VERACYTE, INC.

Previous wording

As discussed in the section titled “Special Note Regarding Forward Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events 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 set forth herein under the heading “Forward Looking Statements” and in the section titled “Risk Factors” under Part II, Item 1A of this report and under Part I, Item 1A of our Annual Report. Historical results are not necessarily indicative of future results.

Current wording

As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events 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 set forth herein under the heading “Special Note Regarding Forward-Looking Statements” and in the section titled “Risk Factors” under Part II, Item 1A of this report and under Part I, Item 1A of our Annual Report. Historical results are not necessarily indicative of future results.

Previous wording

Revenue growth depends on our ability to secure coverage decisions, achieve broader reimbursement from third-party payers, expand our base of prescribing physicians and increase our penetration in existing accounts. Because some payers consider our products experimental and investigational, we may not receive payment for tests and payments we receive may not be at acceptable levels. We expect our revenue growth to increase if more payers make a positive coverage decision and as payers enter into contracts with us, which should enhance our revenue and cash collections. Our sales teams are aligned under our general manager-based structure to focus on specific products and global markets. If we are unable to expand the base of prescribing physicians and penetration within these accounts at an acceptable rate, or if we are not able to execute our strategy for increasing reimbursement and associated collections, we may not be able to effectively increase our revenue. We expect to continue to see pressure from payers to limit the utilization of tests, generally, and we believe more payers are deploying cost containment tactics, such as pre-authorization, reduction of the payer portion of reimbursement and employing laboratory benefit managers to reduce utilization rates. Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates.

Current wording

Our sales teams are aligned under our general manager-based structure to focus on specific products and global markets. If we are unable to expand the base of prescribing physicians and penetration within these accounts at an acceptable rate, or if we are not able to execute our strategy for increasing reimbursement and associated collections, we may not be able to effectively increase our revenue. We expect to continue to see pressure from payers to limit the utilization of tests, generally, and we believe more payers are deploying cost containment tactics, such as requiring prior authorization, reduction of the payer portion of reimbursement and employing laboratory benefit managers to reduce utilization rates. Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates. Changes or implementation of government regulations or reimbursement policies, including under the Protecting Access to Medicare Act of 2014, or PAMA, could result in lower reimbursement rates for our tests. Any such reductions could negatively affect our revenues and margins.

Previous wording

Revenue growth, operational results and advances to our business strategy depends on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets and other strategic transactions that we may pursue may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.

Current wording

Revenue growth, operational results and advances to our test offering strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets and other strategic transactions that we may pursue may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.

Previous wording

A significant aspect of our business is our investment in research and development activities, including activities related to the development of new tests and the ongoing development of our IVD and MRD strategies. In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products.

Current wording

A significant aspect of our business is our investment in development activities, including activities related to the development of new tests and modifications and enhancements to our current tests, including the ongoing development of our IVD and MRD strategies. In addition to these development activities, we also perform clinical evidence studies which are critical to gaining clinician adoption of our tests, driving favorable coverage decisions by payers, as well as gaining guideline inclusion for such tests.

Previous wording

We recognize revenue in accordance with the provisions of the FASB Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, or ASC 606. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.

Current wording

We recognize revenue in accordance with the provisions of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, or ASC 606. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.

Previous wording

We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the amount that will ultimately be realized. In determining the amount to accrue for a delivered test, we consider factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and us, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions. Upon ultimate collection, the amount received is compared to previous estimates and the amount accrued is adjusted accordingly.

Current wording

We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the cash amount that will ultimately be collected. In determining the amount to accrue for a delivered test, we consider factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and us, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions. Upon ultimate collection, the amount received is compared to previous estimates and the amount accrued is adjusted accordingly.

Previous wording

Our product revenue consists primarily of sales of the Prosigna breast cancer assay and related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. 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. Performance obligations are considered satisfied once we have transferred control of a product to the customer, meaning the customer has the ability to use and obtain the benefit of the product. We recognize product revenue for satisfied performance obligations only when there are no uncertainties regarding payment terms or transfer of control. Shipping and handling costs incurred for product shipments are charged to our customers and included in product revenue. Revenue is presented net of the taxes that are collected from customers and remitted to governmental authorities.

Current wording

Our product revenue consists primarily of sales of the Prosigna breast cancer IVD and related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. 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. Performance obligations are considered satisfied once we have transferred control of a product to the customer, meaning the customer has the ability to use and obtain the benefit of the product. We recognize product revenue for satisfied performance obligations only when there are no uncertainties regarding payment terms or transfer of control. Shipping and handling costs incurred for product shipments are charged to our customers and included in product revenue. Revenue is presented net of the taxes that are collected from customers and remitted to governmental authorities.

Previous wording

We incur a significant amount of expenses related to activities to secure clinical trial results in support of our testing and product development portfolio and on-market tests, as well as clinical validation and utilization studies. We also deploy state-of-the-art and costly genomic technologies in our discovery experiments, and our spending on these technologies may vary substantially from quarter to quarter. The timing of these research and development activities is difficult to predict, as is the timing of clinical trial enrollments and sample acquisitions. If a substantial number of clinical samples are acquired in a given quarter or if a high-cost experiment is conducted in one quarter versus the next, the timing of these expenses can affect our financial results. We conduct clinical studies to validate our new products, as well as on-going clinical studies to further the published evidence to support our commercialized tests. As these studies are initiated, start-up costs for each site can be significant and concentrated in a specific quarter. Spending on research and development, for both experiments and studies, may vary significantly by quarter depending on the timing of these various expenses.

Current wording

We deploy state-of-the-art and costly genomic technologies in our discovery and development experiments. Further, we conduct clinical studies to validate our new products, as well as on-going clinical studies to further the published evidence to support our commercialized tests. The timing of these research and development activities is difficult to predict, as is the timing of clinical trial enrollments and sample acquisitions. Therefore, spending on research and development may vary significantly by quarter depending on the timing of these various expenses.

Previous wording

The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses. Costs associated with performing tests are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test. As a result, our cost of testing revenue as a percentage of testing revenue may vary significantly from period to period because we may not recognize all revenue in the period in which the associated costs are incurred. We expect cost of testing revenue in absolute dollars to increase as the number of tests we perform increases. However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, and other cost reductions. As we introduce new tests, initially our cost of testing revenue will be high as we expect to run suboptimal batch sizes, run quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.

Current wording

The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses. We expect cost of testing revenue in absolute dollars to increase as the number of tests we perform increases. However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, and other cost reductions. As we introduce new tests, initially our cost of testing revenue will be high as we expect to run suboptimal batch sizes, run quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.

Previous wording

Our cost of product revenue consists primarily of costs of purchasing diagnostic kit components, labor, installation, service and packaging and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products. As our Prosigna test kits we produce are sold in various configurations with different number of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.

Current wording

Our cost of product revenue consists primarily of costs of purchasing diagnostic kit components, labor, installation, service and packaging and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products. As our Prosigna test kits are sold in various configurations with different numbers of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.

Previous wording

Research and development expenses include expenses incurred to collect clinical samples and conduct clinical studies to develop and support our products and pipeline, as well as develop future technology. These expenses consist of compensation expenses, direct research and development expenses such as laboratory supplies and costs associated with setting up and conducting clinical studies at domestic and international sites, professional fees, depreciation and amortization, other miscellaneous expenses and allocation of facility and information technology expenses. We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the three months ended March 31, 2025 and the year ended December 31, 2024 in support of our early-stage products, including Percepta Nasal Swab, support for the development and validation of our MRD tests, and the development of new IVD products and discovery. Going forward, we expect to incur significant expense as we invest in the continued development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current IVD tests.

Current wording

Research and development expenses include expenses incurred to collect clinical samples and conduct clinical studies to develop and support our products and pipeline, as well as develop future technology. These expenses consist of compensation expenses, direct research and development expenses such as laboratory supplies and costs associated with setting up and conducting clinical studies at domestic and international sites, professional fees, depreciation and amortization, other miscellaneous expenses and allocation of facility and information technology expenses. We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the six months ended June 30, 2025 and the year ended December 31, 2024 in support of our early-stage products, including Percepta Nasal Swab, support for the development and validation of our MRD tests, and the development of new IVD products and discovery. Going forward, we expect to incur significant expense as we invest in the continued development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current IVD tests.

Previous wording

Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 110 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians. The business units have dedicated marketing support, as well as a marketing operations team that serves the commercial organization broadly. Prosigna sales outside of the U.S. are led by country managers and sales teams that call on laboratories and breast cancer oncologists, with dedicated marketing support.

Current wording

Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 110 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians. The business units have dedicated marketing support, as well as a marketing operations team that serves the commercial organization broadly. Prosigna sales outside of the U.S. are led by country managers and sales teams that call on laboratories and breast cancer oncologists.

Previous wording

Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and French research tax credits. The French research tax credits (crédit d’impôt recherche, or CIR) are generated by our wholly owned subsidiary, Veracyte SAS, in connection with its research efforts performed in Marseille, France.

Current wording

Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and French research tax credits.

Previous wording

Comparison of the three months ended March 31, 2025 and 2024 (in thousands of dollars, except percentages and test volume):

Current wording

Comparison of the three and six months ended June 30, 2025 and 2024 (in thousands of dollars, except percentages and test volume):

Previous wording

Revenue increased $17.6 million for the three months ended March 31, 2025 compared to the same period in 2024. This was primarily due to a $17.0 million increase in testing revenue driven by a 23% volume increase and a 3% average selling price decrease, and by a $0.6 million increase in our biopharmaceutical and other revenue. The increase in testing revenue and tests reported for the three months ended March 31, 2025 was due to Decipher Prostate and Afirma revenue growing 22% partially offset by a $1.4 million decrease in Envisia revenue.

Current wording

Revenue increased $15.7 million for the three months ended June 30, 2025 compared to the same period in 2024. This was primarily due to a $15.3 million increase in testing revenue and a $0.8 million increase in our biopharmaceutical and other revenue, partially offset by a $0.3 million decrease in our product revenue. The 14% growth in testing revenue was primarily driven by an 18% volume increase, partially offset by lower prior period collections compared to the prior year period.

Previous wording

Biopharmaceutical and other revenue increased by $0.6 million for the three months ended March 31, 2025 compared to the same period in 2024, driven primarily by an increase of customer projects related to our US product offering.

Current wording

Biopharmaceutical and other revenue increased by $0.8 million for the three months ended June 30, 2025 and increased by $1.3 million for the six months ended June 30, 2025, compared to the same periods in 2024, driven primarily by an increase of customer projects related to our U.S. CLIA test offering.

Previous wording

Cost of testing revenue increased $2.3 million, or 9%, for the three months ended March 31, 2025 compared to the same period in 2024. The increase in cost of testing revenue was due to increased volume in testing, higher staffing to support testing performance and the build out of infrastructure related to current and future growth expectations, primarily related to Decipher Prostate and Afirma tests.

Current wording

Cost of testing revenue increased $4.5 million, or 16%, for the three months ended June 30, 2025 compared to the same period in 2024. The increase in cost of testing revenue was due to increased volume in testing, higher staffing to support testing performance and the build out of infrastructure related to current and future growth expectations, primarily related to Decipher Prostate and Afirma tests, partially offset by lab efficiencies.

Previous wording

Cost of biopharmaceutical and other revenue includes labor costs, laboratory supplies and pass-through expenses incurred. Cost of biopharmaceutical and other revenue for the three months ended March 31, 2025 decreased by $0.1 million compared to the same period in 2024, driven by reductions of staffing and variable expenses related to projects.

Current wording

Cost of biopharmaceutical and other revenue includes labor costs, laboratory supplies and pass-through expenses incurred. Cost of biopharmaceutical and other revenue for the three and six months ended June 30, 2025 decreased by $0.2 million and $0.4 million, respectively, compared to the same periods in 2024, driven by reductions of staffing and variable expenses related to projects.

Previous wording

Research and development expense increased $1.8 million, or 11%, for the three months ended March 31, 2025 compared to the same period in 2024. The increase was primarily driven by annual compensation expense increases as well as direct research and product development expense related to our on-going development costs for our U.S. CLIA, IVD and MRD strategies. In addition to these costs, there was an increase in our allocated costs from general and administrative expenses.

Current wording

Research and development expense increased $1.6 million, or 5%, for the six months ended June 30, 2025 compared to the same period in 2024. The increase was primarily driven by annual compensation expense increases and partially offset by timing of spend related to direct research and product development expense related to our on-going development costs for our U.S. CLIA, IVD and MRD strategies. In addition to these costs, there was an increase in our allocated costs from general and administrative expenses.

Previous wording

Selling and marketing expense increased $0.7 million, or 3%, for the three months ended March 31, 2025 compared to the same period in 2024. The increase is primarily due to annual compensation increases, headcount additions and the impact of stock-based compensation related to employee exits in the prior year period, these increases were partially offset by the reduction of sales support for our Envisia product. Direct marketing expense decreased primarily due to decreased participation in trade show events. In addition to these costs, there was an increase in allocated costs from general and administrative expenses.

Current wording

Selling and marketing expense increased $1.8 million, or 4%, for the six months ended June 30, 2025 compared to the same period in 2024. The increase was primarily due to annual merit increases, headcount additions and the impact of stock-based compensation related to employee exits in the prior year period, offset in part by the reduction of Envisia sales support.

Previous wording

General and administrative expense increased by $7.6 million for the three months ended March 31, 2025, compared to the same period in 2024. Compensation expense for the three months ended March 31, 2025 compared to the same period in 2024 increased primarily due to annual merit increases, additional headcount and higher stock-based compensation. Partially offsetting these impacts was a reduction in restructuring costs recognized in the prior year. Professional fees increased $7.3 million primarily due to $3.8 million of one-time expense related to the on-going proceedings regarding the bankruptcy petition filing made by our French subsidiary, Veracyte SAS, and a one-time $3.3 million payment related to the C2i Acquisition. Information technology expenses increased primarily related to continued investment in our cloud infrastructure, and additional investment in our software development capabilities. Occupancy costs increased primarily due to our expansion of our South San Francisco facilities commitment to support our future growth plans, and contingent consideration decreased $2.0 million primarily in relation to a reversal of expense when the contingency related to our C2i Acquisition was remeasured. General and administrative expenses related to occupancy costs and information technology costs are allocated to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location.

Current wording

General and administrative expense increased by $8.2 million for the six months ended June 30, 2025, compared to the same period in 2024. The results were impacted primarily by an increase of $7.9 million in professional fees mainly related to the Veracyte SAS collective proceedings petition filing, as well as information technology expense increases related to our cloud infrastructure and software development investments. Compensation expense increased primarily due to annual merit increases, additional headcount and higher stock-based compensation and was partially offset by the prior year expense related to the voluntary exits related to our Veracyte SAS employees. These increases were offset by reductions in the revaluation of contingent consideration related to the acquisitions of C2i and nCounter diagnostic rights. General and administrative expenses related to occupancy costs and information technology costs are allocated to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location.

Previous wording

Other income, net, increased $1.8 million for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to an increased gain of $2.1 million due to unrealized foreign currency gain(loss) offset by a decrease of $0.4 million related to the French research tax credit.

Current wording

Other income, net, increased $5.5 million for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to an increased gain of $5.6 million due to unrealized foreign currency gain(loss).

Previous wording

We recorded income tax expense of $0.4 million for the three months ended March 31, 2025, and recorded income tax benefit of $44.0 thousand for the three months ended March 31, 2024.

Current wording

We recorded income tax expense of $2.2 million and $1.6 million for the three months ended June 30, 2025 and 2024, respectively, and recorded income tax expense of $2.6 million and $1.6 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

As of March 31, 2025, we had cash and cash equivalents and short-term investments of $287.4 million. During the three months ended March 31, 2025, our cash and cash equivalents and short-term investments decreased by $2.1 million. Historically, we have obtained financing primarily through sales of our equity securities. Beginning in 2023, our operations have been financed primarily by cash flows generated by our revenue. For the three months ended March 31, 2025, we had net income of $7.0 million, but we may not sustain profitability in the future. As of March 31, 2025, we had an accumulated deficit of $436.9 million.

Current wording

As of June 30, 2025, we had cash and cash equivalents and short-term investments of $320.7 million. During the six months ended June 30, 2025, our cash and cash equivalents and short-term investments increased by $31.3 million. Historically, we have obtained financing primarily through sales of our equity securities. Beginning in 2023, our operations have been financed primarily by cash flows generated by our revenue. For the six months ended June 30, 2025, we had net income of $6.1 million, but we may not sustain profitability in the future. As of June 30, 2025, we had an accumulated deficit of $437.9 million.

Previous wording

We believe our existing cash and cash equivalents and short-term investments as of March 31, 2025, and cash flows generated by our revenue during the next 12 months will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the filing date of this report. We expect that our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, potential milestones associated with the C2i acquisition, costs to fund our overseas operations, and general corporate expenses associated with the growth of our business. However, we may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements. If we are not able to generate cash flows from our revenue to finance our cash requirements, we will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements. If we are not able to secure additional financing when needed, or on terms that are favorable to us, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives, or forgo potential acquisitions or investments. In addition, we may have to work with a partner on one or more of our products or development programs, which could lower the economic value of those programs to us. Moreover, any instability in the global credit markets or the banking system may impact our liquidity both in the short term and long term.

Current wording

We believe our existing cash and cash equivalents and short-term investments as of June 30, 2025, and cash flows generated by our revenue during the next 12 months will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the filing date of this report. We expect that our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, potential milestones associated with the C2i Acquisition, and general corporate expenses associated with the growth of our business. However, we may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements. If we are not able to generate cash flows from our revenue to finance our cash requirements, we will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements. If we are not able to secure additional financing when needed, or on terms that are favorable to us, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives, or forgo potential acquisitions or investments. In addition, we may have to work with a partner on one or more of our products or development programs, which could lower the economic value of those programs to us. Moreover, any instability in the global credit markets or the banking system may impact our liquidity both in the short term and long term.

Previous wording

We lease office and laboratory facilities in the U.S., including in South San Francisco and San Diego, California and Austin, Texas, and in Marseille, France, and lease certain equipment under various non-cancelable lease agreements. The lease terms extend to March 2040 and contain extension of lease term and expansion options. As of March 31, 2025, the leases have a weighted average remaining lease term of 11.5 years and total future minimum lease payments of $93.2 million.

Current wording

We lease office and laboratory facilities in the U.S., including in South San Francisco and San Diego, California and Austin, Texas, and prior to the liquidation of Veracyte SAS assets, in Marseille, France, and lease certain equipment under various non-cancelable lease agreements. The lease terms extend to March 2040 and contain extension of lease term and expansion options. As of June 30, 2025, the leases have a weighted average remaining lease term of 11.3 years and total future minimum lease payments of $92.5 million.

Previous wording

Pursuant to the Agreement and Plan of Merger, dated as of January 5, 2024, by and among the Company, C2i, Canary Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company, Veracyte Diagnostics, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, and Fortis Advisors LLC, as the C2i securityholders’ agent, or the Merger Agreement, we may be required to pay to certain noteholders of C2i up to an additional $16.0 million in cash or shares of our common stock, at our election, upon the achievement of certain milestones. During the three months ended March 31, 2025, another one of the milestones was achieved resulting in the payment of $0.7 million. As of March 31, 2025, we expect to achieve a portion or all of the remaining milestones contained in the Merger Agreement within the next 12 months, requiring payments totaling up to $16.0 million.

Current wording

Pursuant to the Agreement and Plan of Merger, dated as of January 5, 2024, by and among the Company, C2i, Canary Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company, Veracyte Diagnostics, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, and Fortis Advisors LLC, as the C2i securityholders’ agent, or the Merger Agreement, we may be required to pay to certain noteholders of C2i up to an additional $16.0 million in cash or shares of our common stock, at our election, upon the achievement of certain milestones. During the six months ended June 30, 2025, one of the milestones was achieved resulting in the payment of $0.7 million. As of June 30, 2025, we expect to achieve a portion or all of the remaining milestones contained in the Merger Agreement within the next 12 months, requiring payments totaling up to $16.0 million.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands of dollars):

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024 (in thousands of dollars):

Previous wording

Cash provided by operating activities for the three months ended March 31, 2025 was $5.4 million. Our net income of $7.0 million includes non-cash charges of $11.0 million of stock-based compensation expense, $5.4 million of depreciation and amortization, of which $3.2 million was related to intangible asset amortization, non-cash lease expense of $0.9 million, non-cash gains of $2.0 million from the revaluation of contingent consideration and $1.6 million from the effect of foreign currency changes on operations. Cash used as a result of changes in operating assets and liabilities was $15.4 million, primarily composed of a decrease in accrued liabilities and deferred revenue of $8.9 million, an increase in accounts receivable of $7.1 million, an increase in prepaid expenses and other current assets of $2.9 million, and an increase in supplies and inventory of $2.3 million partially offset by an increase in accounts payable of $7.1 million.

Current wording

Cash provided by operating activities for the six months ended June 30, 2025 was $39.0 million. Our net income of $6.1 million includes non-cash charges of $21.9 million of stock-based compensation expense, $10.9 million of depreciation and amortization, of which $6.5 million was related to intangible asset amortization, $20.5 million tied to the impairment of assets, non-cash lease expense of $1.6 million, non-cash gains of $2.9 million from the revaluation of contingent consideration and $5.1 million from the effect of foreign currency changes on operations. Cash used as a result of changes in operating assets and liabilities was $14.2 million, primarily composed of an increase in prepaid expenses and other current assets of $5.5 million, an increase in accounts receivable of $4.3 million, a decrease in accrued liabilities and deferred revenue of $2.1 million, and an increase in supplies and inventory of $2.9 million partially offset by an increase in accounts payable of $3.1 million.

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was $9.0 million. Our net loss of $1.9 million includes non-cash charges of $8.0 million of stock-based compensation expense, $5.6 million of depreciation and amortization, of which $3.7 million was related to intangible asset amortization, and the remainder was due to a non-cash lease expense of $1.1 million. Cash used as a result of changes in operating assets and liabilities was $22.8 million, primarily composed of a decrease in accrued liabilities and deferred revenue of $9.0 million, an increase in accounts receivable of $6.5 million, an increase in prepaid expenses and other current assets of $2.7 million, an increase in supplies and inventory of $2.3 million, a decrease in accounts payable of $1.5 million, and a decrease in operating lease liability of $1.1 million, partially offset by a decrease in other assets of $0.3 million.

Current wording

Cash provided by operating activities for the six months ended June 30, 2024 was $20.6 million. Our net income of $3.9 million includes non-cash charges of $17.9 million of stock-based compensation expense, $11.3 million of depreciation and amortization, of which $7.4 million was related to intangible asset amortization, and the remainder was due to a non-cash lease expense of $2.3 million. Cash used as a result of changes in operating assets and liabilities was $17.0 million, primarily composed of an increase in accounts receivable of $10.1 million, an increase in supplies and inventory of $3.3 million, a decrease in operating lease liability of $2.4 million, an increase in prepaids and other current assets of $2.2 million, a decrease in accounts payable of $1.7 million, and an increase in other assets of $1.2 million. Cash used as a result of changes in operating assets and liabilities was partially offset by cash provided by an increase in accrued liabilities and deferred revenue of $3.9 million.

Previous wording

Cash used in investing activities for the three months ended March 31, 2025 was $51.8 million, consisting of $50.0 million from the purchase of short-term investments and $1.8 million used in the purchase of property, plant and equipment.

Current wording

Cash used in investing activities for the six months ended June 30, 2025 was $52.0 million, consisting of $48.9 million from the purchase and maturity of short-term investments and $3.1 million used in the purchase of property, plant and equipment.

Previous wording

Cash provided by investing activities for the three months ended March 31, 2024 was $2.9 million, consisting of $5.0 million net cash acquired from C2i excluding post-close transactions costs, partially offset by $2.1 million used in the purchase of property, plant and equipment.

Current wording

Cash provided by investing activities for the six months ended June 30, 2024 was $0.1 million, consisting of $5.0 million net cash acquired from C2i excluding post-close transactions costs, partially offset by $4.9 million used in the purchase of property, plant and equipment

Previous wording

Cash used in financing activities for the three months ended March 31, 2025 was $6.5 million, consisting of $9.5 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $3.0 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our Employee Stock Purchase Plan, or ESPP.

Current wording

Cash used in financing activities for the six months ended June 30, 2025 was $7.1 million, consisting of $11.8 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $4.8 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our Employee Stock Purchase Plan, or ESPP.

Previous wording

Cash used in financing activities for the three months ended March 31, 2024 was $0.9 million, consisting of $3.8 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $3.0 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our ESPP.

Current wording

Cash used in financing activities for the six months ended June 30, 2024 was $0.9 million, consisting of $5.1 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $4.3 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our ESPP.