What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-22 · 105 added, 84 removed, 388 unchanged (33% of the section changed)

18 unchanged sentences

In addition, in March 2023, we submitted a premarket approval application, or PMA, for our Shield blood test to the FDA.

The FDA’s Molecular and Clinical Genetics Panel of the Medical Devices Advisory Committee intends to review the PMA.

We also expect to expand into lung and multi-cancer screening with our investigational, next-generation Shield assay.

We currently perform our tests in our laboratories located in Redwood City, California, and San Diego, California.

In July 2024, we received FDA approval of our Shield blood test for colorectal cancer screening in adults age 45 and older who are at average risk for the disease, and in August 2024, our Shield blood test became commercially available in the U.S.

as the first blood test approved by the FDA for primary colorectal cancer screening, meaning healthcare providers can offer Shield in a manner similar to all other non-invasive methods recommended in screening guidelines.

Shield is also the first blood test for colorectal cancer screening that meets coverage requirements by Medicare.

We also expect to expand into lung cancer screening and multi-cancer detection with our Shield platform.

We currently perform clinical, research use only, and investigation use only tests in our laboratory located in Redwood City, California.

Our Redwood City laboratory is certified pursuant to the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, permitted by the New York State Department of Health, or NYSDOH, and licensed in California and four other states.

Our San Diego laboratory is CAP-accredited, CLIA-certified, and licensed in California.

In addition, our Palo Alto, California laboratory is currently operated as a center for our research and technology development.

We have also received CAP accreditation and In Vitro Diagnostic, or IVD, sample processing approval from Japan's Ministry of Health, Labour and Welfare, or the MHLW, for our laboratory in Japan.

We also perform research use only tests in our laboratory located in San Diego, California.

In addition, our Redwood City, San Diego and Palo Alto, California laboratories are currently operated as centers for our research and technology development.

We generated total revenue of $739.0 million, $563.9 million and $449.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We also incurred net losses of $436.4 million, $479.4 million and $654.6 million in the years ended December 31, 2024, 2023 and 2022, respectively.

We have funded our operations to date principally from the sale of our stock, convertible senior notes, and revenue from our precision oncology testing and development services and other.

We have funded our operations to date

principally from the sale of our stock, convertible senior notes, and revenue from our precision oncology testing and development services and other.

In May 2023, we completed a follow-on underwritten public offering, in which we issued and sold 14,375,000 shares of our common stock at a price of $28.00 per share, and received net proceeds of $381.4 million after deducting underwriting discounts and commissions and other offering costs of $21.1 million.

In December 2023, we completed a registered direct offering with an investment management firm, in which we issued and sold 3,387,446 shares of our common stock at a price of $26.77 per share, and received net proceeds of $90.6 million.

As of December 31, 2023, we had cash, cash equivalents and marketable debt securities of approximately $1.2 billion.

As of December 31, 2024, we had cash, cash equivalents, restricted cash and marketable debt securities of approximately $944.2 million.

Factors affecting our performance

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Customer mix for our tests has the potential to significantly affect our results of operations, as the average selling price for biopharmaceutical sample testing is currently higher than our average reimbursement for clinical tests because we are not a contracted provider for, or our tests are not covered by clinical patients’ insurance for, the majority of the tests that we perform for patients on behalf of clinicians.

Revenue from clinical tests for patients covered by Medicare represented approximately 43%, 45% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2023, 2022 and 2021, respectively.

Precision oncology revenue from clinical tests for patients covered and administered by Medicare represented approximately 39%, 43% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2024, 2023 and 2022, respectively.

• Payer coverage and reimbursement .

14 unchanged sentences

If their policies were to change in the future to cover additional cancer indications, we anticipate that our total reimbursement would increase.

In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx with an effective date in April 2021.

Additionally, based on this new PLA code, we applied to the Centers for Medicare and Medicaid Services, or CMS, for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT.

In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.

Effective January 1, 2022, Medicare started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023.

In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, has conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.

In March 2021, the Centers for Medicare and Medicaid Services, or CMS, approved advanced diagnostic laboratory test, or ADLT, status to our Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.

Effective January 1, 2022, Medicare started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers.

In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.

The policy covers our Guardant360 TissueNext test for Medicare fee-for-service patients with advanced solid tumor cancers.

In July 2022, Palmetto GBA conveyed coverage for our Guardant Reveal test for fee-for-service Medicare patients in the United States with stage II or III colorectal cancer whose testing is initiated within three months following curative intent therapy, with an effective date of December 2021.

2022, Palmetto GBA conveyed coverage for our Guardant Reveal test for fee-for-service Medicare patients in the United States with stage II or III colorectal cancer whose testing is initiated within three months following curative intent therapy, with an effective date of December 2021.

In April 2023, Palmetto GBA conveyed coverage for our Guardant360 Response test for fee-for-service Medicare patients in the U.S.

1 unchanged sentence

Effective January 1, 2024, Medicare has increased the reimbursement rate for our Guardant360 LDT test to the same rate as our Guardant360 CDx test.

In January 2025, Palmetto GBA granted coverage for our Guardant Reveal test to monitor disease recurrence in patients with colorectal cancer in the surveillance setting following curative intent therapy.

This represents an expansion from the prior Medicare coverage of our Guardant Reveal test for colorectal cancer in the early post-surgical setting only.

In August 2024, following the FDA approval, our Shield blood test met the coverage requirements by Medicare based on the criteria established in its National Coverage Determination for blood-based colorectal cancer screening tests.

The test is covered once every three years for eligible Medicare beneficiaries.

Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received differs from the revenue recorded.

18 unchanged sentences

Based on these study results, in March 2023, we submitted a PMA to the FDA for our Shield blood test.

The FDA’s Molecular and Clinical Genetics Panel of the Medical Devices Advisory Committee intends to review the PMA.

In addition, to evaluate the performance of our investigational, next-generation Shield assay in detecting lung cancer in high-risk individuals ages 50-80, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study.

Shield is also the first blood test for colorectal cancer screening that meets coverage requirements by Medicare.

To clinically validate the performance of our next-generation Shield blood test in lung cancer screening in high-risk individuals ages 50-80, in January 2022, we initiated a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study.

In addition, in January 2025, our Shield multi-cancer detection, or MCD, test was selected for the Vanguard study funded by the National Cancer Institute, part of the National Institutes of Health.

The Vanguard study is a four-year pilot study which will enroll up to 24,000 people to inform the design of a randomized controlled trial evaluating the use of MCD tests for cancer screening.

We have expended considerable resources, and expect to increase such expenditures over the next few years, to support our research and development programs with the goal of fueling further innovation.

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In June 2022, we purchased all of the shares held by SoftBank and its affiliates, and upon completion of the transaction, we obtained full control over operations of Guardant Health AMEA, Inc.

throughout the Asia, Middle East and Africa region.

In February 2022, we received CAP accreditation, and in October 2022, we received IVD sample processing approval from the MHLW for our laboratory in Japan.

In addition, in July 2023, the MHLW granted national reimbursement approval for our Guardant360 CDx test for patients with advanced or metastatic solid tumor cancers in Japan.

In July 2023, Japan's Ministry of Health, Labour and Welfare granted national reimbursement approval for our Guardant360 CDx test for patients with advanced or metastatic solid tumor cancers in Japan.

In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our digital sequencing platform became available at the VHIO testing facility in Spain.

In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, or Royal Marsden, a premier cancer center within the United Kingdom, or the UK, for patient care, research and teaching of all types of cancer, and in April 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Royal Marsden testing facility in the UK.

In September 2024, we signed a partnership agreement with the Agostino Gemelli University Polyclinic Foundation IRCCS, one of Italy’s largest and most renowned hospitals known for its advanced oncology services, including diagnostics, treatment, and research, to establish an in-house liquid biopsy testing service within its hospital system.

In June 2022, we signed a strategic partnership agreement with Adicon Holdings Limited, or Adicon, a leading independent clinical laboratory company based in China, and in December 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Adicon's testing facility, which offers our industry-leading comprehensive genomic profiling tests to biopharmaceutical companies to advance clinical research and the development of new cancer therapies in China.

21 unchanged sentences

We also submit claims to Medicare for reimbursement for our Guardant360 CDx, Guardant360 LDT, Guardant360 TissueNext, Guardant Reveal and Guardant360 Response clinical testing performed for qualifying patients.

Development services and other.

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In addition to companion diagnostic development and regulatory approval services, we also provide other development services, including clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM.

Other revenue includes amounts derived from licensing our technologies and kit fulfillment.

Other revenue includes amounts derived from licensing our technologies, kit fulfillment and delivery of our Shield screening tests.

Costs and operating expenses

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Cost of development services and other .

Cost of development services and other primarily includes costs incurred for the performance of development services requested by our biopharmaceutical customers, and costs associated with our partnership agreements and delivery of screening tests, which comprise of labor and material costs including any inventory write-downs.

Cost of development services and other primarily includes costs incurred for the performance of development services requested by our biopharmaceutical customers, and costs associated with our partnership agreements and delivery of Shield screening tests, which comprise of labor and material costs including any inventory write-downs.

For development of new products, costs incurred before technological feasibility has been achieved are reported as research and development expenses, while costs incurred thereafter are reported as cost of revenue.

18 unchanged sentences

Interest income

Interest income consists of interest earned on our cash, cash equivalents and marketable debt securities.

Interest income consists of interest earned on our cash, cash equivalents, restricted cash and marketable debt securities.

Interest expense

1 unchanged sentence

Other income (expense), net

Other income (expense), net consists of foreign currency exchange gains and losses, fair value adjustments of marketable equity securities, and impairment of non-marketable equity securities and other related assets.

Other income (expense), net consists of foreign currency exchange gains and losses, unrealized and realized gains and losses of marketable equity securities, and impairment of non-marketable equity securities and other related assets.

We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

25 unchanged sentences

Cost of development services and other (1)

29,218 21,524

Research and development expense (1)

12 unchanged sentences

Other income (expense), net (42,605) 53,174

Fair value adjustments of noncontrolling interest liability — (99,785)

Loss before provision for income taxes

12 unchanged sentences

$ 140,411 $ 90,759

In November 2020, we granted restricted stock units with certain performance metrics, or PSUs, consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met.

As of December 31, 2023, these PSUs had a grant-date fair value of approximately $25.7 million, net of forfeitures, however no compensation expense for these PSUs has been recorded to-date since the achievement of the performance metrics did not meet the criteria for accrual as of December 31, 2023.

At each reporting date, we will continue to assess the likelihood of the performance criteria being met and will record a cumulative catch-up adjustment should the achievement of the performance metrics be determined to be probable.

For example, had the achievement of the performance metrics been determined to be probable as of December 31, 2023, we would have recorded a total charge of $18.1 million, of which $1.7 million would have been recorded to cost of development services and other, and $6.8 million, $5.8 million and $3.8 million would have been recorded as components of research and development expense, sales and marketing expense, and general and administrative expense, respectively, in the consolidated statements of operations for the year ended December 31, 2023.

In addition, any of these PSUs that remain unvested at the end of the performance period will be forfeited.

In November 2020 and May 2021, we granted restricted stock units with certain performance metrics, or PSUs, consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met, with a grant date fair value of $113.40 per share and $148.19 per share, respectively.

Before 2024, no compensation expense for these PSUs had been recorded since the achievement of the performance metrics did not meet the criteria for accrual.

In 2024, the performance metrics of these PSUs were considered to be achieved;

as such we recorded $24.8 million in stock-based compensation expense related to these PSUs, based on 219,161 shares granted with fair values of $113.40 per share and $148.19 per share, of which $2.4 million was recorded to cost of development services and other, and $11.8 million, $6.5 million and $4.1 million was recorded as components of research and development expense, sales and marketing expense, and general and administrative expense, respectively.

Comparison of the Years Ended December 31, 2024 and 2023

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Precision oncology revenue from tests for clinical customers was $542.8 million for the year ended December 31, 2024, up 34% from $403.9 million for the year ended December 31, 2023.

This increase in clinical testing revenue was driven primarily by an increase in sample volume.

This increase in clinical testing revenue was driven primarily by an increase in sample volume and an increase in reimbursement for our tests.

Total tests for clinical customers increased to approximately 206,700 for the year ended December 31, 2024, from approximately 172,900 for the year ended December 31, 2023.

The increase in reimbursement for our tests for the year ended December 31, 2024 was primarily attributable to an increase in Medicare reimbursement for our Guardant360 LDT test to $5,000, effective January 1, 2024;

and increases in Medicare Advantage and commercial payer reimbursement.

Precision oncology revenue from tests for biopharmaceutical customers was $145.1 million for the year ended December 31, 2024, up 31% from $110.4 million for the year ended December 31, 2023.

1 unchanged sentence

Total tests for biopharmaceutical customers increased to approximately 40,500 for the year ended December 31, 2024, from approximately 29,900 for the year ended December 31, 2023.

Development services and other revenue decreased to $49.7 million for the year ended December 31, 2023, from $57.5 million for the year ended December 31, 2022, a decrease of $7.8 million, or 14%.

This decrease in development services and other revenue was primarily due to revenue decrease of $6.9 million associated with our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers, and a reduction in royalty revenue of $3.8 million, partially offset by revenue increase from our data services of $2.4 million and partnership agreements of $1.4 million during the year ended December 31, 2023.

Development services and other revenue increased to $51.1 million for the year ended December 31, 2024, from $49.7 million for the year ended December 31, 2023, an increase of $1.4 million, or 3%.

This increase in development services and other revenue was primarily due to an increase of $9.1 million associated with our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers, partially offset by a decrease of $7.2 million associated with our partnership agreements, and a reduction of $3.2 million in royalty revenue.

The increase in other revenue was also attributable to $4.1 million derived from the delivery of approximately 6,400 of our Shield screening tests for the three months ended December 31, 2024, following the FDA approval.

Cost of Revenue

8 unchanged sentences

Cost of precision oncology testing was $260.6 million for the year ended December 31, 2024, compared to $205.5 million for the year ended December 31, 2023, an increase of $55.1 million, or 27%.

This increase in cost of precision oncology testing was primarily attributable to an increase in sample volumes, resulting in a $33.0 million increase in material costs, a $19.9 million increase in production labor and overhead costs, and a $4.0 million increase in other costs, including costs related to collection kits, freight, professional services and reporting of test results for physicians.

Cost of development services and other was $21.5 million for the year ended December 31, 2023, compared to $8.1 million for the year ended December 31, 2022, an increase of $13.4 million.

This increase in cost of development services and other was primarily due to costs associated with providing screening testing services which increased to $13.5 million for the year ended December 31, 2023, from $2.0 million for the year ended December 31, 2022, an increase of $11.5 million.

The increase was also related to cost increase of $4.5 million associated with our partnership agreements, partially offset by cost decrease of $2.7 million associated with our companion diagnostics collaboration projects with biopharmaceutical customers during the year ended December 31, 2023.

This increase in cost of precision oncology testing was primarily attributable to an increase in sample volumes and an increase in average cost per sample primarily due to changes in product mix, resulting in a $44.7 million increase in material costs, a $4.7 million increase in production labor and overhead costs, and a $4.6 million increase in other costs, including costs related to collection kits, freight and professional services.

Cost of development services and other was $29.2 million for the year ended December 31, 2024, compared to $21.5 million for the year ended December 31, 2023, an increase of $7.7 million, or 36%.

This increase in cost of development services and other was primarily due to an increase of $4.3 million associated with our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers, and an increase of $3.3 million associated with providing Shield screening tests during the year ended December 31, 2024.

Operating Expenses

5 unchanged sentences

Research and development expenses were $347.8 million for the year ended December 31, 2024, compared to $367.2 million for the year ended December 31, 2023, a decrease of $19.4 million, or 5%.

This decrease was primarily due to a decrease of $11.2 million in material costs, a decrease of $5.6 million in information technology infrastructure costs, and a decrease of $3.1 million in post-acquisition contingent consideration, partially offset by an increase of $8.1 million in stock-based compensation, an increase of $3.3 million in personnel costs, and an increase of $2.7 million in depreciation and amortization.

This decrease was primarily due to a decrease of $31.8 million in outside services costs primarily driven by a reduction in the ECLIPSE clinical study costs as the study nears completion, a decrease of $9.7 million in material costs, and a decrease of $3.7 million in information technology infrastructure costs;

partially offset by an increase of $15.9 million in stock-based compensation, primarily related to the PSUs of $11.8 million discussed in the Results of operations section above;

and an increase of $10.0 million in other personnel costs.

Sales and marketing expense

3 unchanged sentences

$ 364,935 $ 295,227 $ 69,708 24 %

Selling and marketing expenses were $295.2 million for the year ended December 31, 2023, compared to $299.8 million for the year ended December 31, 2022, a decrease of $4.6 million, or 2%.

This decrease was primarily due to a decrease of $2.1 million in personnel costs, and a decrease of $1.8 million in information technology infrastructure costs.

Sales and marketing expenses were $364.9 million for the year ended December 31, 2024, compared to $295.2 million for the year ended December 31, 2023, an increase of $69.7 million, or 24%.

This increase was related to commercial team expansion and marketing activities to support existing products and the Shield product launch, primarily resulting in an increase of $34.1 million in other personnel costs;

an increase of $14.9 million in marketing activity related costs;

an increase of $11.7 million in stock-based compensation, including $6.5 million related to the PSUs discussed in the Result of operations section above;

and an increase of $10.5 million in information technology infrastructure costs.

General and administrative expense

3 unchanged sentences

$ 180,123 $ 155,800 $ 24,323 16 %

General and administrative expenses were $155.8 million for the year ended December 31, 2023, compared to $164.0 million for the year ended December 31, 2022, a decrease of $8.2 million, or 5%.

This decrease was primarily due to a decrease of $12.3 million in stock-based compensation, a decrease of $4.2 million in acquisition-related contingent consideration, a decrease of $2.7 million in information technology infrastructure costs, and a decrease of $1.9 million in office and administrative costs, partially offset by an increase of $7.5 million in severance costs related to a workforce reduction incurred in the first quarter of 2023, and an increase of $5.0 million in personnel costs.

General and administrative expenses were $180.1 million for the year ended December 31, 2024, compared to $155.8 million for the year ended December 31, 2023, an increase of $24.3 million, or 16%.

This increase was primarily due to an increase of $19.2 million in stock-based compensation, including $4.1 million related to the PSUs discussed in the Results of operation section above;

and an increase of $12.4 million in other personnel costs;

partially offset by a decrease of $7.5 million in severance costs related to a workforce reduction in the first quarter of 2023, and a decrease of $3.1 million in legal expenses.

Other operating expense

3 unchanged sentences

$ — $ 83,400 $ (83,400) (100) %

* Not applicable

Other operating expense for the year ended December 31, 2023 was related to a legal accrual in connection with a jury verdict related to TwinStrand Biosciences, Inc.

6 unchanged sentences

$ 53,691 $ 35,365 $ 18,326 52 %

Interest income was $35.4 million for the year ended December 31, 2023, compared to $6.1 million for the year ended December 31, 2022, an increase of $29.3 million, or 483%, primarily due to higher interest rates, and increase in cash and cash equivalents and marketable debt securities balances.

Interest income was $53.7 million for the year ended December 31, 2024, compared to $35.4 million for the year ended December 31, 2023, an increase of $18.3 million, or 52%, primarily attributable to higher rates of return on our investments.

Interest expense

9 unchanged sentences

$ (42,605) $ 53,174 $ (95,779) (180) %

* Not meaningful

Other income (expense), net was a $53.2 million income for the year ended December 31, 2023, primarily attributable to $79.7 million of unrealized gains recorded for our marketable equity security investment in Lunit, Inc., partially offset by $29.1 million of impairment recorded for our non-marketable equity security investments and other related assets during the period.

Other income (expense), net was a $12.8 million expense for the year ended December 31, 2022, primarily due to $7.8 million of unrealized losses recorded for our marketable equity security investment in Lunit, Inc., and $5.3 million of impairment recorded for our non-marketable equity security investments and other related assets during the period.

Fair value adjustments of noncontrolling interest liability

Year Ended December 31, Change

(in thousands)

Fair value adjustments of noncontrolling interest liability

$ — $ (99,785) $ 99,785 *

* Not meaningful

Fair value adjustments of noncontrolling interest liability for the year ended December 31, 2022 was made as a result of the Joint Venture Acquisition completed in June 2022.

Other income (expense), net was a $42.6 million expense for the year ended December 31, 2024, primarily attributable to $44.4 million of net unrealized and realized losses recorded for our marketable equity security investment in Lunit, Inc.

during the period.

Other income (expense), net was a $53.2 million income for the year ended December 31, 2023, primarily due to $79.7 million of unrealized gains recorded for our marketable equity security investment in Lunit, Inc., partially offset by $29.1 million of impairment recorded for our non-marketable equity security investments and other related assets during the period.

Provision for income taxes

9 unchanged sentences

We have funded our operations to date principally from the sale of stock, convertible debt and through revenue from precision oncology testing and development services and other.

As of December 31, 2023, we had cash and cash equivalents of $1.1 billion and marketable debt securities of $35.1 million.

As of December 31, 2024, we had cash, cash equivalents, restricted cash and marketable debt securities of $944.2 million.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to provide liquidity while ensuring capital preservation.

Additionally, we have investments held in marketable debt securities consisting primarily of United States treasury securities that can be immediately liquid.

Based on our current business plan, we believe our current cash, cash equivalents and marketable debt securities and anticipated cash flows from operations, will be sufficient to meet our anticipated cash requirements for more than 12 months from the date of this Annual Report on Form 10-K.

Based on our current business plan, we believe our current cash, cash equivalents, restricted cash and marketable debt securities and anticipated cash flows from operations, will be sufficient to meet our anticipated cash requirements for more than 12 months from the date of this Annual Report on Form 10-K.

We may consider raising additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons.

1 unchanged sentence

Any increase in accounts receivable and inventory may not be completely offset by increases in accounts payable and accrued liabilities, which could impact our working capital balances.

If our available cash, cash equivalents and marketable debt securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements because of lower demand for our products as a result of lower than currently expected rates of reimbursement from our customers or other risks described in this Annual Report on Form 10-K, we may seek to sell additional common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing.

If our available cash, cash equivalents, restricted cash and marketable debt securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements because of lower demand for our products as a result of lower than currently expected rates of reimbursement from our customers or other risks described in this Annual Report on Form 10-K, we may seek to sell additional common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing.

The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock.

2 unchanged sentences

Additional capital may not be available to us on reasonable terms, or at all.

At-The-Market Offering Program

In August 2024, we entered into an Open Market Sales Agreement, or the Sales Agreement, with Jefferies LLC, or the Agent, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having aggregate gross proceeds of up to $400.0 million through the Agent, subject to the terms and conditions of the Sales Agreement.

During the year ended December 31, 2024, no shares of our common stock were sold under the Sales Agreement.

Convertible Notes Exchange

In February 2025, we entered into privately negotiated exchange agreements with certain holders of our convertible senior notes due 2027.

See Note 17, Subsequent Events , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information related to this transaction.

The transaction will be accounted for under FASB ASC Topic 470, Debt , and relevant accounting guidance, based on which and due to the nature of the transaction, a gain is currently expected to be recorded for the three months ended March 31, 2025.

The following table summarizes our cash flows for the periods presented:

2 unchanged sentences

Net cash used in operating activities $ (239,858) $ (324,975)

Net cash provided by investing activities 840,250 149,816

Net cash provided by (used in) financing activities 477,375 (189,093)

Net cash (used in) provided by investing activities

(261,308) 840,250

Net cash (used in) provided by financing activities

(996) 477,375

Operating activities

Cash used in operating activities during the year ended December 31, 2023 was $325.0 million, which resulted from a net loss of $479.4 million, partially offset by non-cash charges of $100.6 million and cash effect of changes in our operating assets and liabilities of $53.8 million.

Non-cash charges primarily consisted of $90.8 million of stock-based compensation, $42.9 million of depreciation and amortization, $29.7 million of operating lease costs, and $29.1 million of impairment on non-marketable equity security investments and other related assets, partially offset by $79.7 million of unrealized gains on marketable equity security investment in Lunit, inc., and $13.6 million of amortization of discount on marketable debt securities.

The cash effect of changes in our operating assets and liabilities was primarily the result of a $88.6 million increase in accounts payable and accrued liabilities, primarily due to a legal accrual of $83.4 million in connection with a jury verdict entered in favor of TwinStrand Biosciences, Inc.

and the University of Washington in November 2023, and a $8.4 million decrease in accounts receivable, net, partially offset by a $31.5 million payment of operating lease liabilities net of receipt of tenant improvement allowance, a $10.4 million increase in inventory, net due to forecasted higher testing volumes, and a $4.3 million increase in prepaid expenses and other current assets, net.

Cash used in operating activities during the year ended December 31, 2022 was $309.5 million, which resulted from a net loss of $654.6 million, partially offset by non-cash charges of $283.6 million and cash effect of changes in our operating assets and liabilities of $61.6 million.

Non-cash charges primarily consisted of $99.8 million of fair value adjustments of noncontrolling interest liability in connection with the Joint Venture Acquisition, $94.7 million of stock-based compensation, $36.0 million of depreciation and amortization, $28.6 million of operating lease costs, $7.8 million of unrealized losses on marketable equity security investment in Lunit, inc., $5.3 million of impairment on non-marketable equity security investments and other related assets, $4.6 million of amortization of premium on marketable debt securities, and $4.3 million of acquisition-related contingent consideration.

The cash effect of changes in our operating assets and liabilities was primarily the result of a $60.3 million increase in accounts payable and accrued liabilities, primarily due to increase in purchases of goods and services, increased personnel and increase in accrued and other liabilities, a $20.4 million decrease in prepaid expenses and other current assets, net primarily driven by a $25.0 million one-time payment pursuant to a settlement and license agreement entered into in December 2021, a $11.7 million decrease in other assets, net and a $9.9 million increase in deferred revenue primarily due to upfront payments from international laboratory partners, partially offset by a $20.9 million increase in inventory, net due to forecasted higher testing volumes, and increased inventory level to offset potential disruption in supply chain, and a $20.2 million payment of operating lease liabilities net of receipt of tenant improvement allowance.

Cash used in operating activities during the year ended December 31, 2024 was $239.9 million, which resulted from a net loss of $436.4 million and changes in our operating assets and liabilities of $60.9 million, partially offset by non-cash charges of $257.4 million.

Non-cash charges primarily consisted of $140.4 million of stock-based compensation, $44.4 million of net unrealized and realized losses on marketable equity security investment in Lunit, inc., $42.4 million of depreciation and amortization, and $31.1 million of operating lease costs, partially offset by $6.8 million of amortization of discount on marketable debt securities.

The changes in our operating assets and liabilities was primarily the result of a $36.1 million payment of operating lease liabilities net of receipt of tenant improvement allowance, a $21.4 million increase in accounts receivable, net, a $9.1 million increase in inventory, net, a $7.7 million increase in prepaid expenses and other current assets, net, and a $2.8 million decrease in accounts payable and accrued liabilities;

partially offset by a $18.7 million increase in deferred revenue.

Cash used in operating activities during the year ended December 31, 2023 was $325.0 million, which resulted from a net loss of $479.4 million, partially offset by non-cash charges of $100.6 million and changes in our operating assets and liabilities of $53.8 million.

partially offset by $79.7 million of unrealized gains on marketable equity security investment in Lunit, inc., and $13.6 million of amortization of discount on marketable debt securities.

The changes in our operating assets and liabilities was primarily the result of a legal accrual of $83.4 million in connection with a jury verdict entered in favor of TwinStrand Biosciences, Inc.

and the University of Washington in November 2023, a $8.4 million decrease in accounts receivable, net, and a $5.2 million increase in accounts payable and accrued liabilities;

partially offset by a $31.5 million payment of operating lease liabilities net of receipt of tenant improvement allowance, a $10.4 million increase in inventory, net due to forecasted higher testing volumes, and a $4.3 million increase in prepaid expenses and other current assets, net.

Investing activities

Cash provided by investing activities during the year ended December 31, 2023 was $840.3 million, which resulted primarily from maturities of marketable debt securities of $1.5 billion, partially offset by purchases of marketable debt securities of $629.9 million, purchases of property and equipment of $20.5 million, and purchases of non-marketable equity security investments and other related assets of $5.6 million.

Cash provided by investing activities during the year ended December 31, 2022 was $149.8 million, which resulted primarily from maturities of marketable debt securities of $555.0 million, partially offset by purchases of marketable debt securities of $303.8 million, purchases of property and equipment of $77.5 million, and purchases of non-marketable equity security investments and other related assets of $24.0 million.

Cash used in investing activities during the year ended December 31, 2024 was $261.3 million, which resulted primarily from purchases of marketable debt securities of $307.3 million, purchases of property and equipment of $35.1 million, and purchases of non-marketable equity security investments of $7.5 million;

partially offset by sales of marketable equity security investment in Lunit, Inc.

of $53.6 million and maturities of marketable debt securities of $35.0 million.

Cash provided by investing activities during the year ended December 31, 2023 was $840.3 million, which resulted primarily from maturities of marketable debt securities of $1.5 billion;

partially offset by purchases of marketable debt securities of $629.9 million, purchases of property and equipment of $20.5 million, and purchases of non-marketable equity security investments and other related assets of $5.6 million.

Financing activities

Cash provided by financing activities during the year ended December 31, 2023 was $477.4 million, which was primarily attributable to proceeds of $493.1 million from equity offerings, and proceeds of $10.2 million from issuances of common stock under our employee stock purchase plan, partially offset by payment of equity offering costs of $21.1 million, and taxes paid related to net share settlement of restricted stock units of $11.2 million.

Cash used in financing activities during the year ended December 31, 2022 was $189.1 million, which was primarily attributable to consideration payment for the Joint Venture Acquisition of $177.8 million, payment for the tender offer in connection with the Joint Venture Acquisition and acquisition related costs of $14.2 million, and taxes paid related to net share settlement of restricted stock units of $7.9 million, partially offset by proceeds of $9.3 million from issuances of common stock under our employee stock purchase plan.

Cash used in financing activities during the year ended December 31, 2024 was $1.0 million, which was primarily attributable to employee taxes paid related to settlement of restricted stock units of $15.7 million, partially offset by proceeds from issuances of common stock under our employee stock purchase plan of $11.7 million and proceeds from exercise of stock options of $3.1 million.

Cash provided by financing activities during the year ended December 31, 2023 was $477.4 million, which was primarily attributable to proceeds from equity offerings of $493.1 million, and proceeds from issuances of common stock under our employee stock purchase plan of $10.2 million;

partially offset by payment of equity offering costs of $21.1 million, and employee taxes paid related to settlement of restricted stock units of $11.2 million.

Critical accounting policies and estimates

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We derive revenue from the provision of precision oncology testing services, as well as from development services and other.

Precision oncology testing revenue includes amount derived from the delivery of our precision oncology tests, including those tests delivered by labs operated by our strategic partners.

Precision oncology testing revenue includes amounts derived from the delivery of our precision oncology tests, including those tests delivered by labs operated by our strategic partners.

Development services include companion diagnostic development and regulatory approval, clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM.

Other revenue includes amounts derived from licensing our technologies, and kit fulfillment.

Other revenue includes amounts derived from licensing our technologies, kit fulfillment, and delivery of our Shield screening tests.

We currently receive payments from third-party commercial and governmental payers, certain hospitals and oncology centers and individual patients, as well as biopharmaceutical companies, research institutes, international laboratory partners and distributors.

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Both the estimate and any subsequent revision contain uncertainty and require the use of significant judgment in the estimation of the variable consideration and application of the constraint for such variable consideration.

We analyze actual cash collections over the expected reimbursement period and compare it with the estimated variable consideration for each portfolio and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal.

Revenue from sales of precision oncology tests to biopharmaceutical customers are based on a negotiated price per test or on the basis of an agreement to provide certain testing volume over a defined period.

We identify our promise to transfer a series of distinct tests to biopharmaceutical customers as a single performance obligation.

We identify our promise to transfer a number of distinct tests to biopharmaceutical customers as a single performance obligation.

Precision oncology tests to biopharmaceutical customers are generally billed at a fixed price for each test performed.

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In making this assessment, we consider our historical experience with similar milestones, the degree of complexity and uncertainty associated with each milestone, and whether achievement of the milestone is dependent on parties other than us.

The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved.

The constraint for variable consideration is applied to the transaction price such that it is probable a significant cumulative reversal of revenue will not occur when the uncertainty associated with the contingency is resolved.

Application of the constraint for variable consideration is assessed and updated at each reporting period as a revision to the estimated transaction price.

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Other revenue also includes kit fulfillment, which is recognized when such products are delivered.

In addition, other revenue includes amounts derived from delivery of our Shield screening tests.

Contracts with multiple performance obligations

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We first identify material promises, in contrast to immaterial promises or administrative tasks, under the contract, and then evaluate whether these promises are both capable of being distinct and distinct within the context of the contract.

In assessing whether a promised service is capable of being distinct, we consider whether the customer could benefit from the service either on its own or together with other resources that are readily available to the customer, including factors such as the research, development, and commercialization capabilities of a third party as well as the availability of the associated expertise in the general marketplace.

In assessing whether a promised service is distinct within the context of the contract, we consider whether we provide a significant integration of the services, whether the services significantly modify or customize one another, or whether the services are highly interdependent or interrelated.

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No stock-based compensation expense is recorded for PSUs, unless it is determined to be probable that the related performance metrics will be met.

In addition, a cumulative adjustment will be recorded in the period when the probability of achieving the related performance metrics is adjusted.

Any PSUs that remain unvested at the end of the performance period will be forfeited.

Forfeitures are accounted for as they occur.

We measure stock-based compensation expense for stock options granted to our employees, directors, and non-employee consultants on the date of grant based on the fair value of the awards and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards.

We measure stock-based compensation expense for stock options granted to our employees, directors, and non-employees on the date of grant based on the fair value of the awards and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards.

Compensation expense for stock options with performance metrics is calculated based upon expected achievement of the metrics specified in the grant.

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The Black-Scholes option-pricing model requires the use of assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine.

The assumptions used to calculate the fair value of our stock options, including the Joint Venture, were:

The assumptions used to calculate the fair value of our stock options, were:

Fair Value of Common Stock

The fair value of our common stock is determined by the closing price, on the date of grant, of our common stock, which is traded on the Nasdaq Global Select Market.

The grant date fair value of the Joint Venture's common stock was determined by the board of directors of the Joint Venture, using valuation methodologies which utilize certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability.

The methodologies used to estimate the enterprise value of the Joint Venture were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

Expected Term

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The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty.

The Joint Venture derived the expected volatility from the average historical volatility over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Joint Venture did not have any trading history for its common stock.

Risk-Free Interest Rate

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We do not anticipate paying any dividends in the foreseeable future and, therefore, use an expected dividend yield of zero.

The Joint Venture did not anticipate paying any dividends, therefore used an expected dividend yield of zero.

Black-Scholes Assumptions

The weighted-average assumptions used in our Black-Scholes option-pricing model, including the Joint Venture, were as follows for stock option granted to our employees, directors and non-employees for the periods presented:

The weighted-average assumptions used in our Black-Scholes option-pricing model were as follows for stock option granted to our employees, directors and non-employees for the periods presented:

Year Ended December 31,

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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-K

Item 7. Management’s Discussion and Analysis