Guardant Health, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Guardant Health, Inc. Index to Consolidated Financial Statements As of December 31, 2024 and 2023, and For the Years Ended December 31, 2024, 2023 and 2022 Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 93 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 95 Consolidated Balance Sheets 96 Consolidated Statements of Operations 97 Consolidated Statements of Comprehensive Loss 98 Consolidated Statements of Stockholders' Equity (Deficit) 99 Consolidated Statements of Cash Flows 100 Notes to Consolidated Financial Statements 101 92 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Guardant Health, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Guardant Health, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Precision Oncology Testing Revenue – Estimated Transaction Price for Clinical Customers — Refer to Note 2 to the consolidated financial statements Critical Audit Matter Description The Company recognizes revenue from the sale of precision oncology tests for clinical customers at the time results of the test are reported to physicians. Most precision oncology tests requested by clinical customers are sold without a written agreement; however, the Company determines an implied contract exists with its clinical customers. Except for certain limited contracted arrangements with insurance carriers and other institutions where the transaction price is fixed, a stated contract price does not exist and the transaction price for each implied contract with clinical customers represents variable consideration. The Company estimates the variable consideration under the portfolio approach and considers the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data. The estimated transaction price under the portfolio approach represents consideration the Company expects to receive based on historical payment data from third-party payers and patients, adjusted for known and forecasted changes in payment patterns and subject to a constraint such that revenue recognized is not expected to be reversed. 93 The Company analyzes its actual cash collections over the expected reimbursement period and compares 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. 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 identified management’s estimation of the transaction price for precision oncology tests for clinical customers as a critical audit matter due to the significant judgments required by management to estimate payer reimbursements. This required a high degree of auditor judgment and an increased extent of effort, including the involvement of more experienced engagement team members, when performing audit procedures to evaluate the estimated transaction prices for precision oncology tests. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to estimated transaction prices for precision oncology tests for clinical customers, included the following, among others: • We understood and tested the design, implementation, and operating effectiveness of controls over management’s determination of the assumptions used and the related review and approval of the estimated transaction prices. • We developed an independent expectation of the estimated transaction prices for precision oncology tests for clinical customers in developing an independent expectation of revenue and comparing the recorded amount to our expectation. • We tested the assumptions used in our independent expectation of the estimated transaction prices for precision oncology tests for clinical customer by: • Testing the historical cash receipts from payers used in the estimate of transaction prices, by making selections and agreeing the selected information to source documents. ▪ Testing the completeness and accuracy of the precision oncology tests for clinical customers reported to physicians used in our independent expectation, by making selections and agreeing the selected information to source documents. • We tested management’s ability to estimate transaction prices accurately by comparing recorded revenue to cash receipts received through December 2024. • We evaluated trends in estimated transaction prices and revenue compared to previous periods to identify evidence that is inconsistent with management’s assumptions regarding estimated transaction prices. /s/ Deloitte & Touche LLP San Jose, California February 20, 2025 We have served as the Company’s auditor since 2023. 94 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Guardant Health, Inc. Opinion on the Financial Statements We have audited the consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows of Guardant Health, Inc. (the Company) for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2015 to 2023. San Mateo, California February 23, 2023 except for Note 15, as to which the date is February 20, 2025 95 Guardant Health, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) As of December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 525,540 $ 1,133,537 Short-term marketable debt securities 314,438 35,097 Accounts receivable, net 110,253 88,783 Inventory, net 71,083 61,948 Prepaid expenses and other current assets, net 33,800 27,741 Total current assets 1,055,114 1,347,106 Restricted cash 104,215 150 Property and equipment, net 136,813 145,096 Right-of-use assets, net 142,265 157,616 Intangible assets, net 6,760 8,979 Goodwill 3,290 3,290 Other assets, net 37,152 124,184 Total Assets $ 1,485,609 $ 1,786,421 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 38,551 $ 51,741 Accrued compensation 83,219 72,736 Accrued expenses 68,345 63,475 Deferred revenue 35,468 17,965 Total current liabilities 225,583 205,917 Convertible senior notes, net 1,142,547 1,139,966 Long-term operating lease liabilities 164,292 185,848 Other long-term liabilities 92,834 96,006 Total Liabilities 1,625,256 1,627,737 Commitments and contingencies (Note 9) Stockholders’ equity (deficit): Preferred stock, par value of $ 0.00001 per share; 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2024 and 2023 — — Common stock, par value of $ 0.00001 per share; 350,000,000 shares authorized as of December 31, 2024 and 2023; 123,994,006 and 121,629,861 shares issued and outstanding as of December 31, 2024 and 2023, respectively 1 1 Additional paid-in capital 2,443,788 2,304,220 Accumulated other comprehensive loss ( 5,201 ) ( 3,675 ) Accumulated deficit ( 2,578,235 ) ( 2,141,862 ) Total Stockholders’ Equity (Deficit) ( 139,647 ) 158,684 Total Liabilities and Stockholders’ Equity (Deficit) $ 1,485,609 $ 1,786,421 The accompanying notes are an integral part of these consolidated financial statements. 96 Table of Contents Guardant Health, Inc. Consolidated Statements of Operations (in thousands, except per share data) Year Ended December 31, 2024 2023 2022 Revenue: Precision oncology testing $ 687,936 $ 514,249 $ 392,049 Development services and other 51,080 49,699 57,489 Total revenue 739,016 563,948 449,538 Costs and operating expenses: Cost of precision oncology testing 260,581 205,528 148,199 Cost of development services and other 29,218 21,524 8,126 Research and development expense 347,753 367,194 373,807 Sales and marketing expense 364,935 295,227 299,828 General and administrative expense 180,123 155,800 163,956 Other operating expense — 83,400 — Total costs and operating expenses 1,182,610 1,128,673 993,916 Loss from operations ( 443,594 ) ( 564,725 ) ( 544,378 ) Interest income 53,691 35,365 6,069 Interest expense ( 2,581 ) ( 2,578 ) ( 2,577 ) Other income (expense), net ( 42,605 ) 53,174 ( 12,778 ) Fair value adjustments of noncontrolling interest liability — — ( 99,785 ) Loss before provision for income taxes ( 435,089 ) ( 478,764 ) ( 653,449 ) Provision for income taxes 1,284 685 1,139 Net loss $ ( 436,373 ) $ ( 479,449 ) $ ( 654,588 ) Net loss per share, basic and diluted $ ( 3.56 ) $ ( 4.28 ) $ ( 6.41 ) Weighted-average shares used in computing net loss per share, basic and diluted 122,745 111,988 102,178 The accompanying notes are an integral part of these consolidated financial statements. 97 Table of Contents Guardant Health, Inc. Consolidated Statements of Comprehensive Loss (in thousands) Year Ended December 31, 2024 2023 2022 Net loss $ ( 436,373 ) $ ( 479,449 ) $ ( 654,588 ) Other comprehensive income (loss), net of tax impact: Unrealized gain (loss) on available-for-sale securities 244 16,758 ( 13,158 ) Foreign currency translation adjustments ( 1,770 ) ( 911 ) ( 1,600 ) Other comprehensive (loss) income ( 1,526 ) 15,847 ( 14,758 ) Comprehensive loss $ ( 437,899 ) $ ( 463,602 ) $ ( 669,346 ) The accompanying notes are an integral part of these consolidated financial statements. 98 Guardant Health, Inc. Consolidated Statements of Stockholders’ Equity (Deficit) (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Balance as of January 1, 2022 101,767,446 $ 1 $ 1,657,593 $ ( 4,764 ) $ ( 1,007,825 ) $ 645,005 Issuance of common stock upon exercise of stock options 228,311 — 2,625 — — 2,625 Vesting of restricted stock units 315,673 — — — — — Vesting of common stock exercised early — — 8 — — 8 Issuance of common stock under employee stock purchase plan 307,953 — 9,316 — — 9,316 Employee taxes paid related to settlement of restricted stock units — — ( 7,878 ) — — ( 7,878 ) Stock-based compensation — — 94,685 — — 94,685 Tender offer issued in connection with the Joint Venture Acquisition and acquisition related costs — — ( 14,235 ) — — ( 14,235 ) Other comprehensive loss — — — ( 14,758 ) — ( 14,758 ) Net loss — — — — ( 654,588 ) ( 654,588 ) Balance as of December 31, 2022 102,619,383 1 1,742,114 ( 19,522 ) ( 1,662,413 ) 60,180 Issuance of common stock upon follow-on offering, net of offering costs of $ 21,131 14,375,000 — 381,369 — — 381,369 Issuance of common stock upon registered direct offering 3,387,446 — 90,616 — — 90,616 Issuance of common stock upon exercise of stock options 51,124 — 405 — — 405 Vesting of restricted stock units 732,038 — — — — — Issuance of common stock under employee stock purchase plan 464,870 — 10,154 — — 10,154 Employee taxes paid related to settlement of restricted stock units — — ( 11,197 ) — — ( 11,197 ) Stock-based compensation — — 90,759 — — 90,759 Other comprehensive income — — — 15,847 — 15,847 Net loss — — — — ( 479,449 ) ( 479,449 ) Balance as of December 31, 2023 121,629,861 1 2,304,220 ( 3,675 ) ( 2,141,862 ) 158,684 Issuance of common stock upon exercise of stock options 609,495 — 3,119 — — 3,119 Vesting of restricted stock units 1,176,892 — — — — — Issuance of common stock under employee stock purchase plan 577,758 — 11,719 — — 11,719 Employee taxes paid related to settlement of restricted stock units — — ( 15,681 ) — — ( 15,681 ) Stock-based compensation — — 140,411 — — 140,411 Other comprehensive loss — — — ( 1,526 ) — ( 1,526 ) Net loss — — — — ( 436,373 ) ( 436,373 ) Balance as of December 31, 2024 123,994,006 $ 1 $ 2,443,788 $ ( 5,201 ) $ ( 2,578,235 ) $ ( 139,647 ) The accompanying notes are an integral part of these consolidated financial statements. 99 Table of Contents Guardant Health, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 OPERATING ACTIVITIES: Net loss $ ( 436,373 ) $ ( 479,449 ) $ ( 654,588 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 42,387 42,881 35,962 Operating lease costs 31,133 29,699 28,585 Contingent consideration 1,010 110 4,305 Stock-based compensation 140,411 90,759 94,685 Amortization of debt issuance costs 2,581 2,575 2,569 Amortization of (discount) premium on marketable debt securities ( 6,774 ) ( 13,552 ) 4,595 Unrealized and realized losses (gains) on marketable equity securities 44,401 ( 79,710 ) 7,793 Impairment of non-marketable equity securities and other related assets — 29,054 5,261 Fair value adjustments of noncontrolling interest liability — — 99,785 Other 2,228 ( 1,182 ) 21 Changes in operating assets and liabilities: Accounts receivable, net ( 21,389 ) 8,378 375 Inventory, net ( 9,135 ) ( 10,350 ) ( 20,926 ) Prepaid expenses and other current assets, net ( 7,691 ) ( 4,332 ) 20,444 Other assets, net ( 2,375 ) 1,298 11,698 Accounts payable and accrued liabilities ( 2,820 ) 5,191 60,328 Other legal liabilities — 83,400 — Operating lease liabilities ( 36,115 ) ( 31,478 ) ( 20,228 ) Deferred revenue 18,663 1,733 9,873 Net cash used in operating activities ( 239,858 ) ( 324,975 ) ( 309,463 ) INVESTING ACTIVITIES: Purchases of marketable debt securities ( 307,323 ) ( 629,902 ) ( 303,757 ) Maturities of marketable debt securities 35,000 1,494,700 555,000 Sales of marketable equity securities and other related assets 53,600 1,531 — Purchases of non-marketable equity securities and other related assets ( 7,500 ) ( 5,593 ) ( 23,966 ) Purchases of property and equipment ( 35,085 ) ( 20,486 ) ( 77,461 ) Net cash (used in) provided by investing activities ( 261,308 ) 840,250 149,816 FINANCING ACTIVITIES: Proceeds from issuance of common stock under employee stock purchase plan 11,719 10,154 9,316 Proceeds from issuance of common stock upon exercise of stock options 3,119 405 2,625 Employee taxes paid related to settlement of restricted stock units ( 15,681 ) ( 11,197 ) ( 7,878 ) Proceeds from equity offerings — 493,116 — Payment of equity offering costs — ( 21,131 ) — Joint Venture Acquisition — — ( 177,785 ) Tender offer issued in connection with the Joint Venture Acquisition and acquisition related costs — — ( 14,235 ) Other ( 153 ) 6,028 ( 1,136 ) Net cash (used in) provided by financing activities ( 996 ) 477,375 ( 189,093 ) Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 1,770 ) ( 911 ) ( 1,600 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 503,932 ) 991,739 ( 350,340 ) Cash, cash equivalents and restricted cash – Beginning of period 1,133,687 141,948 492,288 Cash, cash equivalents and restricted cash – End of period $ 629,755 $ 1,133,687 $ 141,948 Supplemental Disclosures of Cash Flow Information: Cash paid for income taxes $ 1,007 $ 1,969 $ 1,331 Supplemental Disclosures of Noncash Investing and Financing Activities: Operating lease liabilities arising from obtaining right-of-use assets $ 7,899 $ 5,015 $ 4,073 Purchases of property and equipment included in accounts payable and accrued liabilities $ 3,809 $ 5,279 $ 8,291 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 525,540 $ 1,133,537 $ 141,647 Restricted cash – included in restricted cash 104,215 150 — Restricted cash – included in other assets, net — — 301 Total cash, cash equivalents and restricted cash $ 629,755 $ 1,133,687 $ 141,948 The accompanying notes are an integral part of these consolidated financial statements. 100 Table of Contents Guardant Health, Inc. Notes to Consolidated Financial Statements 1. Description of Business Guardant Health, Inc., or the Company, is a leading precision oncology company focused on guarding wellness and giving every person more time free from cancer. The Company is transforming patient care by providing critical insights into what drives disease through its advanced blood and tissue tests, and real-world data. The Company's tests help improve outcomes across all stages of care, including screening to find cancer early, monitoring for recurrence in early-stage cancer, and helping doctors select the best treatment for patients with advanced cancer. For patients with advanced stage cancer, the Company has commercially launched Guardant360 LDT and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. The Company has also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging. The Company also collaborates with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation Smart Liquid Biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from its tests, the Company has also developed its GuardantINFORM platform to help biopharmaceutical companies accelerate precision oncology drug development through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers. For early cancer detection, in May 2022, the Company launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In December 2022, the Company announced that the ECLIPSE study, a registrational study evaluating the performance of its Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. In addition, in March 2023, the Company submitted a premarket approval application, or PMA, for its Shield blood test to the FDA. In July 2024, the Company received FDA approval of its 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, the Company's 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. The Company was incorporated in Delaware in December 2011 and is headquartered in Palo Alto, California. 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and in conjunction with the rules and regulations of the Securities and Exchange Commission, or the SEC. The accompanying consolidated financial statements include the accounts of Guardant Health, Inc., its consolidated Joint Venture (see Note 3, Joint Venture ), and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company adjusted the accompanying consolidated balance sheet as of December 31, 2023 to separately present accounts payable and accrued expenses, inclusive of accrued compensation. In addition, certain other reclassifications of prior period amounts were made to conform with the current period presentation. The Company determined the adjustment is immaterial based on consideration of quantitative and qualitative factors. The Company believes that its existing cash, cash equivalents, and marketable debt securities as of December 31, 2024 will be sufficient to allow the Company to fund its current operating plan through at least a period of one year after the date the accompanying consolidated financial statements are issued. As the Company continues to incur losses, its transition to profitability is dependent upon a level of revenues adequate to support the Company’s cost 101 Table of Contents structure. If the Company’s transition to profitability is not consistent with its current operating plan, the Company may have to seek additional capital. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimation of variable consideration, estimation of credit losses, standalone selling price allocation included in contracts with multiple performance obligations, goodwill and identifiable intangible assets, stock-based compensation, incremental borrowing rate for operating leases, contingencies, certain inputs into the provision for income taxes, including related reserves, valuation of non-marketable securities, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates. Segment Information The Company operates as one operating and reportable segment. The Company's chief operating decision makers are its Co-Chief Executive Officers, who review financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance and allocating resources. Cash, Cash Equivalents and Restricted Cash Cash equivalents consist of highly liquid investments with original maturities at the time of purchase of three months or less. Cash equivalents include bank demand deposits and money market accounts that invest primarily in U.S. government-backed securities and treasuries. Cash equivalents are carried at cost, which approximates their fair value. As of December 31, 2024, the Company had restricted cash balance of $ 104.2 million, of which $ 103.6 million was related to cash held as collateral under surety bond requirements related to the intellectual property dispute with TwinStrand Biosciences, Inc. and the University of Washington, as described in Note 9 Commitments and Contingencies - Legal Proceedings to the Company's consolidated financial statements. As of December 31, 2023, the Company's restricted cash balance was immaterial. Marketable Debt Securities Marketable debt securities consist primarily of high-grade U.S. government and agency securities and corporate bonds. Marketable debt securities with original maturities at the time of purchase between three and twelve months from balance sheet dates are classified as short-term marketable debt securities and those with maturities over twelve months from balance sheet dates are classified as long-term marketable debt securities. The Company classifies all marketable debt securities as available-for-sale, which are recorded at fair value. Unrealized gains and losses are included in accumulated other comprehensive gain (loss) in stockholders’ equity (deficit). Any premium or discount arising at purchase is amortized or accreted to interest income or expense. The Company periodically evaluates its available-for-sale marketable debt securities for impairment. When the fair value of a marketable debt security is below its amortized cost, the amortized cost is reduced to its fair value if it is more likely than not that the Company is required to sell the impaired security before recovery of its amortized cost basis, or the Company has the intention to sell the security. If neither of these conditions are met, the Company determines whether the impairment is due to credit losses by comparing the present value of the expected cash flows of the security with its amortized cost basis. The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the security. An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in other income (expense), net on the consolidated statements of operations. Impairment losses that are not credit-related are included in accumulated other comprehensive gain (loss) in stockholders’ equity (deficit). Non-Marketable Securities The Company acquires certain equity investments in private companies to promote business and strategic objectives. The Company's investments in non-marketable equity securities do not give the Company the ability to control or exercise significant influence over the investees. One of the investees is concluded to be a variable interest entity, or 102 Table of Contents VIE, but the Company is deemed not to be the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance. The Company's non-marketable equity and other related investments totaled $ 16.1 million and $ 8.6 million as of December 31, 2024, and 2023, respectively, and are included in other assets, net on the accompanying consolidated balance sheets. Non-marketable securities are recorded at cost, subject to periodic impairment reviews and adjustments for observable price changes from orderly transactions. The Company's evaluation of impairment of such non-marketable securities is based on adverse changes in market conditions and the regulatory or economic environment; qualitative and quantitative analysis of the operating performance and financial condition of the investee; changes in operating structure or management of the investee; and additional funding requirements of the investee. As a result of the evaluation, the Company recorded an impairment of $ 22.1 million for the year ended December 31, 2023 for one of its non-marketable equity security investments, included in other income (expense), net on the accompanying consolidated statements of operations. In addition, in connection with the investment in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the investee, on or before December 31, 2022. In September 2022, the Company decided not to exercise such rights to purchase the investee and recorded an impairment of $ 5.3 million for the year ended December 31, 2022, included in other income (expense), net on the accompanying consolidated statements of operations. Pursuant to another investment in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the Company, on or before October 1, 2023, and acquired rights to obtain the exclusive license of the investee's certain technologies. In June 2023, the Company decided not to exercise such rights and recorded an impairment of $ 7.0 million for the year ended December 31, 2023, included in other income (expense), net on the accompanying consolidated statements of operations. No other impairment or downward adjustments to the carrying value of the Company's non-marketable securities have been otherwise recorded. Concentration of Risk The Company is subject to credit risk from its portfolio of cash equivalents, restricted cash and investments in marketable debt securities. The Company limits its exposure to credit losses by investing in money market funds through a U.S. bank with high credit ratings. The Company’s cash may consist of deposits held with banks that may at times exceed federally insured limits, however, its exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the consolidated balance sheets. The Company performs evaluations of the relative credit standing of these financial institutions to limit the amount of credit exposure. The Company also invests in investment‑grade debt instruments and has policy limits for the amount it can invest in any one type of security, except for securities issued or guaranteed by the U.S. government. The goals of the Company’s investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after‑tax rate of return. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, investment type and issuer, as a result, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The Company is subject to credit risk from its accounts receivable. The majority of the Company’s accounts receivable arises from the provision of precision oncology services and development services and other, primarily with biopharmaceutical companies and international laboratory partners, all of which have high credit ratings. The Company has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Accounts receivable are recorded net of allowance for credit losses, if any. 103 Table of Contents A significant customer is any biopharmaceutical customer, clinical testing payer, or international laboratory partner that represents 10% or more of the Company’s total revenue or accounts receivable balance. Revenue attributable to each significant customer, including its affiliated entities, as a percentage of the Company’s total revenue, for the respective period, and accounts receivable balance attributable to each significant customers, including its affiliated entities, as a percentage of the Company’s total accounts receivable balance, at the respective consolidated balance sheet date, are as follows: Revenue Accounts Receivable, Net Year Ended December 31, As of December 31, 2024 2023 2022 2024 2023 Customer A * * * 14 % 12 % Customer B 29 % 31 % 30 % 12 % 12 % Customer C * * * 11 % 10 % * less than 10% Accounts Receivable, Net Accounts receivable represent valid claims against commercial and governmental payers, biopharmaceutical companies, research institutes, international laboratory partners and distributors, including unbilled receivables, and royalty payments due from third parties for licensing the Company’s technologies. Unbilled receivables include balances due from biopharmaceutical customers related to development services and other revenues that are recognized upon the achievement of performance-based milestones but prior to the achievement of contractual billing rights. As of December 31, 2024 and 2023, the Company had unbilled receivables of $ 3.4 million and $ 4.9 million, respectively. The Company evaluates the collectability of its accounts receivable based on historical collection trends, the financial condition of payment partners, and external market factors and provides for an allowance for potential credit losses based on management’s best estimate of the amount of probable credit losses. The Company recorded immaterial credit losses related to its accounts receivable for the years ended December 31, 2024, 2023 and 2022. Inventory, Net Inventories are stated at the lower of cost or net realizable value on a first-in, first-out basis. Inventory consisted entirely of supplies, which are consumed when providing tests, and therefore the Company does not maintain any finished goods inventory. In order to assess the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements compared to current or committed inventory levels. The Company periodically reviews its inventories for excess or obsolescence and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value. If the actual net realizable value is less than that estimated by the Company, or if it is determined that inventory utilization will further diminish based on estimates of demand, additional inventory write-downs may be required. Amounts written-down due to unmarketable inventory are recorded in cost of precision oncology testing and cost of development services and other, as appropriate. Property and Equipment, Net Property and equipment are recorded at cost. Depreciation is computed over estimated useful lives of the related assets using the straight-line method. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the remaining term of the lease, whichever is shorter. The Company periodically reviews the depreciable lives assigned to property and equipment placed in service and changes the estimates of useful lives, if necessary. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. 104 Table of Contents Estimated useful lives for property and equipment are as follows: Property and Equipment Estimated Useful Life Machinery and equipment 5 years Furniture and fixtures 7 years Computer hardware and computer software 3 years Leasehold improvements Lesser of estimated useful life or remaining lease term Goodwill and Intangible Assets, net Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill is not amortized but is tested for impairment at least annually during the fourth fiscal quarter, or if circumstances indicate its value may no longer be recoverable. The Company continues to operate in one segment, which is considered to be the sole reporting unit and, therefore, goodwill is tested for impairment at the enterprise level. As of December 31, 2024, there has been no impairment of goodwill. Intangible assets are carried at cost, net of accumulated amortization. The Company does not have intangible assets with indefinite useful lives other than goodwill. Amortization is recorded on a straight-line basis over the intangible asset's useful life, which is approximately 6 — 12 years. Impairment for Long-Lived Assets The Company evaluates its long-lived assets, including property and equipment, finite-lived intangible assets, and right-of-use assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. The Company had immaterial amount of impairment for long-lived assets for the years ended December 31, 2024, 2023 and 2022. Leases The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use, or ROU, assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received or receivable. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities, as the Company's leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less. Convertible Senior Notes Convertible senior notes are accounted for as a liability and measured at their amortized cost. Transaction costs related to the issuance of the notes are netted with the liability and are amortized to interest expense over the term of the notes, using an effective interest rate method. Revenue Recognition The Company derives revenue from the provision of precision oncology testing services, as well as from development services and other. Precision oncology testing revenue includes amounts derived from the delivery of the Company's 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 the Company's technologies, kit fulfillment, and delivery of the Company's Shield screening tests. The Company currently receives 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. 105 Table of Contents Revenues are recognized when control of services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. FASB ASC Topic 606, Revenue from Contracts with Customers , provides for a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation. Precision oncology testing The Company recognizes revenue from the sale of its precision oncology tests for clinical customers, including certain hospitals, cancer centers, other institutions and patients, at the time results of the test are reported to physicians. Most precision oncology tests requested by clinical customers are sold without a written agreement; however, the Company determines an implied contract exists with its clinical customers. The Company identifies each sale of its test to a clinical customer as a single performance obligation. With the exception of certain limited contracted arrangements with insurance carriers and other institutions where the transaction price is fixed, a stated contract price does not exist and the transaction price for each implied contract with clinical customers represents variable consideration. The Company estimates the variable consideration under the portfolio approach and considers the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data. The Company monitors the estimated amount to be collected in the portfolio at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. 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. The Company analyzes its actual cash collections over the expected reimbursement period and compares 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 cumulative 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. The Company identifies its promise to transfer a series 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. For agreements involving testing volume to be satisfied over a defined period, revenue is recognized over time based on the number of tests performed as the performance obligation is satisfied over time. Results of the Company’s precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by the Company or billed to customers. Development services and other The Company performs development services for its biopharmaceutical customers utilizing its precision oncology information platform. Development services typically represent a single performance obligation as the Company performs a significant integration service, such as analytical validation and regulatory submissions. The individual promises are not separately identifiable from other promises in the contracts and, therefore, are not distinct. However, under certain contracts, a biopharmaceutical customer may engage the Company for multiple distinct development services which are both capable of being distinct and separately identifiable from other promises in the contracts and, therefore, distinct performance obligations. The Company collaborates with biopharmaceutical companies in the development of new drugs. As part of these collaborations, the Company provides services related to regulatory filings to support companion diagnostic device submissions for the Company’s testing panels. Under these collaborations, the Company generates revenue from achievement of milestones, as well as provision of on-going support. For the companion diagnostic development and regulatory approval services performed, the Company is compensated through a combination of an upfront fee and performance-based, non-refundable regulatory and other developmental milestone payments. The transaction price of these contracts typically represents variable consideration. Application of the constraint for variable consideration to milestone payments is an area that requires significant judgment. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be managed to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone. In making this assessment, the Company considers its 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 the Company. The constraint for variable consideration is applied to the contract 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. 106 Table of Contents The Company recognizes companion diagnostic development and regulatory approval services revenue over the period in which biopharmaceutical research and development services are provided. Specifically, the Company recognizes revenue using an input method to measure progress, utilizing costs incurred to-date relative to total expected costs as its measure of progress. The Company assesses the changes to the total expected cost estimates as well as any incremental fees negotiated resulting from changes to the scope of the original contract in determining the revenue recognition at each reporting period. For development of new products or services under these arrangements, costs incurred before technological feasibility is reached are included as research and development expenses in the Company’s consolidated statements of operations, while costs incurred thereafter are recorded as cost of development services and other. The Company also recognizes revenue from other development services, in addition to companion diagnostic development and regulatory approval services noted above, such as clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. These revenues are generally recognized over time based on an input method to measure progress in the period when the associated services have been performed. In addition, the Company licenses its digital sequencing technologies to its domestic customers and international laboratory partners. For the licensed technology, the Company is compensated through royalty-based payments, non-refundable upfront payments, guaranteed minimum payments, and/or sample milestone payments. Depending on the nature of the technology licensing arrangements, and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur, when the technology transfer is complete or over the technology transfer period. Other revenue also includes kit fulfillment, which is recognized when such products are delivered. In addition, other revenue includes amounts derived from delivery of the Company's Shield screening tests. For the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 35.3 million, $ 14.2 million and $ 8.8 million, respectively, as revenue related to performance obligations satisfied in prior periods. Contracts with multiple performance obligations Contracts with biopharmaceutical customers and international laboratory partners may include multiple distinct performance obligations, such as provision of precision oncology testing, the above-mentioned development services, and digital sequencing technology licensing, among others. The Company evaluates the terms and conditions included within its contracts with biopharmaceutical customers and international laboratory partners to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. The Company first identifies material promises, in contrast to immaterial promises or administrative tasks, under the contract, and then evaluates 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, the Company considers 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, the Company considers whether it provides a significant integration of the services, whether the services significantly modify or customize one another, or whether the services are highly interdependent or interrelated. For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines standalone selling price by considering the historical selling price of these performance obligations in similar transactions as well as other factors, including, but not limited to, the price that customers in the market would be willing to pay, competitive pricing of other vendors, industry publications and current pricing practices, and expected costs of satisfying each performance obligation plus appropriate margin; or by using the residual approach if standalone selling price is not observable, by reference to the total transaction price less the sum of the observable standalone selling prices of other performance obligations promised in the contract. Deferred revenue Deferred revenue, which is a contract liability, consists primarily of payments received in advance of revenue recognition from contracts with customers. For example, development services and other contracts with biopharmaceutical customers often contain upfront payments which results in the recording of deferred revenue to the extent cash is received prior to the Company’s performance of the related services. Contract liabilities are 107 Table of Contents relieved as the Company performs its obligations under the contract and revenue is consequently recognized. As of December 31, 2024 and 2023, the Company's deferred revenue balance was $ 41.6 million and $ 22.9 million, respectively, of which $ 6.1 million and $ 5.0 million was considered long-term and recorded within other long-term liabilities on the accompanying consolidated balance sheets. Revenue recognized in the year ended December 31, 2024 that was included in the deferred revenue balance as of December 31, 2023 was $ 14.5 million, and revenue recognized in the year ended December 31, 2023 that was included in the deferred revenue balance as of December 31, 2022 was $ 13.9 million, respectively. Transaction price allocated to the remaining performance obligations Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. The Company expects to recognize substantially all of the remaining transaction price in the next 1 - 2 years. Costs of Precision Oncology Testing Cost of precision oncology testing generally consists of cost of materials, cost of labor, including bonus, benefit and stock-based compensation, equipment and infrastructure expenses associated with processing test samples (including sample accessioning, library preparation, sequencing, and quality control analyses), freight, curation of test results for physicians, phlebotomy, and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, lease costs, amortization of leasehold improvements, and information technology costs. Costs associated with performing the Company’s tests are recorded as the tests are performed regardless of whether revenue was recognized with respect to that test. Cost of Development Services and Other Cost of development services and other primarily includes costs incurred for the performance of development services requested by the Company’s biopharmaceutical customers, and costs associated with the Company's partnership agreements and delivery of the Company's Shield screening tests. 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 development services and other. Research and Development Expenses Research and development expenses consist of costs incurred to develop technology and include salaries and benefits including stock-based compensation, reagents and supplies used in research and development laboratory work, infrastructure expenses, including facility occupancy and information technology costs, contract services, other outside costs and costs to develop the Company's technology capabilities. Research and development expenses also include costs related to activities performed under contracts with biopharmaceutical companies before technological feasibility has been achieved. Research and development costs are expensed as incurred. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Costs to develop technology capabilities are recorded as research and development expenses unless they meet the criteria to be capitalized as internal-use software costs. Advertising The Company expenses advertising costs as incurred. For the years ended December 31, 2024, 2023 and 2022, the Company's advertising costs were no t material to the consolidated financial statements. Stock‑Based Compensation Stock‑based compensation related to stock options granted to the Company’s and the Joint Venture's employees, directors and nonemployees is measured at the grant date based on the fair value of the award. The fair value is recognized as expense 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. The Company uses the Black‑Scholes option‑pricing model to estimate the fair value of stock options granted under the 2012 Stock Plan (as amended and restated), or the 2012 Plan, the 2018 Incentive Award Plan, or the 2018 Plan, the former Joint Venture's 2020 Equity Incentive Plan (see Note 11, Stock-Based Compensation ), and the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, and stock purchase rights granted under the 2018 108 Table of Contents Employee Stock Purchase Plan. The Black-Scholes option-pricing model requires assumptions to be made related to the expected term of an award, expected volatility, risk-free rate and expected dividend yield. The Company measures the grant date fair value of its service-based and performance-based restricted stock units issued to employees and non-employees based on the closing market price of the common stock on the date of grant. For restricted stock units with only service-based vesting conditions, compensation expense is recognized in the Company’s consolidated statement of operations on a straight-line basis over the requisite service period. Compensation expense for restricted stock units with performance metrics, or PSUs, is calculated based upon expected achievement of the metrics specified in the grant, and is recognized in the Company’s consolidated statement of operations using an accelerated attribution model over the requisite service period for each separately vesting portion of the award. 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. For market-based restricted stock units, or MSUs, the Company derived the grant date fair value and requisite service period using the Monte Carlo simulation model and the related compensation expense was recognized over the derived service period using an accelerated attribution model commencing on the grant date. Stock-based compensation expense was recorded regardless of whether the market conditions were achieved or not. The MSUs were fully expensed as of June 30, 2022. Income Taxes Income taxes are recorded using an asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Tax benefits are recognized when it is more likely than not that a tax position will be sustained during an audit. Deferred tax assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision. The Company evaluates uncertain tax positions on a regular basis. The evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of the audit, and effective settlement of audit issues. The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties. Net Loss Per Share The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method or the as-if converted method, as appropriate. For purposes of this calculation, stock options, restricted stock units, shares issuable pursuant to the employee stock purchase plan, and contingently issuable shares under the convertible senior notes are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive. Accounting Pronouncements Adopted In November 2023, the Financial Accounting Standards Board, or FASB, issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance is effective for the annual reporting periods beginning the year ended December 31, 2024, and will be effective for interim reporting periods beginning January 1, 2025, and should be applied retrospectively. The Company adopted this pronouncement retrospectively in 109 Table of Contents the fiscal year of 2024 and provided required disclosures in Note 15 Segment and Geographic Information to the consolidated financial statements. New Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which amended existing income tax disclosure guidance, primarily requiring more detailed disclosures on the effective tax rate reconciliation and income taxes paid. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2025, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company expects to provide required disclosures upon the effective date. In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures , which requires additional disclosures of specified information about certain costs and expenses in the notes to financial statements. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2027, and for interim reporting periods beginning January 1, 2028, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently assessing the impact of adopting this accounting pronouncement on its consolidated financial statements. 3. Joint Venture In May 2018, the Company and an affiliate of SoftBank formed and capitalized Guardant Health AMEA, Inc., the Joint Venture, for the sale, marketing and distribution of the Company’s tests generally outside the Americas and Europe, and to accelerate commercialization of its products in Asia, the Middle East and Africa. Under the terms of the joint venture agreement, each party held an approximately 50 % ownership interest in the Joint Venture and two seats on the board of the Joint Venture. In June 2022, the Company purchased all of the shares held by SoftBank and its affiliates in consideration for a cash payment of the aggregate purchase price of $ 177.8 million, which resulted in $ 99.8 million of fair value adjustments to the noncontrolling interest liability for the year ended December 31, 2022. In connection with the Joint Venture Acquisition, the Company also issued a tender offer to purchase the Joint Venture's Class B common stock issued and issuable upon exercise of vested Joint Venture's stock options held by the Joint Venture's employees (see Note 11, Stock-Based Compensation ). Prior to the completion of the Joint Venture Acquisition, the Joint Venture was deemed to be a VIE, and the Company had been identified as the VIE’s primary beneficiary. As the primary beneficiary, the Company had consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances had been eliminated in consolidation. Upon completion of the Joint Venture Acquisition and the tender offer, Guardant Health AMEA, Inc. became the Company's wholly owned subsidiary. 110 Table of Contents 4. Consolidated Balance Sheet Components Property and Equipment, Net Property and equipment, net consist of the following: As of December 31, 2024 2023 (in thousands) Machinery and equipment $ 124,567 $ 118,117 Leasehold improvements 103,569 102,298 Computer hardware 36,497 34,417 Construction in progress 28,136 7,508 Furniture and fixtures 7,874 7,999 Computer software 1,695 2,065 Property and equipment, gross 302,338 272,404 Less: accumulated depreciation ( 165,525 ) ( 127,308 ) Property and equipment, net $ 136,813 $ 145,096 Depreciation expense related to property and equipment was $ 40.1 million, $ 40.0 million and $ 33.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. Accrued Expenses Accrued expenses consist of the following: As of December 31, 2024 2023 (in thousands) Operating lease liabilities $ 29,213 $ 27,950 Other 39,132 35,525 Total accrued expenses $ 68,345 $ 63,475 5. Fair Value Measurements, Cash Equivalents and Marketable Securities Financial instruments consist of cash equivalents, marketable securities, accounts receivable, net, prepaid expenses and other current assets, net, and accounts payable and accrued liabilities. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, net, and accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. Fair value is defined as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 111 Table of Contents Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows: December 31, 2024 Fair Value Level 1 Level 2 Level 3 (in thousands) Financial Assets: Money market funds $ 57,151 $ 57,151 $ — $ — Income deposit funds 103,581 — 103,581 — U.S. government debt securities 429,294 — 429,294 — Total cash equivalents and restricted cash 590,026 57,151 532,875 — U.S. government debt securities 314,438 — 314,438 — Total short-term marketable debt securities 314,438 — 314,438 — Total $ 904,464 $ 57,151 $ 847,313 $ — Financial Liabilities: Contingent consideration $ 6,050 $ — $ — $ 6,050 Total $ 6,050 $ — $ — $ 6,050 December 31, 2023 Fair Value Level 1 Level 2 Level 3 (in thousands) Financial Assets: Money market funds $ 1,032,500 $ 1,032,500 $ — $ — Total cash equivalents 1,032,500 1,032,500 — — U.S. government debt securities 35,097 — 35,097 — Total short-term marketable debt securities 35,097 — 35,097 — Long-term marketable equity securities 98,002 98,002 — — Total $ 1,165,599 $ 1,130,502 $ 35,097 $ — Financial Liabilities: Contingent consideration $ 6,540 $ — $ — $ 6,540 Total $ 6,540 $ — $ — $ 6,540 The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Income deposit funds and U.S. government debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs. In July 2022, one of the Company's equity investees, Lunit Inc., or Lunit, completed its initial public offering, or IPO, subsequent to which, the Company started to account for the investment in Lunit at fair value on a recurring basis, and classified the investment as marketable equity securities within Level 1 of the fair value hierarchy as the 112 Table of Contents investment is valued using the quoted market price. The Company was subject to a 2-year lock-up period from Lunit's IPO date, during which the Company shall not transfer Lunit's shares between accounts, establish or cancel pledges, sell, or withdraw such shares, without approval from the Korea Exchange. In November 2023, Lunit issued bonus shares to its existing shareholders by allocating one new share for each existing share, and the Company was subject to the same lock-up period with the same restrictions for these bonus shares which expired in July 2024. In 2024, the Company sold all of its investment in Lunit. As of December 31, 2023, the balance of the Company's investment in Lunit was $ 98.0 million, included in other assets, net, on the accompanying consolidated balance sheets. In addition, the Company recorded $ 79.7 million unrealized gains and $ 7.8 million unrealized losses for the years ended December 31, 2023 and 2022, on its investment in Lunit, respectively, included in other income (expense), net on the accompanying consolidated statements of operations. There were no transfers between Level 1, Level 2 and Level 3 during the periods presented. Acquisition-related contingent consideration is measured at fair value on a quarterly basis and changes in estimated contingent consideration to be paid are included in general and administrative expense in the consolidated statements of operations. The fair value of acquisition-related contingent consideration is estimated using a multiple-outcome discounted cash flow valuation technique. Contingent consideration is classified within Level 3 of the fair value hierarchy, as it is based on a probability that includes significant unobservable inputs. The significant unobservable inputs include a probability-weighted estimate of achievement of certain commercialization milestones, and discount rate to present value the expected payments. A significant change in any of these input factors in isolation could have a material impact to fair value measurement. As of December 31, 2024 and 2023, the Company's acquisition-related contingent consideration liability was $ 6.1 million and $ 6.5 million, respectively, of which $ 2.1 million and $ 5.0 million was considered long-term and recorded within other long-term liabilities on the accompanying consolidated balance sheets. Prior to the completion of the Joint Venture Acquisition in June 2022, the fair value of the noncontrolling interest liability was considered to be a Level 3 measurement and was determined based on an annual internal rate of return of 20 % on the initial amount of $ 41.0 million invested by SoftBank in May 2018, to the date of Company's exercising the call right in November 2021. The noncontrolling interest liability was fully paid by June 30, 2022 (see Note 3, Joint Venture ). The following tables summarize the activities for the Level 3 financial instruments for the years ended December 31, 2024, 2023 and 2022: Contingent Consideration Year Ended December 31, 2024 2023 2022 (in thousands) Fair value — beginning of period $ 6,540 $ 6,430 $ 3,625 Increase in fair value 1,010 110 4,305 Settlement ( 1,500 ) — ( 1,500 ) Fair value — end of period $ 6,050 $ 6,540 $ 6,430 Noncontrolling Interest Liability Year Ended December 31, 2024 2023 2022 (in thousands) Fair value — beginning of period $ — $ — $ 78,000 Increase in fair value — — 99,785 Settlement — — ( 177,785 ) Fair value — end of period $ — $ — $ — The Company considers the fair value of the Convertible Notes as of December 31, 2024 to be a Level 2 measurement. The fair value of the Convertible Notes is primarily affected by the trading price of the Company's common stock and market interest rates. As such, the carrying value of the Convertible Notes does not reflect the market rate. See Note 7, Debt , for additional information related to the Convertible Notes. 113 Table of Contents The following tables summarize the Company’s cash equivalents, restricted cash and marketable debt securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category: December 31, 2024 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value (in thousands) Money market funds $ 57,151 $ — $ — $ 57,151 Income deposit funds 103,581 — — 103,581 U.S. government debt securities 743,500 232 — 743,732 Total $ 904,232 $ 232 $ — $ 904,464 December 31, 2023 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value (in thousands) Money market funds $ 1,032,500 $ — $ — $ 1,032,500 U.S. government debt securities 35,108 — ( 11 ) 35,097 Total $ 1,067,608 $ — $ ( 11 ) $ 1,067,597 None of the Company’s marketable debt securities had been in a continuous unrealized loss position for more than one year as of December 31, 2024 and 2023, respectively. There have been no material realized gains or losses on marketable debt securities for the periods presented. In addition, there has been no recognition of credit losses on marketable debt securities for the periods presented. 6. Intangible Assets, Net and Goodwill The following table presents details of purchased intangible assets as of December 31, 2024 and 2023: December 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Remaining Weighted-Average Useful Life (in thousands) (in years) Intangible assets subject to amortization: Acquired license $ 11,886 $ ( 5,795 ) $ 6,091 5.8 Non-compete agreements and other covenant rights 5,100 ( 4,431 ) 669 1.1 Acquired technology 1,600 ( 1,600 ) — 0.0 Total intangible assets subject to amortization 18,586 ( 11,826 ) 6,760 Intangible assets not subject to amortization: Goodwill 3,290 — 3,290 Total purchased intangible assets $ 21,876 $ ( 11,826 ) $ 10,050 114 Table of Contents December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Remaining Weighted-Average Useful Life (in thousands) (in years) Intangible assets subject to amortization: Acquired license $ 11,886 $ ( 4,686 ) $ 7,200 6.8 Non-compete agreements and other covenant rights 5,100 ( 3,588 ) 1,512 1.9 Acquired technology 1,600 ( 1,333 ) 267 0.3 Total intangible assets subject to amortization 18,586 ( 9,607 ) 8,979 Intangible assets not subject to amortization: Goodwill 3,290 — 3,290 Total purchased intangible assets $ 21,876 $ ( 9,607 ) $ 12,269 Amortization of finite-lived intangible assets was $ 2.2 million, $ 2.7 million and $ 2.5 million, for the years ended December 31, 2024, 2023 and 2022, respectively. The following table summarizes estimated future amortization expense of finite-lived intangible assets, net: Year Ending December 31, (in thousands) 2025 $ 1,670 2026 1,212 2027 1,107 2028 1,109 2029 765 2030 and thereafter 897 Total $ 6,760 7. Debt Convertible Senior Notes In November 2020, the Company issued $ 1.15 billion principal amount of its 0 % Convertible Senior Notes due 2027, or the 2027 Notes. The 2027 Notes do not bear interest, and the principal amount of the Notes will not accrete. However, special interest and additional interest may accrue on the 2027 Notes at a rate per annum not exceeding 0.50 % (subject to certain exceptions) upon the occurrence of certain events such as the failure to file certain reports to the Securities and Exchange Commission, or to remove certain restrictive legends from the Notes. The Notes will mature on November 15, 2027, unless repurchased, redeemed or converted earlier. Before August 15, 2027, holders of the 2027 Notes will have the right to convert their 2027 Notes only under the following circumstances: • during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on March 31, 2021, if the last reported sale price of the Company's common stock exceeds 130 % of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, or the sale price condition; • during the five consecutive business days immediately after any ten consecutive trading day period, or the measurement period, if the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period is less than 98 % of the product of the last reported sale price of the Company's common stock on such trading day and the conversion rate on such trading day; or • upon the occurrence of specified corporate events 115 From and after August 15, 2027, holders of the 2027 Notes may convert their 2027 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 7.1523 shares of common stock per $1,000 principal amount of 2027 Notes, which represents an initial conversion price of approximately $ 139.82 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. The Company may not redeem the 2027 Notes at its option at any time before November 20, 2024. The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after November 20, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption. If certain corporate events that constitute a “Fundamental Change” occur, then, subject to a limited exception for certain cash mergers, holders of Notes may require the Company to repurchase their 2027 Notes at a cash repurchase price equal to the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock. Since the 2027 Notes were not convertible as of December 31, 2024, the net carrying amount of the 2027 Notes was classified as a long-term liability. In February 2025, the Company entered into privately negotiated exchange agreements with certain holders of its 2027 Notes. See Note 17, Subsequent Events, for additional information related to this transaction. The following table sets forth the net carrying amounts of the 2027 Notes as of December 31, 2024 and 2023: As of December 31, 2024 2023 (in thousands) Principal $ 1,150,000 $ 1,150,000 Less: debt issuance costs, net of amortization ( 7,453 ) ( 10,034 ) Net carrying amount $ 1,142,547 $ 1,139,966 The total estimated fair value of the 2027 Notes was $ 964.9 million and $ 809.3 million as of December 31, 2024 and 2023, respectively. The fair value was determined based on the closing trading price per $ 100 of the 2027 Notes as of the last day of trading for the period. 116 The following table sets forth interest expense recognized and effective interest rate represented related to the 2027 Notes: For the Year Ended December 31, 2024 2023 2022 (in thousands) Amortization of debt issuance costs $ 2,581 $ 2,575 $ 2,569 Total interest expense recognized $ 2,581 $ 2,575 $ 2,569 Effective interest rate 0.2 % 0.2 % 0.2 % Note Hedges To minimize the impact of potential economic dilution upon conversion of the 2027 Notes, the Company entered into convertible note hedge transactions, or the 2027 Note Hedges, with respect to its common stock concurrent with the issuance of the Notes. The 2027 Note Hedges cover, subject to customary adjustments, the number of shares of common stock initially underlying the Notes. The strike price of the 2027 Note Hedges will initially be approximately $ 182.60 per share, which represents a premium of 75 % over the last reported sale price of the Company’s common stock of $ 104.34 per share on November 16, 2020, and is subject to certain adjustments under the terms of the 2027 Note Hedges. The 2027 Note Hedges will expire upon maturity of the 2027 Notes. The 2027 Note Hedges are separate transactions and are not part of the terms of the 2027 Notes. Holders of the 2027 Notes will not have any rights with respect to the 2027 Note Hedges. The shares receivable related to the 2027 Note Hedges are excluded from the calculation of diluted earnings per share as they are anti-dilutive. As these transactions meet certain accounting criteria, the 2027 Note Hedges are recorded in stockholders’ equity and are not accounted for as derivatives. The Company paid an aggregate amount of $ 90.0 million for the 2027 Note Hedges, which has been recorded as a reduction to additional paid-in capital and will not be remeasured. 8. Leases The Company has entered into various operating lease agreements for office space, data center, lab and warehouse use, with remaining terms ranging from 0.2 to 8.5 years, some of which include one or more options to renew. As leases approach maturity, the Company considers various factors such as market conditions and the terms of any renewal options that may exist to determine whether it will renew the lease, as such, the Company does not include renewal options in its lease terms for calculating its lease liability, as the renewal options allow it to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options at the time of the lease commencement. Operating lease expense for the years ended December 31, 2024, 2023 and 2022, was $ 31.1 million, $ 29.7 million and $ 28.6 million, respectively, which includes both lease and non-lease components (primarily common area maintenance charges and property taxes). As of December 31, 2024 2023 Weighted-average remaining lease term (in years) 7.5 8.3 Weighted-average discount rate 3.82 % 3.87 % 117 The following table summarizes the Company's future principal contractual obligations for operating lease commitments as of December 31, 2024: Year Ending December 31, (in thousands) 2025 $ 35,709 2026 30,193 2027 26,156 2028 24,300 2029 22,946 2030 and thereafter 80,834 Total operating lease payments 220,138 Less: imputed interest ( 26,633 ) Total operating lease liabilities $ 193,505 Finance leases are not material to the Company's consolidated financial statements. 9. Commitments and Contingencies Indemnification Agreements The Company has entered into indemnification agreements with certain directors and officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, no such matters have arisen and the Company does not believe that the outcome of any claims under indemnification arrangements will have a material adverse effect on its financial positions, results of operations or cash flows. Accordingly, the Company has not recorded a liability related to such indemnifications as of December 31, 2024. Legal Proceedings In addition to commitments and obligations incurred in the ordinary course of business, from time to time the Company may be subject to a variety of claims and legal proceedings, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. For example, the Company has received, and may in the future continue to receive letters, claims or complaints from others alleging false advertising, patent infringement, violation of employment practices and trademark infringement. The Company has also instituted, and may in the future institute, additional legal proceedings to enforce its rights and seek remedies, such as monetary damages, injunctive relief and declaratory relief. The Company cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on the Company because of diversion of management time and attention as well as the financial costs related to resolving such disputes. The Company and its affiliates are parties to the legal claims and proceedings described below. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If the Company is unsuccessful in defending, or if it determines to settle, any of these matters, it may be required to pay substantial sums, be subject to injunction and/or be forced to change how it operates its business, which could have a material adverse impact on its financial position or results of operations. Unless otherwise stated, the Company is unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for the Company to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over a number of years. The Company reviews loss contingencies at least quarterly to determine whether the loss probability has changed and whether it can make a reasonable estimate of the possible loss or range of loss. When the Company determines that a loss from a claim is probable and reasonably estimable, it records a liability in the amount of its estimate for the ultimate loss. The Company also provides disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed its recorded liability. 118 Table of Contents Intellectual Property Disputes In August 2021, TwinStrand Biosciences, Inc., or TwinStrand Biosciences, and the University of Washington filed a patent infringement suit in the United States District Court for the District of Delaware alleging that the Company infringes U.S. Patent Nos. 10,287,631; 10,689,699; 10,752,951; and 10,760,127. The Company answered the complaint in October 2021, denying TwinStrand Biosciences’ allegations and asserted counterclaims of invalidity, unenforceability due to inequitable conduct and infringement of four of the Company’s patents. Discovery in the case has concluded. In October 2023, the District Court dismissed with prejudice TwinStrand’s infringement claims related to U.S. Patent Nos. 10,689,699 and 10,752,951. On November 14, 2023, a jury verdict was entered in favor of TwinStrand Biosciences and the University of Washington and against the Company. The jury found that the Company willfully infringed U.S. Patent Nos. 10,287,631 and 10,760,127, and awarded TwinStrand Biosciences and the University of Washington $ 83.4 million in damages, representing a 6 % royalty on past sales. As a result, the Company recorded a liability of $ 83.4 million in the fourth quarter of 2023, which was reflected as a charge to other operating expense on its consolidated statements of operations, and as a component of other long-term liabilities on its consolidated balance sheets. Post-trial motions were filed on March 4, 2024, where the Company moved to overturn the jury’s verdict, seek a new trial, and/or amend the judgment, and TwinStrand Biosciences moved for enhanced damages based on the jury’s finding of willful infringement, pre- and post-judgment interest, and a go-forward running royalty. A hearing date has not yet been set on the post-trial motions. The Company strongly disagrees with the jury verdict and will vigorously contest the verdict and judgment through post-trial motions in the District Court, and if needed, through appeal to the U.S. Court of Appeals for the Federal Circuit. On June 11, 2024, the Company filed a patent infringement suit against Tempus AI, Inc. or Tempus, in the United States District Court for the District of Delaware alleging that Tempus infringes U.S. Patent Nos. 11,149,306; 9,902,992; 10,501,810; 10,793,916; and 11,643,693. The Company is seeking an injunction to stop Tempus’ infringement and compensatory damages. The case Guardant Health, Inc. v. Tempus AI, Inc. , Case No. 1:24-cv-00687, has been assigned to Judge Richard Andrews and does not yet have a scheduling order. On October 21, 2024, Tempus moved to dismiss the Company’s suit alleging that some of the asserted patents were invalid. The Company disagrees and will be responding accordingly. False Advertising Disputes In May 2021, the Company also filed a lawsuit against Natera, Inc., or Natera, in the United States District Court for the Northern District of California, wherein the Company alleged that Natera is misleading healthcare providers about the performance of the Company’s new oncology test, Guardant Reveal, by suggesting the test is inaccurate and/or insensitive, and inferior to Natera’s Signatera assay. The Company is seeking an injunction to prevent Natera from continuing to make false and misleading statements and to require Natera to take corrective actions. Natera asserted counterclaims of false and misleading statements, false advertising, unlawful trade practices and unfair competition. The Company moved to dismiss Natera’s counterclaims, and in January 2022, the court granted in part and denied in part the Company's motion to dismiss. On November 25, 2024, after a three-week trial before Judge Edward M. Chen, the jury unanimously found in favor of the Company on all of its claims against Natera for false advertising and unfair competition. The jury awarded the Company $ 292.5 million, including $ 175.5 million in punitive damages. The jury also unanimously rejected all of Natera’s counterclaims against the Company. Both parties have filed post-trial briefing, which will be considered by Judge Chen at a hearing scheduled for March 2025. On January 13, 2025, Tempus sent the Company a letter alleging that the Company made certain false or misleading statements in its advertising related to Guardant360 and Tempus’ xF+ assay. The Company strongly disagrees with Tempus’ allegations and responded to each allegation. On January 17, 2025, the Company filed a declaratory judgment action against Tempus in the United States District Court for the District of Delaware, seeking to show that Tempus’ allegations are without merit. 10. Common Stock The Company’s common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors, or the Board of Directors. As of December 31, 2024 and 2023, no dividends on the Company’s common stock had been declared by the Board of Directors. 119 Table of Contents The Company’s common stock has been reserved for the following potential future issuances: As of December 31, 2024 2023 Shares underlying outstanding stock options 4,631,750 4,012,903 Shares underlying unvested restricted stock units 7,020,251 4,346,785 Shares underlying unvested market-based restricted stock units — 2,260,764 Shares underlying unvested performance-based restricted stock units 1,290,684 412,490 Shares available for issuance under the 2018 Incentive Award Plan 8,079,498 7,053,406 Shares available for issuance under the 2018 Employee Stock Purchase Plan 2,208,577 1,679,635 Shares available for issuance under the 2023 Employment Inducement Incentive Award Plan 3,916,766 4,949,988 Total 27,147,526 24,715,971 Equity Offering In May 2023, the Company completed a follow-on underwritten public offering, in which it issued and sold 14,375,000 shares of its 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, the Company completed a registered direct offering with an investment management firm, in which it issued and sold 3,387,446 shares of its common stock at a price of $ 26.77 per share, and received net proceeds of $ 90.6 million. At-The-Market Offering Program In August 2024, the Company 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 the Company may offer and sell, from time to time at its sole discretion, shares of its 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 the Company's common stock were sold under the Sales Agreement. 11. Stock-Based Compensation 2012 Stock Plan and 2018 Incentive Award Plan In June 2012 and September 2018, the Company’s Board of Directors adopted and its stockholders approved the Company’s 2012 Stock Plan (as amended and restated), or the 2012 Plan, and the Company’s 2018 Incentive Award Plan, or the 2018 Plan, respectively, under which the Company may grant cash and equity incentive awards to its employees and non-employees. Upon effectiveness of the 2018 Plan in connection with the IPO in October 2018, the 2012 Plan was terminated and 508,847 shares reserved under the 2012 Plan were forfeited. Any outstanding awards granted under the 2012 Plan remain outstanding, subject to the terms of the 2012 Plan and applicable award agreement, and further cancellation of awards granted under the 2012 Plan are not available for grant in the future. No further grants will be made under the 2012 Plan. The number of shares of common stock available for issuance under the 2018 Plan may be increased on January 1 of each calendar year beginning in 2019 and ending in 2028 by an amount equal to the least of (i) 3,689,000 shares, (ii) four percent of the shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors. 2023 Employment Inducement Incentive Award Plan In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, under which the Company may exclusively grant awards to its new employees as an inducement material to the employee’s entry into employment with the Company. The 2023 Plan was approved by the Company's Board of Directors without stockholder approval in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules. Stock Option Activity 120 Table of Contents A summary of the Company’s stock option activity under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows: Options Outstanding Shares Available for Grant Shares Subject to Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Balance as of January 1, 2022 5,231,624 2,624,974 $ 29.17 6.5 $ 193,014 2018 Plan annual increase (1) 3,689,000 — Granted ( 1,051,466 ) 1,051,466 44.86 Granted in connection with the Joint Venture Acquisition ( 15,128 ) 15,128 4.90 Exercised — ( 228,311 ) 6.29 Canceled 56,391 ( 60,683 ) 90.84 Restricted stock units granted ( 2,995,533 ) — Restricted stock units canceled 490,525 — Performance-based restricted stock units granted ( 26,935 ) — Performance-based restricted stock units canceled 59,818 — Balance as of December 31, 2022 5,438,296 3,402,574 34.34 6.8 39,749 2018 Plan annual increase (1) 3,689,000 — Shares authorized under the 2023 Plan 5,000,000 — Granted ( 1,000,760 ) 1,000,760 30.80 Exercised — ( 51,124 ) 7.93 Canceled 338,570 ( 339,307 ) 58.45 Restricted stock units granted ( 2,436,947 ) — Restricted stock units canceled 1,049,447 — Performance-based restricted stock units granted ( 126,041 ) — Performance-based restricted stock units canceled 51,829 — Balance as of December 31, 2023 12,003,394 4,012,903 31.76 6.6 39,115 2018 Plan annual increase (1) 3,689,000 — Granted ( 1,440,273 ) 1,440,273 27.07 Exercised — ( 609,495 ) 5.12 Canceled 211,931 ( 211,931 ) 49.71 Restricted stock units granted ( 5,004,910 ) — Restricted stock units canceled 1,164,260 — Market-based restricted stock units canceled 2,260,764 — Performance-based restricted stock units granted ( 913,829 ) — Performance-based restricted stock units adjusted for performance achievement ( 48,234 ) — Performance-based restricted stock units canceled 74,161 — Balance as of December 31, 2024 11,996,264 4,631,750 $ 32.98 7.1 $ 35,980 Vested and Exercisable as of December 31, 2024 2,429,278 $ 33.88 5.3 $ 30,205 121 Table of Contents (1) Effective as of January 1, 2022, 2023 and 2024, an additional 3,689,000 shares of common stock became available for issuance under the 2018 Plan, as a result of the operation of the automatic annual increase provision therein. Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised was $ 9.4 million, $ 1.0 million and $ 12.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. The weighted-average grant date fair value of options granted was $ 17.20 , $ 19.90 and $ 28.61 per share for the years ended December 31, 2024, 2023 and 2022, respectively. Future stock-based compensation for unvested options as of December 31, 2024 was $ 40.7 million, which is expected to be recognized over a weighted-average period of 2.1 years. Restricted Stock Units A summary of the Company’s restricted stock unit activity excluding the performance-based and market-based restricted stock units under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows: Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Balance as of January 1, 2022 1,498,553 $ 109.72 Granted 2,902,217 45.04 Granted in connection with the Joint Venture Acquisition 93,316 38.24 Vested and released ( 315,673 ) 96.36 Canceled ( 490,525 ) 90.52 Balance as of December 31, 2022 3,687,888 60.70 Granted 2,436,947 26.62 Vested and released ( 728,603 ) 60.07 Canceled ( 1,049,447 ) 56.85 Balance as of December 31, 2023 4,346,785 42.63 Granted 5,004,910 25.94 Vested and released ( 1,167,184 ) 46.36 Canceled ( 1,164,260 ) 42.61 Balance as of December 31, 2024 7,020,251 $ 30.11 Future stock-based compensation for unvested restricted stock units as of December 31, 2024 was $ 181.5 million, which is expected to be recognized over a weighted-average period of 2.2 years. Performance-based Restricted Stock Units Since November 2020, the Compensation Committee of the Board of Directors started to approve, and the Company started to grant performance-based restricted stock units, or PSUs, to its employees and non-employees. The PSUs granted consist of financial and/or operational metrics to be met over a performance period of approximately 0.6 to 4 years and an additional service period requirement of up to 2 years after the performance metrics are met. In addition, granted units might be adjusted when certain performance metrics are met. The PSUs are expected to be expensed over a period of approximately 0.6 to 4.5 years subject to meeting the respective performance metrics and service requirements. In November 2020 and May 2021, and as part of these PSU programs, the Company granted 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 the Company 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. 122 Table of Contents A summary of the Company’s PSU activity under the 2018 Plan and related information is as follows: Performance-based Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value Balance as of January 1, 2022 374,596 $ 116.58 Granted 26,935 37.50 Canceled ( 59,818 ) 114.94 Balance as of December 31, 2022 341,713 110.64 Granted 126,041 32.84 Vested and released ( 3,435 ) 32.86 Canceled ( 51,829 ) 80.91 Balance as of December 31, 2023 412,490 91.25 Granted 913,829 18.73 Vested and released ( 9,708 ) 94.73 Adjusted for performance achievement 48,234 32.84 Canceled ( 74,161 ) 102.14 Balance as of December 31, 2024 1,290,684 $ 37.07 Stock-based compensation recorded for the PSUs for the years ended December 31, 2024, 2023 and 2022 was $ 33.3 million, $ 2.6 million and $ 1.3 million, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of December 31, 2024 was $ 16.1 million, which is expected to be recognized over a weighted-average period of 1.9 years. Market-based Restricted Stock Units In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, or MSUs, under the 2018 Plan to each of the Company's Co-Chief Executive Officers, which is subject to the achievement of market-based share price goals established by the Board of Directors. The MSUs consist of three separate tranches and the vesting of each tranche is subject to the Company's common stock closing price being maintained at or above a predetermined share price goal for a period of 30 consecutive calendar days. The grant date fair values of the MSUs were determined using a Monte Carlo valuation model for each tranche. The related stock-based compensation expense for each tranche was recognized based on an accelerated attribution method over the estimated derived service period, which was the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. The weighted-average grant date fair value of the MSUs was $ 67.00 per share and the weighted-average derived service period was estimated to be in the range of 0.83 – 2.07 years. All three tranches of the MSUs were fully expensed as of June 30, 2022. Stock-based compensation for the MSUs for the year ended December 31, 2022 was $ 16.1 million, which was recorded in general and administrative expenses on the accompanying consolidated statement of operations. On January 1, 2021, Tranche 1 of the MSUs became vested because it had met both service requirement and market-based performance metrics. No MSUs were granted, vested or canceled during the years ended December 31, 2023, and 2022. As of December 31, 2023, 2,260,764 shares of the MSUs, with a weighted-average grant date fair value of $ 65.20 per share, were outstanding under the 2018 Plan. In March 2024, the Board of Directors approved to cancel the unvested MSUs and concurrently approved to grant new awards to the Co-Chief Executive Officers, which was accounted for as a modification, however no stock-based compensation expense was reversed as the Company's Co-Chief Executive Officers had fulfilled the service requirement. AMEA 2020 Equity Incentive Plan In August 2020, the board of directors of the Joint Venture approved its 2020 Equity Incentive Plan, or the AMEA 2020 Plan, under which the Joint Venture may grant equity incentive awards to its employees and non-employees. 123 Table of Contents In June 2022, in connection with the Joint Venture Acquisition, the Company issued a tender offer to purchase the Joint Venture's Class B common stock issued and issuable upon exercise of vested Joint Venture's stock options, at a price of $ 4.44 per share determined pursuant to an independent valuation. In July 2022, the Company settled the tender offer with the 39 grantees for a total amount of $ 13.7 million. In addition, in connection with the Joint Venture Acquisition, the unvested Joint Venture's stock options were cancelled and such grantees received replacement awards covering a number of shares of the Company's common stock. The replacement awards, valued at $ 4.1 million, are subject to the same vesting schedule that applied to the unvested Joint Venture's stock option immediately prior to the close of the Joint Venture Acquisition transaction, to be recognized over a weighted-average period of 2.2 years. The Company accounted for this as a modification which resulted in an immaterial incremental stock-based compensation expense. After the settlement of the tender offer in July 2022, the Company cancelled the AMEA 2020 Plan. A summary of the Joint Venture's stock option activity under the AMEA 2020 Plan and related information is as follows: Options Outstanding Shares Available for Grant Shares Subject to Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Balance as of January 1, 2022 340,928 3,652,219 $ 0.58 8.8 $ — Exercised — ( 2,051,645 ) 0.58 Canceled 82,407 ( 82,407 ) 0.58 Canceled in connection with the Joint Venture Acquisition ( 423,335 ) ( 1,518,167 ) 0.58 Balance as of December 31, 2022 — — $ — 0.0 $ — Stock‑Based Compensation Expense The following table presents the effect of employee and non‑employee related stock‑based compensation expense including the Joint Venture: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of precision oncology testing $ 5,315 $ 4,614 $ 5,498 Cost of development services and other 4,050 1,851 — Research and development expense 50,566 34,682 26,630 Sales and marketing expense 36,479 24,764 25,442 General and administrative expense 44,001 24,848 37,115 Total stock-based compensation expense $ 140,411 $ 90,759 $ 94,685 Valuation of Stock Options The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions: Year Ended December 31, 2024 2023 2022 Expected term (in years) 5.50 – 6.09 5.50 – 6.10 5.50 – 6.10 Expected volatility 67.4 % – 69.4 % 69.3 % – 70.5 % 63.3 % – 67.6 % Risk-free interest rate 3.8 % – 4.5 % 3.4 % – 4.5 % 1.9 % – 4.4 % Expected dividend yield — % — % — % 124 Table of Contents The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of common stock of the Company, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as follows: Fair Value of Common Stock The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market. Expected Term The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term. Expected Volatility Prior to the commencement of trading of the Company’s common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with its IPO, there was no active trading market for the Company’s common stock. Due to limited historical data for the trading of the Company’s common stock, expected volatility is estimated based on the average volatility for comparable publicly traded peer group companies in the same industry plus the Company's expected volatility for the available periods. The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty. Risk-Free Interest Rate The risk-free interest rate is based on the U.S. Treasury rate, with maturities similar to the expected term of the stock options. Expected Dividend Yield The Company does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero . 2018 Employee Stock Purchase Plan In September 2018, the Company’s Board of Directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan, or the ESPP. A total of 922,250 shares of common stock were initially reserved for issuance under the ESPP. On the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of shares of common stock available for issuance under the ESPP may be increased by the least of (i) 1,106,700 shares, (ii) 1 % of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors. Effective as of January 1, 2020, March 2, 2023 and February 23, 2024, an additional 942,614 , 1,026,194 and 1,106,700 shares of common stock became available for issuance under the ESPP. Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 10 % of their earnings for the purchase of the Company’s common stock at a discounted price per share. The price at which common stock is purchased under the ESPP is equal to 85 % of the fair market value of the Company’s common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods beginning on May 15 and November 15 of each year. Shares of common stock purchased under the ESPP were 577,758 , 464,870 and 307,953 , for the years ended December 31, 2024, 2023 and 2022, respectively. The total compensation expense related to the ESPP was $ 4.7 million, $ 5.1 million and $ 4.6 million, for the years ended December 31, 2024, 2023 and 2022, respectively. The grant date fair value of the stock purchase right granted under the ESPP was estimated on the first day of each offering period using the Black-Scholes option pricing model. The following assumptions used in the valuation were substantially consistent with the assumptions used to value stock options with the exception of the expected term which was based on the term of each purchase period: 125 Table of Contents Year Ended December 31, 2024 2023 2022 Expected term (in years) 0.50 0.50 0.50 Expected volatility 62.7 % – 64.2 % 51.5 % – 76.6 % 81.8 % – 92.0 % Risk-free interest rate 4.4 % – 5.4 % 5.2 % – 5.4 % 1.5 % – 4.5 % Expected dividend yield — % — % — % As of December 31, 2024, the unrecognized stock-based compensation expense related to the ESPP was $ 2.5 million , which is expected to be recognized over the remaining term of the offering period of 0.4 years. 12. Net Loss Per Share The following table sets forth the computation of the basic and diluted net loss per share: Year Ended December 31, 2024 2023 2022 (in thousands, except per share data) Net loss, basic and diluted $ ( 436,373 ) $ ( 479,449 ) $ ( 654,588 ) Net loss per share, basic and diluted $ ( 3.56 ) $ ( 4.28 ) $ ( 6.41 ) Weighted-average shares used in computing net loss per share, basic and diluted 122,745 111,988 102,178 Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share for the periods presented as they had an anti-dilutive effect: Year Ended December 31, 2024 2023 2022 (in thousands) Stock options 3,990 3,566 2,799 Restricted stock units 5,199 3,474 2,342 MSUs 484 2,261 2,261 PSUs 1,125 389 354 ESPP obligation 209 176 105 Convertible senior notes 8,225 8,225 8,225 Total 19,232 18,091 16,086 13. Income Taxes The components of (loss) income before provision for income taxes are as follows: Year Ended December 31, 2024 2023 2022 (in thousands) United States $ ( 437,179 ) $ ( 481,405 ) $ ( 659,757 ) Foreign 2,090 2,641 6,308 Total $ ( 435,089 ) $ ( 478,764 ) $ ( 653,449 ) 126 The components of the provision for income taxes are as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Current: State $ 126 $ 35 $ 127 Foreign 871 1,191 1,248 Total current tax expense 997 1,226 1,375 Deferred: Federal — — 18 State — — 3 Foreign 287 ( 541 ) ( 257 ) Total deferred tax expense 287 ( 541 ) ( 236 ) Total provision for income taxes $ 1,284 $ 685 $ 1,139 Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows: As of December 31, 2024 2023 (in thousands) Deferred tax assets: Net operating losses carryforwards $ 422,990 $ 344,314 Capitalized research and development costs 118,340 122,162 Property, equipment and intangible assets 14,429 12,161 Accruals and reserves 42,043 40,172 Research and development credits 71,330 62,533 Stock-based compensation 12,923 18,278 Lease liabilities 49,538 54,564 Other 2,379 73 Total deferred tax assets 733,972 654,257 Deferred tax liabilities: Right-of-use asset ( 36,426 ) ( 40,213 ) Equity security investments — ( 9,044 ) Other ( 313 ) ( 206 ) Total deferred tax liabilities ( 36,739 ) ( 49,463 ) Less: valuation allowance ( 696,473 ) ( 603,747 ) Net deferred tax assets $ 760 $ 1,047 127 The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company’s income tax expense for the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Taxes at the statutory federal rate $ ( 91,369 ) $ ( 100,553 ) $ ( 137,276 ) Change in valuation allowance 92,726 114,707 175,916 Stock-based compensation 12,012 8,077 7,905 Research and development credits ( 11,000 ) ( 14,549 ) ( 15,738 ) State taxes, net of federal benefits ( 15,918 ) ( 19,117 ) ( 28,522 ) Prior period true-up 7,962 8,212 — Other 6,871 3,908 ( 1,146 ) Total provision for income taxes $ 1,284 $ 685 $ 1,139 The Company’s actual tax expense differed from the statutory federal income tax expense using a tax rate of 21% for the years ended December 31, 2024, 2023 and 2022, primarily due to the change in valuation allowance, state income taxes net of federal benefits, withholding taxes, research and development tax credits, and stock-based compensation expenses. As of December 31, 2024 and 2023, the Company had net operating loss carryforwards of $ 1.6 billion and $ 1.4 billion for federal purposes, and $ 1.4 billion and $ 1.0 billion for state and local purposes, respectively, which may be subject to limitations as described below. If not utilized, these carryforwards will begin to expire in 2031 for federal purposes, and 2025 for state and local purposes. Federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. Some but not all states conform to the federal treatment of net operating losses. As of December 31, 2024, the Company had federal and state research and development tax credit carryforwards of $ 47.9 million, net of reserve of $ 25.8 million, and $ 29.7 million, net of reserve of $ 16.0 million, respectively. As of December 31, 2023, the Company had federal and state research and development tax credit carryforwards of $ 41.9 million, net of reserve of $ 22.6 million, and $ 26.1 million, net of reserve of $ 14.0 million, respectively. The federal research and development tax credit carryforwards will expire at various dates beginning in the year 2032. The Company’s state research and development tax credit carryforwards do not expire. Utilization of the net operating loss, or NOL, carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. Current laws impose substantial restrictions on the utilization of NOL carryforwards and credits in the event of an “ownership change” within a three-year period as defined by the Internal Revenue Code Section 382, or Section 382. If there should be an ownership change, the Company’s ability to utilize its NOL carryforwards and credits could be limited. The Company has not performed a Section 382 analysis. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the Company’s history of U.S. operating losses, the Company believes that the recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized and, accordingly, have provided a full valuation allowance against net U.S. deferred tax assets. The net change in total valuation allowance was an increase of $ 92.7 million, an increase of $ 114.7 million and an increase of $ 175.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a provision for deferred U.S. federal and state income tax expense and foreign withholding taxes on approximately $ 3.7 million of undistributed earnings of foreign subsidiaries indefinitely reinvested outside the United States. If the foreign earnings are repatriated, the income tax provision would be adjusted in the period the earnings are determined to be no longer indefinitely reinvested outside the United States. The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income, or GILTI, taxes as a current period expense rather than including these amounts in the measurement of deferred taxes. 128 Uncertain Tax Positions The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company recorded unrecognized tax benefits for uncertain tax positions of $ 42.1 million and $ 36.9 million as of December 31, 2024 and 2023, respectively, which, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets the deferred tax assets. A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Unrecognized tax benefits - Beginning of period $ 36,946 $ 29,634 $ 20,100 Increases related to current year’s tax positions 6,414 8,465 9,233 (Decreases) increases related to prior years’ tax positions ( 1,274 ) ( 1,153 ) 301 Unrecognized tax benefits - End of period $ 42,086 $ 36,946 $ 29,634 The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2024, 2023 and 2022, the Company recognized no interest and penalties associated with unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date. Due to the net operating loss carryforwards, all years remain open for income tax examination by tax authorities in the United States, various states and foreign tax jurisdictions in which the Company files tax returns. 14. Employee Benefit Plan The Company sponsors a defined contribution plan, or a 401(k) plan, and pursuant to its terms, eligible employees can elect to contribute to the 401(k) plan, subject to certain limitations, up to the lesser of the statutory maximum or 100 % of eligible compensation on a pre-tax basis. For the years ended December 31, 2024, 2023 and 2022, the Company contributed $ 7.9 million, $ 7.1 million and $ 6.7 million, respectively, to match employee contributions as permitted by the plan. The Company pays the administrative costs for the plan. 15. Segment and Geographic Information The Company operates as one operating segment, and the Company's chief operating decision makers, or the CODMs, are its Co-Chief Executive Officers. The CODMs review segment financial information presented on a consolidated basis, including revenue, gross profit, operating expenses, net loss and adjusted EBITDA, and considers budget-to-actual variances for the purposes of making operating decisions, assessing financial performance and allocating resources. The CODMs do not evaluate operating segment performance using asset information. 129 Table of Contents The following table presents a summary of the Company's segment information: Year Ended December 31, 2024 2023 2022 (in thousands) Revenue $ 739,016 $ 563,948 $ 449,538 Less: Cost of precision oncology testing (1) 254,551 200,202 141,691 Cost of development services and other (1) 24,886 18,863 8,126 Research and development expense (1) 295,866 329,826 341,650 Sales and marketing expense (1) 328,064 270,132 273,961 General and administrative expense (1) 133,352 129,247 121,023 Other segment items (2) 138,670 95,127 217,675 Net loss $ ( 436,373 ) $ ( 479,449 ) $ ( 654,588 ) (1) Excludes stock-based compensation and related employer payroll tax payments, contingent consideration, and amortization of intangible assets. (2) Includes stock-based compensation and related employer payroll tax payments, contingent consideration, amortization of intangible assets, interest income and expense, provision for income taxes, and other income and expense. The following table sets forth the Company’s revenue by geographic areas based on the customers’ locations: Year Ended December 31, 2024 2023 2022 (in thousands) United States $ 697,162 $ 526,524 $ 420,618 International 41,854 37,424 28,920 Total revenue $ 739,016 $ 563,948 $ 449,538 As of December 31, 2024 and 2023, 99 % and 98 %, respectively, of the Company’s long-lived assets and right-of-use assets are located in the United States. 16. Related Party Transactions As discussed in Note 3, Joint Venture , in May 2018, the Company and an affiliate of SoftBank formed and capitalized the Joint Venture to accelerate commercialization of its products in Asia, the Middle East and Africa. Prior to the completion of the Joint Venture Acquisition in June 2022, the Company had consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances had been eliminated in consolidation. 17. Subsequent Events In February 2025, the Company entered into privately negotiated exchange agreements with certain holders of its 2027 Notes, pursuant to which the Company issued $ 600.0 million aggregate principal amount of 1.25 % Convertible Senior Notes due 2031, or the New Notes, in exchange for the retirement of $ 659.3 million aggregate principal amount of the 2027 Notes, or the Transaction. The Company will settle conversions of the New Notes by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate of the New Notes is 16.0716 shares of common stock per $1,000 principal amount of the New Notes, which represents an initial conversion price of approximately $ 62.22 per share of common stock, which reflects a conversion premium of approximately 35 % to the last reported sale price of the Company’s common stock on February 6, 2025. The conversion rate and conversion price is subject to customary adjustments upon the occurrence of certain events. Following the closing of the Transaction, $ 490.7 million in aggregate principal amount of the 2027 Notes remain outstanding with terms unchanged. In connection with the Transaction, in February 2025, the Company repurchased $ 45.0 million of shares of its common stock from certain participants in the Transaction through a financial intermediary at a price of $ 46.09 per share, which was the last reported sale price of its common stock on February 6, 2025. 130 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.