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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________
Commission File Number: 001-38984

CASTLE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 77-0701774
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
505 S. Friendswood Drive, Suite 401, Friendswood, Texas |  | 77546
(Address of principal executive offices) |  | (Zip Code)

(866) 788-9007
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, $0.001 par value per share | CSTL | The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☒
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 28, 2025, there were 29,008,281 shares of common stock, $0.001 par value per share, issued and outstanding.

Table of Contents
Table of Contents

|  | Page
PART I. | FINANCIAL INFORMATION | 1
Item 1. | Financial Statements | 1
| Condensed Consolidated Balance Sheets as of June 30, 2025 (Unaudited) and December 31, 2024 | 1
| Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 3 0, 2025 and 2024 | 2
| Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 3 0, 2025 and 2024 | 3
| Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 3 0, 2025 and 2024 | 4
| Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 3 0, 2025 and 2024 | 6
| Notes to Unaudited Condensed Consolidated Financial Statements | 8
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 43
Item 4. | Controls and Procedures | 44
PART II. | OTHER INFORMATION | 45
Item 1. | Legal Proceedings | 45
Item 1A. | Risk Factors | 45
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 52
Item 3. | Defaults Upon Senior Securities | 52
Item 4. | Mine Safety Disclosures | 52
Item 5. | Other Information | 52
Item 6. | Exhibits | 53
SIGNATURES |  | 54

i

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

| June 30, 2025 |  | December 31, 2024
ASSETS | (unaudited) |  |
Current Assets |  |  |
Cash and cash equivalents | $ | 82,233 |  |  | $ | 119,709 |
Marketable investment securities | 193,697 |  |  | 173,421 |
Accounts receivable, net | 52,311 |  |  | 51,218 |
Inventory | 8,366 |  |  | 8,135 |
Prepaid expenses and other current assets | 12,061 |  |  | 7,671 |
Total current assets | 348,668 |  |  | 360,154 |
Long-term accounts receivable, net | 1,132 |  |  | 918 |
Property and equipment, net | 74,060 |  |  | 51,122 |
Operating lease assets | 15,503 |  |  | 11,584 |
Goodwill and other intangible assets, net | 104,125 |  |  | 106,229 |
Other assets – long-term | 1,241 |  |  | 1,228 |
Total assets | $ | 544,729 |  |  | $ | 531,235 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current Liabilities |  |  |
Accounts payable | $ | 13,181 |  |  | $ | 6,901 |
Accrued compensation | 24,973 |  |  | 32,555 |
Contingent consideration | 1,000 |  |  | — |
Operating lease liabilities | 1,571 |  |  | 1,665 |
Current portion of long-term debt | 1,944 |  |  | 278 |
Other accrued and current liabilities | 8,221 |  |  | 7,993 |
Total current liabilities | 50,890 |  |  | 49,392 |
Long-term debt | 8,096 |  |  | 9,745 |
Noncurrent portion of contingent consideration | 1,500 |  |  | — |
Noncurrent operating lease liabilities | 25,377 |  |  | 14,345 |
Noncurrent finance lease liabilities | 364 |  |  | 311 |
Deferred tax liability | 3,126 |  |  | 1,607 |
Total liabilities | 89,353 |  |  | 75,400 |
Commitments and Contingencies (Note 12) |  |  |
Stockholders’ Equity |  |  |
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized as of June 30, 2025 and December 31, 2024; no shares issued and outstanding as of June 30, 2025 and December 31, 2024 | — |  |  | — |
Common stock, $0.001 par value per share; 200,000,000 shares authorized as of June 30, 2025 and December 31, 2024; 28,981,151 and 28,483,195 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | 29 |  |  | 28 |
Additional paid-in capital | 676,759 |  |  | 655,703 |
Accumulated deficit | (221,451) |  |  | (200,126) |
Accumulated other comprehensive income | 39 |  |  | 230 |
Total stockholders’ equity | 455,376 |  |  | 455,835 |
Total liabilities and stockholders’ equity | $ | 544,729 |  |  | $ | 531,235 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1

Table of Contents
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
NET REVENUES | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | 174,176 |  |  | $ | 159,976 |
OPERATING EXPENSES |  |  |  |  |  |  |
Cost of sales (exclusive of amortization of acquired intangible assets) | 17,626 |  |  | 14,519 |  |  | 34,009 |  |  | 28,413 |
Research and development | 12,787 |  |  | 14,136 |  |  | 25,375 |  |  | 27,945 |
Selling, general and administrative | 58,065 |  |  | 51,088 |  |  | 116,685 |  |  | 99,583 |
Amortization of acquired intangible assets | 1,961 |  |  | 2,247 |  |  | 30,286 |  |  | 4,494 |
Total operating expenses, net | 90,439 |  |  | 81,990 |  |  | 206,355 |  |  | 160,435 |
Operating (loss) income | (4,251) |  |  | 5,012 |  |  | (32,179) |  |  | (459) |
Interest income | 2,944 |  |  | 3,144 |  |  | 6,043 |  |  | 6,140 |
Changes in fair value of trading securities | 1,185 |  |  | — |  |  | (240) |  |  | — |
Interest expense | (21) |  |  | (270) |  |  | (38) |  |  | (284) |
(Loss) income before income taxes | (143) |  |  | 7,886 |  |  | (26,414) |  |  | 5,397 |
Income tax benefit | (4,666) |  |  | (1,034) |  |  | (5,089) |  |  | (989) |
Net income (loss) | $ | 4,523 |  |  | $ | 8,920 |  |  | $ | (21,325) |  |  | $ | 6,386 |
Earnings (loss) per share: |  |  |  |  |  |  |
Basic | $ | 0.16 |  |  | $ | 0.32 |  |  | $ | (0.74) |  |  | $ | 0.23 |
Diluted | $ | 0.15 |  |  | $ | 0.31 |  |  | $ | (0.74) |  |  | $ | 0.22 |
Weighted-average shares outstanding: |  |  |  |  |  |  |
Basic | 28,914 |  |  | 27,646 |  |  | 28,763 |  |  | 27,566 |
Diluted | 29,545 |  |  | 28,738 |  |  | 28,763 |  |  | 28,542 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

Table of Contents
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Net income (loss) | $ | 4,523 |  |  | $ | 8,920 |  |  | $ | (21,325) |  |  | $ | 6,386 |
Other comprehensive loss: |  |  |  |  |  |  |
Net unrealized loss on marketable investment securities | (92) |  |  | (61) |  |  | (191) |  |  | (308) |
Comprehensive income (loss) | $ | 4,431 |  |  | $ | 8,859 |  |  | $ | (21,516) |  |  | $ | 6,078 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share data)

|  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income (Loss) |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |
BALANCE, JANUARY 1, 2024 |  | 27,410,532 |  |  | $ | 27 |  |  | $ | 609,477 |  |  | $ | (218,371) |  |  | $ | 136 |  |  | $ | 391,269 |
Stock-based compensation expense |  | — |  |  | — |  |  | 12,675 |  |  | — |  |  | — |  |  | 12,675 |
Exercise of common stock options |  | 19,066 |  |  | — |  |  | 65 |  |  | — |  |  | — |  |  | 65 |
Issuance of common stock from vested restricted stock units and payment of employees’ taxes |  | 44,830 |  |  | — |  |  | (474) |  |  | — |  |  | — |  |  | (474) |
Issuance of common stock under the employee stock purchase plan |  | 111,241 |  |  | 1 |  |  | 1,707 |  |  | — |  |  | — |  |  | 1,708 |
Net unrealized loss on marketable investment securities |  | — |  |  | — |  |  | — |  |  | — |  |  | (247) |  |  | (247) |
Net loss |  | — |  |  | — |  |  | — |  |  | (2,534) |  |  | — |  |  | (2,534) |
BALANCE, MARCH 31, 2024 |  | 27,585,669 |  |  | $ | 28 |  |  | $ | 623,450 |  |  | $ | (220,905) |  |  | $ | (111) |  |  | $ | 402,462 |
Stock-based compensation expense |  | — |  |  | — |  |  | 13,179 |  |  | — |  |  | — |  |  | 13,179 |
Exercise of common stock options |  | 1,779 |  |  | — |  |  | 8 |  |  | — |  |  | — |  |  | 8 |
Issuance of common stock from vested restricted stock units and payment of employees’ taxes |  | 123,576 |  |  | — |  |  | (615) |  |  | — |  |  | — |  |  | (615) |
Net unrealized loss on marketable investment securities |  | — |  |  | — |  |  | — |  |  | — |  |  | (61) |  |  | (61) |
Net income |  | — |  |  | — |  |  | — |  |  | 8,920 |  |  | — |  |  | 8,920 |
BALANCE, JUNE 30, 2024 |  | 27,711,024 |  |  | $ | 28 |  |  | $ | 636,022 |  |  | $ | (211,985) |  |  | $ | (172) |  |  | $ | 423,893 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share data)

|  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income (Loss) |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |
BALANCE, JANUARY 1, 2025 |  | 28,483,195 |  |  | $ | 28 |  |  | $ | 655,703 |  |  | $ | (200,126) |  |  | $ | 230 |  |  | $ | 455,835 |
Stock-based compensation expense |  | — |  |  | — |  |  | 11,179 |  |  | — |  |  | — |  |  | 11,179 |
Exercise of common stock options |  | 6,331 |  |  | — |  |  | 18 |  |  | — |  |  | — |  |  | 18 |
Issuance of common stock from vested restricted stock units and payment of employees’ taxes |  | 251,970 |  |  | 1 |  |  | (2,517) |  |  | — |  |  | — |  |  | (2,516) |
Issuance of common stock under the employee stock purchase plan |  | 103,441 |  |  | — |  |  | 1,737 |  |  | — |  |  | — |  |  | 1,737 |
Net unrealized loss on marketable investment securities |  | — |  |  | — |  |  | — |  |  | — |  |  | (99) |  |  | (99) |
Net loss |  | — |  |  | — |  |  | — |  |  | (25,848) |  |  | — |  |  | (25,848) |
BALANCE, MARCH 31, 2025 |  | 28,844,937 |  |  | $ | 29 |  |  | $ | 666,120 |  |  | $ | (225,974) |  |  | $ | 131 |  |  | $ | 440,306 |
Stock-based compensation expense |  | — |  |  | — |  |  | 11,208 |  |  | — |  |  | — |  |  | 11,208 |
Exercise of common stock options |  | 10,664 |  |  | — |  |  | 19 |  |  | — |  |  | — |  |  | 19 |
Issuance of common stock from vested restricted stock units and payment of employees’ taxes |  | 125,550 |  |  | — |  |  | (588) |  |  | — |  |  | — |  |  | (588) |
Net unrealized loss on marketable investment securities |  | — |  |  | — |  |  | — |  |  | — |  |  | (92) |  |  | (92) |
Net income |  | — |  |  | — |  |  | — |  |  | 4,523 |  |  | — |  |  | 4,523 |
BALANCE, JUNE 30, 2025 |  | 28,981,151 |  |  | $ | 29 |  |  | $ | 676,759 |  |  | $ | (221,451) |  |  | $ | 39 |  |  | $ | 455,376 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

| Six Months Ended June 30,
| 2025 |  | 2024
OPERATING ACTIVITIES |  |  |
Net (loss) income | $ | (21,325) |  |  | $ | 6,386 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: |  |  |
Depreciation and amortization | 33,178 |  |  | 6,688 |
Stock-based compensation expense | 22,387 |  |  | 25,854 |
Change in fair value of trading securities | 240 |  |  | — |
Deferred income taxes | (5,437) |  |  | (1,542) |
Accretion of discounts on marketable investment securities | (2,606) |  |  | (3,422) |
Other | 219 |  |  | 83 |
Change in operating assets and liabilities: |  |  |
Accounts receivable | (1,307) |  |  | (7,620) |
Prepaid expenses and other current assets | (4,696) |  |  | (294) |
Inventory | (231) |  |  | (71) |
Operating lease assets | 664 |  |  | 678 |
Other assets | (13) |  |  | 143 |
Accounts payable | 1,689 |  |  | (1,650) |
Operating lease liabilities | (869) |  |  | (432) |
Accrued compensation | (7,582) |  |  | (7,706) |
Other accrued and current liabilities | 474 |  |  | 68 |
Net cash provided by operating activities | 14,785 |  |  | 17,163 |
INVESTING ACTIVITIES |  |  |
Purchases of marketable investment securities | (92,832) |  |  | (113,194) |
Proceeds from maturities of marketable investment securities | 80,300 |  |  | 86,450 |
Purchases of debt securities classified as held-to-maturity | (5,569) |  |  | — |
Asset acquisition, net of cash and cash equivalents acquired | (18,726) |  |  | — |
Purchases of property and equipment | (14,003) |  |  | (14,381) |
Proceeds from sale of property and equipment | 21 |  |  | 7 |
Net cash used in investing activities | (50,809) |  |  | (41,118) |
FINANCING ACTIVITIES |  |  |
Proceeds from exercise of common stock options | 37 |  |  | 73 |
Payment of employees’ taxes on vested restricted stock units | (3,104) |  |  | (1,089) |
Proceeds from contributions to the employee stock purchase plan | 1,482 |  |  | 1,749 |
Repayment of principal portion of finance lease liabilities | (57) |  |  | (47) |
Proceeds from lease incentives received | 190 |  |  | — |
Proceeds from issuance of term debt | — |  |  | 10,000 |
Net cash (used in) provided by financing activities | (1,452) |  |  | 10,686 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(in thousands)

| Six Months Ended June 30,
| 2025 |  | 2024
NET CHANGE IN CASH AND CASH EQUIVALENTS | (37,476) |  |  | (13,269) |
Beginning of period | 119,709 |  |  | 98,841 |
End of period | $ | 82,233 |  |  | $ | 85,572 |
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |  |  |
Asset acquisition, liability for contingent consideration | $ | 2,500 |  |  | $ | — |
Accrued purchases of property and equipment | $ | 6,822 |  |  | $ | 2,148 |
Operating lease assets obtained in exchange for lease obligations | $ | 4,687 |  |  | $ | — |
Decrease in operating lease assets with corresponding change in lease liabilities | $ | (104) |  |  | $ | (7) |
Finance lease assets obtained in exchange for lease obligations | $ | 119 |  |  | $ | 166 |
Property and equipment acquired with tenant improvement allowance | $ | 7,224 |  |  | $ | — |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Description of Business
Castle Biosciences, Inc. (the ‘‘Company,” “we,” “us” or “our”) was incorporated in the state of Delaware on September 12, 2007. We are a commercial-stage diagnostics company focused on providing clinicians and their patients with personalized, clinically actionable information to inform treatment decisions and improve health outcomes. We are based in Friendswood, Texas (a suburb of Houston, Texas) and our laboratory operations are conducted at our facilities located in Phoenix, Arizona and Pittsburgh, Pennsylvania.
2. Summary of Significant Accounting Policies
Basis of Presentation
Our unaudited condensed consolidated financial statements include the accounts of Castle Biosciences, Inc. and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’). All intercompany accounts and transactions have been eliminated in consolidation.
We have a history of recurring net losses and negative cash flows and as of June 30, 2025, we had an accumulated deficit of $221.5 million. We believe our $82.2 million of cash and cash equivalents and $193.7 million of marketable investment securities as of June 30, 2025, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.
Unaudited Interim Financial Information
The accompanying condensed consolidated balance sheet as of June 30, 2025; the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of stockholders’ equity, each for the three and six months ended June 30, 2025 and 2024; and the condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of June 30, 2025, the results of our consolidated operations for the three and six months ended June 30, 2025 and 2024 and our consolidated cash flows for the six months ended June 30, 2025 and 2024. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2025 and 2024 are also unaudited. The results for the three and six months ended June 30, 2025 are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim periods, or any future year or period. The balance sheet as of December 31, 2024 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on February 27, 2025.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include revenue recognition, the valuation of stock-based compensation, assessing future tax exposure and the realizability of deferred tax assets, the useful lives and recoverability of long-lived assets, the goodwill impairment test, the valuation of acquired intangible assets, the valuation of contingent consideration, and other contingent liabilities. We base these estimates on historical and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Segment Reporting
Operating segments are components of an enterprise engaging in business activities from which it may recognize revenues and incur expenses, where discrete financial information is available, and where its operating results are regularly reviewed by the public entity's chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess its performance. A CODM may be an individual or a decision-making group. A reportable segment consists of one or more operating segments. For additional information on our segment reporting, see Note 15.
Cash and Cash Equivalents including Concentrations of Credit Risk
Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds, which are not insured by the Federal Deposit Insurance Corporation (“FDIC”), that are primarily invested in short-term U.S. government obligations. Cash deposits at financial institutions may exceed the amount of insurance provided by the FDIC. Management believes that we are not exposed to significant credit risk on our cash deposits due to the financial position of the financial institutions in which deposits are held.
Marketable Investment Securities
Our marketable investment securities are comprised of debt and equity securities. All debt securities are recognized in accordance with Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) Topic 320, Investments-Debt Securities (‘‘ASC 320’’). Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. Debt securities that are classified as available-for-sale (“AFS”) are recorded at fair value in accordance with ASC 320. We recognize the unrealized gains and losses related to changes in fair value as a separate component of accumulated other comprehensive loss within total stockholders’ equity, net of any related deferred income tax effects, on our condensed consolidated balance sheets. Debt securities that are classified as held-to-maturity (“HTM”) are reported at amortized cost with ASC 320. Premiums or discounts from par value are amortized to interest income over the life of the underlying investment and are included in interest income in the consolidated statements of operations. Realized gains and losses on AFS and HTM debt securities, if any, are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations. Impairments of AFS or HTM debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations. See Notes 5 and 11 for further details.
Our equity securities consist of investments in shares of common stock which are listed and traded on the Nasdaq Global Market. All trading securities are recognized in accordance with ASC Topic 321, Investments-Equity Securities and reported at their readily determinable fair values as quoted by market exchanges where changes in fair value are included in changes in fair value of trading securities in the consolidated statements of operations. All changes in a marketable security’s fair value are reported in earnings as they occur, as such, the sale of our trading securities does not necessarily give rise to a significant gain or loss. Investments in equity securities are classified as either current or long-term depending upon management’s intentions. See Notes 5 and 11 for further details.
Acquisitions
We assess acquisitions under ASC Topic 805, Business Combinations (“ASC 805”), to determine whether a transaction represents the acquisition of assets or a business combination. Under this guidance, we apply a two-step model. The first step involves a screening test where we evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or a group of similar assets. If the screening test is met, we account for the set as an asset acquisition. If the screening test is not met, we apply the second step of the model to determine if the set meets the definition of a business based on the guidance in ASC 805. If so, the transaction is treated as a business combination. Otherwise, it is treated as an asset acquisition. Asset acquisitions are accounted for by allocating the cost of the acquisition, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis without recognition of goodwill. If the total consideration transferred is less than the aggregate fair value of the net assets acquired (i.e., a bargain purchase), the difference is not recognized as a gain. Instead, the difference is allocated to the cost of the acquired assets on a relative fair value basis. Business combinations are accounted for using the acquisition method. Under the acquisition method, goodwill is measured as a residual amount equal to the fair value of the consideration transferred less the net recognized fair value of the identifiable assets acquired and the liabilities assumed, as of the acquisition date, and transaction costs are expensed as incurred.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Contingent Consideration
Under the terms of business combinations or asset acquisitions, we may be required to pay additional consideration if specified future events occur or certain conditions are met. In May 2025, we acquired Capsulomics, Inc., d/b/a Previse (“Capsulomics”), which was recorded as an asset acquisition, and agreed to pay additional consideration of up to $2.5 million in cash based on the achievement of certain commercial milestones (the “Earnout Payments”). We account for the contingent consideration as a liability in accordance with ASC 450-20, Loss Contingencies (“ASC 450-20”) when it is both probable and reasonably estimable. In accordance with ASC 450-20, we recorded the contingent consideration at the amount required to settle the respective obligation, and subsequent changes are recognized as adjustments to the cost basis of the acquired assets. These changes are allocated to the acquired assets based on their relative fair values as of the date of acquisition.
Contingent consideration is classified as current or noncurrent in our condensed consolidated balance sheets based on the contractual timing of future settlement.
Revenue Recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we follow a five-step process to recognize revenues: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied. We have determined that we have a contract with the patient when the treating clinician orders the test. Our contracts generally contain a single performance obligation, which is the delivery of the test report, and we satisfy our performance obligation at a point in time upon the delivery of the test report to the treating clinician, at which point we can bill for the report. The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration. See Note 3 for further details.
Accounts Receivable and Allowance for Credit Losses
We classify accounts receivable balances that are expected to be paid more than one year from the consolidated balance sheet date as noncurrent assets. The estimated timing of payment utilized as a basis for classification as noncurrent is determined by analyses of historical payor-specific payment experience, adjusted for known factors that are expected to change the timing of future payments.
We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected. Management’s estimates are typically based on historical loss information adjusted for current conditions. We generally do not perform evaluations of customers’ financial condition and generally do not require collateral. Historically, our credit losses have not been significant. The allowance for credit losses was zero as of June 30, 2025 and December 31, 2024. Adjustments for implicit price concessions attributable to variable consideration, as discussed below, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between five and ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease. Our leasehold improvements primarily relate to our office and laboratory facilities located in Friendswood, Texas, Phoenix, Arizona and Pittsburgh, Pennsylvania, and are generally depreciated over the remaining lease terms, which end in 2025, 2034 and 2033, respectively. Maintenance and repairs are charged to expense as incurred, and material improvements are capitalized. Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at which point the capitalized interest costs are amortized using the straight-line method over the estimated useful life of the underlying asset. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment. We test goodwill for
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
impairment in the fourth quarter of each fiscal year and when events, or changes in circumstances, indicate that it may be impaired. Events and changes in circumstances indicating that goodwill may be impaired include sustained declines in the price of our common stock, increased competition, changes in macroeconomic developments, unfavorable government or regulatory developments and changes in coverage or reimbursement conditions.
Goodwill is tested for impairment at the reporting unit level where goodwill is held. Testing begins with completion of an optional qualitative assessment. If the qualitative assessment suggests that impairment is more likely than not, quantitative testing is conducted. If the qualitative assessment is bypassed, we proceed directly to quantitative testing. Quantitative testing consists of comparing the carrying value of goodwill to its estimated fair value. Impairment of goodwill is the condition that exists when the carrying value exceeds its fair value. Amounts by which carrying value exceed fair value, up to the total amount of goodwill allocated to the reporting unit, are recognized as an impairment loss in the consolidated statements of operations.
Accrued Compensation
We accrue for liabilities under discretionary employee and executive bonus plans. Our estimated compensation liabilities are based on progress against corporate objectives approved by our board of directors, compensation levels of eligible individuals and target bonus percentage levels. Our board of directors reviews and evaluates the performance against these objectives and ultimately determines the actual achievement levels attained. We also accrue for liabilities under employee sales incentive bonus plans with accruals based on performance achieved to date compared to established targets. As of June 30, 2025 and December 31, 2024, we accrued approximately $15.0 million and $23.3 million, respectively, for liabilities associated with these bonus plans. These amounts are classified as current or noncurrent accrued liabilities in the unaudited condensed consolidated balance sheets based on the expected timing of payment.
Stock-Based Compensation
Stock-based compensation expense for equity instruments is measured based on the grant-date fair value of the awards. For stock option awards, and purchase rights made under the 2019 Employee Stock Purchase Plan (the “ESPP”), the fair value is estimated on the date of grant using the Black-Scholes option-pricing valuation model. For restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), the fair value is equal to the closing price of our common stock on the date of grant. For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For stock options and RSUs, the requisite service period is generally the award’s vesting period (typically four years). PSUs vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. Share-based awards falling into the scope of the 2023 Retirement Policy are accounted for as a modification of existing awards under ASC Topic 718, Compensation – Stock Compensation. The modifications do not result in the recognition of incremental compensation cost; however, they do result in a new estimate of the requisite service period, which we reassess at each balance sheet date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date. Forfeitures are accounted for as they occur.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) is made up of net income (loss) plus net unrealized loss on marketable investment securities, which is our only other item of other comprehensive income (loss).
Accounting Pronouncements Yet to be Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40)—Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses (“ASU 2024-03”), which specifies additional disclosure requirements. The amendments in ASU 2024-03 require disclosure about the composition of certain income expense line items, such as purchases of inventory, employee compensation, and other expenses, as well as disclosure about selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures.
We have evaluated all other recently issued, but not yet effective, accounting pronouncements and do not believe that these accounting pronouncements will have any material impact on the consolidated financial statements or disclosures upon adoption.
3. Revenue
All of our revenues from contracts with customers are associated with the provision of testing services. Our revenues are primarily attributable to our DecisionDx®-Melanoma test for cutaneous melanoma and our DecisionDx®-SCC test for cutaneous squamous cell carcinoma. We also provide a test for patients diagnosed with Barrett’s esophagus, the TissueCypher® test, a test for patients with suspicious pigmented lesions, MyPath® Melanoma, a test for uveal melanoma, DecisionDx®-UM, and a pharmacogenomics testing service focused on mental health, IDgenetix®.
Once we satisfy our performance obligations and bill for the service, the timing of the collection of payments may vary based on the payment practices of the third-party payor and the existence of contractually established reimbursement rates. The payments for our services are primarily made by third-party payors, including Medicare and commercial health insurance carriers. Certain contracts contain a contractual commitment of a reimbursement rate that differs from our list prices. However, absent a positive coverage policy, with or without a contractually committed reimbursement rate, with a commercial carrier or governmental program, our diagnostic tests may or may not be paid by these entities. In addition, patients do not enter into direct agreements with us that commit them to pay any portion of the cost of the tests in the event that their insurance provider declines to reimburse us. We may pursue, on a case-by-case basis, reimbursement from such patients in the form of co-payments and co-insurance, in accordance with the contractual obligations that we have with the insurance carrier or health plan. These situations may result in a delay in the collection of payments.
The Medicare claims that are covered by Medicare are generally paid at a rate established on Medicare’s Clinical Laboratory Fee Schedule or by the respective Medicare contractor within 30 days from receipt. Medicare claims that were either submitted to Medicare prior to the local coverage determination or other coverage commencement date or are not covered but meet the definition of being medically reasonable and necessary pursuant to the controlling Section 1862(a)(1)(A) of the Social Security Act are generally appealed and may ultimately be paid at the first (termed ‘‘redetermination’’), second (termed ‘‘reconsideration’’) or third level of appeal (de novo hearing with an Administrative Law Judge). A successful appeal at any of these levels may result in prompt payment.
In the absence of Medicare coverage, contractually established reimbursements rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration attributable to these price concessions is measured at the expected value using the ‘‘most likely amount’’ method under ASC 606. The amounts are estimated using historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties. Such variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. Variable consideration may be constrained and excluded from the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor. Accordingly, in such situations revenues are recognized on the basis of actual cash collections. Variable consideration for Medicare claims that are
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Included in revenues for the three months ended June 30, 2025 and 2024 were less than $0.1 million of net positive revenue adjustments and $0.4 million of net positive revenue adjustments, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods. Included in revenues for the six months ended June 30, 2025 and 2024 were $2.0 million of net negative revenue adjustments and $1.0 million of net positive revenue adjustments, respectively, associated with changes in estimated variable consideration.
These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.
Because our contracts with customers have an expected duration of one year or less, we have elected the practical expedient in ASC 606 to not disclose information about our remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expenses as incurred due to the short duration of our contracts. Contract balances consisted solely of accounts receivable (both current and noncurrent) as of June 30, 2025 and December 31, 2024.
Disaggregation of Revenues
The table below provides the disaggregation of revenue by type (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Dermatologic(1) | $ | 56,297 |  |  | $ | 68,828 |  |  | $ | 119,259 |  |  | $ | 128,163 |
Non-Dermatologic(2) | 29,891 |  |  | 18,174 |  |  | 54,917 |  |  | 31,813 |
Total net revenues | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | 174,176 |  |  | $ | 159,976 |

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering.
(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
We have presented disaggregated net revenues included in our single reportable segment in the table above. The characteristics for each test in our single segment are similar, with each test having a single performance obligation. Our CODM is the single individual responsible for managing our segment and reviews consolidated results and budgets in assessing performance and in allocating resources. See Note 15 for additional information about our reportable segment.
Payor Concentration
We rely upon reimbursements from third-party government payors (primarily Medicare) and private-payor insurance companies to collect accounts receivable related to sales of our tests.
Our significant third-party payors and their related revenues as a percentage of total revenues and accounts receivable balances were as follows:

| Percentage of Revenues |  |  |  |
| Six Months Ended June 30, |  | Percentage of Accounts Receivable (current) as of |  | Percentage of Accounts Receivable (noncurrent) as of
| 2025 |  | 2024 |  | June 30, 2025 |  | December 31, 2024 |  | June 30, 2025 |  | December 31, 2024
Medicare | 47 | % |  | 48 | % |  | 16 | % |  | 18 | % |  | * |  | *
Payor A | 15 | % |  | 15 | % |  | 17 | % |  | 19 | % |  | 16 | % |  | 15 | %
Payor B | * |  | * |  | 26 | % |  | 20 | % |  | 10 | % |  | 12 | %

* Less than 10%
There were no other third-party payors that individually accounted for more than 10% of our total revenue or accounts receivable for the periods shown in the table above.
4. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options, vesting of RSUs and PSUs or purchases under the ESPP. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Contingently issuable PSU awards are included in the computation of diluted earnings (loss) per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period. However, potentially dilutive shares are excluded from the computation of diluted loss per share when their effect is antidilutive.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The following table shows the computation of basic and diluted earnings (loss) per share for the following three and six months ended June 30, 2025 and 2024 (in thousands, except per share data):

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Numerator: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 4,523 |  |  | $ | 8,920 |  |  | $ | (21,325) |  |  | $ | 6,386 |
Denominator: |  |  |  |  |  |  |  |
Weighted-average common shares outstanding, basic |  | 28,914 |  |  | 27,646 |  |  | 28,763 |  |  | 27,566 |
Assumed exercise of stock options |  | 361 |  |  | 440 |  |  | — |  |  | 441 |
Assumed vesting of RSUs |  | 186 |  |  | 546 |  |  | — |  |  | 427 |
Assumed vesting of PSUs |  | 84 |  |  | 98 |  |  | — |  |  | 98 |
Assumed issuance of shares under the ESPP |  | — |  |  | 8 |  |  | — |  |  | 10 |
Weighted-average common shares outstanding, diluted |  | 29,545 |  |  | 28,738 |  |  | 28,763 |  |  | 28,542 |
Earnings (loss) per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.16 |  |  | $ | 0.32 |  |  | $ | (0.74) |  |  | $ | 0.23 |
Diluted |  | $ | 0.15 |  |  | $ | 0.31 |  |  | $ | (0.74) |  |  | $ | 0.22 |

Due to the Company reporting a net loss attributable to common stockholders for the six months ended June 30, 2025, all potentially dilutive securities are antidilutive and are excluded from the computations of diluted loss per share.
The table below provides the weighted-average number of potential common shares associated with outstanding securities not included in our calculation of diluted earnings (loss) per share for the three and six months ended June 30, 2025 and 2024 because to do so would be antidilutive. With regard to the PSUs, we assume that the associated performance targets will be met at the target level of performance for purposes of calculating diluted earnings per common share until such time that it is probable that actual performance will be above or below target (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Stock options | 2,466 |  |  | 2,487 |  |  | 2,965 |  |  | 2,493 |
RSUs and PSUs | 2,958 |  |  | 892 |  |  | 4,053 |  |  | 877 |
ESPP | 123 |  |  | 216 |  |  | 150 |  |  | 233 |
Total | 5,547 |  |  | 3,595 |  |  | 7,168 |  |  | 3,603 |

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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
5. Marketable Investment Securities
Marketable investment securities consisted of the following (in thousands):

| June 30, 2025 |  | December 31, 2024
Current marketable investment securities: |  |  |
Trading securities | $ | 3,315 |  |  | $ | 3,555 |
Debt securities - AFS | 184,805 |  |  | 169,866 |
Debt securities - HTM(1) | 5,577 |  |  | — |
Total current marketable investment securities | $ | 193,697 |  |  | $ | 173,421 |

(1) We held no debt securities - HTM as of December 31, 2024.
Trading securities
We recognized unrealized gains of $1.2 million and unrealized losses of $0.2 million in our trading securities for the three and six months ended June 30, 2025, respectively. No gains or losses were recognized for the three and six months ended June 30, 2024, as we did not hold any trading securities during those periods.
Debt securities
The following tables present our debt securities (in thousands):

| June 30, 2025
| Amortized Cost |  | Unrealized |  | Estimated Fair Value
|  | Gains |  | Losses |
U.S. government securities - AFS | $ | 184,766 |  |  | $ | 58 |  |  | $ | (19) |  |  | $ | 184,805 |
U.S. government securities - HTM | 5,577 |  |  | 2 |  |  | — |  |  | 5,579 |
Total debt securities | $ | 190,343 |  |  | $ | 60 |  |  | $ | (19) |  |  | $ | 190,384 |

| December 31, 2024
| Amortized Cost |  | Unrealized |  | Estimated Fair Value
|  | Gains |  | Losses |
U.S. government securities - AFS | $ | 169,636 |  |  | $ | 244 |  |  | $ | (14) |  |  | $ | 169,866 |
U.S. government securities - HTM(1) | — |  |  | — |  |  | — |  |  | — |
Total debt securities | $ | 169,636 |  |  | $ | 244 |  |  | $ | (14) |  |  | $ | 169,866 |

(1) We held no debt securities - HTM as of December 31, 2024.
Our U.S. government securities includes both AFS and HTM securities. The AFS securities are available to be sold to meet operating needs or otherwise, but are generally held through maturity. We classify all AFS investments as current assets, as these are readily available for use in current operations. We classify our HTM investments as current assets, as we have the positive intent and ability to hold these investments to maturity, and all such maturities are less than one year from the balance sheet date.
We evaluated our U.S. government securities under the AFS and HTM impairment model guidance, respectively, and determined our investment portfolio is comprised of low-risk, investment grade securities.
As of June 30, 2025, unrealized losses on our AFS and HTM U.S. government securities are not attributed to credit risk. We believe that an allowance for credit losses is unnecessary because the unrealized losses on certain of our marketable investment securities are due to market factors. The allowance for credit losses was zero as of June 30, 2025 and December 31, 2024.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
There were no realized gains or losses on sales of debt securities for the three and six months ended June 30, 2025 and 2024. No credit-related or noncredit-related impairment losses were recorded for the three and six months ended June 30, 2025 and 2024.
Accrued interest receivable for our AFS and HTM U.S. government securities is included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets. As of June 30, 2025 and December 31, 2024, the accrued interest receivable related to AFS securities was $1.0 million and $0.6 million, respectively. The balance related to HTM securities was immaterial as of June 30, 2025, and no amounts were accrued as of December 31, 2024, as no securities were classified as HTM at that time.
Additional information relating to the fair value of marketable investment securities can be found in Note 11.
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):

| June 30, 2025 |  | December 31, 2024
Land | $ | 7,245 |  |  | $ | 7,245 |
Lab equipment | 26,400 |  |  | 23,633 |
Leasehold improvements | 14,808 |  |  | 14,616 |
Computer equipment | 5,702 |  |  | 5,306 |
Furniture and fixtures | 3,550 |  |  | 3,541 |
Construction-in-progress | 31,870 |  |  | 9,614 |
Total | 89,575 |  |  | 63,955 |
Less accumulated depreciation | (15,515) |  |  | (12,833) |
Property and equipment, net | $ | 74,060 |  |  | $ | 51,122 |

Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 909 |  |  | $ | 637 |  |  | $ | 1,812 |  |  | $ | 1,292 |
Research and development | 95 |  |  | 85 |  |  | 189 |  |  | 169 |
Selling, general and administrative | 449 |  |  | 379 |  |  | 891 |  |  | 733 |
Total | $ | 1,453 |  |  | $ | 1,101 |  |  | $ | 2,892 |  |  | $ | 2,194 |

7. Goodwill and Other Intangible Assets, Net
Goodwill
We had a single reporting unit where all goodwill was allocated for as of June 30, 2025 and December 31, 2024. The balance of our goodwill was $10.7 million as of June 30, 2025 and December 31, 2024. There were no accumulated impairments of goodwill as of June 30, 2025 or December 31, 2024.
We had a single reportable segment consisting of a single operating segment where the operating segment and the single reporting unit where the same as of June 30, 2025 and December 31, 2024. See Note 15 for additional information on our reportable segment.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Other Intangible Assets, Net
Our other intangible assets, net consisted of the following (in thousands):

| June 30, 2025
| Gross carrying value |  | Accumulated amortization |  | Net |  | Weighted-Average Remaining Life (in years)
Developed technology | $ | 153,500 |  |  | $ | (60,227) |  |  | $ | 93,273 |  |  | 10.7
Assembled workforce | 563 |  |  | (403) |  |  | 160 |  |  | 1.4
Total other intangible assets, net | $ | 154,063 |  |  | $ | (60,630) |  |  | $ | 93,433 |  |  |

| December 31, 2024
| Gross carrying value |  | Accumulated amortization |  | Net |  | Weighted-Average Remaining Life (in years)
Developed technology | $ | 125,317 |  |  | $ | (29,996) |  |  | $ | 95,321 |  |  | 8.0
Assembled workforce | 563 |  |  | (347) |  |  | 216 |  |  | 1.9
Total other intangible assets, net | $ | 125,880 |  |  | $ | (30,343) |  |  | $ | 95,537 |  |  |

During the first quarter of 2025, we made the decision to discontinue our IDgenetix test offering, effective May 2025. As a result of this decision, we further revised the estimated useful life of the asset and determined that the intangible asset should be fully amortized as of March 31, 2025. This change resulted in an acceleration of amortization expense of approximately $20.1 million.
In connection with the acquisition of Capsulomics, and in accordance with ASC 805, we determined that substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset; therefore, the transaction was accounted for as an asset acquisition. The acquired intangible asset consists of developed technology and is valued at $28.2 million with an estimated useful life of 12 years and is being amortized on a straight-line basis.
Amortization expense of intangible assets was $2.0 million and $30.3 million for the three and six months ended June 30, 2025, respectively, and $2.2 million and $4.5 million for the three and six months ended June 30, 2024 respectively.
8. Other Accrued and Current Liabilities
Other accrued and current liabilities consisted of the following (in thousands):

| June 30, 2025 |  | December 31, 2024
Clinical studies | $ | 2,204 |  |  | $ | 2,580 |
Accrued service fees | 2,986 |  |  | 2,338 |
Accrued taxes | 1,193 |  |  | 1,076 |
ESPP Contributions | 969 |  |  | 1,225 |
Other | 869 |  |  | 774 |
Total | $ | 8,221 |  |  | $ | 7,993 |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
9. Long-Term Debt
Our long-term debt is presented in the table below (in thousands):

| June 30, 2025 |  | December 31, 2024 |  |
Term debt | $ | 10,200 |  |  | $ | 10,200 |  |  |
Unamortized discount | (160) |  |  | (177) |  |  |
Total debt, net | 10,040 |  |  | 10,023 |  |  |
Less: Current portion of long-term debt | (1,944) |  |  | (278) |  |  |
Total long-term debt | $ | 8,096 |  |  | $ | 9,745 |  |  |

Future maturities of principal amounts on long-term debt as of June 30, 2025 were as follows (in thousands):

Years Ending December 31, |
2025 | $ | 278 |
2026 | 3,333 |
2027 | 3,333 |
2028 | 3,056 |
Total | $ | 10,000 |

2024 Loan and Security Agreement
On March 26, 2024 (the ‘‘Closing Date’’), we entered into a Loan and Security Agreement, as amended in April 2025 (the ‘‘2024 LSA”), by and between us, our wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’). The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of term loans (discussed in the ‘‘2024 Term Loan’’ section below), and (ii) from the Closing Date until September 30, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (discussed in the ‘‘2024 Credit Line’’ section below) at our option.
The obligations under the 2024 LSA are secured by substantially all of our assets, excluding intellectual property, the real property held by us, and are subject to certain other exceptions and limitations. We have the right to prepay the 2024 LSA in whole, subject to a prepayment fee of approximately 1.50% if prepaid prior to March 26, 2026. Amounts repaid under the 2024 LSA may not be reborrowed.
In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA. Should we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required. As of June 30, 2025, we were in compliance with all of the covenants.
The 2024 LSA bears interest at a floating rate equal to the greater of (a) the WSJ Prime Rate plus 0.25% or (b) 6.00% per annum. The Term Loans are interest only from the Closing Date through November 30, 2025, which may be extended at our option through November 30, 2026 as long as no event of default under the 2024 LSA has occurred. After the end of the interest only period, we are required to pay equal monthly installments of principal through the maturity date of November 1, 2028.
We are also obligated to make an additional final payment of 2.00% of the aggregate original principal amounts of Term Loans advanced by the Lender, due at the earlier of the maturity date or date the Term Loans are repaid in full.
On April 4, 2025, the Company entered into a Consent and First Amendment (the “Amendment”) with the Lender. The Amendment modified certain terms of the 2024 LSA including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
2024 Term Loan
On March 26, 2024, we drew $10.0 million in Term Loans under the terms and provisions of the 2024 LSA. We are obligated to make a final payment of $0.2 million under the terms of the 2024 LSA final payment provisions. A discount on debt equal to this obligation was recorded on the draw date and is being amortized as additional interest expense using the effective interest method over the term of the debt. As of June 30, 2025, no payment on principal has been made. As of June 30, 2025, the weighted average effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19%.
2024 Credit Line
We have a $25.0 million line of credit under the terms and provisions of the 2024 LSA and the Amendment, from the Closing Date through September 30, 2025. Amounts repaid under the 2024 Credit Line may not be reborrowed. As of June 30, 2025, no draws had been made on the line of credit.
Interest Expense on Long-Term Debt
Interest expense on long-term debt consisted of the following (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Interest expense on long term debt | $ | 203 |  |  | $ | 228 |  |  | $ | 405 |  |  | $ | 241 |
Less: Capitalized interest | (194) |  |  | (12) |  |  | (388) |  |  | (12) |
Total | $ | 9 |  |  | $ | 216 |  |  | $ | 17 |  |  | $ | 229 |

10. Leases
Scottsdale Lease
On May 14, 2025, we entered into a lease agreement (the “Commencement Date”) with Perimeter Gateway Portfolio, LLC (the “Lessor”) for the lease of approximately 55,573 square feet of office and laboratory space in Scottsdale, Arizona (the “Scottsdale Lease”). The Scottsdale Lease has a term of 143 months term that will expire in April 2037, and provides for right of refusal to lease any additional adjacent space that would/may become available in the future (the “ROFR Space”). The Scottsdale Lease provides us two optional five-year term extensions, and a one-time option to terminate the lease on the last day of the 96th month following the Commencement Date, subject to certain conditions, in exchange for payment of an early termination fee equal to the following: the unamortized balance of the commissions paid to Lessor’s broker and our broker, plus the unamortized balance of the hard and soft costs incurred by the Lessor in connection with the tenant improvement allowance. The Scottsdale Lease contains provisions for $7.2 million in lease incentives in form of Lessor paid improvements. Rent for the first twelve months is abated, in the amount of $1.8 million, and any amount that is unamortized becomes payable if we default on the lease.
11. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used in measuring fair value. There are three levels to the fair value hierarchy based on the reliability of inputs, as follows:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions.
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
fair values. Accordingly, the fair value estimates disclosed, or amounts recorded, may not be indicative of the amount that we or holders of the instruments could realize in a current market exchange.
The tables below provide information, by level within the fair value hierarchy, of our financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 (in thousands):

| As of June 30, 2025
| Quoted Prices in Active Markets for Identical Items (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets |  |  |  |  |  |  |
Money market funds(1) | $ | 75,812 |  |  | $ | — |  |  | $ | — |  |  | $ | 75,812 |
U.S. government securities - AFS(2) | $ | 184,805 |  |  | $ | — |  |  | $ | — |  |  | $ | 184,805 |
Trading securities(2) | $ | 3,315 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,315 |
Liabilities |  |  |  |  |  |  |
Term Debt(3)(4) | $ | — |  |  | $ | 10,040 |  |  | $ | — |  |  | $ | 10,040 |

| As of December 31, 2024
| Quoted Prices in Active Markets for Identical Items (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets |  |  |  |  |  |  |
Money market funds(1) | $ | 114,091 |  |  | $ | — |  |  | $ | — |  |  | $ | 114,091 |
U.S. government securities - AFS(2) | $ | 169,866 |  |  | $ | — |  |  | $ | — |  |  | $ | 169,866 |
Trading securities(2) | $ | 3,555 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,555 |
Liabilities |  |  |  |  |  |  |
Term Debt (3)(4) | $ | — |  |  | $ | 10,023 |  |  | $ | — |  |  | $ | 10,023 |

(1)Classified as “Cash and cash equivalents” in the unaudited condensed consolidated balance sheets.
(2)Classified as “Marketable investment securities” in the unaudited condensed consolidated balance sheets.
(3)Classified as “Current portion of long-term debt” and “Long term debt” in the consolidated balance sheets.
(4)Borrowings approximate their fair value as the interest rate is variable and reflects market rates.
We have U.S. government securities that are HTM investments and are carried at amortized costs. The fair value of our HTM investments is classified as Level 1 of the fair value hierarchy. For additional information on the carrying amount and fair value of our HTM investments, see Note 5.
12. Commitments and Contingencies
From time to time, we may be involved in legal proceedings arising in the ordinary course of business. We believe there is no threatened litigation or litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows. On February 1, 2024, we received a subpoena from the Department of Health and Human Services, Office of Inspector General, seeking documents and information concerning claims submitted for payment under federal healthcare programs. The subpoena requested that we produce documents relating primarily to interactions with medical providers and billing to government-funded healthcare programs for our tests. The time period covered by the subpoena is January 1, 2015 through February 1, 2024. We are continuing to cooperate with the government’s request and are in the process of responding to the Subpoena. We are unable to predict what action, if any, might be taken in the future by the Department of Health and Human Services, Office of Inspector General, or any other governmental authority as a result of the matters related to this Subpoena. No claims have been made against us at this time. Any potential claims could subject us to significant liability for damages and harm our reputation. Our insurance and indemnities
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
may not cover all claims that may be asserted against us. We are unable to predict the outcome and are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.
13. Stock Incentive Plans and Stock-Based Compensation
Equity Incentive Plan
On July 24, 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for automatic annual increases to the number of shares authorized for issuance, equal to 5% of our common shares outstanding as of the immediately preceding year end, through January 1, 2029. Under this provision, effective January 1, 2025, an additional 1,424,159 shares became available under the 2019 Plan. As of June 30, 2025, there were 1,002,126 shares remained available for grant under the 2019 Plan.
Inducement Plan
On December 22, 2022, our board of directors approved the 2022 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the granting of awards as inducement material to the grantee’s entering into employment with us to the extent such grantee was not previously an employee of ours or is entering into employment following a bona fide period of non-employment with us. As of June 30, 2025, there were 88,640 shares available for grant under the Inducement Plan.
Stock Options
Stock option activity under our stock plans for the six months ended June 30, 2025 is set forth below:

|  |  | Weighted-Average |  |
| Stock Options Outstanding |  | Exercise Price |  | Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2024 | 2,989,763 |  |  | $ | 36.23 |  |  |  |  |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | (16,995) |  |  | $ | 2.16 |  |  |  |  |
Forfeited/Cancelled | (60,225) |  |  | $ | 43.98 |  |  |  |  |
Balance as of June 30, 2025 | 2,912,543 |  |  | $ | 36.27 |  |  | 5.1 |  | $ | 7,583 |
Exercisable at June 30, 2025 | 2,834,588 |  |  | $ | 36.17 |  |  | 5.0 |  | $ | 7,583 |

Restricted Stock Units
The following table summarizes our RSU activity for the six months ended June 30, 2025:

| Restricted Stock Units Outstanding |  | Weighted-Average Grant Date Fair Value
Balance as of December 31, 2024 | 3,196,224 |  |  | $ | 23.52 |
Granted | 1,508,158 |  |  | $ | 21.18 |
Vested(1) | (520,157) |  |  | $ | 22.74 |
Forfeited/Cancelled | (159,905) |  |  | $ | 23.48 |
Balance as of June 30, 2025 | 4,024,320 |  | $ | 22.75 |

(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 142,637 for the six months ended June 30, 2025.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Performance-Based Restricted Stock Units
The following table summarizes our PSU activity for the six months ended June 30, 2025:

| Performance-Based Restricted Stock Units Outstanding |  | Weighted-Average Grant Date Fair Value
Balance as of December 31, 2024 | 275,528 |  |  | $ | 21.94 |
Granted | 172,631 |  |  | $ | 22.23 |
Vested | — |  |  | $ | — |
Forfeited/Cancelled | — |  |  | $ | — |
Balance as of June 30, 2025 | 448,159 |  | $ | 22.05 |

Employee Stock Purchase Plan
The ESPP provides for certain automatic increases in the number of shares of common stock reserved for issuance, which resulted in an additional 284,831 shares becoming available under the ESPP effective January 1, 2025. During the six months ended June 30, 2025, we issued 103,441 shares of common stock pursuant to scheduled purchases under the ESPP. As of June 30, 2025, 1,228,070 shares remained available for issuance under the ESPP.
Determining Fair Value - Summary of Assumptions
We use the Black-Scholes valuation model to estimate the fair value of the purchase rights issued under the ESPP at the date of grant, start of the offering or other relevant measurement date. The following table sets forth assumptions used under the ESPP:

| Six Months Ended June 30,
| 2025 |  | 2024
Average expected term (years) | 1.2 |  | 1.3
Expected stock price volatility | 56.55% - 85.21% |  | 72.04% - 130.95%
Risk-free interest rate | 3.88% - 4.22% |  | 4.43% - 5.33%
Dividend yield | —% |  | —%

Fair Value
There were no stock options granted for the six months ended June 30, 2025 and 2024. For the six months ended June 30, 2025 and 2024, the weighted-average grant date fair value of the purchase rights granted under the ESPP was $9.43 and $11.17 per share, respectively.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Stock-Based Compensation Expense
Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 1,422 |  |  | $ | 1,401 |  |  | $ | 2,878 |  |  | $ | 2,715 |
Research and development | 1,962 |  |  | 2,637 |  |  | 3,857 |  |  | 5,266 |
Selling, general and administrative | 7,824 |  |  | 9,141 |  |  | 15,652 |  |  | 17,873 |
Total stock-based compensation expense | $ | 11,208 |  |  | $ | 13,179 |  |  | $ | 22,387 |  |  | $ | 25,854 |

Retirement Policy
In January 2023, our board of directors approved a retirement policy (the “Retirement Policy”) that provides for acceleration of a portion of unvested awards granted to and held by certain eligible employees upon meeting age, service and notice requirements. Pursuant to the Retirement Policy, we accelerated the recognition of compensation expense of $0.2 million and $0.4 million during the three months ended June 30, 2025, and 2024, respectively, and accelerated the recognition of compensation expense of $0.5 million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively.
As of June 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $80.5 million, which is expected to be recognized over a weighted-average period of 2.5 years. The total unrecognized compensation cost will be adjusted for forfeitures in future periods as they occur.
14. Income Taxes
During the three and six months ended June 30, 2025, we recognized income tax benefit of $4.7 million and $5.1 million, respectively, primarily from the reduction of the valuation allowance on deferred tax assets, recorded as a discrete benefit in the quarter ended June 30, 2025. This release was primarily driven by the acquisition of Capsulomics, which resulted in deferred tax liabilities related to acquired intangible assets.
The deferred tax assets previously reserved are now expected to be realizable against those liabilities. This release is non‑recurring and materially impacted our effective tax rate for the period. Because this benefit is nonrecurring and not reflective of ongoing operations, the effective tax rate for the period is not meaningful. The effective rate for the three and six months ended June 30, 2025 differed from our federal statutory rate of 21% primarily due to the tax impact from the valuation allowance for current year activity including the acquisition of Capsulomics, state income taxes and the non-deductibility of other permanent items.
Our effective income tax rate was (13.1)% and (18.3)% for the three and six months ended June 30, 2024. The effective rate for the three and six months ended June 30, 2024 differed from our federal statutory rate of 21% primarily due to the tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.
15. Segment and Related Information
The Company derives revenues through the delivery of test reports for our molecular diagnostic tests. All of our operations are located within the United States and our business is focused on the U.S. market.
We have a single reportable segment consisting of a single operating segment.
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CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The measures of segment profit and loss for of our single reportable segment were as follows (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Net revenues from external customers(1) | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | 174,176 |  |  | $ | 159,976 |
Significant segment expenses: |  |  |  |  |  |  |
Personnel costs | 51,551 |  |  | 48,051 |  |  | 103,751 |  |  | 93,967 |
Organizational and business development costs | 14,487 |  |  | 11,835 |  |  | 28,716 |  |  | 22,835 |
Inventory usage | 5,458 |  |  | 5,013 |  |  | 10,189 |  |  | 9,800 |
Clinical studies and publication costs | 1,923 |  |  | 3,177 |  |  | 4,008 |  |  | 5,814 |
Professional services | 2,298 |  |  | 2,420 |  |  | 5,874 |  |  | 5,544 |
Other segment items | 5,948 |  |  | 7,586 |  |  | 42,963 |  |  | 15,630 |
Segment income (loss) | $ | 4,523 |  |  | $ | 8,920 |  |  | $ | (21,325) |  |  | $ | 6,386 |

(1)For information on disaggregation of segment revenue by type and information about payor concentration, see Note 3.
Other Segment Items
Other segment items include all other operating expenses types to included IT service and software licensing costs, fixed and variable expenses incurred for leasing of facilities and equipment, depreciation and amortization, gain or losses on disposal of fixed assets in the routine course of business, fair value adjustment for trading securities, realized gains or losses on investment securities, administrative costs, expense for use of prepaids to include insurance premiums and warranties for lab equipment, public company costs (less audit fees), interest and other non-operating income, and income tax expense or benefits. Our CODM does not individually review budgets or results for these activities.
Other amounts included in the measure of segment profit or loss were as follows (in thousands):

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Interest income |  | $ | 2,944 |  |  | $ | 3,144 |  |  | $ | 6,043 |  |  | $ | 6,140 |
Interest expense |  | $ | (21) |  |  | $ | (270) |  |  | $ | (38) |  |  | $ | (284) |
Depreciation and amortization |  | $ | 3,414 |  |  | $ | 3,348 |  |  | $ | 33,178 |  |  | $ | 6,688 |
Income tax benefit |  | $ | (4,666) |  |  | $ | (1,034) |  |  | $ | (5,089) |  |  | $ | (989) |
Stock-based compensation expense |  | $ | 11,208 |  |  | $ | 13,179 |  |  | $ | 22,387 |  |  | $ | 25,854 |
Changes in fair value of trading securities |  | $ | 1,185 |  |  | $ | — |  |  | $ | (240) |  |  | $ | — |

Total assets for our reportable segment were located in the United States and were $544.7 million and $531.2 million as of June 30, 2025 and December 31, 2024, respectively. Expenditures for additions to long-lived assets were $12.9 million and $6.7 million for the three months ended June 30, 2025 and 2024, respectively, $18.6 million and $15.3 million for the six months ended June 30, 2025, and 2024, respectively.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q with our audited financial statements and notes thereto as of and for the years ended December 31, 2024,and 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, including the section entitled “Critical Accounting Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2025. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Castle,” “we,” “us” and “our” refer to Castle Biosciences, Inc.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipate,” “believe,” “estimate,” “expect,” “may,” “plan,” “potential,” “will,” “would” or the negative or plural of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions or expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in the 2024 10-K, Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.
Overview
Castle Biosciences is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), uveal melanoma (“UM”), and in the treatment of mental health conditions.
Our Test Portfolio
We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology. We also offer a proprietary pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.
Our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM. As of April 24, 2025, Novitas reached a decision not to cover SCC, resulting in the discontinuance of Medicare reimbursement for DecisionDx-SCC.
All five of our MAAA tests have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare and Medicaid (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies; and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests. We believe this designation not only demonstrates our focus on developing and validating innovative tests but also enables our Medicare reimbursement rate to be set, over the long term, by the median private payor rate, which we believe provides a fair exchange of value. Further information about Medicare coverage and ADLT status with respect to each of our tests is set forth below.
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Test Overview
Our Dermatology Tests
DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test that predicts the risk of metastasis or recurrence, including a positive sentinel lymph node, for patients diagnosed with invasive CM. In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States, representing an estimated U.S. total addressable market (“TAM”) of approximately $540 million. We estimate that approximately 50% of patients diagnosed with CM are 65 years of age or older.
DecisionDx-SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC) that both predicts the risk of metastasis as well as response to adjuvant radiation therapy. We estimate 20% of SCC, or 200,000 annually in the United States, are classified as high risk, representing an estimated U.S. TAM of approximately $820 million.
MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion. We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S. TAM of approximately $600 million. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory in May 2021.
Our Gastroenterology Test
TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of progression of high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite dysplasia or low-grade dysplasia BE. We estimate a U.S. TAM of approximately $1 billion.
Our Ophthalmology Test
DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM. We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States. We estimate a U.S. TAM of approximately $10 million.
Our Mental Health Test
IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. After careful further assessments, we discontinued our IDgenetix test in May 2025.
Reimbursement
The primary source of revenue for our products is reimbursement from third-party payors, which includes government payors, such as Medicare, and commercial payors, such as insurance companies. Achieving broad coverage and reimbursement of our current products by third-party payors and continued Medicare coverage are key components of our financial success.
We bill third-party payors and patients for the tests we perform. We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM, and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries.
The Medicare rates discussed below are prior to giving effect to applicable sequestration in effect from time to time as described in further detail under “Government Regulation and Product Approval—Healthcare Reform” included in Item 1, Business, of the 2024 10-K.
DecisionDx-Melanoma
DecisionDx-Melanoma tests are processed from our Phoenix laboratory and since the second quarter of 2022, have been covered under “foundational” local coverage determinations (“LCD” of “LCDs”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto and Noridian.
DecisionDx-Melanoma has met ADLT status, as determined by the CMS, since 2019. ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage. Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding
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calendar year. For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021. Our rate for 2024 was $7,193 per test and is $7,193 for 2025.
DecisionDx‑SCC
We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix labs, with a majority of tests being issued from our Pittsburgh lab. Palmetto’s MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering claims for test reports issued by our Phoenix laboratory.
DecisionDx-SCC has met “new ADLT” status since 2022. Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test. Effective April 1, 2024, and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will continue at $8,500 based on the median private payor rates received between July 1, 2023 and November 30, 2023.
On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024. On January 9, 2025, Novitas finalized an oncology biomarker LCD, Genetic Testing for Oncology: Specific Tests, which also lists DecisionDx-SCC as non-covered; that LCD became effective on April 24, 2025.
TissueCypher
Most of our TissueCypher tests are processed in our Pittsburgh laboratory under the Medicare jurisdiction managed by Novitas.
On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status. ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients. Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test, which remained effective through December 31, 2024. This rate was based on the median private payor rates received between April 1, 2022 and August 31, 2022. Beginning with 2025, the rate for TissueCypher will be set annually based upon the median private payor rate for the first half of the second preceding calendar year. Our 2025 rate will continue to be $4,950 per test based on the median private payor rate data from January 1, 2023 to June 30, 2023.
MyPath Melanoma
MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019. Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for MyPath Melanoma.
MyPath Melanoma was approved as a “new ADLT” in September 2019. The rate for our MyPath Melanoma test is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022. Our rate for 2024 was $1,950 per test and remains at $1,950 per test for 2025.
Diagnostic GEP Offering
Our Diagnostic GEP offering included MyPath Melanoma and DiffDx-Melanoma. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021. Our internal data indicates that we have improved the technical performance of MyPath Melanoma and that it is comparable to the technical performance of DiffDx-Melanoma. As such, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023.
DecisionDx-UM
DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017.
DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019. Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021. Our rate for 2024 was $7,776 per test and remains at $7,776 per test for 2025.
IDgenetix
IDgenetix is currently covered under a Noridian LCD policy and accompanying billing and coding article developed by MolDX.
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During 2023, we obtained a test-specific PLA CPT code for IDgenetix which became effective October 1, 2023. In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024. Our reimbursement rate for 2024 was $1,336 per test and remains at $1,336 per test in the first quarter of 2025. Our IDgenetix test was discontinued in May 2025.
Government Regulation and Oversight of Laboratory Developed Tests
On May 6, 2024, the U.S. Food and Drug Administration (“FDA”) published a final rule on the regulation of Laboratory Developed Tests (“LDTs”) which amends the FDA's regulations to make explicit that LDT's are devices under the Federal Food, Drug and Cosmetic Act (“FD&C Act”). The FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs. The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by New York State Department of Health (“NYSDOH”). Our proprietary tests, outlined above, are all NYSDOH approved. We believe this final ruling will have no material impact on our existing test offerings given all of our tests were marketed before May 6, 2024. In addition, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA’s LDT final rule. The U.S. government did not appeal the ruling, and the deadline to do so has passed; therefore, the court’s decision stands.
In July 2025, the FDA granted Breakthrough Device designation to our DecisionDx-Melanoma test. We believe this designation highlights the test’s potential to improve melanoma care through individualized prognostic insights. The Breakthrough Device designation is intended to expedite the development and review of certain medical devices that may offer more effective diagnosis or treatment of life-threatening conditions.
Delivered Test Reports
The number of test reports we deliver is a key indicator that we use to assess our business. A test report is generated when we receive a sample in our laboratory, and then the relevant test information is entered into our Laboratory Information Management System, the laboratory portion of the test is performed, including proprietary algorithmic analysis of the combined biomarkers, and a report is then delivered to the clinician who ordered the test.
The number of test reports delivered by us are presented in the table below:

| Proprietary Dermatologic GEP Tests |  |  |  |  |  |  |  |
| DecisionDx- Melanoma |  | DecisionDx-SCC |  | Diagnostic GEP offering |  | Dermatologic Total |  | DecisionDx-UM |  | TissueCypher |  | IDgenetix(1) |  | Grand Total
Q1 2025 | 8,621 |  |  | 4,375 |  |  | 926 |  |  | 13,922 |  |  | 470 |  |  | 7,432 |  |  | 2,578 |  |  | 24,402 |
Q2 2025 | 9,981 |  |  | 4,762 |  |  | 1,166 |  |  | 15,909 |  |  | 468 |  |  | 9,170 |  |  | 1,027 |  |  | 26,574 |
For the six months ended June 30, 2025 | 18,602 |  |  | 9,137 |  |  | 2,092 |  |  | 29,831 |  |  | 938 |  |  | 16,602 |  |  | 3,605 |  |  | 50,976 |
Q1 2024 | 8,384 |  |  | 3,577 |  |  | 998 |  |  | 12,959 |  |  | 422 |  |  | 3,429 |  |  | 4,078 |  |  | 20,888 |
Q2 2024 | 9,585 |  |  | 4,277 |  |  | 1,099 |  |  | 14,961 |  |  | 456 |  |  | 4,782 |  |  | 4,903 |  |  | 25,102 |
For the six months ended June 30, 2024 | 17,969 |  |  | 7,854 |  |  | 2,097 |  |  | 27,920 |  |  | 878 |  |  | 8,211 |  |  | 8,981 |  |  | 45,990 |
Q3 2024 | 9,367 |  |  | 4,195 |  |  | 933 |  |  | 14,495 |  |  | 397 |  |  | 6,073 |  |  | 5,045 |  |  | 26,010 |
Q4 2024 | 8,672 |  |  | 4,299 |  |  | 879 |  |  | 13,850 |  |  | 424 |  |  | 6,672 |  |  | 3,125 |  |  | 24,071 |
For year ended December 31, 2024 | 36,008 |  |  | 16,348 |  |  | 3,909 |  |  | 56,265 |  |  | 1,699 |  |  | 20,956 |  |  | 17,151 |  |  | 96,071 |

(1)The IDgenetix test was discontinued effective May 2025.
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For the three and six months ended June 30, 2025, our test report volume increased by 5.9% and 10.8%, respectively, compared to the same period in 2024. Our dermatologic test report volume increased by 6.3% and 6.8% for the three and six months ended June 30, 2025, respectively, compared to the prior period in 2024, largely driven by continued growth from DecisionDx-Melanoma and DecisionDx-SCC tests. TissueCypher increased by 91.8% and 102.2%, respectively, for the three and six months ended June 30, 2025, compared to the prior period in 2024, further contributing to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “— Components of Results of Operations—Net Revenues” below.
For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test. During the six months ended June 30, 2025, approximately 67% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.
Information About Certain Metrics
The following provides additional information about certain metrics we have disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Test Reports Delivered
Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated. The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.
Other Events
Impact of Macroeconomic Conditions
Macroeconomic conditions, including uncertainties associated with the ongoing conflicts in the Middle East, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
Our Financial Results
Our net income (loss) may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we:
•execute clinical studies to generate evidence supporting our current and future product candidates;
•execute our commercialization strategy for our current and future commercial products;
•continue our ongoing and planned development of new products in our pipeline;
•seek to discover and develop additional product candidates;
•hire additional scientific and research and development staff;
•add additional operational, financial and management information systems and personnel; and
•make additional capital expenditures to support business growth and sustain existing operations.
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Factors Affecting Our Performance
We believe there are several important factors that have impacted, and that we expect will continue to impact, our operating performance and results of operations, including:
•Report volume. We believe that the number of reports we deliver to clinicians is an important indicator of the growth of adoption among the healthcare provider community. Our revenue and costs are affected by the volume of testing and mix of customers. Our performance depends on our ability to retain and broaden adoption with existing prescribing clinicians, as well as attract new clinicians. Our report volume could be negatively impacted by developments related to evolving macroeconomic developments, as discussed above.
•Reimbursement. We believe that expanding reimbursement is an important indicator of the value of our products. Payors require extensive evidence of clinical utility, clinical validity, patient outcomes and health economic benefits in order to provide reimbursement for diagnostic products. Our revenue depends on our ability to demonstrate the value of our products to these payors.
•Gross margin. We believe that our gross margin is an important indicator of the operating performance of our business. Higher gross margins reflect the average selling price of our tests, as well as the operating efficiency of our laboratory operations.
•Expansion of our sales force and marketing programs. We believe the expansion of our direct sales force and marketing organization to educate clinicians and pathologists on the value of our molecular testing products will significantly impact our performance.
•Integrating acquisitions. Revenue growth, operational results and advances to our business strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.
•New product development. A significant aspect of our business is our investment in research and development activities, including activities related to the development of new products. In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products.
Components of the Results of Operations
Net Revenues
We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, TissueCypher, DecisionDx-SCC and DecisionDx-UM. We bill third-party payors and patients for the tests we perform.
Under ASC 606, we recognize revenue at the amount we expect to be entitled, subject to a constraint for variable consideration, in the period in which our tests are delivered to the treating clinicians. We have determined that our contracts contain variable consideration under ASC 606 because the amounts paid by third-party payors may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration is recognized only to the extent it is probable that a significant reversal of revenue will not occur in future periods when the uncertainties are resolved. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. For these fully constrained claims, we generally recognize revenue in the period the uncertainty is favorably resolved, if at all. Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period. Our ability to recognize revenue for a test is dependent on the development of reimbursement experience and obtaining coverage decisions. For tests with limited reimbursement experience or no coverage, we recognize revenues on the basis of actual cash collections.
Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, maintain Medicare coverage for our currently marketed
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products, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed.
Cost of Sales (exclusive of amortization of acquired intangible assets)
The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test. As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred. We expect cost of sales in absolute dollars to increase as the number of tests we perform increases. Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth. For example, continued investment in and expansion of our laboratory facilities.
Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “—Results of Operations—Comparison of the Three Months Ended June 30, 2025 and 2024” and “Results of Operations—Comparison of the Six Months Ended June 30, 2025 and 2024” for details.
Research and Development
Research and development expenses include costs incurred to develop our tests, collect clinical samples and conduct clinical studies to develop and support our products. These costs consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), prototype materials, laboratory supplies, consulting costs, regulatory costs, electronic medical records set up costs, costs associated with setting up and conducting clinical studies and allocated overhead, including rent, information technology, equipment depreciation and utilities. We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.
We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our ongoing and future clinical studies and pipeline initiatives.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses include executive, selling and marketing, legal, finance and accounting, human resources and billing functions. These expenses consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), direct marketing expenses, audit and legal expenses, consulting costs, payor outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities. Other administrative and professional services expenses within SG&A are expected to increase with the scale of our business, but selling and marketing-related expenses are expected to increase significantly, consistent with our growth strategy.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021, AltheaDx in April 2022, and Capsulomics, Inc., d/b/a Previse (“Capsulomics”) in May 2025.
Interest Income
Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and our short-term U.S. government obligations are a component of our marketable investment securities.
Change in Fair Value of Trading Securities
Change in fair value of trading securities is primarily attributable to unrealized gains and losses on our equity securities which we present as marketable investment securities.
Interest Expense
Interest expense is primarily attributable to long-term debt and finance leases.
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Income Tax Benefit
Income tax benefit is primarily due to the reduction of the valuation allowance previously recorded against our federal deferred tax assets. This reduction resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics. Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business. We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and research and development credits and other tax credits.
As of December 31, 2024, we had federal NOL carryforwards of $129.4 million, of which $52.9 million will begin to expire in 2031 if not utilized to offset federal taxable income, and $76.5 million may be carried forward indefinitely. Also, as of December 31, 2024, we also had state NOL carryforwards of $86.5 million, which begin to expire in 2028 if not utilized to offset state taxable income.
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Results of Operations
Comparison of the Three Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

| Three Months Ended June 30, |  | Change
| 2025 |  | 2024 |
| (unaudited) |  |  |  |
Net revenues | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | (814) |  |  | (0.9) | %
Operating expenses |  |  |  |  |  |  |
Cost of sales (exclusive of amortization of acquired intangible assets) | 17,626 |  |  | 14,519 |  |  | 3,107 |  |  | 21.4 | %
Research and development | 12,787 |  |  | 14,136 |  |  | (1,349) |  |  | (9.5) | %
Selling, general and administrative | 58,065 |  |  | 51,088 |  |  | 6,977 |  |  | 13.7 | %
Amortization of acquired intangible assets | 1,961 |  |  | 2,247 |  |  | (286) |  |  | (12.7) | %
Total operating expenses, net | 90,439 |  |  | 81,990 |  |  | 8,449 |  |  | 10.3 | %
Operating (loss) income | (4,251) |  |  | 5,012 |  |  | (9,263) |  |  | (184.8) | %
Interest income | 2,944 |  |  | 3,144 |  |  | (200) |  |  | (6.4) | %
Changes in fair value of trading securities | 1,185 |  |  | — |  |  | 1,185 |  |  | NA
Interest expense | (21) |  |  | (270) |  |  | 249 |  |  | 92.2 | %
(Loss) income before income taxes | (143) |  |  | 7,886 |  |  | (8,029) |  |  | (101.8) | %
Income tax benefit | (4,666) |  |  | (1,034) |  |  | (3,632) |  |  | (351.3) | %
Net income | $ | 4,523 |  |  | $ | 8,920 |  |  | $ | (4,397) |  |  | (49.3) | %

NA = Not applicable
The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands):

| Three Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 1,422 |  |  | $ | 1,401 |  |  | $ | 21 |
Research and development | 1,962 |  |  | 2,637 |  |  | (675) |
Selling, general and administrative | 7,824 |  |  | 9,141 |  |  | (1,317) |
Total stock-based compensation expense | $ | 11,208 |  |  | $ | 13,179 |  |  | $ | (1,971) |

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The following table provides a disaggregation of net revenues by type (in thousands):

| Three Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Dermatologic(1) | $ | 56,297 |  |  | $ | 68,828 |  |  | $ | (12,531) |
Non-Dermatologic(2) | 29,891 |  |  | 18,174 |  |  | 11,717 |
Total net revenues | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | (814) |

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.
(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.
The following table presents the calculation of gross margin (in thousands, except percentages):

| Three Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Net revenues | $ | 86,188 |  |  | $ | 87,002 |  |  | $ | (814) |
Less: Cost of sales (exclusive of amortization of acquired intangible assets) | 17,626 |  |  | 14,519 |  |  | 3,107 |
Less: Amortization of acquired intangible assets | 1,961 |  |  | 2,247 |  |  | (286) |
Gross margin | $ | 66,601 |  |  | $ | 70,236 |  |  | $ | (3,635) |
Gross margin percentage | 77.3 | % |  | 80.7 | % |  | (3.4) | %

Net Revenues
Net revenues for the three months ended June 30, 2025 decreased by $0.8 million, or 0.9%, to $86.2 million compared to the three months ended June 30, 2024, due to a $12.5 million decrease in revenue from our dermatologic tests offset by a $11.7 million increase in revenue from our non-dermatologic tests.
The $12.5 million decrease in net revenues for our dermatologic tests was primarily attributable to our DecisionDx-SCC test, which was due to lower realized average selling price (“ASP”) and, to a lesser extent offset by higher test report volumes. The reduction in ASP was primarily driven by the loss of Medicare LCD coverage in April 2025. For the three months ended June 30, 2025 compared to the three months ended June 30, 2024, test report volumes for our DecisionDx-SCC test increased by 11%.
The $11.7 million increase in net revenues from our non-dermatologic tests was largely attributable to an increase in test report volumes for our TissueCypher Barrett’s Esophagus test. Increases in our TissueCypher Barrett’s Esophagus test report volumes reflect growth through our sales force efforts. Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 20.9% for the three months ended June 30, 2024 to 34.7% for the three months ended June 30, 2025.
Cost of Sales (exclusive of amortization of acquired intangible assets)
Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended June 30, 2025 increased by $3.1 million, or 21.4%, compared to the three months ended June 30, 2024, primarily due to higher personnel costs, higher lab services cost, and higher expenses for lab supplies. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. Higher expense for lab services and lab supplies also reflects higher test report volumes.
Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support expected operational growth and higher test volumes.
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Gross Margin
Our gross margin percentage was 77.3% for the three months ended June 30, 2025, compared to 80.7% for the same period in 2024. The decrease was primarily due to lower ASP relating to our DecisionDx-SCC test and higher personnel costs and higher lab services expense.
Research and Development
Research and development expenses decreased by $1.3 million, or 9.5%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and primarily reflects lower expense for clinical trials and slightly lower personnel costs.
We expect to continue incurring research and development expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist.
Selling, General and Administrative
The following table provides a breakdown of SG&A expenses (in thousands):

| Three Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Sales and marketing | $ | 35,123 |  |  | $ | 32,675 |  |  | $ | 2,448 |
General and administrative | 22,942 |  |  | 18,413 |  |  | 4,529 |
Total selling, general and administrative expense | $ | 58,065 |  |  | $ | 51,088 |  |  | $ | 6,977 |

Sales and marketing expenses increased by $2.4 million, or 7.5%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to higher organizational and business development activities cost and higher sales related travel expense. Stock-based compensation expense included in sales and marketing was $3.9 million for the three months ended June 30, 2025, compared to $4.8 million for the three months ended June 30, 2024.
General and administrative expenses increased by $4.5 million, or 24.6%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and was primarily due to higher personnel costs and higher information technology related costs. Higher personnel cost reflects headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $3.5 million for the three months ended June 30, 2025, compared to $4.4 million for the three months ended June 30, 2024.
Amortization of Acquired Intangible Assets
Amortization expense decreased by approximately $0.3 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to our decision to discontinue the IDgenetix test, which resulted in full amortization of its remaining carrying value as of March 31, 2025.
Changes in Fair Value of Trading Securities
The change in fair value of trading securities increased by $1.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and was entirely associated with our investments in equity securities where we had no such investments during the comparative period.
Income Tax Benefit
Our income tax benefit increased by approximately $3.6 million for the three months ended June 30, 2025, primarily due to the reduction of the valuation allowance previously recorded against our federal deferred tax assets. This release resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics.
Stock-Based Compensation Expense
Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense totaled $11.2 million and $13.2 million for the three months ended June 30, 2025 and 2024, respectively. We expect stock-based compensation expense will continue to be material in future periods,
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attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of June 30, 2025, we had 798 employees, compared to 703 as of June 30, 2024. As of June 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $80.5 million, which is expected to be recognized over a weighted-average period of 2.5 years.
Comparison of the Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

| Six Months Ended June 30, |  | Change
| 2025 |  | 2024 |
| (unaudited) |  |  |  |
Net revenues | $ | 174,176 |  |  | $ | 159,976 |  |  | $ | 14,200 |  |  | 8.9 | %
Operating expenses |  |  |  |  |  |  |
Cost of sales (exclusive of amortization of acquired intangible assets) | 34,009 |  |  | 28,413 |  |  | 5,596 |  |  | 19.7 | %
Research and development | 25,375 |  |  | 27,945 |  |  | (2,570) |  |  | (9.2) | %
Selling, general and administrative | 116,685 |  |  | 99,583 |  |  | 17,102 |  |  | 17.2 | %
Amortization of acquired intangible assets | 30,286 |  |  | 4,494 |  |  | 25,792 |  |  | 573.9 | %
Total operating expenses, net | 206,355 |  |  | 160,435 |  |  | 45,920 |  |  | 28.6 | %
Operating loss | (32,179) |  |  | (459) |  |  | (31,720) |  |  | NM
Interest income | 6,043 |  |  | 6,140 |  |  | (97) |  |  | (1.6) | %
Changes in fair value of trading securities | (240) |  |  | — |  |  | (240) |  |  | NA
Interest expense | (38) |  |  | (284) |  |  | 246 |  |  | 86.6 | %
(Loss) income before income taxes | (26,414) |  |  | 5,397 |  |  | (31,811) |  |  | (589.4) | %
Income tax benefit | (5,089) |  |  | (989) |  |  | (4,100) |  |  | (414.6) | %
Net (loss) income | $ | (21,325) |  |  | $ | 6,386 |  |  | $ | (27,711) |  |  | (433.9) | %

NA = Not applicable
NM = Not meaningful
The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands):

| Six Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 2,878 |  |  | $ | 2,715 |  |  | $ | 163 |
Research and development | 3,857 |  |  | 5,266 |  |  | (1,409) |
Selling, general and administrative | 15,652 |  |  | 17,873 |  |  | (2,221) |
Total stock-based compensation expense | $ | 22,387 |  |  | $ | 25,854 |  |  | $ | (3,467) |

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The following table provides a disaggregation of net revenues by type (in thousands):

| Six Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Dermatologic(1) | $ | 119,259 |  |  | $ | 128,163 |  |  | $ | (8,904) |
Non-Dermatologic(2) | 54,917 |  |  | 31,813 |  |  | 23,104 |
Total net revenues | $ | 174,176 |  |  | $ | 159,976 |  |  | $ | 14,200 |

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.
(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.
The following table presents the calculation of gross margin (in thousands, except percentages):

| Six Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Net revenues | $ | 174,176 |  |  | $ | 159,976 |  |  | $ | 14,200 |
Less: Cost of sales (exclusive of amortization of acquired intangible assets) | 34,009 |  |  | 28,413 |  |  | 5,596 |
Less: Amortization of acquired intangible assets | 30,286 |  |  | 4,494 |  |  | 25,792 |
Gross margin | $ | 109,881 |  |  | $ | 127,069 |  |  | $ | (17,188) |
Gross margin percentage | 63.1 | % |  | 79.4 | % |  | (16.3) | %

Net Revenues
Net revenues for the six months ended June 30, 2025 increased by $14.2 million, or 8.9%, to $174.2 million compared to the six months ended June 30, 2024, due to a $23.1 million increase in revenue from our non-dermatologic tests and a $8.9 million decrease in revenue from our dermatologic tests.
The $23.1 million increase in revenue from our non-dermatologic tests was largely attributable to a 102.2% increase in tests report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP. Increases in our TissueCypher test report volumes reflect growth through our sales force efforts. Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 19.9% for the six months ended June 30, 2024 to 31.5% for the six months ended June 30, 2025.
The $8.9 million decrease from our dermatologic tests was primarily due to a lower ASP for DecisionDx-SCC test, where we stopped receiving Medicare coverage as of April 24, 2025, offset by 16.3% increase in DecisionDx-SCC test report volumes, and a 3.5% increase in DecisionDx-Melanoma test report volumes.
Cost of Sales (exclusive of amortization of acquired intangible assets)
Cost of sales (exclusive of amortization of acquired intangible assets) for the six months ended June 30, 2025 increased by $5.6 million, or 19.7%, compared to the six months ended June 30, 2024, primarily due to higher personnel costs, higher lab services cost, and higher depreciation expense. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. The increase in lab services expense was driven by higher test report volumes, while the rise in depreciation expense reflects continued investment in and expansion of our laboratory facilities.
Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected operational growth and higher test volumes.
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Gross Margin
Our gross margin percentage was 63.1% for the six months ended June 30, 2025, compared to 79.4% for the six months ended June 30, 2024. The decrease was primarily due to higher amortization from accelerating our IDgenetix test, higher personnel costs and higher depreciation expense.
Research and Development
Research and development expenses decreased by $2.6 million, or 9.2%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily reflecting lower clinical studies costs and slightly lower personnel costs.
We expect to continue incurring research and development expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist.
Selling, General and Administrative
The following table provides a breakdown of SG&A expenses (in thousands):

| Six Months Ended June 30, |  |
| 2025 |  | 2024 |  | Change
| (unaudited) |  |
Sales and marketing | $ | 71,931 |  |  | $ | 63,219 |  |  | $ | 8,712 |
General and administrative | 44,754 |  |  | 36,364 |  |  | 8,390 |
Total selling, general and administrative expense | $ | 116,685 |  |  | $ | 99,583 |  |  | $ | 17,102 |

Sales and marketing expenses increased by $8.7 million, or 13.8%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The increase is primarily due to higher expense incurred through organizational and business development activities, higher personnel costs, and higher sales related travel expenses. Increases in personnel costs reflect a higher headcount as well as merit and annual inflationary wage adjustment for existing employees. Higher test report volumes is a result of our continued investments in human capital for our sales organization. Stock-based compensation expense included in sales and marketing expense was $7.9 million for the six months ended June 30, 2025, compared to $9.5 million for the six months ended June 30, 2024.
General and administrative expenses increased by $8.4 million, or 23.1%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The increase is primarily due to higher personnel costs and higher information technology-related costs. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $7.0 million for the six months ended June 30, 2025, compared to $8.4 million for the six months ended June 30, 2024.
Amortization of Acquired Intangible Assets
Amortization increased by approximately $25.8 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025. As a result of this decision, the Company revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025.
Income Tax Benefit
Income tax benefit increased by approximately $4.1 million for the six months ended June 30, 2025 and was primarily due to a released portion of the valuation allowance previously recorded against our federal deferred tax assets. This release resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics.
Stock-Based Compensation Expense
Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $22.4 million for the six months ended June 30, 2025, compared to $25.9 million for the six months ended June 30, 2024. We expect material increases in stock-based compensation expense in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future
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employees. As of June 30, 2025, we had 798 employees compared to 703 as of June 30, 2024. As of June 30, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $80.5 million, which is expected to be recognized over a weighted-average period of 2.5 years.
Liquidity and Capital Resources
Sources of Liquidity
Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities, cash generated from the sale of our products and our line-of-credit under the 2024 Loan and Security Agreement, as amended (the “2024 LSA”). All of our marketable investment securities are considered investment grade, are readily available for use in current operations. As of June 30, 2025 and December 31, 2024, we had marketable investment securities of $193.7 million and $173.4 million, respectively. Additionally, as of June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $82.2 million and $119.7 million, respectively. Furthermore, on April 4, 2025, we amended the 2024 LSA to modify certain terms, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit. As of June 30, 2025, we had a $25.0 million credit-line available under the 2024 LSA.
Our liquidity has been primarily derived from the revenue generated from the sale of our products. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months. However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected.
As mentioned above, we expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including the clinical studies noted above in “—Components of the Results of Operations—Research and Development.”
Material Cash Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical research and development services, laboratory operations, equipment and related supplies, legal and other regulatory expenses, general administrative costs and, from time to time, expansion of our laboratory and office facilities in support of our growth, such as the construction of our future corporate headquarters. We anticipate that a substantial portion of our cash requirements in the foreseeable future will relate to the further commercialization of our currently marketed products, the development of our future product candidates in our pipeline and the potential commercialization of these pipeline products, should their development be successful, and the construction of our future corporate headquarters.
In July 2023, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building where our future corporate headquarters will be located. In February 2024, we closed on the purchase of the land for cash consideration of $7.2 million. The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space. Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use. Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis. As of June 30, 2025, the development project is expected to cost a total of approximately $44.2 million. During the three and six months ended June 30, 2025, we incurred total capital spent of $8.8 million and $14.0 million, respectively, related to this development project. We intend to use the proceeds from the 2024 Term Loan, (as defined below), the 2024 Credit Line and our existing cash and cash equivalents to pay for this project.
Since our inception, we have generally incurred significant losses and negative operating cash flows, and we have relied heavily on proceeds from our financing activities to fund capital expenditures, business expansion campaigns, and to offset operating deficits. For the year ended December 31, 2024, we recognized net income of $18.2 million, and had positive operating cash flow of $64.9 million, though we may be unable to sustain profitability and positive cash flows in future periods. Collections on Medicare claims for our DecisionDx-SCC test represented a significant portion of our 2024 operating cash flows. We lost Medicare coverage for our DecisionDx-SCC test in April 2025 and decreases in revenues and cash inflows from this test are expected to follow. Our ability to maintain profitability will heavily depend on us maintaining Medicare coverage for our currently marketed products, on the successful commercialization of the products we plan to launch in the future, and our ability to manage operating expenses. We expect to incur additional expenses in the future as we invest in the commercialization of our existing products and the development and commercialization of our current pipeline products and future product candidates. We
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believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from the sale of our commercial products will be sufficient to fund our operations for at least the next 12 months. We believe we will meet longer-term expected cash requirements and obligations through a combination of existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products and issuances of equity securities or debt offerings. However, we have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. There are numerous risks and uncertainties associated with developing genomic tests, including, among others, the uncertainty of:
•successful commencement and completion of clinical study protocols;
•successful identification and acquisition of tissue samples;
•the development and validation of genomic classifiers; and
•acceptance of new genomic tests by clinicians, patients and third-party payors including competitor actions.
Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate our exact working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of, many factors, including those listed above as well as those listed in Part I, Item 1A, “Risk Factors” in the 2024 10-K and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.
In the event additional funding is required, we expect that we would use a combination of equity and debt financings, which may not be available to us when needed, on terms that we deem to be favorable or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we are unable to raise additional funds through debt or equity financing or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product discovery and development activities or future commercialization efforts.
Long-Term Debt
Our long-term debt is presented in the table below (in thousands):

| June 30, 2025 |  | December 31, 2024 |  |
| (unaudited) |  |  |  |
Term debt | $ | 10,200 |  |  | $ | 10,200 |  |  |
Unamortized discount | (160) |  |  | (177) |  |  |
Total debt, net | 10,040 |  |  | 10,023 |  |  |
Less: Current portion of long-term debt | (1,944) |  |  | (278) |  |  |
Total long-term debt | $ | 8,096 |  |  | $ | 9,745 |  |  |

2024 Loan and Security Agreement
On March 26, 2024 (the ‘‘Closing Date’’), we entered into the ‘2024 LSA, as amended on April 4, 2025, by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’). The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the “2024 Term Loan” section below), and (ii) from the Closing Date until September 30, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in ‘‘2024 Credit Line’’ below) at our option.
The obligations under the 2024 LSA are secured by substantially all of our assets, excluding intellectual property, the real property held by the Company, and are subject to certain other exceptions and limitations. We have the right to prepay the 2024 LSA in whole, subject to a prepayment fee of approximately 1.50% if paid prior to March 26, 2026. Amounts repaid under the 2024 LSA may not be reborrowed.
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In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA. Should we seek to further amend the terms of the 2024 LSA, the consent of the Lender would be required. As of June 30, 2025, we were in compliance with these covenants.
The 2024 LSA bears interest at a floating rate equal to the greater of (a) the WSJ Prime Rate plus 0.25% or (b) 6.00% per annum. The Term Loans are interest only from the Closing Date through November 30, 2025, which may be extended at our option through November 30, 2026 as long as no event of default under the 2024 LSA has occurred. After the end of the interest only period, we are required to pay equal monthly installments of principal through the maturity date of November 1, 2028.
We are also obligated to make an additional final payment of 2.00% of the aggregate original principal amounts of Term Loans advanced by the Lender, due at the earlier of the maturity date or date the Term Loans are repaid in full.
On April 4, 2025, the Company entered into a Consent and First Amendment (the “Amendment”) with the
Lender. The Amendment modified certain terms of the 2024 LSA, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit.
2024 Term Loan
On the Closing Date, we drew $10.0 million in Term Loans under the terms and provisions of the 2024 LSA. We are obligated to make a final payment of $0.2 million under the terms of the 2024 LSA final payment provisions. A discount on debt equal to this obligation was recorded on the draw date and is being amortized as additional interest expense using the effective interest method over the term of the debt. As of June 30, 2025, the effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19%.
2024 Credit Line
We have a $25.0 million line of credit under the terms and provisions of the 2024 LSA and the Amendment available from the Closing Date until September 30, 2025. Amounts repaid under the 2024 Credit Line may not be reborrowed. As of June 30, 2025, no draws had been made on the 2024 Credit Line.
Leases
We have entered into various operating and finance leases, which are primarily associated with our laboratory facilities and office space.
Total undiscounted future minimum payment obligations under our operating leases and finance leases as of June 30, 2025 totaled approximately $41.5 million, of which $1.6 million is payable through the remainder of 2025 and $39.9 million is payable through early 2037. The leases expire on various dates through 2034 and provide certain options to renew for additional periods.
We expect our lease obligations may increase in the future as we expand our facilities, operations and headcount in support of the anticipated growth in our portfolio of commercial products and pipeline tests.
Cash Flows
The following table summarizes our sources and uses of cash and cash equivalents for each of the periods presented (in thousands):

|  |  | Six Months Ended June 30, |  |
|  |  |  |  | 2025 |  | 2024 |  |  |  |
|  |  |  |  | (unaudited) |  |  |  |
Net cash provided by operating activities |  |  |  |  | $ | 14,785 |  |  | $ | 17,163 |  |  |  |  |
Net cash used in investing activities |  |  |  |  | (50,809) |  |  | (41,118) |  |  |  |  |
Net cash (used in) provided by financing activities |  |  |  |  | (1,452) |  |  | 10,686 |  |  |  |  |
Net change in cash and cash equivalents |  |  |  |  | (37,476) |  |  | (13,269) |  |  |  |  |
Cash and cash equivalents, beginning of period |  |  |  |  | 119,709 |  |  | 98,841 |  |  |  |  |
Cash and cash equivalents, end of period |  |  |  |  | $ | 82,233 |  |  | $ | 85,572 |  |  |  |  |

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Operating Activities
Net cash provided by operating activities was $14.8 million for the six months ended June 30, 2025, and was primarily attributable to depreciation and amortization of $33.2 million, non-cash stock-based compensation expense of $22.4 million, and increases in accounts payable of $1.7 million, partially offset by net loss of $21.3 million, decreases in accrued compensation of $7.6 million, deferred income taxes of $5.4 million, increases in prepaid expenses and other current assets of $4.7 million, accretion of discounts on marketable investment securities of $2.6 million, and increases in accounts receivable of $1.3 million.
Net cash provided by operating activities was $17.2 million for the six months ended June 30, 2024, and was primarily attributable to non-cash stock-based compensation expense of $25.9 million, depreciation and amortization of $6.7 million, and net income of $6.4 million, partially offset by decreases in accrued compensation of $7.7 million, increases in accounts receivable of $7.6 million, accretion of discounts on marketable investment securities of $3.4 million, decreases in accounts payable of $1.7 million and deferred income taxes of $1.5 million.
The $2.4 million decrease in cash provided by operating activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to increases in operating expenditures, partially offset by increases in collections from customers attributable to higher net revenues. The cash provided during the six months ended June 30, 2025 also reflects the payment of annual cash bonuses to our employees and certain health care benefit payments totaling $22.5 million, which are not expected to recur in the remainder of 2025. By comparison, we paid $20.8 million for similar items during the first half of 2024.
Investing Activities
Net cash used in investing activities was $50.8 million for the six months ended June 30, 2025 and consisted primarily of purchases of marketable investment securities of $92.8 million, our asset acquisition of Capsulomics for $18.7 million, purchases of property and equipment of $14.0 million and purchases of debt securities classified as held-to-market of $5.6 million, partially offset by the maturity of marketable investment securities of $80.3 million.
Net cash used in investing activities was $41.1 million for the six months ended June 30, 2024 and consisted primarily of purchases of marketable investment securities of $113.2 million and purchases of property and equipment of $14.4 million, partially offset by the maturity of marketable investment securities of $86.5 million.
The $9.7 million increase in cash used in investing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to our acquisition of Capsulomics for $18.7 million, which includes both the cash consideration and direct transaction costs, $6.2 million fewer proceeds from maturing marketable investment securities, partially offset by $14.8 million fewer purchases of such securities.
Financing Activities
Net cash used in financing activities was $1.5 million for the six months ended June 30, 2025, and consisted primarily of the $3.1 million payment of employee taxes attributable to the vesting of Restricted Stock Units (“RSUs”), partially offset by the $1.5 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”) and $0.2 million of proceeds from lease incentives received .
Net cash provided by financing activities was $10.7 million for the six months ended June 30, 2024, and consisted primarily of $10.0 million of proceeds from issuance of long-term debt and $1.7 million of proceeds from contributions to our ESPP, partially offset by the $1.1 million payment of employee taxes attributable to the vesting of RSUs.
Critical Accounting Estimates
During the six months ended June 30, 2025, there were no significant changes to the information discussed under “Critical Accounting Estimates” included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2024 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates fluctuations. We had cash and cash equivalents of $82.2 million as of June 30, 2025, which include bank deposits and money market funds. We had marketable investment securities of $193.7 million as of June 30, 2025, which
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include U.S. government securities. Due to the nature of these instruments, we believe that we have no material exposure to interest rate risk.
We had a term debt of $10.0 million as of June 30, 2025, consisting of an outstanding term loan which bears interest at a floating rate that fluctuates with the WSJ Prime Rate, subject to an interest rate floor of 6.00%.
A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.
Inflation Risk
Our exposure to inflationary pressures is primarily in personnel and related costs. The extent of any future impacts from inflation on our business and our results of operations will be dependent upon how long the elevated inflation levels persist and if the rate of inflation were to further increase, neither of which we are able to predict. If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, the purchasing power of our cash and cash equivalents may be eroded, our expenses could increase faster than anticipated and we may utilize our capital resources sooner than expected. Further, given the complexities of the reimbursement landscape in which we operate, our payors may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts.
Equity Price Risk
As of June 30, 2025, we had equity securities with a total fair value of $3.3 million. A hypothetical 10% decrease in the market price of our trading securities as of June 30, 2025 would decrease the fair value by approximately $0.3 million. These securities are subject to a wide variety and number of market-related risks that could substantially reduce or increase the fair value of our holdings.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2025. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in legal proceedings arising in the ordinary course of business. Legal proceedings, including litigation, government investigations and enforcement actions could result in material costs, occupy significant management resources and entail civil and criminal penalties, even if we ultimately prevail. On February 1, 2024, we received a subpoena from United States Department of Health and Human Services, Office of Inspector General, seeking documents and information concerning claims submitted for payment under federal healthcare programs. The subpoena requested that we produce documents relating primarily to interactions with medical providers and billing to government-funded healthcare programs for our tests. The time period covered by the subpoena is January 1, 2015 through the date of issuance of the subpoena. We are continuing to cooperate with the government’s request and is in the process of responding to the subpoena. We are unable to predict what action, if any, might be taken in the future by the Department of Health and Human Services, Office of Inspector General, or any other governmental authority as a result of the matters related to this subpoena. No claims have been made against us at this time. This inquiry, and any potential resulting claim asserted against us, with or without merit, could be time-consuming, expensive to address and divert management’s attention and other resources. These claims also could subject us to significant liability for damages and harm our reputation. Our insurance and indemnities may not cover all claims that may be asserted against us. We are unable to predict the outcome and are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the 2024 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described the 2024 10-K other than the updates to the risk factors or new risk factors set forth below. New risk factors that were not included in the 2024 10-K have been marked with an asterisk (*).
We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.
Risks Related to Our Financial Condition
We incurred significant losses in the past, and we may be unable to achieve sustained profitability in the future.
Since our inception, we have had a history of net losses. For the year ended December 31, 2024, we had net income of $18.2 million, and as of December 31, 2024, we had an accumulated deficit of $200.1 million. For the six months ended June 30, 2025, we had net income of $4.5 million, and as of June 30, 2025, we had an accumulated deficit of $221.5 million. We cannot predict if we will continue to achieve profitability in the future. We may incur losses in the future as we plan to invest significant additional funds toward the expansion of our commercial organization, the conduct of clinical utility and validity studies to support adoption of our products and the development or acquisition of additional products. We also expect increases in our stock-based compensation expense in future periods due to additional awards outstanding, attributable to increased headcount. Additionally, our performance could be affected by the impacts of geopolitical and macroeconomic developments, such as the invasion of Ukraine by Russia and related sanctions, the ongoing conflicts in the Middle East, economic slowdowns, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, bank failures or other disruptions in the banking system or financing markets, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments. Due to the requirements associated with being a public company, we expect to continue incurring significant additional legal, accounting and other expenses. We also expect that any acquisitions of businesses, assets, products or technologies will increase our expenses. These increased expenses will make it harder for us to achieve future profitability or generate positive cash flows. Furthermore, our revenues from our DecisionDx-SCC test represented a significant portion of our 2024 revenues, but that is not expected to be the case for our 2025 operating results. See “—Risks Related to Our Business—Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, DecisionDx-SCC and TissueCypher tests, and we will need to generate sufficient revenue from these products and other products to grow our business.” We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in the 2024 10-K, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities. Our
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failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.
Risks Related to Our Business
Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, DecisionDx-SCC and TissueCypher tests, and we will need to generate sufficient revenue from these products and other products to grow our business.
Our revenue in 2024 was primarily derived from the sale of our DecisionDx-Melanoma, DecisionDx-SCC and TissueCypher tests. While we also derive revenue from our other tests, we expect that the majority of our revenue for the next several years will be derived from sales of our DecisionDx-Melanoma and TissueCypher tests. Revenues from our DecisionDx-SCC test represented a significant portion of our 2024 revenues but are not expected to be so in our 2025 operating results. On January 9, 2025, Novitas finalized an oncology biomarker LCD that became effective on April 24, 2025. On April 24, 2025, the Novitas LCD, Genetic Testing for Oncology: Specific Tests, that includes DecisionDx-SCC as noncovered, became effective.
We believe that our long-term commercial success, and ability to generate revenue, will depend on our ability to develop and market additional products, on our ability to increase market penetration for our existing and potential future products and on our ability to obtain favorable coverage and reimbursement policies from government payors, such as Medicare, and from private payors, such as insurance companies.
Without positive coverage policies, our products may not be reimbursed and we may not be able to recognize revenue. If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, TissueCypher, and our other tests, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve profitability would be impaired, and the market price of our stock could decline substantially.
Unfavorable U.S. and global economic conditions could adversely affect our business, financial condition, results of operations or cash flows.
Our results of operations could be adversely affected by general conditions in the U.S. and global economies, the U.S. and global financial markets and adverse macroeconomic developments. U.S. and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, such as the ongoing conflicts in the Middle East and the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns, at, and failures of, banks and other financial institutions or other disruptions in the banking system or financial markets, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments, among others. General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, changes in trade and tariff policies, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our collaborators, our manufacturers and our suppliers operate.
A severe or prolonged global economic downturn could result in a variety of risks to our business. For example, inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation has resulted in increased personnel costs and increased prices for certain lab supplies and may result in additional increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all. In addition, the U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks. Furthermore, the closures of specific financial institutions, or the broader financial services industry, may lead to market-wide liquidity shortages that could materially harm our business and financial condition. For example, closures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023 resulted in broader financial institution liquidity risk and concerns. Additionally, rapid changes in U.S. trade policy, such as the imposition of additional tariffs and trade barriers, as well as potential retaliatory measures taken by other governments, could increase the price of and/or affect the availability of imported raw materials used in the production of our products.
Risks of a prolonged global economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis. A weak or declining economy could also strain our suppliers and manufacturers, possibly
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resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022. In response to the invasion, the United States, UK and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and/or supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the Russia-Ukraine conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. More recently, the escalation of hostilities between Iran and Israel has introduced additional geopolitical instability and uncertainty, particularly in the Middle East. This conflict has the potential to disrupt global energy supplies, impact shipping routes, and lead to broader regional or international involvement, further straining global supply chains and financial markets. Further, a weak or declining economy could strain our suppliers, manufacturers and collaborators, possibly resulting in additional supply disruption for our product candidates. As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and escalating tensions between Iran and Israel, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. If economic conditions in Europe, the Middle East, or other key markets for our business and the business of our suppliers, manufacturers and collaborators remain uncertain or deteriorate further, we could experience adverse effects on our business, financial condition, results of operations or cash flows.
Risks Related to Reimbursement and Government Regulation
Our products are currently marketed as LDTs, and any changes in regulations or the FDA’s enforcement discretion for LDTs, or violations of regulations by us, could adversely affect our business, prospects, results of operations or financial condition.
The diagnostics industry is highly regulated, and we cannot assure you that the regulatory environment in which we operate will not change significantly and adversely in the future. In many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Although the FDA has statutory authority to provide reasonable assurance that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics (“IVDs”) that are intended for clinical use and are designed, manufactured and used within a single laboratory that is certified under Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) and meets the regulatory requirements under CLIA to perform high-complexity testing. These tests are referred to as LDTs. We currently market our products as LDTs.
On May 6, 2024, the FDA published a final rule on the regulation of LDTs, which amends the FDA regulations under 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act. Under this final rule, the FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs, including LDTs marketed as of the date of publication of the final rule on May 6, 2024, as well as LDTs that have received approval from the NYSDOH. On March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA's LDT final rule. The U.S. government did not appeal the ruling, and the deadline to do so has passed; therefore, the court’s decision stands.
Even if the LDT final rule were reinstated, we do not believe it would have a material impact on our existing test offerings given all of our tests were marketed before May 6, 2024. We believe that our tests would continue to be subject to FDA enforcement discretion in their current forms. Additionally, pursuant to the LDT final rule, the FDA would gradually end its general enforcement discretion approach in five stages over a four-year period for other LDTs not approved by NYSDOH or not already on market. Each stage of the proposed phaseout period would subject LDTs to a set of regulatory requirements. For example, the first stage of the phaseout would require LDT developers to comply with medical device reporting requirements and correction and removal reporting requirements by May 6, 2025. LDTs considered higher-risk IVDs would be subject to premarket review requirements within three and a half years, and LDTs considered low to moderate risk IVDs would be subject to premarket submission requirements within four years after publication of the LDT final rule. While the enforcement policy is
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phased out, the FDA could still decide to pursue enforcement action at any time against LDTs that it deemed to be violative of its regulations when appropriate.
All of our existing tests were marketed prior to May 6, 2024 and are conducted in labs licensed by the NYSDOH. If the FDA were to determine that our tests, or modifications thereof, are not within the scope of the FDA's enforcement discretion policy for LDTs for any reason, including based on the LDT final rule, if reinstated, or new rules, policies or guidance, or due to changes in statute, our existing tests may become subject to extensive FDA requirements, or our business may otherwise be adversely affected and lead to potential adverse effects on our business, prospects, results of operations and financial condition. Furthermore, under the terms of the LDT final rule, any future Castle tests developed and commercialized would likely be subject to extensive FDA requirements which could adversely impact our business, prospects, results of operations and financial conditions. Based on the LDT final rule, any such future Castle tests would be required to obtain marketing authorization by November 6, 2027 (if the tests were considered high risk) or by May 6, 2028 (if the tests were considered low to moderate risk and were otherwise not exempt from premarket review requirements). We would also be subject to other device requirements, such as establishment registration and device listing requirements, medical device reporting requirements and current good manufacturing practice requirements. We could be required to conduct clinical trials prior to continuing to sell our existing products or launching any other products we may develop. This could increase the cost of conducting, or otherwise harm, our business.
Even if the FDA does not modify its policy of enforcement discretion, the FDA may disagree that we are marketing our LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements. While we believe that we are currently in material compliance with applicable laws and regulations as historically enforced by the FDA, we cannot assure you that the FDA will agree with our determination. A determination that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations or financial condition.
We may be required to obtain marketing authorization under Section 510(k), 513(f)(2) or 515 of the FD&C Act for any future test we wish to offer. The process for submitting a premarket notification (501(k) and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed. Similarly, the process for submitting a de novo authorization request and receiving FDA’s granting of the request usually takes from 4 to 18 months, but it can take significantly longer and such granting of the request is never guaranteed. The process for submitting and obtaining FDA approval of a PMA is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer, and approval is not guaranteed. PMA approval typically requires extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process or de novo authorization process. Despite the time, effort and expense expended, there can be no assurance that a particular device ultimately will receive FDA’s marketing authorization through the 510(k) clearance process, de novo authorization process or the PMA process on a timely basis, or at all. Moreover, there can be no assurance that any FDA-authorized labeling claims will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products. If premarket review is required for some or all of our products, the FDA may require that we stop selling our products pending marketing authorization, which would negatively impact our business. Even if our products are allowed to remain on the market prior to marketing authorization, demand or reimbursement for our products may decline if there is uncertainty about our products, if we are required to label our products as investigational by the FDA, or if the FDA limits the labeling claims we are permitted to make for our products. As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other pipeline products. Furthermore, it could reduce our revenues or increase our operating costs and adversely affect our business, prospects, results of operations or financial condition.
The FDA may modify its enforcement discretion policy with respect to LDTs in a risk-based manner, and we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.
On May 6, 2024, the FDA published a final rule which amends 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act. In conjunction with this final rule, the FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach for LDTs so that IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs. On March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA's LDT final rule. The U.S. government did not appeal the ruling, and the deadline to do so has passed; therefore, the court’s decision stands.
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If the FDA changes or ends its policy of enforcement discretion with respect to LDTs, and our products become subject to the FDA’s requirements for premarket review of medical devices, we may be required to cease commercial sales of our products and conduct clinical trials prior to making submissions to the FDA to obtain premarket authorization or approval. If we are required to conduct such clinical trials, delays in the commencement or completion of clinical trials could significantly increase our product development costs and delay commercialization of any currently marketed testing that we may be required to cease selling or the commercialization of any future tests that we may develop. Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of marketing authorization. The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial.
The FDA requires medical device manufacturers to comply with, among other things, current good manufacturing practices for medical devices, known as the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process; the medical device reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; labeling regulations, including the FDA’s general prohibition against promoting products for unapproved or ‘‘off-label’’ uses; and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act caused by the device which may present a risk to health.
Even if we were able to obtain FDA marketing authorization for one or more of our products, if required, a diagnostic test may be subject to limitations on the indications for which it may be marketed or to other regulatory conditions. In addition, such marketing authorization may contain requirements for costly post-market testing and surveillance to monitor the safety or efficacy of the test.
In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approvals. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing authorization that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
Furthermore, government funding of the FDA other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other government agencies may impact the ability of such agencies to timely review and process our regulatory and other submissions, which could have a material adverse effect on our business.
Disruptions at the FDA and other government agencies caused by layoffs, funding shortages or global health concerns could negatively impact our business.*
The ability of the FDA to review proposed clinical trials or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, including executive and congressional priorities, the impacts of which are inherently fluid and unpredictable. Disruptions at the FDA and other agencies may slow the time necessary for new product candidates to be reviewed and/or approved, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. In addition, the current administration has proposed substantial reductions in force at various government agencies including the FDA, which could significantly reduce the FDA’s capacity to perform its functions in a manner consistent with its past practices and could delay reviews and negatively impact our business.
We cannot predict the likelihood, nature or extent of government regulation or other measures that may arise from future legislation or administrative or executive action, either in the United States or abroad.*
The policies of the FDA and other regulatory authorities may change, including as a result of changes in the U.S. presidential administration, and additional government regulations or executive orders may be enacted that could
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change our continuing compliance obligations or otherwise adversely affect our business. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability. In addition, significant tariffs or other restrictions imposed and related countermeasures taken by impacted foreign countries could adversely affect our operation and financial results. We cannot predict the likelihood, nature or extent of government regulation or other measures that may arise from future legislation or administrative or executive action either in the United States or abroad.
Risks Related to Employee Matters and Managing Growth and Other Risks Related to Our Business
We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
We have experienced significant revenue growth in a short period of time. We may not achieve similar growth rates in future periods. You should not rely on our operating results for any prior periods as an indication of our future operating performance. To effectively manage our anticipated future growth, we must continue to maintain and enhance our financial, accounting, human resources, laboratory operations, customer support and sales administration systems, processes and controls. Failure to effectively manage our anticipated growth could lead us to over-invest or under-invest in development, operational and administrative infrastructure, result in weaknesses in our infrastructure, systems, or internal controls, give rise to operational mistakes, losses, loss of customers, productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees.
We also anticipate further growth in our business operations. For example, since December 2021, we have completed the acquisitions of Cernostics, AltheaDx, and Capsulomics. These acquisitions and other future growth could create strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service and sales organization management. We expect to continue increasing our headcount and hire more specialized personnel in the future as we grow our business and expand our product offerings. We will need to continue to hire, train and manage additional qualified scientists, laboratory personnel, client and account services personnel, and sales and marketing staff and improve and maintain our technology to effectively manage our growth. If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees or if we are not successful in retaining our existing employees, our business may be harmed.
In addition, our anticipated growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new diagnostic tests and services. As we commercialize additional tests, we may need to incorporate new equipment, implement new technology systems, automate or otherwise improve the efficiency of our operational processes or hire new personnel with different qualifications. Failure to manage this growth or transition could result in turnaround time delays, higher costs, declining quality, deteriorating customer service, and slower responses to competitive challenges. Failure in any one of these areas could make it difficult for us to meet market expectations for our products and could damage our reputation and the prospects for our business.
For example, we experienced initial operational challenges in expanding business for our TissueCypher test. In July 2023, we elected to temporarily pause accepting additional TissueCypher orders to focus on scaling efforts and to work through a significant backlog of orders. In September 2023, we resumed accepting new orders for testing in a phased approach consistent with continued scaling activity aimed at accommodating current demand and future growth. As of mid-October 2023, we completed the pre-existing backlog orders. However, there can be no assurance that our efforts will be successful, which could damage our reputation and the prospects for our business. As we expanded our TissueCypher business line, we also incurred additional rent and overhead costs through the opening of our new Pittsburgh facilities in the second quarter of 2023 and through our expansion of these facilities in 2024. Furthermore, we have made significant capital expenditures for leasehold improvements and purchase of lab equipment for these facilities to support business growth for our TissueCypher test. We cannot be certain that our existing investments will be sufficient to sustain continued growth, or that we may be successful in such business strategy and expansion efforts.
After completing our initial launch of the IDgenetix test in 2022, we commenced measured commercial investments to grow this business line through sales force and territory expansions. These efforts continued into late 2024; however, operational results did not meet prior expectations. Consequently, in late 2024, we revised our commercial strategy for the IDgenetix test, reallocating resources to inside sales and non-personal promotions. In December 2024, we observed month-to-month decreases in IDgenetix test reports, which persisted through year-end. In May 2025, after careful further assessment, we discontinued the test.
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We may not be able to maintain the quality or expected turnaround times of our products, or satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. The time and resources required to implement these new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations. If our management is unable to effectively manage our anticipated growth, our expenses may increase more than expected, our revenue could decline or grow more slowly than expected and we may be unable to implement our business strategy. The quality of our products and services may suffer, which could negatively affect our reputation and harm our ability to retain and attract customers.
We have engaged in, and may continue to engage in, strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.
From time to time, we may consider strategic opportunities and engage in transactions such as acquisitions of businesses, assets, products or technologies, as well as technology licenses or investments in complementary businesses. For example, in December 2021, April 2022, and May 2025 we completed the acquisitions of Cernostics, AltheaDx, and Capsulomics, respectively. These and any other strategic acquisition transactions may entail numerous operational and financial risks, including:
•delays, difficulties and higher than expected costs associated with integration activities, such as those involving operational processes, regulatory and licensure compliance, personnel and information technology systems;
•difficulties in scaling and growing the operations of acquired businesses in a cost-efficient manner;
•disruption of our existing business operations and diversion of management’s time, focus and attention;
•decreases in our liquidity and operating cash flows, increases in our overall operating costs, substantial amounts of amortization expense, increased capital expenditure requirements and non-recurring charges, including possible impairments of acquired assets and losses on the remeasurement of contingent consideration;
•incurrence of substantial debt or dilutive issuances of equity securities, the assumption of additional liabilities, exposure to unknown liabilities and being subject to disputes with former owners of acquired businesses;
•inability to retain key personnel of any acquired businesses; and
•failure to realize any of the anticipated revenues, synergies, efficiencies or other benefits of a transaction within our estimated time frame or at all.
Any acquisition, integration or expansion of our business may cause actual results to differ materially from our plans and expectations. Further, there are inherent execution and business risks associated with managing the integration and growth objectives of more than one acquisition, integration, and growth strategy at the same time and such circumstances may have the effect of heightening the operational and financial risks related to acquisitions noted above and the other risks described in this “Risk Factors” section.
For example, we began offering the TissueCypher test following our acquisition of Cernostics and the IDgenetix test following our acquisition of AltheaDx, and we have experienced certain challenges related to those tests. See “—We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.”
We are unable to predict the timing, size or nature of any future transactions, whether they will be completed or financed on favorable terms, if at all, or what the impact of those transactions might be on our financial results, including if such transactions are not effectively and profitably integrated into our business. Our failure to successfully complete the integration of any business that we acquire could have an adverse effect on our prospects, business activities, cash flows, financial condition, results of operations and stock price. Additionally, our ability to successfully integrate, manage and derive financial and other benefits from any acquired business, asset, product or technology cannot be assured given our limited historical experience with such transactions.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.
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New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. Legislation referred to as the One Big Beautiful Bill Act (the “OBBBA”) enacted in 2025, the Inflation Reduction Act enacted in 2022, the Coronavirus Aid, Relief, and Economic Security Act enacted in 2020, and the Tax Cuts and Jobs Act (“TCJA”) enacted in 2017 made many significant changes to the U.S. tax laws. For example, for tax years beginning after December 31, 2024, the OBBBA restores the tax deductibility of domestic research and development expenses in the year incurred, which expenses had been required under the TCJA to be capitalized and subsequently amortized over five years. The OBBBA did not change the tax treatment of expenses incurred in research and development activities conducted outside the United States, which expenses continue to be required to be capitalized and amortized over 15 years. We are evaluating the potential impacts this and other changes under the OBBBA may have on our business. Future Further guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation or sunset in future years. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds from IPO of Common Stock
On July 29, 2019, we completed our IPO, pursuant to which we issued and sold 4,600,000 shares of our common stock, including 600,000 shares associated with the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $16.00 per share.
The offer and sale of all of the shares of our common stock in the IPO were registered under the Securities Act pursuant to our Registration Statements on Form S-1, as amended (File Nos. 333-232369 and 333-232796), which were declared or became effective on July 24, 2019.
There has been no material change in our planned use of the net proceeds from the IPO as described in the final prospectus filed with the SEC on July 26, 2019 relating to our Registration Statements on Form S-1 (File Nos. 333-232369 and 333-232796).
Since the effective date of our registration statement through June 30, 2025, we have not used any of the net proceeds from the IPO. Pending such uses, we have invested, and plan to continue to invest, the balance of the net proceeds from the IPO in cash and cash equivalent securities or highly liquid investment securities.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On May 8, 2025, Derek Maetzold, our Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 48,204 shares of our common stock and up to 100% of the shares of our common stock issued upon the settlement of 48,919 outstanding RSUs, less the number of shares withheld to cover tax withholding obligations in connection with the vesting and settlement of such RSUs. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is estimated to be from August 14, 2025 until the earlier of all transaction under the trading arrangement being completed or February 13, 2026.
No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as defined in Regulation S-K Item 408, for the three months ended June 30, 2025.
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Item 6. Exhibits.

Exhibit Number |  | Description of document
3.1 |  | Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 23, 2025.
3.2 |  | Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019.
4.1 |  | Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019.
4.2 |  | Sixth Amended and Restated Investors’ Rights Agreement, dated July 12, 2019, by and among the Registrant and certain of its stockholders, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019.
10.1#+ |  | Consent and First Amendment to the Loan and Security Agreement, dated April 4, 2025, by and among the Registrant, Castle Narnia Way Real Estate Holding 1, LLC a nd Silicon Valley Bank incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 5, 2025
10.2 |  | Third Amendment to Commercial Lease, executed April 14, 2025, by and between the Registrant and Tannos Land Holdings III, LLC i ncorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 5, 2025
10.3* |  | Office L ease A greement dated M a y 1 4, 2025, by and between the Registrant and Perimeter Gateway Portfolio LLC.
10.4*^ |  | Non-Employee Director Compensation Policy, as amended effective May 22, 2025.
10.5*^ |  | Amended P articipation A greement, dated June 20, 2025 by and between the Registrant and Frank Stokes.
10.6*^ |  | Amended P articipation A greement, dated June 20, 2025 by and between the Registrant and Toby Juvenal.
10.7*^ |  | Amended P articipation A greement, dated June 20, 2025 by and between the Registrant and Kristen Oelschlager.
31.1* |  | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
31.2* |  | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
32.1** |  | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act, and 18 U.S.C. Section 1350.
101.INS* |  | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH* |  | Inline XBRL Taxonomy Extension Schema.
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase.
104* |  | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

_____________________________________
* Filed herewith
** Furnished herewith
^ Indicates management contract or compensatory plan.
# Certain schedules or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished.
+ Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”) because the Company has determined that the information is not material and is the type that the Company treats as private or confidential.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  |  | CASTLE BIOSCIENCES, INC.
Date: | August 4, 2025 |  | By: | /s/ Derek J. Maetzold
|  |  |  | Derek J. Maetzold President and Chief Executive Officer (Principal Executive Officer)
Date: | August 4, 2025 |  | By: | /s/ Frank Stokes
|  |  |  | Frank Stokes Chief Financial Officer (Principal Financial and Accounting Officer)

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