What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-08-06 · 110 added, 165 removed, 181 unchanged (60% of the section changed)

13 unchanged sentences

• 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 our new tests at comparable levels to our existing tests, including with respect to UnitedHealthcare's coverage decisions to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test;

• risks related to recent changes in the our senior management team and the successful implantation of the company's strategic plan;

• risks related to changes in governmental or private insurers’ coverage and reimbursement levels for our tests or our ability to obtain reimbursement for our new tests at comparable levels to our existing tests, including with respect to UnitedHealthcare's coverage decisions not to provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test;

• risks related to increased competition and the development of new competing tests;

17 unchanged sentences

• 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;

• 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, 2025 as updated under the heading "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q filed with the SEC on May 7, 2025 and this Quarterly Report on Form 10-Q, and subsequent filings we make with the SEC.

• 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, 2025 as updated under the heading "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q filed with the SEC on May 7, 2025 and August 6, 2025, and this Quarterly Report on Form 10-Q, 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.

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Our recent significant business updates include the following:

• In July 2025, we closed a $125 million secured term debt financing with OrbiMed (“the Agreement”), a leading global healthcare investment firm.

This Agreement includes an option to borrow up to an additional $75 million.

• In July 2025, we earned the Great Place to Work Certification for the third consecutive year.

• In June 2025, we launched early access of FirstGene Multiple Prenatal Screen, a prenatal genetic risk assessment screen that combines several testing modalities into a single assay, in a large, multi-site study, called CONNECTOR.

• In May 2025, at the American Society of Clinical Oncology (ASCO) Annual Meeting, our partner the National Cancer Center Hospital East in Japan presented MRD data from the MONSTAR-SCREEN-3 prospective study which we believe demonstrates successful pan-cancer implementation of whole genome sequencing (WGS)-based personalized circulating tumor DNA, or ctDNA, detection.

In more than 100 patients, the interim results of this study show 100% baseline detection of ctDNA across tumor types, including those traditionally challenging to assess, detection of tumor fractions as low as 0.0001%, and a lead time in detecting recurrence compared to imaging.

We believe this data demonstrates the potential importance of our ultra-sensitive Precise MRD test compared to first-generation MRD tests.

Results of Operations for the Three Months Ended June 30, 2025 and 2024

The results of operations for the three months ended June 30, 2025 and 2024 are discussed below.

• In October 2025, we announced the addition of two genes, F8 and FXN, to the Foresight Carrier Screen Universal Plus Panel.

• In September 2025, we announced a strategic collaboration with SOPHiA Genetics, Inc.

to develop and provide pharmaceutical companies with an innovative global liquid biopsy companion diagnostic (CDx) test.

• In September 2025, we announced the publication of a new meta-analysis of six prospective controlled studies that included 3,532 adults with major depressive disorder (MDD).

The meta-analysis showed that when GeneSight Psychotropic test results were available to treating clinicians, there were significant improvements in response and remission rates for patients with MDD, compared to treatment as usual.

• Effective August 16, 2025, Benjamin R.

Wheeler was appointed Chief Financial Officer.

Results of Operations for the Three Months Ended September 30, 2025 and 2024

The results of operations for the three months ended September 30, 2025 and 2024 are discussed below.

The following table summarizes year-over-year revenue changes in our core product categories:

Three months ended June 30, % of Total Revenue

Three months ended September 30, % of Total Revenue

(in millions) 2025 2024 Change 2025 2024

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The following table summarizes volume changes in our core product categories:

Three months ended June 30,

Three months ended September 30,

(in thousands) 2025 2024 % Change

3 unchanged sentences

Pharmacogenomics 137 127 8 %

384 389 (1) %

Revenues increased $1.6 million for the three months ended June 30, 2025 compared to the same period in the prior year primarily due to an increase in the average revenue per test, due in part to changes in contracted price and operational improvements, which was partially offset by a 1% decrease in volume.

Hereditary Cancer revenues increased $4.8 million for the three months ended June 30, 2025 compared to the same period in the prior year primarily due to a 7% increase in volume.

Prenatal revenues increased $3.2 million for the three months ended June 30, 2025 compared to the same period in the prior year due to a 17% increase in average revenue per test partially offset by an 8% decrease in volume.

These increases in Hereditary Cancer and Prenatal revenues were partially offset by decreases in Pharmacogenomics and Tumor Profiling revenue.

Pharmacogenomics revenues decreased $5.2 million for the three months ended June 30, 2025 compared to the same period in the prior year due to a 16% decrease in average revenue per test.

We expect that Pharmacogenomics revenues during the remainder of fiscal year 2025 and thereafter will continue to be negatively impacted by UnitedHealthcare's change in GeneSight test coverage under its commercial and individual exchange benefits plans.

Tumor Profiling revenue decreased $1.2 million primarily due to the sale of our EndoPredict business in August 2024.

Revenues decreased $7.6 million for the three months ended September 30, 2025 compared to the same period in the prior year primarily due to $8.6 million of revenue recognized during the three months ended September 30, 2024 for tests in which the performance obligation was met in a prior period.

For the three months ended September 30, 2025, revenue for tests in which the performance obligation was met in a prior period was immaterial.

Pharmacogenomics revenues decreased $9.0 million for the three months ended September 30, 2025 compared to the same period in the prior year due to a 25% year-over-year decrease in average revenue per test, due to revenue recognized for the three months ended September 30, 2024 for tests in which the performance obligation was met in a prior period and UnitedHealthcare's change in GeneSight test coverage under its commercial, individual exchange, and certain managed Medicaid benefit plans.

We expect this coverage decision will continue to negatively affect Pharmacogenomics revenue in future periods.

Cost of Revenue

Three months ended June 30,

Three months ended September 30,

(in millions) 2025 2024 Change % Change

3 unchanged sentences

30.1 % 29.8 %

Cost of revenue for the three months ended June 30, 2025 decreased $3.1 million compared to the same period in the prior year primarily due to a reduction in the cost per test for the current period driven by reductions in the cost of laboratory reagents and supplies.

Research and Development Expense

Three months ended June 30,

Cost of revenue for the three months ended September 30, 2025 decreased $1.6 million compared to the same period in the prior year primarily due to a reduction in the cost per test for the current period driven by reductions in the cost of laboratory reagents and supplies.

Operating Expenses

Three months ended September 30,

(in millions) 2025 2024 Change % Change

Research and development expense

Research and development expense as a % of total revenue 12.0 % 12.8 %

Research and development expenses for the three months ended June 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

We remain committed to disciplined cost management while maintaining investments in key strategic areas, such as research and development.

Sales and Marketing Expense

Three months ended June 30,

(in millions) 2025 2024 Change % Change

$ 28.2 $ 28.5 $ (0.3) (1) %

Sales and marketing expense $ 71.0 $ 69.9 $ 1.1 2 %

General and administrative expense

$ 67.9 $ 69.2 $ (1.3) (2) %

Sales and marketing expense as a % of total revenue

Total operating expenses

$ 167.1 $ 167.6 $ (0.5) — %

Sales and marketing expenses for the three months ended June 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

General and Administrative Expense

Three months ended June 30,

(in millions) 2025 2024 Change % Change

General and administrative expense

Research and development expense as a % of total revenue

13.7 % 13.4 %

Sales and marketing expense as a % of total revenue 34.5 % 32.8 %

General and administrative expense as a % of total revenue

33.0 % 32.4 %

General and administrative expense decreased by $5.3 million for the three months ended June 30, 2025 compared to the prior year primarily due to a decrease in consulting fees, a decrease in amortization for previously impaired intangible assets, and compensation expenses.

Total operating expenses as a % of total revenue

81.2 % 78.6 %

For the three months ended September 30, 2025, operating expenses were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

We remain committed to disciplined cost management while maintaining investments in key strategic areas, such as research and development.

Goodwill and Long-lived Asset Impairment Charges

Three months ended June 30, Change

Three months ended September 30, Change

(in millions) 2025 2024 % Change

1 unchanged sentence

Goodwill and long-lived asset impairment charges as a % of total revenue — % 1.0 %

Goodwill and long-lived asset impairment charges of $316.7 million in the three months ended June 30, 2025 consisted of goodwill impairment charges of $234.7 million and intangible asset impairment charges of $82.0 million related to our Women's Health and Pharmacogenomics reporting units.

For additional information regarding the testing and analysis performed, refer to "Critical Accounting Estimates" below.

There were no goodwill and long-lived asset impairment charges in the three months ended September 30, 2025.

In the prior year, we recognized $2.2 million of losses in connection with the sale of the EndoPredict business.

Other Income (Expense), Net

Three months ended June 30,

Three months ended September 30,

(in millions) 2025 2024 Change % Change

Other income (expense), net $ (2.9) $ (1.2) $ (1.7) 141.7 %

Other income (expense), net for the three months ended June 30, 2025 decreased $0.7 million as compared to the same period in the prior year due to an increase in interest expense.

Income Tax Benefit

Three months ended June 30,

Other expense, net for the three months ended September 30, 2025 increased $1.7 million as compared to the same period in the prior year primarily due to an increase in interest expense related to our new $125 million term loan secured in July 2025.

Income Tax Expense

Three months ended September 30,

(in millions) 2025 2024 Change % Change

Income tax benefit

Income tax expense

$ 1.2 $ 0.9 $ 0.3 33.3 %

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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 June 30, 2025, there was $0.1 million income tax benefit and our effective tax rate was 0.0%.

For the three months ended June 30, 2024, there was $0.5 million income tax benefit and our effective tax rate was 1.3%.

For the three months ended June 30, 2025 and 2024, our effective tax rate differs from the U.S.

federal statutory rate primarily due to the recognition of valuation allowances and uncertain tax positions.

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 period includes a valuation allowance against the majority of the current year increase in deferred tax assets, including any tax-deductible loss from the $316.7 million of goodwill and long-lived impairment charges recorded during the three months ended June 30, 2025.

Results of Operations for the Six Months Ended June 30, 2025 and 2024

The results of operations for the six months ended June 30, 2025 and 2024 are discussed below.

For the three months ended September 30, 2025, there was $1.2 million income tax expense and our effective tax rate was (4.6)%.

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, 2025 and 2024, our effective tax rate differs from the U.S.

federal statutory rate primarily due to the recognition of valuation allowances.

Results of Operations for the Nine Months Ended September 30, 2025 and 2024

The results of operations for the nine months ended September 30, 2025 and 2024 are discussed below.

The following table summarizes revenue changes in our core product categories:

Six months ended June 30, % of Total Revenue

Nine months ended September 30, % of Total Revenue

(in millions) 2025 2024 Change 2025 2024

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The following table summarizes volume changes in our core product categories:

Six months ended June 30,

Nine months ended September 30,

(in thousands) 2025 2024 % Change

3 unchanged sentences

Pharmacogenomics 399 380 5%

Revenue decreased $4.7 million for the six months ended June 30, 2025 compared to the same period in the prior year.

For the six months ended June 30, 2024, we recognized $9.3 million of revenue for tests in which the performance obligation was met in a prior period, including $3.0 million in revenue due to a retroactive coverage change by a payor for one of its prenatal products.

For the six months ended June 30, 2025, revenue for tests in which the performance obligation was met in a prior period was immaterial.

Pharmacogenomics revenue decreased $13.1 million for the six months ended June 30, 2025 compared to the same period in the prior year due primarily to a 19% decrease in the average revenue per test.

Pharmacogenomics revenue for the six months ended June 30, 2025 has been negatively impacted by UnitedHealthcare’s change in coverage of the GeneSight test under its commercial, individual exchange benefit, and certain managed Medicaid plans.

We expect this coverage decision will continue to negatively affect revenue in future periods.

Tumor Profiling revenue decreased $2.8 million for the six months ended June 30, 2025 compared to the same period in the prior year due primarily to a decrease in volume for EndoPredict due to the sale of our EndoPredict business in August 2024.

These decreases in revenue were partially offset by growth in our Prenatal and Hereditary Cancer revenues.

Prenatal revenue increased $8.2 million for the six months ended June 30, 2025 compared to the same period in the prior year due to a 14% increase in average revenue per test, partially offset by a 4% decrease in volume primarily driven by decline in volume for SneakPeek.

Hereditary Cancer revenue increased $3.0 million for the six months ended June 30, 2025 compared to the same period in the prior year due to a 5% increase in volume, partially offset by a 3% decrease in average revenue per test.

1,155 1,146 1%

Revenue decreased $12.3 million for the nine months ended September 30, 2025 compared to the same period in the prior year.

For the nine months ended September 30, 2024, we recognized $20.3 million of revenue for tests in which the performance obligation was met in a prior period, including $3.0 million in revenue due to a retroactive coverage change by a payor for one of our prenatal products.

For the nine months ended September 30, 2025, revenue for tests in which the performance obligation was met in a prior period was immaterial.

This decrease in revenue was partially offset by increased revenue resulting from higher volumes for Hereditary Cancer.

Pharmacogenomics revenue decreased $22.1 million for the nine months ended September 30, 2025 compared to the same period in the prior year primarily due to a 21% decrease in the average revenue per test due to revenue recognized in the nine months ended September 30, 2024, for tests in which the performance obligation had been satisfied in a prior period and UnitedHealthcare's change in GeneSight test coverage under its commercial, individual exchange, and certain managed Medicaid benefit plans.

We expect this coverage decision will continue to negatively affect Pharmacogenomics revenue in future periods.

Tumor Profiling revenue decreased $4.9 million for the nine months ended September 30, 2025 compared to the same period in the prior year primarily due to the sale of our EndoPredict business in August 2024.

These decreases in revenue were partially offset by growth in Prenatal and Hereditary Cancer revenues.

Prenatal revenue increased $9.2 million for the nine months ended September 30, 2025 compared to the same period in the prior year due to a 11% increase in average revenue per test, partially offset by a 4% decrease in volume primarily driven by decline in SneakPeek volume.

Hereditary Cancer revenue increased $5.5 million for the nine months ended September 30, 2025 compared to the same period in the prior year due to a 6% increase in volume, partially offset by a 4% decrease in average revenue per test.

Cost of Revenue

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

3 unchanged sentences

30.1 % 30.7 %

Cost of revenue for the six months ended June 30, 2025 decreased $5.9 million compared to the same period in the prior year primarily due to a reduction in the cost per test for the current period driven by reduction in the cost of laboratory reagents and supplies.

Cost of revenue for the nine months ended September 30, 2025 decreased $7.6 million compared to the same period in the prior year primarily due to a reduction in the cost per test for the current period driven by reduction in the cost of laboratory reagents and supplies.

Research and Development Expense

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

1 unchanged sentence

Research and development expense as a % of total revenue 13.2 % 13.0 %

Research and development expense for the six months ended June 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

Research and development expense for the nine months ended September 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

Sales and Marketing Expense

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

1 unchanged sentence

Sales and marketing expense as a % of total revenue 34.5 % 33.8 %

Sales and marketing expense for the six months ended June 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

Sales and marketing expense for the nine months ended September 30, 2025 were relatively consistent with the expenses incurred in the same period of the prior year, reflecting stable operating activities across the business.

General and Administrative Expense

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

1 unchanged sentence

General and administrative expense as a % of total revenue 32.7 % 33.8 %

General and administrative expense decreased by $9.4 million for the six months ended June 30, 2025 compared to the prior year primarily due to a decrease of $4.1 million in consulting fees, a $3.4 million decrease in amortization for previously impaired intangible assets, and a $3.2 million decrease in compensation and benefits.

General and administrative expense decreased by $10.7 million for the nine months ended September 30, 2025 compared to the prior year primarily due to a $6.8 million decrease in amortization for previously impaired intangible assets, and a decrease of $3.4 million in consulting fees.

Goodwill and Long-lived Asset Impairment Charges

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change

2 unchanged sentences

Goodwill and long-lived asset impairment charges as a % of total revenue

Goodwill and long-lived asset impairment charges in the six months ended June 30, 2025 included goodwill impairment charges of $234.7 million and intangible asset impairment charges of $82.0 million related to our Women's Health and Pharmacogenomics reporting units.

For additional information regarding the testing and analysis performed, refer to "Critical Accounting Estimates" in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations." In the prior year, we recognized $11.6 million of losses in connection with the sale of the EndoPredict business.

Goodwill and long-lived asset impairment charges in the nine months ended September 30, 2025 included goodwill impairment charges of $234.7 million and intangible asset impairment charges of $82.0 million related to our Women's Health and Pharmacogenomics reporting units.

In the prior year, we recognized $13.8 million of losses in connection with the sale of the EndoPredict business.

Other Income (Expense), Net

Six months ended June 30,

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

Other income (expense), net $ (4.7) $ 0.1 $ (4.8) (4800)%

Other income (expense), net changed for the six months ended June 30, 2025 as compared to the same period in the prior year due primarily due to an increase in interest expense for the current period and due to the $2.2 million gain recognized on the Precise Tumor acquisition in the prior period

Income Tax Benefit

Six months ended June 30,

Other income (expense), net for the nine months ended September 30, 2025 increased $4.8 million as compared to the same period in the prior year primarily due to an increase in interest expense for the current period related to our new $125 million term loan secured in July 2025.

Income Tax (Benefit) Expense

Nine months ended September 30,

(in millions) 2025 2024 Change % Change

Income tax benefit

Income tax (benefit) expense

$ (28.2) $ 0.4 $ (28.6) (7150)%

3 unchanged sentences

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 benefit for the six months ended June 30, 2025 was $29.4 million and our effective tax rate was 8.2%.

Income tax benefit for the six months ended June 30, 2024 was $0.4 million and our effective tax rate was 0.6%.

For the three and six months ended June 30, 2025 and 2024, our recognized effective tax rate differs from the U.S.

Income tax benefit for the nine months ended September 30, 2025 was $28.2 million and our effective tax rate was 7.3%.

Income tax expense for the nine months ended September 30, 2024 was $0.4 million and our effective tax rate was (0.5)%.

For the nine months ended September 30, 2025 and 2024, our recognized effective tax rate differs from the U.S.

federal statutory rate primarily due to the release of unrecognized tax benefits and the recognition of valuation allowances.

The unrecognized tax benefits released were primarily related to tax refund claims following the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act.

Following the success of these claims, we remeasured or released the unrecognized benefits resulting in a discrete tax benefit of $29.6 million during the six months ended June 30, 2025.

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, including any tax-deductible loss from the $316.7 million of goodwill and long-lived impairment charges recorded for the six months ended June 30, 2025.

Following the success of these claims, we remeasured or released the unrecognized benefits resulting in a discrete tax benefit of $29.6 million during the nine months ended September 30, 2025 .

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, including any tax-deductible loss from the $316.7 million of goodwill and long-lived impairment charges recorded for the nine months ended September 30, 2025.

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 new debt financing with Orbimed discussed below.

Our primary sources of liquidity are our cash and cash equivalents, our expected cash flows from operations, and, in certain circumstances, amounts available for borrowing under our new credit facility discussed below.

Our capital deployment strategy focuses on use of resources in the key areas of research and development, technology, and collaborations.

We believe that investing organically through research and development and new product development or collaborations to support our business strategy provides the best return on invested capital.

On July 31, 2025 (the "Closing Date"), we entered into a Credit Agreement (the "Credit Agreement") with the lenders from time to time party thereto, and OrbiMed Royalty & Credit Opportunities IV, LP., as administrative agent (the "Administrative Agent") and as initial lender (“OrbiMed”).

The Credit Agreement consists of a $200 million term loan credit facility with an initial term loan of $125 million (the "Initial Loan"), which amount was funded on the Closing Date, and delayed draw term loans (the "Delayed Draw Loans" and together with the Initial Loan, the "Loans"), at our election on or prior to June 30, 2027, in a maximum principal amount of $75 million (the "Credit Facility").

The proceeds of the Credit Facility were or will be used for working capital needs and general corporate purposes, including, without limitation, refinancing existing indebtedness, including $60.2 million of the proceeds to repay the ABL Facility in full.

The Credit Agreement consists of a $200.0 million term loan credit facility with an initial term loan o f $125.0 million (the "Initial Loan"), which amount was funded on the Closing Date, and delayed draw term loans (the "Delayed Draw Loans" and together with the Initial Loan, the "Loans"), at our election on or prior to June 30, 2027, in a maximum principal amount of $75.0 million (the "Credit Facility").

We incurred debt discounts and issuance costs totaling $9.4 million.

These costs are being amortized using the effective interest method.

The proceeds of the Credit Facility were or will be used for our working capital needs and general corporate purposes.

Concurrent with the new Credit Facility, we used $60.2 million of the proceeds to repay our previous debt facility, an asset-based revolving credit facility (the “ABL Facility”), in full and terminated the ABL Facility agreement.

The Credit Facility matures on July 31, 2030 (the "Maturity Date").

Loans outstanding under the Credit Facility will bear interest at a rate per annum equal to (x) the greater of the one-month SOFR Rate and 2.50% plus (y) an applicable margin of 6.50%.

Commencing on September 30, 2029, and on the last business day of each fiscal quarter thereafter, we are required to make a scheduled principal payment equal to 2.50% of the unpaid principal amount of the loans outstanding on the fourth anniversary of the Closing Date, together with any applicable exit fee and repayment premium.

We may elect to prepay all or any portion of the amounts owed prior to the Maturity Date subject to a repayment premium.

Loans outstanding under the Credit Facility bear interest at a rate per annum equal to (x) the greater of the one-month Secured Overnight Financing Rate (SOFR) Rate and 2.5% plus (y) an applicable margin of 6.5% .

All repayments are subject to the accrued exit fee.

Commencing on September 30, 2029, and on the last business day of each fiscal quarter thereafter, we are required to make a scheduled principal payment equal to 2.5% of the unpaid principal amount of the loans outstanding on the fourth anniversary of the Closing Date, together with any applicable exit fee.

We may elect to prepay all or a portion of the amounts owed prior to the Maturity Date subject to a repayment premium, in addition to the exit fee.

Any undrawn amount of the Delayed Draw Loans bears an fee of 0.5% based on the amount that remains undrawn through June 30, 2027.

The interest rate for borrowings under the Credit Agreement as of September 30, 2025 was 10.8%.

The Credit Facility is also subject to customary mandatory prepayments with the proceeds of indebtedness and certain asset sales and casualty events.

In addition to the repayment premium referenced above, voluntary and mandatory prepayments and all other payments of the Credit Facility must also be accompanied by payment of accrued interest on the principal amount repaid or prepaid.

In addition to the exit fee and repayment premium referenced above, voluntary and mandatory prepayments and all other payments of the Credit Facility must also be accompanied by payment of accrued interest on the principal amount repaid or prepaid.

The Credit Facility is also subject to other customary fee arrangements.

The Credit Facility is secured by substantially all of our assets and those of our subsidiary guarantors under a Pledge and Security Agreement entered into with the Administrative Agent.

Our obligations are guaranteed by certain of our material subsidiaries (the “Credit Facility Guarantors”) pursuant to a Guarantee.

Our obligations and the Credit Facility Guarantors under the Credit Agreement and Guarantee are secured by substantially all of our assets and the Credit Facility Guarantors under a Pledge and Security Agreement entered into with the Administrative Agent.

The Credit Facility requires us and our subsidiaries, on a consolidated basis, to comply with a minimum trailing twelve-month revenue test as of the end of each month, commencing with the month ending December 31, 2025 at $615.0 million and increasing quarterly to $974.0 million beginning on December 31, 2029 and thereafter.

2 unchanged sentences

If any event of default occurs (subject, in certain instances, to specified grace periods), the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Credit Facility may become due and payable immediately.

In March 2025, we received notification from the congressional Joint Committee on Taxation that it had concluded its review of tax refund claims following the CARES Act that allowed the carryback of losses.

As a result, we currently estimate we will receive a refund of approximately $13 million, including interest, during 2025.

As of September 30, 2025, we were in compliance with all covenants under the Credit Agreement.

We believe that our existing capital resources will be sufficient to meet our projected operating requirements for at least the next 12 months.

8 unchanged sentences

We have experienced and may continue to experience coverage limitations or denials for many of our products.

For example, UnitedHealthcare updated its medical policies for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial, individual exchange benefit, and certain managed Medicaid plans, effective during the first half of 2025.

The change in UnitedHealthcare coverage has negatively impacted our revenue, profitability, and cash flow in the first half of 2025 and we expect that these negative impacts will continue into future periods.

The following table represents the balances of cash and cash equivalents securities as of the dates set forth in the table below:

(in millions) June 30,

For example, UnitedHealthcare updated its medical policies for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial, individual exchange, and certain managed Medicaid benefit plans, effective during 2025.

The change in UnitedHealthcare coverage has negatively impacted our Pharmacogenomics revenue, profitability, and cash flow in 2025 and we expect that these negative impacts will continue into future periods.

The following table represents the balances of cash and cash equivalents as of the dates set forth in the table below:

(in millions) September 30,

2025 December 31,

Cash and cash equivalents $ 145.4 $ 102.4 $ 43.0

The decrease in cash and cash equivalents as of June 30, 2025 as compared to December 31, 2024 was primarily driven by $29.9 million in cash used by operations, $15.2 million in cash used for capital expenditures including the capitalization of internal-use software, and $3.1 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 $19.5 million increase in net borrowings under the ABL Facility.

The increase in cash and cash equivalents as of September 30, 2025 as compared to December 31, 2024 was primarily driven by a net increase in cash proceeds from borrowings of $76.1 million under our new Credit Facility partially offset by $21.4 million in cash used for capital expenditures including the capitalization of internal-use software and $8.8 million in cash used for operating activities.

The following table represents the Condensed Consolidated Cash Flow Statement:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2025 2024 Change

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Effect of foreign exchange rates on cash, cash equivalents, and restricted cash 0.7 (0.3) 1.0

Change in cash and cash equivalents classified as held for sale

Net decrease in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

42.9 (31.1) 74.0

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Cash Flows from Operating Activities

We used $13.9 million more cash for operating activities for the six months ended June 30, 2025 compared to the same period in the prior year.

The increase in cash used for operating activities was primarily driven by a $10.9 million decrease in cash collected from accounts receivables driven by timing differences in collections.

We used $6.5 million less cash for operating activities for the nine months ended September 30, 2025 compared to the same period in the prior year.

The decrease in cash used for operating activities was primarily driven by changes in working capital.

Cash Flows from Investing Activities

Cash flows used in investing activities for the six months ended June 30, 2025 were relatively consistent with the same period of the prior year, reflecting stable investing activities across the business.

We used $15.4 million more cash for investing activities for the nine months ended September 30, 2025 compared to the same period in the prior year.

In fiscal year 2024, we had cash inflows from the maturities of investments and the sale of our EndoPredict business, which did not occur in 2025.

Cash Flows from Financing Activities

Cash flows from financing activities increased $22.6 million for the six months ended June 30, 2025 compared to cash flows used in financing activities in the same period in the prior year, primarily due to the incremental borrowing of $19.5 million from the ABL Facility.

Cash flows from financing activities increased $81.9 million for the nine months ended September 30, 2025 compared to the same period in the prior year, primarily due to an increase of cash proceeds from our new Credit Facility of $76.1 million, net of the repayment of our prior ABL Facility and debt issuance costs related to the term loan.

Effects of Inflation

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Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations.

For a further discussion of our critical accounting estimates, see our Annual Report on Form 10-K filed with the SEC on February 28, 2025.

No significant changes to our critical accounting estimates took place during the three months ended June 30, 2025, except as described below:

During the second quarter of 2025, we concluded that an impairment triggering event had occurred due to a further sustained decline in our market capitalization, resulting in our carrying value of these assets exceeding our total market capitalization.

Additional factors that contributed to this conclusion included downward revisions to our forecasts.

These factors were applicable to all of our reporting units, developed technology intangible assets, and certain other intangible assets.

Thus, we performed quantitative impairment testing on our goodwill and intangible assets as discussed above.

See also Note 5, "Goodwill and Intangible Assets" in the notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Based on the outcome of these assessments, we recognized goodwill and asset impairment charges totaling $316.7 million.

We test goodwill for impairment by reporting unit on an annual basis and in the interim if events and circumstances indicate that goodwill may be impaired.

The events and circumstances that are considered include business climate and market conditions, legal factors, operating performance indicators and competition.

Impairment of goodwill is evaluated on a qualitative basis before calculating the fair value of the reporting unit.

If the qualitative assessment suggests that impairment is more likely than not, a quantitative impairment analysis is performed.

The quantitative analysis involves comparison of the fair value of a reporting unit with its carrying amount.

The valuation of a reporting unit requires judgment in estimating future cash flows, discount rates, residual growth rates and other factors.

In making these judgments, we evaluate the financial health of our business, including such factors as industry performance, market saturation and opportunity, changes in technology and operating cash flows, and other relevant entity-specific events.

Goodwill impairment testing requires us to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, and other financial assumptions, which are based upon our long-term plan.

The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both debt and equity, including a risk premium.

While we use the best available information to prepare our cash flows and discount rate assumptions, actual future cash flows and/or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.

While changes in assumptions will occur to reflect changing business and market conditions, our overall methodology used has remained unchanged.

Changes in our forecasts or decreases in the value of our common stock could cause book value of reporting units to exceed their fair values.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

If an event occurs that would cause a revision to the estimates and assumptions used in analyzing the value of the goodwill, the revision could result in a non-cash impairment charge that could have a material impact on our financial results.

During the second quarter of 2025, we identified an impairment triggering event had occurred based on a sustained decline in our market capitalization, due in part to downward revisions to the Company's forecasts and resulted in us performing quantitative goodwill impairment testing on all of our reporting units.

The quantitative assessments performed during the second quarter of 2025, resulted in a total goodwill impairment charge of $234.7 million, which includes impairment charges of $143.5 million and $91.2 million related to our Women's Health and Pharmacogenomics reporting units, respectively, which is included in Goodwill and long-lived asset impairment charges in the Condensed Consolidated Statements of Operations included in this Quarterly Report on Form 10-Q.

As of the date the impairment, the remaining value of goodwill was $4.5 million for Women's Health and $29.8 million for Pharmacogenomics reporting units.

We measured the fair value of the Pharmacogenomics and Women's Health reporting units utilizing the market approach and the discounted cash flow method under the income approach.

The income approach considered projected revenue and profitability associated with each reporting unit and a discount rate reflective of the risk-adjusted cost of capital of 17.0% and 16.0% for the Pharmacogenomics and Women's Health reporting units, respectively.

We measured the fair value of the International reporting unit utilizing the market approach and the discounted cash flow method under the income approach.

The income approach considered projected revenue and profitability associated with the reporting unit and a discount rate reflective of the risk-adjusted cost of capital of 16.0%.

The resulting fair value of the International reporting unit exceeded its carrying value by 145.7%.

Additionally, we corroborated the reasonableness of the estimated reporting unit fair values by reconciling them to our enterprise value and market capitalization as of May 2025.

Considerable management judgment is necessary to estimate expected future cash flows for our reporting units, including evaluating the impact of operational and external economic factors on our future cash flows, all of which are subject to uncertainty.

The assumptions and estimates used in determining the fair value of our reporting units involve significant elements of subjective judgment and analysis by management.

Certain future events and circumstances, including a higher cost of capital or a decline in actual and expected revenues or profitability, among others, could result in changes to these assumptions and judgements.

A revision of these estimates and assumptions could cause the fair values of the reporting units to fall below their respective carrying values, resulting in impairment charges, which could have a material adverse effect on our results of operations.

We will continue to monitor our reporting units for any triggering events or other signs of impairment which could result in impairment charges in the future.

Intangible Assets.

Intangible assets are initially recorded at their acquisition date fair value and are subsequently amortized over their useful lives.

We review our intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

We performed the recoverability test by comparing the carrying value of certain of our asset groups to their estimated undiscounted future cash flows.

The analysis indicated that the carrying value exceeded the recoverable amount for certain of our asset groups, requiring us to determine the fair value of those groups.

The fair value of our Pharmacogenomics developed technology intangible asset was determined using a discounted cash flow model.

The approach considered projected revenue, profitability associated with the developed technology, a discount rate reflective of the risk-adjusted cost of capital of 17% and the expected remaining useful life of the developed technology.

As the carrying value for the developed technology intangible asset exceeded the relative fair value, we recognized impairment charges of $71.8 million during the period ended June 30, 2025, which is included in Goodwill and long-lived asset impairment charges in the Consolidated Statements of Operations included in this Quarterly Report on Form 10-Q.

The impairment reduced the carrying value of the developed technology to its estimated fair value of $12.1 million as of the impairment date.

The fair value of the Gateway intangible assets, including developed technology, trademark and customer relationship intangible assets, was determined using a discounted cash flow model and relief from royalty models.

The primary assumptions used in the discounted cash flow model included projected revenue and profitability associated with the developed technology based on management's forecast and a discount rate reflective of the risk-adjusted cost of capital of 16%.

The primary assumptions used in the relief from royalty models were projected revenue and royalty rates.

As the carrying value of each of the intangible assets exceeded the relative value fair value, we recognized a total impairment charge of $10.2 million associated with the asset group during the period ended June 30, 2025.

The impairment reduced the carrying value of these intangible assets to their estimated fair value of $2.4 million as of the impairment date.

The assumptions and estimates used in determining the fair value of our intangible assets involve significant elements of subjective judgment and analysis by management.

Certain future events and circumstances, including higher cost of capital or a decline in actual and expected revenues or profitability, could result in changes to these assumptions and judgements.

A revision of these estimates and assumptions could cause the fair values of the intangible assets to fall below their respective carrying values, resulting in impairment charges, which could have a material adverse effect on our results of operations.

We will continue to monitor our intangible assets for any triggering events or other signs of impairment, which could result in impairment charges in the future.

For a further discussion of our critical accounting estimates, see our Annual Report on Form 10-K filed with the SEC on February 28, 2025 and our Quarterly Report on Form 10-Q filed with the SEC on August 6, 2025.

No significant changes to our critical accounting estimates took place during the three months ended September 30, 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis