GeneDx Holdings Corp

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share amounts)

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(in thousands, except share amounts)

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of Business

GeneDx Holdings Corp., through its subsidiary GeneDx, LLC, is a leading genomics company—one that sits at the intersection of diagnostics and data science, pairing decades of genomic expertise with an ability to interpret clinical data at scale. The Company is focused on delivering personalized and actionable health insights to inform diagnosis, direct treatment and improve drug discovery. The Company believes it is well-positioned to accelerate the use of genomics and leverage large-scale clinical data to enable precision medicine as the standard of care. With a focus in pediatric and rare diseases, the Company believes it has a competitive advantage in these two areas and can deliver on its vision today. GeneDx LLC serves healthcare professionals who work with their patients and bills third-party payors across the United States.

Unless otherwise stated herein or unless the context otherwise requires, references in these notes to:

•“GeneDx Holdings” refers to GeneDx Holdings Corp., a Delaware corporation (f/k/a Sema4 Holdings Corp. (“Sema4 Holdings”));

•“Legacy GeneDx” refers to GeneDx, LLC, a Delaware limited liability company (formerly, GeneDx, Inc., a New Jersey corporation), which we acquired on April 29, 2022 (the “Acquisition”);

•“Legacy Sema4” refers to Mount Sinai Genomics, Inc. d/b/a as Sema4, a Delaware corporation, which consummated the business combination with CM Life Sciences, Inc. (“CMLS”) on July 22, 2021 (the “Business Combination”); and

•“we,” “us” and “our,” the “Company” and “GeneDx” refer, as the context requires, to:

◦Legacy Sema4 prior to the Business Combination, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Business Combination; and

◦Legacy GeneDx prior to the Acquisition, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Acquisition.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the accounting disclosure rules and regulations of the SEC regarding interim financial reporting. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP. These condensed financial statements consolidate the operations and accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless otherwise noted, all tabular dollars are in thousands, except per share amounts. Certain reclassifications have been made to the prior year condensed consolidated financial statements in order to conform to the current year’s presentation.

In the opinion of management, the condensed consolidated financial statements reflect all normal recurring adjustments considered necessary for a fair statement of the financial position and the results of operations of the Company for the interim periods presented. Interim results are not necessarily indicative of the results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Emerging Growth Company

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. In addition, the Company was previously a “smaller reporting company”, as defined in Item 10(f)(1) of the U.S. Securities and Exchange Commission’s Regulation S-K and currently takes advantage of certain of the scaled disclosures available to smaller reporting companies. As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting, including the reporting of two fiscal years of financial statements, not being required to provide an auditor attestation of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events. These estimates include, but are not limited to, the transaction price for certain contracts with customers, potential or actual claims for recoupment from third-party payors, the valuation of stock-based awards, the valuation of warrant liabilities, income taxes and intangible assets. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates, judgments and assumptions.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included in the 2023 Form 10-K. There have been no material changes to the Company’s critical accounting policies and estimates in the current period.

Concentration of Credit Risk and Other Risks and Uncertainties

The Company assesses both the self-pay patient and, if applicable, the third-party payor that reimburses the Company on the patient’s behalf when evaluating concentration of credit risk. Significant patients and payors are those that represent more than 10% of the Company’s total revenues for the period or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable as of June 30, 2024 and December 31, 2023 were primarily from large managed care insurance companies, institutional billed accounts, and data arrangements. The Company does not require collateral as a means to mitigate customer credit risk.

For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:

• Less than 10%

(1)This payor group includes multiple individual plans and the Company calculates and presents the aggregated value from all plans, which is consistent with the Company’s portfolio approach used in accounting for diagnostic test revenue.

The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 16% and 14% of purchases for the three months ended June 30, 2024 and 2023, respectively, and 12% and 14% for the six months ended June 30, 2024 and 2023, respectively. A second supplier accounted for approximately 13% and 13% of purchases for the three months ended June 30, 2024 and 2023, respectively, and 10% and 11% for the six months ended June 30, 2024 and 2023, respectively. This risk is managed by maintaining a target quantity of surplus stock. Alternative suppliers are available for some or all of these reagents and supplies.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-09, Income Taxes – Improvements to Income Tax Disclosures (“ASU 2023-09”). The standard requires additional disclosures around disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with early adoption permitted. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The standard requires enhanced segment reporting disclosures, including significant segment expenses and other segment items. Additionally, the standard requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 will be effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. The guidance will be applied retrospectively to all periods presented in financial statements unless it is impractical to do so. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements and related disclosures.

3. Revenue Recognition

Disaggregated Revenue

The following table summarizes the Company’s disaggregated revenue by payor category:

Reassessment of Variable Consideration

Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates estimated variable consideration quarterly.

For the three months ended June 30, 2024 and 2023, the total change in estimate resulted in a net increase to revenue of $7.2 million and $3.5 million, respectively, resulting from changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met and potential and actual settlements with third party payors. The change in estimate also included an increase in revenue related to a partial release of a previously established payor reserve, as further disclosed in the “Certain Payor Matters” section below. The quarterly change in estimate did not result in material adjustments to the Company’s previously reported revenue or accounts receivable amounts.

Certain Payor Matters

As noted above, third-party payors, including government programs, may decide to deny payment or seek to recoup payments for tests performed by the Company that they contend were improperly billed, not medically necessary or against their coverage determinations, or for which they believe they have otherwise overpaid, including as a result of their own error. As a result, the Company may be required to refund payments already received, and the Company’s revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance, and changes by government agencies and payors in interpretations, requirements, policies and/or “conditions of participation” in various programs. The Company processes requests for recoupment from third-party payors in the ordinary course of its business, and it is likely that the Company will continue to do so in the future. If a third-party payor denies payment for testing or recoups money from the Company in a later period, reimbursement and the associated recognition of revenue for the Company’s testing services could decline.

From time to time, the Company may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault. Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing services. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor, the Company’s historical settlement activity (if any), and the Company’s assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved. Estimated settlements are adjusted in future periods as such adjustments become known (that is, if new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.

On December 30, 2022, the Company entered into a settlement agreement with one of its third-party payors (the “Payor”) in order to settle the claims related to coverage and billing matters allegedly resulting in the overpayments by the Payor to Legacy Sema4 (the “Disputed Claims”). Under the settlement agreement, $42.0 million is to be paid by the Company to the Payor in a series of payments each year through June 30, 2026. As of June 30, 2024, $22.0 million in scheduled payments under the agreement remain with $10.0 million due December 2024, $10.0 million in December 2025 and $2.0 million in 2026. In consideration for these payments, the Payor provided releases of the Disputed Claims, effective March 31, 2023.

As a result of this matter, and in connection with a review of certain billing policies and procedures undertaken by management, the Company considered the need to establish reserves for potential recoupments of payments previously made by third-party payors. As of June 30, 2024 and December 31, 2023, $25.1 million and $27.0 million of liabilities were recorded in accounts payable and accrued expenses and other liabilities, respectively. The Company uses estimates, judgments, and assumptions to assess whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods, based upon information presently available. These estimates are subject to change. In addition, as discussed above, the Company has made certain adjustments to its estimated variable consideration as result of this matter and other potential settlements with payors.

Remaining Performance Obligations

Due to the long-term nature of collaboration service agreements, the Company’s obligations pursuant to such agreements represents partially unsatisfied performance obligations at June 30, 2024. The revenues under these existing long-term service agreements are estimated to be approximately $2.1 million. The Company expects to recognize the majority of this revenue over the next nine months.

Costs to Fulfill Contracts

Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to Icahn School of Medicine at Mount Sinai (“ISMMS”). Amounts are generally prepaid and then expensed in line with the pattern of revenue recognition. Prepayment of amounts prior to the costs being incurred are recognized on the condensed consolidated balance sheets as current or non-current assets based upon forecasted performance.

As of June 30, 2024 and December 31, 2023, deferred costs to fulfill contracts were nominal. At each period, all outstanding deferred costs were recorded as other current assets.

The cost recognized was $0.3 million and $0.5 million for the three months ended June 30, 2024 and 2023, respectively, and $0.7 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively. These costs are recorded in the cost of services in the condensed consolidated statements of operations and comprehensive loss.

4. Fair Value Measurements

The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis:

There were no transfers between Level 1, Level 2 and Level 3 during the three and six months ended June 30, 2024 or 2023.

The Company’s marketable securities presented in the condensed consolidated balance sheet as of June 30, 2024 have maturity dates ranging from 2024 through 2027 and are classified as current assets as these investments are intended to be readily available to fund current operations. The differences between the fair value and amortized cost basis of each security are the unrealized gains or losses recorded in accumulated other comprehensive income. As of June 30, 2024, the amortized cost for maturities less than one year and greater than one year were $37.6 million and $12.4 million, respectively.

Public and Private Warrants

As of the consummation of the merger in July 2021 in connection with the Business Combination, there were 666,516 warrants to purchase shares of Class A common stock outstanding, including 447,223 public warrants and 219,293 private placement warrants. As of June 30, 2024, there were 666,515 warrants to purchase shares of Class A common stock outstanding, including 457,323 public warrants and 209,192 private placement warrants outstanding. Each warrant expires 5 years after the Business Combination or earlier upon redemption or liquidation, and entitles the holder to purchaseone share of Class A common stock at an exercise price of $379.50 per share, subject to adjustment, at any time commencing on September 4, 2021.

The Company may redeem the outstanding public warrants if the price per share of the Class A common stock equals or exceeds $594.00 as described below:

•in whole and not in part;

•at a price of $0.33 per public warrant;

•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

•if, and only if, the closing price of the Class A common stock equals or exceeds $594.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before sending the notice of redemption to warrant holders.

The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $330.00 as described below:

•in whole and not in part;

•at $3.30 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the common stock;

•if, and only if, the closing price of the Class A common stock equals or exceeds $330.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and

•if the closing price of the common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $594.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

The private placement warrants were issued to CMLS Holdings, LLC, Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock issuable upon the exercise of the private placement warrants would not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $330.00) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

For the three and six months ended June 30, 2024, a gain of $0.7 million and loss of $0.4 million, respectively, was recorded within the change in fair value of warrants and earn-out contingent liabilities in the condensed consolidated statements of operations and comprehensive loss. The change in fair value of the warrants for the three and six months ended June 30, 2023 was a gain of $0.2 million and $0.2 million, respectively.

Perceptive Warrant

On October 27, 2023 (the “Closing Date”), the Company entered into a Credit Agreement and Guaranty (the “Credit Agreement”) with Perceptive Credit Holdings IV, LP, as lender and administrative agent (“Perceptive”), which provides for a senior secured delayed draw term loan facility in an aggregate principal amount of up to $75.0 million (the “Perceptive Term Loan Facility”). As consideration for the Credit Agreement, the Company issued to Perceptive a warrant to purchase up to 1,200,000 shares (the “Perceptive Warrant”) of its Class A common stock.800,000 warrant shares (the “Initial Warrant Shares”) vested and became exercisable on the Closing Date and 400,000 warrant shares (the “Additional Warrant Shares” and, together with the Initial Warrant Shares, the “Warrant Shares”) will potentially vest and become exercisable on the Tranche B Borrowing Date, as defined in Note 8, “Long-Term Debt” included within this Quarterly Report.

On April 30, 2024 (the “Exercise Date”) Perceptive provided the Company with a notice to exercise the Initial Warrant Shares at an aggregate exercise price of $2.5 million and, as payment of the aggregate exercise price, instructed the Company to withhold a number of Initial Warrant Shares based on their aggregate fair market value as of the Exercise Date. The fair market value price of each Initial Warrant Share was equal to the 1-day volume weighted average price (the “1-day VWAP”) of the Company’s Class A common stock on the Exercise Date, or $16.4321. As a result, the Company issued 645,414 shares of its Class A common stock to Perceptive in satisfaction of the cashless exercise in respect of the Initial Warrant Shares. See Note 8, “Long-Term Debt” included within this Quarterly Report for further information.

For the three and six months ended June 30, 2024, a loss of $5.1 million and $10.1 million, respectively, was recorded within the change in fair value of warrants and earn-out contingent liabilities in the condensed consolidated statements of operations and comprehensive loss based on re-measurement performed through the Exercise Date.

Contingent Consideration (Legacy GeneDx)

In connection with the Acquisition, up to $150.0 million of contingent payments was to be payable to OPKO Health, Inc. (“OPKO”), based upon achievement of 2022 and 2023 revenue milestones (the “Milestone Payments”) pursuant to the merger agreement (the “Acquisition Merger Agreement”). The first Milestone Payment was paid out in full in April 2023 and the second Milestone Payment was valued at zero as the milestone was not met during fiscal year 2023.

During the three and six months ended June 30, 2023, a gain of $3.3 million and loss of $0.1 million, respectively, was recorded within the change in fair market value of warrant and earn-out contingent liabilities in the condensed consolidated statements of operations and comprehensive loss.

Connecticut Department of Economic and Community Development Funding Commitment

The Company’s loan from the Connecticut Department of Economic and Community Development (“DECD”) is classified within Level 2 of the fair value hierarchy. The loan was recorded at its carrying value of $6.3 million as of June 30, 2024 and December 31, 2023, with $1.1 million recorded in other current liabilities on the condensed consolidated balance sheets at June 30, 2024. The fair value of the loan as of June 30, 2024 was $4.9 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.

5. Property and Equipment, net

Property and equipment, net consisted of the following:

For the three months ended June 30, 2024 and 2023, depreciation and amortization expense was $1.7 million and $6.8 million, respectively. For the six months ended June 30, 2024 and 2023, depreciation and amortization expense was $3.5 million and $12.0 million, respectively.

For the three months ended June 30, 2023, the Company recorded a $3.4 million charge to accelerate the amortization for certain capitalized software projects associated with Legacy Sema4 that are not expected to be utilized, and also recorded a $3.0 million gain on sale of assets during the period associated with the closure of Legacy Sema4 facilities. For the six months ended June 30, 2023, the Company recorded a $1.6 million non-cash impairment charge on the condensed consolidated statements of operations and comprehensive loss (of which $0.8 million was allocated to the right-of-use asset associated with the sublease), which was driven by indicators of impairment related to a sublease agreement.

Depreciation and amortization expense is included within the condensed consolidated statements of operations and comprehensive loss as follows:

6. Intangible Assets

The following table reflects, as of June 30, 2024, the carrying values and remaining useful lives of acquired intangible assets:

Amortization expense for tradenames and trademarks and developed technology of $2.3 million and $2.3 million was recorded in general and administrative for the three months ended June 30, 2024 and 2023, respectively, and $4.6 million and $4.6 million for the six months ended June 30, 2024 and 2023, respectively, within the condensed consolidated statements of operations and comprehensive loss. Amortization expense for customer relationships of $1.2 million and $1.2 million was recorded in selling and marketing for the three months ended June 30, 2024 and 2023, respectively, and $2.5 million and $2.5 million for the six months ended June 30, 2024 and 2023, respectively, within the condensed consolidated statements of operations and comprehensive loss.

7. Related Party Transactions

Related Party Revenues

Total related party diagnostic testing revenues were $0.5 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively, and $1.1 million and $1.6 million for the six months ended June 30, 2024 and 2023, respectively. Related party revenues primarily include diagnostic testing revenues from a subsidiary of OPKO and the prices charged represent market rates.

Related Party Expenses

Total related party costs are included within cost of services and other operating expenses, net in the condensed consolidated statements of operations and comprehensive loss as follows:

On June 1, 2017, the Company signed a contribution and funding agreement and other agreements with ISMMS, whereby ISMMS contributed certain assets and liabilities related to the Company’s operations, provided certain services to the Company, and also committed to funding the Company up to $55.0 million in future capital contributions in exchange for equity in the Company, of which $55.0 million was drawn as of December 31, 2019. Following the transaction, the Company commenced operations and began providing the services and performing research.

Expenses recognized pursuant to other service arrangements with ISMMS totaled $1.1 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively, and $2.5 million and $3.3 million for the six months ended June 30, 2024 and 2023, respectively. These amounts are included in either cost of services or other operating expenses, net on the condensed consolidated statements of operations and comprehensive loss depending on the particular activity to which the costs relate. Payables due to ISMMS for the other service arrangements were $0.5 million and $1.0 million at June 30, 2024 and December 31, 2023, respectively. These amounts are included within due to related parties on the Company’s condensed consolidated balance sheets.

Additionally, the Company incurred $5.1 million in purchases of diagnostic testing kits and materials and $1.8 million and $2.8 million was recorded in cost of services for the three and six months ended June 30, 2024, respectively, from an affiliate of a member of the Board of Directors who has served in the role since July 2021. The Company incurred $1.5 million in purchases and $0.7 million and $0.8 million was recorded in cost of services for the three and six months ended June 30, 2023, respectively.

The prices paid represent market rates. Payables due were $0.7 million and $0.4 million as of June 30, 2024 and December 31, 2023, respectively.

Legacy GeneDx and OPKO entered into a Transition Services Agreement dated as of April 29, 2022 (the “OPKO TSA”) pursuant to which OPKO had agreed to provide services, at cost, subject to certain limited exceptions, in order to facilitate the transactions contemplated by the Acquisition Merger Agreement, including human resources, information technology support, and finance and accounting. Services in connection with the OPKO TSA were fully completed in October 2023. The Company recognized $0.4 million and $1.2 million of expenses for the three and six months ended June 30, 2023, respectively, related to the agreement.

8. Long-Term Debt

At June 30, 2024, long-term debt matures as follows:

Perceptive Term Loan Facility

On October 27, 2023 (the “Closing Date”), the Company entered into the Perceptive Term Loan Facility. An initial tranche of $50 million (the “Tranche A Loan”) was funded under the Perceptive Term Loan Facility on the Closing Date. In addition to the Tranche A Loan, the Perceptive Term Loan Facility includes an additional tranche of $25 million (the “Tranche B Loan,” and together with the Tranche A Loan, the “Term Loans”), which will be accessible by the Company so long as the Company satisfies certain customary conditions precedent, including a specified revenue milestone (the funding date of the Tranche B Loan, the “Tranche B Borrowing Date”). The Perceptive Term Loan Facility has a maturity date of October 27, 2028 (the “Maturity Date”) and provides for an interest-only period during the term of the loan with principal due at the maturity date.

Interest Rate

The Perceptive Term Loan Facility will accrue interest at an annual rate equal to the sum of (a) Term SOFR (as defined in the Credit Agreement) and (b) an applicable margin of 7.5% (the “Applicable Margin”). Accrued interest on the Term Loans is payable monthly in arrears. Upon an Event of Default (as defined in the Credit Agreement), the Applicable Margin will automatically increase by an additional 4% per annum.

Amortization and Prepayment

Prior to the Maturity Date, there will be no scheduled principal payments under the Perceptive Term Loan Facility. On the Maturity Date, the Company is required to pay Perceptive the aggregate outstanding principal amount of the Term Loans and all accrued and unpaid interest thereon. The Term Loans may be prepaid at any time, subject to a prepayment premium equal to 0% to 10% of the aggregate outstanding principal amount being prepaid, depending on the date of prepayment.

Security Instruments and Warrant

In connection with the Credit Agreement, the Company also entered into a Security Agreement, dated as of the Closing Date, with Perceptive, pursuant to which all of its obligations under the Credit Agreement are secured by a first lien perfected security interest on substantially all of its existing and after-acquired assets, subject to customary exceptions.

On the Closing Date, as consideration for the Credit Agreement, the Company issued the Perceptive Warrant to Perceptive, which allows them to purchase up to 1,200,000 Warrant Shares. The 800,000 Initial Warrant Shares vested and became exercisable on the Closing Date and the 400,000 Additional Warrant Shares will potentially vest and become exercisable on the Tranche B Borrowing Date. The per share exercise price for the Initial Warrant Shares is $3.1752 (the “Initial Warrant Exercise Price”), which is equal to the 10-day volume weighted average price (the “10-day VWAP”) of the Company’s Class A common stock at the end of the business day immediately prior to the Closing Date, and the per share exercise price for the Additional Warrant Shares will be equal to the lower of (a) the Initial Warrant Exercise Price or (b) the 10-day VWAP ending on the end of the business day immediately preceding the Tranche B Borrowing Date. The Perceptive Warrant will be exercisable, in whole or in part, until the 10 th anniversary of the applicable vesting date.

On April 30, 2024, Perceptive provided the Company with a notice to exercise the Initial Warrant Shares at an aggregate exercise price of $2.5 million and instructed the Company to withhold a number of Initial Warrant Shares as payment for the aggregate exercise price. As a result, the Company issued 645,414 shares of its Class A common stock in satisfaction of the cashless exercise in respect of the Initial Warrant Shares. See Note 4, “Fair Value Measurements” included within this Quarterly Report for further information.

Connecticut Department of Economic and Community Development Funding Commitment

In June 2017, ISMMS assigned a loan funding commitment from the DECD to the Company (the “DECD Loan Agreement”) to support the Genetic Sequencing Laboratory Project in Branford, Connecticut, with funding based on the achievement of certain project development phases. The DECD Loan Agreement provided for a total loan commitment of $15.5 million at a fixed annual interest rate of 2.0% for a term of 10 years. The Company was required to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023. The final payment of principal and interest was due in July 2028. However, under the terms of the DECD Loan Agreement, the DECD granted a partial principal loan forgiveness of up to $12.3 million in the aggregate. Such forgiveness was contingent upon the Company achieving certain job creation and retention milestones and $4.5 million had been forgiven at December 31, 2022. This commitment was collateralized by a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement.

In January 2023, the Company amended the DECD Loan Agreement, which resulted in the Company agreeing to pay $2.0 million in principal, obtaining $2.8 million in debt forgiveness for achieving its Phase 2 job milestone, and agreeing totwo new forgiveness milestone targets for its Phase 3 job milestone (eligible for $2.0 million in forgiveness) and a final phase job milestone (eligible for $1.0 million in forgiveness) (the “2022 Amended DECD Loan Agreement”). Upon execution of this amendment, the Company paid the $2.0 million in principal and received $2.8 million in debt forgiveness, and the Company recognized the debt forgiveness as other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2023. The terms of the 2022 Amended DECD Loan Agreement require the Company to make interest-only payments through July 2024 and principal and interest payments commencing in August 2024 through July 2029 at the same fixed annual interest rate of 2.0%. The other terms of the 2022 Amended DECD Loan Agreement remained the same.

The outstanding loan balance from the 2022 Amended DECD Loan Agreement was $6.3 million at June 30, 2024.

9. Purchase Commitments and Contingencies

Purchase Commitments

The following sets forth purchase commitments with software and equipment providers as of June 30, 2024 with a remaining term of at least one year:

The Company enters into contracts with suppliers to purchase materials needed for diagnostic testing. These contracts generally do not require multi-year purchase commitments.

There have been no material changes to the lease obligations from those disclosed in Note 10, “Leases” to the consolidated financial statements included in the 2023 Form 10-K.

Contingencies

The Company is or may become subject to various claims and legal actions arising in the ordinary course of business. The Company does not believe that the outcome of any existing matters will have a material effect on the Company’s condensed consolidated financial statements. However, no assurance can be given that the ultimate resolution of such proceedings will not materially impact the Company’s condensed consolidated financial statements.

Except as described below, the Company was not a party to any material legal proceedings at June 30, 2024, nor is it a party to any material legal proceedings at the date of issuance of these condensed consolidated financial statements.

On September 7, 2022, a shareholder class action lawsuit was filed in the United States District Court for the District of Connecticut against the Company and certain of the Company’s current and former officers. The complaint purports to bring suit on behalf of stockholders who purchased the Company’s publicly traded securities between March 14, 2022 and August 15, 2022. Following the appointment of a lead plaintiff, an amended complaint was filed on January 30, 2023. As amended, the complaint purports to allege that the defendants made false and misleading statements about the Company’s business, operations and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and seeks unspecified compensatory damages, fees and costs. The defendants moved to dismiss the amended complaint on August 21, 2023. That motion is pending. The Company believes the allegations and claims made in the complaint are without merit.

On February 7, 2023, a stockholder commenced a lawsuit in the Delaware Court of Chancery. The suit is brought as a class action on behalf of stockholders of CMLS who did not redeem their shares in connection with the Business Combination between CMLS and Legacy Sema4. The suit names as defendants all directors of CMLS at the time of the transaction, including certain directors who continue to serve on the Company’s Board of Directors, as well as CMLS Holdings LLC. The Company is not named as a defendant. The complaint alleges that the July 2, 2021 proxy statement mailed to CMLS stockholders in connection with the transaction contained false and misleading statements, and purports to assert a claim of breach of fiduciary duty against all individual defendants, and a similar claim against CMLS Holdings LLC and certain individuals for breach of fiduciary duty as control persons. The suit seeks to recover unspecified damages on behalf of the alleged class, among other relief. After defendants moved to dismiss the case, the plaintiff filed an amended complaint on July 6, 2023, revising certain allegations and adding third parties as defendants. The defendants answered the amended complaint on September 15, 2023. The Company is subject to certain claims for advancement and indemnification by the individual defendants in this proceeding.

During the second quarter of 2024, the parties reached an agreement in principle through mediation to resolve all claims for approximately $21 million. The agreement in principle is expected to be funded by the Company (based on its indemnification obligations) and available insurance of approximately $10 million. The parties are currently in the process of negotiating the formal stipulation of settlement, which must be approved by the Court in order to be finalized. There can be no assurance that the final stipulation of settlement will be executed, that the stipulation of settlement, if executed, will include the terms and conditions currently anticipated by the Company or that such stipulation of settlement will be approved by the Court. As of June 30, 2024, the Company reserved the aforementioned settlement and associated litigation costs of approximately $2.4 million in accounts payable and accrued expenses, and recorded insurance recoveries in prepaid expenses and other current assets on the condensed consolidated balance sheet.

On November 28, 2023, a stockholder filed a derivative suit, allegedly on behalf of the Company, based largely on the same allegations in the securities class action referenced above. The suit was filed in federal court in the District of Delaware, styled Ghazaleh v. Schadt, et al, 23-cv-01357 (D. Del.), and purports to assert claims against certain of the Company’s former and current officers and directors under Section 10(b) of the Exchange Act, and for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment and corporate waste. The Company is named only as a nominal defendant. The complaint seeks damages on the Company’s behalf, and seeks corporate governance and other relief. The parties have agreed to stay this suit in light of the securities class action referenced above, and hence no response to the complaint is currently due.

On June 25, 2024, a substantially similar stockholder derivative suit was filed in federal court in the District of Connecticut, styled Scinto v. Schadt, et al, 2:24-cv-01100 (D. Conn.). The suit, also purportedly brought on the Company’s behalf against certain of its former or current officers and directors, asserts claims for breach of fiduciary duty, unjust enrichment, corporate waste, and violations of Sections 10(b) and 14(a) of the Exchange Act. The Company is named only as a nominal defendant. The Complaint seeks damages on the Company’s behalf, as well as corporate governance reforms and other relief. The parties are discussing a stay of the case in light of the securities class action referenced above.

10. Stock-Based Compensation

Stock-based compensation expense is included within the condensed consolidated statements of operations and comprehensive loss as follows:

1 The Company recorded an aggregate reversal of stock-based compensation of $0.1 million and $7.5 million during the three months ended June 30, 2024 and 2023, respectively, and $3.3 million and $15.6 million during the six months ended June 30, 2024 and 2023, respectively, due to forfeiture activities upon employee terminations.

2 Includes $78 thousand of expense related to the 2021 Employee Stock Purchase Plan during the three and six months ended June 30, 2024.

The Company maintains the 2021 Equity Incentive Plan (as amended, the “2021 Plan”), which allows for grants of stock-based awards. No awards granted under the 2021 Plan are exercisable after 10 years from the date of grant, and the awards granted under the 2021 Plan generally vest over afour-year period on a graded vesting basis; however, the Company also granted certain

RSUs with vesting terms beginning 12 months from the grant date and vesting immediately on the grant date. On January 1 of each year through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to 5% of the total number of shares of all classes of common stock issued and outstanding immediately preceding December 31. In January 2024, the number of Class A common stock reserved for future issuance under the 2021 Plan automatically increased by 1,298,943 shares.

The Company also maintains the 2023 Equity Inducement Plan (the “Equity Inducement Plan”), which allows for grants of equity awards of the Company’s Class A common stock to individuals who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company.

As of June 30, 2024, there was an aggregate of 1,748,523 shares available for grants of stock options or other awards under the 2021 Plan and Equity Inducement Plan.

Stock Options

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

At June 30, 2024, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $1.1 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.2 years.

Restricted Stock Units (RSUs)

The following table summarizes the time-based RSU activity during the six months ended June 30, 2024:

Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. On January 1 of each year through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the 2021 ESPP may be increased automatically by the number of shares equal to 1% of the total number of shares of all classes of common stock issued and outstanding immediately preceding December 31.

The 2021 ESPP became open for enrollment in April 2024. Under the 2021 ESPP, eligible employees may purchase shares of the Company’s Class A common stock at a discount through payroll deductions during each discretesix-month offering period. The purchase price under each discrete offering period is equal to 85% of the lesser of the fair market value of the Class A common stock on the first and last day of the offering period.

The first offering period will be completed on October 31, 2024. As such, the Company hasnot issued any shares under the 2021 ESPP during the three and six months ended June 30, 2024. A total of 596,604 shares of Class A common stock were reserved for future issuance under the 2021 ESPP as of June 30, 2024.

11. Income Taxes

Income tax benefit for the six months ended June 30, 2024 and 2023 was $0.3 million and $0.3 million, respectively. Income taxes for these periods are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events should they occur. The Company’s estimated annual effective tax rate was 0.48% and 0.33% for the six months ended June 30, 2024 and 2023, respectively.

The difference between the Company’s effective tax rates in 2024 and 2023 compared to the U.S. statutory tax rate of 21% is primarily due to changes in valuation allowances associated with the Company’s assessment of the likelihood of the recoverability of deferred tax assets. The Company currently has valuation allowances against a significant portion of its deferred tax assets primarily related to its net operating loss carryforwards and tax credit carryforwards.

12. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented as the effect would be anti-dilutive:

13. Restructuring Costs

Total restructuring costs were $0.2 million and $1.6 million for the three months ended June 30, 2024 and 2023, respectively, and $1.1 million and $2.3 million for the six months ended June 30, 2024 and 2023, respectively. The table below provides certain information concerning restructuring activity during the six months ended June 30, 2024:

On October 30, 2023, the Company announced a continued strategic realignment of its organization to key priorities which includes the elimination of approximately 50 positions impacted on August 23, 2023, and approximately 35 positions impacted on October 30, 2023. Together these actions reduced the size of the Company’s workforce by 10% from the total number that existed at the time of the August reduction in force. In total, the Company announced cost saving initiatives, including but not limited to these reductions in force, that are expected to result in an excess of $40 million in annual cost reduction. The Company expects that all remaining cash severance payments will be complete in less than one year.

14. Supplemental Financial Information

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the condensed consolidated balance sheets to the total of the same amounts shown on the condensed consolidated statements of cash flows:

Restricted cash as of June 30, 2024 and December 31, 2023 primarily consists of money market deposit accounts that secure an irrevocable standby letter of credit that serves as collateral for security deposit operating leases.

Prepaid expenses and other current assets consisted of the following:

Accounts payable and accrued expenses consisted of the following:

Other current liabilities consisted of the following:

Other liabilities consisted of the following:

Capital Raise

On January 31, 2023, the Company raised approximately $150.0 million in gross proceeds and announced the closing of an underwritten public offering of 9,962,316 shares of its Class A common stock and a concurrent registered direct offering of 2,353,436 shares of its Class A common stock. The net offering proceeds received after deducting underwriters' discounts and commissions payable by the Company were approximately $135.4 million. On April 17, 2023, following the Company’s receipt of stockholder approval for the issuance, the Company issued the remaining 676,868 shares of the Company’s Class A common stock in its previously announced registered direct offering for gross proceeds of approximately $7.6 million.

15. Segment Reporting

The Company’s structure is aligned with how the chief operating decision maker (“CODM”) reviews the business, makes investing and resource allocation decisions and assesses operating performance. The Company’stwo reportable segments are: (i)

GeneDx inclusive of Legacy GeneDx and Legacy Sema4 data revenues and associated costs and (ii) Legacy Sema4 diagnostics. The GeneDx segment primarily provides pediatric and rare disease diagnostics with a focus on whole exome and genome sequencing and, to a lesser extent, data and information services. The Legacy Sema4 diagnostics segment provided reproductive and women’s health and somatic oncology diagnostic testing and screening products and has been completely shut down.

The CODM evaluates segment performance based on revenue and adjusted gross profit.

(1)Adjusted cost of services and adjusted gross profit exclude depreciation and amortization expense, stock-based compensation expense and restructuring costs.

Management manages assets on a total company basis, not by reporting segment. The CODM does not regularly review any asset information by reporting segment and, accordingly, the Company does not report asset information by reporting segment.