10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                      

Commission file number: 001-37478

NATERA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	01-0894487
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

13011 McCallen Pass Building A Suite 100 Austin, TX	78753
(Address of Principal Executive Offices)	(Zip Code)

(650) 980-9190

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	NTRA	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ⌧     No  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ⌧    No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	◻
		Emerging growth company	◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ◻    No  ⌧

As of August 1, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 123,681,432.

Natera, Inc.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

TABLE OF CONTENTS

		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Part I — Financial Information
	Item 1. Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	9
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	10
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	48
	Item 4. Controls and Procedures	49
Part II — Other Information
	Item 1. Legal Proceedings	49
	Item 1A. Risk Factors	51
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3. Defaults Upon Senior Securities	51
	Item 4. Mine Safety Disclosures	51
	Item 5. Other Information	51
	Item 6. Exhibits	52
	Signatures	54

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. The forward-looking statements are contained principally in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this report. Forward-looking statements include information concerning our future results of operations and financial position, strategy and plans, and our expectations for future operations. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as "believe," "may," "will," "estimate," "continue," "anticipate," "design," "intend," "expect," "could," "plan," "potential," "predict," "seek," "should," "would" or the negative version of these words and similar expressions.

These forward-looking statements include, but are not limited to, statements concerning the following:

● our expectations regarding revenue, expenses and other operating results;

● our expectation that, for the foreseeable future, a significant portion of our revenues will be derived from sales of Panorama, Horizon, and Signatera;

● our ability to increase demand and reimbursement for our tests;

● our expectation that Panorama will be adopted for the screening of microdeletions and that third-party payer reimbursement will be available for this testing, including our expectations that the results from our single nucleotide polymorphism-based Microdeletion and Aneuploidy RegisTry, or SMART, Study may support broader use of and reimbursement for the use of Panorama for microdeletions;

● our expectations of the reliability, accuracy, and performance of our tests, as well as expectations of the benefits of our tests to patients, providers, and payers;

● our ability to successfully develop additional revenue opportunities, expand our product offerings to include new tests, and expand adoption of our current and future technologies through Constellation, our cloud-based distribution model;

● our efforts to successfully develop and commercialize, or enhance, our products;

● our ability to comply with federal, state, and foreign regulatory requirements, programs and policies, including a recently enacted rule from the FDA that would classify our tests as medical devices, and to successfully operate our business in response to changes in such requirements, programs and policies;

● our ability to respond to, defend, or otherwise favorably resolve litigation or other proceedings, including investigations, subpoenas, demands, disputes, requests for information, and other regulatory or administrative actions or proceedings;

● the effect of improvements in our cost of goods sold;

● our estimates of the total addressable markets for our current and potential product offerings;

● our ability and expectations regarding obtaining, maintaining and expanding third-party payer coverage of, and reimbursement for, our tests;

● the effect of changes in the way we account for our revenue;

● the scope of protection we establish and maintain for, and developments or disputes concerning, our intellectual property or other proprietary rights, including associated litigation costs we may incur and our assumptions regarding any potential liabilities associated with our existing litigation matters;

● our ability to successfully compete in the markets we serve;

● our reliance on collaborators such as medical institutions, contract laboratories, laboratory partners, and other third parties;

● our ability to operate our laboratory facilities and meet expected demand, and to successfully scale our operations;

● our reliance on a limited number of suppliers, including sole source suppliers, which may impact our ability to maintain a continued supply of laboratory instruments and materials and to run our tests;

● our expectations of the rate of adoption of our current or future tests by laboratories, clinics, clinicians, payers, and patients;

● our ability to complete clinical studies and publish compelling clinical data in peer-reviewed medical publications regarding our current and future tests, and the effect of such data or publications on professional society or practice guidelines or coverage and reimbursement determinations from third-party payers, including our SMART and CIRCULATE-Japan studies and our ongoing and planned trials in oncology and organ health;

● our reliance on our partners to market and offer our tests in the United States and in international markets;

3

● our expectations regarding acquisitions, dispositions and other strategic transactions;

● our expectations regarding the conversion of our outstanding 2.25% convertible senior notes due 2027, or the Convertible Notes, in the aggregate principal amount of $287.5 million prior to the scheduled redemption date of October 11, 2024;

● our ability to control our operating expenses and fund our working capital requirements;

● the factors that may impact our financial results, including our revenue recognition assumptions and estimates; and

● anticipated trends and challenges in our business and the markets in which we operate.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those discussed in Part II, Item 1A, “Risk Factors” in this report and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024. Given these uncertainties, you should not place undue reliance on these forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.

Also, forward-looking statements represent our beliefs and assumptions only as of the date of this report. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used in this Quarterly Report on Form 10-Q, the terms “Natera,” “Registrant,” “Company,” “we,” “us,” and “our” mean Natera, Inc. and its subsidiaries unless the context indicates otherwise.

4

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Natera, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands except par value)

	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	796,798	$	642,095
Short-term investments		90,299		236,882
Accounts receivable, net of allowance of $7,021 and $6,481 at June 30, 2024 and December 31, 2023, respectively		335,936		278,289
Inventory		40,985		40,759
Prepaid expenses and other current assets, net		37,798		60,524
Total current assets		1,301,816		1,258,549
Property and equipment, net		133,280		111,210
Operating lease right-of-use assets		52,582		56,537
Other assets		29,311		15,403
Total assets	$	1,516,989	$	1,441,699
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	33,100	$	14,998
Accrued compensation		41,487		45,857
Other accrued liabilities		141,231		149,405
Deferred revenue, current portion		18,367		16,612
Short-term debt financing		80,389		80,402
Total current liabilities		314,574		307,274
Long-term debt financing		283,604		282,945
Deferred revenue, long-term portion and other liabilities		21,066		19,128
Operating lease liabilities, long-term portion		61,225		67,025
Total liabilities		680,469		676,372
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value: 750,000 shares authorized at both June 30, 2024 and December 31, 2023; 123,365 and 119,581 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		12		11
Additional paid-in capital		3,320,365		3,145,837
Accumulated deficit		(2,482,499)		(2,377,436)
Accumulated other comprehensive loss		(1,358)		(3,085)
Total stockholders’ equity		836,520		765,327
Total liabilities and stockholders’ equity	$	1,516,989	$	1,441,699

See accompanying notes to the unaudited interim condensed consolidated financial statements.

5

Natera, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except per share data)

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues
Product revenues	$	411,364	$	258,256	$	776,036	$	496,053
Licensing and other revenues		1,987		3,148		5,056		7,107
Total revenues		413,351		261,404		781,092		503,160
Cost and expenses
Cost of product revenues		169,850		142,808		328,683		290,562
Cost of licensing and other revenues		329		341		636		711
Research and development		89,109		78,173		177,746		160,479
Selling, general and administrative		197,965		152,508		392,243		302,135
Total cost and expenses		457,253		373,830		899,308		753,887
Loss from operations		(43,902)		(112,426)		(118,216)		(250,727)
Interest expense		(3,127)		(3,177)		(6,251)		(6,238)
Interest and other income, net		10,457		4,518		20,724		9,103
Loss before income taxes		(36,572)		(111,085)		(103,743)		(247,862)
Income tax (expense) benefit		(892)		282		(1,320)		122
Net loss	$	(37,464)	$	(110,803)	$	(105,063)	$	(247,740)
Unrealized gain on available-for-sale securities, net of tax		834		2,595		1,727		7,159
Comprehensive loss	$	(36,630)	$	(108,208)	$	(103,336)	$	(240,581)
Net loss per share (Note 12):
Basic and diluted	$	(0.30)	$	(0.97)	$	(0.86)	$	(2.20)
Weighted-average number of shares used in computing basic and diluted net loss per share:
Basic and diluted		122,853		113,690		121,834		112,734

See accompanying notes to the unaudited interim condensed consolidated financial statements.

6

Natera, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)

	Three months ended June 30, 2023
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of March 31, 2023	113,359	$	11	$	2,741,932	$	(11,798)	$	(2,079,572)	$	650,573
Issuance of common stock upon exercise of stock options	48		—		638		—		—		638
Issuance of common stock under the employee stock purchase plan	219		—		8,674		—		—		8,674
Vesting of restricted stock units	425		—		—		—		—		—
Stock-based compensation	—		—		44,470		—		—		44,470
Unrealized gain on available-for sale securities	—		—		—		2,595		—		2,595
Net loss	—		—		—		—		(110,803)		(110,803)
Balance as of June 30, 2023	114,051	$	11	$	2,795,714	$	(9,203)	$	(2,190,375)	$	596,147

	Six months ended June 30, 2023
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2022	111,255	$	11	$	2,664,730	$	(16,362)	$	(1,942,635)	$	705,744
Issuance of common stock upon exercise of stock options	217		—		2,939		—		—		2,939
Issuance of common stock under the employee stock purchase plan	219		—		8,674		—		—		8,674
Issuance of stock for bonuses	349		—		19,771		—		—		19,771
Issuance of common stock for IPR&D milestone	336		—		14,435		—		—		14,435
Vesting of restricted stock units	1,675		—		—		—		—		—
Stock-based compensation	—		—		85,165		—		—		85,165
Unrealized gain on available-for sale securities	—		—		—		7,159		—		7,159
Net loss	—		—		—		—		(247,740)		(247,740)
Balance as of June 30, 2023	114,051	$	11	$	2,795,714	$	(9,203)	$	(2,190,375)	$	596,147

7

	Three months ended June 30, 2024
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of March 31, 2024	122,234	$	12	$	3,241,326	$	(2,192)	$	(2,445,035)	$	794,111
Issuance of common stock upon exercise of stock options	286		—		2,182		—		—		2,182
Issuance of common stock under the employee stock purchase plan	263		—		8,862		—		—		8,862
Vesting of restricted stock units	582		—		—		—		—		—
Stock-based compensation	—		—		67,995		—		—		67,995
Unrealized gain on available-for sale securities	—		—		—		834		—		834
Net loss	—		—		—		—		(37,464)		(37,464)
Balance as of June 30, 2024	123,365	$	12	$	3,320,365	$	(1,358)	$	(2,482,499)	$	836,520

	Six months ended June 30, 2024
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2023	119,581	$	11	$	3,145,837	$	(3,085)	$	(2,377,436)	$	765,327
Issuance of common stock upon exercise of stock options	1,078		—		8,648		—		—		8,648
Issuance of common stock under the employee stock purchase plan	263		—		8,862		—		—		8,862
Issuance of stock for bonuses	270		—		24,071		—		—		24,071
Vesting of restricted stock units	2,173		1		—		—		—		1
Stock-based compensation	—		—		132,947		—		—		132,947
Unrealized gain on available-for sale securities	—		—		—		1,727		—		1,727
Net loss	—		—		—		—		(105,063)		(105,063)
Balance as of June 30, 2024	123,365	$	12	$	3,320,365	$	(1,358)	$	(2,482,499)	$	836,520

See accompanying notes to the unaudited interim condensed consolidated financial statements.

8

Natera, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	June 30,
	2024		2023
	(in thousands)
Operating activities
Net loss	$	(105,063)	$	(247,740)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		14,978		10,201
Expensed in-process research and development		—		2,679
Premium amortization and discount accretion on investment securities		(556)		1,450
Stock-based compensation		131,858		84,789
Non-cash lease expense		7,204		7,451
Amortization of debt discount and issuance cost		658		642
Foreign exchange adjustment		377		265
Non-cash interest expense		(13)		68
Changes in operating assets and liabilities:
Accounts receivable		(57,647)		(15,680)
Inventory		(225)		(7,281)
Prepaid expenses and other assets		20,874		12,590
Accounts payable		16,668		(9,018)
Accrued compensation		19,701		9,936
Operating lease liabilities		(8,269)		(5,196)
Other accrued liabilities		(10,598)		(11,175)
Deferred revenue		1,044		6,368
Cash provided by (used in) operating activities		30,991		(159,651)
Investing activities
Purchases of investments		(72,810)		—
Proceeds from maturity of investments		221,500		83,250
Purchases of property and equipment, net		(31,993)		(20,190)
Cash paid for acquisition of intangible assets		(10,495)		—
Cash provided by investing activities		106,202		63,060
Financing activities
Proceeds from exercise of stock options		8,648		2,939
Proceeds from the issuance of common stock under the employee stock purchase plan		8,862		8,674
Cash provided by financing activities		17,510		11,613
Net change in cash, cash equivalents and restricted cash		154,703		(84,978)
Cash, cash equivalents and restricted cash, beginning of period		642,095		466,091
Cash, cash equivalents and restricted cash, end of period	$	796,798	$	381,113
Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,592	$	5,596
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accruals	$	2,245	$	103
Acquisition of warrants	$	1,884	$	—
Amounts accrued for acquisition of intangible assets	$	1,400	$	—
Issuance of common stock for IPR&D acquisition	$	—	$	14,435
Issuance of common stock for bonuses	$	24,071	$	19,771
Stock-based compensation included in capitalized software development costs	$	1,089	$	376

See accompanying notes to the unaudited interim condensed consolidated financial statements.

9

Natera, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

1. Description of Business

Natera, Inc. (the “Company”) was formed in the state of California as Gene Security Network, LLC in November 2003 and incorporated in the state of Delaware in January 2007. The Company is a diagnostics company with proprietary molecular and bioinformatics technology that it is applying to change the management of disease worldwide. The Company’s cell-free DNA (“cfDNA”) technology combines its novel molecular assays, which reliably measure many informative regions across the genome from samples as small as a single cell, with its statistical algorithms which incorporate data available from the broader scientific community to identify genetic variations covering a wide range of serious conditions with high accuracy and coverage. The Company focuses on applying its technology to three main areas of healthcare – women’s health, oncology and organ health. In the women’s health space, the Company develops and commercializes non- or minimally- invasive tests to evaluate risk for, and thereby enable early detection of, a wide range of genetic conditions, such as Down syndrome. In oncology, the Company commercializes, among others, a personalized blood-based DNA test to detect molecular residual disease and monitor for disease recurrence across a broad range of cancer types. The Company’s third area of focus is organ health, with tests to assess kidney, heart, and lung transplant rejection as well as genetic testing for chronic kidney disease. The Company operates laboratories in Austin, Texas and San Carlos, California certified under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) providing a host of cell-free DNA-based molecular testing services. The Company determines its operating segments based on the way it organizes its business to make operating decisions and assess performance. The Company operates one segment, the development and commercialization of molecular testing services, applying its proprietary technology in the fields of women’s health, oncology and organ health.

The Company’s key product offerings include its Panorama Non-Invasive Prenatal Test (“Panorama”) that screens for chromosomal abnormalities of a fetus as well as in twin pregnancies, typically with a blood draw from the mother; Horizon Carrier Screening (“Horizon”) to determine carrier status for a large number of severe genetic diseases that could be passed on to the carrier’s children; its Signatera molecular residual disease test (“Signatera”) to detect circulating tumor DNA in patients previously diagnosed with cancer to assess molecular residual disease, monitor for recurrence, and evaluate treatment response; and its Prospera test, to assess organ transplant rejection in patients who have undergone kidney, heart, or lung transplantation. All testing is available principally in the United States. The Company also offers its Panorama test to customers outside of the United States, primarily in Europe. The Company also offers Constellation, a cloud-based software platform that enables laboratory customers to gain access through the cloud to the Company’s algorithms and bioinformatics in order to validate and launch their own tests based on the Company’s technology.

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2024, there were no material changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (filed on February 29, 2024).

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the Company’s results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date. These financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2024.

10

Some items in the prior period financial statements were reclassified to conform to the current presentation.

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses for the near future. The Company had a net loss of $105.1 million for the six months ended June 30, 2024 and an accumulated deficit of $2.5 billion as of June 30, 2024. As of June 30, 2024, the Company had $796.8 million in cash, cash equivalents, and restricted cash, $90.3 million in marketable securities, an $80.4 million outstanding balance on its Credit Line (as defined in Note 10, Debt) including accrued interest and $287.5 million of outstanding principal on its 2.25% Convertible Senior Notes (the “Convertible Notes”). The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral for its Credit Line. As of June 30, 2024, the Company had $20.0 million remaining and available on its Credit Line.

While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations and business plans. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings.

The Company continues to invest in the development and commercialization of its existing and future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders will experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available when necessary, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations.

On July 19, 2024, the Company announced its decision to redeem all of its outstanding 2.25% Convertible Senior Notes due 2027. The redemption is scheduled for October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with shares of its common stock as the settlement method to apply to all conversions of the Convertible Notes. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of the Company’s common stock prior to the Redemption Date. As a result, the Company does not expect that its decision to redeem the Convertible Notes will have a material effect on its liquidity.

In September 2023, the Company completed an underwritten equity offering and sold 4,550,000 shares of its common stock at a price of $55 per share to the public. Before estimated offering expenses of $0.4 million, the Company received proceeds of approximately $235.8 million net of the underwriting discount.

On September 10, 2021, the Company entered into an agreement with a third party for an asset acquisition where the acquired asset was in-process research and development primarily in exchange for an equity consideration payment. In addition, pursuant to the agreement, certain employees of the third party became employees of the Company. The third party was a biotechnology company focused on oncology. The total upfront acquisition consideration amounts to $35.6 million composed of the issuance of 276,346 shares of the Company's common stock with a fair value of $30.9 million, approximately $3.9 million of cash consideration, assumed net liabilities of $0.2 million, as well as $0.6 million of acquisition related legal and accounting costs directly attributable to the acquisition of the asset. The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified in-process research and development asset (“IPR&D”) thus satisfying the requirements of the screen test in Accounting Standards Update (“ASU”) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of Business. The estimated fair value of the acquired workforce was not significant. The Company concluded the acquired IPR&D has no alternative-future use and accordingly expensed approximately $35.6 million, on the day the transaction closed as research and development expense, which is reflected in its consolidated statement of operations.

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Further, additional consideration aggregating up to approximately $35.0 million was estimated to be paid via issuance of an estimated 269,547 additional shares of the Company’s common stock, consistent with the registration statement filed with the SEC on September 10, 2021, upon achievement of defined milestones relating to product development, commercial launch and continued employment of certain selling shareholders, each of which was revalued at each reporting date and amount of compensation expense was adjusted accordingly and reported in research and development expenses. In November 2022, the terms of the payment for any remaining consideration were modified, resulting in $10.0 million of consideration paid in December 2022 and $15.0 million of consideration paid in March 2023, with such consideration primarily consisting of the Company’s common stock.

Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2024.

Principles of Consolidation

The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiaries. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. The Company established a subsidiary that operates in Canada following the acquisition of the IPR&D asset. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) in the United States requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, the average useful life for property and equipment including impairment estimates, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of options, income tax uncertainties, and the expected consideration to be received from contracts with customers, insurance payors, and patients. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements.

Investments

Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, irrespective of maturity date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.

The Company classifies its investments as Level 1 or 2 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. The Company holds Level 2 securities which are initially valued at the transaction price and subsequently valued by a third-party service provider using inputs other than quoted prices that are observable either directly or indirectly, such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of these holdings.  

Available-for-sale debt securities. The amended guidance from ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires the measurement of expected credit

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losses for available-for-sale debt securities held at the reporting date over the remaining life based on historical experience, current conditions, and reasonable and supportable forecasts. The Company evaluated its investment portfolio under the available-for-sale debt securities impairment model guidance and determined the Company’s investment portfolio is composed of low-risk, investment grade securities and thus has not recorded an expected credit loss for its investment portfolio. Further, gross unrealized losses on available for sale securities were not material at June 30, 2024.

Accounts Receivable

Trade accounts receivable and other receivables. The allowance for doubtful accounts for trade accounts receivable is based on the Company’s assessment of the collectability of accounts related to its clinics and laboratory partner customers. The Company regularly reviews the allowance by considering factors such as historical experience, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. See Note 6, Balance Sheet Components, for a roll-forward of the allowance for doubtful accounts related to trade accounts receivable for three months and six months ended June 30, 2024 and 2023. The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) and applies a constraint to the estimated variable consideration such that it is not probable that a significant reversal will occur. When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds. After applying the ASC 606 constraint, the Company assessed for credit losses and allowance for doubtful accounts and determined an incremental credit loss was not needed given the quality of the insurance payors from whom such receivables are expected to be collectible and the relatively short duration over which the majority of receivables are collected. Accordingly, the Company currently does not have an incremental credit loss reserve nor allowance for doubtful accounts against accounts receivable for insurance and patient payors due to the average selling price calculations which incorporate these risks as net receivables are recorded.

Inventory

Inventory is recorded at the lower of cost or net realizable value, determined on a first-in, first-out basis. Inventory consists entirely of supplies, which the Company consumes when providing its test reports, and therefore, the Company does not maintain any finished goods inventory. The Company enters into inventory purchases commitments so that it can meet future delivery schedules based on forecasted demand for its tests.

The Company uses judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. A write down of specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period is first recognized by using a number of factors including product expiration dates and scrapped inventory. Any write-down of inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded to cost of revenue on our consolidated statements of operations. The Company makes assumptions about future demand, market conditions and the release of new products that may supersede older products. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs may be required.

Other Assets

In January 2024, the Company acquired from Invitae Corp. (“Invitae”) certain assets relating to Invitae’s non-invasive prenatal screening and carrier screening business. The transaction price of $10.5 million consisted of $10.0 million in upfront payment costs and approximately $0.5 million of other transaction costs which were capitalized as intangible assets over an estimated useful life of ten years. An additional payment of up to $42.5 million may be made should the Company achieve certain customer volume retention targets and based on certain legal outcomes.

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Accumulated Other Comprehensive Income (Loss)

Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities and foreign currency translation adjustments.

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	(2,192)	$	(11,798)	$	(3,085)	$	(16,362)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment		834		2,595		1,727		7,159
Ending balance	$	(1,358)	$	(9,203)	$	(1,358)	$	(9,203)

The change in net unrealized loss on available-for-sale securities is due to increased market volatility. The Company has assessed the unrealized loss position for available-for-sale securities and determined that an allowance for credit loss was not necessary.

Revenue Recognition

The Company recognizes revenue under, ASC 606, using the following five step process:

● Identification of a contract, or contracts, with a customer;

● Identification of the performance obligations in the contract;

● Determination of the transaction price;

● Allocation of the transaction price to the performance obligations in the contract; and

● Revenue recognition when, or as, the performance obligations are satisfied.

The Company uses the most likely amount method of estimating variable consideration. The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable, and is primarily based on historical cash collections for tests delivered, as adjusted for current expectations. Current expectations of cash collections factor in changes in reimbursement rate trends, past events not expected to recur, and future known changes such as anticipated contractual pricing changes or changes to insurance coverage.  For insurance carriers and product types with similar reimbursement characteristics, the Company uses a portfolio approach to estimate variable consideration. The Company also applies a constraint to the estimated variable consideration when it assesses whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods.

When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds.

See Note 3, Revenue Recognition, for detailed discussions of product revenues, licensing and other revenues, and how the five steps described above are applied.

Fair Value

The Company discloses the fair value of financial instruments for financial assets and liabilities for which the value is practicable to estimate. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

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Related Party

On December 6, 2021, the Company participated along with certain other investors in the series B financing of MyOme, Inc. (“MyOme”), and purchased preferred shares and warrants in exchange for a cash payment of approximately $4.0 million. The Company does not hold a seat on MyOme’s board of directors. The Company’s investment in MyOme is recorded at cost and no impairment was identified as of June 30, 2024. The following are the Company’s related persons and the basis of each such related person’s relationship with MyOme:

● Matthew Rabinowitz, the Company’s executive chairman and co-founder, is the chairman of the board and founder of MyOme, and a beneficial holder of approximately 26.5% of the outstanding shares of MyOme on a fully dilutive basis;

● Jonathan Sheena, the Company’s co-founder and a member of the Company’s board of directors, is a stockholder and a member of the board of directors of MyOme;

● Daniel Rabinowitz, the Company’s Secretary and Chief Legal Officer, is a stockholder of MyOme; and

● Roelof Botha, the Lead Independent Director of the Company’s board of directors, is a managing member of Sequoia Capital. Certain funds affiliated with Sequoia Capital also participated in MyOme’s series B financing.

None of the related party investments in MyOme by our executives and directors noted above were at the behest of the Company nor funded by the Company.

In February 2024, the Company entered into a collaboration and commercialization agreement (the “Collaboration Agreement”) with MyOme pursuant to which the parties will partner to offer certain genetic testing services to be developed and funded solely by MyOme and overseen by a joint steering committee. The Company will assist MyOme with commercial activities. In connection with the Collaboration Agreement, the Company received a 10-year warrant to purchase 3,058,485 shares of MyOme's common stock at an exercise price of $0.25 per share, which will vest upon a MyOme liquidity event (as such terms are defined in MyOme's certificate of incorporation). The warrants were valued using the Black-Scholes valuation model on the date of acquisition and are accounted for using the measurement alternative. No impairment was identified as of June 30, 2024. The warrants have been included within other assets and deferred revenue, long-term portion and other liabilities, which will be recognized as a reduction of selling and marketing expense upon commercialization and sale of the products contemplated under the Collaboration Agreement. Subject to the Company's achievement of certain commercialization milestones, the Company may receive additional warrants to purchase MyOme’s Series B Preferred Stock. To the extent the genetic testing services are successfully commercialized, the Company will owe certain royalty payments to MyOme. Should the Company exercise all its MyOme common stock warrants, the Company would hold an accumulated 12.4% of MyOme on a fully diluted basis.

Risk and Uncertainties

Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents, and restricted cash, accounts receivable and investments. The Company limits its exposure to loss by placing its cash in financial institutions with high credit ratings. The Company's cash may consist of deposits held with banks that may at times exceed federally insured limits of $250,000 per customer. The Company performs evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution.

For the three and six months ended June 30, 2024, and 2023, there were no customers exceeding 10% of total revenues on an individual basis. As of June 30, 2024 and December 31, 2023, there were no customers with an outstanding balance exceeding 10% of net accounts receivable. 

For the three months ended June 30, 2024 and 2023, approximately 10.3% and 12.5%, respectively, of total revenue were paid by Medicare on behalf of multiple customers. For the six months ended June 30, 2024 and 2023, approximately 10.9% and 13.2%, respectively, of total revenue were paid by Medicare on behalf of multiple customers.

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As of June 30, 2024 and December 31, 2023, approximately 8.8% and 10.2%, respectively, of accounts receivable are expected to be paid by Medicare on behalf of multiple customers.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed below, the Company believes that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

New Accounting Pronouncements Not Yet Adopted

In March 2020, ASU 2020-04, Reference Rate Reform (Topic 848) was issued which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. ASU 2022-06, or Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company does not expect adoption of this standard to have a material impact on its consolidated financial statements.

In November 2023, ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In December 2023, ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, was issued, which requires enhanced disclosures in connection with an entity's effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard will be effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

3. Revenue Recognition

The Company recognizes revenues when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers.

Product Revenues

Product revenues are derived by performing genetic testing services and the Company’s performance obligation is complete when test results are delivered to a clinic or patient, who are considered the customer for such services as further discussed below.

Additionally, the Company enters into agreements with pharmaceutical companies to utilize the Company’s Signatera tests typically to study new cancer treatments or to validate the outcomes of clinical trials for which the pharmaceutical companies are identified as customers. Such arrangements generally involve performing whole exome sequencing services and the testing of patient samples to detect cancer mutations using its Signatera test. In addition to performing Signatera tests, these agreements typically include certain activities to fulfill the contract, such as customer data setup and management and ongoing reporting. Each test result is billable to customers upon delivery and the personalized cancer profile also makes each test distinct within the context of the contract as customers can exercise control over the test results upon delivery. Accordingly, the Company recognizes test processing revenue as individual test results are delivered to customers.

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For certain contracts with pharmaceutical companies where the Company is developing a companion diagnostic test in addition to performing regular testing services, revenue is primarily recognized proportionally as services are performed and/or tests are delivered.

A performance obligation represents a promise in a contract to transfer a distinct good or service to a customer, which represents a unit of accounting in accordance with ASC 606. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company evaluates its contracts with laboratory partners and patients and identifies the performance obligations in those contracts, which are the delivery of the test results.

The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable. Consideration includes reimbursement from both patients and insurance carriers, adjusted for variable consideration related to disallowed cases, percent of patient responsibility collected, refunds and reserves, and is estimated using the most likely amount method. For insurance carriers and product types with similar reimbursement characteristics, the Company uses a portfolio of relevant historical data to estimate variable consideration and total collections for the Company’s products. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. The consideration expected from laboratory partners usually includes a fixed amount, but it can be variable depending on the volume of tests performed, and the Company determines the variable consideration using the expected value approach. For laboratory partners and patients, the Company allocates the total consideration to a single performance obligation, which is the delivery of the test results to the customers.

When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds.

The Company enters into contracts with insurance carriers with primarily payment terms related to tests provided to patients who have health insurance coverage. Insurance carriers are considered as third-party payers on behalf of the patients, and the patients are considered as the customers who receive genetic test services. Tests may be billed to insurance carriers, patients, or a combination of insurance carriers and patients. Further, the Company sells tests to a number of domestic and international laboratory partners and identifies the laboratory partners as customers provided that there is a test services agreement between the two parties.

The Company generally bills an insurance carrier, a laboratory partner or a patient upon delivery of test results. The Company also bills patients directly for out-of-pocket costs involving co-pays and deductibles that they are responsible for. The Company may or may not get reimbursed for the full amount billed. Further, the Company may not get reimbursed at all for tests performed if such tests are not covered under the insurance carrier’s reimbursement policies or the Company is not a qualified provider to the insurance carrier, or if the tests were not previously authorized.

Product revenue is recognized in an amount equal to the total consideration (as described above) expected to be received at a point in time when the test results are delivered. Approximately 90% of cash collections attributable to such product revenue occurs within nine months with the remaining collections generally taking an additional six months. During this time, management routinely reassesses its estimates of actual to expected cash collections, which are based on historical collection rates and adjusted for current information and trends. To the extent cash collections for tests delivered in prior periods are trending higher than expectations, the Company will increase revenue recognized when sufficient evidence is obtained to conclude the additional revenue will not result in a reversal of revenue in a future period. If cash collections for tests delivered in prior periods are trending below expectations, the Company will reduce revenue to the amount expected to be collected based on the latest information and expectations. Increases or decreases to the amount of cash expected to be collected for tests delivered in prior periods are recognized in product revenue with a corresponding impact to accounts receivable during the period such determination is made. During the three months ended June 30, 2024

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and 2023, the Company increased revenue by a net of $39.9 million and $3.4 million, respectively, for collections related to tests delivered in prior periods that were fully collected (including an estimate of unapplied receipts). The increased revenue and decreased net loss resulted in a corresponding decrease in loss per share by $0.32 and $0.03 for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the Company increased revenue by a net of $73.7 million for collections related to tests delivered in prior periods that were fully collected (including an estimate of unapplied receipts). The increased revenue and decreased net loss resulted in a corresponding decrease in loss per share by $0.60 for the six months ended June 30, 2024. During the six months ended June 30, 2023, the Company reduced revenue by a net of $5.8 million for a reduction in expected collections related to tests delivered in prior periods. The decreased revenue and increased net loss resulted in a corresponding increase in loss per share by $0.05 for the six months ended June 30, 2023.  

As of June 30, 2024, the Company had $16.6 million in cash receipts which had not yet been applied to specific accounts receivables primarily due to the disruption to Change Healthcare’s network that occurred in February 2024. The Company reviewed the historical unapplied payment trends. Based on the historical estimation, within the unapplied cash receipt of $16.6 million, the Company estimated approximately $1.3 million was related to tests delivered in prior periods that were fully collected.  Additionally, as overpayments were not material in prior periods, the Company accounted for temporary unapplied balances as of June 30, 2024, as contra accounts receivable on the Balance Sheet. As of December 31, 2023, the unapplied accounts receivable balance was $1.3 million.

Product revenue is constrained for refunds estimated to be paid to insurance carriers. Certain refunds are recognized in accrued liabilities until they are either paid to the respective insurance carrier or it is determined the refund will not ultimately be paid, at which time the related accrual is reduced with a corresponding increase to revenue. During the three months ended June 30, 2024 and 2023, the reserves for refunds to insurance carriers were reduced and product revenue increased by $1.7 million and $0.8 million, respectively, for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.01 for both the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, the reserves for refunds to insurance carriers were reduced and product revenue increased by $3.8 million and $6.5 million, respectively, for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.03 and $0.06 for the six months ended June 30, 2024 and 2023, respectively.

In addition, certain other refunds are recognized as a reduction to accounts receivable until they are either paid to the respective insurance carrier or it is determined the refund will not ultimately be paid, at which time the related reserve is reduced with a corresponding increase to revenue. During the three months ended June 30, 2024, the reserves for refunds to insurance carriers were reduced and product revenue increased by $1.9 million for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.02 for the three months ended June 30, 2024. During the six months ended June 30, 2024, the reserves for refunds to insurance carriers were reduced and product revenue increased by $4.1 million for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and decreased net loss resulted in a decreased loss per share by $0.03 for the six months ended June 30, 2024. There was no such adjustment in the three and six months ended June 30, 2023.

Licensing and Other Revenues

The Company recognizes licensing revenues from its cloud-based distribution service offering, Constellation, by granting licenses to its licensees to use certain of the Company’s proprietary intellectual properties and cloud-based software and in vitro diagnostic (“IVD”) kits. The Company also recognizes revenues from its strategic collaboration agreements, such as those with BGI Genomics Co., Ltd. (“BGI Genomics”) and Foundation Medicine, Inc. (“Foundation Medicine”). The Company recognizes licensing and other revenues through agreements with pharmaceutical companies in support of potential clinical trials managed by the pharmaceutical companies.

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Constellation

The laboratory partners with whom the Company enters into a licensing arrangement represent the licensees and are identified as customers. The licensees do not have the right to possess the Company’s software, but rather receive services through the cloud software. These arrangements often include: (i) the delivery of the services through the cloud software, (ii) the necessary support and training, and (iii) the IVD kits to be consumed as tests are processed. The Company does not consider the software as a service, the support or the training as being distinct in the context of such arrangements, and therefore they are combined as a single performance obligation. The software, support and training are delivered simultaneously to the licensees over the term of the arrangement.

The Company bills the majority of licensees, who process the tests in their laboratories, a fixed price for each test processed. Licensing revenues are recognized as the performance obligations are satisfied (i.e., upon the delivery of each test) and reported in licensing and other revenues in the Company’s statements of operations and comprehensive loss.

BGI Genomics

In February 2019, the Company entered into a License Agreement (the “BGI Genomics Agreement”) with BGI Genomics to develop, manufacture, and commercialize next generation sequencing-based genetic testing assays for clinical and commercial use. The BGI Genomics Agreement has a term of ten years and expires in February 2029. Pursuant to the BGI Genomics Agreement, the Company licensed its intellectual property to and provided development services for BGI Genomics. Following completion of development services, the Company began providing assay interpretation services over the term of the agreement.

According to the BGI Genomics Agreement, the Company is entitled to a total of $50.0 million, comprised of upfront technology license fees, prepaid royalties relating to future sales of licensed products and performance of assay interpretation services, and milestone payments. Due to uncertainties in achieving certain milestones, $6.0 million of the $50.0 million was constrained. A net of $44.0 million has been collected by the Company in cash, which includes $20.0 million in prepaid royalties.

The Company concluded that the license is not a distinct performance obligation as it does not have a stand-alone value to BGI Genomics apart from the related development services. Therefore, license and related development services, for each of the non-invasive prenatal tests (“NIPTs”) and Oncology products, representing two separate performance obligations, to which $24.0 million of transaction consideration was allocated. This performance obligation was fully satisfied in March 2023 and no further related amounts will be recognized as revenue.

As of December 31, 2023, the Company's performance obligation to provide ongoing NIPT assay interpretation services was removed. Therefore, the Company now has a single remaining performance obligation related to Oncology assay interpretation services, to which $20.0 million of transaction consideration was allocated and prepaid by BGI Genomics. During the six months ended June 30, 2023, the Company recognized $0.6 million related to oncology assay interpretation services, of which $0.2 million was recognized against deferred royalties. During the six months ended June 30, 2024, the Company did not record any material amounts related to oncology assay interpretation services. The Company currently has $18.9 million in deferred revenue as of June 30, 2024.

As required by the BGI Genomics Agreement, in June 2019 the Company prepaid $6.0 million to BGI Genomics for future sequencing services and $4.0 million for future sequencing equipment. These advance payments are for equipment and services to be received in future periods, which was assessed as a standalone transaction that did not reduce revenue, aggregated to $10.0 million and was originally recorded in long-term advances on the Company’s Consolidated Balance Sheet and will be periodically assessed for impairment. During both the three and six months ended June 30, 2024, $0.4 million in equipment and services was received.  During the three and six months ended June 30, 2023, $1.0 million and $2.6 million, respectively, in equipment and services was received. As of June 30, 2024, the remaining advanced payments were $4.5 million, with $0.6 million recorded in prepaid expenses and other current assets and $3.8 million recorded in other assets.

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Foundation Medicine, Inc.

In August 2019, the Company entered into a License and Collaboration Agreement (the “Foundation Medicine Agreement”) with Foundation Medicine to develop and commercialize personalized circulating tumor DNA monitoring assays, for use by biopharmaceutical and clinical customers who order Foundation Medicine’s FoundationOne CDx. The Company and Foundation Medicine will share the revenues generated from both biopharmaceutical and clinical customers in accordance with the terms of the Foundation Medicine Agreement. The Foundation Medicine Agreement has an initial term of five years, expiring in August 2024, with automatic renewals thereafter for successive one-year terms, unless the Foundation Medicine Agreement is earlier terminated in accordance with its terms. The Company and Foundation Medicine have elected not to renew the agreement beyond the initial term.

Pursuant to the Foundation Medicine Agreement, the Company will provide development services that are required to customize its proprietary Signatera test to work with Foundation Medicine’s FoundationOne CDx in conjunction with granting the use of the Company’s intellectual property. Following completion of those development services, the Company is currently providing assay testing services over the term of the agreement. The intellectual property has been licensed to Foundation Medicine for the customized test. In addition, the Company is responsible for delivering clinical study plans in order to demonstrate efficacy of the customized test which commenced in the second quarter of 2021.

The Company is entitled to a total of $32.0 million, comprised of upfront technology license fees, prepaid royalties relating to future sales of licensed products and performance of assay interpretation services, and milestone payments. $7.7 million is constrained due to uncertainties in achieving certain milestones. A net of $24.3 million has been collected by the Company in cash, which includes $5.0 million of prepaid royalties.

The Company concluded that the license is not a distinct performance obligation as it does not have a stand-alone value to Foundation Medicine apart from the related development services. Therefore, license and related development services, for Oncology products, represent a single performance obligation, to which $19.3 million of transaction consideration was allocated. Of this amount, $0.2 million was recognized in the three months ended March 31, 2023. This performance obligation was fully satisfied in March 2023 and no further related amounts will be recognized as revenue.

Royalties related to assay interpretation services represent separate performance obligations for Oncology products, to which $5.0 million of transaction consideration was allocated and prepaid by Foundation Medicine. During the three and six months ended June 30, 2023, the Company recognized $0.1 million and $0.4 million, respectively, related to oncology assay interpretation services. During the three and six months ended June 30, 2024, the Company recognized $0.2 million related to oncology assay interpretation services. The Company currently has $3.0 million in deferred revenue related to this agreement as of June 30, 2024.

Disaggregation of Revenues

The Company measures its performance results primarily based on revenues recognized from the three categories described below. The following table shows disaggregation of revenues by payer types:

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Insurance carriers	$	384,128	$	226,521	$	725,156	$	436,899
Laboratory and other partners		22,254		27,449		42,530		50,254
Patients		6,969		7,434		13,406		16,007
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

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The following table presents total revenues by geographic area based on the location of the Company’s payers:

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
United States	$	404,872	$	253,296	$	764,285	$	486,550
Americas, excluding U.S.		1,601		1,206		3,082		2,364
Europe, Middle East, India, Africa		5,439		5,620		10,617		10,816
Asia Pacific and Other		1,439		1,282		3,108		3,430
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

The following table summarizes the Company’s beginning and ending balances of accounts receivable and deferred revenues:

	Balance at
	June 30,		December 31,
	2024		2023
	(in thousands)
Assets:
Accounts receivable, net	$	335,936	$	278,289
Liabilities:
Deferred revenue, current portion	$	18,367	$	16,612
Deferred revenue, long-term portion		18,416		19,128
Total deferred revenues	$	36,783	$	35,740

The following table summarizes the changes in the balance of deferred revenues during the six months ended June 30, 2024 and 2023:

	Balance at
	June 30,
	2024			2023
	(in thousands)
Beginning balance	$	35,740	$	30,778
Increase in deferred revenues		14,826		17,402
Revenue recognized during the period that was included in deferred revenues at the beginning of the period		(9,646)		(7,521)
Revenue recognized from performance obligations satisfied within the same period		(4,137)		(3,513)
Ending balance	$	36,783	$	37,146

During the six months ended June 30, 2024, revenue recognized that was included in the deferred revenue balance at the beginning of the period totaled $9.6 million. This balance consisted of approximately a net $0.1 million related to BGI Genomics and Foundation Medicine and $9.5 million related to genetic testing services. The current portion of deferred revenue includes $14.8 million from genetic testing services, $0.5 million from BGI Genomics, and $3.0 million from the Foundation Medicine Agreement as of June 30, 2024. The non-current portion of deferred revenue consists of $18.4 million from the BGI Genomics Agreement as of June 30, 2024.

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4. Fair Value Measurements

The Company's financial assets and liabilities carried at fair value are comprised of investment assets that include money market and investments.

The fair value accounting guidance requires that assets and liabilities be carried at fair value and classified in one of the following three categories:

Level I: Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access.

Level II: Observable market-based inputs or unobservable inputs that are corroborated by market data, such as quoted prices, interest rates, and yield curves; and

Level III: Inputs that are unobservable data points that are not corroborated by market data.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

The following table represents the fair value hierarchy for the Company’s financial assets and financial liabilities measured at fair value on a recurring basis:

	June 30, 2024								December 31, 2023
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash, cash equivalents and restricted cash (1)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities		58,814		—		—		58,814		200,418		—		—		200,418
Municipal securities		—		31,485		—		31,485		—		36,464		—		36,464
Total financial assets	$	855,612	$	31,485	$	—	$	887,097	$	842,513	$	36,464	$	—	$	878,977

(1) Cash equivalents includes money market deposits and liquid demand deposits.

Fair Value of Short-Term and Long-Term Debt:

As of June 30, 2024 and December 31, 2023, the estimated fair value of the total principal outstanding and accrued interest of the Credit Line was $80.4 million, and were based upon observable Level 2 inputs, including the interest rate based on the 30-day Secured Overnight Financing Rate (“SOFR”) average, plus 0.5%. The estimated fair value approximates the carrying value due to the short term duration and variable interest rate.

As of June 30, 2024 and December 31, 2023, the estimated fair value of the Convertible Notes was $800.7 million and $491.8 million, respectively, based upon observable, Level 2 inputs, including pricing information from recent trades of the Convertible Notes. See Note 10, Debt, for additional details and carrying value.

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5. Financial Instruments

The Company elected to invest a portion of its cash assets in conservative, income earning, and liquid investments. Cash, cash equivalents, restricted cash and investments, which are classified as available-for-sale securities, consisted of the following:

	June 30, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Cash, cash equivalents and restricted cash (2)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities (1)		58,923		—		(109)		58,814		201,522		14		(1,118)		200,418
Municipal securities (1)		32,556		—		(1,071)		31,485		38,091		—		(1,627)		36,464
Total	$	888,277	$	—	$	(1,180)	$	887,097	$	881,708	$	14	$	(2,745)	$	878,977
Classified as:
Cash, cash equivalents and restricted cash (2)								796,798								642,095
Short-term investments								90,299								236,882
Total							$	887,097							$	878,977

(1) Per the Company’s investment policy, all debt securities are classified as short-term investments irrespective of holding period.  

(2) Cash equivalents includes liquid demand deposits, and money market funds.

The Company invests in U.S. Treasuries, U.S. agency and high-quality municipal bonds which mature at par value and are all paying their coupons on schedule. The Company has therefore concluded an allowance for expected credit losses of its investments was not necessary and will continue to recognize unrealized gains and losses in other comprehensive income (loss). During the six months ended June 30, 2024, the Company did not sell any investments. The Company uses the specific investment identification method to calculate realized gains and losses and amounts reclassified out of other comprehensive income (loss) to net loss. As of June 30, 2024, the Company had 15 investments in an unrealized loss position in its portfolio. Gross unrealized losses were not material as of June 30, 2024. Gross unrealized losses were primarily due to declines in the value of fixed rate instruments as interest rates in the broader market increased, and were not indictive of a decline in the credit worthiness of the underlying issuer, and as such, the Company did not record a credit loss reserve as of June 30, 2024.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of June 30, 2024, aggregated by major security type in a continuous loss position.

		Less Than 12 Months				12 Months or Longer				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
U.S. Treasury securities		$	23,923	$	—	$	34,891	$	(109)	$	58,814	$	(109)
Municipal securities			—		—		31,485		(1,071)		31,485		(1,071)
Total		$	23,923	$	—	$	66,376	$	(1,180)	$	90,299	$	(1,180)

The following table summarizes the Company’s portfolio of available-for-sale securities by contractual maturity as of June 30, 2024:

	June 30, 2024
	Amortized Cost		Fair Value
	(in thousands)
Less than or equal to one year	$	75,440	$	75,003
Greater than one year but less than five years		16,039		15,296
Total	$	91,479	$	90,299

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6. Balance Sheet Components

Allowance for doubtful accounts

The following is a roll-forward of the allowances for doubtful accounts related to trade accounts receivable for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended
	June 30,
	2024			2023
		(in thousands)
Beginning balance	$	7,252	$	5,134
(Reversal of) Provision for doubtful accounts		(185)		446
Write-offs		(46)		—
Total	$	7,021	$	5,580

	Six Months Ended
	June 30,
	2024		2023
		(in thousands)
Beginning balance	$	6,481	$	3,830
Provision for doubtful accounts		744		1,750
Write-offs		(204)		—
Total	$	7,021	$	5,580

Property and Equipment, net

The Company’s property and equipment consisted of the following:

		June 30,		December 31,
	Useful Life	2024		2023
		(in thousands)
Machinery and equipment	3-5 years	$	94,785	$	85,626
Computer equipment	3 years		3,040		1,850
Purchased and capitalized software held for internal use	3 years		10,672		11,636
Leasehold improvements	Lesser of useful life or lease term		47,666		38,999
Construction-in-process			41,577		29,392
			197,740		167,503
Less: Accumulated depreciation and amortization			(64,460)		(56,293)
Total Property and Equipment, net		$	133,280	$	111,210

The Company’s long-lived assets are located in the United States.

During the six months ended June 30, 2024, the increase in net property and equipment was due to expansion projects and purchases of new equipment for the Company’s laboratories located in Texas and California to expand testing capabilities, offset by depreciation expense of $13.3 million recorded in the six months ended June 30, 2024. Depreciation expense of $10.2 million was recorded in the six months ended June 30, 2023. The Company did not incur any impairment charges during the six months ended June 30, 2024 or 2023.

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Other Accrued Liabilities

The Company’s other accrued liabilities consisted of the following:

	June 30,		December 31,
	2024		2023
	(in thousands)
Reserves for refunds to insurance carriers	$	16,465	$	23,245
Accrued charges for third-party testing		10,574		14,823
Testing and laboratory materials from suppliers		14,142		11,229
Marketing and corporate affairs		11,792		10,085
Short term advances		13,899		—
Legal, audit and consulting fees		31,979		43,897
Accrued shipping charges		1,800		3,646
Sales and income tax payable		4,053		3,731
Accrued third-party service fees		8,173		7,111
Clinical trials and studies		7,502		12,126
Operating lease liabilities, current portion		12,384		11,621
Property and equipment purchases		5,330		4,316
Other accrued interest		1,078		1,078
Other accrued expenses		2,060		2,497
Total other accrued liabilities	$	141,231	$	149,405

Reserves for refunds to insurance carriers include overpayments from and amounts to be refunded to insurance carriers, and additional amounts that the Company estimates for potential refund requests during the period. When the Company releases these previously accrued amounts, they are recognized as product revenues in the condensed statements of operations and comprehensive loss.

The following table summarizes the reserve balance and activities for refunds to insurance carriers for the six months ending June 30, 2024 and 2023:

	June 30,
	2024		2023
	(in thousands)
Beginning balance	$	23,245	$	18,948
Additional reserves		1,065		5,148
Refunds to carriers		(3,095)		(963)
Reserves released to revenue		(4,750)		(7,653)
Ending balance	$	16,465	$	15,480

As of June 30, 2024, the Company had $13.9 million in short term advances obtained as a result of the disruption to Change Healthcare’s network in February 2024 which are due and payable within ten days of demand.

7. Leases

Operating Leases

In September 2015, the Company entered into a long-term lease agreement for laboratory and office space totaling approximately 94,000 square feet in Austin, Texas. The original lease term was 132 months beginning in December 2015 and expiring in November 2026 with monthly payments beginning in December 2016. In December 2021, the Company entered into an amendment of the Austin lease agreement which extended the lease of the current premises through March 2033. The amendment also includes two additional office spaces (the “First Expansion Premises” and the “Second

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Expansion Premises”). The First Expansion Premises consists of 32,500 rentable square feet and commenced in February 2022. The Second Expansion Premises consists of 65,222 rentable square feet and commenced in September 2022. The terms of the First and Second Expansion Premises expire in March 2033.

In October 2016, the Company entered into a lease directly with its landlord for laboratory and office spaces at its facilities located in San Carlos, California. The Company currently occupies approximately 136,000 square feet comprised of two office spaces (the “First Space” and the “Second Space”). The First Space covers approximately 88,000 square feet, and the Second Space totals approximately 48,000 square feet. In January 2021, the Company entered into an amendment of the lease to extend the term for 48 months to October 2027. The combined annual rent for the First Space and Second Space is $9.3 million which commenced in October 2023.

The Company entered into a lease agreement commencing June 2018 for its cord blood tissue storage facility in Tukwila, Washington that covers approximately 10,000 square feet. The lease term is 62 months and expired in July 2023. The Company had the option to extend this lease for five years, and the fair market rent upon renewal was not determinable. However, since the Company sold its business related to cord blood and tissue storage in September 2019, the Company has subleased the facility and did not exercise its option to renew the facility upon expiration.

The Company entered into a lease agreement in November 2020 to lease 11,395 square feet of space located in South San Francisco, California over a 36-month term. The premises are used for general office, laboratory and research use. The annual lease payment starts at $0.9 million and escalates annually after commencing in December 2021. In December 2022, the Company exercised the renewal option of the South San Francisco lease agreement. In January 2023, the Company entered in an amendment to extend the lease term of the South San Francisco premises by three years, through November 2026.

The Company entered into a lease agreement in September 2023 to lease 16,319 square feet of space located in Pleasanton, California over a 60-month term. The premises are used for laboratory and research use and commenced in December 2023. The annual lease payment starts at $0.5 million and escalates annually.

As part of the IPR&D asset acquisition in September 2021, the Company inherited a 24-month lease for 7,107 square feet of laboratory space in Canada. The annual lease payment started at $0.2 million and expired in August 2023.

The Company has also historically entered into leases of individual workspaces and storage spaces at various locations on both a month-to-month basis without an established lease term, and more recently for certain locations, has committed to terms approximating one to five years. For the facilities without a committed lease term, the Company has elected to not recognize them as right-of-use assets on the condensed consolidated balance sheets as they are all considered short-term leases. For individual workspaces where the committed lease term exceeds one year, the Company has recorded a right-of-use asset on the condensed consolidated balance sheets.

For the six months ended June 30, 2024, the Company had $0.6 million in noncash operating activities related to additional right-of-use assets accounted from a new lease and extending existing leases under ASC, Topic 842, Leases

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(“ASC 842”). For the six months ended June 30, 2023, the Company did not have any noncash operating activities related to additional right-of-use assets.

The operating lease right-of-use assets are classified as noncurrent assets in the balance sheet. The corresponding lease liabilities are separated into current and long-term portions as follows:

	June 30,		December 31,
	2024		2023
		(in thousands)
Operating lease liabilities, current portion included in other accrued liabilities	$	12,384	$	11,621
Operating lease liabilities, long-term portion		61,225		67,025
Total operating lease liabilities	$	73,609	$	78,646

The initial recognition of the operating lease liabilities was measured as the present value of the future minimum lease payments using a discount rate determined as of January 1, 2019. The operating right-of-use assets was calculated as the operating lease liabilities discounted at the present value, less the amount of unamortized tenant improvement allowance and deferred rent. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable. In accordance with ASC 842, the incremental borrowing rate was estimated as the annual percentage yield resulting from a corporate debt financing over a loan term approximating the remaining term of each lease, with the effect of certain credit risk rating. As of June 30, 2024, the weighted-average remaining lease term was 6.30 years and the weighted-average discount rate was 6.8%.

The Company continues to recognize lease expense on a straight-line basis. The lease expense includes the amortization of the right-of-use assets with the associated interest component estimated by applying the effective interest method. For the three months ended June 30, 2024 and 2023, total lease expense of $3.6 million and $3.7 million was recognized in the condensed statements of operations and comprehensive loss, respectively. For the six months ended June 30, 2024 and 2023, total lease expense of $7.2 million and $7.5 million was recognized in the condensed statements of operations and comprehensive loss, respectively. Cash paid for amounts in the measurement of operating lease liabilities totaled $4.1 million and $3.0 million for the three months ended June 30, 2024 and 2023, respectively. Cash paid for amounts in the measurement of operating lease liabilities totaled $8.3 million and $5.2 million for the six months ended June 30, 2024 and 2023, respectively.

The present value of the future annual minimum lease payments under all non-cancellable operating leases as of June 30, 2024 are as follows:

	Operating Leases
	(in thousands)
As of June 30, 2024
2024 (remaining 6 months)	$	8,449
2025		17,155
2026		17,450
2027		14,345
2028		6,675
2029 and thereafter		27,928
		92,002
Less: imputed interest		(18,393)
Operating lease liabilities	$	73,609

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8. Commitments and Contingencies

Legal Proceedings

The Company is involved in legal matters, including investigations, subpoenas, demands, disputes, litigation, requests for information, and other regulatory or administrative actions or proceedings, including those with respect to intellectual property, testing and test performance, billing, reimbursement, marketing, short seller and media allegations, employment, and other matters.

The Company is responding to ongoing regulatory and governmental investigations, subpoenas and inquiries, and contesting its current legal matters, but cannot provide any assurance as to the ultimate outcome with respect to any of the foregoing. There are many uncertainties associated with these matters. Such matters may cause the Company to incur costly litigation and/or substantial settlement charges, divert management attention, result in adverse judgments, fines, penalties, injunctions or other relief, and may result in loss of customer or investor confidence regardless of their merit or ultimate outcome. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If any of the foregoing were to occur, the Company’s business, financial condition, results of operations, cash flows, prospects, or stock price could be adversely affected.

The Company assesses legal contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. When evaluating legal contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation or other matters may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability. Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  During the periods presented, the Company does not believe there are such matters that will have a material effect on its financial condition.  

Intellectual Property Litigation Matters.

The Company has been involved in two patent litigations against CareDx, Inc. (“CareDx”) in the United States District Court for the District of Delaware (“CareDx Patent Cases”). In the first CareDx Patent Case, CareDx alleged, in a complaint filed jointly with the Board of Trustees of the Leland Stanford Junior University in March 2019 and amended in March 2020, that the Company infringed three patents (the “CareDx Patents”). The complaint sought unspecified damages and injunctive relief. In September 2021, the Court granted the Company’s motion for summary judgment, finding all three CareDx Patents invalid. This finding was affirmed on appeal by the United States Court of Appeals for the Federal Circuit. CareDx’s petition for rehearing by the Federal Circuit, and its subsequent petition for certiorari to the United States Supreme Court, were both denied. In the second CareDx Patent Case, the Company alleged, in suits filed in January 2020 and May 2022, infringement by CareDx of certain of the Company’s patents, seeking unspecified damages and injunctive relief. In January 2024, after trial, the jury returned a verdict in favor of the Company, finding both asserted patents valid and one patent infringed by CareDx. The jury awarded damages to the Company for lost profits and past royalties totaling $96.3 million.  

In January 2020, the Company filed suit against ArcherDX, Inc. (“ArcherDX”) in the United States District Court for the District of Delaware. In January 2021, the Company named an additional Archer DX entity, ArcherDx LLC, and Invitae as defendants. The Company alleged, among other things, that certain ArcherDX products, including the Personalized Cancer Monitoring (“PCM”) test, infringed three of the Company’s patents (the “ArcherDX Case”) and sought unspecified monetary damages and injunctive relief. Following a jury trial in May 2023 and a bench trial in June 2023, all three asserted patents were found to be valid and infringed by ArcherDX and Invitae, and the jury awarded damages totaling $19.35 million to the Company. In November 2023, the Court granted in part the Company’s motion for a permanent injunction against the PCM test, which the defendants have appealed. In February 2024, Invitae and ArcherDX filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey, resulting in an automatic bankruptcy stay in the case.

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The Company is the subject of a lawsuit filed against it by Ravgen, Inc. (“Ravgen”) in June 2020 in the United States District Court for the Western District of Texas, alleging infringement of two Ravgen patents and seeking monetary damages and injunctive relief. In January 2024, after trial, the jury returned a verdict of non-willful infringement by the Company and found damages of $57 million. The Company intends to appeal certain of the rulings. In addition, various parties, including the Company, have filed petitions challenging the validity of the asserted patents with the United States Patent and Trademark Office, all of which were instituted for review, and some of which were decided in favor of upholding the challenged claims. The petitions filed by the Company and certain others remain pending.

In October 2020, the Company filed suit against Genosity Inc. (“Genosity”), in the United States District Court for the District of Delaware, alleging that various Genosity products infringe one of the Company’s patents and seeking unspecified monetary damages and injunctive relief. The case has been stayed pending the entry of a final judgment in the ArcherDX Case, in which the subject patent is also asserted. In February 2024, Genosity filed a voluntary Chapter 11 petiion in the U.S. Bankruptcy Court for the District of New Jersey.

The Company is the subject of lawsuits filed against it by Invitae in the United States District Court of the District of Delaware alleging, in complaints filed in May and November of 2021, infringement of three patents and seeking monetary damages and injunctive relief. The parties have filed cross-motions for summary judgment, which motions are currently pending before the Court. In February 2024, subsequent to Invitae’s voluntary Chapter 11 petition described above, the Court granted Invitae’s request to continue the trial, which is now scheduled for September 2025.

The Company filed suits against Inivata, Inc. and Inivata Ltd. (collectively “Inivata”) in the United States District Court for the District of Delaware in January 2021 and December 2022, alleging that certain of Inivata’s oncology products infringe certain of the Company’s patents and seeking unspecified monetary damages and injunctive relief. The two suits have been consolidated. Inivata has filed a motion to dismiss the Company’s complaint with respect to one patent, which motion is currently pending before the Court. In March 2024, the Court stayed the case in light of the Company’s case against NeoGenomics Laboratories, Inc. (“NeoGenomics”), which acquired Inivata in 2021, discussed below.

In July 2023, the Company filed suit against NeoGenomics in the United States District Court for the Middle District of North Carolina (the “District Court”), alleging infringement of certain Natera patents by NeoGenomics’ commercialization of the RaDaR test. The complaint seeks monetary damages and injunctive relief. In December 2023, the Court denied NeoGenomics’ motion to dismiss the complaint, and granted the Company’s motion for preliminary injunction. The injunction went into effect as of January 12, 2024. NeoGenomics filed a motion to modify and stay the injunction, which was denied by the District Court and affirmed on appeal in July 2024 by the Federal Circuit Court of Appeals. NeoGenomics has also filed petitions challenging the validity of both of the asserted patents with the United States Patent and Trademark Office. One of the petitions has been denied.

Other Litigation Matters.

CareDx filed suit against the Company in April 2019 in the United States District Court for the District of Delaware, alleging false advertising, and related claims based on statements describing studies that concern the Company’s technology and CareDx’s technology, seeking unspecified damages and injunctive relief. The Company filed a counterclaim against CareDx in the United States District Court for the District of Delaware, alleging false advertising, unfair competition and deceptive trade practices and seeking unspecified damages and injunctive relief. In March 2022, after trial, the jury returned a verdict that the Company was liable to CareDx and found damages of $44.9 million. The jury also returned a verdict against CareDx, finding that CareDx had engaged in false advertising. In July 2023, the Court granted in part the Company’s motion for judgment as a matter of law requesting that the Court set aside the portions of the jury verdict adverse to the Company, ruling that CareDx is not entitled to any damages. The jury verdict of false advertising by CareDx remains in place. Both parties are appealing.

In May 2021, Guardant. Inc. (“Guardant”) filed suit against the Company in the United States District Court of the Northern District of California alleging false advertising and related claims and seeking unspecified damages and injunctive relief. Also in May 2021, the Company filed suit against Guardant in the Western District of Texas, alleging false advertising and related claims. The Company has voluntarily dismissed its Texas suit against Guardant and has

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asserted the claims from the Texas action as counterclaims in the California action, seeking unspecified damages and injunctive relief. In August 2021, Guardant moved to dismiss the Company’s counterclaims, which motion was denied in all material respects. Both parties filed cross-motions for summary judgment, which were granted in part and denied in part. Trial is currently scheduled for November 2024.

In November 2021, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of California, by a patient alleging various causes of action relating to the Company’s patient billing and seeks, among other relief, class certification, injunctive relief, restitution and/or disgorgement, attorneys’ fees, and costs. In May 2023, the Court granted the Company’s motion to dismiss the lawsuit, and the case was dismissed without prejudice. In July 2023, the plaintiff filed analogous claims in the Superior Court of California, County of San Mateo, and subsequently filed an amended claim with an additional plaintiff. Based on the additional plaintiff, the case was transferred back to the United States District Court for the Northern District of California. The parties subsequently agreed that claims brought by the original plaintiff be remanded back to the Superior Court of California, County of San Mateo, and that the action be stayed pending the outcome of the action in the United States District Court for the Northern District of California.

In February 2022, two purported class action lawsuits were filed against the Company in the United States District Court for the Northern District of California. Each suit was filed by an individual patient alleging various causes of action related to the marketing of Panorama and seeking, among other relief, class certification, monetary damages, attorneys’ fees, and costs. These matters have been consolidated. The Company filed a motion to dismiss the consolidated lawsuit, which resulted in the plaintiffs filing an amended complaint in April 2023.

In March 2022, a purported class action lawsuit was filed against the Company and certain of its management in the Supreme Court of the State of New York, County of New York, asserting claims under Sections 11, 12, and 15 of the Securities Act of 1933. The complaint alleges, among other things, that the Company failed to disclose certain information regarding its Panorama test. The complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs. This matter has been dismissed and the claims raised in this matter have been included in the lawsuit discussed below.

A purported class action lawsuit was filed against the Company and certain of its management in the United States District Court for the Western District of Texas, asserting claims under Sections 10(b) and 20(a) of the Securities Act of 1934 and Rule 10b-5 thereunder. The complaint, filed in April 2022 and amended in October 2022 (to include, among others, the claims raised in the lawsuit discussed in the preceding paragraph), alleges, among other things, that the management defendants made materially false or misleading statements, and/or omitted material information that was required to be disclosed, about certain of the Company’s products and operations. The complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs. The Company filed a motion to dismiss this lawsuit, which was granted in part and denied in part.

In each of October 2023 and January 2024, shareholder derivative complaints were filed in the United States District Court for the Western District of Texas and the United States District Court for the District of Delaware, respectively, against the Company as nominal defendant and certain of the Company’s management. Each complaint alleges, among other things, that the management defendants made materially false or misleading statements, and/or omitted material information that was required to be disclosed, about certain of the Company’s products and operations. Each complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs.

Director and Officer Indemnifications

As permitted under Delaware law, and as set forth in the Company’s Amended and Restated Certificate of Incorporation and its Amended and Restated Bylaws, the Company indemnifies its directors, executive officers, other officers, employees and other agents for certain events or occurrences that may arise while in such capacity. The maximum potential future payments the Company could be required to make under this indemnification is unlimited; however, the Company has insurance policies that may limit its exposure and may enable it to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, the Company believes any obligations under this indemnification would

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not be material, other than standard retention amounts for securities related claims. However, no assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case the Company may incur substantial liabilities as a result of these indemnification obligations.  

Third-Party Payer Reimbursement Audits

From time to time, the Company receives recoupment requests from third-party payers for alleged overpayments. The Company disagrees with the contentions of pending requests and/or has recorded an estimated reserve for the alleged overpayments if probable and estimable.

Contractual Commitments

The following table sets forth the Company’s material contractual commitments as of June 30, 2024:

Party	Commitments		Expiry Date
	(in thousands)
Laboratory instruments supplier	$	4,404	December 2024
Material suppliers		35,581	December 2024
Application service providers		4,191	March 2026
Cloud platform service provider		36,599	December 2028
Leases (1)		420	March 2029
Other material suppliers		22,323	Various
Total	$	103,518

⁽¹⁾ Represents executed leases which have not commenced. Please refer to Note 7, Leases, for additional information.

9. Stock-Based Compensation

Stock-Based Compensation Expense

The following tables present the stock-based compensation expense recorded for equity classified awards on selected statements of operations line items for the three and six months ended June 30, 2024 and 2023.

	Three months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	4,046	$	2,838
Research and development		21,957		15,337
Selling, general and administrative		41,408		26,137
Total	$	67,411	$	44,312

	Six months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	7,823	$	5,394
Research and development		42,606		29,977
Selling, general and administrative		81,429		49,418
Total	$	131,858	$	84,789

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Additionally, the stock-based compensation expense for liability-classified awards for the three months ended June 30, 2024 and 2023 was $0.2 million and $0.3 million, respectively. The stock-based compensation expense for liability-classified awards for the six months ended June 30, 2024 and 2023 was $0.4 million and $0.5 million, respectively.

Stock Options

The following table summarizes option activity for the six months ended June 30, 2024:

		Weighted-
	Number of	Average
	Shares	Exercise
	Outstanding	Price
	(in thousands, except for per share data)
December 31, 2023	5,501	$	23.65
Options exercised	(1,078)	$	8.02
June 30, 2024	4,423	$	27.45

Restricted Stock Units and Performance-Based Awards

The following table summarizes unvested RSU and performance-based awards for the six months ended June 30, 2024:

		Weighted-
		Average
		Grant Date
	Shares	Fair Value
	(in thousands, except for per share data)
Balance at December 31, 2023	9,248	$	49.50
Granted	4,786	$	68.59
Vested	(2,443)	$	54.93
Cancelled/forfeited	(253)	$	54.27
Balance at June 30, 2024	11,338	$	56.59

The Company grants certain senior-level executives performance stock units which vest based on performance and time-based service conditions, which are referred to herein as performance-based awards. During the six months ended June 30, 2024, the Company granted 0.8 million performance-based awards with an aggregate grant date fair value of $55.0 million. Achievement at 200% of target is deemed probable and as a result, the Company expects to recognize a total of $110.0 million over the requisite service period of which $9.4 million and $16.0 million has been recognized for the three and six months ended June 30, 2024, respectively.

The Company has recognized $22.1 million and $10.2 million in stock-based compensation for performance-based awards for the three months ended June 30, 2024 and 2023, respectively. The Company has recognized $42.8 million and $17.5 million in stock-based compensation for performance-based awards for the six months ended June 30, 2024 and 2023, respectively.

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10. Debt

Credit Line Agreement

In September 2015, the Company entered into a credit line with UBS (the “Credit Line”) providing for a $50.0 million revolving line of credit which was fully drawn down in 2016. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. The interest rate as of June 30, 2024 was 5.84%. The Credit Line was subsequently increased from $50.0 million to $150.0 million in 2020. In November 2022, the Company drew down $30.0 million from the $100.0 million available from the Credit Line. The Credit Line is secured by a first priority lien and security interest in the Company’s money market and marketable securities held in its managed investment account with UBS. The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate the Credit Line, in its discretion and without cause, at any time. In June 2023, the Credit Line decreased from $150.0 million to $100.0 million. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. As of June 30, 2024, the Company has drawn down a total of $80.0 million and there is $20.0 million remaining and available on the Credit Line.

For both the three months ended June 30, 2024 and 2023, the Company recorded interest expense on the Credit Line of $1.2 million. For both the six months ended June 30, 2024 and 2023, the Company recorded interest expense on the Credit Line of $2.4 million. Interest payments on the Credit Line were made within the same periods. As of June 30, 2024 and December 31, 2023, the total principal amount outstanding with accrued interest was $80.4 million.

Convertible Notes

In April 2020, the Company issued $287.5 million aggregate principal amount of Convertible Notes due 2027 in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election.

The Company received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs. In 2020, the Company used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay its obligations under its credit agreement with OrbiMed Royalty Opportunities II, LP.

The holders of the Convertible Notes may convert all or a portion of their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding February 1, 2027 in multiples of $1,000 principal amount, under any the following circumstances:  

● During any fiscal quarter commencing after September 30, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day.

● During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of that five-day consecutive trading period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day.

● If the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second business day prior to the redemption date.

● Upon the occurrence of certain distributions.

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● Upon the occurrence of specified corporate transactions.

The first circumstance has been met as of June 30, 2024. However, there were no conversions for the period ending June 30, 2024.

The Convertible Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share, at an initial conversion rate of 25.7785 shares of common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $38.79 per share of common stock, convertible to 7,411,704 shares of common stock. The conversion rate and corresponding conversion price are subject to adjustment upon the occurrence of certain events but will not be adjusted for any accrued or unpaid interest. The holders of the Convertible Notes who redeem their Convertible Notes in connection with a make-whole fundamental change are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, the holders of the Convertible Notes may require the Company to repurchase for cash all or a portion of their Convertible Notes at a price equal to 100% of the principal amount, plus any accrued and unpaid interest.

The Company may not redeem the Convertible Notes prior to May 2024, and no sinking fund is provided for the Convertible Notes. The Company may redeem for cash all or any portion of the Convertible Notes, at the Company’s option, on or after May 2024, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest.

Upon adoption of ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Heading-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity’s Own Equity, the Company allocated all of the debt discount to long-term debt. The debt discount is amortized to interest expense using the effective interest method, computed to be 2.72%, over the life of the Convertible Notes or approximately its seven-year term. The outstanding Convertible Notes balances as of June 30, 2024 and December 31, 2023 are summarized in the following table:

	June 30, 2024		December 31, 2023
	(in thousands)
Long-Term Debt
Outstanding Principal	$	287,500	$	287,500
Unamortized debt discount and issuance cost		(3,896)		(4,555)
Net carrying amount	$	283,604	$	282,945

The following tables present total interest expense recognized related to the Convertible Notes during the three and six months ended June 30, 2024 and 2023:

	Three months ended
	June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	1,617	$	1,617
Non-cash interest expense
Amortization of debt discount and debt issuance cost		330		322
Total interest expense	$	1,947	$	1,939

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	Six months ended June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	3,234	$	3,234
Non-cash interest expense
Amortization of debt discount and debt issuance cost		658		642
Total interest expense	$	3,892	$	3,876

11. Income Taxes

During the three months ended June 30, 2024 and 2023, the Company recorded total income tax expense (benefit) of approximately $892,000 and ($282,000), respectively. During the six months ended June 30, 2024 and 2023, the Company recorded total income tax expense (benefit) of approximately $1,320,000 and ($122,000), respectively. The income tax expense is primarily attributable to state income tax and foreign income tax. Due to the Company’s history of cumulative operating losses, the Company concluded that, after considering all the available objective evidence, it is not more likely than not that all of the Company’s net deferred tax assets will be realized. Accordingly, all of the Company’s deferred tax assets, which includes net operating loss carryforwards and tax credits related primarily to research and development, continue to be subjected to a full valuation allowance as of June 30, 2024. The Company will continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets.

Interest and/or penalties related to income tax matters are recognized as a component of income tax expense. As of June 30, 2024 and December 31, 2023, there were no accrued interest and penalties related to uncertain tax positions.

12. Net Loss per Share

The Convertible Notes are convertible by the holders as of June 30, 2024. Upon conversion, the Company has the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion. If converted, the fair value of the shares issued to settle the Convertible Notes would exceed the Convertible Note principle by $504.2 million based on the closing price of the Company’s common stock as of June 30, 2024. Since the Company is in a net loss position in the periods presented, the shares which would be issued upon conversion of the Convertible Notes are excluded from the net loss per share calculation as it would have an antidilutive effect. As such, the 7.4 million shares underlying the conversion option of the Convertible Notes have been excluded from the calculation of diluted earnings per share. If converted, the Company does not intend to settle the obligation in cash.

The following table shows total outstanding potentially dilutive shares excluded from the computation of diluted loss per share as their effect would be anti-dilutive, as of June 30, 2024 and 2023:

	June 30,
	2024	2023
	(in thousands)
Options to purchase common stock	4,423	5,427
Performance-based awards and restricted stock units	11,338	9,658
Employee stock purchase plan	41	72
Convertible Notes	7,411	7,411
Total	23,213	22,568

13. Subsequent Events

On July 19, 2024, the Company elected to exercise its optional redemption right to redeem all $287.5 million aggregate principal amount of its outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Convertible Notes Indenture (the “Indenture Agreement”) governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes. The date fixed for the

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redemption of the Convertible Notes is October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with the Company’s shares of common stock as the settlement method to apply to all conversions of the Convertible Notes. All terms and conditions associated with physical settlement are noted within the terms of the original Indenture Agreement.The conversion rate for holders who convert their Convertible Notes in connection with the Company’s election to redeem the Convertible Notes will be increased by 0.4284 additional shares pursuant to the Indenture Agreement. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of its common stock prior to the Redemption Date. Should all holders elect to convert their Convertible Notes, approximately 7,534,000 shares of common stock would be issued for settlement.

In July 2024, the Company entered into an amendment of the San Carlos lease to extend the term for 60 months to October 2032. The annual rent will be approximately $10.6 million when the extension commences in October 2027.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.

Overview

We are a diagnostics company with proprietary molecular and bioinformatics technology that we are applying to change the management of disease worldwide. Our cell-free DNA, or cfDNA, technology combines our novel molecular assays, which reliably measure many informative regions across the genome from samples as small as a single cell, with our statistical algorithms which incorporate data available from the broader scientific community to identify genetic variations covering a wide range of serious conditions with high accuracy and coverage. We aim to make personalized genetic testing and diagnostics part of the standard of care to protect health and inform earlier and more targeted interventions that help lead to longer, healthier lives.

We currently provide a comprehensive suite of products in women’s health, as well as our oncology and organ health products, and our Constellation cloud-based platform. We generate a majority of our revenues from the sale of Panorama, our non-invasive prenatal test, or NIPT, as well as Horizon, our Carrier Screening, test. In addition to Panorama and Horizon, our product offerings in women’s health include Spectrum Preimplantation Genetics, our Anora miscarriage test, and Vistara single-gene NIPT, as well as our Empower hereditary cancer screening test, which we also plan to offer to oncologists through our oncology sales channel. We also offer our Signatera molecular residual disease test for oncology applications, which we commercialize as a test run in our CLIA (as defined below) laboratory and offer on a research use only basis to research laboratories and pharmaceutical companies; and our Prospera organ transplant assessment tests.

We process tests in our laboratories certified under the Clinical Laboratory Improvement Amendments of 1988 (or CLIA) in Austin, Texas and San Carlos, California. A portion of our testing is performed by third-party laboratories. Our customers include independent laboratories, national and regional reference laboratories, medical centers and physician practices for our screening tests, and research laboratories and pharmaceutical companies. We market and sell our tests through our direct sales force and, for our women’s health tests, through our laboratory distribution partners. We bill clinics, laboratory distribution partners, patients, pharmaceutical companies and insurance payers for the tests we perform. In cases where we bill laboratory distribution partners, our partners in turn bill clinics, patients and insurers. The majority of our revenue comes from insurers with whom we have in-network contracts. Such insurers reimburse us for our tests pursuant to our in-network contracts with them, based on positive coverage determinations, which means that the insurer has determined that the test in general is medically necessary for this category of patient.

In addition to offering tests to be performed at our laboratories, either directly or through our laboratory distribution partners, we also establish licensing arrangements with laboratories under Constellation, our cloud-based distribution model, whereby our laboratory licensees run the molecular workflows themselves and then access our bioinformatics algorithms through our cloud-based software. This cloud-based distribution model results in lower revenues and gross profit per test than cases in which we process a test ourselves; however, because we do not incur the costs of processing the tests, our costs per test under this model are also lower. We began entering into these licensing arrangements starting in the fourth quarter of 2015.

The principal focus of our commercial operations is to offer our tests through both our direct sales force and laboratory distribution partners, and our Constellation licensees under our cloud-based distribution model. The number of tests that we accession is a key indicator that we use to assess our business. A test is accessioned when we receive the test at our laboratory, the relevant information about the test is entered into our computer system, and the test sample is routed into the appropriate workflow. This number is a subset of the number of tests that we process, which includes tests distributed through our Constellation licensees. The number of tests that we process is a key metric as it tracks overall

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volume growth, particularly as our laboratory partners may transition from sending samples to our laboratory to our cloud-based distribution model, as a result of which our tests accessioned would decrease but our tests processed would remain unchanged.

During the six months ended June 30, 2024, we processed approximately 1,496,000 tests, comprised of approximately 1,462,800 tests accessioned in our laboratory, compared to approximately 1,243,400 tests processed, comprised of approximately 1,206,700 tests accessioned in our laboratory, during the six months ended June 30, 2023. This increase in volume primarily represents continued commercial growth of Signatera, Panorama and Horizon, both as tests performed in our laboratory as well as through our Constellation software platform.

The percent of our revenues attributable to our U.S. direct sales force for the six months ended June 30, 2024 was 95%, an increase compared to 90% for the six months ended June 30, 2023. The percent of our revenues attributable to U.S. laboratory distribution partners for the six months ended June 30, 2024 was 3%, a decrease compared to 7% from the same period in the prior year. Our ability to increase our revenues and gross profit will depend on our ability to further penetrate the U.S. market with our direct sales force. The percent of our revenues attributable to international laboratory distribution partners and other international sales for the six months ended June 30, 2024 was 2%, a decrease from 3% in the six months ended June 30, 2023.

For the six months ended June 30, 2024, total revenues were $781.1 million compared to $503.2 million in the six months ended June 30, 2023. Product revenues accounted for $776.0 million, 99% of total revenues for the six months ended June 30, 2024 compared to $496.1 million representing 99% of total revenues for the six months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, no customers exceeded 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $16.8 million, representing approximately 2% of total revenues for the six months ended June 30, 2024. For the six months ended June 30, 2023, revenues from customers outside the United States were $16.6 million, representing approximately 3% total revenues. Most of our revenues have been denominated in U.S. dollars, though we generate some revenue in foreign currency, primarily denominated in Euros and Singapore Dollars.

Our net loss for the six months ended June 30, 2024 and 2023 was $105.1 million and $247.7 million, respectively. This included non-cash stock compensation expense of $131.9 million and $84.8 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $2.5 billion.

Components of the Results of Operations

Revenues

Product Revenues

We generate revenues from the sale of our tests, primarily from the sale of our Panorama and Horizon tests. Our two primary distribution channels are our direct sales force and our laboratory partners. In cases where we promote our tests through our direct sales force, we generally bill directly to a patient, clinic or insurance carrier, or a combination of the insurance carrier and patient, for the fees.

Sales of our clinical tests are recorded as product revenues. Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements, are reported in licensing and other revenues.

In cases where we sell our tests through our laboratory partners, the majority of our laboratory partners bill the patient, clinic or insurance carrier for the performance of our tests, and we are entitled to either a fixed price per test or a percentage of their collections.

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Our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, obtain reimbursement from additional third-party payers and increase our reimbursement rates for tests performed. For example, our financial performance depends on reimbursement for microdeletions testing. Many third-party payers do not currently reimburse for microdeletions screening in part because there has historically been limited published data on the performance of microdeletions screening tests, with our single nucleotide polymorphism-based Microdeletion and Aneuploidy RegisTry, or SMART study results only being published in early 2022.

Entering into in-network contracts continues to be an important part of our business strategy, as we believe that in-network coverage of our tests by third-party payers is crucial to our growth and long-term success, as in-network pricing is more predictable than out-of-network pricing, enables us to develop stable, long-term relationships with third-party payers, and provides access to a larger population of covered lives. However, the negotiated fees under our contracts with third party payers are typically lower than the list price of our tests, and in some cases the third party payers that we contract with have negative coverage determinations for some of our offerings, in particular Panorama for microdeletions screening. Therefore, being in network with third party payers has in the past had, and may in the future have, an adverse impact on our revenues and gross margins. We intend to mitigate any impact by driving more business from our most profitable accounts.

Licensing and Other Revenues

Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements are reported in licensing and other revenues. We also recognize licensing revenues through the licensing and the provisioning of services to support the use of our proprietary technology by licensees under our cloud-based distribution model.

Our strategy to offer access to our algorithm to laboratory licensees via our Constellation cloud-based software platform may also cause our revenues to decrease because we do not process the tests and perform the molecular biology analysis in our own laboratory under this model, and therefore are not able to charge as high an amount, and as a result realize lower revenues per test than when we perform the entire test ourselves.

Cost of Product Revenues

The components of our cost of product revenues are material and service costs, impairment charges associated with testing equipment, personnel costs, including stock-based compensation expense, equipment and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, costs incurred from third party test processing fees, and allocated overhead such as rent, information technology costs, equipment depreciation and utilities. Costs associated with Whole Exome Sequencing, are also included, as well as labor costs, relating to our Signatera CLIA and Signatera research use only offerings. Costs associated with performing tests are recorded when the test is accessioned. We expect cost of product revenues in absolute dollars to increase as the number of tests we perform increases.

As we continue to achieve scale, we have increased our focus on more efficient use of labor, automation, and DNA sequencing. For example, we updated the molecular and bioinformatics process for Panorama to further reduce the sequencing reagents, test steps and associated labor costs required to obtain a test result, while increasing the accuracy of the test to allow it to run with lower fetal fraction input. These improvements also reduced the frequency of the need to require blood redraws from the patient.

Cost of Licensing and Other Revenues

The components of our cost of licensing and other revenues are material costs associated with test kits sold to Constellation clients, development and support services relating to our strategic partnership agreements and other costs.

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We consider our cost of licensing and other revenues for the Constellation software platform to be relatively low, and therefore we expect its associated gross margin is higher. We expect our cost of licensing will increase in relation to volume growth.

Expenses

Research and Development

Research and development expenses include costs incurred to develop our technology, collect clinical samples and conduct clinical studies to develop and support our products. These costs consist of personnel costs, including stock-based compensation expense; prototype materials; laboratory supplies; consulting costs; regulatory costs; electronic medical record set up costs; and costs associated with setting up and conducting clinical studies at domestic and international sites and allocated overhead, including rent, information technology, equipment depreciation and utilities. We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.

Selling, General and Administrative

Selling, general and administrative expenses include executive, selling and marketing, legal, finance and accounting, human resources, billing and client services. These expenses consist of personnel costs, including stock-based compensation expense; direct marketing expenses; audit and legal expenses; consulting costs; training and medical education activities; payer outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities.

Interest Expense

Interest expense is attributable to borrowing under our Convertible Senior Notes (the “Convertible Notes”) and credit line with UBS (the “Credit Line”), including the amortization of debt discounts.

Interest Income and Other (Expense) Income, Net

Interest income and other (expense) income, net is comprised of interest earned on our cash, realized gains and losses on investments and assets, sublease rental income, and foreign currency remeasurement gains and losses.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider our critical accounting policies and estimates to be revenue recognition and stock-based compensation attributable to performance-based awards.

There have been no material changes to our other critical accounting policies and estimates as compared to the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Recent Accounting Pronouncements

We believe that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Results of Operations

Comparison of the three months ended June 30, 2024 and 2023

	Three Months Ended
	June 30,				Change
	2024		2023		Amount		Percent
	(in thousands except percentage)
Revenues
Product revenues	$	411,364	$	258,256	$	153,108	59.3	%
Licensing and other revenues		1,987		3,148		(1,161)	(36.9)
Total revenues		413,351		261,404		151,947	58.1
Cost and expenses
Cost of product revenues		169,850		142,808		27,042	18.9
Cost of licensing and other revenues		329		341		(12)	(3.5)
Research and development		89,109		78,173		10,936	14.0
Selling, general and administrative		197,965		152,508		45,457	29.8
Total cost and expenses		457,253		373,830		83,423	22.3
Loss from operations		(43,902)		(112,426)		68,524	61.0
Interest expense		(3,127)		(3,177)		50	1.6
Interest and other income, net		10,457		4,518		5,939	131.5
Loss before income taxes		(36,572)		(111,085)		74,513	67.1
Income tax (expense) benefit		(892)		282		(1,174)	(416.3)
Net loss	$	(37,464)	$	(110,803)	$	73,339	66.2	%

Revenues

Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which primarily includes development licensing revenue and licensing of our Constellation software. Total revenues increased by $151.9 million, or 58.1%, when compared to the three months ended June 30, 2023.

We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled “Overview” above, the number of tests that we process is a key metric as it tracks our overall volume growth. During the three months ended June 30, 2024, total reported units were approximately 725,200, comprised of approximately 709,800 tests reported in our laboratory. Comparatively, during the three months ended June 30, 2023, total reported units were approximately 594,900, comprising of approximately 578,200 tests reported in our laboratory. During the three months ended June 30, 2024 and 2023, total oncology units processed were approximately 125,400 and 83,500, respectively.

Product Revenues

During the three months ended June 30, 2024, product revenues increased by $153.1 million, or 59.3%, compared to the three months ended June 30, 2023, primarily as a result of the continued revenue growth from increased test volumes, average selling price improvements, as well as cash receipts during the quarter related to tests delivered in prior periods that were fully collected.

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Licensing and Other Revenues

Licensing and other revenues decreased by $1.2 million, or 36.9%, during the three months ended June 30, 2024 when compared to the three months ended June 30, 2023. The decrease was primarily due to a decrease in revenue from our collaborative agreements.

Cost of Product Revenues

During the three months ended June 30, 2024, cost of product revenues increased compared to the three months ended June 30, 2023 by approximately $27.0 million, or 18.9%, primarily due to a $13.1 million increase in third-party fees, higher costs related to inventory consumption of $7.5 million driven by an increase in accessioned cases, and a $6.4 million increase in equipment and related depreciation expense, labor, overhead, shipping and other related costs driven by headcount growth and product support.

Cost of Licensing and Other Revenues

Cost of licensing and other revenues for the three months ended June 30, 2024, when compared to the three months ended June 30, 2023, was flat, primarily due to minimal change in costs to support our collaborative agreements.

Expenses

Research and Development

Research and development expenses during the three months ended June 30, 2024, increased by $10.9 million, or 14.0%, when compared to the three months ended June 30, 2023. The increase was attributable to a $11.5 million increase in salary and related compensation expenditures, which includes a $7.0 million increase in stock-based compensation expense. This was offset by a $0.6 million net decrease in lab and clinical trial related expenses, consulting, travel, office, facilities, and other expenses.

Selling, General and Administrative

Selling, general and administrative expenses increased by $45.5 million, or 29.8%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was attributable to a $26.6 million increase in salary and related compensation expenditures, which includes a $15.4 million increase in stock-based compensation expense, a $4.1 million increase in consulting and legal expenses, a $4.0 million increase in marketing expenses, a $5.0 million increase in vendor expenses, and a $5.8 million increase in travel, facilities, office and other costs.

Interest Expense

Interest expense decreased by $0.1 million in the three months ended June 30, 2024 compared to the same period in the prior year. The interest expense decreased primarily as a result of the slight decrease in interest rate.

Interest and Other Income

Interest and other income for the three months ended June 30, 2024 increased $5.9 million compared to the same period in the prior year, primarily due to greater cash and investment balances driving higher interest income.

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Comparison of the six months ended June 30, 2024 and 2023

	Six Months Ended
	June 30,				Change
	2024		2023		Amount		Percent
	(in thousands except percentage)
Revenues
Product revenues	$	776,036	$	496,053	$	279,983	56.4	%
Licensing and other revenues		5,056		7,107		(2,051)	(28.9)
Total revenues		781,092		503,160		277,932	55.2
Cost and expenses
Cost of product revenues		328,683		290,562		38,121	13.1
Cost of licensing and other revenues		636		711		(75)	(10.5)
Research and development		177,746		160,479		17,267	10.8
Selling, general and administrative		392,243		302,135		90,108	29.8
Total cost and expenses		899,308		753,887		145,421	19.3
Loss from operations		(118,216)		(250,727)		132,511	52.9
Interest expense		(6,251)		(6,238)		(13)	(0.2)
Interest and other income, net		20,724		9,103		11,621	127.7
Loss before income taxes		(103,743)		(247,862)		144,119	58.1
Income tax (expense) benefit		(1,320)		122		(1,442)	(1,182.0)
Net loss	$	(105,063)	$	(247,740)	$	142,677	57.6	%

Revenues

Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which primarily includes development licensing revenue and licensing of our Constellation software. Total revenues increased by $277.9 million, or 55.2%, when compared to the six months ended June 30, 2023.

We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled “Overview” above, the number of tests that we process is a key metric as it tracks overall volume growth. During the six months ended June 30, 2024, total reported units were approximately 1,404,600, comprised of approximately 1,373,300 tests reported in our laboratory. Comparatively, during the six months ended June 30, 2023, total reported units were approximately 1,178,300, comprising of approximately 1,144,200 tests reported in our laboratory. During the six months ended June 30, 2024 and 2023, total oncology units processed were approximately 240,200 and 154,500, respectively.

Product Revenues

During the six months ended June 30, 2024, product revenues increased by $280.0 million, or 56.4% compared to the six months ended June 30, 2023, primarily as a result of the continued revenue growth from increased test volumes, average selling price improvements, as well as cash receipts during the quarter related to tests delivered in prior periods that were fully collected.

Licensing and Other Revenues

Licensing and other revenues decreased by $2.1 million, or 28.9%, during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. The decrease was primarily due to a decrease in revenue from our collaborative agreements.

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Cost of Product Revenues

During the six months ended June 30, 2024, cost of product revenues increased compared to the six months ended June 30, 2023 by approximately $38.1 million, or 13.1%, due to a $14.8 million increase in third-party fees, higher costs related to inventory consumption of $11.3 million driven by an increase in accessioned cases, and a $12.0 million increase in shipping, equipment and related depreciation expense, labor, overhead, and other related costs driven by headcount growth and product support.

Cost of Licensing and Other Revenues

Cost of licensing and other revenues for the six months ended June 30, 2024, when compared to the six months ended June 30, 2023, decreased by $0.1 million, or 10.5%, primarily due to a net decrease in costs to support our collaborative agreements.

Expenses

Research and Development

Research and development expenses during the six months ended June 30, 2024, increased by $17.3 million, or 10.8%, when compared to the six months ended June 30, 2023. The increase was attributable to an increase of $19.5 million increase in salary and related compensation expenditures, which includes a $13.3 million increase in stock-based compensation expense, and a $1.8 million net increase in consulting, office, facilities, and other expenses. This was offset by a decrease of $4.0 million in lab and clinical trial related expenses.

Selling, General and Administrative

Selling, general and administrative expenses increased by $90.1 million, or 29.8%, during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was attributable to an increase of $52.5 million increase in salary and related compensation expenditures, which includes a $32.1 million increase in stock-based compensation expense, a $20.3 million increase in consulting and legal expenses, a $8.9 million increase in vendor expenses, and a $8.4 million increase in marketing, travel, facilities, office and other costs.

Interest Expense

Interest expense was flat in the six months ended June 30, 2024 compared to the same period in the prior year.

Interest and Other Income

Interest and other income for the six months ended June 30, 2024 increased $11.6 million compared to the same period in the prior year, primarily due to greater cash and investment balances driving higher interest income.

Liquidity and Capital Resources

We have incurred net losses each year since our inception. For the six months ended June 30, 2024, we had a net loss of $105.1 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products. As of June 30, 2024, we had an accumulated deficit of $2.5 billion. As of June 30, 2024, we had $796.8 million in cash and cash equivalents and restricted cash, $90.3 million in marketable securities, $80.4 million of outstanding balance under the Credit Line including accrued interest, and $287.5 million outstanding principal balance on the Convertible Notes. As of June 30, 2024, we had $20.0 million remaining and available on the Credit Line.

While we have introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, we have funded the portion of operating costs that exceeds revenues through a combination of equity issuances and debt and other financings. We expect to develop and commercialize future products

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and continue to invest in the growth of our business and, consequently, we will need to generate additional revenues to achieve future profitability and may need to raise additional equity or incur additional debt. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available at all, or in amounts or on terms acceptable to us. If we are unable to obtain additional financing, we may be required to delay the development and commercialization of our products and significantly scale back our business and operations.

In September 2023, we completed an underwritten equity offering and sold 4,550,000 shares of our common stock at a price of $55 per share to the public. Before offering expenses of approximately $0.4 million, we received proceeds of approximately $235.8 million net of the underwriting discount. Our contractual obligations and other commitments have been satisfied by the equity offering described above, our convertible note financing conducted in April 2020 described below, the Credit Line described below, and our product, licensing, and other sales. For our commitments, refer to the “Contractual Obligations and Other Commitments” section below.

Refer to additional disclosures associated with risks and our ability to generate and obtain adequate amounts of cash to meet capital requirements for both short-term and long-term obligations.

Based on our current business plan, we believe that our existing cash and marketable securities will be sufficient to meet our anticipated cash requirements for at least 12 months after August 8, 2024.

Credit Line Agreement

In September 2015, we entered into a Credit Line with UBS, or the Credit Line, providing for a $50.0 million revolving line of credit which could be drawn in increments at any time. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. The interest rate was subsequently changed to the 30-day Secured Overnight Financing Rate (“SOFR”) average, plus 1.21%. The SOFR rate is variable. The Credit Line was subsequently increased from $50.0 million to $150.0 million. In June 2023, the Credit Line decreased to $100.0 million. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. As of June 30, 2024, the total principal amount outstanding with accrued interest was $80.4 million and $20.0 million is remaining as available under the Credit Line.

Convertible Notes

In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

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The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. On July 19, 2024, we elected to exercise our optional redemption right to redeem all $287.5 million aggregate principal amount of our outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Indenture Agreement governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes. The Redemption Date fixed for the redemption of the Convertible Notes is October 11, 2024. The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. We elected physical settlement with shares of our common stock as the settlement method to apply to all conversions of the Convertible Notes. Based on the conversion terms of the Convertible Notes and the market price of our common stock, we expect that substnaitally all outstanding Convertible Notes will be converted into shares of our common stock prior to the Redemption Date. As a result, we do not expect that our redemption of the Convertible Notes will have a material effect on our liquidity. Should all holders elect to convert their Convertible Notes, approximately 7,534,000 shares of common stock would be issued for settlement.

We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs. We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under our credit agreement with OrbiMed Royalty Opportunities II, LP.

Cash Flows

The following table summarizes our condensed consolidated cash flows for the periods indicated:

	Six Months Ended
	June 30,
	2024		2023
	(in thousands)
Cash provided by (used in) operating activities	$	30,991	$	(159,651)
Cash provided by investing activities		106,202		63,060
Cash provided by financing activities		17,510		11,613
Net change in cash, cash equivalents and restricted cash		154,703		(84,978)
Cash, cash equivalents and restricted cash, beginning of period		642,095		466,091
Cash, cash equivalents and restricted cash, end of period	$	796,798	$	381,113

Cash Provided by (Used in) Operating Activities

Cash provided by operating activities during the six months ended June 30, 2024 was $31.0 million. The net loss of $105.1 million includes $154.5 million in non-cash charges resulting from $15.0 million of depreciation and amortization, $131.9 million of stock-based compensation expense, $7.2 million of non-cash lease expense, $0.6 million for amortization of debt discount and issuance cost, and $0.4 million for foreign exchange adjustment, offset by a $0.6 million decrease in premium amortization and discount accretion on investment securities. Operating assets had cash outflows of $36.9 million resulting from a $57.6 million increase in accounts receivable, a $0.2 million increase in inventory, offset by a $20.9 million decrease in prepaid expenses and other assets. Operating liabilities resulted in cash inflows of $18.5 million resulting from a $16.7 million increase in accounts payable, $19.7 million increase in accrued compensation and a $1.0 million increase in deferred revenue, offset by, a $8.3 million decrease in lease liabilities and a $10.6 million decrease in other accrued liabilities.

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Cash used in operating activities during the six months ended June 30, 2023 was $159.7 million. The net loss of $247.7 million includes $107.5 million in non-cash charges resulting from $10.2 million of depreciation and amortization, $2.7 million in-process research and development, $1.5 million premium amortization and discount accretion on investment securities, $84.8 million of stock-based compensation expense, $7.4 million of non-cash lease expense, $0.6 million for amortization of debt discount and issuance cost, and $0.3 million for foreign exchange adjustment. Operating assets had cash outflows of $10.4 million resulting from a $15.7 million increase in accounts receivable, a $7.3 million increase in inventory, offset by a $12.6 million decrease in prepaid expenses and other assets. Operating liabilities resulted in cash outflows of $9.1 million resulting from a $9.0 million decrease in accounts payable, a $11.2 million decrease in other accrued liabilities and a $5.2 million decrease in lease liabilities, offset by a $9.9 million increase in accrued compensation and a $6.4 million increase in deferred revenue.

Cash Provided by Investing Activities

Cash provided by investing activities for the six months ended June 30, 2024 totaled $106.2 million, which was comprised of $221.5 million from proceeds of investments maturities, offset by $72.8 million in purchasing of new investments, $32.0 million in acquisitions of property and equipment and $10.5 million in asset acquisition.

Cash provided by investing activities for the six months ended June 30, 2023 totaled $63.1 million, which was comprised of $83.2 million from proceeds of investments maturities, offset by $20.2 million in acquisitions of property and equipment.

Cash Provided by Financing Activities

Cash provided by financing activities for the six months ended June 30, 2024, totaled $17.5 million which was comprised of $8.6 million from proceeds from the exercise of stock options and $8.9 million from the issuance of common stock under the employee stock purchase plan.

Cash provided by financing activities for the six months ended June 30, 2023, totaled $11.6 million which was comprised of $2.9 million from proceeds from the exercise of stock options and $8.7 million from the issuance of common stock under the employee stock purchase plan.

Contractual Obligations and Other Commitments

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to our lease commitments, Credit Line, Convertible Notes, commercial supply agreements and other agreements.

Credit Line

The short-term debt obligations consist of the $80.4 million principal amount drawn from the Credit Line with UBS and applicable interest. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. In October 2023, the interest rate was subsequently changed to the 30-day SOFR average, plus 0.5%. Please refer to Note 10, Debt, for further details.

Convertible Notes

The long-term debt obligations consist of the $287.5 million principal amount from a private placement offering to qualified institutional buyers and applicable interest. The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased

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or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

Inventory purchase and other contractual obligations

We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, testing, manufacturing, and other services for operational purposes. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments have not been included separately within these contractual and other obligations disclosures. Please refer to Note 8, Commitments and Contingencies in the Notes to Unaudited Interim Condensed Consolidated Financial Statements for further details.

Operating leases

Our lease commitments consist of $0.3 million of payments, which will be paid over the terms of the leases. The leases have not commenced under Accounting Standards Codification, or ASC, Topic 842, Leases (ASC 842), as of June 30, 2024. As a result, these leases are not reflected within the consolidated balance sheets.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements during the periods presented.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates. Our Credit Line had an interest rate of 30-day LIBOR plus 1.10%. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. An incremental change in the borrowing rate of 100 basis points would increase our annual interest expense by $0.8 million based on our $80.4 million gross debt outstanding on our Credit Line, including principal and accrued interest as of June 30, 2024. The interest rate for our Convertible Notes is fixed at 2.25% and not exposed market risk related to interest rates. Our investment portfolio is exposed to market risk from changes in interest rates. This risk is mitigated as we have maintained a relatively short average maturity for our investment portfolio. An incremental change in the investment yield of 100 basis points would increase our annual interest income by approximately $0.9 million annually in relation to amounts we would expect to earn, based on our short-term investments as of June 30, 2024.

Foreign Currency Exchange Rate Fluctuations

Our operations are currently conducted primarily in the United States. As we expand internationally, our results of operations and cash flows may become subject to fluctuations due to changes in foreign currency exchange rates. In periods when the U.S. dollar declines in value as compared to the foreign currencies in which we incur expenses, our foreign currency-based expenses will increase when translated into U.S. dollars. In addition, future fluctuations in the value of the U.S. dollar may affect the price at which we sell our tests outside the United States. To date, our foreign currency risk has been minimal, and we have not historically hedged our foreign currency risk; however, we may consider doing so in the future.

Inflation Risk

As of the date of filing of this Quarterly Report on Form 10-Q, we do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant

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inflationary pressures, we may not be able to fully offset such higher costs through increases in revenue as increases in core inflation rates may also negatively affect demand for our product offerings. Our inability or failure to do so could harm our business, financial condition, and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

From time to time, we are involved in legal proceedings. The results of such legal proceedings and claims cannot be predicted with certainty, and regardless of the outcome, legal proceedings could have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors.

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For information regarding certain current legal proceedings, see “Note 8—Commitments and Contingencies—Legal Proceedings” in the Notes to Unaudited Interim Condensed Consolidated Financial Statements, which is incorporated herein by reference.

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ITEM 1A.RISK FACTORS

Investing in our common stock involves a high degree of risk. In addition to the information set forth in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, you should consider carefully the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024. The occurrence of any of the risks and uncertainties described in such Annual Report could materially and adversely affect our business, financial condition, results of operations and prospects. In that event, the price of our common stock could decline and you could lose part or all of your investment. Furthermore, such risks are not the only ones we face; additional risks and uncertainties not currently known or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or results of operations.

ITEM 2         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)         Recent Sales of Unregistered Securities

              None.

(b)         Use of Proceeds

Not applicable.

(c)         Purchases of Equity Securities by the Issuer and Affiliated Purchasers

              None.

ITEM 3         DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4         MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5         OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

During the quarter ended June 30, 2024, none of our officers or directors, as defined in Rule 16a-1(f), informed us of the adoption or termination of a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, each as defined in Regulation S-K Item 408.

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ITEM 6         EXHIBITS

INDEX TO EXHIBITS

		Incorporated by Reference
Exhibit No.	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.1	Amended and Restated Employment Agreement, by and between Registrant and Steve Chapman, dated August 1, 2024.					X
10.2	Amended and Restated 2015 Equity Incentive Plan	8-K	001-37478	10.1	June 18, 2024
31.1	Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1†	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2†	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X

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		Incorporated by Reference
Exhibit No.	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.					X

†The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Natera, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, regardless of any general incorporation language contained in any filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

	NATERA, INC.
Date: August 8, 2024	By:	/ s / Steve Chapman
	Name:	Steve Chapman
	Title:	Chief Executive Officer, President, and Director
		(Principal Executive Officer)
	By:	/ s / Michael Brophy
	Name:	Michael Brophy
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

Amended and Restated Employment Agreement

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) effective as of August 1, 2024(the“EffectiveDate”),byandbetweenSTEVE CHAPMAN (the“Executive”)andNATERA, INC., a Delaware corporation (the “Company”).

1. Duties and Scope of Employment.

(a)Position.Effective as of the Commencement Date (the “Employment”), the Company agrees to employ the Executive in the position of Chief Executive Officer (“CEO”).The Executive shall report to the Company’s Board of Directors (the “Board”).Further, no later than the first meeting of the Board following the commencement of the Employment, the Executive shall be elected to theBoard,andatalltimesthereafterduringthetermoftheExecutive’sserviceasChiefExecutiveOfficer of the Company, the Executive shallserve as a member ofthe Board.The Executive agreesto resign asa member of the Board in connection with any resignation or termination of his Employment as Chief Executive Officer, whether voluntary or involuntary, with or without cause and for any or no reason.

(b)Obligations to the Company.During his Employment, the Executive shall be a full-timeemployeeandshalldevotetheExecutive’sfullbusinesseffortstotheCompanyinordertoperform the dutiesofthe Executive’s position.TheExecutive shall complywiththe Company’s policies and rules that may be in effect from time to time during his Employment.The Executive shall be located in the Company’s Texas headquarters, but acknowledges that this position may require travel for business purposes.

(c)No Conflicting Obligations.The Executive represents and warrants to the Company that he is under no obligations or commitments, whether contractual or otherwise, that are inconsistentorconflict withhisobligationsunderthisAgreement.TheExecutiverepresentsandwarrants that he will not use or disclose, in connection with his Employment, any trade secrets or other proprietary informationorintellectualpropertyinwhichtheExecutiveoranyotherpersonorentityhasanyright,title orinterestandthathisEmploymentwillnotinfringeorviolatetherightsofanyotherpersonorentity.The Executive represents and warrants to the Company that he has returned all property and confidential informationbelongingtoanyprioremployer.DuringtheEmployment,theExecutiveagreesnottoengage in anyother employment, consultingor other businessactivity(whether full-time or part-time) that would create a conflict of interest with the Company.

(d)Commencement Date.ThecommencementdatefortheEmploymentpursuantto this Agreement will be January 2, 2019 (the “Commencement Date”).

2. Cash and Incentive Compensation.

(a)Salary.The Company shall pay the Executive as compensation for his services aninitialbasesalary for the Company’s 2019 fiscal year atagrossannualrateof$450,000(FourHundredFiftyThousandDollars).Thissalary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from timetotime.SuchsalaryshallbepayableinaccordancewiththeCompany’sstandardpayrollprocedures. Theannualcompensationspecifiedinthis Section2(a),asineffect fromtimetotime,isreferredtointhis Agreement as “Base Salary.”

(b)Cash Bonus.The Executive shallbe eligibleforan annualincentive bonus.The Executive’seligiblebonusfortheCompany’s2019fiscalyearwillbeequalto50%ofhisBaseSalary(the “Eligible Bonus”), payable to the extent applicable performance goals have been satisfied.The bonus for theCompany’s2019fiscalyear,ifany,willbecalculatedbasedonachievementofCompanyperformance

1

Exhibit 10.1

goals.The Board or Compensation Committee of the Board shall use commercially reasonable efforts to communicatesuchCompanyperformancegoalstotheExecutivebyMarch31ofeachyear,subjecttoany reasonable and necessary revisions to such goals during the year to accommodate the changing requirementsoftheCompany’sbusiness.SuchbonusshallbeawardedbasedontheCompanybonuspolicy and pursuant to the Company’s Management Cash Incentive Plan and, except as is otherwise provided herein, is subject to change at the sole discretion of the Company.The determination of the Company’s BoardorCompensationCommitteewithrespecttobonusesshallbefinalandbinding.Exceptasotherwise providedherein,theExecutiveshallnot beentitledtoanannualbonusiftheExecutiveisnotemployedby theCompanyonthedatewhensuchbonusispaid.Further,theExecutiveshallnotbeentitledtoaprorated bonus distribution upon a Separation from the Company.

(c)Annual Equity Awards. Subject to the approval of the Board or its Compensation Committee, the Company shall grant Employee annual equity awards (“Annual Equity Awards”) in connection with the Company’s annual equity award process and consistent with the Company’s standard equity grant cycle. The number of RSUs granted shall be calculated in accordance with the Company’s equity grant policies and procedures. The Annual Equity Awards shall be subject to the terms and conditions applicable to equity granted under the Company’s 2015 Equity Incentive Plan (the “Plan”), as described in the Plan and in each applicable award agreement. The vesting terms and conditions of any performance-based awards will be set forth in the applicable award agreement.

3.Executive Benefits.Asaregularstatus,full-timeemployee,theExecutivewillbeeligible toparticipateinallCompany-sponsoredbenefits,subjectineachcasetothegenerallyapplicabletermsand conditionsoftheplanorbenefitinquestionandtothedeterminationsofanypersonorcommittee administering such plan or benefit.The Company’s benefits are subject to change from time to time and currentlyincludemedical,dental,visionandlifeinsurance,a401(k)retirementplanwithaCompanymatch, as well as holiday pay and paid-time off.

4.Business Expenses.TheExecutivewillbereimbursedforordinaryandnecessarybusiness expenses that are submitted in accordance with the Company’s then-current policies.In addition, the Executive shall be eligible to fly business class for all flights with a duration of four hours or longer.

5. Employment Relationship.

(a)Employment at Will.TheExecutive’s Employment with the Companyis for no specific period of time.The Executive’s Employment with the Company shall be “at will,” meaning that either the Executive or the Company may terminate the Executive’s Employment at any time and for any reason, with or without cause.Any contrary representations that may have been made to the Executive shall be superseded by this Agreement.This Agreement shall constitute the full and complete agreement between the Executive and the Company on the “at will” nature of the Executive’s Employment, which mayonlybechangedinanexpresswrittenagreementsignedbytheExecutiveandtheCompany’sGeneral Counsel or Chief Executive Officer.

(b)Rights Upon Termination.UponanyterminationofEmployment,theExecutive shall be entitled to the compensation, benefits and expense reimbursements that the Executive has earned under this Agreement before and including the effective date of the termination.

6. Termination Benefits.

(a)Conditions.  If the Executive is subject to an Involuntary Termination as described below in this Section 6, then the Executive will be entitled to the benefits described in this Section 6, provided that the Executive has (i) completed three years of continuous service with the Company (except in the event of a CIC Involuntary Termination (as defined below), (ii) returned all Company property in the Executive’s possession, (iii) resigned as a member of the boards of directors of the Company and all of its

2

Exhibit 10.1

subsidiaries, to the extent applicable, and (iv) executed a general release of all claims, in a reasonable form prescribed by the Company (the “Release”).  The Executive must execute and return the Release on or before the date specified by the Company in the prescribed form (the “Release Deadline”).  The Release Deadline will in no event be later than fifty days after the Executive’s Separation.  For the avoidance of doubt, if the Executive fails to return the Release on or before the Release Deadline, or if the Executive revokes the Release, then the Executive will not be entitled to the benefits described in this Section 6.

(b)Severance Pay.  If the Executive is subject to an Involuntary Termination, then the Company shall pay the Executive a lump sum equal to twelve months of Base Salary (or if an Involuntary Termination occurs at the time of or within eighteen months following such Change in Control (a “CIC Involuntary Termination”), then the Company shall pay the Executive a lump sum equal to the sum of (A) eighteen months of Base Salary plus (B) the Eligible Bonus (calculated, for the avoidance of doubt, as if all performance criteria had been satisfied at 100% of the target level (where applicable)).  Such amount will be referred to as the “Severance” payment.

The cash Severance payment will be made within sixty days after the Executive’s Separation; however, if such sixty-day period spans two calendar years, then the payment will in any event be made in the second calendar year.

If the Executive is subject to an Involuntary Termination and if the Executive elects to continue health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following Separation, then the Company will pay the Executive’s monthly premium under COBRA until the earliest of (i) twelve months after Separation (eighteen months after Separation in the event of a CIC Involuntary Termination), (ii) the expiration of the Executive’s continuation coverage under COBRA or (iii) the date when the Executive receives substantially equivalent health insurance coverage in connection with new employment or self-employment.  Such amounts may be reported as taxable income to the Executive to the extent necessary or advisable to avoid adverse tax consequences to the Executive, the Company or the Company’s other employees, in the Company’s sole discretion.

(c)Vesting of Equity Awards.

(i)Time-Based Equity Awards.  If the Executive is subject to an Involuntary Termination (that does not qualify as a CIC Involuntary Termination), then the Executive will become vested in the greater of (i) an additional 50% of the unvested and outstanding option shares and shares granted pursuant to other equity-based awards that vest solely based on Executive’s continuous Service to the Company (collectively, the “Time-Based Equity Awards”) measured as of the date of the Involuntary Termination or (ii) a number of shares subject to the outstanding Time-Based Equity Awards determined as if the Executive had completed an additional eighteen months of continuous Service measured from the date of the Involuntary Termination.

(ii)Performance-Based Equity Awards.  If the Executive is subject to an Involuntary Termination (that does not qualify as a CIC Involuntary Termination), then the Executive will become vested in that number of shares issuable under the Executive’s then-unvested performance-based equity awards (each a “Performance-Based Equity Award” and collectively, the “Performance-Based Equity Awards”) calculated as follows: (1) the total number of shares eligible for vesting based on the actual achievement of the performance conditions set forth in the applicable Performance-Based Equity Award as determined at the end of the measurement period set forth in such award (the “Eligible Shares”) multiplied by (2) the greater of (A) 0.50 and (B) the portion of the measurement period of such Performance-Based Equity Award during which the Executive provided service to the Company as if the Executive had completed an additional eighteen (18) months of continuous service measured from the date of the Involuntary Termination. For purposes of clarity, the Executive shall vest in 100% of the Eligible Shares under a Performance-Based Equity Award if such award vests during such eighteen-month period of continuous service; and the Executive shall not vest in any portion of a Performance-Based Equity Award

3

Exhibit 10.1

unless the minimum performance condition thereunder is achieved in accordance with the terms of such award.

Notwithstanding the foregoing, with respect to Performance-Based Equity Awards outstanding as of April 22, 2024 that are subject to milestones based on the Company’s market capitalization (“Market Valuation Equity Awards”), if the Executive is subject to an Involuntary Termination (that does not qualify as a CIC Involuntary Termination), then the Executive will become vested in such portion(s) of any unvested and outstanding Market Valuation Equity Awards for each performance milestone(s) set forth therein that are achieved within eighteen (18) months following the date Executive ceases providing Services to the Company.

Further, if an Involuntary Termination occurs after a market capitalization performance milestone has been achieved but prior to completion of the continuous service requirements for subsequent vesting (if any), the remaining portions of the Market Valuation Equity Awards shall be eligible for accelerated vesting in accordance with this Section (c)(ii) if and only if the Stock Value equals or exceeds the First Milestone Stock Value or Second Milestone Stock Value (as such terms are defined in the Market Valuation Equity Awards), as applicable, on either (1) the date of such Involuntary Termination or (2) when averaged during the three-month period ending on the date of such Involuntary Termination.

(iii)CIC Involuntary Termination.  If the Executive is subject to a CIC Involuntary Termination, then the Executive shall become fully vested in all of the then-unvested and outstanding Time-Based and Performance-Based Equity Awards.

(iv)Application.  For the avoidance of doubt, and notwithstanding anything in this Agreement to the contrary, any greater benefits granted to the Executive pursuant to the terms of an existing equity award shall not be superseded hereby.  Further, this Section 6 shall apply to all future Time-Based and Performance-Based Equity Awards, unless the terms of such future award agreements expressly provide otherwise.    

(d)Consulting Agreement.  If the Executive is subject to an Involuntary Termination (that does not qualify as a CIC Involuntary Termination), the Company will consider in good faith a consulting agreement with the Executive (the “Consulting Agreement”).  The terms of any such Consulting Agreement will be subject to approval by the Company’s Board of Directors in its sole discretion.

(e)Definition of “Involuntary Termination.”  For all purposes under this Agreement, “Involuntary Termination” shall mean a Separation as a result of either (i) the involuntary discharge of the Executive by the Company (or the parent or subsidiary employing him) for reasons other than Cause or (ii) a voluntary resignation by the Executive for Good Reason.

(f)Definition of “Cause.”  For all purposes under this Agreement, “Cause” shall mean:  (i) the unauthorized use or disclosure by the Executive of the Company’s confidential information or trade secrets;  (ii) a material breach by the Executive of any agreement between the Executive and the Company; (iii) a material failure by the Executive to comply with the Company’s written policies or rules; (iv) the Executive’s commission of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof; (v) the Executive’s gross negligence, willful misconduct or commission of an act of fraud in his dealings with the Company; (vi) failure by the Executive to perform, or apply the requisite effort to, his assigned duties; (vii) the Executive’s (1) inability to perform the essential functions of the Executive’s position, with or without reasonable accommodation, for a period of at least 120 consecutive days because of a physical or mental impairment or (2) death; or (viii) failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or executives, if the Company has requested such cooperation. Any determination of Cause by the Company shall be made by the Board; provided, however, that no such determination may be made with respect to (ii), (iii), (vi), and (viii) above until the Executive has been given written notice detailing the specific Cause

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Exhibit 10.1

event and such event remains uncured (if susceptible to cure) to the reasonable satisfaction of the Board for a period of thirty (30) days following the receipt of such notice.

(g)Definition of “Change in Control.”  For all purposes under this Agreement, “Change in Control” means (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii) the consummation of a merger or consolidation of the Company with or into another entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or (iv) individuals who are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board over a period of 12 months; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.  The foregoing notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.  In addition, if a Change in Control constitutes a payment event with respect to any equity award which provides for a deferral of compensation and is subject to Code Section 409A, then notwithstanding anything to the contrary in the Plan or applicable equity award agreement the transaction with respect to such equity award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A.

(h)Definition of “Good Reason.”  For all purposes of this Agreement, “Good Reason” shall mean any action by the Company, in each case without the Executive’s prior written consent, that (i) results in a material diminution in the Executive’s duties, authority or responsibilities or a diminution in the Executive’s title or position (other than for Cause); provided, that, for the avoidance of doubt, (x) modifying the Executive’s title and (y) the failure to nominate or maintain the Executive on the Board (other than for Cause) shall each constitute Good Reason; (ii) requires the Executive to report to any person other than the Board; (iii) reduces the Base Salary, annual incentive bonus opportunity, grant date fair value of annual long-term incentive equity awards in forms including Options, RSUs and Performance Awards, or benefits under employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates; (iv) relocates the Executive’s principal place of employment to a location more than 25 miles from the Company’s office in Austin, Texas; provided, that if the Executive agrees in writing to establish another location as his principal place of employment, then for purposes of this clause (iv), such other location shall be substituted for Austin, Texas; or (v) constitutes a material breach by the Company of this Agreement (including, without limitation, failure to timely pay or award the Base Salary, annual incentive bonus or the annual long-term incentive equity awards or provide benefits under any material agreement between the Executive and the Company); provided, in all cases, that, in no event shall the occurrence of any such condition constitute Good Reason unless (1) the Executive gives notice to the Company of the condition giving rise to Good Reason within 120 days following its initial existence, (2) the Company fails to cure such condition within 30 days following the date such notice is given and (3) the Executive terminates his employment with the Company within 120 days following the expiration of such cure period. The existence of Good Reason will not be affected by the Executive’s temporary incapacity due to physical or mental illness not constituting a “disability” as defined in the regulations under Section 409A of the Code and the Treasury Regulations promulgated thereunder.

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Exhibit 10.1

(i)Definition of “Separation.”  For all purposes under this Agreement, “Separation” shall mean a “separation from service,” as defined in the regulations under Section 409A of the Code and the Treasury regulations promulgated thereunder.

(j)Definition of “Code.”  For all purposes under this Agreement, “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

(k)Definition of “Service.”  For all purposes under this Agreement, “Service” shall mean service as an employee or consultant of the Company.

(l)Golden Parachute Tax Limitation.

(i)In the event that it is determined that any payment or distribution of any type (cash, equity or otherwise) to or for the Executive’s benefit made by the Company, by any of its affiliates, by any person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of Code Section 280G and the regulations thereunder) or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or under any other agreement including the Executive’s equity award agreements (the “Total Payments”), would be subject to the excise tax imposed by Code Section 4999 or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “Excise Tax”), then the Total Payments shall be made to the Executive either (i) in full or (ii) as to such lesser amount as would result in no portion of the Total Payments being subject to Excise Tax (a “Reduced Payment”), whichever of the foregoing results in the Executive’s receipt, on an after-tax basis, of benefits of the greatest value, notwithstanding that all or some portion of the Total Payments may be subject to the Excise Tax.

(ii)For avoidance of doubt, the Total Payments shall include acceleration of vesting of equity awards granted by the Company that accelerate in connection with a Change in Control of the Company, but only to the extent such acceleration of vesting is deemed a parachute payment with respect to a Change in Control of the Company.

(iii)The determination (the “Determination”) as to whether any of the Total Payments are “parachute payments” (within the meaning of Code Section 280G) and whether to make a Reduced Payment shall be made by an independent accounting firm selected by the Company (the “Accounting Firm”), which shall provide such Determination, together with detailed supporting calculations both to the Company and to the Executive within seven business days of the Executive’s Separation, if applicable, or such earlier time as is requested by the Company or by the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax).  In any event, as promptly as practicable following the Accounting Firm’s Determination, the Company shall pay or transfer to or for the Executive’s benefit such amounts as are then due to the Executive and shall promptly pay or transfer to or for the Executive’s benefit in the future such amounts as become due to the Executive.  Any determination by the Accounting Firm shall be binding upon the Executive and the Company, absent manifest error.

(iv)For purposes of determining whether to make a Reduced Payment, if applicable, the Company shall cause to be taken into account all federal, state and local income and employment taxes and excise taxes applicable to the Executive (including the Excise Tax).  If a Reduced Payment is made, the Company shall reduce or eliminate the Total Payments in the following order:  (1) cancellation of accelerated vesting of options with no intrinsic value, (2) reduction of cash payments, (3) cancellation of accelerated vesting of equity awards other than options, (4) cancellation of accelerated vesting of options with intrinsic value and (5) reduction of other benefits paid to the Executive.  In the event that acceleration of vesting is reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Executive’s equity awards.  In the event that cash payments or other benefits are

6

Exhibit 10.1

reduced, such reduction shall occur in reverse order beginning with payments or benefits which are to be paid farthest in time from the date of the Determination.  For avoidance of doubt, an option will be considered to have no intrinsic value if the exercise price of the shares subject to the option exceeds the fair market value of such shares.

(v)As a result of uncertainty in the application of Code Sections 4999 and 280G of at the time of the initial Determination by the Accounting Firm hereunder, it is possible that payments will have been made by the Company that should not have been made (an “Overpayment”) or that additional payments that will not have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of whether and to what extent a Reduced Payment shall be made hereunder.  In either event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred.  In the event that the Accounting Firm determines that an Overpayment has occurred, such Overpayment shall be treated for all purposes as a loan to the Executive that the Executive shall repay to the Company, together with interest at the applicable federal rate provided in Code Section 7872(f)(2); provided, however, that no amount shall be payable by the Executive to the Company if and to the extent that such payment would not reduce the amount that is subject to taxation under Code Section 4999.  In the event that the Accounting Firm determines that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the Executive’s benefit, together with interest at the applicable federal rate provided in Code Section 7872(f)(2).

(vi)If this Section 6(l) is applicable with respect to the Executive’s receipt of a Reduced Payment, it shall supersede any contrary provision of any plan, arrangement or agreement governing the Executive’s rights to the Total Payments.

7.Proprietary Information and Inventions Agreement.TheExecutivewillremainsubject to the Company’s standard Proprietary Information and Inventions Agreement, which the Executive has previously signed.

8.Successors.This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantiallyalloftheCompany’sbusinessand/orassets.ForallpurposesunderthisAgreement,theterm “Company” shall include any successor to the Company’s business and/or assets that becomes bound by this Agreement.

9. Miscellaneous Provisions.

(a)Notice.Notices and all other communications contemplated by this Agreement shallbeinwritingandshallbedeemedtohavebeendulygivenwhenpersonallydeliveredorwhenmailed by U.S. registered or certified mail, return receipt requested and postage prepaid.In the case of the Executive, mailed notices shall be addressed to him at the home address that he most recently communicated to the Company in writing.In the caseof the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Corporate Secretary. Notices may also be sent by electronic mail or facsimile and will be effective upon transmission or confirmationoftransmission,asthecasemaybe,totheaddressofthepartytobenoticedassetforthherein or to such other address as such party last provided to the other by written notice.

(b)Modifications and Waivers.No provision of this Agreement shall be modified, waivedordischargedunlessthemodification,waiverordischargeisagreedtoinwritingbytheExecutive and by an officer of the Company authorized by the Company’s Board.No waiver by either party of any breach of, or of compliancewith, anycondition or provision of this Agreement bythe other partyshall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

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Exhibit 10.1

(c)409A.If the Company determines that the Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of the Executive’s Separation, then the cash SeverancepaymentunderSection6,totheextentthatitissubjecttoSection409AoftheCode,willbepaid onthefirstbusinessdayfollowingtheearlierof(A) theexpirationofthesix-monthperiodmeasuredfrom the Executive’s Separation or (B) the date of the Executive’s death.For purposes of Section 409A of the Code, each “payment” (as defined by Section 409A of the Code) made under this Agreement shall be considereda“separatepayment.”Inaddition,forpurposesofSection409AoftheCode,eachsuchpayment shallbedeemedexemptfromSection409AoftheCodetothefullestextentpossibleunderthe“short-term deferral”exemptionofTreasuryRegulation §1.409A-1(b)(4),aswellasanyotherapplicableexemptions.

(d)Whole Agreement.No other agreements, representations or understandings (whetheroral or writtenandwhetherexpressor implied) thatarenotexpresslysetforthinthisAgreement have been made or entered into by either party with respect to the subject matter hereof.This Agreement containstheentireunderstandingofthepartieswithrespecttothesubjectmatterhereofandsupersedesand replaces any prioragreements,representations orunderstandingsbetweenthepartieswithrespecttothe

subjectmatterhereof,includingwithoutlimitation thatcertainemploymentagreementbyandbetweenthe Executive and the Company entered into as of August 7, 2017, as amended from time to time.

(e)Withholding Taxes.All forms of compensation referred to in this Agreement shall be subject to reduction to reflect taxes or other deductions required to be withheld by law.The Executive is encouraged to obtain his own tax advice regarding the Executive’s compensation from the Company.TheExecutiveagreesthattheCompanydoesnothaveadutytodesignitscompensationpolicies inamannerthatminimizestheExecutive’staxliabilities,andtheExecutivewillnotmakeanyclaimagainst the Company or its Board related to tax liabilities arising from the Executive’s compensation.

(f)Choice of Law, Choice of Venue and Severability.This Agreement shall be interpreted in accordance with the laws of the State of Texas (except their provisions governing the choice of law).The Company and the Executive agree to file any claims, complaints or actions, whether in law or equity, arising out of the Executive’s employment with the Company with the federal courts of competent jurisdiction located in Travis County, Texas, and the state courts of competent jurisdiction locatedinTravisCounty,StateofTexasonly,andsuchcourtsshallhaveexclusivejurisdictionof anysuchmatters.IfanyprovisionofthisAgreementbecomesorisdeemedinvalid,illegalorunenforceable inanyapplicablejurisdictionbyreasonofthescope,extentordurationofitscoverage,thensuchprovision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid andenforceableor,ifsuchprovisioncannotbesoamendedwithoutmateriallyalteringtheintentionofthe parties, then such provision shall be stricken and the remainder of this Agreement shall continue in full forceandeffect.IfanyprovisionofthisAgreementisrenderedillegalbyanypresentorfuturestatute,law, ordinance or regulation (collectively, the “Law”), then such provision shall be curtailed or limited only to the minimum extent necessary to bring such provision into compliance with the Law.All the other terms and provisions of this Agreement shall continue in full force and effect without impairment or limitation.

(g)No Assignment.This Agreement and all rights and obligations of the Executive hereunder are personal to the Executive and may not be transferred or assigned by the Executive at any time.TheCompanymayassignitsrightsunderthisAgreementtoanyentitythatassumesthe Company’s obligationshereunderinconnectionwithanysaleortransferofallorasubstantialportionoftheCompany’s assets to such entity.

(h)Counterparts.This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

EXECUTIVE

By: ​ ​/s/ Steve Chapman​ ​

Name:  Steve Chapman

NATERA, INC.

By: ​ ​/s/ Rowan Chapman​ ​

Name: Rowan Chapman

Title:  Compensation Committee Chair

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steve Chapman, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2024 of Natera, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

3
Date: August 8, 2024	By:	/s/ Steve Chapman
	Name:	Steve Chapman
	Title:	Chief Executive Officer and President
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Brophy, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2024 of Natera, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

3
Date: August 8, 2024	By:	/ s / Michael Brophy
	Name:	Michael Brophy
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Steve Chapman, Chief Executive Officer and President of Natera, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The quarterly report on Form 10-Q for the Company for the quarter ended June 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

ovemb
Date: August 8, 2024	By:	/ s / Steve Chapman
	Name:	Steve Chapman
	Title:	Chief Executive Officer and President
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Brophy, Chief Financial Officer of Natera, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The quarterly report on Form 10-Q for the Company for the quarter ended June 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

3
Date: August 8, 2024	By:	/ s / Michael Brophy
	Name:	Michael Brophy
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2024	Aug. 01, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2024
Entity File Number	001-37478
Entity Registrant Name	Natera, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	01-0894487
Entity Address, Address Line One	13011 McCallen Pass
Entity Address, Address Line Two	Building A Suite 100
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78753
City Area Code	650
Local Phone Number	980-9190
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	NTRA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		123,681,432
Entity Central Index Key	0001604821
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Current assets:
Cash, cash equivalents and restricted cash	$ 796,798	$ 642,095
Short-term investments	90,299	236,882
Accounts receivable, net of allowance of $7,021 and $6,481 at June 30, 2024 and December 31, 2023, respectively	335,936	278,289
Inventory	40,985	40,759
Prepaid expenses and other current assets, net	37,798	60,524
Total current assets	1,301,816	1,258,549
Property and equipment, net	133,280	111,210
Operating lease right-of-use assets	52,582	56,537
Other assets	29,311	15,403
Total assets	1,516,989	1,441,699
Current liabilities:
Accounts payable	33,100	14,998
Accrued compensation	41,487	45,857
Other accrued liabilities	141,231	149,405
Deferred revenue, current portion	18,367	16,612
Short-term debt financing	80,389	80,402
Total current liabilities	314,574	307,274
Long-term debt financing	283,604	282,945
Deferred revenue, long-term portion and other liabilities	21,066	19,128
Operating lease liabilities, long-term portion	61,225	67,025
Total liabilities	680,469	676,372
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.0001 par value: 750,000 shares authorized at both June 30, 2024 and December 31, 2023; 123,365 and 119,581 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	12	11
Additional paid-in capital	3,320,365	3,145,837
Accumulated deficit	(2,482,499)	(2,377,436)
Accumulated other comprehensive loss	(1,358)	(3,085)
Total stockholders' equity	836,520	765,327
Total liabilities and stockholders' equity	$ 1,516,989	$ 1,441,699

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Condensed Consolidated Balance Sheets
Allowances on accounts receivable	$ 7,021	$ 6,481
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	750,000	750,000
Common stock, shares issued	123,365	119,581
Common stock, shares outstanding	123,365	119,581

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Revenues
Total revenues	$ 413,351,000	$ 261,404,000	$ 781,092,000	$ 503,160,000
Cost and expenses
Research and development	89,109,000	78,173,000	177,746,000	160,479,000
Selling, general and administrative	197,965,000	152,508,000	392,243,000	302,135,000
Total cost and expenses	457,253,000	373,830,000	899,308,000	753,887,000
Loss from operations	(43,902,000)	(112,426,000)	(118,216,000)	(250,727,000)
Interest expense	(3,127,000)	(3,177,000)	(6,251,000)	(6,238,000)
Interest and other income, net	10,457,000	4,518,000	20,724,000	9,103,000
Loss before income taxes	(36,572,000)	(111,085,000)	(103,743,000)	(247,862,000)
Income tax (expense) benefit	(892,000)	282,000	(1,320,000)	122,000
Net loss	(37,464,000)	(110,803,000)	(105,063,000)	(247,740,000)
Unrealized gain on available-for-sale securities, net of tax	834,000	2,595,000	1,727,000	7,159,000
Comprehensive loss	$ (36,630,000)	$ (108,208,000)	$ (103,336,000)	$ (240,581,000)
Net loss per share (Note 12):
Basic (in dollars per share)	$ (0.30)	$ (0.97)	$ (0.86)	$ (2.20)
Diluted (in dollars per share)	$ (0.30)	$ (0.97)	$ (0.86)	$ (2.20)
Weighted-average number of shares used in computing basic and diluted net loss per share:
Basic (in shares)	122,853	113,690	121,834	112,734
Diluted (in shares)	122,853	113,690	121,834	112,734
Product
Revenues
Total revenues	$ 411,364,000	$ 258,256,000	$ 776,036,000	$ 496,053,000
Cost and expenses
Cost of revenues	169,850,000	142,808,000	328,683,000	290,562,000
Licensing and other
Revenues
Total revenues	1,987,000	3,148,000	5,056,000	7,107,000
Cost and expenses
Cost of revenues	$ 329,000	$ 341,000	$ 636,000	$ 711,000

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balance at Dec. 31, 2022	$ 11	$ 2,664,730	$ (16,362)	$ (1,942,635)	$ 705,744
Balance (in shares) at Dec. 31, 2022	111,255
Issuance of common stock upon exercise of stock options		2,939			2,939
Issuance of common stock upon exercise of stock options (in shares)	217
Issuance of common stock under the employee stock purchase plan		8,674			8,674
Issuance of common stock under the employee stock purchase plan (in shares)	219
Issuance of common stock for bonuses		19,771			19,771
Issuance of common stock for bonuses (in shares)	349
Issuance of common stock for IPR&D milestone		14,435			14,435
Issuance of common stock for IPR&D milestone (in shares)	336
Vesting of restricted stock units (in shares)	1,675
Stock based compensation		85,165			85,165
Unrealized gain on available-for sale securities			7,159		7,159
Net loss				(247,740)	(247,740)
Balance at Jun. 30, 2023	$ 11	2,795,714	(9,203)	(2,190,375)	596,147
Balance (in shares) at Jun. 30, 2023	114,051
Balance at Mar. 31, 2023	$ 11	2,741,932	(11,798)	(2,079,572)	650,573
Balance (in shares) at Mar. 31, 2023	113,359
Issuance of common stock upon exercise of stock options		638			638
Issuance of common stock upon exercise of stock options (in shares)	48
Issuance of common stock under the employee stock purchase plan		8,674			8,674
Issuance of common stock under the employee stock purchase plan (in shares)	219
Vesting of restricted stock units (in shares)	425
Stock based compensation		44,470			44,470
Unrealized gain on available-for sale securities			2,595		2,595
Net loss				(110,803)	(110,803)
Balance at Jun. 30, 2023	$ 11	2,795,714	(9,203)	(2,190,375)	596,147
Balance (in shares) at Jun. 30, 2023	114,051
Balance at Dec. 31, 2023	$ 11	3,145,837	(3,085)	(2,377,436)	$ 765,327
Balance (in shares) at Dec. 31, 2023	119,581				119,581
Issuance of common stock upon exercise of stock options		8,648			$ 8,648
Issuance of common stock upon exercise of stock options (in shares)	1,078
Issuance of common stock under the employee stock purchase plan		8,862			8,862
Issuance of common stock under the employee stock purchase plan (in shares)	263
Issuance of common stock for bonuses		24,071			24,071
Issuance of common stock for bonuses (in shares)	270
Vesting of restricted stock units	$ 1				1
Vesting of restricted stock units (in shares)	2,173
Stock based compensation		132,947			132,947
Unrealized gain on available-for sale securities			1,727		1,727
Net loss				(105,063)	(105,063)
Balance at Jun. 30, 2024	$ 12	3,320,365	(1,358)	(2,482,499)	$ 836,520
Balance (in shares) at Jun. 30, 2024	123,365				123,365
Balance at Mar. 31, 2024	$ 12	3,241,326	(2,192)	(2,445,035)	$ 794,111
Balance (in shares) at Mar. 31, 2024	122,234
Issuance of common stock upon exercise of stock options		2,182			2,182
Issuance of common stock upon exercise of stock options (in shares)	286
Issuance of common stock under the employee stock purchase plan		8,862			8,862
Issuance of common stock under the employee stock purchase plan (in shares)	263
Vesting of restricted stock units (in shares)	582
Stock based compensation		67,995			67,995
Unrealized gain on available-for sale securities			834		834
Net loss				(37,464)	(37,464)
Balance at Jun. 30, 2024	$ 12	$ 3,320,365	$ (1,358)	$ (2,482,499)	$ 836,520
Balance (in shares) at Jun. 30, 2024	123,365				123,365

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Operating activities:
Net loss	$ (105,063)	$ (247,740)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	14,978	10,201
Expensed in-process research and development		2,679
Premium amortization and discount accretion on investment securities	(556)	1,450
Stock-based compensation	131,858	84,789
Non-cash lease expense	7,204	7,451
Amortization of debt discount and issuance cost	658	642
Foreign exchange adjustment	377	265
Non-cash interest expense	(13)	68
Changes in operating assets and liabilities:
Accounts receivable	(57,647)	(15,680)
Inventory	(225)	(7,281)
Prepaid expenses and other assets	20,874	12,590
Accounts payable	16,668	(9,018)
Accrued compensation	19,701	9,936
Operating lease liabilities	(8,269)	(5,196)
Other accrued liabilities	(10,598)	(11,175)
Deferred revenue	1,044	6,368
Cash provided by (used in) operating activities	30,991	(159,651)
Investing activities:
Purchases of investments	(72,810)
Proceeds from maturity of investments	221,500	83,250
Purchases of property and equipment, net	(31,993)	(20,190)
Cash paid for acquisition of intangible assets	(10,495)
Cash provided by investing activities	106,202	63,060
Financing activities:
Proceeds from exercise of stock options	8,648	2,939
Proceeds from the issuance of common stock under the employee stock purchase plan	8,862	8,674
Cash provided by financing activities	17,510	11,613
Net change in cash, cash equivalents and restricted cash	154,703	(84,978)
Cash, cash equivalents and restricted cash, beginning of period	642,095	466,091
Cash, cash equivalents and restricted cash, end of period	796,798	381,113
Supplemental disclosure of cash flow information:
Cash paid for interest	5,592	5,596
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accruals	2,245	103
Acquisition of warrants	1,884
Amounts accrued for acquisition of intangible assets	1,400
Issuance of common stock for IPR&D acquisition		14,435
Issuance of common stock for bonuses	24,071	19,771
Stock-based compensation included in capitalized software development costs	$ 1,089	$ 376

XML

Description of Business

6 Months Ended

Jun. 30, 2024

Description of Business

Description of Business

1. Description of Business

Natera, Inc. (the “Company”) was formed in the state of California as Gene Security Network, LLC in November 2003 and incorporated in the state of Delaware in January 2007. The Company is a diagnostics company with proprietary molecular and bioinformatics technology that it is applying to change the management of disease worldwide. The Company’s cell-free DNA (“cfDNA”) technology combines its novel molecular assays, which reliably measure many informative regions across the genome from samples as small as a single cell, with its statistical algorithms which incorporate data available from the broader scientific community to identify genetic variations covering a wide range of serious conditions with high accuracy and coverage. The Company focuses on applying its technology to three main areas of healthcare – women’s health, oncology and organ health. In the women’s health space, the Company develops and commercializes non- or minimally- invasive tests to evaluate risk for, and thereby enable early detection of, a wide range of genetic conditions, such as Down syndrome. In oncology, the Company commercializes, among others, a personalized blood-based DNA test to detect molecular residual disease and monitor for disease recurrence across a broad range of cancer types. The Company’s third area of focus is organ health, with tests to assess kidney, heart, and lung transplant rejection as well as genetic testing for chronic kidney disease. The Company operates laboratories in Austin, Texas and San Carlos, California certified under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) providing a host of cell-free DNA-based molecular testing services. The Company determines its operating segments based on the way it organizes its business to make operating decisions and assess performance. The Company operates one segment, the development and commercialization of molecular testing services, applying its proprietary technology in the fields of women’s health, oncology and organ health.

The Company’s key product offerings include its Panorama Non-Invasive Prenatal Test (“Panorama”) that screens for chromosomal abnormalities of a fetus as well as in twin pregnancies, typically with a blood draw from the mother; Horizon Carrier Screening (“Horizon”) to determine carrier status for a large number of severe genetic diseases that could be passed on to the carrier’s children; its Signatera molecular residual disease test (“Signatera”) to detect circulating tumor DNA in patients previously diagnosed with cancer to assess molecular residual disease, monitor for recurrence, and evaluate treatment response; and its Prospera test, to assess organ transplant rejection in patients who have undergone kidney, heart, or lung transplantation. All testing is available principally in the United States. The Company also offers its Panorama test to customers outside of the United States, primarily in Europe. The Company also offers Constellation, a cloud-based software platform that enables laboratory customers to gain access through the cloud to the Company’s algorithms and bioinformatics in order to validate and launch their own tests based on the Company’s technology.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2024, there were no material changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (filed on February 29, 2024).

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the Company’s results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date. These financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2024.

Some items in the prior period financial statements were reclassified to conform to the current presentation.

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses for the near future. The Company had a net loss of $105.1 million for the six months ended June 30, 2024 and an accumulated deficit of $2.5 billion as of June 30, 2024. As of June 30, 2024, the Company had $796.8 million in cash, cash equivalents, and restricted cash, $90.3 million in marketable securities, an $80.4 million outstanding balance on its Credit Line (as defined in Note 10, Debt) including accrued interest and $287.5 million of outstanding principal on its 2.25% Convertible Senior Notes (the “Convertible Notes”). The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral for its Credit Line. As of June 30, 2024, the Company had $20.0 million remaining and available on its Credit Line.

While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations and business plans. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings.

The Company continues to invest in the development and commercialization of its existing and future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders will experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available when necessary, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations.

On July 19, 2024, the Company announced its decision to redeem all of its outstanding 2.25% Convertible Senior Notes due 2027. The redemption is scheduled for October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with shares of its common stock as the settlement method to apply to all conversions of the Convertible Notes. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of the Company’s common stock prior to the Redemption Date. As a result, the Company does not expect that its decision to redeem the Convertible Notes will have a material effect on its liquidity.

In September 2023, the Company completed an underwritten equity offering and sold 4,550,000 shares of its common stock at a price of $55 per share to the public. Before estimated offering expenses of $0.4 million, the Company received proceeds of approximately $235.8 million net of the underwriting discount.

On September 10, 2021, the Company entered into an agreement with a third party for an asset acquisition where the acquired asset was in-process research and development primarily in exchange for an equity consideration payment. In addition, pursuant to the agreement, certain employees of the third party became employees of the Company. The third party was a biotechnology company focused on oncology. The total upfront acquisition consideration amounts to $35.6 million composed of the issuance of 276,346 shares of the Company's common stock with a fair value of $30.9 million, approximately $3.9 million of cash consideration, assumed net liabilities of $0.2 million, as well as $0.6 million of acquisition related legal and accounting costs directly attributable to the acquisition of the asset. The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified in-process research and development asset (“IPR&D”) thus satisfying the requirements of the screen test in Accounting Standards Update (“ASU”) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of Business. The estimated fair value of the acquired workforce was not significant. The Company concluded the acquired IPR&D has no alternative-future use and accordingly expensed approximately $35.6 million, on the day the transaction closed as research and development expense, which is reflected in its consolidated statement of operations.

Further, additional consideration aggregating up to approximately $35.0 million was estimated to be paid via issuance of an estimated 269,547 additional shares of the Company’s common stock, consistent with the registration statement filed with the SEC on September 10, 2021, upon achievement of defined milestones relating to product development, commercial launch and continued employment of certain selling shareholders, each of which was revalued at each reporting date and amount of compensation expense was adjusted accordingly and reported in research and development expenses. In November 2022, the terms of the payment for any remaining consideration were modified, resulting in $10.0 million of consideration paid in December 2022 and $15.0 million of consideration paid in March 2023, with such consideration primarily consisting of the Company’s common stock.

Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2024.

Principles of Consolidation

The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiaries. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. The Company established a subsidiary that operates in Canada following the acquisition of the IPR&D asset. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) in the United States requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, the average useful life for property and equipment including impairment estimates, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of options, income tax uncertainties, and the expected consideration to be received from contracts with customers, insurance payors, and patients. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements.

Investments

Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, irrespective of maturity date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.

The Company classifies its investments as Level 1 or 2 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. The Company holds Level 2 securities which are initially valued at the transaction price and subsequently valued by a third-party service provider using inputs other than quoted prices that are observable either directly or indirectly, such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of these holdings.  

Available-for-sale debt securities. The amended guidance from ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires the measurement of expected credit

losses for available-for-sale debt securities held at the reporting date over the remaining life based on historical experience, current conditions, and reasonable and supportable forecasts. The Company evaluated its investment portfolio under the available-for-sale debt securities impairment model guidance and determined the Company’s investment portfolio is composed of low-risk, investment grade securities and thus has not recorded an expected credit loss for its investment portfolio. Further, gross unrealized losses on available for sale securities were not material at June 30, 2024.

Accounts Receivable

Trade accounts receivable and other receivables. The allowance for doubtful accounts for trade accounts receivable is based on the Company’s assessment of the collectability of accounts related to its clinics and laboratory partner customers. The Company regularly reviews the allowance by considering factors such as historical experience, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. See Note 6, Balance Sheet Components, for a roll-forward of the allowance for doubtful accounts related to trade accounts receivable for three months and six months ended June 30, 2024 and 2023. The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) and applies a constraint to the estimated variable consideration such that it is not probable that a significant reversal will occur. When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds. After applying the ASC 606 constraint, the Company assessed for credit losses and allowance for doubtful accounts and determined an incremental credit loss was not needed given the quality of the insurance payors from whom such receivables are expected to be collectible and the relatively short duration over which the majority of receivables are collected. Accordingly, the Company currently does not have an incremental credit loss reserve nor allowance for doubtful accounts against accounts receivable for insurance and patient payors due to the average selling price calculations which incorporate these risks as net receivables are recorded.

Inventory

Inventory is recorded at the lower of cost or net realizable value, determined on a first-in, first-out basis. Inventory consists entirely of supplies, which the Company consumes when providing its test reports, and therefore, the Company does not maintain any finished goods inventory. The Company enters into inventory purchases commitments so that it can meet future delivery schedules based on forecasted demand for its tests.

The Company uses judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. A write down of specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period is first recognized by using a number of factors including product expiration dates and scrapped inventory. Any write-down of inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded to cost of revenue on our consolidated statements of operations. The Company makes assumptions about future demand, market conditions and the release of new products that may supersede older products. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs may be required.

Other Assets

In January 2024, the Company acquired from Invitae Corp. (“Invitae”) certain assets relating to Invitae’s non-invasive prenatal screening and carrier screening business. The transaction price of $10.5 million consisted of $10.0 million in upfront payment costs and approximately $0.5 million of other transaction costs which were capitalized as intangible assets over an estimated useful life of ten years. An additional payment of up to $42.5 million may be made should the Company achieve certain customer volume retention targets and based on certain legal outcomes.

Accumulated Other Comprehensive Income (Loss)

Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities and foreign currency translation adjustments.

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	(2,192)	$	(11,798)	$	(3,085)	$	(16,362)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment		834		2,595		1,727		7,159
Ending balance	$	(1,358)	$	(9,203)	$	(1,358)	$	(9,203)

The change in net unrealized loss on available-for-sale securities is due to increased market volatility. The Company has assessed the unrealized loss position for available-for-sale securities and determined that an allowance for credit loss was not necessary.

Revenue Recognition

The Company recognizes revenue under, ASC 606, using the following five step process:

● Identification of a contract, or contracts, with a customer;

● Identification of the performance obligations in the contract;

● Determination of the transaction price;

● Allocation of the transaction price to the performance obligations in the contract; and

● Revenue recognition when, or as, the performance obligations are satisfied.

The Company uses the most likely amount method of estimating variable consideration. The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable, and is primarily based on historical cash collections for tests delivered, as adjusted for current expectations. Current expectations of cash collections factor in changes in reimbursement rate trends, past events not expected to recur, and future known changes such as anticipated contractual pricing changes or changes to insurance coverage.  For insurance carriers and product types with similar reimbursement characteristics, the Company uses a portfolio approach to estimate variable consideration. The Company also applies a constraint to the estimated variable consideration when it assesses whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods.

When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds.

See Note 3, Revenue Recognition, for detailed discussions of product revenues, licensing and other revenues, and how the five steps described above are applied.

Fair Value

The Company discloses the fair value of financial instruments for financial assets and liabilities for which the value is practicable to estimate. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Related Party

On December 6, 2021, the Company participated along with certain other investors in the series B financing of MyOme, Inc. (“MyOme”), and purchased preferred shares and warrants in exchange for a cash payment of approximately $4.0 million. The Company does not hold a seat on MyOme’s board of directors. The Company’s investment in MyOme is recorded at cost and no impairment was identified as of June 30, 2024. The following are the Company’s related persons and the basis of each such related person’s relationship with MyOme:

● Matthew Rabinowitz, the Company’s executive chairman and co-founder, is the chairman of the board and founder of MyOme, and a beneficial holder of approximately 26.5% of the outstanding shares of MyOme on a fully dilutive basis;

● Jonathan Sheena, the Company’s co-founder and a member of the Company’s board of directors, is a stockholder and a member of the board of directors of MyOme;

● Daniel Rabinowitz, the Company’s Secretary and Chief Legal Officer, is a stockholder of MyOme; and

● Roelof Botha, the Lead Independent Director of the Company’s board of directors, is a managing member of Sequoia Capital. Certain funds affiliated with Sequoia Capital also participated in MyOme’s series B financing.

None of the related party investments in MyOme by our executives and directors noted above were at the behest of the Company nor funded by the Company.

In February 2024, the Company entered into a collaboration and commercialization agreement (the “Collaboration Agreement”) with MyOme pursuant to which the parties will partner to offer certain genetic testing services to be developed and funded solely by MyOme and overseen by a joint steering committee. The Company will assist MyOme with commercial activities. In connection with the Collaboration Agreement, the Company received a 10-year warrant to purchase 3,058,485 shares of MyOme's common stock at an exercise price of $0.25 per share, which will vest upon a MyOme liquidity event (as such terms are defined in MyOme's certificate of incorporation). The warrants were valued using the Black-Scholes valuation model on the date of acquisition and are accounted for using the measurement alternative. No impairment was identified as of June 30, 2024. The warrants have been included within other assets and deferred revenue, long-term portion and other liabilities, which will be recognized as a reduction of selling and marketing expense upon commercialization and sale of the products contemplated under the Collaboration Agreement. Subject to the Company's achievement of certain commercialization milestones, the Company may receive additional warrants to purchase MyOme’s Series B Preferred Stock. To the extent the genetic testing services are successfully commercialized, the Company will owe certain royalty payments to MyOme. Should the Company exercise all its MyOme common stock warrants, the Company would hold an accumulated 12.4% of MyOme on a fully diluted basis.

Risk and Uncertainties

Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents, and restricted cash, accounts receivable and investments. The Company limits its exposure to loss by placing its cash in financial institutions with high credit ratings. The Company's cash may consist of deposits held with banks that may at times exceed federally insured limits of $250,000 per customer. The Company performs evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution.

For the three and six months ended June 30, 2024, and 2023, there were no customers exceeding 10% of total revenues on an individual basis. As of June 30, 2024 and December 31, 2023, there were no customers with an outstanding balance exceeding 10% of net accounts receivable. 

For the three months ended June 30, 2024 and 2023, approximately 10.3% and 12.5%, respectively, of total revenue were paid by Medicare on behalf of multiple customers. For the six months ended June 30, 2024 and 2023, approximately 10.9% and 13.2%, respectively, of total revenue were paid by Medicare on behalf of multiple customers.

As of June 30, 2024 and December 31, 2023, approximately 8.8% and 10.2%, respectively, of accounts receivable are expected to be paid by Medicare on behalf of multiple customers.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed below, the Company believes that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

New Accounting Pronouncements Not Yet Adopted

In March 2020, ASU 2020-04, Reference Rate Reform (Topic 848) was issued which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. ASU 2022-06, or Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company does not expect adoption of this standard to have a material impact on its consolidated financial statements.

In November 2023, ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In December 2023, ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, was issued, which requires enhanced disclosures in connection with an entity's effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard will be effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

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Revenue Recognition

6 Months Ended

Jun. 30, 2024

Revenue Recognition

Revenue Recognition

3. Revenue Recognition

The Company recognizes revenues when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers.

Product Revenues

Product revenues are derived by performing genetic testing services and the Company’s performance obligation is complete when test results are delivered to a clinic or patient, who are considered the customer for such services as further discussed below.

Additionally, the Company enters into agreements with pharmaceutical companies to utilize the Company’s Signatera tests typically to study new cancer treatments or to validate the outcomes of clinical trials for which the pharmaceutical companies are identified as customers. Such arrangements generally involve performing whole exome sequencing services and the testing of patient samples to detect cancer mutations using its Signatera test. In addition to performing Signatera tests, these agreements typically include certain activities to fulfill the contract, such as customer data setup and management and ongoing reporting. Each test result is billable to customers upon delivery and the personalized cancer profile also makes each test distinct within the context of the contract as customers can exercise control over the test results upon delivery. Accordingly, the Company recognizes test processing revenue as individual test results are delivered to customers.

For certain contracts with pharmaceutical companies where the Company is developing a companion diagnostic test in addition to performing regular testing services, revenue is primarily recognized proportionally as services are performed and/or tests are delivered.

A performance obligation represents a promise in a contract to transfer a distinct good or service to a customer, which represents a unit of accounting in accordance with ASC 606. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company evaluates its contracts with laboratory partners and patients and identifies the performance obligations in those contracts, which are the delivery of the test results.

The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable. Consideration includes reimbursement from both patients and insurance carriers, adjusted for variable consideration related to disallowed cases, percent of patient responsibility collected, refunds and reserves, and is estimated using the most likely amount method. For insurance carriers and product types with similar reimbursement characteristics, the Company uses a portfolio of relevant historical data to estimate variable consideration and total collections for the Company’s products. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. The consideration expected from laboratory partners usually includes a fixed amount, but it can be variable depending on the volume of tests performed, and the Company determines the variable consideration using the expected value approach. For laboratory partners and patients, the Company allocates the total consideration to a single performance obligation, which is the delivery of the test results to the customers.

When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds.

The Company enters into contracts with insurance carriers with primarily payment terms related to tests provided to patients who have health insurance coverage. Insurance carriers are considered as third-party payers on behalf of the patients, and the patients are considered as the customers who receive genetic test services. Tests may be billed to insurance carriers, patients, or a combination of insurance carriers and patients. Further, the Company sells tests to a number of domestic and international laboratory partners and identifies the laboratory partners as customers provided that there is a test services agreement between the two parties.

The Company generally bills an insurance carrier, a laboratory partner or a patient upon delivery of test results. The Company also bills patients directly for out-of-pocket costs involving co-pays and deductibles that they are responsible for. The Company may or may not get reimbursed for the full amount billed. Further, the Company may not get reimbursed at all for tests performed if such tests are not covered under the insurance carrier’s reimbursement policies or the Company is not a qualified provider to the insurance carrier, or if the tests were not previously authorized.

Product revenue is recognized in an amount equal to the total consideration (as described above) expected to be received at a point in time when the test results are delivered. Approximately 90% of cash collections attributable to such product revenue occurs within nine months with the remaining collections generally taking an additional six months. During this time, management routinely reassesses its estimates of actual to expected cash collections, which are based on historical collection rates and adjusted for current information and trends. To the extent cash collections for tests delivered in prior periods are trending higher than expectations, the Company will increase revenue recognized when sufficient evidence is obtained to conclude the additional revenue will not result in a reversal of revenue in a future period. If cash collections for tests delivered in prior periods are trending below expectations, the Company will reduce revenue to the amount expected to be collected based on the latest information and expectations. Increases or decreases to the amount of cash expected to be collected for tests delivered in prior periods are recognized in product revenue with a corresponding impact to accounts receivable during the period such determination is made. During the three months ended June 30, 2024

and 2023, the Company increased revenue by a net of $39.9 million and $3.4 million, respectively, for collections related to tests delivered in prior periods that were fully collected (including an estimate of unapplied receipts). The increased revenue and decreased net loss resulted in a corresponding decrease in loss per share by $0.32 and $0.03 for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the Company increased revenue by a net of $73.7 million for collections related to tests delivered in prior periods that were fully collected (including an estimate of unapplied receipts). The increased revenue and decreased net loss resulted in a corresponding decrease in loss per share by $0.60 for the six months ended June 30, 2024. During the six months ended June 30, 2023, the Company reduced revenue by a net of $5.8 million for a reduction in expected collections related to tests delivered in prior periods. The decreased revenue and increased net loss resulted in a corresponding increase in loss per share by $0.05 for the six months ended June 30, 2023.  

As of June 30, 2024, the Company had $16.6 million in cash receipts which had not yet been applied to specific accounts receivables primarily due to the disruption to Change Healthcare’s network that occurred in February 2024. The Company reviewed the historical unapplied payment trends. Based on the historical estimation, within the unapplied cash receipt of $16.6 million, the Company estimated approximately $1.3 million was related to tests delivered in prior periods that were fully collected.  Additionally, as overpayments were not material in prior periods, the Company accounted for temporary unapplied balances as of June 30, 2024, as contra accounts receivable on the Balance Sheet. As of December 31, 2023, the unapplied accounts receivable balance was $1.3 million.

Product revenue is constrained for refunds estimated to be paid to insurance carriers. Certain refunds are recognized in accrued liabilities until they are either paid to the respective insurance carrier or it is determined the refund will not ultimately be paid, at which time the related accrual is reduced with a corresponding increase to revenue. During the three months ended June 30, 2024 and 2023, the reserves for refunds to insurance carriers were reduced and product revenue increased by $1.7 million and $0.8 million, respectively, for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.01 for both the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, the reserves for refunds to insurance carriers were reduced and product revenue increased by $3.8 million and $6.5 million, respectively, for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.03 and $0.06 for the six months ended June 30, 2024 and 2023, respectively.

In addition, certain other refunds are recognized as a reduction to accounts receivable until they are either paid to the respective insurance carrier or it is determined the refund will not ultimately be paid, at which time the related reserve is reduced with a corresponding increase to revenue. During the three months ended June 30, 2024, the reserves for refunds to insurance carriers were reduced and product revenue increased by $1.9 million for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and corresponding decreased net loss resulted in a decreased loss per share by $0.02 for the three months ended June 30, 2024. During the six months ended June 30, 2024, the reserves for refunds to insurance carriers were reduced and product revenue increased by $4.1 million for amounts the Company determined would not be refunded to insurance carriers. The increased revenue and decreased net loss resulted in a decreased loss per share by $0.03 for the six months ended June 30, 2024. There was no such adjustment in the three and six months ended June 30, 2023.

Licensing and Other Revenues

The Company recognizes licensing revenues from its cloud-based distribution service offering, Constellation, by granting licenses to its licensees to use certain of the Company’s proprietary intellectual properties and cloud-based software and in vitro diagnostic (“IVD”) kits. The Company also recognizes revenues from its strategic collaboration agreements, such as those with BGI Genomics Co., Ltd. (“BGI Genomics”) and Foundation Medicine, Inc. (“Foundation Medicine”). The Company recognizes licensing and other revenues through agreements with pharmaceutical companies in support of potential clinical trials managed by the pharmaceutical companies.

Constellation

The laboratory partners with whom the Company enters into a licensing arrangement represent the licensees and are identified as customers. The licensees do not have the right to possess the Company’s software, but rather receive services through the cloud software. These arrangements often include: (i) the delivery of the services through the cloud software, (ii) the necessary support and training, and (iii) the IVD kits to be consumed as tests are processed. The Company does not consider the software as a service, the support or the training as being distinct in the context of such arrangements, and therefore they are combined as a single performance obligation. The software, support and training are delivered simultaneously to the licensees over the term of the arrangement.

The Company bills the majority of licensees, who process the tests in their laboratories, a fixed price for each test processed. Licensing revenues are recognized as the performance obligations are satisfied (i.e., upon the delivery of each test) and reported in licensing and other revenues in the Company’s statements of operations and comprehensive loss.

BGI Genomics

In February 2019, the Company entered into a License Agreement (the “BGI Genomics Agreement”) with BGI Genomics to develop, manufacture, and commercialize next generation sequencing-based genetic testing assays for clinical and commercial use. The BGI Genomics Agreement has a term of ten years and expires in February 2029. Pursuant to the BGI Genomics Agreement, the Company licensed its intellectual property to and provided development services for BGI Genomics. Following completion of development services, the Company began providing assay interpretation services over the term of the agreement.

According to the BGI Genomics Agreement, the Company is entitled to a total of $50.0 million, comprised of upfront technology license fees, prepaid royalties relating to future sales of licensed products and performance of assay interpretation services, and milestone payments. Due to uncertainties in achieving certain milestones, $6.0 million of the $50.0 million was constrained. A net of $44.0 million has been collected by the Company in cash, which includes $20.0 million in prepaid royalties.

The Company concluded that the license is not a distinct performance obligation as it does not have a stand-alone value to BGI Genomics apart from the related development services. Therefore, license and related development services, for each of the non-invasive prenatal tests (“NIPTs”) and Oncology products, representing two separate performance obligations, to which $24.0 million of transaction consideration was allocated. This performance obligation was fully satisfied in March 2023 and no further related amounts will be recognized as revenue.

As of December 31, 2023, the Company's performance obligation to provide ongoing NIPT assay interpretation services was removed. Therefore, the Company now has a single remaining performance obligation related to Oncology assay interpretation services, to which $20.0 million of transaction consideration was allocated and prepaid by BGI Genomics. During the six months ended June 30, 2023, the Company recognized $0.6 million related to oncology assay interpretation services, of which $0.2 million was recognized against deferred royalties. During the six months ended June 30, 2024, the Company did not record any material amounts related to oncology assay interpretation services. The Company currently has $18.9 million in deferred revenue as of June 30, 2024.

As required by the BGI Genomics Agreement, in June 2019 the Company prepaid $6.0 million to BGI Genomics for future sequencing services and $4.0 million for future sequencing equipment. These advance payments are for equipment and services to be received in future periods, which was assessed as a standalone transaction that did not reduce revenue, aggregated to $10.0 million and was originally recorded in long-term advances on the Company’s Consolidated Balance Sheet and will be periodically assessed for impairment. During both the three and six months ended June 30, 2024, $0.4 million in equipment and services was received.  During the three and six months ended June 30, 2023, $1.0 million and $2.6 million, respectively, in equipment and services was received. As of June 30, 2024, the remaining advanced payments were $4.5 million, with $0.6 million recorded in prepaid expenses and other current assets and $3.8 million recorded in other assets.

Foundation Medicine, Inc.

In August 2019, the Company entered into a License and Collaboration Agreement (the “Foundation Medicine Agreement”) with Foundation Medicine to develop and commercialize personalized circulating tumor DNA monitoring assays, for use by biopharmaceutical and clinical customers who order Foundation Medicine’s FoundationOne CDx. The Company and Foundation Medicine will share the revenues generated from both biopharmaceutical and clinical customers in accordance with the terms of the Foundation Medicine Agreement. The Foundation Medicine Agreement has an initial term of five years, expiring in August 2024, with automatic renewals thereafter for successive one-year terms, unless the Foundation Medicine Agreement is earlier terminated in accordance with its terms. The Company and Foundation Medicine have elected not to renew the agreement beyond the initial term.

Pursuant to the Foundation Medicine Agreement, the Company will provide development services that are required to customize its proprietary Signatera test to work with Foundation Medicine’s FoundationOne CDx in conjunction with granting the use of the Company’s intellectual property. Following completion of those development services, the Company is currently providing assay testing services over the term of the agreement. The intellectual property has been licensed to Foundation Medicine for the customized test. In addition, the Company is responsible for delivering clinical study plans in order to demonstrate efficacy of the customized test which commenced in the second quarter of 2021.

The Company is entitled to a total of $32.0 million, comprised of upfront technology license fees, prepaid royalties relating to future sales of licensed products and performance of assay interpretation services, and milestone payments. $7.7 million is constrained due to uncertainties in achieving certain milestones. A net of $24.3 million has been collected by the Company in cash, which includes $5.0 million of prepaid royalties.

The Company concluded that the license is not a distinct performance obligation as it does not have a stand-alone value to Foundation Medicine apart from the related development services. Therefore, license and related development services, for Oncology products, represent a single performance obligation, to which $19.3 million of transaction consideration was allocated. Of this amount, $0.2 million was recognized in the three months ended March 31, 2023. This performance obligation was fully satisfied in March 2023 and no further related amounts will be recognized as revenue.

Royalties related to assay interpretation services represent separate performance obligations for Oncology products, to which $5.0 million of transaction consideration was allocated and prepaid by Foundation Medicine. During the three and six months ended June 30, 2023, the Company recognized $0.1 million and $0.4 million, respectively, related to oncology assay interpretation services. During the three and six months ended June 30, 2024, the Company recognized $0.2 million related to oncology assay interpretation services. The Company currently has $3.0 million in deferred revenue related to this agreement as of June 30, 2024.

Disaggregation of Revenues

The Company measures its performance results primarily based on revenues recognized from the three categories described below. The following table shows disaggregation of revenues by payer types:

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Insurance carriers	$	384,128	$	226,521	$	725,156	$	436,899
Laboratory and other partners		22,254		27,449		42,530		50,254
Patients		6,969		7,434		13,406		16,007
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

The following table presents total revenues by geographic area based on the location of the Company’s payers:

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
United States	$	404,872	$	253,296	$	764,285	$	486,550
Americas, excluding U.S.		1,601		1,206		3,082		2,364
Europe, Middle East, India, Africa		5,439		5,620		10,617		10,816
Asia Pacific and Other		1,439		1,282		3,108		3,430
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

The following table summarizes the Company’s beginning and ending balances of accounts receivable and deferred revenues:

	Balance at
	June 30,		December 31,
	2024		2023
	(in thousands)
Assets:
Accounts receivable, net	$	335,936	$	278,289
Liabilities:
Deferred revenue, current portion	$	18,367	$	16,612
Deferred revenue, long-term portion		18,416		19,128
Total deferred revenues	$	36,783	$	35,740

The following table summarizes the changes in the balance of deferred revenues during the six months ended June 30, 2024 and 2023:

	Balance at
	June 30,
	2024			2023
	(in thousands)
Beginning balance	$	35,740	$	30,778
Increase in deferred revenues		14,826		17,402
Revenue recognized during the period that was included in deferred revenues at the beginning of the period		(9,646)		(7,521)
Revenue recognized from performance obligations satisfied within the same period		(4,137)		(3,513)
Ending balance	$	36,783	$	37,146

During the six months ended June 30, 2024, revenue recognized that was included in the deferred revenue balance at the beginning of the period totaled $9.6 million. This balance consisted of approximately a net $0.1 million related to BGI Genomics and Foundation Medicine and $9.5 million related to genetic testing services. The current portion of deferred revenue includes $14.8 million from genetic testing services, $0.5 million from BGI Genomics, and $3.0 million from the Foundation Medicine Agreement as of June 30, 2024. The non-current portion of deferred revenue consists of $18.4 million from the BGI Genomics Agreement as of June 30, 2024.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Measurements

Fair Value Measurements

4. Fair Value Measurements

The Company's financial assets and liabilities carried at fair value are comprised of investment assets that include money market and investments.

The fair value accounting guidance requires that assets and liabilities be carried at fair value and classified in one of the following three categories:

Level I: Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access.

Level II: Observable market-based inputs or unobservable inputs that are corroborated by market data, such as quoted prices, interest rates, and yield curves; and

Level III: Inputs that are unobservable data points that are not corroborated by market data.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

The following table represents the fair value hierarchy for the Company’s financial assets and financial liabilities measured at fair value on a recurring basis:

	June 30, 2024								December 31, 2023
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash, cash equivalents and restricted cash (1)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities		58,814		—		—		58,814		200,418		—		—		200,418
Municipal securities		—		31,485		—		31,485		—		36,464		—		36,464
Total financial assets	$	855,612	$	31,485	$	—	$	887,097	$	842,513	$	36,464	$	—	$	878,977

(1) Cash equivalents includes money market deposits and liquid demand deposits.

Fair Value of Short-Term and Long-Term Debt:

As of June 30, 2024 and December 31, 2023, the estimated fair value of the total principal outstanding and accrued interest of the Credit Line was $80.4 million, and were based upon observable Level 2 inputs, including the interest rate based on the 30-day Secured Overnight Financing Rate (“SOFR”) average, plus 0.5%. The estimated fair value approximates the carrying value due to the short term duration and variable interest rate.

As of June 30, 2024 and December 31, 2023, the estimated fair value of the Convertible Notes was $800.7 million and $491.8 million, respectively, based upon observable, Level 2 inputs, including pricing information from recent trades of the Convertible Notes. See Note 10, Debt, for additional details and carrying value.

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Financial Instruments

6 Months Ended

Jun. 30, 2024

Financial Instruments

Financial Instruments

5. Financial Instruments

The Company elected to invest a portion of its cash assets in conservative, income earning, and liquid investments. Cash, cash equivalents, restricted cash and investments, which are classified as available-for-sale securities, consisted of the following:

	June 30, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Cash, cash equivalents and restricted cash (2)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities (1)		58,923		—		(109)		58,814		201,522		14		(1,118)		200,418
Municipal securities (1)		32,556		—		(1,071)		31,485		38,091		—		(1,627)		36,464
Total	$	888,277	$	—	$	(1,180)	$	887,097	$	881,708	$	14	$	(2,745)	$	878,977
Classified as:
Cash, cash equivalents and restricted cash (2)								796,798								642,095
Short-term investments								90,299								236,882
Total							$	887,097							$	878,977

(1) Per the Company’s investment policy, all debt securities are classified as short-term investments irrespective of holding period.  

(2) Cash equivalents includes liquid demand deposits, and money market funds.

The Company invests in U.S. Treasuries, U.S. agency and high-quality municipal bonds which mature at par value and are all paying their coupons on schedule. The Company has therefore concluded an allowance for expected credit losses of its investments was not necessary and will continue to recognize unrealized gains and losses in other comprehensive income (loss). During the six months ended June 30, 2024, the Company did not sell any investments. The Company uses the specific investment identification method to calculate realized gains and losses and amounts reclassified out of other comprehensive income (loss) to net loss. As of June 30, 2024, the Company had 15 investments in an unrealized loss position in its portfolio. Gross unrealized losses were not material as of June 30, 2024. Gross unrealized losses were primarily due to declines in the value of fixed rate instruments as interest rates in the broader market increased, and were not indictive of a decline in the credit worthiness of the underlying issuer, and as such, the Company did not record a credit loss reserve as of June 30, 2024.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of June 30, 2024, aggregated by major security type in a continuous loss position.

		Less Than 12 Months				12 Months or Longer				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
U.S. Treasury securities		$	23,923	$	—	$	34,891	$	(109)	$	58,814	$	(109)
Municipal securities			—		—		31,485		(1,071)		31,485		(1,071)
Total		$	23,923	$	—	$	66,376	$	(1,180)	$	90,299	$	(1,180)

The following table summarizes the Company’s portfolio of available-for-sale securities by contractual maturity as of June 30, 2024:

	June 30, 2024
	Amortized Cost		Fair Value
	(in thousands)
Less than or equal to one year	$	75,440	$	75,003
Greater than one year but less than five years		16,039		15,296
Total	$	91,479	$	90,299

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Balance Sheet Components

6 Months Ended

Jun. 30, 2024

Balance Sheet Components

Balance Sheet Components

6. Balance Sheet Components

Allowance for doubtful accounts

The following is a roll-forward of the allowances for doubtful accounts related to trade accounts receivable for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended
	June 30,
	2024			2023
		(in thousands)
Beginning balance	$	7,252	$	5,134
(Reversal of) Provision for doubtful accounts		(185)		446
Write-offs		(46)		—
Total	$	7,021	$	5,580

	Six Months Ended
	June 30,
	2024		2023
		(in thousands)
Beginning balance	$	6,481	$	3,830
Provision for doubtful accounts		744		1,750
Write-offs		(204)		—
Total	$	7,021	$	5,580

Property and Equipment, net

The Company’s property and equipment consisted of the following:

		June 30,		December 31,
	Useful Life	2024		2023
		(in thousands)
Machinery and equipment	3-5 years	$	94,785	$	85,626
Computer equipment	3 years		3,040		1,850
Purchased and capitalized software held for internal use	3 years		10,672		11,636
Leasehold improvements	Lesser of useful life or lease term		47,666		38,999
Construction-in-process			41,577		29,392
			197,740		167,503
Less: Accumulated depreciation and amortization			(64,460)		(56,293)
Total Property and Equipment, net		$	133,280	$	111,210

The Company’s long-lived assets are located in the United States.

During the six months ended June 30, 2024, the increase in net property and equipment was due to expansion projects and purchases of new equipment for the Company’s laboratories located in Texas and California to expand testing capabilities, offset by depreciation expense of $13.3 million recorded in the six months ended June 30, 2024. Depreciation expense of $10.2 million was recorded in the six months ended June 30, 2023. The Company did not incur any impairment charges during the six months ended June 30, 2024 or 2023.

Other Accrued Liabilities

The Company’s other accrued liabilities consisted of the following:

	June 30,		December 31,
	2024		2023
	(in thousands)
Reserves for refunds to insurance carriers	$	16,465	$	23,245
Accrued charges for third-party testing		10,574		14,823
Testing and laboratory materials from suppliers		14,142		11,229
Marketing and corporate affairs		11,792		10,085
Short term advances		13,899		—
Legal, audit and consulting fees		31,979		43,897
Accrued shipping charges		1,800		3,646
Sales and income tax payable		4,053		3,731
Accrued third-party service fees		8,173		7,111
Clinical trials and studies		7,502		12,126
Operating lease liabilities, current portion		12,384		11,621
Property and equipment purchases		5,330		4,316
Other accrued interest		1,078		1,078
Other accrued expenses		2,060		2,497
Total other accrued liabilities	$	141,231	$	149,405

Reserves for refunds to insurance carriers include overpayments from and amounts to be refunded to insurance carriers, and additional amounts that the Company estimates for potential refund requests during the period. When the Company releases these previously accrued amounts, they are recognized as product revenues in the condensed statements of operations and comprehensive loss.

The following table summarizes the reserve balance and activities for refunds to insurance carriers for the six months ending June 30, 2024 and 2023:

	June 30,
	2024		2023
	(in thousands)
Beginning balance	$	23,245	$	18,948
Additional reserves		1,065		5,148
Refunds to carriers		(3,095)		(963)
Reserves released to revenue		(4,750)		(7,653)
Ending balance	$	16,465	$	15,480

As of June 30, 2024, the Company had $13.9 million in short term advances obtained as a result of the disruption to Change Healthcare’s network in February 2024 which are due and payable within ten days of demand.

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Leases

6 Months Ended

Jun. 30, 2024

Leases.

Leases

7. Leases

Operating Leases

In September 2015, the Company entered into a long-term lease agreement for laboratory and office space totaling approximately 94,000 square feet in Austin, Texas. The original lease term was 132 months beginning in December 2015 and expiring in November 2026 with monthly payments beginning in December 2016. In December 2021, the Company entered into an amendment of the Austin lease agreement which extended the lease of the current premises through March 2033. The amendment also includes two additional office spaces (the “First Expansion Premises” and the “Second

Expansion Premises”). The First Expansion Premises consists of 32,500 rentable square feet and commenced in February 2022. The Second Expansion Premises consists of 65,222 rentable square feet and commenced in September 2022. The terms of the First and Second Expansion Premises expire in March 2033.

In October 2016, the Company entered into a lease directly with its landlord for laboratory and office spaces at its facilities located in San Carlos, California. The Company currently occupies approximately 136,000 square feet comprised of two office spaces (the “First Space” and the “Second Space”). The First Space covers approximately 88,000 square feet, and the Second Space totals approximately 48,000 square feet. In January 2021, the Company entered into an amendment of the lease to extend the term for 48 months to October 2027. The combined annual rent for the First Space and Second Space is $9.3 million which commenced in October 2023.

The Company entered into a lease agreement commencing June 2018 for its cord blood tissue storage facility in Tukwila, Washington that covers approximately 10,000 square feet. The lease term is 62 months and expired in July 2023. The Company had the option to extend this lease for five years, and the fair market rent upon renewal was not determinable. However, since the Company sold its business related to cord blood and tissue storage in September 2019, the Company has subleased the facility and did not exercise its option to renew the facility upon expiration.

The Company entered into a lease agreement in November 2020 to lease 11,395 square feet of space located in South San Francisco, California over a 36-month term. The premises are used for general office, laboratory and research use. The annual lease payment starts at $0.9 million and escalates annually after commencing in December 2021. In December 2022, the Company exercised the renewal option of the South San Francisco lease agreement. In January 2023, the Company entered in an amendment to extend the lease term of the South San Francisco premises by three years, through November 2026.

The Company entered into a lease agreement in September 2023 to lease 16,319 square feet of space located in Pleasanton, California over a 60-month term. The premises are used for laboratory and research use and commenced in December 2023. The annual lease payment starts at $0.5 million and escalates annually.

As part of the IPR&D asset acquisition in September 2021, the Company inherited a 24-month lease for 7,107 square feet of laboratory space in Canada. The annual lease payment started at $0.2 million and expired in August 2023.

The Company has also historically entered into leases of individual workspaces and storage spaces at various locations on both a month-to-month basis without an established lease term, and more recently for certain locations, has committed to terms approximating one to five years. For the facilities without a committed lease term, the Company has elected to not recognize them as right-of-use assets on the condensed consolidated balance sheets as they are all considered short-term leases. For individual workspaces where the committed lease term exceeds one year, the Company has recorded a right-of-use asset on the condensed consolidated balance sheets.

For the six months ended June 30, 2024, the Company had $0.6 million in noncash operating activities related to additional right-of-use assets accounted from a new lease and extending existing leases under ASC, Topic 842, Leases

(“ASC 842”). For the six months ended June 30, 2023, the Company did not have any noncash operating activities related to additional right-of-use assets.

The operating lease right-of-use assets are classified as noncurrent assets in the balance sheet. The corresponding lease liabilities are separated into current and long-term portions as follows:

	June 30,		December 31,
	2024		2023
		(in thousands)
Operating lease liabilities, current portion included in other accrued liabilities	$	12,384	$	11,621
Operating lease liabilities, long-term portion		61,225		67,025
Total operating lease liabilities	$	73,609	$	78,646

The initial recognition of the operating lease liabilities was measured as the present value of the future minimum lease payments using a discount rate determined as of January 1, 2019. The operating right-of-use assets was calculated as the operating lease liabilities discounted at the present value, less the amount of unamortized tenant improvement allowance and deferred rent. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable. In accordance with ASC 842, the incremental borrowing rate was estimated as the annual percentage yield resulting from a corporate debt financing over a loan term approximating the remaining term of each lease, with the effect of certain credit risk rating. As of June 30, 2024, the weighted-average remaining lease term was 6.30 years and the weighted-average discount rate was 6.8%.

The Company continues to recognize lease expense on a straight-line basis. The lease expense includes the amortization of the right-of-use assets with the associated interest component estimated by applying the effective interest method. For the three months ended June 30, 2024 and 2023, total lease expense of $3.6 million and $3.7 million was recognized in the condensed statements of operations and comprehensive loss, respectively. For the six months ended June 30, 2024 and 2023, total lease expense of $7.2 million and $7.5 million was recognized in the condensed statements of operations and comprehensive loss, respectively. Cash paid for amounts in the measurement of operating lease liabilities totaled $4.1 million and $3.0 million for the three months ended June 30, 2024 and 2023, respectively. Cash paid for amounts in the measurement of operating lease liabilities totaled $8.3 million and $5.2 million for the six months ended June 30, 2024 and 2023, respectively.

The present value of the future annual minimum lease payments under all non-cancellable operating leases as of June 30, 2024 are as follows:

	Operating Leases
	(in thousands)
As of June 30, 2024
2024 (remaining 6 months)	$	8,449
2025		17,155
2026		17,450
2027		14,345
2028		6,675
2029 and thereafter		27,928
		92,002
Less: imputed interest		(18,393)
Operating lease liabilities	$	73,609

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies

Commitments and Contingencies

8. Commitments and Contingencies

Legal Proceedings

The Company is involved in legal matters, including investigations, subpoenas, demands, disputes, litigation, requests for information, and other regulatory or administrative actions or proceedings, including those with respect to intellectual property, testing and test performance, billing, reimbursement, marketing, short seller and media allegations, employment, and other matters.

The Company is responding to ongoing regulatory and governmental investigations, subpoenas and inquiries, and contesting its current legal matters, but cannot provide any assurance as to the ultimate outcome with respect to any of the foregoing. There are many uncertainties associated with these matters. Such matters may cause the Company to incur costly litigation and/or substantial settlement charges, divert management attention, result in adverse judgments, fines, penalties, injunctions or other relief, and may result in loss of customer or investor confidence regardless of their merit or ultimate outcome. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If any of the foregoing were to occur, the Company’s business, financial condition, results of operations, cash flows, prospects, or stock price could be adversely affected.

The Company assesses legal contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. When evaluating legal contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation or other matters may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability. Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  During the periods presented, the Company does not believe there are such matters that will have a material effect on its financial condition.  

Intellectual Property Litigation Matters.

The Company has been involved in two patent litigations against CareDx, Inc. (“CareDx”) in the United States District Court for the District of Delaware (“CareDx Patent Cases”). In the first CareDx Patent Case, CareDx alleged, in a complaint filed jointly with the Board of Trustees of the Leland Stanford Junior University in March 2019 and amended in March 2020, that the Company infringed three patents (the “CareDx Patents”). The complaint sought unspecified damages and injunctive relief. In September 2021, the Court granted the Company’s motion for summary judgment, finding all three CareDx Patents invalid. This finding was affirmed on appeal by the United States Court of Appeals for the Federal Circuit. CareDx’s petition for rehearing by the Federal Circuit, and its subsequent petition for certiorari to the United States Supreme Court, were both denied. In the second CareDx Patent Case, the Company alleged, in suits filed in January 2020 and May 2022, infringement by CareDx of certain of the Company’s patents, seeking unspecified damages and injunctive relief. In January 2024, after trial, the jury returned a verdict in favor of the Company, finding both asserted patents valid and one patent infringed by CareDx. The jury awarded damages to the Company for lost profits and past royalties totaling $96.3 million.  

In January 2020, the Company filed suit against ArcherDX, Inc. (“ArcherDX”) in the United States District Court for the District of Delaware. In January 2021, the Company named an additional Archer DX entity, ArcherDx LLC, and Invitae as defendants. The Company alleged, among other things, that certain ArcherDX products, including the Personalized Cancer Monitoring (“PCM”) test, infringed three of the Company’s patents (the “ArcherDX Case”) and sought unspecified monetary damages and injunctive relief. Following a jury trial in May 2023 and a bench trial in June 2023, all three asserted patents were found to be valid and infringed by ArcherDX and Invitae, and the jury awarded damages totaling $19.35 million to the Company. In November 2023, the Court granted in part the Company’s motion for a permanent injunction against the PCM test, which the defendants have appealed. In February 2024, Invitae and ArcherDX filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey, resulting in an automatic bankruptcy stay in the case.

The Company is the subject of a lawsuit filed against it by Ravgen, Inc. (“Ravgen”) in June 2020 in the United States District Court for the Western District of Texas, alleging infringement of two Ravgen patents and seeking monetary damages and injunctive relief. In January 2024, after trial, the jury returned a verdict of non-willful infringement by the Company and found damages of $57 million. The Company intends to appeal certain of the rulings. In addition, various parties, including the Company, have filed petitions challenging the validity of the asserted patents with the United States Patent and Trademark Office, all of which were instituted for review, and some of which were decided in favor of upholding the challenged claims. The petitions filed by the Company and certain others remain pending.

In October 2020, the Company filed suit against Genosity Inc. (“Genosity”), in the United States District Court for the District of Delaware, alleging that various Genosity products infringe one of the Company’s patents and seeking unspecified monetary damages and injunctive relief. The case has been stayed pending the entry of a final judgment in the ArcherDX Case, in which the subject patent is also asserted. In February 2024, Genosity filed a voluntary Chapter 11 petiion in the U.S. Bankruptcy Court for the District of New Jersey.

The Company is the subject of lawsuits filed against it by Invitae in the United States District Court of the District of Delaware alleging, in complaints filed in May and November of 2021, infringement of three patents and seeking monetary damages and injunctive relief. The parties have filed cross-motions for summary judgment, which motions are currently pending before the Court. In February 2024, subsequent to Invitae’s voluntary Chapter 11 petition described above, the Court granted Invitae’s request to continue the trial, which is now scheduled for September 2025.

The Company filed suits against Inivata, Inc. and Inivata Ltd. (collectively “Inivata”) in the United States District Court for the District of Delaware in January 2021 and December 2022, alleging that certain of Inivata’s oncology products infringe certain of the Company’s patents and seeking unspecified monetary damages and injunctive relief. The two suits have been consolidated. Inivata has filed a motion to dismiss the Company’s complaint with respect to one patent, which motion is currently pending before the Court. In March 2024, the Court stayed the case in light of the Company’s case against NeoGenomics Laboratories, Inc. (“NeoGenomics”), which acquired Inivata in 2021, discussed below.

In July 2023, the Company filed suit against NeoGenomics in the United States District Court for the Middle District of North Carolina (the “District Court”), alleging infringement of certain Natera patents by NeoGenomics’ commercialization of the RaDaR test. The complaint seeks monetary damages and injunctive relief. In December 2023, the Court denied NeoGenomics’ motion to dismiss the complaint, and granted the Company’s motion for preliminary injunction. The injunction went into effect as of January 12, 2024. NeoGenomics filed a motion to modify and stay the injunction, which was denied by the District Court and affirmed on appeal in July 2024 by the Federal Circuit Court of Appeals. NeoGenomics has also filed petitions challenging the validity of both of the asserted patents with the United States Patent and Trademark Office. One of the petitions has been denied.

Other Litigation Matters.

CareDx filed suit against the Company in April 2019 in the United States District Court for the District of Delaware, alleging false advertising, and related claims based on statements describing studies that concern the Company’s technology and CareDx’s technology, seeking unspecified damages and injunctive relief. The Company filed a counterclaim against CareDx in the United States District Court for the District of Delaware, alleging false advertising, unfair competition and deceptive trade practices and seeking unspecified damages and injunctive relief. In March 2022, after trial, the jury returned a verdict that the Company was liable to CareDx and found damages of $44.9 million. The jury also returned a verdict against CareDx, finding that CareDx had engaged in false advertising. In July 2023, the Court granted in part the Company’s motion for judgment as a matter of law requesting that the Court set aside the portions of the jury verdict adverse to the Company, ruling that CareDx is not entitled to any damages. The jury verdict of false advertising by CareDx remains in place. Both parties are appealing.

In May 2021, Guardant. Inc. (“Guardant”) filed suit against the Company in the United States District Court of the Northern District of California alleging false advertising and related claims and seeking unspecified damages and injunctive relief. Also in May 2021, the Company filed suit against Guardant in the Western District of Texas, alleging false advertising and related claims. The Company has voluntarily dismissed its Texas suit against Guardant and has

asserted the claims from the Texas action as counterclaims in the California action, seeking unspecified damages and injunctive relief. In August 2021, Guardant moved to dismiss the Company’s counterclaims, which motion was denied in all material respects. Both parties filed cross-motions for summary judgment, which were granted in part and denied in part. Trial is currently scheduled for November 2024.

In November 2021, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of California, by a patient alleging various causes of action relating to the Company’s patient billing and seeks, among other relief, class certification, injunctive relief, restitution and/or disgorgement, attorneys’ fees, and costs. In May 2023, the Court granted the Company’s motion to dismiss the lawsuit, and the case was dismissed without prejudice. In July 2023, the plaintiff filed analogous claims in the Superior Court of California, County of San Mateo, and subsequently filed an amended claim with an additional plaintiff. Based on the additional plaintiff, the case was transferred back to the United States District Court for the Northern District of California. The parties subsequently agreed that claims brought by the original plaintiff be remanded back to the Superior Court of California, County of San Mateo, and that the action be stayed pending the outcome of the action in the United States District Court for the Northern District of California.

In February 2022, two purported class action lawsuits were filed against the Company in the United States District Court for the Northern District of California. Each suit was filed by an individual patient alleging various causes of action related to the marketing of Panorama and seeking, among other relief, class certification, monetary damages, attorneys’ fees, and costs. These matters have been consolidated. The Company filed a motion to dismiss the consolidated lawsuit, which resulted in the plaintiffs filing an amended complaint in April 2023.

In March 2022, a purported class action lawsuit was filed against the Company and certain of its management in the Supreme Court of the State of New York, County of New York, asserting claims under Sections 11, 12, and 15 of the Securities Act of 1933. The complaint alleges, among other things, that the Company failed to disclose certain information regarding its Panorama test. The complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs. This matter has been dismissed and the claims raised in this matter have been included in the lawsuit discussed below.

A purported class action lawsuit was filed against the Company and certain of its management in the United States District Court for the Western District of Texas, asserting claims under Sections 10(b) and 20(a) of the Securities Act of 1934 and Rule 10b-5 thereunder. The complaint, filed in April 2022 and amended in October 2022 (to include, among others, the claims raised in the lawsuit discussed in the preceding paragraph), alleges, among other things, that the management defendants made materially false or misleading statements, and/or omitted material information that was required to be disclosed, about certain of the Company’s products and operations. The complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs. The Company filed a motion to dismiss this lawsuit, which was granted in part and denied in part.

In each of October 2023 and January 2024, shareholder derivative complaints were filed in the United States District Court for the Western District of Texas and the United States District Court for the District of Delaware, respectively, against the Company as nominal defendant and certain of the Company’s management. Each complaint alleges, among other things, that the management defendants made materially false or misleading statements, and/or omitted material information that was required to be disclosed, about certain of the Company’s products and operations. Each complaint seeks, among other relief, monetary damages, attorneys’ fees, and costs.

Director and Officer Indemnifications

As permitted under Delaware law, and as set forth in the Company’s Amended and Restated Certificate of Incorporation and its Amended and Restated Bylaws, the Company indemnifies its directors, executive officers, other officers, employees and other agents for certain events or occurrences that may arise while in such capacity. The maximum potential future payments the Company could be required to make under this indemnification is unlimited; however, the Company has insurance policies that may limit its exposure and may enable it to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, the Company believes any obligations under this indemnification would

not be material, other than standard retention amounts for securities related claims. However, no assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case the Company may incur substantial liabilities as a result of these indemnification obligations.  

Third-Party Payer Reimbursement Audits

From time to time, the Company receives recoupment requests from third-party payers for alleged overpayments. The Company disagrees with the contentions of pending requests and/or has recorded an estimated reserve for the alleged overpayments if probable and estimable.

Contractual Commitments

The following table sets forth the Company’s material contractual commitments as of June 30, 2024:

Party	Commitments		Expiry Date
	(in thousands)
Laboratory instruments supplier	$	4,404	December 2024
Material suppliers		35,581	December 2024
Application service providers		4,191	March 2026
Cloud platform service provider		36,599	December 2028
Leases (1)		420	March 2029
Other material suppliers		22,323	Various
Total	$	103,518

⁽¹⁾ Represents executed leases which have not commenced. Please refer to Note 7, Leases, for additional information.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2024

Stock-Based Compensation

Stock-Based Compensation

9. Stock-Based Compensation

Stock-Based Compensation Expense

The following tables present the stock-based compensation expense recorded for equity classified awards on selected statements of operations line items for the three and six months ended June 30, 2024 and 2023.

	Three months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	4,046	$	2,838
Research and development		21,957		15,337
Selling, general and administrative		41,408		26,137
Total	$	67,411	$	44,312

	Six months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	7,823	$	5,394
Research and development		42,606		29,977
Selling, general and administrative		81,429		49,418
Total	$	131,858	$	84,789

Additionally, the stock-based compensation expense for liability-classified awards for the three months ended June 30, 2024 and 2023 was $0.2 million and $0.3 million, respectively. The stock-based compensation expense for liability-classified awards for the six months ended June 30, 2024 and 2023 was $0.4 million and $0.5 million, respectively.

Stock Options

The following table summarizes option activity for the six months ended June 30, 2024:

		Weighted-
	Number of	Average
	Shares	Exercise
	Outstanding	Price
	(in thousands, except for per share data)
December 31, 2023	5,501	$	23.65
Options exercised	(1,078)	$	8.02
June 30, 2024	4,423	$	27.45

Restricted Stock Units and Performance-Based Awards

The following table summarizes unvested RSU and performance-based awards for the six months ended June 30, 2024:

		Weighted-
		Average
		Grant Date
	Shares	Fair Value
	(in thousands, except for per share data)
Balance at December 31, 2023	9,248	$	49.50
Granted	4,786	$	68.59
Vested	(2,443)	$	54.93
Cancelled/forfeited	(253)	$	54.27
Balance at June 30, 2024	11,338	$	56.59

The Company grants certain senior-level executives performance stock units which vest based on performance and time-based service conditions, which are referred to herein as performance-based awards. During the six months ended June 30, 2024, the Company granted 0.8 million performance-based awards with an aggregate grant date fair value of $55.0 million. Achievement at 200% of target is deemed probable and as a result, the Company expects to recognize a total of $110.0 million over the requisite service period of which $9.4 million and $16.0 million has been recognized for the three and six months ended June 30, 2024, respectively.

The Company has recognized $22.1 million and $10.2 million in stock-based compensation for performance-based awards for the three months ended June 30, 2024 and 2023, respectively. The Company has recognized $42.8 million and $17.5 million in stock-based compensation for performance-based awards for the six months ended June 30, 2024 and 2023, respectively.

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Debt

6 Months Ended

Jun. 30, 2024

Debt

Debt

10. Debt

Credit Line Agreement

In September 2015, the Company entered into a credit line with UBS (the “Credit Line”) providing for a $50.0 million revolving line of credit which was fully drawn down in 2016. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. The interest rate as of June 30, 2024 was 5.84%. The Credit Line was subsequently increased from $50.0 million to $150.0 million in 2020. In November 2022, the Company drew down $30.0 million from the $100.0 million available from the Credit Line. The Credit Line is secured by a first priority lien and security interest in the Company’s money market and marketable securities held in its managed investment account with UBS. The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate the Credit Line, in its discretion and without cause, at any time. In June 2023, the Credit Line decreased from $150.0 million to $100.0 million. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. As of June 30, 2024, the Company has drawn down a total of $80.0 million and there is $20.0 million remaining and available on the Credit Line.

For both the three months ended June 30, 2024 and 2023, the Company recorded interest expense on the Credit Line of $1.2 million. For both the six months ended June 30, 2024 and 2023, the Company recorded interest expense on the Credit Line of $2.4 million. Interest payments on the Credit Line were made within the same periods. As of June 30, 2024 and December 31, 2023, the total principal amount outstanding with accrued interest was $80.4 million.

Convertible Notes

In April 2020, the Company issued $287.5 million aggregate principal amount of Convertible Notes due 2027 in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election.

The Company received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs. In 2020, the Company used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay its obligations under its credit agreement with OrbiMed Royalty Opportunities II, LP.

The holders of the Convertible Notes may convert all or a portion of their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding February 1, 2027 in multiples of $1,000 principal amount, under any the following circumstances:  

● During any fiscal quarter commencing after September 30, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day.

● During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of that five-day consecutive trading period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day.

● If the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second business day prior to the redemption date.

● Upon the occurrence of certain distributions.

● Upon the occurrence of specified corporate transactions.

The first circumstance has been met as of June 30, 2024. However, there were no conversions for the period ending June 30, 2024.

The Convertible Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share, at an initial conversion rate of 25.7785 shares of common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $38.79 per share of common stock, convertible to 7,411,704 shares of common stock. The conversion rate and corresponding conversion price are subject to adjustment upon the occurrence of certain events but will not be adjusted for any accrued or unpaid interest. The holders of the Convertible Notes who redeem their Convertible Notes in connection with a make-whole fundamental change are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, the holders of the Convertible Notes may require the Company to repurchase for cash all or a portion of their Convertible Notes at a price equal to 100% of the principal amount, plus any accrued and unpaid interest.

The Company may not redeem the Convertible Notes prior to May 2024, and no sinking fund is provided for the Convertible Notes. The Company may redeem for cash all or any portion of the Convertible Notes, at the Company’s option, on or after May 2024, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest.

Upon adoption of ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Heading-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity’s Own Equity, the Company allocated all of the debt discount to long-term debt. The debt discount is amortized to interest expense using the effective interest method, computed to be 2.72%, over the life of the Convertible Notes or approximately its seven-year term. The outstanding Convertible Notes balances as of June 30, 2024 and December 31, 2023 are summarized in the following table:

	June 30, 2024		December 31, 2023
	(in thousands)
Long-Term Debt
Outstanding Principal	$	287,500	$	287,500
Unamortized debt discount and issuance cost		(3,896)		(4,555)
Net carrying amount	$	283,604	$	282,945

The following tables present total interest expense recognized related to the Convertible Notes during the three and six months ended June 30, 2024 and 2023:

	Three months ended
	June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	1,617	$	1,617
Non-cash interest expense
Amortization of debt discount and debt issuance cost		330		322
Total interest expense	$	1,947	$	1,939

	Six months ended June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	3,234	$	3,234
Non-cash interest expense
Amortization of debt discount and debt issuance cost		658		642
Total interest expense	$	3,892	$	3,876

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Income Taxes

6 Months Ended

Jun. 30, 2024

Income Taxes

Income Taxes

11. Income Taxes

During the three months ended June 30, 2024 and 2023, the Company recorded total income tax expense (benefit) of approximately $892,000 and ($282,000), respectively. During the six months ended June 30, 2024 and 2023, the Company recorded total income tax expense (benefit) of approximately $1,320,000 and ($122,000), respectively. The income tax expense is primarily attributable to state income tax and foreign income tax. Due to the Company’s history of cumulative operating losses, the Company concluded that, after considering all the available objective evidence, it is not more likely than not that all of the Company’s net deferred tax assets will be realized. Accordingly, all of the Company’s deferred tax assets, which includes net operating loss carryforwards and tax credits related primarily to research and development, continue to be subjected to a full valuation allowance as of June 30, 2024. The Company will continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets.

Interest and/or penalties related to income tax matters are recognized as a component of income tax expense. As of June 30, 2024 and December 31, 2023, there were no accrued interest and penalties related to uncertain tax positions.

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Net Loss per Share

6 Months Ended

Jun. 30, 2024

Net Loss per Share

Net Loss per Share

12. Net Loss per Share

The Convertible Notes are convertible by the holders as of June 30, 2024. Upon conversion, the Company has the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion. If converted, the fair value of the shares issued to settle the Convertible Notes would exceed the Convertible Note principle by $504.2 million based on the closing price of the Company’s common stock as of June 30, 2024. Since the Company is in a net loss position in the periods presented, the shares which would be issued upon conversion of the Convertible Notes are excluded from the net loss per share calculation as it would have an antidilutive effect. As such, the 7.4 million shares underlying the conversion option of the Convertible Notes have been excluded from the calculation of diluted earnings per share. If converted, the Company does not intend to settle the obligation in cash.

The following table shows total outstanding potentially dilutive shares excluded from the computation of diluted loss per share as their effect would be anti-dilutive, as of June 30, 2024 and 2023:

	June 30,
	2024	2023
	(in thousands)
Options to purchase common stock	4,423	5,427
Performance-based awards and restricted stock units	11,338	9,658
Employee stock purchase plan	41	72
Convertible Notes	7,411	7,411
Total	23,213	22,568

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Subsequent Events

6 Months Ended

Jun. 30, 2024

Subsequent Events

Subsequent Events

13. Subsequent Events

On July 19, 2024, the Company elected to exercise its optional redemption right to redeem all $287.5 million aggregate principal amount of its outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Convertible Notes Indenture (the “Indenture Agreement”) governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes. The date fixed for the

redemption of the Convertible Notes is October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with the Company’s shares of common stock as the settlement method to apply to all conversions of the Convertible Notes. All terms and conditions associated with physical settlement are noted within the terms of the original Indenture Agreement.The conversion rate for holders who convert their Convertible Notes in connection with the Company’s election to redeem the Convertible Notes will be increased by 0.4284 additional shares pursuant to the Indenture Agreement. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of its common stock prior to the Redemption Date. Should all holders elect to convert their Convertible Notes, approximately 7,534,000 shares of common stock would be issued for settlement.

In July 2024, the Company entered into an amendment of the San Carlos lease to extend the term for 60 months to October 2032. The annual rent will be approximately $10.6 million when the extension commences in October 2027.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (37,464)	$ (110,803)	$ (105,063)	$ (247,740)

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Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the Company’s results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date. These financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2024.

Some items in the prior period financial statements were reclassified to conform to the current presentation.

Liquidity Matters

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses for the near future. The Company had a net loss of $105.1 million for the six months ended June 30, 2024 and an accumulated deficit of $2.5 billion as of June 30, 2024. As of June 30, 2024, the Company had $796.8 million in cash, cash equivalents, and restricted cash, $90.3 million in marketable securities, an $80.4 million outstanding balance on its Credit Line (as defined in Note 10, Debt) including accrued interest and $287.5 million of outstanding principal on its 2.25% Convertible Senior Notes (the “Convertible Notes”). The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral for its Credit Line. As of June 30, 2024, the Company had $20.0 million remaining and available on its Credit Line.

While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations and business plans. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings.

The Company continues to invest in the development and commercialization of its existing and future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders will experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available when necessary, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations.

On July 19, 2024, the Company announced its decision to redeem all of its outstanding 2.25% Convertible Senior Notes due 2027. The redemption is scheduled for October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with shares of its common stock as the settlement method to apply to all conversions of the Convertible Notes. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of the Company’s common stock prior to the Redemption Date. As a result, the Company does not expect that its decision to redeem the Convertible Notes will have a material effect on its liquidity.

In September 2023, the Company completed an underwritten equity offering and sold 4,550,000 shares of its common stock at a price of $55 per share to the public. Before estimated offering expenses of $0.4 million, the Company received proceeds of approximately $235.8 million net of the underwriting discount.

On September 10, 2021, the Company entered into an agreement with a third party for an asset acquisition where the acquired asset was in-process research and development primarily in exchange for an equity consideration payment. In addition, pursuant to the agreement, certain employees of the third party became employees of the Company. The third party was a biotechnology company focused on oncology. The total upfront acquisition consideration amounts to $35.6 million composed of the issuance of 276,346 shares of the Company's common stock with a fair value of $30.9 million, approximately $3.9 million of cash consideration, assumed net liabilities of $0.2 million, as well as $0.6 million of acquisition related legal and accounting costs directly attributable to the acquisition of the asset. The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified in-process research and development asset (“IPR&D”) thus satisfying the requirements of the screen test in Accounting Standards Update (“ASU”) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of Business. The estimated fair value of the acquired workforce was not significant. The Company concluded the acquired IPR&D has no alternative-future use and accordingly expensed approximately $35.6 million, on the day the transaction closed as research and development expense, which is reflected in its consolidated statement of operations.

Further, additional consideration aggregating up to approximately $35.0 million was estimated to be paid via issuance of an estimated 269,547 additional shares of the Company’s common stock, consistent with the registration statement filed with the SEC on September 10, 2021, upon achievement of defined milestones relating to product development, commercial launch and continued employment of certain selling shareholders, each of which was revalued at each reporting date and amount of compensation expense was adjusted accordingly and reported in research and development expenses. In November 2022, the terms of the payment for any remaining consideration were modified, resulting in $10.0 million of consideration paid in December 2022 and $15.0 million of consideration paid in March 2023, with such consideration primarily consisting of the Company’s common stock.

Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2024.

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiaries. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. The Company established a subsidiary that operates in Canada following the acquisition of the IPR&D asset. All intercompany balances and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) in the United States requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, the average useful life for property and equipment including impairment estimates, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of options, income tax uncertainties, and the expected consideration to be received from contracts with customers, insurance payors, and patients. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements.

Investments

Investments

Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, irrespective of maturity date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.

The Company classifies its investments as Level 1 or 2 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. The Company holds Level 2 securities which are initially valued at the transaction price and subsequently valued by a third-party service provider using inputs other than quoted prices that are observable either directly or indirectly, such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of these holdings.  

Available-for-sale debt securities. The amended guidance from ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires the measurement of expected credit

losses for available-for-sale debt securities held at the reporting date over the remaining life based on historical experience, current conditions, and reasonable and supportable forecasts. The Company evaluated its investment portfolio under the available-for-sale debt securities impairment model guidance and determined the Company’s investment portfolio is composed of low-risk, investment grade securities and thus has not recorded an expected credit loss for its investment portfolio. Further, gross unrealized losses on available for sale securities were not material at June 30, 2024.

Accounts Receivable

Accounts Receivable

Trade accounts receivable and other receivables. The allowance for doubtful accounts for trade accounts receivable is based on the Company’s assessment of the collectability of accounts related to its clinics and laboratory partner customers. The Company regularly reviews the allowance by considering factors such as historical experience, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. See Note 6, Balance Sheet Components, for a roll-forward of the allowance for doubtful accounts related to trade accounts receivable for three months and six months ended June 30, 2024 and 2023. The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) and applies a constraint to the estimated variable consideration such that it is not probable that a significant reversal will occur. When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds. After applying the ASC 606 constraint, the Company assessed for credit losses and allowance for doubtful accounts and determined an incremental credit loss was not needed given the quality of the insurance payors from whom such receivables are expected to be collectible and the relatively short duration over which the majority of receivables are collected. Accordingly, the Company currently does not have an incremental credit loss reserve nor allowance for doubtful accounts against accounts receivable for insurance and patient payors due to the average selling price calculations which incorporate these risks as net receivables are recorded.

Inventory

Inventory

Inventory is recorded at the lower of cost or net realizable value, determined on a first-in, first-out basis. Inventory consists entirely of supplies, which the Company consumes when providing its test reports, and therefore, the Company does not maintain any finished goods inventory. The Company enters into inventory purchases commitments so that it can meet future delivery schedules based on forecasted demand for its tests.

The Company uses judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. A write down of specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period is first recognized by using a number of factors including product expiration dates and scrapped inventory. Any write-down of inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded to cost of revenue on our consolidated statements of operations. The Company makes assumptions about future demand, market conditions and the release of new products that may supersede older products. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs may be required.

Other Assets

Other Assets

In January 2024, the Company acquired from Invitae Corp. (“Invitae”) certain assets relating to Invitae’s non-invasive prenatal screening and carrier screening business. The transaction price of $10.5 million consisted of $10.0 million in upfront payment costs and approximately $0.5 million of other transaction costs which were capitalized as intangible assets over an estimated useful life of ten years. An additional payment of up to $42.5 million may be made should the Company achieve certain customer volume retention targets and based on certain legal outcomes.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities and foreign currency translation adjustments.

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	(2,192)	$	(11,798)	$	(3,085)	$	(16,362)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment		834		2,595		1,727		7,159
Ending balance	$	(1,358)	$	(9,203)	$	(1,358)	$	(9,203)

The change in net unrealized loss on available-for-sale securities is due to increased market volatility. The Company has assessed the unrealized loss position for available-for-sale securities and determined that an allowance for credit loss was not necessary.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue under, ASC 606, using the following five step process:

● Identification of a contract, or contracts, with a customer;

● Identification of the performance obligations in the contract;

● Determination of the transaction price;

● Allocation of the transaction price to the performance obligations in the contract; and

● Revenue recognition when, or as, the performance obligations are satisfied.

The Company uses the most likely amount method of estimating variable consideration. The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable, and is primarily based on historical cash collections for tests delivered, as adjusted for current expectations. Current expectations of cash collections factor in changes in reimbursement rate trends, past events not expected to recur, and future known changes such as anticipated contractual pricing changes or changes to insurance coverage.  For insurance carriers and product types with similar reimbursement characteristics, the Company uses a portfolio approach to estimate variable consideration. The Company also applies a constraint to the estimated variable consideration when it assesses whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods.

When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds.

See Note 3, Revenue Recognition, for detailed discussions of product revenues, licensing and other revenues, and how the five steps described above are applied.

Fair Value

Fair Value

The Company discloses the fair value of financial instruments for financial assets and liabilities for which the value is practicable to estimate. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Related Party

Related Party

On December 6, 2021, the Company participated along with certain other investors in the series B financing of MyOme, Inc. (“MyOme”), and purchased preferred shares and warrants in exchange for a cash payment of approximately $4.0 million. The Company does not hold a seat on MyOme’s board of directors. The Company’s investment in MyOme is recorded at cost and no impairment was identified as of June 30, 2024. The following are the Company’s related persons and the basis of each such related person’s relationship with MyOme:

● Matthew Rabinowitz, the Company’s executive chairman and co-founder, is the chairman of the board and founder of MyOme, and a beneficial holder of approximately 26.5% of the outstanding shares of MyOme on a fully dilutive basis;

● Jonathan Sheena, the Company’s co-founder and a member of the Company’s board of directors, is a stockholder and a member of the board of directors of MyOme;

● Daniel Rabinowitz, the Company’s Secretary and Chief Legal Officer, is a stockholder of MyOme; and

● Roelof Botha, the Lead Independent Director of the Company’s board of directors, is a managing member of Sequoia Capital. Certain funds affiliated with Sequoia Capital also participated in MyOme’s series B financing.

None of the related party investments in MyOme by our executives and directors noted above were at the behest of the Company nor funded by the Company.

In February 2024, the Company entered into a collaboration and commercialization agreement (the “Collaboration Agreement”) with MyOme pursuant to which the parties will partner to offer certain genetic testing services to be developed and funded solely by MyOme and overseen by a joint steering committee. The Company will assist MyOme with commercial activities. In connection with the Collaboration Agreement, the Company received a 10-year warrant to purchase 3,058,485 shares of MyOme's common stock at an exercise price of $0.25 per share, which will vest upon a MyOme liquidity event (as such terms are defined in MyOme's certificate of incorporation). The warrants were valued using the Black-Scholes valuation model on the date of acquisition and are accounted for using the measurement alternative. No impairment was identified as of June 30, 2024. The warrants have been included within other assets and deferred revenue, long-term portion and other liabilities, which will be recognized as a reduction of selling and marketing expense upon commercialization and sale of the products contemplated under the Collaboration Agreement. Subject to the Company's achievement of certain commercialization milestones, the Company may receive additional warrants to purchase MyOme’s Series B Preferred Stock. To the extent the genetic testing services are successfully commercialized, the Company will owe certain royalty payments to MyOme. Should the Company exercise all its MyOme common stock warrants, the Company would hold an accumulated 12.4% of MyOme on a fully diluted basis.

Risk and Uncertainties

Risk and Uncertainties

Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents, and restricted cash, accounts receivable and investments. The Company limits its exposure to loss by placing its cash in financial institutions with high credit ratings. The Company's cash may consist of deposits held with banks that may at times exceed federally insured limits of $250,000 per customer. The Company performs evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution.

For the three and six months ended June 30, 2024, and 2023, there were no customers exceeding 10% of total revenues on an individual basis. As of June 30, 2024 and December 31, 2023, there were no customers with an outstanding balance exceeding 10% of net accounts receivable. 

For the three months ended June 30, 2024 and 2023, approximately 10.3% and 12.5%, respectively, of total revenue were paid by Medicare on behalf of multiple customers. For the six months ended June 30, 2024 and 2023, approximately 10.9% and 13.2%, respectively, of total revenue were paid by Medicare on behalf of multiple customers.

As of June 30, 2024 and December 31, 2023, approximately 8.8% and 10.2%, respectively, of accounts receivable are expected to be paid by Medicare on behalf of multiple customers.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed below, the Company believes that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

New Accounting Pronouncements Not Yet Adopted

In March 2020, ASU 2020-04, Reference Rate Reform (Topic 848) was issued which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. ASU 2022-06, or Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company does not expect adoption of this standard to have a material impact on its consolidated financial statements.

In November 2023, ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In December 2023, ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, was issued, which requires enhanced disclosures in connection with an entity's effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard will be effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

Schedule of Accumulated Other Comprehensive Income (Loss)

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	(2,192)	$	(11,798)	$	(3,085)	$	(16,362)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment		834		2,595		1,727		7,159
Ending balance	$	(1,358)	$	(9,203)	$	(1,358)	$	(9,203)

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2024

Revenue Recognition

Schedule of disaggregation of revenues by payer types

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
Insurance carriers	$	384,128	$	226,521	$	725,156	$	436,899
Laboratory and other partners		22,254		27,449		42,530		50,254
Patients		6,969		7,434		13,406		16,007
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

Schedule of total revenue by geographic area

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands)
United States	$	404,872	$	253,296	$	764,285	$	486,550
Americas, excluding U.S.		1,601		1,206		3,082		2,364
Europe, Middle East, India, Africa		5,439		5,620		10,617		10,816
Asia Pacific and Other		1,439		1,282		3,108		3,430
Total revenues	$	413,351	$	261,404	$	781,092	$	503,160

Schedule of beginning and ending balances of accounts receivable and deferred revenues

	Balance at
	June 30,		December 31,
	2024		2023
	(in thousands)
Assets:
Accounts receivable, net	$	335,936	$	278,289
Liabilities:
Deferred revenue, current portion	$	18,367	$	16,612
Deferred revenue, long-term portion		18,416		19,128
Total deferred revenues	$	36,783	$	35,740

Schedule of changes in the balance of deferred revenues

	Balance at
	June 30,
	2024			2023
	(in thousands)
Beginning balance	$	35,740	$	30,778
Increase in deferred revenues		14,826		17,402
Revenue recognized during the period that was included in deferred revenues at the beginning of the period		(9,646)		(7,521)
Revenue recognized from performance obligations satisfied within the same period		(4,137)		(3,513)
Ending balance	$	36,783	$	37,146

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2024

Fair Value Measurements

Summary of financial assets and liabilities measured on recurring basis

	June 30, 2024								December 31, 2023
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash, cash equivalents and restricted cash (1)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities		58,814		—		—		58,814		200,418		—		—		200,418
Municipal securities		—		31,485		—		31,485		—		36,464		—		36,464
Total financial assets	$	855,612	$	31,485	$	—	$	887,097	$	842,513	$	36,464	$	—	$	878,977

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2024

Financial Instruments

Schedule of available-for-sale securities

	June 30, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Cash, cash equivalents and restricted cash (2)	$	796,798	$	—	$	—	$	796,798	$	642,095	$	—	$	—	$	642,095
U.S. Treasury securities (1)		58,923		—		(109)		58,814		201,522		14		(1,118)		200,418
Municipal securities (1)		32,556		—		(1,071)		31,485		38,091		—		(1,627)		36,464
Total	$	888,277	$	—	$	(1,180)	$	887,097	$	881,708	$	14	$	(2,745)	$	878,977
Classified as:
Cash, cash equivalents and restricted cash (2)								796,798								642,095
Short-term investments								90,299								236,882
Total							$	887,097							$	878,977

(1) Per the Company’s investment policy, all debt securities are classified as short-term investments irrespective of holding period.  

(2) Cash equivalents includes liquid demand deposits, and money market funds.

Schedule of debt securities available-for-sale in unrealized loss position

		Less Than 12 Months				12 Months or Longer				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
U.S. Treasury securities		$	23,923	$	—	$	34,891	$	(109)	$	58,814	$	(109)
Municipal securities			—		—		31,485		(1,071)		31,485		(1,071)
Total		$	23,923	$	—	$	66,376	$	(1,180)	$	90,299	$	(1,180)

Summarized portfolio of available-for-sale securities by contractual maturity

	June 30, 2024
	Amortized Cost		Fair Value
	(in thousands)
Less than or equal to one year	$	75,440	$	75,003
Greater than one year but less than five years		16,039		15,296
Total	$	91,479	$	90,299

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2024

Balance Sheet Components

Schedule of allowances for credit losses related to trade accounts receivable and other receivables

The following is a roll-forward of the allowances for doubtful accounts related to trade accounts receivable for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended
	June 30,
	2024			2023
		(in thousands)
Beginning balance	$	7,252	$	5,134
(Reversal of) Provision for doubtful accounts		(185)		446
Write-offs		(46)		—
Total	$	7,021	$	5,580

	Six Months Ended
	June 30,
	2024		2023
		(in thousands)
Beginning balance	$	6,481	$	3,830
Provision for doubtful accounts		744		1,750
Write-offs		(204)		—
Total	$	7,021	$	5,580

Schedule of property and equipment

		June 30,		December 31,
	Useful Life	2024		2023
		(in thousands)
Machinery and equipment	3-5 years	$	94,785	$	85,626
Computer equipment	3 years		3,040		1,850
Purchased and capitalized software held for internal use	3 years		10,672		11,636
Leasehold improvements	Lesser of useful life or lease term		47,666		38,999
Construction-in-process			41,577		29,392
			197,740		167,503
Less: Accumulated depreciation and amortization			(64,460)		(56,293)
Total Property and Equipment, net		$	133,280	$	111,210

Schedule of other accrued liabilities

	June 30,		December 31,
	2024		2023
	(in thousands)
Reserves for refunds to insurance carriers	$	16,465	$	23,245
Accrued charges for third-party testing		10,574		14,823
Testing and laboratory materials from suppliers		14,142		11,229
Marketing and corporate affairs		11,792		10,085
Short term advances		13,899		—
Legal, audit and consulting fees		31,979		43,897
Accrued shipping charges		1,800		3,646
Sales and income tax payable		4,053		3,731
Accrued third-party service fees		8,173		7,111
Clinical trials and studies		7,502		12,126
Operating lease liabilities, current portion		12,384		11,621
Property and equipment purchases		5,330		4,316
Other accrued interest		1,078		1,078
Other accrued expenses		2,060		2,497
Total other accrued liabilities	$	141,231	$	149,405

Summary of reserve balance and activities for refunds to insurance carriers

	June 30,
	2024		2023
	(in thousands)
Beginning balance	$	23,245	$	18,948
Additional reserves		1,065		5,148
Refunds to carriers		(3,095)		(963)
Reserves released to revenue		(4,750)		(7,653)
Ending balance	$	16,465	$	15,480

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Leases (Tables)

6 Months Ended

Jun. 30, 2024

Leases.

Schedule of lease liabilities

	June 30,		December 31,
	2024		2023
		(in thousands)
Operating lease liabilities, current portion included in other accrued liabilities	$	12,384	$	11,621
Operating lease liabilities, long-term portion		61,225		67,025
Total operating lease liabilities	$	73,609	$	78,646

Schedule of annual minimum lease payments

	Operating Leases
	(in thousands)
As of June 30, 2024
2024 (remaining 6 months)	$	8,449
2025		17,155
2026		17,450
2027		14,345
2028		6,675
2029 and thereafter		27,928
		92,002
Less: imputed interest		(18,393)
Operating lease liabilities	$	73,609

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies

Schedule of material contractual commitments

Contractual Commitments

The following table sets forth the Company’s material contractual commitments as of June 30, 2024:

Party	Commitments		Expiry Date
	(in thousands)
Laboratory instruments supplier	$	4,404	December 2024
Material suppliers		35,581	December 2024
Application service providers		4,191	March 2026
Cloud platform service provider		36,599	December 2028
Leases (1)		420	March 2029
Other material suppliers		22,323	Various
Total	$	103,518

⁽¹⁾ Represents executed leases which have not commenced. Please refer to Note 7, Leases, for additional information.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2024

Stock-Based Compensation

Summary of stock-based compensation expenses

The following tables present the stock-based compensation expense recorded for equity classified awards on selected statements of operations line items for the three and six months ended June 30, 2024 and 2023.

	Three months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	4,046	$	2,838
Research and development		21,957		15,337
Selling, general and administrative		41,408		26,137
Total	$	67,411	$	44,312

	Six months ended June 30,
		2024		2023
	(in thousands)
Cost of revenues	$	7,823	$	5,394
Research and development		42,606		29,977
Selling, general and administrative		81,429		49,418
Total	$	131,858	$	84,789

Summary of stock option activity

		Weighted-
	Number of	Average
	Shares	Exercise
	Outstanding	Price
	(in thousands, except for per share data)
December 31, 2023	5,501	$	23.65
Options exercised	(1,078)	$	8.02
June 30, 2024	4,423	$	27.45

RSU and performance-based awards

		Weighted-
		Average
		Grant Date
	Shares	Fair Value
	(in thousands, except for per share data)
Balance at December 31, 2023	9,248	$	49.50
Granted	4,786	$	68.59
Vested	(2,443)	$	54.93
Cancelled/forfeited	(253)	$	54.27
Balance at June 30, 2024	11,338	$	56.59

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Debt (Tables)

6 Months Ended

Jun. 30, 2024

Debt

Schedule of outstanding Convertible Notes

	June 30, 2024		December 31, 2023
	(in thousands)
Long-Term Debt
Outstanding Principal	$	287,500	$	287,500
Unamortized debt discount and issuance cost		(3,896)		(4,555)
Net carrying amount	$	283,604	$	282,945

Summary of interest expense

	Three months ended
	June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	1,617	$	1,617
Non-cash interest expense
Amortization of debt discount and debt issuance cost		330		322
Total interest expense	$	1,947	$	1,939

	Six months ended June 30,
	2024		2023
	(in thousands)
Cash interest expense
Contractual interest expense	$	3,234	$	3,234
Non-cash interest expense
Amortization of debt discount and debt issuance cost		658		642
Total interest expense	$	3,892	$	3,876

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2024

Net Loss per Share

Total outstanding potentially dilutive shares

	June 30,
	2024	2023
	(in thousands)
Options to purchase common stock	4,423	5,427
Performance-based awards and restricted stock units	11,338	9,658
Employee stock purchase plan	41	72
Convertible Notes	7,411	7,411
Total	23,213	22,568

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Description of Business (Details)	6 Months Ended
	Jun. 30, 2024 segment
Description of Business
Number of operating segments	1

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Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended		6 Months Ended
	Jul. 19, 2024	Apr. 30, 2020	Sep. 30, 2023	Apr. 30, 2020	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023	Dec. 31, 2022
Policies
Net Income (Loss)					$ (37,464)	$ (110,803)	$ (105,063)	$ (247,740)
Accumulated deficit					2,482,499		2,482,499		$ 2,377,436
Cash, cash equivalents and restricted cash					796,798	$ 381,113	796,798	$ 381,113	642,095	$ 466,091
Marketable securities					90,299		90,299		236,882
Short-term Credit Line, outstanding balance					80,389		80,389		$ 80,402
Collateral amount					150,000		150,000
Remaining borrowing capacity					$ 20,000		$ 20,000
Common stock, shares issued					123,365,000		123,365,000		119,581,000
Payment of offering expenses			$ 400
Proceeds from issuance of common stock			$ 235,800
Convertible Notes
Policies
Outstanding principal balance		$ 287,500		$ 287,500	$ 287,500		$ 287,500
Per annum interest rate (as a percent)				2.25%			2.25%
Percentage of principal amount converted		100.00%
Convertible Notes | Subsequent event
Policies
Per annum interest rate (as a percent)	2.25%
Percentage of principal amount converted	100.00%
Equity offering
Policies
Common stock, shares issued			4,550,000
Stock issued (in dollars per share)			$ 55

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Summary of Significant Accounting Policies - Other Assets (Details) - USD ($) $ in Millions		1 Months Ended
	Sep. 10, 2021	Jan. 31, 2024	Mar. 31, 2023	Dec. 31, 2022
In-process research and development acquisition
Asset Acquisition [Line Items]
Asset acquisition, consideration	$ 35.6		$ 15.0	$ 10.0
Issuance of common stock	276,346
Value of common stock issued	$ 30.9
Cash consideration	3.9
Net liabilities assumed	0.2
Acquisition related costs	0.6
Value of additional shares potentially issuable	$ 35.0
Number of additional shares potentially issuable	269,547
Assets acquired from Invitae
Asset Acquisition [Line Items]
Asset acquisition, consideration		$ 10.5
Cash consideration		10.0
Potential milestone payments		42.5
Acquisition related costs		$ 0.5
Estimated useful life (in years)		10 years

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Summary of Significant Accounting Policies - AOCIL (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (2,192)	$ (11,798)	$ (3,085)	$ (16,362)
Ending balance	(1,358)	(9,203)	(1,358)	(9,203)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Increase (decrease) in other comprehensive loss	$ 834	$ 2,595	$ 1,727	$ 7,159

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Summary of Significant Accounting Policies - Related Party (Details) - MyOme, Inc. - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	6 Months Ended
	Feb. 29, 2024	Jun. 30, 2024	Dec. 06, 2021
Related Party Transaction [Line Items]
Investment in equity securities without readily determinable fair value			$ 4.0
Equity securities without readily determinable fair value, impairment loss		$ 0.0
Warrants term	10 years
Warrants convertible into number of common stock shares	3,058,485
Warrants exercise price (in dollars per share)	$ 0.25
Warrants impairment		$ 0.0
Ownership percentage if warrants are exercised	12.40%
Executive chairman
Related Party Transaction [Line Items]
Ownership percentage			26.50%

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Summary of Significant Accounting Policies - Risks and Uncertainties (Details) - Customer - customer	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Sales
Risk and Uncertainties
Number of customers exceeding 10% of benchmark	0	0	0	0
Sales | Medicare
Risk and Uncertainties
Concentration risk (as a percent)	10.30%	12.50%	10.90%	13.20%
Accounts receivable
Risk and Uncertainties
Number of customers exceeding 10% of benchmark			0		0
Accounts receivable | Medicare
Risk and Uncertainties
Concentration risk (as a percent)			8.80%		10.20%

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Revenue Recognition (Details) $ / shares in Units, $ in Thousands	1 Months Ended			3 Months Ended			6 Months Ended
	Mar. 31, 2023 USD ($) item	Aug. 31, 2019	Feb. 28, 2019 USD ($)	Jun. 30, 2024 USD ($) $ / shares	Jun. 30, 2023 USD ($) $ / shares	Mar. 31, 2023 USD ($)	Jun. 30, 2024 USD ($) $ / shares	Jun. 30, 2023 USD ($) $ / shares	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Jun. 30, 2019 USD ($)
Allowances on accounts receivable									$ 1,300
Other assets				$ 29,311			$ 29,311		15,403
Deferred revenue				36,783	$ 37,146		36,783	$ 37,146	35,740	$ 30,778
Disruption at Change Healthcare
Allowances on accounts receivable				16,600			$ 16,600
Product
Approximate percentage of revenue collected within 9 months							90.00%
Billing collection period (in months)							9 months
Extended billing collection period (in months)							6 months
Increased (decreased) revenues				1,700	800		$ 3,800	6,500
(Increased) decreased net loss				$ 1,700	$ 800		$ 3,800	$ 6,500
(Increased) decreased net loss per share | $ / shares				$ 0.01	$ 0.01		$ 0.03	$ 0.06
Tests delivered in prior periods that were fully collected
Increased (decreased) revenues				$ 39,900	$ 3,400		$ 73,700	$ (5,800)
(Increased) decreased net loss				$ 39,900	$ 3,400		$ 73,700	$ (5,800)
(Increased) decreased net loss per share | $ / shares				$ 0.32	$ 0.03		$ 0.60	$ (0.05)
Tests delivered in prior periods that were fully collected | Disruption at Change Healthcare
Allowances on accounts receivable				$ 1,300			$ 1,300
Amounts not refunded to insurance carriers
Increased (decreased) revenues				1,900			4,100
(Increased) decreased net loss				$ 1,900			$ 4,100
(Increased) decreased net loss per share | $ / shares				$ 0.02			$ 0.03
BGI Genomics
Revenue recognized			$ 44,000
Agreement term			10 years
Revenue, remaining performance obligation			$ 6,000
Transaction price			50,000
Contract asset				$ 4,500			$ 4,500
Other assets				3,800			3,800
Prepaid expenses and other current assets				600			600
Prepaid royalties			$ 20,000
BGI Genomics | License and related development services
Number of performance obligations | item	2
Revenue, remaining performance obligation	$ 24,000					$ 24,000
BGI Genomics | Sequencing services
Other assets											$ 6,000
BGI Genomics | Sequencing products
Other assets											4,000
BGI Genomics | Sequencing products and services
Other assets											$ 10,000
BGI Genomics | Oncology assay interpretation services
Revenue recognized								$ 600
Revenue, remaining performance obligation									$ 20,000
Deferred revenue				18,900	$ 200		18,900	200
BGI Genomics | Equipment and Services
Equipment and services received				400	1,000		400	2,600
Foundation Medicine ("FMI")
Revenue recognized							24,300
Agreement term		5 years
Automatic renewals, successive period thereafter		1 year
Revenue, remaining performance obligation				7,700			7,700
Transaction price				32,000			32,000
Prepaid royalties				5,000			5,000
Foundation Medicine ("FMI") | Oncology assay interpretation services
Revenue recognized				200	$ 100		200	$ 400
Revenue, remaining performance obligation				5,000			5,000
Deferred revenue				$ 3,000			$ 3,000
Foundation Medicine ("FMI") | Oncology products
Revenue recognized						200
Revenue, remaining performance obligation	$ 19,300					$ 19,300

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Revenue Recognition - Disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenues	$ 413,351	$ 261,404	$ 781,092	$ 503,160
United States
Disaggregation of Revenue [Line Items]
Total revenues	404,872	253,296	764,285	486,550
Americas, excluding U.S.
Disaggregation of Revenue [Line Items]
Total revenues	1,601	1,206	3,082	2,364
Europe, Middle East, India, Africa
Disaggregation of Revenue [Line Items]
Total revenues	5,439	5,620	10,617	10,816
Asia Pacific and Other
Disaggregation of Revenue [Line Items]
Total revenues	1,439	1,282	3,108	3,430
Insurance carriers
Disaggregation of Revenue [Line Items]
Total revenues	384,128	226,521	725,156	436,899
Laboratory partners
Disaggregation of Revenue [Line Items]
Total revenues	22,254	27,449	42,530	50,254
Patients
Disaggregation of Revenue [Line Items]
Total revenues	6,969	7,434	13,406	16,007
Licensing and other
Disaggregation of Revenue [Line Items]
Total revenues	$ 1,987	$ 3,148	$ 5,056	$ 7,107

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Revenue Recognition - Accounts Receivable and Deferred Revenue (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023	Jun. 30, 2023	Dec. 31, 2022
Assets
Accounts receivable, net	$ 335,936	$ 278,289
Liabilities:
Deferred revenue, current portion	18,367	16,612
Deferred revenue, long-term portion	18,416	19,128
Total deferred revenues	$ 36,783	$ 35,740	$ 37,146	$ 30,778

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Revenue Recognition - Changes in Balance of Deferred Revenues (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Revenue Recognition
Beginning balance	$ 35,740	$ 30,778
Increase in deferred revenues	14,826	17,402
Revenue recognized during the period that was included in deferred revenues at the beginning of the period	(9,646)	(7,521)
Revenue recognized from performance obligations satisfied within the same period	(4,137)	(3,513)
Ending Balance	$ 36,783	$ 37,146

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Revenue Recognition - Deferred Revenues (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Revenue recognized during the period that was included in deferred revenues at the beginning of the period	$ 9,646	$ 7,521
Deferred revenue, current portion	18,367		$ 16,612
Deferred revenue, Long-term	18,416		$ 19,128
BGI Genomics
Deferred revenue, current portion	500
Deferred revenue, Long-term	18,400
Foundation Medicine ("FMI")
Deferred revenue, current portion	3,000
BGI Genomics and Foundation Medicine ("FMI")
Revenue recognized during the period that was included in deferred revenues at the beginning of the period	100
Genetic testing services
Revenue recognized during the period that was included in deferred revenues at the beginning of the period	9,500
Deferred revenue, current portion	$ 14,800

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Fair Value Measurements (Details) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended	21 Months Ended
	Oct. 31, 2023	Jun. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Line Of Credit-UBS
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Line of credit facility, fair value of amount outstanding		$ 80,400		$ 80,400
Line Of Credit-UBS | SOFR
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Spread on interest rate (as a percent)	0.50%	0.50%	1.21%
Level 2 | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of long-term debt		$ 800,700		491,800
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		887,097		878,977
Recurring | Cash, cash equivalents, and restricted cash
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		796,798		642,095
Recurring | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		58,814		200,418
Recurring | Municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		31,485		36,464
Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		855,612		842,513
Recurring | Level 1 | Cash, cash equivalents, and restricted cash
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		796,798		642,095
Recurring | Level 1 | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		58,814		200,418
Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		31,485		36,464
Recurring | Level 2 | Municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets		$ 31,485		$ 36,464

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Financial Instruments (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2024 USD ($) position	Dec. 31, 2023 USD ($)	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract]
Amortized Cost	$ 888,277	$ 881,708
Gross Unrealized Gain		14
Gross Unrealized Loss	(1,180)	(2,745)
Estimated Fair Value	887,097	878,977
Cash, cash equivalents and restricted cash	796,798	642,095	$ 381,113	$ 466,091
Short-term investments	90,299	236,882
Securities Sold	$ 0
Number of investments, unrealized loss position | position	15
Credit loss reserve	$ 0
Less than 12 Months, Fair value	23,923
12 Months or Longer, Fair value	66,376
Fair value	90,299
12 Months or Longer, Unrealized loss	(1,180)
Unrealized loss	(1,180)
Amortized Cost
Less than or equal to one year	75,440
Greater than one year but less than five years	16,039
Total	91,479
Fair Value
Less than or equal to one year	75,003
Greater than one year but less than five years	15,296
Total	90,299
Cash, cash equivalents, and restricted cash
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract]
Amortized Cost	796,798	642,095
Estimated Fair Value	796,798	642,095
U.S. Treasury securities
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract]
Amortized Cost	58,923	201,522
Gross Unrealized Gain		14
Gross Unrealized Loss	(109)	(1,118)
Estimated Fair Value	58,814	200,418
Less than 12 Months, Fair value	23,923
12 Months or Longer, Fair value	34,891
Fair value	58,814
12 Months or Longer, Unrealized loss	(109)
Unrealized loss	(109)
Municipal securities
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract]
Amortized Cost	32,556	38,091
Gross Unrealized Loss	(1,071)	(1,627)
Estimated Fair Value	31,485	$ 36,464
12 Months or Longer, Fair value	31,485
Fair value	31,485
12 Months or Longer, Unrealized loss	(1,071)
Unrealized loss	$ (1,071)

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Balance Sheet Components - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Balance Sheet Components
Beginning balance	$ 7,252	$ 5,134	$ 6,481	$ 3,830
(Reversal of) Provision for doubtful accounts	(185)	446	744	1,750
Write-offs	(46)		(204)
Total	$ 7,021	$ 5,580	$ 7,021	$ 5,580

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Balance Sheet Components - Property and Equipment, net (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Property and Equipment, net
Property and equipment, gross	$ 197,740		$ 167,503
Less: Accumulated depreciation and amortization	(64,460)		(56,293)
Total Property and Equipment, net	133,280		111,210
Depreciation expense	13,300	$ 10,200
Impairment charge	0
Equipment pledged	150,000
Machinery and equipment
Property and Equipment, net
Property and equipment, gross	94,785		85,626
Computer equipment
Property and Equipment, net
Property and equipment, gross	$ 3,040		1,850
Useful Life	3 years
Software held for internal use
Property and Equipment, net
Property and equipment, gross	$ 10,672		11,636
Useful Life	3 years
Leasehold improvements
Property and Equipment, net
Property and equipment, gross	$ 47,666		38,999
Construction-in-process
Property and Equipment, net
Property and equipment, gross	$ 41,577		$ 29,392
Minimum | Machinery and equipment
Property and Equipment, net
Useful Life	3 years
Maximum | Machinery and equipment
Property and Equipment, net
Useful Life	5 years

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Balance Sheet Components - Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023	Jun. 30, 2023	Dec. 31, 2022
Balance Sheet Components
Reserves for refunds to insurance carriers	$ 16,465	$ 23,245	$ 15,480	$ 18,948
Accrued charges for third-party testing	10,574	14,823
Testing and laboratory materials from suppliers	14,142	11,229
Marketing and corporate affairs	11,792	10,085
Short term advances	13,899
Legal, audit and consulting fees	31,979	43,897
Accrued shipping charges	1,800	3,646
Sales and income tax payable	4,053	3,731
Accrued third-party service fees	8,173	7,111
Clinical trials and studies	7,502	12,126
Operating lease liabilities, current portion	12,384	11,621
Property and equipment purchases	5,330	4,316
Other accrued interest	1,078	1,078
Other accrued expenses	2,060	2,497
Total other accrued liabilities	$ 141,231	$ 149,405

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Balance Sheet Components - Reserve Balance and Activities for Refunds (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Balance Sheet Components
Beginning balance	$ 23,245	$ 18,948
Additional reserves	1,065	5,148
Refunds to carriers	(3,095)	(963)
Reserves released to revenue	(4,750)	(7,653)
Ending balance	16,465	$ 15,480
Short term advances	$ 13,900

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Leases (Details) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended
	Oct. 31, 2027 USD ($)	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2021 USD ($) ft²	Jun. 30, 2024 USD ($) ft²	Jun. 30, 2023 USD ($)	Jun. 30, 2024 USD ($) ft² lease item	Jun. 30, 2023 USD ($)	Dec. 31, 2023 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease liabilities, current portion included in other accrued liabilities				$ 12,384		$ 12,384		$ 11,621
Operating lease liabilities, long-term portion				61,225		61,225		67,025
Operating lease liabilities				$ 73,609		73,609		$ 78,646
Noncash operating activities related to right-of-use assets						$ 600	$ 0
Weighted average remaining lease term				6 years 3 months 18 days		6 years 3 months 18 days
Weighted average discount rate (as a percent)				6.80%		6.80%
Lease expense				$ 3,600	$ 3,700	$ 7,200	7,500
Operating lease payments				$ 4,100	$ 3,000	$ 8,300	$ 5,200
Austin TX, Long-term Lease
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				94,000		94,000
Number of office space locations | lease						2
Term of lease				132 months		132 months
First Expansion Premises
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				32,500		32,500
Second Expansion Premises
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				65,222		65,222
Corporate Headquarters Lease
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				136,000		136,000
Number of office space locations | item						2
"First Space" Sublease
Lessee, Lease, Description [Line Items]
Number of office space locations | ft²						88,000
"Second Space" Sublease
Lessee, Lease, Description [Line Items]
Number of office space locations | ft²						48,000
Corporate Headquarters Lease Amendment
Lessee, Lease, Description [Line Items]
Annual lease payment						$ 9,300
Term of lease				48 months		48 months
Tukwila, WA Lease
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				10,000		10,000
Term of lease				62 months		62 months
Renewal term of lease				5 years		5 years
San Carlos, CA Sublease Amendment | Forecast
Lessee, Lease, Description [Line Items]
Annual lease payment	$ 10,600
South San Francisco, CA Lease
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²				11,395		11,395
Annual lease payment						$ 900
Term of lease				36 months		36 months
Renewal term of lease				3 years		3 years
Pleasanton, CA Lease
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²		16,319
Annual lease payment		$ 500
Term of lease		60 months
Laboratory space in Canada
Lessee, Lease, Description [Line Items]
Lease space (area) | ft²			7,107
Annual lease payment			$ 200
Term of lease			24 months
Certain workspaces and storage spaces | Minimum
Lessee, Lease, Description [Line Items]
Term of lease				1 year		1 year
Certain workspaces and storage spaces | Maximum
Lessee, Lease, Description [Line Items]
Term of lease				5 years		5 years

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Leases - Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Leases.
2024 (remaining 6 months)	$ 8,449
2025	17,155
2026	17,450
2027	14,345
2028	6,675
2029 and thereafter	27,928
Total future minimum lease payments	92,002
Less: imputed interest	(18,393)
Operating lease liabilities	$ 73,609	$ 78,646

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Commitments and Contingencies (Details) $ in Thousands	1 Months Ended
	Jan. 31, 2024 USD ($) patent	Jun. 30, 2023 USD ($) patent	Dec. 31, 2022 patent lawsuit	Mar. 31, 2022 USD ($)	Oct. 31, 2020 patent	Mar. 31, 2020 lawsuit patent	Jun. 30, 2024 USD ($)	Feb. 28, 2022 lawsuit
Other commitments
Loss contingency, patents allegedly infringed, number | patent	2
Amount awarded to other party	$ 57,000
Total commitments							$ 103,518
Laboratory instruments supplier
Other commitments
Total commitments							4,404
Material suppliers
Other commitments
Total commitments							35,581
Application service providers
Other commitments
Total commitments							4,191
Cloud platform service provider
Other commitments
Total commitments							36,599
Leases
Other commitments
Total commitments							420
Other material suppliers
Other commitments
Total commitments							$ 22,323
CareDX Patent Case
Other commitments
Loss contingency, patents allegedly infringed, number | patent						3
Number of invalid patents | patent						3
Gain contingency, patents allegedly infringed, number | patent	1
Number of lawsuits | lawsuit						2
Amount awarded to other party				$ 44,900
Amount awarded from other party	$ 96,300
ArcherDX Case
Other commitments
Gain contingency, patents allegedly infringed, number | patent		3
Amount awarded from other party		$ 19,350
Genosity Inc. Patent Case
Other commitments
Gain contingency, patents allegedly infringed, number | patent					1
Inivata Patent Case
Other commitments
Gain contingency, patents allegedly infringed, number | patent			1
Number of lawsuits | lawsuit			2
Class action
Other commitments
Number of lawsuits | lawsuit								2

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Stock-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Stock based compensation expense
Stock-based compensation expense	$ 67,411	$ 44,312	$ 131,858	$ 84,789
Cost of revenues
Stock based compensation expense
Stock-based compensation expense	4,046	2,838	7,823	5,394
Research and development
Stock based compensation expense
Stock-based compensation expense	21,957	15,337	42,606	29,977
Selling, general and administrative
Stock based compensation expense
Stock-based compensation expense	41,408	26,137	81,429	49,418
Liability classified awards
Stock based compensation expense
Stock-based compensation expense	$ 200	$ 300	$ 400	$ 500

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Stock-Based Compensation - Narrative (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Stock Based Compensation
Stock-based compensation expense	$ 67,411	$ 44,312	$ 131,858	$ 84,789
Performance-based awards
Stock Based Compensation
Stock-based compensation expense	$ 22,100	10,200	$ 42,800	17,500
Shares granted			800
Options to purchase common stock
Stock Based Compensation
Options outstanding (in shares)	4,423		4,423		5,501
Liability classified awards
Stock Based Compensation
Stock-based compensation expense	$ 200	$ 300	$ 400	$ 500

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Stock-Based Compensation - Stock Options (Details) - Options to purchase common stock shares in Thousands	6 Months Ended
	Jun. 30, 2024 $ / shares shares
Number of shares Outstanding
Outstanding, beginning balance (in shares) | shares	5,501
Options exercised (in shares) | shares	(1,078)
Outstanding, end balance (in shares) | shares	4,423
Weighted-Average Exercise Price
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 23.65
Exercised (in dollars per share) | $ / shares	8.02
Outstanding, end balance (in dollars per share) | $ / shares	$ 27.45

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Stock-Based Compensation - Restricted Stock Units (Details) - RSU and performance-based awards shares in Thousands	6 Months Ended
	Jun. 30, 2024 $ / shares shares
Shares
Balance (in shares) | shares	9,248
Granted (in shares) | shares	4,786
Vested (in shares) | shares	(2,443)
Canceled/Forfeited (in shares) | shares	(253)
Balance (in shares) | shares	11,338
Weighted Average Grant Date Fair Value
Balance (in dollars per share) | $ / shares	$ 49.50
Granted (in dollars per share) | $ / shares	68.59
Vested (in dollars per share) | $ / shares	54.93
Canceled/Forfeited (in dollars per share) | $ / shares	54.27
Balance (in dollars per share) | $ / shares	$ 56.59

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Stock-Based Compensation - Performance-based Awards (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 67,411	$ 44,312	$ 131,858	$ 84,789
Performance-based awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			0.8
Aggregate value	55,000		$ 55,000
Aggregate value recognized	9,400		$ 16,000
Target (percentage)			200.00%
Expected compensation expense recognition over requisite service period			$ 110,000
Stock-based compensation expense	$ 22,100	$ 10,200	$ 42,800	$ 17,500

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Debt (Details) $ / shares in Units, shares in Thousands		1 Months Ended				3 Months Ended		6 Months Ended		21 Months Ended
	Apr. 30, 2020 USD ($) $ / shares	Oct. 31, 2023	Nov. 30, 2022 USD ($)	Apr. 30, 2020 USD ($) D $ / shares	Jul. 31, 2017	Jun. 30, 2024 USD ($) $ / shares shares	Jun. 30, 2023 USD ($)	Jun. 30, 2024 USD ($) $ / shares shares	Jun. 30, 2023 USD ($)	Sep. 30, 2023	Dec. 31, 2023 USD ($) $ / shares shares	Dec. 31, 2020 USD ($)	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
Remaining borrowing capacity						$ 20,000,000.0		$ 20,000,000.0
Collateral amount						$ 150,000,000.0		$ 150,000,000.0
Common Stock, Par or Stated Value Per Share | $ / shares						$ 0.0001		$ 0.0001			$ 0.0001
Common stock, shares issued | shares						123,365		123,365			119,581
Accrued Interest						$ 1,078,000		$ 1,078,000			$ 1,078,000
Amortization of debt discount and issuance cost								658,000	$ 642,000
Interest expense						3,127,000	$ 3,177,000	6,251,000	6,238,000
Convertible Notes
Debt Instrument [Line Items]
Principal amount	$ 287,500,000			$ 287,500,000		287,500,000		$ 287,500,000
Proceeds from Convertible Note, net of issuance costs				$ 278,300,000
Per annum interest rate (as a percent)				2.25%				2.25%
Interest expense						$ 1,947,000	1,939,000	$ 3,892,000	3,876,000
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.0001			$ 0.0001
Debt instrument, term								7 years
Effective interest rate (as a percent)						2.72%		2.72%
Principal amount per convertible note				$ 1,000
Number of threshold consecutive trading days | D				30
Threshold business days | D				5
Conversion price (in dollars per share) | $ / shares	$ 38.79			$ 38.79
Initial conversion rate	25.7785
Convertible to shares of common stock	7,411,704
Percentage of principal amount converted	100.00%
Carrying value						$ 283,604,000		$ 283,604,000			282,945,000
5 consecutive trading day period | Convertible Notes
Debt Instrument [Line Items]
Threshold trading days | D				5
Percentage of conversion price				98.00%
20 trading days period | Convertible Notes
Debt Instrument [Line Items]
Threshold trading days | D				20
Percentage of conversion price				130.00%
Redeemable for cash on or after May 2024
Debt Instrument [Line Items]
Number of threshold consecutive trading days | D				20
Threshold trading days | D				30
Percentage of conversion price				130.00%
Percentage of principal amount converted				100.00%
Level 2 | Convertible Notes
Debt Instrument [Line Items]
Fair value of long-term debt						800,700,000		800,700,000			491,800,000
Line Of Credit-UBS
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 100,000,000.0				100,000,000.0		100,000,000.0			$ 150,000,000.0	$ 50,000,000.0
Outstanding balance						80,400,000		80,400,000			$ 80,400,000
Credit facility drawn down								80,000,000.0
Remaining borrowing capacity						20,000,000.0		20,000,000.0
Borrowings under credit facility			$ 30,000,000.0
Collateral amount						$ 150,000,000.0		150,000,000.0
Interest expense								$ 2,400,000	$ 2,400,000
Interest rate (as a percent)						5.84%		5.84%
Interest expense						$ 1,200,000	$ 1,200,000
Line Of Credit-UBS | LIBOR
Debt Instrument [Line Items]
Spread on interest rate (as a percent)					1.10%
Line Of Credit-UBS | SOFR
Debt Instrument [Line Items]
Spread on interest rate (as a percent)		0.50%						0.50%		1.21%
2017 Term Loan
Debt Instrument [Line Items]
Debt, repayment amount				$ 79,200,000

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Debt - Discount and Issuance Costs (Details) - Convertible Notes	6 Months Ended
	Jun. 30, 2024
Effective interest rate (as a percent)	2.72%
Debt instrument, term	7 years

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Debt - Convertible Notes Balances (Details) - Convertible Notes - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Outstanding principle	$ 287,500	$ 287,500
Unamortized debt discount and issuance cost	(3,896)	(4,555)
Net carrying amount	$ 283,604	$ 282,945

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Debt - Interest Expense Recognized Related To Convertible Notes (Details) - Convertible Notes - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Cash interest expense
Contractual interest expense	$ 1,617	$ 1,617	$ 3,234	$ 3,234
Non-cash interest expense
Amortization of debt discount and debt issuance cost	330	322	658	642
Total interest expense	$ 1,947	$ 1,939	$ 3,892	$ 3,876

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Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Income Taxes
Income tax expense	$ 892,000	$ (282,000)	$ 1,320,000	$ (122,000)
Interest and penalties accrued	$ 0		$ 0		$ 0

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Net Loss per Share - Loss per Share (Details) $ in Millions	6 Months Ended
	Jun. 30, 2024 USD ($)
Convertible Notes
Earnings or Loss per Share [Line Items]
Convertible, If-converted value in excess of principal	$ 504.2

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Net Loss per Share - Potentially Dilutive Shares (Details) - shares shares in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares not included in diluted per share calculation	23,213	22,568
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares not included in diluted per share calculation	4,423	5,427
Performance-based awards and restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares not included in diluted per share calculation	11,338	9,658
Employee stock purchase plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares not included in diluted per share calculation	41	72
Convertible Notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares not included in diluted per share calculation	7,411	7,411

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Subsequent Events (Details) - USD ($) $ in Millions			1 Months Ended		6 Months Ended
	Jul. 19, 2024	Apr. 30, 2020	Oct. 31, 2027	Apr. 30, 2020	Jun. 30, 2024	Jul. 31, 2024
San Carlos, CA Sublease Amendment | Forecast
Subsequent Event [Line Items]
Annual lease payment			$ 10.6
Convertible Notes
Subsequent Event [Line Items]
Per annum interest rate (as a percent)				2.25%	2.25%
Percentage of principal amount converted		100.00%
Subsequent event | San Carlos, CA Sublease Amendment
Subsequent Event [Line Items]
Renewal term of lease						60 months
Subsequent event | Convertible Notes
Subsequent Event [Line Items]
Convertible, if converted common shares aggregate value	$ 287.5
Per annum interest rate (as a percent)	2.25%
Percentage of principal amount converted	100.00%
Conversion rate increase	0.4284
Subsequent event | Convertible Notes | Maximum
Subsequent Event [Line Items]
Conversion, shares to be issued	7,534,000