CASTLE BIOSCIENCES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q with our audited financial statements and notes thereto as of and for the years ended December 31, 2024, and 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, including the section entitled “Critical Accounting Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2025. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Castle Biosciences, Inc. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipate,” “believe,” “estimate,” “expect,” “may,” “plan,” “potential,” “will,” “would” or the negative or plural of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions or expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in the 2024 10-K, Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law. Overview Castle Biosciences, Inc. is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), uveal melanoma (“UM”), and in the treatment of mental health conditions. Our Test Portfolio We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology. We plan to launch a sixth MAAA test in November 2025. We also previously offered a proprietary pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions. Our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our TissueCypher risk stratification test for BE which is supplemented by revenue generated from our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), and our DecisionDx-UM risk stratification test for UM. All five of our MAAA tests have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare and Medicaid (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies; and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests. We believe this designation not only demonstrates our focus on developing and validating innovative tests but also enables our Medicare reimbursement rate to be set, over the long term, by the median private payor rate, which we believe provides a fair exchange of value. Further information about Medicare coverage and ADLT status with respect to each of our tests is set forth below. 27 Table of Contents Test Overview Our Dermatology Tests DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test that predicts the risk of metastasis or recurrence, including a positive sentinel lymph node, for patients diagnosed with invasive CM. In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States, representing an estimated U.S. total addressable market (“TAM”) of approximately $540 million. We estimate that approximately 50% of patients diagnosed with CM are 65 years of age or older. DecisionDx-SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC) that both predicts the risk of metastasis as well as response to adjuvant radiation therapy. We estimate 20% of SCC patients, or approximately 200,000 annually in the United States, are classified as high risk, representing an estimated U.S. TAM of approximately $820 million. MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion. We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S. TAM of approximately $600 million. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory in May 2021. AdvanceAD-Tx is a non-invasive GEP test designed to guide systemic treatment selection for patients aged 12 years and older with moderate-to-severe atopic dermatitis (“AD”). The test evaluates the expression of 487 genes across 12 known immune, inflammatory and skin-related pathways associated with inflammatory skin conditions to identify the underlying biology driving an individual patient’s disease. Results classify patients into one of two molecular profiles: Janus Kinase (“JAK”) Inhibitor Responder Profile or T helper 2 (“Th2”) Molecular Profile. Using multiple data sources focused on one-year prevalence, we estimate there are approximately 13.2 million individuals ages 12 and older in the United States with moderate-to-severe AD, representing an estimated U.S. TAM of approximately $33 billion. We plan a limited access launch of AdvanceAD-Tx in November 2025. Our Gastroenterology Test TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of progression of high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite dysplasia or low-grade dysplasia BE. We estimate a U.S. TAM of approximately $1 billion. Our Ophthalmology Test DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM. We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States. We estimate a U.S. TAM of approximately $10 million. Our Mental Health Test IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. After careful further assessments, we discontinued our IDgenetix test in May 2025. Reimbursement The primary source of revenue for our products is reimbursement from third-party payors, which includes government payors, such as Medicare, and commercial payors, such as insurance companies. Achieving broad coverage and reimbursement of our current products by third-party payors and continued Medicare coverage are key components of our financial success. We bill third-party payors and patients for the tests we perform. We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM, and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries. The Medicare rates discussed below are prior to giving effect to applicable sequestration in effect from time to time as described in further detail under “Government Regulation and Product Approval—Healthcare Reform” included in Item 1, Business, of the 2024 10-K. DecisionDx-Melanoma DecisionDx-Melanoma tests are processed from our Phoenix laboratory and since the second quarter of 2022, have been covered under “foundational” local coverage determinations (“LCD” or “LCDs”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto and Noridian. 28 Table of Contents DecisionDx-Melanoma has met ADLT status, as determined by the CMS, since 2019. ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage. Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022. Our rate for 2024 was $7,193 per test and remains at $7,193 for 2025. DecisionDx‑SCC We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix laboratories. Palmetto’s MolDX (“MolDX”) program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering Medicare claims for test reports issued by our Phoenix laboratory. Novitas is the MAC responsible for administering Medicare claims for test reports issued by our Pittsburgh laboratory. DecisionDx-SCC has met “new ADLT” status since 2022. Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test. Effective April 1, 2024, and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will continue at $8,500 based on the median private payor rates received between July 1, 2023 and November 30, 2023. On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024. On January 9, 2025, Novitas finalized an oncology biomarker LCD, Genetic Testing for Oncology: Specific Tests, which also lists DecisionDx-SCC as non-covered; that LCD became effective on April 24, 2025. In July 2025, we submitted reconsideration requests for both the Novitas and MolDX LCDs. Novitas subsequently confirmed that our request for DecisionDx-SCC was valid. MolDX also subsequently confirmed that our request for DecisionDx-SCC was valid and that the test has been placed on its waiting list, with an Open Meeting date to be determined. These confirmations represent another procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome. TissueCypher Most of our TissueCypher tests are processed in our Pittsburgh and Phoenix laboratories. Novitas is the MAC responsible for administering Medicare claims for test reports issued by our Pittsburgh laboratory. Palmetto’s MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering Medicare claims for test reports issued by our Phoenix laboratory. On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status. ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients. Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test, which remained effective through December 31, 2024. This rate was based on the median private payor rates received between April 1, 2022 and August 31, 2022. Beginning with 2025, the rate for TissueCypher will be set annually based upon the median private payor rate for the first half of the second preceding calendar year. Our 2025 rate will continue to be $4,950 per test based on the median private payor rate data from January 1, 2023 to June 30, 2023. MyPath Melanoma MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019. Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for MyPath Melanoma. MyPath Melanoma was approved as a “new ADLT” in September 2019. The rate for our MyPath Melanoma test is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022. Our rate for 2024 was $1,950 per test and remains at $1,950 per test for 2025. Diagnostic GEP Offering Our Diagnostic GEP offering included MyPath Melanoma and DiffDx-Melanoma. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021. Our internal data indicates that we have improved the technical performance of MyPath Melanoma and that it is comparable to the technical performance of DiffDx-Melanoma. As such, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023. 29 Table of Contents DecisionDx-UM DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017. DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019. Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022. Our rate for 2024 was $7,776 per test and remains at $7,776 per test for 2025. IDgenetix IDgenetix is currently covered under a Noridian LCD policy and accompanying billing and coding article developed by MolDX. During 2023, we obtained a test-specific PLA CPT code for IDgenetix which became effective October 1, 2023. In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024. Our reimbursement rate for 2024 was $1,336 per test and remained at $1,336 per test in the first quarter of 2025. Our IDgenetix test was discontinued in May 2025. Government Regulation and Oversight of Laboratory Developed Tests On May 6, 2024, the U.S. Food and Drug Administration (“FDA”) published a final rule on the regulation of Laboratory Developed Tests (“LDTs”) which amended the FDA's regulations to make explicit that LDT’s are devices under the Federal Food, Drug and Cosmetic Act (“FD&C Act”). However, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA’s LDT final rule. The U.S. government did not appeal the decision, and the FDA rescinded the rule on September 19, 2025. Accordingly, the FDA’s phased enforcement approach and related requirements are no longer in effect. Our proprietary tests, which were first marketed prior to May 6, 2024, remain approved by and under the oversight of the New York State Department of Health (“NYSDOH”), and we continue to believe that changes in FDA’s regulatory approach to LDTs will have no material impact on our existing test offerings. In July 2025, the FDA granted Breakthrough Device designation to our DecisionDx-Melanoma test. We believe this designation highlights the test’s potential to improve melanoma care through individualized prognostic insights. The Breakthrough Device designation is intended to expedite the development and review of certain medical devices that may offer more effective diagnosis or treatment of life-threatening conditions. Delivered Test Reports The number of test reports we deliver is a key indicator that we use to assess our business. A test report is generated when we receive a sample in our laboratory, and then the relevant test information is entered into our Laboratory Information Management System, the laboratory portion of the test is performed, including proprietary algorithmic analysis of the combined biomarkers, and a report is then delivered to the clinician who ordered the test. 30 Table of Contents The number of test reports delivered by us are presented in the table below: Proprietary Dermatologic GEP Tests DecisionDx- Melanoma DecisionDx-SCC Diagnostic GEP offering Dermatologic Total DecisionDx-UM TissueCypher IDgenetix (1) Grand Total Q1 2025 8,621 4,375 926 13,922 470 7,432 2,578 24,402 Q2 2025 9,981 4,762 1,166 15,909 468 9,170 1,027 26,574 Q3 2025 10,459 4,186 1,151 15,796 436 10,609 — 26,841 For the nine months ended September 30, 2025 29,061 13,323 3,243 45,627 1,374 27,211 3,605 77,817 Q1 2024 8,384 3,577 998 12,959 422 3,429 4,078 20,888 Q2 2024 9,585 4,277 1,099 14,961 456 4,782 4,903 25,102 Q3 2024 9,367 4,195 933 14,495 397 6,073 5,045 26,010 For the nine months ended September 30, 2024 27,336 12,049 3,030 42,415 1,275 14,284 14,026 72,000 Q4 2024 8,672 4,299 879 13,850 424 6,672 3,125 24,071 For year ended December 31, 2024 36,008 16,348 3,909 56,265 1,699 20,956 17,151 96,071 (1) The IDgenetix test was discontinued effective May 2025. For the three and nine months ended September 30, 2025, our test report volume increased by 3.2% and 8.1%, respectively, compared to the same period in 2024. Our dermatologic test report volume increased by 9.0% and 7.6% for the three and nine months ended September 30, 2025, respectively, compared to the prior period in 2024, largely driven by continued growth from DecisionDx-Melanoma and DecisionDx-SCC tests. TissueCypher increased by 74.7% and 90.5%, respectively, for the three and nine months ended September 30, 2025, compared to the prior period in 2024, further contributing to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “Components of Results of Operations—Net Revenues” below. For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test. During the nine months ended September 30, 2025, approximately 74% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period. Information About Certain Metrics The following provides additional information about certain metrics we have disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Test Reports Delivered Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated. The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606. 31 Table of Contents Other Events Impact of Macroeconomic Conditions Macroeconomic conditions, including uncertainties associated with the ongoing conflicts in the Middle East, the ongoing conflict between Ukraine and Russia, economic slowdowns, the ongoing shutdown of the federal government including regulatory agencies, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business. Our Financial Results Our net (loss) income may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we: • execute clinical studies to generate evidence supporting our current and future product candidates; • execute our commercialization strategy for our current and future commercial products; • continue our ongoing and planned development of new products in our pipeline; • seek to discover and develop additional product candidates; • hire additional scientific and research and development (“R&D”) staff; • add additional operational, financial and management information systems and personnel; and • make additional capital expenditures to support business growth and sustain existing operations. Factors Affecting Our Performance We believe there are several important factors that have impacted, and that we expect will continue to impact, our operating performance and results of operations, including: • Report volume. We believe that the number of reports we deliver to clinicians is an important indicator of the growth of adoption among the healthcare provider community. Our revenue and costs are affected by the volume of testing and mix of customers. Our performance depends on our ability to retain and broaden adoption with existing prescribing clinicians, as well as attract new clinicians. Our report volume could be negatively impacted by developments related to evolving macroeconomic developments, as discussed above. • Reimbursement. We believe that expanding reimbursement is an important indicator of the value of our products. Payors require extensive evidence of clinical utility, clinical validity, patient outcomes and health economic benefits in order to provide reimbursement for diagnostic products. Our revenue depends on our ability to demonstrate the value of our products to these payors. • Gross margin. We believe that our gross margin is an important indicator of the operating performance of our business. Higher gross margins reflect the average selling price of our tests, as well as the operating efficiency of our laboratory operations. • Expansion of our sales force and marketing programs. We believe the expansion of our direct sales force and marketing organization to educate clinicians and pathologists on the value of our molecular testing products will significantly impact our performance. 32 Table of Contents • Integrating acquisitions. Revenue growth, operational results and advances to our business strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business. • New product development. A significant aspect of our business is our investment in R&D activities, including activities related to the development of new products. In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products. Components of the Results of Operations Net Revenues We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, TissueCypher, DecisionDx-SCC and DecisionDx-UM. We bill third-party payors and patients for the tests we perform. Under ASC 606, we recognize revenue at the amount we expect to be entitled, subject to a constraint for variable consideration, in the period in which our tests are delivered to the treating clinicians. We have determined that our contracts contain variable consideration under ASC 606 because the amounts paid by third-party payors may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration is recognized only to the extent it is probable that a significant reversal of revenue will not occur in future periods when the uncertainties are resolved. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. 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. For these fully constrained claims, we generally recognize revenue in the period the uncertainty is favorably resolved, if at all. Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period. Our ability to recognize revenue for a test is dependent on the development of reimbursement experience and obtaining coverage decisions. For tests with limited reimbursement experience or no coverage, we recognize revenues on the basis of actual cash collections. Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, maintain Medicare coverage for our currently marketed products, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed. Cost of Sales (exclusive of amortization of acquired intangible assets) The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test. As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred. We expect cost of sales in absolute dollars to increase as the number of tests we perform increases. Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth. For example, continued investment in and expansion of our laboratory facilities. Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “Results of Operations—Comparison of the Three Months Ended September 30, 2025 and 2024” and “Results of Operations—Comparison of the Nine Months Ended September 30, 2025 and 2024” for details. 33 Table of Contents Research and Development R&D expenses include costs incurred to develop our tests, collect clinical samples and conduct clinical studies to develop and support our products. These costs consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), prototype materials, laboratory supplies, consulting costs, regulatory costs, electronic medical records set up costs, costs associated with setting up and conducting clinical studies and allocated overhead, including rent, information technology, equipment depreciation and utilities. We expense all R&D costs in the periods in which they are incurred. We expect our R&D expenses to increase in absolute dollars as we continue to invest in R&D activities related to developing enhanced and new products. We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our ongoing and future clinical studies and pipeline initiatives. Selling, General and Administrative Selling, general and administrative (“SG&A”) expenses include executive, selling and marketing, legal, finance and accounting, human resources and billing functions. These expenses consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), direct marketing expenses, audit and legal expenses, consulting costs, payor outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities. Other administrative and professional services expenses within SG&A are expected to increase with the scale of our business, but selling and marketing-related expenses are expected to increase significantly, consistent with our growth strategy. Amortization of Acquired Intangible Assets Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021, AltheaDx in April 2022, and Capsulomics, Inc., d/b/a Previse (“ Capsulomics ”) in May 2025. Interest Income Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and our short-term U.S. government obligations are a component of our marketable investment securities. Change in Fair Value of Equity Securities Change in fair value of equity securities is primarily attributable to unrealized gains and losses on our equity securities which we present as marketable investment securities. Interest Expense Interest expense is primarily attributable to long-term debt and finance leases. Income Tax Expense (Benefit) On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The legislation includes a number of significant changes to U.S. federal tax law that affect both current and deferred income taxes. Key provisions of the OBBBA include, among other items, changes to certain business deductions, modifications to bonus depreciation rules, and revisions to the treatment of R&D expenditures. As a result of enactment, changes in current taxes are reflected through the revised average effective tax rate, and deferred taxes, including valuation allowance effects, have been recorded as a discrete item in the period. The OBBBA did not have a material impact on our condensed consolidated statement of operations for the three and nine months ended September 30, 2025. Income tax benefit is primarily due to the reduction of the valuation allowance previously recorded against our federal deferred tax assets. This reduction resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics. Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business. We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and R&D credits and other tax credits. As of December 31, 2024, we had federal NOL carryforwards of $129.4 million, of which $52.9 million will begin to expire in 2031 if not utilized to offset federal taxable income, and $76.5 million may be carried forward indefinitely. As of December 31, 2024, we also had state NOL carryforwards of $86.5 million, which begin to expire in 2028 if not utilized to offset state taxable income. 34 Table of Contents Results of Operations Comparison of the Three Months Ended September 30, 2025 and 2024 The following table summarizes our results of operations for the periods indicated (in thousands, except percentages): Three Months Ended September 30, Change 2025 2024 (unaudited) NET REVENUES $ 83,043 $ 85,782 $ (2,739) (3.2) % OPERATING EXPENSES Cost of sales (exclusive of amortization of acquired intangible assets) 18,704 15,609 3,095 19.8 % Research and development 12,960 12,323 637 5.2 % Selling, general and administrative 55,907 50,499 5,408 10.7 % Amortization of acquired intangible assets 2,276 2,272 4 0.2 % Total operating expenses, net 89,847 80,703 9,144 11.3 % Operating (loss) income (6,804) 5,079 (11,883) (234.0) % Interest income 2,833 3,404 (571) (16.8) % Changes in fair value of equity securities 3,561 — 3,561 NA Interest expense (24) (201) 177 88.1 % Other expense 48 — 48 NA (Loss) income before income taxes (386) 8,282 (8,668) (104.7) % Income tax expense 115 6,013 (5,898) (98.1) % Net (loss) income $ (501) $ 2,269 $ (2,770) (122.1) % NA = Not applicable The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands): Three Months Ended September 30, 2025 2024 Change (unaudited) Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,446 $ 1,464 $ (18) Research and development 1,950 2,345 (395) Selling, general and administrative 8,704 9,218 (514) Total stock-based compensation expense $ 12,100 $ 13,027 $ (927) The following table provides a disaggregation of net revenues by type (in thousands): Three Months Ended September 30, 2025 2024 Change (unaudited) Dermatologic (1) $ 48,523 $ 65,060 $ (16,537) Non-Dermatologic (2) 34,520 20,722 13,798 Total net revenues $ 83,043 $ 85,782 $ (2,739) (1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering. (2) Consists of TissueCypher, DecisionDx-UM and IDgenetix. 35 Table of Contents The following table presents the calculation of gross margin (in thousands, except percentages): Three Months Ended September 30, 2025 2024 Change (unaudited) Net revenues $ 83,043 $ 85,782 $ (2,739) Less: Cost of sales (exclusive of amortization of acquired intangible assets) 18,704 15,609 3,095 Less: Amortization of acquired intangible assets 2,276 2,272 4 Gross margin $ 62,063 $ 67,901 $ (5,838) Gross margin percentage 74.7 % 79.2 % (4.5) % Net Revenues Net revenues for the three months ended September 30, 2025 decreased by $2.7 million, or 3.2%, to $83.0 million compared to the three months ended September 30, 2024, due to a $16.5 million decrease in revenue from our dermatologic tests offset by a $13.8 million increase in revenue from our non-dermatologic tests. The $16.5 million decrease in net revenues for our dermatologic tests was primarily attributable to our DecisionDx-SCC test, which was due to lower realized average selling price (“ASP”). The reduction in ASP was primarily driven by the loss of Medicare LCD coverage in April 2025. For the three months ended September 30, 2025 compared to the three months ended September 30, 2024, test report volumes for our DecisionDx-SCC test remained consistent. The $13.8 million increase in net revenues from our non-dermatologic tests was largely attributable to an increase in test report volumes for our TissueCypher Barrett’s Esophagus test. Increases in our TissueCypher Barrett’s Esophagus test report volumes reflect growth through our sales force efforts. Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 24.2% for the three months ended September 30, 2024 to 41.6% for the three months ended September 30, 2025. Cost of Sales (exclusive of amortization of acquired intangible assets) Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended September 30, 2025 increased by $3.1 million, or 19.8%, compared to the three months ended September 30, 2024, primarily due to higher personnel costs, higher expenses for lab supplies, and higher lab services expense. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. Higher expense for lab services and lab supplies also reflects higher test report volumes. Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support expected operational growth and higher test volumes. Gross Margin Our gross margin percentage was 74.7% for the three months ended September 30, 2025, compared to 79.2% for the same period in 2024. The decrease was primarily due to lower ASP relating to our DecisionDx-SCC test and higher personnel costs, higher expenses for lab supplies, and higher lab services expense. Research and Development R&D expenses increased by $0.6 million, or 5.2%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and primarily due to higher personnel costs driven by increased headcount to support continued business growth. We expect to continue incurring R&D expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist. 36 Table of Contents Selling, General and Administrative The following table provides a breakdown of SG&A expenses (in thousands): Three Months Ended September 30, 2025 2024 Change (unaudited) Sales and marketing $ 32,785 $ 29,835 $ 2,950 General and administrative 23,122 20,664 2,458 Total selling, general and administrative expense $ 55,907 $ 50,499 $ 5,408 Sales and marketing expenses increased by $2.9 million, or 9.9%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to higher personnel costs, higher expenses associated with travel, and higher marketing expense. Stock-based compensation expense included in sales and marketing was $3.9 million for the three months ended September 30, 2025, compared to $4.0 million for the three months ended September 30, 2024. General and administrative expenses increased by $2.5 million, or 11.9%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and was primarily due to higher personnel costs and higher information technology related costs. Higher personnel cost reflects headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $4.8 million for the three months ended September 30, 2025, compared to $5.2 million for the three months ended September 30, 2024. Changes in Fair Value of Equity Securities The change in fair value of equity securities increased by $3.6 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and was entirely associated with our investments in equity securities where we had no such investments during the comparative period. Income Tax Expense Our income tax expense decreased by approximately $5.9 million for the three months ended September 30, 2025 , primarily du e to revised estimates of pre-tax income, reflecting uncertainty regarding continued Medicare coverage for our DecisionDx-SCC test and updated financial information, as well as stock-based compensation, permanent differences, changes in valuation allowance, research and development tax credit and state income taxes in the prior period. The prior-year period reflected a net income position compared to a net loss position in the current period. No comparable event occurred in the current period. Stock-Based Compensation Expense Stock-based compensation expense, which is allocated among cost of sales, R&D expense and SG&A expense totaled $12.1 million and $13.0 million for the three months ended September 30, 2025 and 2024, respectively. We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of September 30, 2025, we had 823 employees, compared to 710 as of September 30, 2024. As of September 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $69.6 million, which is expected to be recognized over a weighted-average period of 2.3 years. 37 Table of Contents Comparison of the Nine Months Ended September 30, 2025 and 2024 The following table summarizes our results of operations for the periods indicated (in thousands, except percentages): Nine Months Ended September 30, Change 2025 2024 (unaudited) NET REVENUES $ 257,219 $ 245,758 $ 11,461 4.7 % OPERATING EXPENSES Cost of sales (exclusive of amortization of acquired intangible assets) 52,713 44,022 8,691 19.7 % Research and development 38,335 40,268 (1,933) (4.8) % Selling, general and administrative 172,592 150,082 22,510 15.0 % Amortization of acquired intangible assets 32,562 6,766 25,796 381.3 % Total operating expenses, net 296,202 241,138 55,064 22.8 % Operating (loss) income (38,983) 4,620 (43,603) (943.8) % Interest income 8,876 9,544 (668) (7.0) % Changes in fair value of equity securities 3,321 — 3,321 NA Interest expense (62) (485) 423 87.2 % Other expense 48 — 48 NA (Loss) income before income taxes (26,800) 13,679 (40,479) (295.9) % Income tax (benefit) expense (4,974) 5,024 (9,998) (199.0) % Net (loss) income $ (21,826) $ 8,655 $ (30,481) (352.2) % NA = Not applicable The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands): Nine Months Ended September 30, 2025 2024 Change (unaudited) Cost of sales (exclusive of amortization of acquired intangible assets) $ 4,324 $ 4,179 $ 145 Research and development 5,807 7,611 (1,804) Selling, general and administrative 24,356 27,091 (2,735) Total stock-based compensation expense $ 34,487 $ 38,881 $ (4,394) The following table provides a disaggregation of net revenues by type (in thousands): Nine Months Ended September 30, 2025 2024 Change (unaudited) Dermatologic (1) $ 167,782 $ 193,223 $ (25,441) Non-Dermatologic (2) 89,437 52,535 36,902 Total net revenues $ 257,219 $ 245,758 $ 11,461 (1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering. (2) Consists of TissueCypher, DecisionDx-UM and IDgenetix. 38 Table of Contents The following table presents the calculation of gross margin (in thousands, except percentages): Nine Months Ended September 30, 2025 2024 Change (unaudited) Net revenues $ 257,219 $ 245,758 $ 11,461 Less: Cost of sales (exclusive of amortization of acquired intangible assets) 52,713 44,022 8,691 Less: Amortization of acquired intangible assets 32,562 6,766 25,796 Gross margin $ 171,944 $ 194,970 $ (23,026) Gross margin percentage 66.8 % 79.3 % (12.5) % Net Revenues Net revenues for the nine months ended September 30, 2025 increased by $11.5 million, or 4.7%, to $257.2 million compared to the nine months ended September 30, 2024, due to a $36.9 million increase in revenue from our non-dermatologic tests and a $25.4 million decrease in revenue from our dermatologic tests. The $36.9 million increase in revenue from our non-dermatologic tests was largely attributable to a 90.5% increase in tests report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP. Increases in our TissueCypher test report volumes reflect growth through our sales force efforts. Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 21.4% for the nine months ended September 30, 2024 to 34.8% for the nine months ended September 30, 2025. The $25.4 million decrease from our dermatologic tests was primarily due to a lower ASP for DecisionDx-SCC test, where we stopped receiving Medicare coverage as of April 24, 2025, offset by 10.6% increase in DecisionDx-SCC test report volumes, and a 6.3% increase in DecisionDx-Melanoma test report volumes. Cost of Sales (exclusive of amortization of acquired intangible assets) Cost of sales (exclusive of amortization of acquired intangible assets) for the nine months ended September 30, 2025 increased by $8.7 million, or 19.7%, compared to the nine months ended September 30, 2024, primarily due to higher personnel costs, higher lab services cost, higher expenses for lab supplies, and higher depreciation expense. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. The increase in lab services expense was driven by higher test report volumes, while the rise in depreciation expense reflects continued investment in and expansion of our laboratory facilities. Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected operational growth and higher test volumes. Gross Margin Our gross margin percentage was 66.8% for the nine months ended September 30, 2025, compared to 79.3% for the nine months ended September 30, 2024. The decrease was primarily due to lower ASP relating to our DecisionDx-SCC test and higher amortization from accelerating our IDgenetix test, higher personnel costs, higher expenses for lab supplies, higher lab services expense, and higher depreciation expense. Research and Development R&D expenses decreased by $1.9 million, or 4.8%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily reflecting lower clinical studies costs. We expect to continue incurring R&D expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist. 39 Table of Contents Selling, General and Administrative The following table provides a breakdown of SG&A expenses (in thousands): Nine Months Ended September 30, 2025 2024 Change (unaudited) Sales and marketing $ 104,716 $ 93,054 $ 11,662 General and administrative 67,876 57,028 10,848 Total selling, general and administrative expense $ 172,592 $ 150,082 $ 22,510 Sales and marketing expenses increased by $11.7 million, or 12.5%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is primarily due to higher personnel costs, higher expenses associated with travel, training events and speaker conferences, and higher sales related travel expenses. Increases in personnel costs reflect a higher headcount as well as merit and annual inflationary wage adjustment for existing employees. Higher test report volumes is a result of our continued investments in human capital for our sales organization. Stock-based compensation expense included in sales and marketing expense was $11.7 million for the nine months ended September 30, 2025, compared to $13.5 million for the nine months ended September 30, 2024. General and administrative expenses increased by $10.8 million, or 19.0%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is primarily due to higher personnel costs and higher information technology-related costs. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $12.6 million for the nine months ended September 30, 2025, compared to $13.6 million for the nine months ended September 30, 2024. Amortization of Acquired Intangible Assets Amortization increased by approximately $25.8 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025. As a result of this decision, we revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025. To a lesser extent, the increase is also attributable to amortization of the developed technology intangible asset recognized in association with the Esopredict test following our acquisition of Capsulomics in May 2025. Income Tax Benefit Income tax benefit increased by approximately $10.0 million for the nine months ended September 30, 2025, primarily due to the partial release of the valuation allowance on our federal deferred tax assets resulting from new deferred tax liabilities recognized upon consolidating Capsulomics in the current period. The increase also reflected revised estimates of pre-tax income due to uncertainty regarding Medicare coverage for our DecisionDx-SCC test and updated financial information, along with changes in stock-based compensation, permanent differences, valuation allowance adjustments, research and development tax credits, and state income taxes. The prior-year period reflected net income compared to a net loss in the current period. Stock-Based Compensation Expense Stock-based compensation expense, which is allocated among cost of sales, R&D expense and SG&A expense, totaled $34.5 million for the nine months ended September 30, 2025, compared to $38.9 million for the nine months ended September 30, 2024. We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of September 30, 2025, we had 823 employees compared to 710 as of September 30, 2024. As of September 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $69.6 million, which is expected to be recognized over a weighted-average period of 2.3 years. 40 Table of Contents Liquidity and Capital Resources Sources of Liquidity Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities and cash generated from the sale of our products. All of our marketable investment securities are considered investment grade and are readily available for use in current operations. As of September 30, 2025 and December 31, 2024, we had marketable investment securities of $202.0 million and $173.4 million, respectively. Additionally, as of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $85.6 million and $119.7 million, respectively. On April 4, 2025, we amended the 2024 Loan and Security Agreement (the “2024 LSA”) to modify certain terms, including the extension of the draw period for our line of credit from March 31, 2025 to September 30, 2025. In August 2025, we exercised the interest-only milestone provision under the 2024 LSA to extend the interest-only period on the term loan from November 30, 2025 to December 1, 2026. As of September 30, 2025, we had not made any draws on the line of credit. The line of credit under the 2024 LSA expired on September 30, 2025 and was no longer available as a source of liquidity thereafter. Our liquidity has been primarily derived from the revenue generated from the sale of our products. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months. However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected. As mentioned above, we expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our R&D activities, including the clinical studies noted above in “—Components of the Results of Operations—Research and Development.” Material Cash Requirements Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical R&D services, laboratory operations, equipment and related supplies, legal and other regulatory expenses, general administrative costs and, from time to time, expansion of our laboratory and office facilities in support of our growth, such as the construction of our future corporate headquarters. We anticipate that a substantial portion of our cash requirements in the foreseeable future will relate to the further commercialization of our currently marketed products, the development of our future product candidates in our pipeline and the potential commercialization of these pipeline products, should their development be successful, and the construction of our future corporate headquarters. In February 2024, we purchased a plot of land located in Friendswood, Texas, for cash consideration of $7.2 million, for the purpose of developing a commercial office building where our future corporate headquarters will be located. The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space. Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use. Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis. As of September 30, 2025, the development project is expected to cost a total of approximately $44.2 million. During the three and nine months ended September 30, 2025, we incurred total capital spend of $6.8 million and $20.8 million, respectively, related to this development project. We intend to use the proceeds from the 2024 Term Loan (as defined below) and our existing cash and cash equivalents to pay for this project. 41 Table of Contents Since our inception, we have generally incurred significant losses and negative operating cash flows, and we have relied heavily on proceeds from our financing activities to fund capital expenditures, business expansion campaigns, and to offset operating deficits. For the year ended December 31, 2024, we recognized net income of $18.2 million, and had positive operating cash flow of $64.9 million, though we may be unable to sustain profitability and positive cash flows in future periods. Collections on Medicare claims for our DecisionDx-SCC test represented a significant portion of our 2024 operating cash flows. We lost Medicare coverage for our DecisionDx-SCC test in April 2025 and decreases in revenues and cash inflows from this test have occurred and are expected to continue if our reconsideration requests for both the MolDX and Novitas LCDs are not approved. Our ability to maintain profitability will heavily depend on us maintaining Medicare coverage for our currently marketed products, on the successful commercialization of the products we plan to launch in the future, and our ability to manage operating expenses. We expect to incur additional expenses in the future as we invest in the commercialization of our existing products and the development and commercialization of our current pipeline products and future product candidates. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from the sale of our commercial products will be sufficient to fund our operations for at least the next 12 months. We believe we will meet longer-term expected cash requirements and obligations through a combination of existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products and issuances of equity securities or debt offerings. However, we have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. There are numerous risks and uncertainties associated with developing genomic tests, including, among others, the uncertainty of: • successful commencement and completion of clinical study protocols; • successful identification and acquisition of tissue samples; • the development and validation of genomic classifiers; and • acceptance of new genomic tests by clinicians, patients and third-party payors including competitor actions. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate our exact working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of, many factors, including those listed above as well as those listed in Part I, Item 1A, “Risk Factors” in the 2024 10-K and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. In the event additional funding is required, we expect that we would use a combination of equity and debt financings, which may not be available to us when needed, on terms that we deem to be favorable or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we are unable to raise additional funds through debt or equity financing or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product discovery and development activities or future commercialization efforts. Long-Term Debt Our long-term debt is presented in the table below (in thousands): September 30, 2025 December 31, 2024 (unaudited) Term debt $ 10,200 $ 10,200 Unamortized discount (151) (177) Total debt, net 10,049 10,023 Less: Current portion of long-term debt — (278) Total long-term debt $ 10,049 $ 9,745 42 Table of Contents 2024 Loan and Security Agreement On March 26, 2024 (the “Closing Date”), we entered into the 2024 LSA, as amended in April 2025, 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) a term loan in the principal amount of $10.0 million, which was drawn on the Closing Date (the “2024 Term Loan”), and (ii) a $25.0 million line of credit that was available at our option from the Closing Date through September 30, 2025, with the same interest rate and maturity as the 2024 Term Loan (the “2024 Credit Line”). The Consent and First Amendment executed on April 4, 2025, modified certain terms of the 2024 LSA, including the extension of the draw period for the line of credit from March 31, 2025 to September 30, 2025. 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 paid prior to March 26, 2026. Amounts repaid may not be reborrowed. 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 further amend the terms of the 2024 LSA, the consent of the Lender would be required. As of September 30, 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 2024 Term Loan is interest-only from the Closing Date through November 30, 2025, subject to extension under the Interest-Only Extension Milestone (as defined in the 2024 LSA) provision. On August 26, 2025, we elected to extend the interest-only period to December 1, 2026. Beginning in December 2026, the principal payments will be made in equal monthly installments through the maturity date of November 1, 2028. In addition, we are required to make a final payment equal to 2.00% of the aggregate original principal amounts of the 2024 Term Loan, due at maturity or upon full repayment. 2024 Term Loan On the Closing Date, we drew $10.0 million under the 2024 Term Loan. 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 September 30, 2025, no payment on principal has been made and the weighted-average effective interest rate for all outstanding debt under the 2024 Term Loan was 7.99%. 2024 Credit Line We had a $25.0 million line of credit under the terms and provisions of the 2024 LSA, from the Closing Date through September 30, 2025. As of September 30, 2025, no draws had been made on the 2024 Credit Line and the 2024 Credit Line expired on September 30, 2025. Leases We have entered into various operating and finance leases, which are primarily associated with our laboratory facilities and office space. Total undiscounted future minimum payment obligations under our operating leases and finance leases as of September 30, 2025 totaled approximately $40.7 million, of which $0.8 million is payable through the remainder of 2025 and $39.9 million is payable through early 2037. The leases expire on various dates through 2037 and provide certain options to renew for additional periods. We expect our lease obligations may increase in the future as we expand our facilities, operations and headcount in support of the anticipated growth in our portfolio of commercial products and pipeline tests. 43 Table of Contents Cash Flows The following table summarizes our sources and uses of cash and cash equivalents for each of the periods presented (in thousands): Nine Months Ended September 30, 2025 2024 (unaudited) Net cash provided by operating activities $ 37,416 $ 40,501 Net cash used in investing activities (69,198) (55,907) Net cash (used in) provided by financing activities (2,371) 11,524 Net change in cash and cash equivalents (34,153) (3,882) Cash and cash equivalents, beginning of period 119,709 98,841 Cash and cash equivalents, end of period $ 85,556 $ 94,959 Operating Activities Net cash provided by operating activities was $37.4 million for the nine months ended September 30, 2025, and was primarily attributable to depreciation and amortization of $37.0 million, non-cash stock-based compensation expense of $34.5 million, and increases in accounts payable of $3.1 million, partially offset by net loss of $21.8 million, increases in deferred income taxes of $5.3 million, prepaid expenses and other current assets of $4.5 million, accretion of discounts on marketable investment securities of $3.5 million, and change in fair value of equity securities of $3.3 million. Net cash provided by operating activities was $40.5 million for the nine months ended September 30, 2024, and was primarily attributable to non-cash stock-based compensation expense of $38.9 million, depreciation and amortization of $10.2 million, net income of $8.7 million, deferred income taxes of $3.7 million and decreases in inventory of $1.4 million, partially offset by increases in accounts receivable of $11.9 million, increases in accretion of discounts on marketable investment securities of $5.1 million, decreases in accounts payable of $3.8 million, increases in prepaid expenses and other current assets of $1.7 million and decreases in accrued compensation of $1.3 million. The $3.1 million decrease in cash provided by operating activities for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to increases in operating expenditures, and decrease in collections from customers attributable to a lower accounts receivable balance. The cash provided during the nine months ended September 30, 2025 also reflects the payment of annual cash bonuses to our employees and certain health care benefit payments totaling $22.5 million, which are not expected to recur in the remainder of 2025. By comparison, we paid $20.8 million for similar items during the nine months ended September 30, 2024. Investing Activities Net cash used in investing activities was $69.2 million for the nine months ended September 30, 2025 and consisted primarily of purchases of marketable investment securities of $151.3 million, purchases of property and equipment of $28.8 million, our asset acquisition of Capsulomics for $18.7 million and purchases of debt securities classified as held-to-market of $5.6 million, partially offset by the maturity of marketable investment securities of $135.2 million. Net cash used in investing activities was $55.9 million for the nine months ended September 30, 2024 and consisted primarily of purchases of marketable investment securities of $158.4 million and purchases of property and equipment of $20.8 million, partially offset by the maturity of marketable investment securities of $123.3 million. The $13.3 million increase in cash used in investing activities for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to our acquisition of Capsulomics for $18.7 million, which includes both the cash consideration and direct transaction costs and $8.1 million in increased purchases of property and equipment, partially offset by an increase of $12.0 million in proceeds from maturing marketable investment securities and $7.1 million fewer purchases of such securities. 44 Table of Contents Financing Activities Net cash used in financing activities was $2.4 million for the nine months ended September 30, 2025, and consisted primarily of the $4.3 million payment of employee taxes attributable to the vesting of Restricted Stock Units (“RSUs”), partially offset by the $1.7 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”). Net cash provided by financing activities was $11.5 million for the nine months ended September 30, 2024, and consisted primarily of $10.0 million of proceeds from issuance of long-term debt and $2.3 million of proceeds from contributions to our ESPP and $1.6 million of proceeds from the exercise of stock options, partially offset by the $2.4 million payment of employee taxes attributable to the vesting of RSUs. Critical Accounting Estimates During the nine months ended September 30, 2025, there were no significant changes to the information discussed under “Critical Accounting Estimates” included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2024 10-K.