What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-03 · 180 added, 277 removed, 261 unchanged (64% of the section changed)

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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.

The words “anticipate,” “believe,” “could”, “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “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.

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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.

is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), atopic dermatitis (“AD”), and uveal melanoma (“UM”).

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;

We currently offer six commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology, ophthalmology, and most recently includes a test to guide systemic treatment decisions in moderate-to-severe atopic dermatitis.

All of our MAAA tests, excluding our recently launched AdvanceAD-Tx test, 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.

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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.

DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test designed to predict the likelihood of a positive sentinel lymph node and the risk of metastasis or recurrence for patients diagnosed with invasive CM.

In a typical year, we estimate that approximately 130,000 patients are diagnosed with invasive CM in the U.S., 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.

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 AD.

The test evaluates the expression of 487 genes across 12 known immune, inflammatory and skin-related pathways 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.

Using multiple data sources focused on one-year prevalence, we estimate that there are approximately 10 million individuals ages 12 and older in the U.S.

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.

We commenced a limited access launch of the AdvanceAD-Tx test in November 2025.

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 U.S., are classified as high risk, representing an estimated U.S.

TAM of approximately $820 million.

MyPath Melanoma is our proprietary, diagnostic GEP test for use in patients with difficult-to-diagnose melanocytic lesions.

Of the 2 million suspicious pigmented lesions biopsied annually in the U.S., we estimate that approximately 300,000 of those present difficult-to-diagnose melanocytic lesion, representing an estimated U.S.

TAM of approximately $600 million.

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.

TissueCypher is our proprietary risk stratification spatialomics test designed to predict future development of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE.

We estimate a U.S.

TAM of approximately $1 billion.

In May 2025, we expanded our BE capabilities through the acquisition of Capsulomics, Inc., d/b/a Previse (“Previse”), which includes methylation-based intellectual property and the Esopredict risk-stratification test.

We expect these assets to support the future development of TissueCypher and enable the potential incorporation of additional molecular modalities.

Beginning in the first quarter of 2026, we began offering Esopredict as a supplemental option when TissueCypher does not produce an actionable result.

Revenue and test volume from Esopredict have not been material to date.

Our Ophthalmology Test

DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM.

DecisionDx-UM is our 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.

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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.

We have received Medicare coverage for our DecisionDx-Melanoma, TissueCypher, MyPath Melanoma and DecisionDx-UM tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries.

DecisionDx-SCC previously received Medicare coverage, which was subsequently impacted by LCD changes finalized in 2025.

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 2025 10-K.

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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.

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.

CMS reviewed and approved DecisionDx-Melanoma for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024.

Our rate for 2024 was $7,193 per test and remains at $7,193 for 2025.

Our rate for 2024 and 2025 was $7,193 per test and remains $7,193 per test for 2026.

Our TissueCypher tests are processed in our Phoenix and Pittsburgh laboratories.

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.

Novitas is the MAC responsible for administering Medicare claims for test reports issued by our Pittsburgh laboratory.

CMS reviewed and approved TissueCypher for ADLT status in 2022.

Effective January 1, 2023, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for TissueCypher was set at $4,950 per test and 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 has been set annually based on the median private payor rate for the first half of the second preceding calendar year.

The rate for 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024.

Our rate for 2025 was $4,950 per test and remains $4,950 per test for 2026.

DecisionDx‑SCC

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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.

CMS reviewed and approved DecisionDx-SCC for ADLT status in 2023.

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.

Effective April 1, 2024, we continued receiving reimbursement at a rate of $8,500 per test, set by CMS using median private payor rate data for the period July 1, 2023 and November 30, 2023, and this rate remained effective through December 31, 2025.

Our rate for 2025 was $8,500 per test and remains $8,500 per test for 2026.

On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024.

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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.

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.

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.

Both Novitas and MolDX subsequently confirmed that our requests were valid.

These confirmations represent an important procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome.

MyPath Melanoma

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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.

CMS reviewed and approved MyPath for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024.

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.

Our rate for 2024 and 2025 was $1,950 per test and remains $1,950 per test for 2026.

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.

CMS reviewed and approved DecisionDx-UM for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024.

Our rate for 2024 was $7,776 per test and remains at $7,776 per test for 2025.

Our rate for 2024 and 2025 was $7,776 per test and remains $7,776 per test for 2026.

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.

The CLFS rate of $1,336 per test was 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.

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

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The number of test reports delivered by us are presented in the table below:

Proprietary Dermatologic GEP Tests

Melanoma DecisionDx-SCC Diagnostic GEP offering Dermatologic Total DecisionDx-UM TissueCypher IDgenetix (1)

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

For the Three Months Ended March 31, 2026

DecisionDx-Melanoma

DecisionDx‑SCC

MyPath Melanoma 973

Dermatologic Total 14,696

TissueCypher 11,745

DecisionDx-UM

Grand Total 26,933

For the Three Months Ended March 31, 2025

DecisionDx-Melanoma

DecisionDx‑SCC

MyPath Melanoma 926

Dermatologic Total 13,922

TissueCypher 7,432

DecisionDx-UM

IDgenetix (1)

Grand Total 24,402

(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 the three months ended March 31, 2026, our test report volume increased by 10% compared to the same period in 2025.

Our dermatologic test report volume increased by 6% for the three months ended March 31, 2026 compared to the prior period in 2025, largely driven by continued growth from our DecisionDx-Melanoma test.

TissueCypher increased by 58% for the three months ended March 31, 2026, compared to the prior period in 2025, 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 AdvanceAD-Tx product line, we received approximately 650 orders during the three months ended March 31, 2026, while still in the initial limited access phase.

We believe early adoption reflects clinician interest in integrating AdvanceAD-Tx into existing AD treatment pathways.

We plan to expand availability in a phased manner throughout the remainder of 2026.

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.

During the three months ended March 31, 2026, approximately 54% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Information About Certain Metrics

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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.

Macroeconomic conditions, including uncertainties associated with the ongoing conflicts in the Middle East, including the conflict between the U.S.

and Iran, the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, the recent 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, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns at, and potential 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.

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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.

Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, TissueCypher and DecisionDx-UM.

We bill third-party payors and patients for the tests we perform.

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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.

See the table in “Results of Operations—Comparison of the Three Months Ended March 31, 2026 and 2025” for details.

Research and Development

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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

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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.

Net Gains (Losses) on Equity Securities

Net gains (losses) on equity securities are primarily attributable to realized and 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.

Other loss is primarily attributable to unrealized foreign currency losses and gains on our foreign currency-denominated investments and loan receivable, which are presented as marketable investment securities and other assets, respectively.

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.

The OBBBA includes a broad range of tax reform provisions affecting businesses, including reinstatement of permanent expensing of domestic research and development costs, higher EBITDA cap on the deduction for interest expense and 100% bonus depreciation.

We will benefit from the reinstatement of permanent expensing of domestic research and development costs and 100% bonus depreciation.

Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business.

Income tax benefit is primarily due to the revised estimated useful life of our intangible asset related to the discontinuation of our IDgenetix test offering in May 2025, which resulted in a temporary difference and a corresponding deferred tax asset.

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, 2025, we had federal NOL carryforwards of $134.8 million, of which $52.9 million will begin to expire in 2032 if not utilized to offset federal taxable income, and $81.9 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.

Also, as of December 31, 2025, we also had state NOL carryforwards of $113.0 million, which begin to expire in 2030 if not utilized to offset state taxable income.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

Comparison of the Three Months Ended March 31, 2026 and 2025

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Three Months Ended

September 30, Change

March 31, Change

NET REVENUES $ 83,679 $ 87,988 $ (4,309) (4.9) %

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Total operating expenses, net 102,086 115,916 (13,830) (11.9) %

Operating (loss) income (6,804) 5,079 (11,883) (234.0) %

Operating loss (18,407) (27,928) 9,521 34.1 %

Interest income 2,545 3,099 (554) (17.9) %

Changes in fair value of equity securities 3,561 — 3,561 NA

Net gains (losses) on equity securities 2,022 (1,425) 3,447 241.9 %

Interest expense (134) (17) (117) (688.2) %

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) %

Other loss (439) — (439) NA

Loss before income taxes (14,413) (26,271) 11,858 45.1 %

Income tax expense (benefit) 109 (423) 532 125.8 %

Net loss $ (14,522) $ (25,848) $ 11,326 43.8 %

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

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,

2026 2025 Change

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Total net revenues $ 83,679 $ 87,988 $ (4,309)

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and MyPath Melanoma.

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

The following table presents the calculation of gross margin (in thousands, except percentages):

Three Months Ended

September 30,

2025 2024 Change

Net revenues $ 83,043 $ 85,782 $ (2,739)

Cost of sales (exclusive of amortization of acquired intangible assets) 18,704 15,609 3,095

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 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.

Net revenues for the three months ended March 31, 2026 decreased by $4.3 million, or 4.9%, to $83.7 million compared to the three months ended March 31, 2025, due to a $21.9 million decrease in revenues from our dermatologic tests, partially offset by a $17.5 million increase in revenues from our non-dermatologic tests.

The $21.9 million decrease in revenues from our dermatologic tests was primarily due to the loss of Medicare coverage for our DecisionDx-SCC test effective April 24, 2025, partially offset by an increase in DecisionDx-Melanoma revenues, which was primarily driven by a 16% increase in test report volumes and, to a lesser extent, a higher realized average selling price (“ASP”).

The $17.5 million increase in revenues from our non-dermatologic tests was largely attributable to a 58% increase in test report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP.

The increase in TissueCypher test report volumes reflects growth driven by our sales force efforts.

Net revenues from our non-dermatologic tests as a percentage of total net revenues increased from 28.4% for the three months ended March 31, 2025 to 50.9% for the three months ended March 31, 2026.

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.

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended March 31, 2026 increased by $4.2 million, or 25.3%, compared to the three months ended March 31, 2025, primarily due to higher expenses for lab supplies, higher lab services cost, higher personnel costs, and higher depreciation expense.

The increase in expenses for lab supplies and lab services expense was driven by higher test report volumes.

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.

The higher 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 expected operational growth and higher test volumes.

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.

Selling, General and Administrative

The following table provides a breakdown of SG&A expenses (in thousands):

Three Months Ended

September 30,

2025 2024 Change

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.

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

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

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

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.

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.

The following table presents the calculation of gross margin (in thousands, except percentages):

Nine Months Ended

September 30,

Three Months Ended

2026 2025 Change

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Gross margin percentage 72.8 % 49.2 % 23.6 %

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.

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.

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.

Our gross margin percentage was 72.8% for the three months ended March 31, 2026, compared to 49.2% for the three months ended March 31, 2025.

The increase was primarily driven by significantly lower amortization of acquired intangible assets.

Amortization expense was elevated in the prior-year period due to accelerated amortization related to the IDgenetix test, which was fully amortized as of March 31, 2025 following the decision to discontinue IDgenetix, resulting in no amortization expense associated with this asset in the current period.

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.

R&D expenses increased by $1.8 million, or 14.6%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to higher personnel costs and higher clinical studies costs.

The increases in personnel costs reflect a higher headcount to support continued business growth and increases in clinical studies costs reflect investment in our pipeline products.

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The following table provides a breakdown of SG&A expenses (in thousands):

Nine Months Ended

September 30,

Three Months Ended

2026 2025 Change

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Total selling, general and administrative expense $ 64,899 $ 58,620 $ 6,279

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.

Sales and marketing expenses increased by $4.2 million, or 11.5%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

The increase is primarily due to higher personnel costs and higher sales related travel expenses.

Increases in personnel costs reflect a higher headcount driven by sales force expansion as well as merit and annual inflationary wage adjustment for existing employees.

Higher sales related travel expenses reflect increased field activity to support growing test report volumes.

Stock-based compensation expense included in sales and marketing expense was $3.5 million for the three months ended March 31, 2026, compared to $4.0 million for the three months ended March 31, 2025.

General and administrative expenses increased by $2.1 million, or 9.4%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

The increase is primarily due to higher personnel costs, higher information technology-related costs, and higher travel costs partially offset by a decrease in professional fees.

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.

Stock-based compensation expense included in general and administrative expense was $3.6 million for the three months ended March 31, 2026, compared to $3.8 million for the three months ended March 31, 2025.

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.

Amortization decreased by approximately $26.1 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, 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.

The decrease is partially offset by amortization of the developed technology intangible asset recognized in association with the Esopredict test following our acquisition of Previse in May 2025.

Net Gains (Losses) on Equity Securities

Net gains (losses) on equity securities increased by $3.4 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

The increase was primarily driven by unrealized gains on equity securities, including our investment in SciBase, partially offset by unrealized and realized losses on other equity securities.

Other loss increased by $0.4 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025 , primarily due to unrealized foreign currency losses on foreign currency-denominated assets.

There were no comparable losses in the prior-year period.

Income Tax Expense (Benefit)

Income tax expense was $0.1 million for the three months ended March 31, 2026 and primarily consisted of income taxes related to federal and state jurisdictions in which we conduct business.

Our income tax benefit was $0.4 million for the three months ended March 31, 2025 , primarily driven by the revision of the estimated useful life of an intangible asset and our net operating loss position during the 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.

The following table indicates the amount of stock-based compensation expense (non-cash) included in the condensed consolidated statements of operations (in thousands):

Three Months Ended

2026 2025 Change

Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,257 $ 1,456 $ (199)

Research and development 1,443 1,895 (452)

Selling, general and administrative 7,076 7,828 (752)

Total stock-based compensation expense $ 9,776 $ 11,179 $ (1,403)

Stock-based compensation expense, which is allocated among cost of sales, R&D expense and SG&A expense, totaled $9.8 million for the three months ended March 31, 2026, compared to $11.2 million for the three months ended March 31, 2025.

The decrease was primarily attributable to higher fair value awards granted in prior periods having substantially vested, resulting in a lower mix of higher fair value awards in the current period.

As of September 30, 2025, we had 823 employees compared to 710 as of September 30, 2024.

As of March 31, 2026, we had 942 employees compared to 784 as of March 31, 2025.

As of March 31, 2026, the total unrecognized stock-based compensation cost related to outstanding awards was $94.5 million, which is expected to be recognized over a weighted-average period of 2.8 years.

Liquidity and Capital Resources

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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.

As of March 31, 2026 and December 31, 2025, we had marketable investment securities of $197.9 million and $182.8 million, respectively.

Additionally, as of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $63.8 million and $116.7 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.

The line of credit under the 2024 LSA expired on September 30, 2025 and is no longer available as a source of liquidity.

No draws were made on the line of credit.

Our liquidity has been primarily derived from the revenue generated from the sale of our products.

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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.

In February 2024, we purchased a plot of land in Friendswood, Texas and soon thereafter began development of the land and construction of a commercial office building which now serves as our corporate headquarters.

Over the duration of this project, we incurred significant capital expenditures through payments to the developer under a percentage-of-completion basis.

We completed the portions of the building that serves as our headquarters in February 2026, at which time we began occupying the building.

During the three months ended March 31, 2026 and 2025, we incurred capital expenditures of $2.7 million and $5.1 million, respectively, related to this development project.

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.

For the year ended December 31, 2025, we recognized a net loss of $24.2 million, and generated positive operating cash flow of $64.3 million, however, we may be unable to sustain profitability and positive cash flows in future periods.

Medicare coverage for our DecisionDx-SCC test was discontinued in April 2025, which reduced revenues and cash inflows from this test during 2025.

We expect this impact to continue unless our reconsideration requests related to both the MolDX and Novitas LCDs are 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 expect to continue to incur 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.

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Term debt $ 10,200 $ 10,200

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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 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 which expired undrawn on 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.

We have the right to prepay the 2024 LSA in whole.

Amounts repaid may not be reborrowed.

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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.

As of March 31, 2026, 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.

The 2024 Term Loan was interest-only from the Closing Date through November 30, 2025, however, on August 26, 2025, we elected to exercise our option 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.

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

As of September 30, 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.

As of March 31, 2026, no payment on principal has been made and the weighted-average effective interest rate for all outstanding debt under the 2024 Term Loan was 7.69%.

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.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of March 31, 2026 totaled approximately $39.2 million, of which $1.9 million is payable through the remainder of 2026 and $37.3 million is payable through early 2037.

The leases expire on various dates through 2037 and provide certain options to renew for additional periods.

On March 19, 2026, we entered into a new lease agreement with an initial term of approximately 11 years for laboratory and office space located in Pittsburgh, Pennsylvania.

As of March 31, 2026, the lease had not yet commenced.

Upon commencement, we expect the leases to increase our undiscounted future minimum payment obligations by a total of approximately $7.7 million.

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.

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,

Net cash provided by operating activities $ 37,416 $ 40,501

Three Months Ended

Net cash used in operating activities $ (22,129) $ (6,036)

Net cash used in investing activities (25,803) (22,431)

Net cash (used in) provided by financing activities (2,371) 11,524

Net cash used in financing activities (5,033) (1,553)

Net change in cash and cash equivalents (52,965) (30,020)

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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.

Net cash used in operating activities was $22.1 million for the three months ended March 31, 2026.

The net loss of $14.5 million includes non-cash charges of stock-based compensation expense of $9.8 million, depreciation and amortization of $3.9 million, offset by net gains on equity securities of $2.0 million.

Cash used as a result of changes in operating assets and liabilities was $19.4 million, primarily due to decreases in accrued compensation of $19.2 million, increases in prepaid expenses and other current assets of $6.7 million, offset by increases in accounts payable of $3.2 million, increases in other accrued and current liabilities of $2.8 million and a decrease in accounts receivable of $1.1 million.

Net cash used in operating activities was $6.0 million for the three months ended March 31, 2025.

The net loss of $25.8 million includes non-cash charges of depreciation and amortization of $29.8 million, stock-based compensation expense of $11.2 million, net losses on equity securities of $1.4 million and accretion of discounts on marketable investment securities of $1.4 million.

Cash used as a result of changes in operating assets and liabilities was $20.4 million, primarily due to decreases in accrued compensation of $14.7 million, increases in accounts receivable of $5.2 million, increases in prepaid expenses and other current assets of $3.4 million, partially offset by decreases in inventory of $1.3 million and increases in other accrued and current liabilities of $1.1 million.

The $16.1 million increase in net cash used in operating activities for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to increases in operating expenditures and the timing of working capital changes, including higher payments of annual bonuses and employee benefits.

Cash used during the three months ended March 31, 2026 included $28.8 million of such payments, compared to $22.5 million in the prior-year period, and these payments are not expected to recur in the remainder of 2026.

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.

Net cash used in investing activities was $25.8 million for the three months ended March 31, 2026 and consisted primarily of purchases of marketable investment securities of $55.1 million, purchases of property and equipment of $12.5 million, partially offset by $39.1 million of proceeds from maturities of marketable investment securities, and $2.7 million of proceeds from the sale of equity securities.

Net cash used in investing activities was $22.4 million for the three months ended March 31, 2025 and consisted primarily of purchases of marketable investment securities of $48.4 million, purchases of debt securities classified as held-to-maturity of $5.6 million and purchases of property and equipment of $4.7 million, partially offset by $36.3 million of proceeds from maturities of marketable investment securities.

The $3.4 million increase in cash used in investing activities for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to $7.7 million of higher purchases of property and equipment and $6.7 million of higher purchases of marketable investment securities, partially offset by no purchases of debt securities classified as held-to-maturity, higher proceeds from maturities of marketable investment securities of $2.8 million, and proceeds from the sale of equity securities of $2.7 million.

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.

Net cash used in financing activities was $5.0 million for the three months ended March 31, 2026, and consisted primarily of $6.6 million of payments for employee taxes related to the vesting of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”), partially offset by $1.3 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”).

Net cash used in financing activities was $1.6 million for the three months ended March 31, 2025, and consisted primarily of $2.5 million of payments for employee taxes attributable to the vesting of RSUs, partially offset by the $1.0 million of proceeds from contributions to our ESPP.

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.

During the three months ended March 31, 2026, 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 2025 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis