CASTLE BIOSCIENCES INC

Previous wording

We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology. We also offer a proprietary a pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.

Current wording

We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology. We also offer a proprietary pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.

Previous wording

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

Current wording

Our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM. As of April 24, 2025, Novitas reached a decision not to cover SCC, resulting in the discontinuance of Medicare reimbursement for DecisionDx-SCC.

Previous wording

MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion. We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S. TAM of approximately $600 million. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory in May 2021 at which point we offered both our MyPath Melanoma test and our DiffDx-Melanoma test under an offering that we referred to as our Diagnostic GEP offering. However, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023 and now the focus of this offering is MyPath Melanoma.

Current wording

MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion. We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S. TAM of approximately $600 million. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory in May 2021.

Previous wording

TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of progression of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE. We estimate a U.S. TAM of approximately $1 billion.

Current wording

TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of progression of high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite dysplasia or low-grade dysplasia BE. We estimate a U.S. TAM of approximately $1 billion.

Previous wording

IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. During the three months ended March 31, 2025, after careful further assessments, we made the decision to discontinue our IDgenetix test, effective May 2025.

Current wording

IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. After careful further assessments, we discontinued our IDgenetix test in May 2025.

Previous wording

DecisionDx-SCC has met “new ADLT” status since 2022. Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test. Effective April 1, 2024, and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will continue at $8,500 based on the median private payor rates received between July 1, 2023 and November 30, 2023. Future rates will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Current wording

DecisionDx-SCC has met “new ADLT” status since 2022. Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test. Effective April 1, 2024, and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will continue at $8,500 based on the median private payor rates received between July 1, 2023 and November 30, 2023.

Previous wording

On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024. On January 9, 2025, Novitas finalized an oncology biomarker LCD that became effective on April 24, 2025. On April 24, 2025, the Novitas LCD, Genetic Testing for Oncology: Specific Tests, that includes DecisionDx-SCC as noncovered, became effective.

Current wording

On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024. On January 9, 2025, Novitas finalized an oncology biomarker LCD, Genetic Testing for Oncology: Specific Tests, which also lists DecisionDx-SCC as non-covered; that LCD became effective on April 24, 2025.

Previous wording

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019. Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for both MyPath Melanoma and DiffDx-Melanoma.

Current wording

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019. Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for MyPath Melanoma.

Previous wording

During 2023, we obtained a test-specific PLA CPT code for IDgenetix which became effective October 1, 2023. In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024. Our reimbursement rate for 2024 was $1,336 per test and remains at $1,336 per test in the first quarter of 2025. IDgenetix test will be discontinued effective May 2025.

Current wording

During 2023, we obtained a test-specific PLA CPT code for IDgenetix which became effective October 1, 2023. In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024. Our reimbursement rate for 2024 was $1,336 per test and remains at $1,336 per test in the first quarter of 2025. Our IDgenetix test was discontinued in May 2025.

Previous wording

On May 6, 2024, the U.S. Food and Drug Administration (“FDA”) published a final rule on the regulation of LDTs which amends the FDA's regulations to make explicit that LDT's are devices under the FD&C Act. The FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs. The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by NYSDOH. Our proprietary tests, outlined above, are all NYSDOH approved. We believe this final ruling will have no material impact on our existing test offerings given all of our tests were marketed before May 6, 2024. In addition, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA’s LDT final rule. It is unclear whether the court’s ruling will be appealed.

Current wording

On May 6, 2024, the U.S. Food and Drug Administration (“FDA”) published a final rule on the regulation of Laboratory Developed Tests (“LDTs”) which amends the FDA's regulations to make explicit that LDT's are devices under the Federal Food, Drug and Cosmetic Act (“FD&C Act”). The FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs. The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by New York State Department of Health (“NYSDOH”). Our proprietary tests, outlined above, are all NYSDOH approved. We believe this final ruling will have no material impact on our existing test offerings given all of our tests were marketed before May 6, 2024. In addition, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA’s LDT final rule. The U.S. government did not appeal the ruling, and the deadline to do so has passed; therefore, the court’s decision stands.

Previous wording

For the three months ended March 31, 2025, our test report volume increased by 16.8% compared to the same period in 2024. Our dermatologic test report volume increased by 7.4% for the three months ended March 31, 2025, compared to the prior period in 2024, largely driven by continued growth from DecisionDx-Melanoma and DecisionDx-SCC tests. TissueCypher increased by 117% for the three months ended March 31, 2025 compared to the prior period in 2024, further contributing to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “— Components of Results of Operations—Net Revenues” below.

Current wording

For the three and six months ended June 30, 2025, our test report volume increased by 5.9% and 10.8%, respectively, compared to the same period in 2024. Our dermatologic test report volume increased by 6.3% and 6.8% for the three and six months ended June 30, 2025, respectively, compared to the prior period in 2024, largely driven by continued growth from DecisionDx-Melanoma and DecisionDx-SCC tests. TissueCypher increased by 91.8% and 102.2%, respectively, for the three and six months ended June 30, 2025, compared to the prior period in 2024, further contributing to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “— Components of Results of Operations—Net Revenues” below.

Previous wording

For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test. During the three months ended March 31, 2025, approximately 52% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Current wording

For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test. During the six months ended June 30, 2025, approximately 67% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Previous wording

Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers(“ASC 606”). We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.

Current wording

Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated. The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers(“ASC 606”). We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.

Previous wording

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Current wording

Macroeconomic conditions, including uncertainties associated with the ongoing conflicts in the Middle East, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Previous wording

Our net loss may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we:

Current wording

Our net income (loss) may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we:

Previous wording

We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher and DecisionDx-UM. We bill third-party payors and patients for the tests we perform.

Current wording

We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, TissueCypher, DecisionDx-SCC and DecisionDx-UM. We bill third-party payors and patients for the tests we perform.

Previous wording

The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test. As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred. We expect cost of sales in absolute dollars to increase as the number of tests we perform increases. Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth. For example, prior to opening our new Pittsburgh facilities during the second quarter of 2023, we incurred additional rent expense as we readied the space for future use.

Current wording

The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test. As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred. We expect cost of sales in absolute dollars to increase as the number of tests we perform increases. Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth. For example, continued investment in and expansion of our laboratory facilities.

Previous wording

Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “—Results of Operations—Comparison of the Three Months Ended March 31, 2025 and 2024”.

Current wording

Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “—Results of Operations—Comparison of the Three Months Ended June 30, 2025 and 2024” and “Results of Operations—Comparison of the Six Months Ended June 30, 2025 and 2024” for details.

Previous wording

Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021 and AltheaDx in April 2022.

Current wording

Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021, AltheaDx in April 2022, and Capsulomics, Inc., d/b/a Previse(“Capsulomics”) in May 2025.

Previous wording

Income tax benefit is primarily due to the revised estimated useful life of our intangible asset related to the discontinuation of our IDgenetix test offering, which resulted in a temporary difference and a corresponding deferred tax asset. Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business. We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and research and development credits and other tax credits.

Current wording

Income tax benefit is primarily due to the reduction of the valuation allowance previously recorded against our federal deferred tax assets. This reduction resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics. Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business. We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and research and development credits and other tax credits.

Previous wording

The $11.4 million increase in net revenues for our non-dermatologic tests was primarily attributable to our TissueCypher Barrett’s Esophagus test, which was due to higher test report volumes and, to a lesser extent, higher realized average selling price (“ASP”). For the three months ended March 31, 2025 compared to the three months ended March 31, 2024, test report volumes for our TissueCypher Barrett’s Esophagus tests increased by 117%.

Current wording

The $12.5 million decrease in net revenues for our dermatologic tests was primarily attributable to our DecisionDx-SCC test, which was due to lower realized average selling price (“ASP”) and, to a lesser extent offset by higher test report volumes. The reduction in ASP was primarily driven by the loss of Medicare LCD coverage in April 2025. For the three months ended June 30, 2025 compared to the three months ended June 30, 2024, test report volumes for our DecisionDx-SCC test increased by 11%.

Previous wording

The $3.6 million increase in net revenues from our dermatologic tests was largely attributable to an increase in test report volumes for our DecisionDx-SCC test. Increases in our DecisionDx-SCC test report volumes reflect growth through our sales force efforts. Net revenue from our dermatologic tests as a percentage of total net revenue increased from 18.7% for the three months ended March 31, 2024 to 28.4% for the three months ended March 31, 2025.

Current wording

The $11.7 million increase in net revenues from our non-dermatologic tests was largely attributable to an increase in test report volumes for our TissueCypher Barrett’s Esophagus test. Increases in our TissueCypher Barrett’s Esophagus test report volumes reflect growth through our sales force efforts. Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 20.9% for the three months ended June 30, 2024 to 34.7% for the three months ended June 30, 2025.

Previous wording

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended March 31, 2025 increased by $2.5 million, or 17.9%, compared to the three months ended March 31, 2024, primarily due to higher personnel costs, higher depreciation expense for lab equipment and leasehold improvements and higher lab services cost. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. Higher expense for lab services also reflects higher test report volumes.

Current wording

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended June 30, 2025 increased by $3.1 million, or 21.4%, compared to the three months ended June 30, 2024, primarily due to higher personnel costs, higher lab services cost, and higher expenses for lab supplies. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. Higher expense for lab services and lab supplies also reflects higher test report volumes.

Previous wording

Research and development expenses decreased by $1.2 million, or 8.8%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and primarily reflect slightly lower personnel costs and expense for clinical studies.

Current wording

Research and development expenses decreased by $1.3 million, or 9.5%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and primarily reflects lower expense for clinical trials and slightly lower personnel costs.

Previous wording

Sales and marketing expenses increased by $6.3 million, or 20.5%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily reflecting higher personnel cost, higher organizational and business development activities cost and higher sales related travel expense. Stock-based compensation expense included in sales and marketing was $4.0 million for the three months ended March 31, 2025, compared to $4.7 million for the three months ended March 31, 2024.

Current wording

Sales and marketing expenses increased by $2.4 million, or 7.5%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to higher organizational and business development activities cost and higher sales related travel expense. Stock-based compensation expense included in sales and marketing was $3.9 million for the three months ended June 30, 2025, compared to $4.8 million for the three months ended June 30, 2024.

Previous wording

General and administrative expenses increased by $3.9 million, or 21.5%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and was primarily due to higher personnel costs, higher information technology related costs and higher professional fees. Higher personnel cost reflects headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $3.8 million for the three months ended March 31, 2025, compared to $4.0 million for the three months ended March 31, 2024.

Current wording

General and administrative expenses increased by $4.5 million, or 24.6%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and was primarily due to higher personnel costs and higher information technology related costs. Higher personnel cost reflects headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $3.5 million for the three months ended June 30, 2025, compared to $4.4 million for the three months ended June 30, 2024.

Previous wording

The change in fair value of trading securities decreased by $1.4 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and was entirely associated with our investments in equity securities where we had no such investments during the comparative period.

Current wording

The change in fair value of trading securities increased by $1.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and was entirely associated with our investments in equity securities where we had no such investments during the comparative period.

Previous wording

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense totaled $11.2 million and $12.7 million for the three months ended March 31, 2025 and 2024, respectively. We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of March 31, 2025, we had 784 employees, compared to 638 as of March 31, 2024. As of March 31, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $88.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.

Current wording

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense totaled $11.2 million and $13.2 million for the three months ended June 30, 2025 and 2024, respectively. We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of June 30, 2025, we had 798 employees, compared to 703 as of June 30, 2024. As of June 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $80.5 million, which is expected to be recognized over a weighted-average period of 2.5 years.

Previous wording

Net revenues for the three months ended March 31, 2025 increased by $15.0 million, or 20.6%, to $88.0 million compared to the three months ended March 31, 2024, due to a $11.4 million increase in revenue from our non-dermatologic tests and a $3.6 million increase in revenue from our dermatologic tests.

Current wording

Net revenues for the six months ended June 30, 2025 increased by $14.2 million, or 8.9%, to $174.2 million compared to the six months ended June 30, 2024, due to a $23.1 million increase in revenue from our non-dermatologic tests and a $8.9 million decrease in revenue from our dermatologic tests.

Previous wording

Our gross margin percentage was 49.2% for the three months ended March 31, 2025, compared to 77.9% for the same period in 2024. The decrease was primarily due to higher amortization from accelerating our IDgenetix test, higher personnel costs and higher depreciation expense.

Current wording

Our gross margin percentage was 63.1% for the six months ended June 30, 2025, compared to 79.4% for the six months ended June 30, 2024. The decrease was primarily due to higher amortization from accelerating our IDgenetix test, higher personnel costs and higher depreciation expense.

Previous wording

Amortization expense increased by approximately$26.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025. As a result of this decision, the Company revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025.

Current wording

Amortization increased by approximately $25.8 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025. As a result of this decision, the Company revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities, cash generated from the sale of our products and our line-of-credit under the 2024 Loan and Security Agreement (the “2024 LSA”). All of our marketable investment securities are considered investment grade, are readily available for use in current operations. As of March 31, 2025 and December 31, 2024, we had marketable investment securities of $185.5 million and $173.4 million, respectively. Additionally, as of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $89.7 million and $119.7 million, respectively. As of March 31, 2025, we had a $25.0 million credit-line available under the 2024 LSA. Furthermore, on April 4, 2025, we amended the 2024 LSA to modify certain terms, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit.

Current wording

Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities, cash generated from the sale of our products and our line-of-credit under the 2024 Loan and Security Agreement, as amended (the “2024 LSA”). All of our marketable investment securities are considered investment grade, are readily available for use in current operations. As of June 30, 2025 and December 31, 2024, we had marketable investment securities of $193.7 million and $173.4 million, respectively. Additionally, as of June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $82.2 million and $119.7 million, respectively. Furthermore, on April 4, 2025, we amended the 2024 LSA to modify certain terms, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit. As of June 30, 2025, we had a $25.0 million credit-line available under the 2024 LSA.

Previous wording

Our liquidity has been primarily derived from the revenue generated from the sale of our products, and proceeds from our IPO in July 2019 and our follow-on public offerings of common stock in June and December of 2020. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months. However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected.

Current wording

Our liquidity has been primarily derived from the revenue generated from the sale of our products. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months. However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected.

Previous wording

In July 2023, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building where our future corporate headquarters will be located. In February 2024, we closed on the purchase of the land for cash consideration of $7.2 million. The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space. Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use. Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis. As of March 31, 2025, the development project is expected to cost a total of approximately $43.1 million. During the three months ended March 31, 2025, we have made $5.1 million in capital expenditures for this development project. We intend to use the proceeds from the 2024 Term Loan, (as defined below), the 2024 Credit Line and our existing cash and cash equivalents to pay for this project.

Current wording

In July 2023, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building where our future corporate headquarters will be located. In February 2024, we closed on the purchase of the land for cash consideration of $7.2 million. The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space. Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use. Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis. As of June 30, 2025, the development project is expected to cost a total of approximately $44.2 million. During the three and six months ended June 30, 2025, we incurred total capital spent of $8.8 million and $14.0 million, respectively, related to this development project. We intend to use the proceeds from the 2024 Term Loan, (as defined below), the 2024 Credit Line and our existing cash and cash equivalents to pay for this project.

Previous wording

On March 26, 2024 (the ‘‘Closing Date’’), we entered into the ‘2024 LSA, by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’). The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the “2024 Term Loan” section below), and (ii) from the Closing Date until March 31, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in ‘‘2024 Credit Line’’ below) at our option.

Current wording

On March 26, 2024 (the ‘‘Closing Date’’), we entered into the ‘2024 LSA, as amended on April 4, 2025, by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’). The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the “2024 Term Loan” section below), and (ii) from the Closing Date until September 30, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in ‘‘2024 Credit Line’’ below) at our option.

Previous wording

In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA. Should we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required. As of March 31, 2025, we were in compliance with these covenants.

Current wording

In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA. Should we seek to further amend the terms of the 2024 LSA, the consent of the Lender would be required. As of June 30, 2025, we were in compliance with these covenants.

Previous wording

We have a $25.0 million line of credit under the terms and provisions of the 2024 LSA available from the Closing Date until March 31, 2025. Amounts repaid under the 2024 Credit Line may not be reborrowed. As of March 31, 2025, no draws had been made on the 2024 Credit Line.

Current wording

We have a $25.0 million line of credit under the terms and provisions of the 2024 LSA and the Amendment available from the Closing Date until September 30, 2025. Amounts repaid under the 2024 Credit Line may not be reborrowed. As of June 30, 2025, no draws had been made on the 2024 Credit Line.

Previous wording

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of March 31, 2025 totaled approximately $22.4 million, of which $2.2 million is payable through the remainder of 2025 and $20.2 million is payable through early 2034. The leases expire on various dates through 2034 and provide certain options to renew for additional periods.

Current wording

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of June 30, 2025 totaled approximately $41.5 million, of which $1.6 million is payable through the remainder of 2025 and $39.9 million is payable through early 2037. The leases expire on various dates through 2034 and provide certain options to renew for additional periods.

Previous wording

Net cash used in operating activities was $6.0 million for the three months ended March 31, 2025, and was primarily attributable to net loss of $25.8 million, decreases in accrued compensation of $14.7 million, increases in accounts receivable of $5.2 million, increases in prepaid expenses and other current assets of $3.4 million and increases in accretion of discounts on marketable investment securities of $1.4 million, partially offset by depreciation and amortization of $29.8 million, non-cash stock-based compensation expense of $11.2 million, change in fair value of trading securities of $1.4 million, decreases in inventory of $1.3 million and increases in other accrued and current liabilities of $1.1 million.

Current wording

Net cash provided by operating activities was $14.8 million for the six months ended June 30, 2025, and was primarily attributable to depreciation and amortization of $33.2 million, non-cash stock-based compensation expense of $22.4 million, and increases in accounts payable of $1.7 million, partially offset by net loss of $21.3 million, decreases in accrued compensation of $7.6 million, deferred income taxes of $5.4 million, increases in prepaid expenses and other current assets of $4.7 million, accretion of discounts on marketable investment securities of $2.6 million, and increases in accounts receivable of $1.3 million.

Previous wording

Net cash used in operating activities was $6.8 million for the three months ended March 31, 2024, and was primarily attributable to decreases in accrued compensation of $14.2 million, increases in accounts receivable of $4.3 million, a net loss of $2.5 million, and increases in accretion of discounts on marketable investment securities of $1.7 million, partially offset by non-cash stock-based compensation expense of $12.7 million, depreciation and amortization of $3.3 million.

Current wording

Net cash provided by operating activities was $17.2 million for the six months ended June 30, 2024, and was primarily attributable to non-cash stock-based compensation expense of $25.9 million, depreciation and amortization of $6.7 million, and net income of $6.4 million, partially offset by decreases in accrued compensation of $7.7 million, increases in accounts receivable of $7.6 million, accretion of discounts on marketable investment securities of $3.4 million, decreases in accounts payable of $1.7 million and deferred income taxes of $1.5 million.