MYRIAD GENETICS INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the related notes thereto included in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the SEC on February 28, 2024. “We,” “us,” “our,” “Myriad” and the “Company” as used in this Quarterly Report on Form 10‑Q refer to Myriad Genetics, Inc., a Delaware corporation, and its subsidiaries. Myriad, the Myriad logo, BRACAnalysis, BRACAnalysis CDx, Colaris, MyRisk, Myriad myRisk, MyRisk Hereditary Cancer, myChoice, Tumor BRACAnalysis CDx, MyChoice CDx, Prequel, Prequel with Amplify, Amplify, Foresight, Foresight Universal Plus, Precise Tumor, Precise Oncology Solutions, Precise Liquid, Precise MRD, FirstGene, SneakPeek, SneakPeek Early Gender DNA Test, SneakPeek Snap, Urosuite, Mygenehistory, Health.Illuminated., RiskScore, Prolaris, and GeneSight are registered trademarks or trademarks of Myriad. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. Cautionary Statement Regarding Forward-Looking Statements The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10‑Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes,” “seek,” “could,” “continue,” “likely,” “will,” “strategy” and “goal” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of known and unknown risks and uncertainties that could cause actual results, conditions, and events to differ materially and adversely from those anticipated. These risks include, but are not limited to: • the risk that sales and profit margins of our existing tests may decline; • the risk that we may not be able to operate our business on a profitable basis; • risks related to our ability to achieve certain revenue growth targets and generate sufficient revenue from our existing product portfolio or in launching and commercializing new tests to be profitable; • risks related to changes in governmental or private insurers’ coverage and reimbursement levels for our tests or our ability to obtain reimbursement for new tests at comparable levels to our existing tests, including risks to our business and financial results associated with UnitedHealthcare's recent update to its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, such as GeneSight, under its commercial and individual exchange benefit plans, effective January 1, 2025, and our pursuit of a resolution with respect thereto that may benefit the company and patients that could benefit from GeneSight; • risks related to increased competition and the development of new competing tests; • the risk that we may be unable to develop or achieve commercial success for additional tests in a timely manner, or at all; • the risk that we may not successfully develop new markets or channels for our tests; • the risk that licenses to the technology underlying our tests and any future tests are terminated or cannot be maintained on satisfactory terms; • risks related to delays or other problems with operating our laboratory testing facilities and the transition of such facilities to our new laboratory testing facilities; • risks related to public concern over genetic testing in general or our tests in particular; • risks related to regulatory requirements or enforcement in the United States and foreign countries and changes in the structure of the healthcare system or healthcare payment systems; • risks related to our ability to obtain new corporate collaborations or licenses and acquire or develop new technologies or businesses on satisfactory terms, if at all; 24 Table of Contents • risks related to our ability to successfully integrate and derive benefits from any technologies or businesses that we license, acquire, or develop; • the risk that we are not able to secure additional financing to fund our business, if needed, in a timely manner or on favorable terms, if it all; • risks related to our projections or estimates about the potential market opportunity for our current and future products; • the risk that we or our licensors may be unable to protect or that third parties will infringe the proprietary technologies underlying our tests; • the risk of patent-infringement claims or challenges to the validity of our patents; • risks related to changes in intellectual property laws covering our tests, or patents or enforcement, in the United States and foreign countries; • risks related to security breaches, loss of data and other disruptions, including from cyberattacks; • risks of new, changing and competitive technologies in the United States and internationally, and that we may not be able to keep pace with the rapid technology changes in our industry, or properly leverage new technologies to achieve or sustain competitive advantages in our products; • the risk that we may be unable to comply with financial or operating covenants under our credit or lending agreements; • the risk that we may not be able to maintain effective disclosure controls and procedures and internal control over financial reporting; • risks related to current and future investigations, claims or lawsuits, including derivative claims, product or professional liability claims, and risks related to the amount of our insurance coverage limits and scope of insurance coverage with respect thereto; and • other factors discussed under the heading "Risk Factors" contained in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on February 28, 2024, as updated in Part II, Item 1A of our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2024, and subsequent filings we make with the SEC. In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q, or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise except as required by law. All forward-looking statements in this Quarterly Report on Form 10-Q attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. General We are a leading genetic testing and precision medicine company dedicated to advancing health and well-being for all. We develop and offer tests that help assess the risk of developing disease or disease progression and guide treatment decisions across medical specialties where genetic insights can significantly improve patient care and lower health care costs. Our genetic tests provide insights that help people take control of their health and enable healthcare providers to better detect, treat, and prevent disease. Personalized genetic data and digital and virtual consumer trends are converging to change traditional models of care. We believe significant growth opportunities exist to help patient populations with pressing health care needs through innovative genetic and precision medicine solutions and services. Our focus is on innovation and growth in three key areas where we have specialized products, capabilities, and expertise: Oncology, Women's Health, and Pharmacogenomics. The pillars of our long-term growth strategy are founded on investments in science and innovation, technology-enabled operations, an elevated customer experience, strong commercial execution, and scalable operations. We believe our path to continued growth is driven by articulating our clinical differentiation, raising awareness with patients who we believe would benefit from our testing products, and innovation that improves clinical outcomes, ease of use, and access. By investing in technology-enabled commercial tools, new laboratory facilities, advanced automation, and standardized processes and technology, we believe we will be able to reduce complexity and cost while enhancing our ability to scale and grow. In June 2024, we launched the Universal Plus Panel to our Foresight Carrier Screen or the Foresight Universal Plus Test, which is an expanded carrier screening test. We also plan to launch new products, such as FirstGene, Precise Liquid, and Precise minimal residual disease, or MRD, which we expect will help accelerate our growth. We intend to develop and enhance our products and services to support growth, improve patient and provider experience, and reach more patients of all backgrounds. We are committed to disciplined management of a key set of initiatives to fulfill our mission and drive long-term growth and profitability. 25 Table of Contents Business Updates Our recent significant business updates and financial highlights include the following: • Revenue growth of 11% year-over-year for the quarter ended September 30, 2024. • Third quarter 2024 testing volumes grew 6% year-over-year, driven by 10% growth year-over-year in Pharmacogenomics test volumes, 5% growth year-over-year in Hereditary Cancer test volumes, and 3% growth year-over-year in Prenatal test volumes. • In October 2024, we announced five research collaborations to study the use of MRD testing in Breast Cancer. • In October 2024, we announced a joint effort with Ultima Genomics to explore the UG 100 TM sequencing platform and its ppmSeq TM technology to advance clinical testing. • In October 2024, we announced a third patent granted for MRD with an early priority date. • In August 2024, Peach State Health Plan, a managed Medicaid plan in Georgia, added GeneSight to its medical policy. The Peach State Plan is part of the Centene network of managed Medicaid plans. On November 1, 2024, UnitedHealthcare updated its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial and individual exchange benefit plans, effective January 1, 2025. We recognized approximately $40.0 million in revenue for GeneSight volume from UnitedHealthcare under these commercial and individual exchange plans during the last twelve months ended September 30, 2024. We do not believe that the updated policy affects coverage of GeneSight by UnitedHealthcare under Medicare Advantage and managed Medicaid plans. While we are still assessing the full impact of UnitedHealthcare's change in its GeneSight coverage policy, including our ability to offset the loss in GeneSight coverage, we anticipate that this change will negatively impact revenue in fiscal year 2025 and thereafter. In addition, please refer to Note 6, "Goodwill and Intangible Assets" in the notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Item 1A, "Risk Factors" in Part II of this Quarterly Report on Form 10-Q for potential impacts of UnitedHealthcare's change on goodwill in our Pharmacogenomics reporting unit. Results of Operations for the Three Months Ended September 30, 2024 and 2023 The results of operations for the three months ended September 30, 2024 and 2023 are discussed below. Revenue The following table summarizes year-over-year revenue changes in our core product categories: Three months ended September 30, % of Total Revenue (in millions) 2024 2023 Change 2024 2023 Testing revenues: Hereditary Cancer $ 90.5 $ 86.5 $ 4.0 43% 45% Tumor Profiling 31.6 30.2 1.4 15% 16% Prenatal 43.5 39.5 4.0 20% 20% Pharmacogenomics 47.7 35.7 12.0 22% 19% Total revenue $ 213.3 $ 191.9 $ 21.4 100% 100% The following table summarizes testing volume changes in our core product categories: Three months ended September 30, (in thousands) 2024 2023 % Change Product volumes: Hereditary Cancer 74 71 5 % Tumor Profiling 13 13 — % Prenatal 162 156 3 % Pharmacogenomics 127 116 10 % Total 376 356 6 % 26 Table of Contents Test revenues increased $21.4 million for the three months ended September 30, 2024 compared to the same period in the prior year primarily due to both an increase in testing volumes and an increase in the average revenue per test, due in part to changes in contracted price and operational improvements. Pharmacogenomics revenues increased $12.0 million for the three months ended September 30, 2024 compared to the same period in the prior year due to a 22% increase in the average revenue per test and a 10% increase in testing volume. Average revenue per test increased primarily due to a change in estimate. We expect that Pharmacogenomics revenues in fiscal year 2025 and thereafter will be negatively impacted by UnitedHealthcare's recent change in GeneSight test coverage under its commercial and individual exchange benefits plans. Hereditary Cancer revenues increased $4.0 million for the three months ended September 30, 2024 compared to the same period in the prior year primarily due to a 5% increase in testing volume. Prenatal revenues increased $4.0 million for the three months ended September 30, 2024 compared to the same period in the prior year due to a 6% increase in average revenue per test and a 3% increase in testing volume. Cost of Sales Three months ended September 30, (in millions) 2024 2023 Change Cost of testing revenue $ 63.5 $ 57.6 $ 5.9 Cost of testing revenue as a % of total revenue 29.8 % 30.0 % Cost of testing revenue for the three months ended September 30, 2024 increased $5.9 million compared to the same period in the prior year primarily due to an increase in testing volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests. Research and Development Expense Three months ended September 30, (in millions) 2024 2023 Change Research and development expense $ 28.5 $ 24.0 $ 4.5 Research and development expense as a % of total revenue 13.4 % 12.5 % Research and development expense for the three months ended September 30, 2024 increased by $4.5 million compared to the same period in the prior year primarily due to additional investments in research and development related to increased headcount and laboratory expenses. Selling, General, and Administrative Expense Three months ended September 30, (in millions) 2024 2023 Change Selling, general, and administrative expense $ 139.1 $ 136.1 $ 3.0 Selling, general, and administrative expense as a % of total revenue 65.2 % 70.9 % Selling, general, and administrative expense in the current period was generally consistent with the expenses incurred in the same period of the prior year. Legal Settlements Three months ended September 30, (in millions) 2024 2023 Change Legal settlements $ — $ 34.3 $ (34.3) Legal settlements as a % of total revenue — % 17.9 % There were no legal settlements in the three months ended September 30, 2024. Legal settlements in the three months ended September 30, 2023 consisted of $34.3 million in connection with accruals for pending settlements. 27 Table of Contents Goodwill and Long-lived Asset Impairment Charges Three months ended September 30, Change (in millions) 2024 2023 Goodwill and long-lived asset impairment charges $ 2.2 $ — $ 2.2 Goodwill and long-lived asset impairment charges as a % of total revenue 1.0 % — % Goodwill and long-lived asset impairment charges in the three months ended September 30, 2024 consisted of $2.2 million of losses in connection with the sale of the EndoPredict business. There were no corresponding impairment charges in the same period of the prior year. Other Income (Expense), Net Three months ended September 30, (in millions) 2024 2023 Change Other income (expense), net $ (1.2) $ (1.1) $ (0.1) Other income (expense), net remained consistent for the three months ended September 30, 2024 as compared to the same period in the prior year. Income Tax Expense Three months ended September 30, (in millions) 2024 2023 Change Income tax expense $ 0.9 $ 0.1 $ 0.8 Effective tax rate (4.2) % (0.2) % Our tax rate is the product of a U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.4%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period. For the three months ended September 30, 2024, there was $0.9 million income tax expense and our effective tax rate was (4.2)%. For the three months ended September 30, 2023, there was $0.1 million income tax expense and our effective tax rate was (0.2)%. For the three months ended September 30, 2024 and 2023, our effective tax rate differs from the U.S. federal statutory rate primarily due to the recognition of valuation allowances. Due to our cumulative loss and the exhaustion of future taxable income from the reversal of taxable temporary differences, our estimated annual effective tax rate for the current year includes a valuation allowance against the majority of the current year increase in deferred tax assets. Results of Operations for the Nine Months Ended September 30, 2024 and 2023 The results of operations for the nine months ended September 30, 2024 and 2023 are discussed below. Revenue The following table summarizes year-over-year revenue changes in our core product categories: Nine months ended September 30, % of Total Revenue (in millions) 2024 2023 Change 2024 2023 Testing revenues: Hereditary Cancer $ 270.1 $ 238.9 $ 31.2 43% 43% Tumor Profiling 95.1 103.5 (8.4) 15% 19% Prenatal 132.2 111.3 20.9 21% 20% Pharmacogenomics 129.6 102.9 26.7 21% 18% Total revenue $ 627.0 $ 556.6 $ 70.4 100% 100% 28 Table of Contents The following table summarizes testing volume changes in our core product categories: Nine months ended September 30, (in thousands) 2024 2023 % Change Product volumes: Hereditary Cancer 219 207 5% Tumor Profiling 41 45 (9)% Prenatal 506 469 8% Pharmacogenomics 380 343 11% Total 1,146 1,064 8% Test revenues increased $70.4 million for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to an increase in the average revenue per test across the majority of our products, due in part to changes in contracted price and operational improvements, as well as an increase in testing volumes. For the nine months ended September 30, 2024, we recorded $17.3 million of revenue as a change of estimate related to previously delivered tests, as compared to the nine months ended September 30, 2023, in which we recorded a $6.2 million decrease in revenue as a change of estimate related to previously delivered tests. Hereditary Cancer revenues increased $31.2 million for the nine months ended September 30, 2024 compared to the same period in the prior year due to an 8% increase in average revenue per test and a 5% increase in testing volume. Pharmacogenomics revenues increased $26.7 million for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to a 13% increase in the average revenue per test, which was partially due to changes in the estimated revenue per test related to prior periods, and an 11% increase in testing volume. We expect that Pharmacogenomics revenues in fiscal year 2025 and thereafter will be negatively impacted by UnitedHealthcare's recent change in GeneSight test coverage under its commercial and individual exchange benefits plans. Prenatal revenues increased $20.9 million for the nine months ended September 30, 2024 compared to the same period in the prior year due to a 10% increase in average revenue per test and an 8% increase in testing volume. Tumor Profiling revenues decreased $8.4 million for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to a decrease in testing volume for MyChoice CDx, which was largely driven by MyChoice CDx studies that occurred in the prior year period. Cost of Sales Nine months ended September 30, (in millions) 2024 2023 Change Cost of testing revenue $ 192.5 $ 174.6 $ 17.9 Cost of testing revenue as a % of total revenue 30.7 % 31.4 % Cost of testing revenue for the nine months ended September 30, 2024 increased $17.9 million compared to the same period in the prior year primarily due to an increase in testing volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests. Research and Development Expense Nine months ended September 30, (in millions) 2024 2023 Change Research and development expense $ 81.2 $ 67.7 $ 13.5 Research and development expense as a % of total revenue 13.0 % 12.2 % Research and development expense for the nine months ended September 30, 2024 increased by $13.5 million compared to the same period in the prior year primarily due to additional investments in research and development, consisting of an $8.1 million increase in compensation costs and $4.5 million increase in laboratory expenses. Compensation expense increased in part due to an increase in the average cost per employee for the current period compared to the same period in the prior year. 29 Table of Contents Selling, General, and Administrative Expense Nine months ended September 30, (in millions) 2024 2023 Change Selling, general, and administrative expense $ 424.0 $ 428.5 $ (4.5) Selling, general, and administrative expense as a % of total revenue 67.6 % 77.0 % Selling, general, and administrative expense decreased $4.5 million for the nine months ended September 30, 2024 primarily due to a decrease in facility costs associated with our real estate optimization strategy. Legal Settlements Nine months ended September 30, (in millions) 2024 2023 Change Legal settlements $ — $ 111.8 $ (111.8) Legal settlements as a % of total revenue — % 20.1 % There were no legal settlements in the nine months ended September 30, 2024. Legal settlements for the nine months ended September 30, 2023 consisted of $111.8 million in connection with accruals for pending settlements. Goodwill and Long-lived Asset Impairment Charges Nine months ended September 30, Change (in millions) 2024 2023 Goodwill and long-lived asset impairment charges $ 13.8 $ — $ 13.8 Goodwill and long-lived asset impairment charges as a % of total revenue 2.2 % — % Goodwill and long-lived asset impairment charges in the nine months ended September 30, 2024 included $12.4 million of losses in connection with the sale of the EndoPredict business. There were no corresponding impairment charges in the same period of the prior year. Other Income (Expense), Net Nine months ended September 30, (in millions) 2024 2023 Change Other income (expense), net $ 0.1 $ (3.9) $ 4.0 Other income (expense), net increased for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to the $2.2 million gain recognized on the February 2024 acquisition of Precise assets and laboratory from Intermountain Health in the current period, an additional $1.3 million loss due to foreign currency fluctuations in the current period and the prior period including an additional $1.4 million in expense from the sale of investments. Income Tax Expense Nine months ended September 30, (in millions) 2024 2023 Change Income tax expense $ 0.4 $ 2.2 $ (1.8) Effective tax rate (0.5) % (1.0) % Our tax rate is the product of a blended U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.4%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period. Income tax expense for the nine months ended September 30, 2024 was $0.4 million and our effective tax rate was (0.5)%. Income tax expense for the nine months ended September 30, 2023 was $2.2 million and our effective tax rate was (1.0)%. For the nine months ended September 30, 2024 and 2023, our recognized effective tax rate differs from the U.S. federal statutory rate primarily due to the recognition of valuation allowances. Due to our cumulative loss and the exhaustion of future taxable income from the reversal of taxable temporary differences, our estimated annual effective tax rate for the current year includes a valuation allowance against the majority of the current year increase in deferred tax assets. 30 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity are our cash and cash equivalents, our expected cash flows from operations, and, in certain circumstances as discussed below, amounts available for borrowing under our asset-based revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, and the other lender parties thereto, or the ABL Facility. As of September 30, 2024, we had cash and cash equivalents of $99.9 million and availability under the ABL Facility was $48.8 million, subject to the minimum availability requirement under the ABL Facility. Our capital deployment strategy focuses on use of resources in the key areas of research and development, technology and acquisitions. We believe that investing organically through research and development and new product development or acquisitively to support our business strategy provides the best return on invested capital. Our ABL Facility has a total maximum principal commitment of $115.0 million. The ABL Facility requires that we and our subsidiaries guaranteeing the indebtedness, on a consolidated basis, maintain minimum liquidity of $60.0 million and minimum availability of $25.0 million at all times before achieving a fixed charge coverage ratio of 1.0 to 1.0 and, thereafter, to maintain a fixed charge coverage ratio of 1.0 to 1.0 until achieving availability under the ABL Facility of greater of (a) $10.6 million and (b) 12.5% of the lesser of the maximum commitment amount and the borrowing base for a period of 30 consecutive days. As of September 30, 2024, we had $40.0 million outstanding under the ABL Facility and availability under the ABL Facility was $48.8 million, subject to the minimum availability requirement under the ABL Facility. We believe that our existing capital resources will be sufficient to meet our projected operating requirements for at least the next 12 months. Our available capital resources, however, may be consumed more rapidly than currently expected, or may be insufficient for our business needs for many reasons, including as a result of our operational cash needs, capital expenditures, and litigation related costs not covered by, or above the limits set forth in, our insurance. In addition, we are subject to covenants under our ABL Facility which could limit our ability to incur additional indebtedness or impact our ability to pursue other financing. If we do not generate sufficient cash from operations, if our capital resources are consumed more rapidly than expected, or if we no longer have access to additional funds under our ABL Facility and we are unable to secure additional funds on acceptable terms, or at all, we may be forced to delay, scale back or eliminate some of our sales and marketing efforts, research and development activities, or other operations; or delay development of our tests in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals could be adversely affected. From time to time, we enter into purchase commitments or other agreements that may materially impact our liquidity position in future periods. In April 2024, we entered into an amendment of our lease in west Salt Lake City, Utah to include approximately 63,000 additional square feet. The lease has a term of 12 years, which is expected to commence in the second half of 2026. Total future rent payments for the additional space are approximately $18.2 million. Because of the technical nature of our business and our focus on science, research, and development, we are highly dependent upon our ability to attract and retain highly qualified and experienced management, scientific, and technical personnel. Loss of the services of or failure to recruit additional key management, scientific, and technical personnel and other qualified personnel who are necessary to operate our business would adversely affect our business, and it may have a material adverse effect on our business as a whole. Additionally, disruptions to our supply chain could cause shortages of critical materials required to conduct our business, which may have a material adverse effect on our business as a whole. In addition, as discussed below, inflation has had, and may continue to have, an impact on the costs we incur to attract and retain qualified personnel, costs to generate sales and produce testing results, and costs of laboratory supplies. Third-party payors, including state and federal health care programs such as Medicare, managed care organizations, and other private health insurers, are increasingly attempting to contain health care costs by limiting or denying coverage for certain tests and reducing reimbursement rates for both new and existing tests. We have experienced and may continue to experience coverage limitations or denials for many of our products. For example, on November 1, 2024, UnitedHealthcare updated its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial and individual exchange benefit plans, effective January 1, 2025. We recognized approximately $40.0 million in revenue for GeneSight volume from UnitedHealthcare under these commercial and individual exchange plans during the last twelve months ended September 30, 2024. While we are still assessing the full impact of UnitedHealthcare's change in its GeneSight coverage policy, including our ability to offset the loss in GeneSight coverage, we anticipate that this change would negatively impact our revenue, profitability and cash flow in fiscal year 2025 and thereafter. 31 Table of Contents The following table represents the balances of cash, cash equivalents and marketable investment securities as of the dates set forth in the table below: (in millions) September 30, 2024 December 31, 2023 Change Cash and cash equivalents $ 99.9 $ 132.1 $ (32.2) Marketable investment securities — 8.8 (8.8) Cash, cash equivalents and marketable investment securities $ 99.9 $ 140.9 $ (41.0) The decrease in cash, cash equivalents and marketable investment securities as of September 30, 2024 as compared to December 31, 2023 was primarily driven by $15.3 million in cash used by operations, $15.4 million in cash used for capital expenditures, $8.4 million in cash used for the capitalization of internal-use software, and $9.2 million in cash used for the payment of withholding tax for the issuance of common stock, net of proceeds from the issuance of common stock. The decrease in cash was partially offset by $8.8 million in cash received from the sale of our EndoPredict business. The following table represents the Condensed Consolidated Cash Flow Statement: Nine Months Ended September 30, (in millions) 2024 2023 Change Cash flows used in operating activities $ (15.3) $ (56.2) $ 40.9 Cash flows provided by (used in) investing activities (6.0) 43.9 (49.9) Cash flows provided by (used in) financing activities (9.5) 31.0 (40.5) Effect of foreign exchange rates on cash, cash equivalents, and restricted cash (0.3) (0.1) (0.2) Net increase (decrease) in cash, cash equivalents, and restricted cash (31.1) 18.6 (49.7) Cash, cash equivalents, and restricted cash at the beginning of the period 140.9 66.4 74.5 Cash, cash equivalents, and restricted cash at the end of the period $ 109.8 $ 85.0 $ 24.8 Cash Flows from Operating Activities We used less cash for operating activities for the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to an improvement in core operations which drove a 13% increase in revenues and an 8% decrease in expenses as a percentage of revenue, excluding non-cash expenses for goodwill and long-lived asset impairment charges and accrued legal settlements. In the nine months ended September 30, 2023, we received $16.3 million in tenant improvement allowance reimbursements that did not reoccur during the nine months ended September 30, 2024. Cash Flows from Investing Activities The decrease in cash flows used in investing activities for the nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to the $94.7 million decrease in cash flows from maturities and sales of marketable investment securities in the current period, partially offset by a $37.8 million decrease in capital expenditures in the current period in connection with the completion of the build-out of new facilities in the prior year. Cash Flows from Financing Activities The decrease in cash flows used in financing activities for the nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to proceeds of $40.0 million under the ABL Facility in the prior year period. Effects of Inflation While inflation continues to return to more moderate levels in 2024, inflation has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to generate sales and produce testing results, and costs of laboratory supplies. Inflationary costs have impacted our profitability and may continue to adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. An increase in interest rates in the future may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, additional funding. 32 Table of Contents Critical Accounting Estimates Critical accounting estimates are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a further discussion of our critical accounting estimates, see our Annual Report on Form 10-K filed with the SEC on February 28, 2024. No significant changes to our accounting policies took place during the three months ended September 30, 2024.