net

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Comprehensive Loss

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

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

Accounting Pronouncements Yet to be Adopted

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Early adoption is permitted.

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

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.

2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosure, 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 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

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.

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

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

We 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 our consolidated financial statements or disclosures upon adoption.

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

We 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.

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.

We also provide a test for patients with cutaneous squamous cell carcinoma, DecisionDx ® -SCC, a test for use in patients with suspicious pigmented lesions, MyPath ® Melanoma, a test for uveal melanoma, DecisionDx ® -UM, a test for patients diagnosed with Barrett’s esophagus, the TissueCypher ® Barrett’s Esophagus Test and a pharmacogenomics testing service focused on mental health, IDgenetix ® .

We previously offered a second test for patients with suspicious pigmented lesions, DiffDx ® -Melanoma, which we suspended in February 2023.

Information on the disaggregation of revenues is included below.

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 lesions, MyPath® Melanoma, a test for uveal melanoma (“UM”), DecisionDx®-UM, and a pharmacogenomics (“PGx”) testing service focused on mental health, IDgenetix®.

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.

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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.

We may pursue, on a case-by-case basis, reimbursement from such patients in the form of co-payments and co-

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 local coverage determination 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).

Medicare claims that were either submitted to Medicare prior to the local coverage determination (“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

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

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

Included in revenues for the three months ended September 30, 2024 and 2023 were $ 0.6 million of net negative revenue adjustments and $ 0.9 million of net positive revenue adjustments, respectively, associated with changes in estimated variable consideration.

Included in revenues for the nine months ended September 30, 2024 and 2023 were $ 1.3 million and $ 3.1 million of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration.

Included in revenues for the three months ended March 31, 2025 and 2024 were $ 0.8 million of net positive revenue adjustments and $ 1.7 million of net positive 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.

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

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

Contract balances consisted solely of accounts receivable (both current and noncurrent) as of March 31, 2025 and December 31, 2024.

Disaggregation of Revenues

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Dermatologic (1)

3 unchanged sentences

Total net revenues $ 87,988 $ 72,974

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma).

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

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering.

(2) Consists of TissueCypher, DecisionDx-UM and IDgenetix.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 allocating resources.

See Note 14 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 are as follows:

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

Nine Months Ended

September 30, Percentage of

Three Months Ended

March 31, Percentage of

Accounts Receivable

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(noncurrent) as of

2024 2023 September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

2025 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024

Medicare 47 % 49 % 21 % 18 % * *

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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.

Earnings (Loss) Per Share

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

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

Loss Per Share

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

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

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 earnings (loss) per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period.

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.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income (loss) $ 2,269 $ ( 6,905 ) $ 8,655 $ ( 54,886 )

Weighted-average common shares outstanding, basic 27,840 26,834 27,659 26,725

Assumed exercise of stock options 457 — 447 —

Assumed vesting of RSUs 1,041 — 663 —

Assumed vesting of PSUs 42 — 55 —

Assumed issuance of shares under the ESPP 21 — 14 —

Weighted-average common shares outstanding, diluted 29,401 26,834 28,838 26,725

Earnings (loss) per share:

Basic $ 0.08 $ ( 0.26 ) $ 0.31 $ ( 2.05 )

Diluted $ 0.08 $ ( 0.26 ) $ 0.30 $ ( 2.05 )

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

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

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

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

The table below provides the weighted-average number of potential common shares associated with outstanding securities not included in our calculation of diluted loss per share for the three months ended March 31, 2025 and 2024 because to do so would be antidilutive or, in the case of PSUs, the applicable performance conditions have not yet been met (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Stock options 2,983 3,192

RSUs and PSUs 3,739 3,131

ESPP 155 371 207 320

Total 6,898 6,656

In addition, in connection with our acquisition of AltheaDx, Inc.

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

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

See Note 11 for additional information.

CASTLE BIOSCIENCES, INC.

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Marketable Investment Securities

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

September 30, 2024

Marketable investment securities consisted of the following (in thousands):

March 31, 2025 December 31, 2024

Current marketable investment securities:

Trading securities $ 2,130 $ 3,555

Debt securities - AFS 183,332 169,866

Total current marketable investment securities $ 185,462 $ 173,421

Long-term marketable investment securities:

Debt securities - HTM $ 5,570 $ —

Trading securities

We recognized $ 1.4 million in losses as of March 31, 2025 all of which were unrealized on our trading securities for three months ended March 31, 2025.

We recognized no gains or losses for the three months ended March 31, 2024.

Debt securities

The following tables present our debt securities (in thousands):

March 31, 2025

Amortized Cost Unrealized Estimated Fair Value

government securities $ 184,353 $ 473 $ — $ 184,826

Total $ 184,353 $ 473 $ — $ 184,826

government securities - AFS $ 183,200 $ 146 $ ( 14 ) $ 183,332

government securities - HTM 5,570 5 — 5,575

Total debt securities $ 188,770 $ 151 $ ( 14 ) $ 188,907

December 31, 2024

Amortized Cost Unrealized Estimated Fair Value

government securities $ 144,122 $ 143 $ ( 7 ) $ 144,258

Total $ 144,122 $ 143 $ ( 7 ) $ 144,258

Although available to be sold to meet operating needs or otherwise, 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 investments for the three and nine months ended September 30, 2024 and 2023.

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

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

government securities - AFS $ 169,636 $ 244 $ ( 14 ) $ 169,866

government securities - HTM — — — —

Total debt securities $ 169,636 $ 244 $ ( 14 ) $ 169,866

government securities includes both AFS and HTM securities.

The AFS securities are available to be sold to meet operating needs or otherwise, but are generally held through maturity.

We classify all AFS investments as current assets, as these are readily available for use in current operations.

We classify our HTM investments as noncurrent assets, as we have the positive intent and ability to hold these investments to maturity, and all such maturities extend beyond one year from the balance sheet date.

We evaluated our U.S.

government securities under the AFS and HTM impairment model guidance, respectively, and determined our investment portfolio is comprised of low-risk, investment grade securities.

As of March 31, 2025, unrealized losses on our AFS U.S.

government securities are not attributed to credit risk.

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

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

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

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

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

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

The allowance for credit losses was zero as of March 31, 2025 and December 31, 2024.

As of March 31, 2025, all of our AFS debt securities had contractual maturities of one year or less.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There were no realized gains or losses on sales of debt securities for the three months ended March 31, 2025 and 2024.

No credit-related or noncredit-related impairment losses were recorded for the three months ended March 31, 2025 and 2024.

Accrued interest receivable for our AFS U.S.

government securities is included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets.

The accrued interest receivable balance for our AFS U.S.

government securities was $ 0.6 million as of both March 31, 2025 and December 31, 2024.

Accrued interest receivable for our HTM U.S.

government securities is included in other assets — long-term in our unaudited condensed consolidated balance sheets.

As of March 31, 2025, the accrued interest receivable balance for our HTM U.S.

government securities was immaterial.

No amounts were accrued as of December 31, 2024 as none were considered HTM.

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

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Land $ 7,245 $ 7,245

Lab equipment 23,728 23,633

6 unchanged sentences

Property and equipment, net $ 55,423 $ 51,122

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Cost of sales (exclusive of amortization of acquired intangible assets) $ 903 $ 655

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Goodwill and Other Intangible Assets, Net

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

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

We had a single reporting unit where all goodwill was allocated for as of March 31, 2025 and December 31, 2024.

The balance of our goodwill was $ 10.7 million as of March 31, 2025 and December 31, 2024.

There were no accumulated impairments of goodwill as of March 31, 2025 or December 31, 2024.

We had a single reportable segment consisting of a single operating segment where the operating segment and the single reporting unit where the same as of March 31, 2025 and December 31, 2024.

See Note 14 for additional information on our reportable segment.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Intangible Assets, Net

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

September 30, 2024

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

March 31, 2025

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

7 unchanged sentences

Total other intangible assets, net $ 125,880 $ ( 30,343 ) $ 95,537

Amortization expense of intangible assets was $ 2.3 million and $ 6.8 million for the three and nine months ended September 30, 2024, respectively, and $ 2.3 million and $ 6.7 million for the three and nine months ended September 30, 2023, respectively.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the first quarter of 2025, we made the decision to discontinue our IDgenetix test offering, effective May 2025.

As a result of this decision, we further revised the estimated useful life of the asset and determined that the intangible asset should be fully amortized as of March 31, 2025.

This change resulted in an acceleration of amortization expense of approximately $ 20.1 million during the three months ended March 31, 2025.

Amortization expense of intangible assets was $ 28.3 million and $ 2.2 million for the three months ended March 31, 2025 and 2024, respectively.

Other Accrued and Current Liabilities

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Clinical studies $ 2,562 $ 2,580

Accrued service fees 3,355 2,338

ESPP contributions 577 896

Accrued benefits 418 199

Accrued taxes 1,280 1,076

Other 1,172 1,999

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Long-Term Debt

We had no debt as of December 31, 2023.

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

September 30, 2024

Our long-term debt is presented in the table below (in thousands):

March 31, 2025 December 31, 2024

Term debt $ 10,200 $ 10,200

Unamortized discount ( 168 ) ( 177 )

Total long-term debt 10,015

Total debt, net 10,032 10,023

Current portion of long-term debt ( 1,111 ) ( 278 )

Total $ 10,015

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

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

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

Total long-term debt $ 8,921 $ 9,745

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future maturities of principal amounts on long-term debt as of March 31, 2025 were as follows (in thousands):

Years Ending December 31,

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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

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA.

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

As of March 31, 2025, 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.

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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 September 30, 2024, no payment on principal has been made.

As of September 30, 2024, the weighted average effective interest rate for all outstanding debt under the 2024 Term Loan was 8.60 %.

As of March 31, 2025, no payment on principal has been made.

As of March 31, 2025, the weighted average effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19 %.

2024 Credit Line

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

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

As of March 31, 2025, no draws had been made on the line of credit.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest Expense on Long-Term Debt

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

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Interest expense on long-term debt consisted of the following (in thousands):

Three Months Ended

Interest expense on long term debt $ 202 $ 12

1 unchanged sentence

Total $ 8 $ 12

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

Lease Amendment

On August 1, 2024 (“the Modification Date”) we amended our lease agreement for our Pittsburgh facilities 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 September 30, 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.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Discount Rate

We remeasured our lease obligations using our incremental borrowing rate as of the Modification Date.

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 the Modification Date, we had outstanding borrowings under the “2024 LSA” and referred to the interest rate of such debt for use as our incremental borrowing rate.

Fair Value Measurements

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

The tables below provide 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 September 30, 2024 and December 31, 2023 (in thousands):

As of September 30, 2024

The tables below provide information, by level within the fair value hierarchy, of our financial assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, 2025

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

3 unchanged sentences

$ 83,858 $ — $ — $ 83,858

government securities (2)

government securities - AFS (2)

$ 183,332 $ — $ — $ 183,332

Contingent consideration (3)

Trading securities (2)

$ 2,130 $ — $ — $ 2,130

Term Debt (3)(4)

$ — $ 10,032 $ — $ 10,032

CASTLE BIOSCIENCES, INC.

6 unchanged sentences

$ 114,091 $ — $ — $ 114,091

government securities (2)

government securities - AFS (2)

$ 169,866 $ — $ — $ 169,866

Contingent consideration (3)

Trading securities (2)

$ 3,555 $ — $ — $ 3,555

Term Debt (3)(4)

$ — $ 10,023 $ — $ 10,023

(1) Classified as “Cash and cash equivalents” in the unaudited condensed consolidated balance sheets.

(2) Classified as “Marketable investment securities” in the unaudited condensed consolidated balance sheets.

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

Contingent Consideration

In connection with our acquisition of AltheaDx, we agreed to pay contingent consideration of up to $ 75.0 million of commercial milestone payments based on the achievement of certain net revenue targets relating to the years ending December 31, 2022, 2023 and 2024 (“AltheaDx Earnout Payments”).

The portion of the AltheaDx Earnout Payments associated with the commercial milestones for the year ended December 31, 2023 was $ 37.5 million and was not paid since the applicable commercial milestones were not met.

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

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

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

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

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

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

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

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

(3) Classified as “Current portion of long-term debt” and “Long term debt” in the consolidated balance sheets.

(4) Borrowings approximate their fair value as the interest rate is variable and reflects market rates.

government securities that are HTM investments and are carried at amortized costs.

The fair value of our HTM investments is classified as Level 1 of the fair value hierarchy.

For additional information on the carrying amount and fair value of our HTM investments, see Note 5.

Commitments and Contingencies

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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.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Incentive Plans and Stock-Based Compensation

Stock Incentive Plans

Effective January 1, 2024, an additional 1,370,526 shares became available under our 2019 Equity Incentive Plan (the “2019 Plan”) pursuant to an automatic annual increase.

Equity Incentive Plans

On July 24, 2019, we adopted the 2019 Equity Incentive Plan (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.

As of September 30, 2024, 556,925 shares remained available for grant under the 2019 Plan.

Under this provision, effective January 1, 2025, an additional 1,424,159 shares became available under the 2019 Plan.

As of March 31, 2025, there were 1,064,380 shares remained available for grant under the 2019 Plan.

Inducement Plan

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

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

As of September 30, 2024, there were 348,917 shares available for grant under 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.

As of March 31, 2025, there were 203,191 shares available for grant under the Inducement Plan.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

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

Stock option activity under our stock plans for the three months ended March 31, 2025 is set forth below:

Weighted-Average

8 unchanged sentences

Forfeited/Cancelled ( 17,308 ) $ 44.49

Balance as of September 30, 2024 3,039,938 $ 36.09 5.8 $ 13,365

Exercisable at September 30, 2024

Balance as of March 31, 2025 2,966,124 $ 36.25 5.3 $ 7,561

Exercisable at March 31, 2025

2,846,745 $ 36.05 5.2 $ 7,561

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.

The following table summarizes our RSU activity for the nine months ended September 30, 2024:

The following table summarizes our RSU activity for the three months ended March 31, 2025:

Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value

4 unchanged sentences

Forfeited/Cancelled ( 88,019 ) $ 23.64

Balance as of September 30, 2024

Balance as of March 31, 2025

3,930,148 $ 23.20

(1) The aggregate number of shares withheld upon vesting for employee tax obligations was 71,944 for the nine months ended September 30, 2024.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) The aggregate number of shares withheld upon vesting for employee tax obligations was 111,775 for the three months ended March 31, 2025.

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 $ 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.

The following table summarizes our PSU activity for the nine months ended September 30, 2024:

The following table summarizes our PSU activity for the three months ended March 31, 2025:

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

2 unchanged sentences

Granted 172,631 $ 22.23

( 98,018 ) $ 23.23

Forfeited/Cancelled — $ —

Balance as of September 30, 2024

Balance as of March 31, 2025

448,159 $ 22.05

(1) The aggregate number of shares withheld upon vesting for employee tax obligations was 30,046 for the nine months ended September 30, 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 that were granted to certain eligible employees upon meeting age, service and notice requirements.

We considered the adoption of the Retirement Policy to be a modification of existing awards under ASC Topic 718 , Compensation – Stock Compensation .

The modification did not result in any incremental compensation cost.

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

In connection with the Retirement Policy, we accelerated the recognition of compensation expense of $ 0.4 million and $ 0.5 million during the three months ended September 30, 2024 and 2023, respectively, and accelerated the recognition of compensation expense of $ 0.8 million and $ 1.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Employee Stock Purchase Plan

The ESPP provides for certain automatic increases in the number of shares of common stock reserved for issuance, which resulted in an additional 284,831 shares becoming available under the ESPP effective January 1, 2025.

During the nine months ended September 30, 2024, we issued 167,688 shares of common stock pursuant to scheduled purchases under the ESPP.

As of September 30, 2024, 1,046,680 shares remained available for issuance under the ESPP.

During the three months ended March 31, 2025, we issued 103,441 shares of common stock pursuant to scheduled purchases under the ESPP.

As of March 31, 2025, 1,228,070 shares remained available for issuance under the ESPP.

CASTLE BIOSCIENCES, INC.

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Determining Fair Value - Summary of Assumptions

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:

Nine Months Ended

September 30,

Average expected term (years) 5.0 5.0

Expected stock price volatility 80.20 % - 80.20 %

75.57 % - 76.01 %

Risk-free interest rate 4.39 % - 4.39 %

3.57 % - 3.57 %

Dividend yield — % — %

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

Nine Months Ended

September 30,

We use the Black-Scholes valuation model to estimate the fair value of the purchase rights issued under the ESPP at the date of grant, start of the offering or other relevant measurement date.

The following table sets forth assumptions used under the ESPP:

Three Months Ended

Average expected term (years) 1.2 1.3

5 unchanged sentences

Dividend yield — % — %

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

There were no stock options granted for the three months ended March 31, 2025 and 2024.

The weighted-average grant date fair value of the purchase rights granted under the ESPP was $ 9.43 and $ 11.17 per share, respectively.

Stock-Based Compensation Expense

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,456 $ 1,314

2 unchanged sentences

Total stock-based compensation expense $ 11,179 $ 12,675

For the nine months ended September 30, 2024 and 2023 the weighted-average grant date fair value of stock options granted was $ 9.23 and $ 15.99 per option, respectively.

For the nine months ended September 30, 2024 and 2023, the weighted-average grant date fair value of the purchase rights granted under the ESPP was $ 12.28 and $ 11.51 per share, respectively.

As of September 30, 2024, the total unrecognized stock-based compensation cost related to outstanding awards was $ 77.6 million, which is expected to be recognized over a weighted-average period of 2.2 years.

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.

Included in total stock-based compensation expense for the three months ended March 31, 2025, and 2024 is $ 0.3 million and $ 0.2 million, respectively, from the accelerated recognition of expense for modifications of awards falling in scope of the Retirement Policy.

As of March 31, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $ 88.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.

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

Our effective income tax rate was immaterial for the three months ended March 31, 2025, and was 11.0 % for the three months ended March 31, 2024.

The effective rate for the three months ended March 31, 2025 and 2024 differed from our federal statutory rate of 21% was primarily due to the tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Segment and Related Information

The Company derives revenues through the delivery of test reports for our molecular diagnostic tests.

All of our operations are located within the United States and our business is focused on the U.S.

We have a single reportable segment consisting of a single operating segment.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the three and nine months ended September 30, 2024, our effective income tax rate was 72.6 % and 36.7 %, respectively.

For the three months ended September 30, 2024, differences in our effective rate and the federal statutory rate of 21% was due to revisions in estimated pre-tax income, reflecting uncertainty in continued Medicare coverage for our DecisionDx-SCC test and updated information, as well as stock-based compensation, permanent differences, changes in valuation allowance, research and development tax credit and state income taxes.

For the nine months ended September 30, 2024, differences in our effective rate and the federal statutory rate of 21% was due to stock-based compensation, permanent differences, changes in valuation allowance, research and development tax credit and state income taxes.

For the three and nine months ended September 30, 2023, our effective income tax rate was immaterial .

The measures of segment profit and loss for of our single reportable segment were as follows (in thousands):

Three Months Ended

Net revenues from external customers (1)

$ 87,988 $ 72,974

Significant segment expenses:

Personnel costs 52,200 45,916

Organizational and business development costs 14,229 11,000

Inventory usage 4,731 4,787

Clinical studies and publication costs 2,085 2,637

Professional services 3,576 3,124

Other segment items 37,015 8,044

Segment loss $ ( 25,848 ) $ ( 2,534 )

(1) For information on disaggregation of segment revenue by type and information about payor concentration, see Note 3.

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, 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 were as follows (in thousands):

Three Months Ended

Interest income $ 3,099 $ 2,996

Interest expense ( 17 ) ( 14 )

Depreciation and amortization 29,764 3,340

Income tax (benefit) expense ( 423 ) 45

Stock-based compensation expense 11,179 12,675

Changes in fair value of trading securities ( 1,425 ) —

Total assets for our reportable segment were located in the United States and were $ 501.7 million and $ 531.2 million as of March 31, 2025 and December 31, 2024, respectively.

Expenditures for additions to long-lived assets were $ 5.7 million and $ 8.6 million for the three months ended March 31, 2025 and 2024, respectively.

Subsequent Events

On April 4, 2025, the Company and its wholly owned subsidiary, Castle Narnia Way Real Estate Holding 1, LLC, entered into a Consent and First Amendment (the “Amendment”) with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company.

The Amendment modified certain terms of the 2024 LSA, dated March 26, 2024, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit.

CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On April 24, 2025, the Novitas LCD, Genetic Testing for Oncology:

Specific Tests, that includes DecisionDx-SCC as noncovered, became effective.

The final LCD was based on a proposed determination initially published in July 2023.

Following a public comment and review process, the LCD recommended non-coverage for the DecisionDx-SCC test.

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

What changed 10-Q

Item 1. Financial Statements