What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-20 · 78 added, 91 removed, 183 unchanged (48% of the section changed)

4 unchanged sentences

You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from these forward-looking statements.

See Note 1, “ Organization and Description of Business ” included within this Annual Report for further information.

See Note 1, “ Organization and Description of Business ” to our consolidated financial statements for further information.

Factors Affecting Our Operating Performance

1 unchanged sentence

While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address.

See the section titled “ Item 1A.

See “ Item 1A.

Risk Factors ” for more information.

5 unchanged sentences

We believe the number of resulted exome and genome tests in any period is important and useful to our investors because it directly correlates with long-term patient relationships and the size of our genomic database.

During the year ended December 31, 2024, we resulted 74,547 exome and genome tests, which represented 33% of all test results, compared to the year ended December 31, 2023, in which we resulted 49,439 exome and genome tests, which represented 22% of all test results.

During the year ended December 31, 2025, we resulted 97,271 exome and genome tests, which represented 43% of all test results, compared to the years ended December 31, 2024 and 2023, in which we resulted 74,547 and 49,439 exome and genome tests, which represented 33% and 22%, respectively, of all test results.

Success Obtaining and Maintaining Reimbursement

39 unchanged sentences

Our ability to increase our revenue will depend on our ability to enter into contracts with third-party partners.

In addition, with the acquisition of Fabric Genomics, we generate revenues through software and interpretation services related to rare disease, hereditary risk, and cancer testing.

Our customers include clinical laboratories, hospitals, and research institutions.

Our ability to increase this revenue will depend on our ability to expand our customer base among hospitals and genomic centers, along with increased adoption of whole genome sequencing and AI-enabled interpretation in clinical workflows.

Cost of Services

The cost of services reflect the aggregate costs incurred in performing services, which include expenses for reagents and laboratory supplies, compensation expenses for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and phlebotomy services, if any, and allocated genetic counseling, facility

and information technology costs associated with delivery services.

Allocated costs include depreciation of laboratory equipment, facility occupancy, and information technology costs.

8 unchanged sentences

These costs primarily consist of compensation expenses for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research.

Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed.

We generally expect our research and development expenses to continue to increase in absolute dollars as we innovate and expand the application of our platforms.

12 unchanged sentences

Results of Operations

A discussion regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 20, 2025.

Comparison of the Years Ended December 31, 2025 and 2024

3 unchanged sentences

Diagnostic test revenue $ 416,668 $ 302,157 $ 114,511 38 %

Other revenue 3,293 6,912 (3,619) (52) %

Other revenue 10,871 3,293 7,578 NM

Total revenue 427,539 305,450 122,089 40 %

4 unchanged sentences

General and administrative 150,819 104,517 46,302 44 %

Impairment loss — 10,402 (10,402) (100) %

Other operating expenses, net 3,407 7,223 (3,816) (53) %

Loss from operations

Non-operating (expenses) income, net

Change in fair value of warrants and contingent liabilities (13,370) 1,170 (14,540) NM

Interest (expense) income, net (3,032) 1,114 (4,146) NM

Other (expense) income, net (13,014) 1,619 (14,633) NM

Total non-operating (expense) income, net (29,416) 3,903 (33,319) NM

(13,077) (23,213) 10,136 (44) %

Non-operating expenses, net

Change in fair value of financial liabilities (1,204) (13,370) 12,166 (91) %

Interest expense, net (2,539) (3,032) 493 (16) %

Other expense, net

(4,317) (13,014) 8,697 (67) %

Total non-operating expense, net (8,060) (29,416) 21,356 (73) %

Loss before income taxes (21,137) (52,629) 31,492 (60) %

4 unchanged sentences

Diagnostic test revenue increased by $114.5 million, or 38%, to $416.7 million for the year ended December 31, 2025, from $302.2 million for the year ended December 31, 2024.

The increase was attributable to a $109.2 million increase in exome and genome test revenue and an increase in other panel revenue of $5.0 million, which was partially offset by a $2.7 million decrease in hereditary cancer test revenue and a $5.0 million decrease in legacy Sema4 revenues.

The increase in exome and genome revenue was driven by a 51% increase in test volume coupled with higher reimbursement rates resulting from lower denial rates and improved collections.

Full year and fourth quarter 2024 revenues includes $6.8 million of discrete benefit in connection with a multi-year appeal recovery from a single third-party payor.

The fourth quarter benefit is composed of $5.8 million to exome genome revenues and $1.0 million to other test lines.

Other revenue, representing revenue from biopharma and/or data partnership, decreased by $3.6 million, or 52%, to $3.3 million for the year ended December 31, 2024, from $6.9 million for the year ended December 31, 2023.

The decrease reflected lower revenue from a partnership program which ended in 2024.

Gross profit increased by $104.4 million for the year ended December 31, 2024, driven by a combination of a favorable shift in volume mix to higher margin whole exome and genome tests, an improvement in exome average reimbursement rates and continued cost per test leverage.

The increase was attributable to a $126.8 million increase in exome and genome sequencing revenues driven by a 30% increase in test volumes and an 18% increase in average reimbursement rates.

This increase was partially offset by lower revenue from non‑core hereditary cancer tests, which were phased out by the end of 2025.

Other revenue increased by $7.6 million, to $10.9 million for the year ended December 31, 2025, from $3.3 million for the year ended December 31, 2024.

The increase reflects $3.4 million of non-testing revenue from the recently acquired Fabric Genomics operating segment and the continued expansion of data and bio pharma programs.

Gross profit increased by $103.8 million for the year ended December 31, 2025, driven by a combination of a shift in test mix to more profitable whole exome and genome tests, improvement in exome average reimbursement rates, and continued cost per test leverage.

Research and Development

Research and development expenses decreased by $12.5 million, or 22%, to $45.7 million for the year ended December 31, 2024, from $58.3 million for the year ended December 31, 2023.

The decrease was primarily attributable to costs incurred in the prior year from the now discontinued Legacy Sema4 business, which included restructuring costs associated with headcount reduction actions and accelerated amortization for capitalized software no longer in use.

Research and development expenses increased by $26.3 million, or 58%, to $72.0 million for the year ended December 31, 2025, from $45.7 million for the year ended December 31, 2024.

The increase was primarily attributable to compensation related costs of $24.3 million, which reflects an investment to expand our product development team and the inclusion of research and development costs of Fabric Genomics.

Selling and Marketing

Selling and marketing expenses increased by $21.0 million, or 31%, to $88.4 million for the year ended December 31, 2025, from $67.4 million for the year ended December 31, 2024.

The increase reflects our investment to support growth in our commercial team as well as incremental variable billing and selling cost

The increase was primarily attributable to higher compensation related costs of $16.5 million, which reflects our investment to support growth in our commercial team, as well as the inclusion of selling and marketing costs of Fabric Genomics.

General and Administrative

General and administrative expenses decreased by $32.6 million, or 24%, to $101.1 million for the year ended December 31, 2024, from $133.8 million for the year ended December 31, 2023 .

The decrease was attributable to lower current period expenses related to professional services, software and information technology related costs, insurance costs, fixed asset depreciation and personnel-related costs from the now discontinued Legacy Sema4 business.

Impairment Loss

The non-cash charge of $10.4 million for the year ended December 31, 2023 reflected the impairment of certain capital and right-of-use asset leases.

See Note 5, “ Property and Equipment, net ” to our consolidated financial statements for further information.

Other Operating Expenses, Net

Other operating expenses, net were $3.4 million for the year ended December 31, 2024, reflecting related party expenses.

Other operating expenses, net were $7.2 million for the year ended December 31, 2023 and included related party expenses of $5.3 million and a non-cash charge of $3.6 million to reserve for obsolete Legacy Sema4 inventory, partially offset by a gain of $1.7 million to recognize the sale of certain assets of Legacy Sema4.

Non-Operating (Expense) Income, Net

Non-operating expense, net of $29.4 million for the year ended December 31, 2024 primarily reflected a legal settlement, net of insurance, of $12.8 million, a non-cash charge of $10.1 million associated with the exercise of the Perceptive warrant and a non-cash charge of $3.3 million to account for the increase in fair value of our warrant liabilities.

General and administrative expenses increased by $46.3 million, or 44%, to $150.8 million for the year ended December 31, 2025, from $104.5 million for the year ended December 31, 2024 .

The increase was primarily attributable to increased compensation related costs of $33.0 million, higher legal, compliance and consultant related costs of $9.5 million, higher IT software and infrastructure costs of $6.1 million and increased amortization expense for acquired intangible assets established in connection with purchase accounting.

These increases were partially offset by a one-time sales-and-use tax refund of $8.4 million.

Non-Operating Expense, Net

Non-operating expense, net of $8.1 million for the year ended December 31, 2025 primarily reflected a legal settlement of $4.8 million and a non-cash charge of $1.2 million to account for the increase in fair value of our financial liabilities.

Net interest expense for the year ended December 31, 2025 was $2.5 million.

Non-operating income, net of $3.9 million for the year ended December 31, 2023, primarily reflected non-cash benefits of $1.2 million to account for the decrease in fair value of our warrants and contingent liabilities and $2.8 million for a principal loan forgiveness under the amendment to the Connecticut Department of Economic and Community Development (“DECD”) loan, partially offset by $1.0 million in contract termination costs associated with the now discontinued Legacy Sema4 business.

Net interest income for the year ended December 31, 2023 was $1.1 million.

Net interest expense for the year ended December 31, 2024 was $3.0 million.

See Note 5, “ Fair Value Measurement ”, Note 9, “ Long-Term Debt ” and Note 11, “ Purchase Commitments and Contingencies ” to our consolidated financial statements for further information.

7 unchanged sentences

A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Investors are encouraged to

review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP.

10 unchanged sentences

We believe these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

The following is a reconciliation of revenue to our adjusted gross profit and adjusted gross margin for the years ended December 31, 2024 and 2023 (in thousands) :

The following is a reconciliation of revenue to our adjusted gross profit and adjusted gross margin for the years ended December 31, 2025, 2024, and 2023 :

Year Ended December 31,

2025 2024 2023

Revenue $ 427,539 $ 305,450 $ 202,566

Cost of services 129,366 111,053 112,560

194,397 90,006

Gross profit 298,173 194,397 90,006

Gross margin 69.7 % 63.6 % 44.4 %

Depreciation and amortization expense $ 5,369 $ 4,047 $ 4,350

Stock-based compensation expense 791 431 (1,217)

Restructuring expense

Restructuring costs 5 54 139

Adjusted gross profit $ 304,338 $ 198,929 $ 93,278

$ 198,929 $ 93,278

Adjusted gross margin 71.2 % 65.1 % 46.0 %

Adjusted Net Income (Loss)

Adjusted net income (loss) is a non-GAAP financial measure that we define as net income (loss) adjusted for depreciation and amortization, stock-based compensation expenses, impairment loss, restructuring and business exit related charges, change in fair market value of financial liabilities, transaction costs and other (income) expense, net.

Adjusted net income (loss) is a non-GAAP financial measure that we define as net income adjusted for depreciation and amortization, stock-based compensation expenses, restructuring costs, impairment loss, change in fair value of financial liabilities, interest expense (income), net, income tax expense (benefit), net, and other (income) expense, net.

We believe adjusted net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall operating performance.

The following is a reconciliation of our net loss to adjusted net income (loss) for the years ended December 31, 2024 and 2023 (in thousands) :

The following is a reconciliation of our net loss to adjusted net income (loss) for the years ended December 31, 2025, 2024, and 2023 :

Year Ended December 31,

2025 2024 2023

Net loss $ (21,021) $ (52,286) $ (175,767)

1 unchanged sentence

Stock-based compensation expense 32,162 9,138 — (326)

Impairment loss (1)

Restructuring costs 1,275 1,752 — 6,532

Change in fair value of warrants and contingent liabilities (3)

Impairment loss (1)

Change in fair value of financial liabilities 1,204 13,370 (1,170)

Interest expense (income), net 2,539 3,032 (1,114)

Income tax benefit

(116) (343) (926)

Gain on sale of assets (4)

Provision for excess and obsolete inventory associated with Legacy Sema4 — 3,634

Gain on debt forgiveness (5)

Adjusted net income (loss) $ 6,716 $ (126,257)

542 12,789 338

Adjusted net income (loss) $ 41,809 $ 9,405 $ (128,297)

(1) Represents the impairment of certain capital and right-of-use asset leases.

(2) Represents costs incurred for restructuring activities, which include severance, and in the prior period, third-party consulting costs.

(3) Represents the change in fair market value of the liabilities associated with our public warrants, private placement warrants, Perceptive warrants and the earn-out shares.

(4) Represents a prior year gain recognized on the sale of certain assets sold as a result of an auction.

(5) Represents principal loan forgiveness under the amendment to the DECD loan.

(6) For the year ended December 31, 2024, represents a legal settlement for a certain litigation matter.

See Note 10, “ Purchase Commitments and Contingencies ” to our consolidated financial statements for further information.

For the year ended December 31, 2023, represents contract termination costs associated with the now discontinued Legacy Sema4 business.

(2) For the year ended December 31, 2025, represents transaction costs associated with the Merger Agreement, a reserve for a certain litigation matter and a sales-and-use tax refund.

For the year ended December 31, 2024, represents reserves net of insurance for a certain litigation matter.

For the year ended December 31, 2023, represents a gain recognized on the sale of certain assets sold as a result of an auction, principal loan forgiveness under the amendment to the DECD loan, and contract termination costs associated with the now discontinued Legacy Sema4 business.

Liquidity and Capital Resources

3 unchanged sentences

Nevertheless, we may also seek additional funding in the future through the sale of common or preferred equity or convertible debt securities, by entering into other credit facilities or other forms of third-party funding, or other debt financing or by disposing of assets or businesses.

We have an effective shelf registration statement that we filed with the SEC in August of 2022, registering $300 million of shares of our Class A common stock and other securities.

As of December 31, 2024, approximately $102 million of securities remained available under this registration statement.

Further, we have entered into a sales agreement (the “Sales Agreement”) with TD Securities (USA) LLC (“TD Cowen”) pursuant to which we may, but are not obligated to, offer and sell, from time to time, shares of our Class A common stock with an aggregate offering price up to $75.0 million through TD Cowen, as sales agent, subject to the terms and conditions described in the Sales Agreement and SEC rules and regulations (our “ATM offering”).

As of December 31, 2024, approximately $26.8 million of capacity remained available under this ATM offering.

In October 2025, we filed an automatic universal shelf registration statement that provides for the sale of our Class A common stock and other securities, and up to an aggregate of $100.0 million of our Class A common stock that may be issued from time to time under a Sales Agreement (the “Sales Agreement”) with TD Securities (USA) LLC (“TD Cowen”).

The Sales Agreement was implemented following the use in full of a prior sales agreement for up to $75.0 million of Class A common stock with TD Cowen.

As of December 31, 2025, approximately $78.2 million of capacity remained available under this Sales Agreement.

Material Cash Requirements for Known Contractual Obligations and Commitments

The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2024 and December 31, 2023.

The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2025.

We anticipate fulfilling such commitments with our existing cash and cash equivalents and available-for-sale marketable securities or through additional capital raised to finance our operations.

Our future minimum payments under non-cancellable operating lease and finance lease agreements were $57.2 million and $29.2 million, respectively as of December 31, 2025.

The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, “ Leases ”, included within this Annual Report.

As discussed in the notes to our consolidated financial statements, in 2022, we entered into an agreement with one of our third-party payors to settle for $42.0 million claims related to coverage and billing matters allegedly resulting in overpayments by the

payor to Legacy Sema4.

The timing of these future payments, by year, can be found in Note 10, “ Leases ” to our consolidated financial statements.

As of December 31, 2025, remaining payments due to the payor were $2.0 million.

For more information regarding this matter, see Note 3, “ Revenue Recognition ” included within this Annual Report.

For more information regarding this matter, see Note 4, “ Revenue Recognition ” to our consolidated financial statements.

Our future contractual purchase commitments were $35.7 million as of December 31, 2025.

The timing of these future payments, by year, can be found in our consolidated financial statements in Note 10, “ Purchase Commitments and Contingencies ”, included within this Annual Report.

The timing of these future payments, by year, can be found in Note 11, “ Purchase Commitments and Contingencies ” to our consolidated financial statements.

Year Ended December 31,

(in thousands)

Net cash used in operating activities $ (28,496) $ (180,147)

2025 2024 2023

Net cash provided by (used in) operating activities $ 33,279 $ (28,496) $ (180,147)

Net cash used in investing activities (61,517) (30,132) (43,726)

1 unchanged sentence

Operating Activities

Net cash used in operating activities during the year ended December 31, 2024 was $28.5 million, driven by lower cash expenditures in the current year as compared with the prior year, which reflected improved gross margin profitability, as well as the realization of cost savings from the exited Legacy Sema4 business and previously executed cost reduction initiatives.

Net cash provided by operating activities during the year ended December 31, 2025 was $33.3 million, driven by improved gross margin profitability in the current year and favorable net working capital attributable to the timing of collections and payments associated with operating assets and liabilities.

Net cash used in operating activities during the year ended December 31, 2024 was $28.5 million, driven by lower cash expenditures in the current year period net loss as compared with the prior year period, which reflected improved gross margin profitability, as well as the realization of cost savings from the exited Legacy Sema4 business and other cost reduction initiatives.

Net cash used in operating activities during the year ended December 31, 2023 was $180.1 million, which was primarily attributable to a net loss of $175.8 million and unfavorable working capital associated with the wind down of the Legacy Sema4 accounts payable, primarily during the second half of 2023, which was partially offset by the release of a third-party payor reserve.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2024 was $30.1 million which included purchases of marketable securities of $66.3 million and $5.5 million in purchases of property and equipment, partially offset by $41.7 million in proceeds from the sales and maturities of marketable securities.

Net cash used in investing activities during the year ended December 31, 2023 was $43.7 million, which included purchases of marketable securities of $47.7 million, $12.1 million in consideration held in escrow paid for the Acquisition and $5.3 million in purchases of property and equipment, which was offset partially by $17.8 million in proceeds from maturities of marketable securities and $4.0 million in proceeds from the sale of assets.

Net cash used in investing activities during the year ended December 31, 2025 was $61.5 million, which included $32.9 million for the acquisition of Fabric Genomics, purchases of property and equipment of $19.0 million, and net marketable securities activity of $9.6 million.

Net cash used in investing activities during the year ended December 31, 2024 was $30.1 million which included net marketable securities activity of $24.6 million and purchases of property and equipment of $5.5 million.

Net cash used in investing activities during the year ended December 31, 2023 was $43.7 million, which included net marketable securities activity of $29.9 million, purchases of property and equipment of $5.3 million, and $12.1 million in consideration held in escrow paid for the Acquisition, which was partially offset by $4.0 million of proceeds from the sale of assets.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2024 was $44.2 million, which included $46.5 million in proceeds from our ATM offering, net of issuance costs, partially offset by $2.7 million of finance lease payments and $0.5 million of principal payments on the DECD loan.

Net cash provided by financing activities during the year ended December 31, 2023 was $186.2 million, which was primarily driven by the $143.0 million net proceeds from the underwritten public offering and concurrent registered direct offering, net of issuance costs, and $48.5 million from the term loan facility with Perceptive (the “Perceptive Term Loan Facility”), which was offset partially by the DECD loan payment of $2.0 million and $3.6 million of finance lease payments.

Net cash provided by financing activities during the year ended December 31, 2025 was $48.0 million, which primarily reflected proceeds from our prior at-the-market offering (“prior ATM offering”) of $46.7 million, net of issuance costs.

Net cash provided by financing activities during the year ended December 31, 2024 was $44.2 million, which included $46.5 million in proceeds from our prior ATM offering, net of issuance costs, which was partially offset by $2.7 million of finance lease payments and $0.5 million of principal payments on the DECD loan.

Net cash provided by financing activities during the year ended December 31, 2023 was $186.2 million, which was primarily driven by the $143.0 million net proceeds from the underwritten public offering and concurrent registered direct offering, net of issuance costs, and $48.5 million from the term loan facility with Perceptive (the “Perceptive Term Loan Facility”), which was partially offset by $3.6 million of finance lease payments and $2.0 million of payments on the DECD loan.

Recent Accounting Pronouncements

Information on recent accounting pronouncements can be found in Note 2, “ Summary of Significant Accounting Policies ”.

Loss of Smaller Reporting Company Status

As the market value of our shares of Class A common stock held by non-affiliates was between $250.0 million and $700.0 million as of June 28, 2024 (the last business day of our most recently completed second fiscal quarter) and our revenue for the year ended December 31, 2023 was more than $100.0 million, we continue to be deemed an accelerated filer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2024.

However, we are no longer a “smaller

reporting company” and will no longer be eligible to rely on the scaled disclosure exemptions available to smaller reporting companies starting with our first Quarterly Report on Form 10-Q in 2025.

JOBS Act Accounting Election

We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act (the “JOBS Act”).

The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates.

We also intend to rely on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We will remain an emerging growth company until the earliest of (1) September 1, 2025, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Information on recent accounting pronouncements can be found in Note 2, “ Summary of Significant Accounting Policies ” to our consolidated financial statements.

Critical Accounting Policies and Estimates

14 unchanged sentences

Management believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used.

For orders received for self-pay patients, we determine a transaction price associated with services rendered in consideration of implicit price concessions that are granted to such orders.

orders received for self-pay patients, we determine a transaction price associated with services rendered in consideration of implicit price concessions that are granted to such orders.

The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators.

5 unchanged sentences

Other Revenue

We also recognize revenue from collaboration service agreements with biopharma companies and other third parties pursuant to which we health information and patient identification support services.

Certain of these contracts provide non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term.

Milestone payments are a form of variable consideration that are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved.

For certain service or collaboration contracts that require us to transfer control of the service over time, we recognize revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer.

The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services, including any subcontracted service costs.

We also recognize revenue from collaboration service agreements with biopharma companies and other third parties pursuant to which we provide health information and patient identification support services.

For Fabric Genomics, Other Revenue consists of clinical services billed directly to institutions, including virtual care, AI-enabled patient engagement, and genomic analysis services.

Revenue is recognized when performance obligations are satisfied and collection is reasonably assured.

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill.

The estimated fair value of identifiable intangible assets acquired in a business combination is based on third-party valuations that use information and assumptions provided by the Company’s management, which consider estimates of inputs and assumptions that a market participant would use.

Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill.

The use of alternative valuation assumptions, including estimated revenue projections, growth rates, royalty rate, estimated cost savings, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis