CASTLE BIOSCIENCES INC 10-Q

Item 1. Financial Statements. CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) March 31, 2025 December 31, 2024 ASSETS (unaudited) Current Assets Cash and cash equivalents $ 89,689 $ 119,709 Marketable investment securities 185,462 173,421 Accounts receivable, net 56,353 51,218 Inventory 6,849 8,135 Prepaid expenses and other current assets 11,035 7,671 Total current assets 349,388 360,154 Long-term marketable investment securities 5,570 — Long-term accounts receivable, net 1,000 918 Property and equipment, net 55,423 51,122 Operating lease assets 11,164 11,584 Goodwill and other intangible assets, net 77,904 106,229 Other assets – long-term 1,266 1,228 Total assets $ 501,715 $ 531,235 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 8,502 $ 6,901 Accrued compensation 17,857 32,555 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 Total current liabilities 37,274 49,392 Long-term debt 8,921 9,745 Noncurrent operating lease liabilities 14,049 14,345 Noncurrent finance lease liabilities 328 311 Deferred tax liability 837 1,607 Total liabilities 61,409 75,400 Commitments and Contingencies (Note 11) Stockholders’ Equity Preferred stock, $ 0.001 par value per share; 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 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 29 28 Additional paid-in capital 666,120 655,703 Accumulated deficit ( 225,974 ) ( 200,126 ) Accumulated other comprehensive income 131 230 Total stockholders’ equity 440,306 455,835 Total liabilities and stockholders’ equity $ 501,715 $ 531,235 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Table of Contents CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended March 31, 2025 2024 NET REVENUES $ 87,988 $ 72,974 OPERATING EXPENSES Cost of sales (exclusive of amortization of acquired intangible assets) 16,383 13,894 Research and development 12,588 13,809 Selling, general and administrative 58,620 48,495 Amortization of acquired intangible assets 28,325 2,247 Total operating expenses, net 115,916 78,445 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 ) 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. 2 Table of Contents CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) (in thousands) Three Months Ended March 31, 2025 2024 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. 3 Table of Contents CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) income Total Stockholders’ Equity Shares Amount BALANCE, JANUARY 1, 2024 27,410,532 $ 27 $ 609,477 $ ( 218,371 ) $ 136 $ 391,269 Stock-based compensation expense — — 12,675 — — 12,675 Exercise of common stock options 19,066 — 65 — — 65 Issuance of common stock from vested restricted stock units and payment of employees’ taxes 44,830 — ( 474 ) — — ( 474 ) Issuance of common stock under the employee stock purchase plan 111,241 1 1,707 — — 1,708 Net unrealized loss on marketable investment securities — — — — ( 247 ) ( 247 ) Net loss — — — ( 2,534 ) — ( 2,534 ) BALANCE, MARCH 31, 2024 27,585,669 $ 28 $ 623,450 $ ( 220,905 ) $ ( 111 ) $ 402,462 BALANCE, JANUARY 1, 2025 28,483,195 $ 28 $ 655,703 $ ( 200,126 ) $ 230 $ 455,835 Stock-based compensation expense — — 11,179 — — 11,179 Exercise of common stock options 6,331 — 18 — — 18 Issuance of common stock from vested restricted stock units and payment of employees’ taxes 251,970 1 ( 2,517 ) — — ( 2,516 ) Issuance of common stock under the employee stock purchase plan 103,441 — 1,737 — — 1,737 Net unrealized loss on marketable investment securities — — — — ( 99 ) ( 99 ) Net loss — — — ( 25,848 ) — ( 25,848 ) BALANCE, MARCH 31, 2025 28,844,937 $ 29 $ 666,120 $ ( 225,974 ) $ 131 $ 440,306 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Ended March 31, 2025 2024 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 30 179 Change in operating assets and liabilities: Accounts receivable ( 5,217 ) ( 4,262 ) Prepaid expenses and other current assets ( 3,364 ) ( 103 ) Inventory 1,286 297 Operating lease assets 420 338 Other assets ( 38 ) ( 230 ) Accounts payable 615 ( 422 ) Operating lease liabilities ( 526 ) ( 250 ) Accrued compensation ( 14,698 ) ( 14,237 ) Other accrued and current liabilities 1,141 73 Net cash used in operating activities ( 6,036 ) ( 6,835 ) INVESTING ACTIVITIES 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 ) FINANCING ACTIVITIES Proceeds from exercise of common stock options 18 65 Payment of employees’ taxes on vested restricted stock units ( 2,515 ) ( 474 ) Proceeds from contributions to the employee stock purchase plan 970 1,089 Repayment of principal portion of finance lease liabilities ( 26 ) ( 36 ) Proceeds from issuance of term debt — 10,000 Net cash (used in) provided by financing activities ( 1,553 ) 10,644 NET CHANGE IN CASH AND CASH EQUIVALENTS ( 30,020 ) ( 15,892 ) Beginning of period 119,709 98,841 End of period $ 89,689 $ 82,949 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents CASTLE BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) (in thousands) Three Months Ended March 31, 2025 2024 DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued purchases of property and equipment $ 3,217 $ 699 Decrease in operating lease assets with corresponding change in lease liabilities $ — $ ( 7 ) Finance lease assets obtained in exchange for lease obligations $ 44 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 Our unaudited condensed 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. 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 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. Certain disclosures have been condensed or omitted from the unaudited interim consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (the “2024 10-K”). 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 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. 7 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 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. 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. 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 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. 8 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 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. 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 2034, 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. 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. 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 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 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 9 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 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 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 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. 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. 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 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. 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- 10 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 (“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 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. Because our contracts with customers have an expected duration of one year or less, we have elected the practical expedient in ASC 606 to not disclose information about our remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expenses as incurred due to the short duration of our contracts. Contract balances consisted solely of accounts receivable (both current and noncurrent) as of March 31, 2025 and December 31, 2024. Disaggregation of Revenues The table below provides the disaggregation of revenue by type (in thousands): Three Months Ended March 31, 2025 2024 Dermatologic (1) $ 62,962 $ 59,334 Non-Dermatologic (2) 25,026 13,640 Total net revenues $ 87,988 $ 72,974 (1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering. (2) Consists of TissueCypher, DecisionDx-UM and IDgenetix. 11 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 were as follows: Percentage of Revenues Three Months Ended March 31, Percentage of Accounts Receivable (current) as of Percentage of Accounts Receivable (noncurrent) as of 2025 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 Medicare 47 % 49 % 21 % 18 % * * Payor A 15 % 14 % 16 % 19 % 15 % 15 % Payor B * * 22 % 20 % 11 % 12 % * 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. 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 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. 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 March 31, 2025 2024 Stock options 2,983 3,192 RSUs and PSUs 3,739 3,131 ESPP 176 333 Total 6,898 6,656 12 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 5. Marketable Investment Securities 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 Gains Losses U.S. government securities - AFS $ 183,200 $ 146 $ ( 14 ) $ 183,332 U.S. 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 Gains Losses U.S. government securities - AFS $ 169,636 $ 244 $ ( 14 ) $ 169,866 U.S. government securities - HTM — — — — Total debt securities $ 169,636 $ 244 $ ( 14 ) $ 169,866 Our U.S. 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. 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. 13 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. 6. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): March 31, 2025 December 31, 2024 Land $ 7,245 $ 7,245 Lab equipment 23,728 23,633 Leasehold improvements 14,624 14,616 Computer equipment 5,545 5,306 Furniture and fixtures 3,543 3,541 Construction-in-progress 14,958 9,614 Total 69,643 63,955 Less accumulated depreciation ( 14,220 ) ( 12,833 ) Property and equipment, net $ 55,423 $ 51,122 Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands): Three Months Ended March 31, 2025 2024 Cost of sales (exclusive of amortization of acquired intangible assets) $ 903 $ 655 Research and development 94 84 Selling, general and administrative 442 354 Total $ 1,439 $ 1,093 7. Goodwill and Other Intangible Assets, Net Goodwill 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. 14 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Other Intangible Assets, Net 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) Developed technology $ 125,317 $ ( 58,293 ) $ 67,024 10.5 Assembled workforce 563 ( 375 ) 188 1.7 Total other intangible assets, net $ 125,880 $ ( 58,668 ) $ 67,212 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 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. 8. Other Accrued and Current Liabilities Other accrued and current liabilities consisted of the following (in thousands): March 31, 2025 December 31, 2024 Clinical studies $ 2,562 $ 2,580 Accrued service fees 3,355 2,338 Accrued taxes 1,280 1,076 Other 1,172 1,999 Total $ 8,369 $ 7,993 9. Long-Term Debt 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 debt, net 10,032 10,023 Less: Current portion of long-term debt ( 1,111 ) ( 278 ) Total long-term debt $ 8,921 $ 9,745 15 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Future maturities of principal amounts on long-term debt as of March 31, 2025 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 (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 (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 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. 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 March 26, 2024, 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 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 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 March 31, 2025, no draws had been made on the line of credit. 16 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Interest Expense on Long-Term Debt Interest expense on long-term debt consisted of the following (in thousands): Three Months Ended March 31, 2025 2024 Interest expense on long term debt $ 202 $ 12 Less: Capitalized interest ( 194 ) — Total $ 8 $ 12 10. 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. 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 (Level 2) Significant Unobservable Inputs (Level 3) Total Assets Money market funds (1) $ 83,858 $ — $ — $ 83,858 U.S. government securities - AFS (2) $ 183,332 $ — $ — $ 183,332 Trading securities (2) $ 2,130 $ — $ — $ 2,130 Liabilities Term Debt (3)(4) $ — $ 10,032 $ — $ 10,032 17 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 - AFS (2) $ 169,866 $ — $ — $ 169,866 Trading securities (2) $ 3,555 $ — $ — $ 3,555 Liabilities 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) 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. We have U.S. 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. 11. 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. 12. Stock Incentive Plans and Stock-Based Compensation 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. 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”). 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. 18 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Stock Options Stock option activity under our stock plans for the three months ended March 31, 2025 is set forth below: Weighted-Average Stock Options Outstanding Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) Balance as of December 31, 2024 2,989,763 $ 36.23 Granted — $ — Exercised ( 6,331 ) $ 2.87 Forfeited/Cancelled ( 17,308 ) $ 44.49 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 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 Balance as of December 31, 2024 3,196,224 $ 23.52 Granted 1,185,688 $ 22.23 Vested (1) ( 363,745 ) $ 22.78 Forfeited/Cancelled ( 88,019 ) $ 23.64 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 111,775 for the three months ended March 31, 2025. Performance-Based Restricted Stock Units 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 Balance as of December 31, 2024 275,528 $ 21.94 Granted 172,631 $ 22.23 Vested — $ — Forfeited/Cancelled — $ — Balance as of March 31, 2025 448,159 $ 22.05 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 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. 19 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Determining Fair Value - Summary of Assumptions 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 March 31, 2025 2024 Average expected term (years) 1.2 1.3 Expected stock price volatility 56.55 % - 85.21 % 72.04 % - 130.95 % Risk-free interest rate 3.88 % - 4.22 % 4.43 % - 5.33 % Dividend yield — % — % Fair Value 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 Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands): Three Months Ended March 31, 2025 2024 Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,456 $ 1,314 Research and development 1,895 2,629 Selling, general and administrative 7,828 8,732 Total stock-based compensation expense $ 11,179 $ 12,675 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. 13. Income Taxes 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. 14. 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. market. We have a single reportable segment consisting of a single operating segment. 20 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) The measures of segment profit and loss for of our single reportable segment were as follows (in thousands): Three Months Ended March 31, 2025 2024 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 March 31, 2025 2024 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. 15. 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. 21 Table of Contents CASTLE BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. 22 Table of Contents