Natera Inc

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

During the nine months ended September 30, 2024, we processed approximately 2,271,800 tests, comprised of approximately 2,223,500 tests accessioned in our laboratory, compared to approximately 1,869,400 tests processed, comprised of approximately 1,816,500 tests accessioned in our laboratory, during the nine months ended September 30, 2023. This increase in volume primarily represents continued commercial growth of Signatera, Panorama and Horizon, both as tests performed in our laboratory as well as through our Constellation software platform.

Previous wording

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

Current wording

The percent of our revenues attributable to our U.S. direct sales force for the nine months ended September 30, 2024 was 94%, an increase compared to 91% for the nine months ended September 30, 2023. The percent of our revenues attributable to U.S. laboratory distribution partners for the nine months ended September 30, 2024 was 3%, a decrease compared to 6% from the same period in the prior year. Our ability to increase our revenues and gross profit will depend on our ability to further penetrate the U.S. market with our direct sales force. The percent of our revenues attributable to international laboratory distribution partners and other international sales for both the nine months ended September 30, 2024 and 2023 was 3%.

Previous wording

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

Current wording

For the nine months ended September 30, 2024, total revenues were $1,220.9 million compared to $771.5 million in the nine months ended September 30, 2023. Product revenues accounted for $1,212.2 million, 99% of total revenues for the nine months ended September 30, 2024 compared to $761.3 million representing 99% of total revenues for the nine months ended September 30, 2023. For the nine months ended September 30, 2024 and 2023, no customers exceeded 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $30.3 million, representing approximately 3% of total revenues for the nine months ended September 30, 2024. For the nine months ended September 30, 2023, revenues from customers outside the United States were $25.0 million, representing approximately 3% total revenues. Most of our revenues have been denominated in U.S. dollars, though we generate some revenue in foreign currency, primarily denominated in Euros and Singapore Dollars.

Previous wording

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

Current wording

Our net loss for the nine months ended September 30, 2024 and 2023 was $136.7 million and $356.8 million, respectively. This included non-cash stock compensation expense of $202.5 million and $142.4 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $2.5 billion.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which primarily includes development licensing revenue and licensing of our Constellation software. Total revenues for the three months ended September 30, 2024 increased by $171.5 million, or 63.9%, when compared to the three months ended September 30, 2023.

Previous wording

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

Current wording

We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled “Overview” above, the number of tests that we process is a key metric as it tracks our overall volume growth. During the three months ended September 30, 2024, total reported units were approximately 750,100, comprised of approximately 735,900 tests reported in our laboratory. Comparatively, during the three months ended September 30, 2023, total reported units were approximately 590,000, comprised of approximately 575,000 tests reported in our laboratory. During the three months ended September 30, 2024 and 2023, total oncology units processed were approximately 137,100 and 88,800, respectively.

Previous wording

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

Current wording

During the three months ended September 30, 2024, product revenues increased by $170.9 million, or 64.4%, compared to the three months ended September 30, 2023, primarily as a result of the continued revenue growth from increased test volumes, average selling price improvements, as well as cash receipts of $34.5 million collected during the current period related to tests delivered in prior periods that were fully collected.

Previous wording

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

Current wording

Licensing and other revenues increased by $0.5 million, or 17.6%, during the three months ended September 30, 2024 when compared to the three months ended September 30, 2023. The increase was primarily due to a increase in revenue from our collaborative agreements.

Previous wording

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

Current wording

During the three months ended September 30, 2024, cost of product revenues increased compared to the three months ended September 30, 2023 by approximately $20.7 million, or 14.1%, primarilydue to a $7.4 million increase in third-party fees, higher costs related to inventory consumption of $9.2 million driven by an increase in accessioned cases, and a $4.1 million increase in equipment and related depreciation expense, labor, overhead, shipping and other related costs driven by headcount growth and product support.

Previous wording

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

Current wording

Research and development expenses during the three months ended September 30, 2024, increased by $19.7 million, or 25.5%, when compared to the three months ended September 30, 2023. The increase was attributable to a $11.6 million increase in salary and related compensation expenditures (including a $4.3 million increase in stock-based compensation expense), a $5.8 million increase in consulting expenses, and a $4.5 million increase in lab and clinical trial related expenses, which was offset by a $2.2 million net decrease in travel, office, facilities, and other expenses.

Previous wording

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

Current wording

Selling, general and administrative expenses increased by $59.4 million, or 38.4%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was attributable to a $29.7 million increase in salary and related compensation expenditures (including an $8.3 million increase in stock-based compensation expense), a $15.4 million increase in consulting and legal expenses, a $5.6 million increase in vendor expenses, and a $8.7 million net increase in marketing, travel, facilities, office and other costs.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Interest and other income for the three months ended September 30, 2024 increased $6.2 million compared to the same period in the prior year, primarily due to greater cash and investment balances driving higher interest income.

Previous wording

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

Current wording

Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which predominantly includes development licensing revenue and licensing of our Constellation software. Total revenues for the nine months ended September 30, 2024 increased by $449.4 million, or 58.3%, when compared to the nine months ended September 30, 2023.

Previous wording

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

Current wording

We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled “Overview” above, the number of tests that we process is a key metric, as it tracks overall volume growth. During the nine months ended September 30, 2024, total reported units were approximately 2,154,700, comprised of approximately 2,109,200 tests reported in our laboratory. Comparatively, during the nine months ended September 30, 2023, total reported units were approximately 1,768,400, comprised of approximately 1,719,200 tests reported in our laboratory. During the nine months ended September 30, 2024 and 2023, total oncology units processed were approximately 377,400 and 243,500, respectively.

Previous wording

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

Current wording

During the nine months ended September 30, 2024, product revenues increased by $450.9 million, or 59.2% compared to the nine months ended September 30, 2023, primarily as a result of the continued revenue growth from increased test volumes, average selling price improvements, as well as cash receipts of $108.1 million collected during the current period related to tests delivered in prior periods that were fully collected.

Previous wording

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

Current wording

Licensing and other revenues decreased by $1.5 million, or 14.8%, during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023. The decrease was primarily due to a decrease in revenue from our collaborative agreements.

Previous wording

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

Current wording

During the nine months ended September 30, 2024, cost of product revenues increased compared to the nine months ended September 30, 2023 by approximately $58.8 million, or 13.4%, due to a $22.2 million increase in third-party fees, higher costs related to inventory consumption of $20.5 million driven by an increase in accessioned cases, and a $16.1 million increase in shipping, equipment and related depreciation expense, labor, overhead, and other related costs driven by headcount growth and product support.

Previous wording

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

Current wording

Cost of licensing and other revenues for the nine months ended September 30, 2024, when compared to the nine months ended September 30, 2023, decreased by $0.1 million, or 6.6%, primarily due to a net decrease in costs to support our collaborative agreements.

Previous wording

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

Current wording

Research and development expenses during the nine months ended September 30, 2024, increased by $37.0 million, or 15.5%, when compared to the nine months ended September 30, 2023. The increase was attributable to an increase of $31.1 million in salary and related compensation expenditures (including a $17.6 million increase in stock-based compensation expense), and a $3.9 million increase in consulting expenses, and a $2.0 million net increase in office, facilities, lab and clinical trial related expenses, and other expenses.

Previous wording

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

Current wording

Selling, general and administrative expenses increased by $149.5 million, or 32.7%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was attributable to an increase of $82.2 million increase in salary and related compensation expenditures (including a $40.4 million increase in stock-based compensation expense), a $35.7 million increase in consulting and legal expenses, a $4.0 million increase in marketing expenses, a $5.6 million increase in travel expenses, a $4.7 million increase in office costs, a $14.5 million increase in vendor expenses, and a $2.8 million increase in facilities and other costs.

Previous wording

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

Current wording

Interest and other income for the nine months ended September 30, 2024 increased $17.8 million compared to the same period in the prior year, primarily due to greater cash and investment balances driving higher interest income.

Previous wording

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

Current wording

We have incurred net losses each year since our inception. For the nine months ended September 30, 2024, we had a net loss of $136.7 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products. As of September 30, 2024, we had an accumulated deficit of $2.5 billion. As of September 30, 2024, we had $892.8 million in cash and cash equivalents and restricted cash, $29.5 million in marketable securities, $80.4 million of outstanding balance under the Credit Line including accrued interest, and $287.5 million outstanding principal balance on the Convertible Notes. As of September 30, 2024, we had $20.0 million remaining and available on the Credit Line.

Previous wording

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

Current wording

While we have introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, we have funded the portion of operating costs that exceeds revenues through a combination of equity issuances and debt and other financings. We expect to develop and commercialize future products and continue to invest in the growth of our business and, consequently, we will need to generate additional revenues to achieve future profitability and may need to raise additional equity or incur additional debt. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available at all, or in amounts or on terms acceptable to us. If we are unable to obtain additional financing, we may be required to delay the development and commercialization of our products and significantly scale back our business and operations.

Previous wording

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

Current wording

In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs. We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under our credit agreement with OrbiMed Royalty Opportunities II, LP.

Previous wording

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

Current wording

The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. On July 19, 2024, we elected to exercise our optional redemption right to redeem all $287.5 million aggregate principal amount of our outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Indenture Agreement governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes. The Redemption Date fixed for the redemption of the Convertible Notes was October 11, 2024. The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. We elected physical settlement with shares of our common stock as the settlement method to apply to all conversions of the Convertible Notes. On the Redemption Date, $287.4 million of Convertible Notes were converted for approximately 7.5 million shares of our common stock under the terms of the redemption notice. The remaining Convertible Notes not converted under the redemption notice were redeemed in exchange for cash at face value plus any accrued interest totaling $0.1 million.

Previous wording

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

Current wording

Cash provided by operating activities during the nine months ended September 30, 2024 was $82.8 million. The net loss of $136.7 million includes $240.2 million in non-cash charges resulting from $23.2 million of depreciation and amortization, $202.5 million of stock-based compensation expense, $11.2 million of non-cash lease expense, $0.9 million for amortization of debt discount and issuance cost, $0.4 million for foreign exchange adjustment, and $2.7 million of non-cash interest expense offset by a $0.6 million decrease in amortization of premiums and accretion of purchase discounts on investment securities and a $0.1 million decrease in non-cash expense recovery. Operating assets had cash outflows of $22.9 million resulting from a $28.6 million increase in accounts receivable, an $8.0 million increase in inventory, offset by a $13.7 million decrease in prepaid expenses and other assets. Operating liabilities resulted in cash inflows of $2.2 million resulting from a $10.8 million increase in accounts payable and a $27.3 million increase in accrued compensation offset by a $12.5 million decrease in lease liabilities, a $22.5 million decrease in other accrued liabilities, and a $0.9 million decrease in deferred revenue.

Previous wording

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

Current wording

Cash used in operating activities during the nine months ended September 30, 2023 was $189.4 million. The net loss of $356.8 million includes $176.5 million in non-cash charges resulting from $17.2 million of depreciation and amortization, $2.7 million in-process research and development, $1.9 million in amortization of premiums and accretion of purchase discounts on investment securities, $142.4 million of stock-based compensation expense, $11.0 million of non-cash lease expense, $1.0 million for amortization of debt discount and issuance cost, and $0.3 million for foreign exchange adjustment. Operating assets had cash outflows of $10.1 million resulting from a $10.8 million increase in accounts receivable, a $6.7 million increase in inventory, offset by a $7.4 million decrease in prepaid expenses and other assets. Operating liabilities resulted in cash inflows of $1.0 million resulting from a $15.2 million increase in accrued compensation and a $5.3 million increase in deferred revenue, offset by a $9.0 million decrease in accounts payable, a $2.1 million decrease in other accrued liabilities and a $8.4 million decrease in lease liabilities.

Previous wording

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

Current wording

Cash provided by investing activities for the nine months ended September 30, 2024 totaled $148.7 million, which was comprised of $24.8 million from proceeds from sale of investments and $307.4 million from proceeds of investments maturities, offset by $122.0 million in purchasing of new investments, $48.3 million in acquisitions of property and equipment, $2.7 million for investment in related party, and $10.5 million in asset acquisition.

Previous wording

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

Current wording

Cash provided by investing activities for the nine months ended September 30, 2023 totaled $144.4 million, which was comprised of $173.5 million from proceeds of investments maturities, offset by $29.1 million in acquisitions of property and equipment.

Previous wording

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

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024, totaled $19.2 million which was comprised of $10.3 million from proceeds from the exercise of stock options and $8.9 million from the issuance of common stock under the employee stock purchase plan.

Previous wording

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

Current wording

Cash provided by financing activities for the nine months ended September 30, 2023, totaled $247.6 million which was comprised of $235.4 million net proceeds from our equity offering completed in the third quarter of 2023, $3.5 million from proceeds from the exercise of stock options and $8.7 million from the issuance of common stock under the employee stock purchase plan.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

Previous wording

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

Current wording

Our lease commitments consist of $0.7 million of payments, which will be paid over the terms of the leases. The leases have not commenced under Accounting Standards Codification, or ASC, Topic 842, Leases (ASC 842), as of September 30, 2024. As a result, these leases are not reflected within the consolidated balance sheets.