Personalis Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 (the “Annual Report”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part II, Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 (the “Annual Report”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part II, Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report.

Previous wording

We develop and market advanced cancer genomic tests and analytics. Our tests and analytics are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and, we expect in the near future, for clinical trial enrollment. Our advanced tests are used by physicians to detect cancer recurrence, monitor cancer evolution, and uncover insights for therapy selection. We also provide sequencing and data analysis services to support population sequencing initiatives.

Current wording

We develop and market advanced cancer genomic tests. Our tests are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and, we expect in the near future, for clinical trial enrollment. Our tests are used by physicians to detect cancer recurrence, monitor cancer evolution, and uncover insights for therapy selection. We also provide sequencing and data analysis services to support population sequencing initiatives.

Previous wording

Today, our products are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized cancer vaccines and other next-generation cancer immunotherapies. For example, we are providing genomic testing to Moderna, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer vaccine. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus AI, Inc. ("Tempus") to commercialize NeXT Personal Dx in the clinical diagnostics market. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").

Current wording

Today, our products are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized cancer vaccines and other next-generation cancer immunotherapies. For example, we are providing genomic testing to Moderna, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer vaccine. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus AI, Inc. ("Tempus") to commercialize our NeXT Personal Dx test. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").

Previous wording

Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale. We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases. To date, we have sequenced more than 445,000 human samples, of which more than 180,000 were whole human genomes.

Current wording

Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale. We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases. To date, we have sequenced more than 475,000 human samples, of which more than 190,000 were whole human genomes.

Previous wording

Total revenue increased 35%, or $5.9 million, during the second quarter of 2024 compared to the second quarter of 2023, driven by higher revenue from pharma tests. Revenue from pharma tests was $13.2 million in the second quarter of 2024 compared to $6.1 million in the second quarter of 2023, an increase of 117%. This increase was partially offset by lower revenue from population sequencing, which declined $1.7 million, or 57%.

Current wording

Total revenue increased 41%, or $7.5 million, during the third quarter of 2024 compared to the third quarter of 2023, driven by higher revenue from pharma tests. Revenue from pharma tests was $15.7 million in the third quarter of 2024 compared to $8.0 million in the third quarter of 2023, an increase of 96%. This increase was partially offset by lower revenue from enterprise sales, which declined $2.5 million, or 33%.

Previous wording

Key business accomplishments and financial updates in the second quarter of 2024 include:

Current wording

Key business accomplishments and financial updates in the third quarter of 2024 include:

Previous wording

In connection with our November 2023 agreement with Tempus, we issued two warrants to Tempus to purchase, in the aggregate, up to 9,218,800 shares of our common stock (the “Tempus Warrants”). Other income (expense), net consists primarily of a noncash gain related to the remeasurement of the Tempus Warrants. Other income (expense), net also includes foreign currency exchange gains and losses.

Current wording

In connection with our November 2023 agreement with Tempus, we issued two warrants to Tempus to purchase, in the aggregate, up to 9,218,800 shares of our common stock (the “Tempus Warrants”). Other income (expense), net consists primarily of a noncash loss related to the remeasurement and settlement of the Tempus Warrants. Other income (expense), net also includes foreign currency exchange gains and losses.

Previous wording

The following sets forth, for the periods presented, our unaudited condensed consolidated statements of operations and selected financial data (in thousands, except share and per share data):

Current wording

The following sets forth, for the periods presented, our unaudited consolidated statements of operations and selected financial data (in thousands, except share and per share data):

Previous wording

Revenue from pharma tests and services increased 117%, or $7.1 million, in the second quarter of 2024, and increased 85%, or $10.6 million, in the first half of 2024. The primary driver was increases in revenue from one of our personalized cancer therapy customers that ramped up clinical trial patient enrollments. Revenue from this customer increased $4.9 million in the second quarter of 2024 and $9.3 million in the first half of 2024. The remainder of revenue increases came from a small number of our largest pharmaceutical customers.

Current wording

Revenue from pharma tests and services increased 96%, or $7.5 million, in the third quarter of 2024, and increased 90%, or $18.3 million, in the first nine months of 2024. The primary driver was increases in revenue from one of our personalized cancer therapy customers that ramped up clinical trial patient enrollments. Revenue from this customer increased $7.9 million in the third quarter of 2024 and $15.6 million in the first nine months of 2024. Revenue from this customer is expected to decline over the next few quarters until this customer enrolls patients in its next set of clinical trials. The remainder of revenue increases in the first nine months of 2024 came from a small number of our largest pharmaceutical customers.

Previous wording

Revenue from enterprise sales decreased 5%, or $0.9 million, in the first half of 2024 due to lower selling prices. The number of samples we processed for Natera increased by over 35%, but such increase was offset by lower selling prices.

Current wording

Revenue from enterprise sales decreased 14%, or $3.5 million, in the first nine months of 2024 due to lower selling prices. The number of samples we processed for Natera increased by over 18%, but such increase was offset by lower selling prices.

Previous wording

Population sequencing revenue is made up entirely of sales to the VA MVP. The decreases in revenue of 57%, or $1.7 million, in the second quarter of 2024, and 54%, or $3.2 million, in the first half of 2024, were primarily due to a decrease in the number of samples we tested, with a slight drop in selling prices accounting for the remainder of the decreases.

Current wording

Population sequencing revenue is made up entirely of sales to the VA MVP. Revenue recognized each period is impacted by timing of our fulfillment of samples under each annual task order. The increase in revenue of 85%, or $2.0 million, in the third quarter of 2024 was due to an increase in the number of samples we processed because we fulfilled the VA MVP's 2023 annual task order in alignment with the VA MVP's fiscal year-end (September 2024), partially offset by a slight drop in selling prices. The decrease in revenue of 14%, or $1.2 million, in the first nine months of 2024 was due to a decrease in the number of samples we processed in addition to a slight drop in selling prices.

Previous wording

Revenue recognized each period is also impacted by timing of our fulfillment of samples under each annual task order. Our annual task orders received in 2023, 2022, and 2021 were $7.5 million, $10.0 million, and $9.7 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times. Therefore, we have the ability to modulate the volume of samples processed from the VA MVP up or down to complement sample volumes from other customers, which can vary from period to period. As of June 30, 2024, our remaining unfulfilled task orders amounted to $4.7 million, which we expect to recognize as revenue over the next two quarters.

Current wording

Our annual task orders from the VA MVP in 2024, 2023, and 2022 were $7.5 million, $7.5 million, and $10.0 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times. Therefore, we may modulate the volume of samples processed from the VA MVP to accommodate sample volumes from other customers, which can vary from period to period. We anticipate fulfilling the new task order received in September 2024 during the first three quarters of 2025.

Previous wording

Other revenue decreased 37%, or $0.1 million, in the second quarter of 2024, due to non-recurring projects with universities and non-profits. Other revenue increased 31%, or $0.1 million, in the first half of 2024, driven by sales of our NeXT Dx diagnostic test.

Current wording

Other revenue increased $0.3 million in the third quarter of 2024 and $0.4 million in the first nine months of 2024, primarily due to increased sales of our NeXT Dx diagnostic test.

Previous wording

Cost of revenue increased 22%, or $2.6 million, in the second quarter of 2024, and increased 10%, or $2.5 million, in the first half of 2024, due to higher revenue levels. The corresponding revenue increases were 35% and 18%, respectively. Cost of revenue increased at a lesser rate as compared to the corresponding revenue increases primarily because of lower labor costs resulting from workforce reductions and operational efficiencies.

Current wording

Cost of revenue increased 15%, or $2.2 million, in the third quarter of 2024, and increased 12%, or $4.7 million, in the first nine months of 2024, due to higher revenue levels. The corresponding revenue increases were 41% and 26%, respectively. Cost of revenue increased at a lesser rate as compared to the corresponding revenue increases primarily because of lower labor costs resulting from workforce reductions and operational efficiencies.

Previous wording

Specific components of the increase in the second quarter of 2024 were a $2.1 million increase in direct material costs to support higher revenue levels, a $1.0 million increase in allocated facilities and equipment costs (mainly due to moving our laboratory from our prior Menlo Park facility to our Fremont facility), and a $0.3 million increase in laboratory supplies and consumables due to increased test volumes; partially offset by a $0.6 million decrease in labor costs and a $0.2 million decrease in shared laboratory costs due to greater usage of our laboratory capacity for R&D activities.

Current wording

Specific components of the increase in the nine months of 2024 were a $5.8 million increase in direct material costs to support higher revenue levels and a $1.9 million increase in allocated facilities and equipment costs (mainly due to moving our laboratory from our prior Menlo Park facility to our Fremont facility), partially offset by a $2.1 million decrease in labor costs and a $0.9 million decrease in shared laboratory costs due to greater usage of our laboratory capacity for R&D projects.

Previous wording

The decreases in research and development expenses of 27%, or $4.9 million, in the second quarter of 2024, and 25%, or $8.7 million, in the first half of 2024 were primarily due to cost savings from our workforce reductions in 2023.

Current wording

The decreases in research and development expenses of 30%, or $5.1 million, in the third quarter of 2024, and 27%, or $13.8 million, in the first nine months of 2024 were primarily due to cost savings from our workforce reductions in 2023 and lower sample processing costs for product development, collaborations, and clinical evidence generation.

Previous wording

Specific components of the decrease in the second quarter of 2024 were a $1.9 million decrease in allocated facilities costs (primarily due to a reduction in R&D usage of our facilities relative to other functions, as well as lower facilities costs in general), a $1.7 million decrease in personnel-related costs driven by our workforce reductions, and a $1.3 million decrease in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation.

Current wording

Specific components of the decrease in the third quarter of 2024 were a $2.9 million decrease in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation; a $1.4 million decrease in personnel-related costs driven by our workforce reductions; and a $0.8 million decrease in allocated facilities costs.

Previous wording

Specific components of the decrease in the first half of 2024 were a $4.3 million decrease in personnel-related costs driven by our workforce reductions, a $3.6 million decrease in allocated facilities costs (primarily due to a reduction in R&D usage of our facilities relative to other functions, as well as lower facilities costs in general), and a $0.8 million decrease in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation.

Current wording

Specific components of the decrease in the first nine months of 2024 were a $5.8 million decrease in personnel-related costs driven by our workforce reductions, a $4.4 million decrease in allocated facilities costs (primarily due to a reduction in R&D usage of our facilities relative to other functions, as well as lower facilities costs in general), and a $3.6 million decrease in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation.

Previous wording

The decreases in selling, general and administrative expenses of 1%, or $0.2 million, in the second quarter of 2024, and 10%, or $2.7 million, in the first half of 2024 were primarily due to cost savings from our workforce reductions in 2023.

Current wording

The decreases in selling, general and administrative expenses of 4%, or $0.5 million, in the third quarter of 2024, and 8%, or $3.2 million, in the first nine months of 2024 were primarily due to lower professional outside services expenses and cost savings from our workforce reductions in 2023.

Previous wording

Specific components of the decrease in the second quarter of 2024 were a $0.9 million decrease in personnel-related costs and a $0.4 million decrease in professional outside services; partially offset by a $0.6 million increase in allocated facilities costs and a $0.5 million increase in marketing costs such as trade shows expenses.

Current wording

Specific components of the decrease in the third quarter of 2024 were a $1.1 million decrease in professional outside services and a $0.6 million decrease in office equipment costs, partially offset by a $0.7 million increase in allocated facilities costs and $0.5 million in other miscellaneous costs.

Previous wording

Specific components of the decrease in the first half of 2024 were a $2.3 million decrease in personnel-related costs and a $1.7 million decrease in professional outside services; partially offset by a $0.9 million increase in allocated facilities costs and a $0.4 million increase in marketing costs such as trade shows expenses.

Current wording

Specific components of the decrease in the first nine months of 2024 were a $2.3 million decrease in personnel-related costs, a $2.3 million decrease in professional outside services, and a $0.6 million decrease in office equipment costs; partially offset by a $1.4 million increase in allocated facilities costs and $0.6 million increase in marketing costs such as trade shows expenses.

Previous wording

The $4.0 million charge recognized in the first half of 2023 was comprised of $3.4 million in one-time employee termination benefits (including costs related to termination of our former China employees) and $0.6 million of other noncash charges (primarily asset disposals and impairments in connection with the closure of our China operations).

Current wording

The $4.0 million charge recognized in the first nine months of 2023 was comprised of $3.4 million in one-time employee termination benefits (including costs related to termination of our former China employees) and $0.6 million of other noncash charges (primarily asset disposals and impairments in connection with the closure of our China operations).

Previous wording

In November 2023, we issued the Tempus Warrants. If Tempus acquires any shares of common stock directly from us other than by exercise of the Tempus Warrants, then the total number of shares issuable upon exercise of the Tempus Warrants will be reduced by such number of shares acquired. Because the number of shares issuable upon settlement are subject to adjustment, the Tempus Warrants are classified as liability instruments and are subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense). Fair value of the Tempus Warrants decreased by $7.7 million as of June 30, 2024 as compared to December 31, 2023. The decrease in fair value resulted in a $3.0 million and $7.7 million noncash gain recognized in the second quarter and first half of 2024, respectively.

Current wording

In November 2023, we issued the Tempus Warrants. The Tempus Warrants included a provision under which the total number of shares issuable upon settlement were subject to adjustment. Consequently, the Tempus Warrants were classified as liability instruments while outstanding and subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense). We recognized noncash losses of $26.0 million and $18.3 million in the third quarter of 2024 and the first nine months of 2024, respectively, as a result of increases in the fair value of the Tempus Warrants since December 31, 2023. In August 2024, Tempus exercised in full the Tempus Warrants for $18.4 million in cash. There will be no further noncash gains or losses associated with the Tempus Warrants going forward.

Previous wording

From our inception through June 30, 2024, we have funded our operations primarily from $279.8 million in net proceeds from our follow-on equity offerings in August 2020 and January 2021, $144.0 million in net proceeds from our IPO in June 2019, $89.6 million from issuance of redeemable convertible preferred stock, $6.4 million in net proceeds from our at-the-market ("ATM") sales facility (see Note 2, "Summary of Significant Accounting Policies" in our unaudited condensed consolidated financial statements for additional information), as well as cash from operations and debt financings. As of June 30, 2024, we had cash and cash equivalents of $47.7 million and short-term investments of $39.2 million.

Current wording

From our inception through September 30, 2024, we have funded our operations primarily from $279.8 million in net proceeds from our follow-on equity offerings in August 2020 and January 2021, $144.0 million in net proceeds from our IPO in June 2019, $89.6 million from issuance of redeemable convertible preferred stock, $36.2 million from Tempus exercising warrants and purchasing additional shares under an investment agreement (see Note 8, "Related Party Transactions" in our unaudited consolidated financial statements for additional information), $33.6 million in net proceeds from our at-the-market ("ATM") sales facility (see Note 2, "Summary of Significant Accounting Policies" in our unaudited consolidated financial statements for additional information), as well as cash from operations and debt financings. As of September 30, 2024, we had cash and cash equivalents of $75.8 million and short-term investments of $67.9 million.

Previous wording

We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our services or other risks described in this Quarterly Report on Form 10-Q, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We filed a sales agreement prospectus in December 2023 pursuant to which we may offer and sell up to an aggregate amount of $50.0 million of shares of our common stock through our ATM facility. As of June 30, 2024, $47.1 million in common stock remained available for future issuance under the ATM facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all.

Current wording

We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our services or other risks described in this Quarterly Report on Form 10-Q, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We filed a sales agreement prospectus in December 2023 pursuant to which we may offer and sell up to an aggregate amount of $50.0 million of shares of our common stock through our ATM facility. As of September 30, 2024, $19.3 million in common stock remained available for future issuance under the ATM facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all.

Previous wording

The $5.0 million increase in cash used in operating activities was primarily due to working capital needs. During the first half of 2023 we received a significant customer deposit in connection with our agreement with Moderna to support its ongoing clinical trials project for development of a personalized cancer vaccine and the customer deposit did not repeat in 2024. We also paid more in rent during the first half of 2024 as compared to the first half of 2023 for our Fremont headquarters due to the end of a free rent period plus escalating rent payments. Furthermore, we paid more to vendors during the first half of 2024 as compared to 2023 due to timing of vendor shipments and billings. Greater use of cash for working capital needs was partially offset by lower operating expenses.

Current wording

The $5.5 million decrease in cash used in operating activities was due to lower operating expenses, particularly as a result of our 2023 reductions in workforce, and higher gross margin (due to a combination of higher revenue levels and higher gross margin percentage). These increases in operating cash flow were partially offset by changes in working capital. Notably, during the first half of 2023 we received a significant customer deposit in connection with our agreement with Moderna to support its ongoing clinical trials project for development of a personalized cancer vaccine and the customer deposit did not repeat in 2024. We also paid more in rent during the first nine months of 2024 as compared to 2023 for our Fremont headquarters due to the end of a free rent period plus escalating rent payments. Furthermore, we paid more to vendors during the first nine months of 2024 as compared to 2023 due to timing of vendor shipments and billings.

Previous wording

The $14.0 million decrease in cash provided by investing activities was due to $20.6 million lower net proceeds from short-term investments, partially offset by a $6.4 million reduction in capital expenditures and $0.2 million proceeds from sales of equipment.

Current wording

The $33.6 million decrease in cash provided by investing activities was due to investment of our cash into short-term investments, partially offset by a $7.0 million reduction in capital expenditures.

Previous wording

The $1.7 million increase in cash provided by financing activities was due to $1.0 million higher net proceeds from sales of common stock under our ATM facility and $1.3 million lower repayments of loans; partially offset by $0.6 million lower proceeds from our employee stock purchase program.

Current wording

The $63.9 million increase in cash provided by financing activities was due to $27.5 million higher net proceeds from sales of common stock under our ATM facility, $36.2 million from Tempus exercising warrants and purchasing additional shares under an investment agreement, and $1.5 million lower repayments of loans; partially offset by $0.8 million payments of costs associated with the Tempus investment, and $0.5 million lower proceeds from our employee stock purchase program.

Previous wording

Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other. We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $87.0 million as of June 30, 2024, as well as anticipated cash receipts from customers. To fund our material cash requirements in the short- and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.

Current wording

Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other spend. We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $143.7 million as of September 30, 2024, as well as anticipated cash receipts from customers. To fund our material cash requirements in the short- and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.

Previous wording

Capital expenditures. Capital expenditures are expected to be lower in 2024 from 2023 levels as we have completed significant laboratory capacity additions. Going forward, our capital expenditures are expected to consist primarily of laboratory equipment and computer equipment. We currently expect capital expenditures to be approximately $1 million in 2024 and between $4 million to $5 million in each of the years 2025 and 2026.

Current wording

Capital expenditures. Capital expenditures are expected to be lower in 2024 from 2023 levels as we completed our planned significant laboratory capacity additions in 2023. Going forward, our capital expenditures are expected to consist primarily of laboratory equipment and computer equipment. We currently expect capital expenditures to be approximately $1 million in 2024 and between $5 million to $6 million in each of the years 2025 and 2026.

Previous wording

Property leases. Our noncancelable operating lease payments were $74.6 million as of June 30, 2024. The timing of these future payments, by year, can be found in Part I, Item 1 of this Form 10-Q in the Notes to Unaudited Condensed Consolidated Financial Statements in Note 7, “Leases.”

Current wording

Property leases. Our noncancelable operating lease payments were $72.6 million as of September 30, 2024. The timing of these future payments, by year, can be found in Part I, Item 1 of this Form 10-Q in the Notes to Unaudited Consolidated Financial Statements in Note 7, “Leases.”

Previous wording

Other. As of June 30, 2024, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory. We owe a total of $2.0 million, of which $0.7 million is payable in 2024 and the remainder in 2025. Additionally, we have an outstanding noninterest bearing loan that was used to finance the purchase of internal use software licenses and related ongoing support. We will make a payment of $0.4 million in September 2024 to pay off this loan. Further discussion of the loans can be found in Part I, Item 1 of this Form 10-Q in the Notes to Unaudited Condensed Consolidated Financial Statements in Note 6, “Loans.”

Current wording

Other. As of September 30, 2024, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory. We owe a total of $1.6 million, of which the majority is payable in 2025. Further discussion of the loan can be found in Part I, Item 1 of this Form 10-Q in the Notes to Unaudited Consolidated Financial Statements in Note 6, “Loans.”

Previous wording

See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our unaudited condensed consolidated financial statements for additional information.

Current wording

See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our unaudited consolidated financial statements for additional information.