CSTL 10-Q
Castle Biosciences Inc (CSTL)
10-Q
2026-07-30
For: 2026-06-30
View Original
Added on
July 30, 2026
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, 2026
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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (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 | ||||||
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 | ☐ | ☒ | |||||||||
| 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 23, 2026, there were 30,549,507 shares of common stock, $0.001 par value per share, issued and outstanding.
Table of Contents
| Page | ||||||||
| PART I. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
i
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, 2026 | December 31, 2025 | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable investment securities | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Long-term accounts receivable, net | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease assets | |||||||||||
| Goodwill and other intangible assets, net | |||||||||||
| Other assets – long-term | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Contingent consideration | |||||||||||
| Operating lease liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Other accrued and current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Noncurrent portion of contingent consideration | |||||||||||
| Noncurrent operating lease liabilities | |||||||||||
| Noncurrent finance lease liabilities | |||||||||||
| Deferred tax liability | |||||||||||
| Total liabilities | |||||||||||
Commitments and Contingencies (Note 12) | |||||||||||
| Stockholders’ Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| NET REVENUES | $ | $ | $ | $ | |||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Amortization of acquired intangible assets | |||||||||||||||||||||||
| Total operating expenses, net | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Net (losses) gains on equity securities | ( | ( | |||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other loss | ( | ( | |||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax expense (benefit) | ( | ( | |||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| (Loss) earnings per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Net unrealized loss on marketable investment securities | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
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 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock from vested restricted stock units, net of shares withheld for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
| Issuance of common stock under the employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Net unrealized loss on marketable investment securities | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock from vested restricted stock units, net of shares withheld for taxes | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Net unrealized loss on marketable investment securities | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
BALANCE, JUNE 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
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, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock from vested restricted stock units and performance-based restricted stock units, net of shares withheld for taxes | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Issuance of common stock under the employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Net unrealized loss on marketable investment securities | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock from vested restricted stock units, net of shares withheld for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
| Net unrealized loss on marketable investment securities | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
BALANCE, JUNE 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Net (gains) losses on equity securities | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Accretion of discounts on marketable investment securities | ( | ( | |||||||||
| Other | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Inventory | ( | ( | |||||||||
| Operating lease assets | |||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Accrued compensation | ( | ( | |||||||||
| Other accrued and current liabilities | |||||||||||
| Net cash (used in) provided by operating activities | ( | ||||||||||
| INVESTING ACTIVITIES | |||||||||||
| Purchases of marketable investment securities | ( | ( | |||||||||
| Proceeds from maturities of marketable investment securities | |||||||||||
| Proceeds from maturities of debt securities classified as held-to-maturity | |||||||||||
| Purchases of debt securities classified as held-to-maturity | ( | ||||||||||
| Proceeds from sale of equity securities | |||||||||||
| Asset acquisition, net of cash and cash equivalents acquired | ( | ||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Proceeds from exercise of common stock options | |||||||||||
| Payment of employees’ taxes on vested restricted stock units and performance-based restricted stock units | ( | ( | |||||||||
| Proceeds from contributions to the employee stock purchase plan | |||||||||||
| Payment of contingent consideration | ( | ||||||||||
| Repayment of principal portion of finance lease liabilities | ( | ( | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(in thousands)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Proceeds from lease incentives received | |||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ( | |||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Asset acquisition, liability for contingent consideration | $ | $ | |||||||||
| Accrued purchases of property and equipment | $ | $ | |||||||||
| Property and equipment acquired with tenant improvement allowance | $ | $ | |||||||||
| Operating lease assets obtained in exchange for lease obligations | $ | $ | |||||||||
| Decrease in operating lease assets with corresponding change in lease liabilities | $ | $ | ( | ||||||||
| Finance lease assets obtained in exchange for lease obligations | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
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
We have a history of recurring net losses and negative cash flows and as of June 30, 2026, we had an accumulated deficit of $240.9 million. We believe our $62.1 million of cash and cash equivalents and $204.7 million of marketable investment securities as of June 30, 2026, 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, 2026; the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive (loss) income and the condensed consolidated statements of stockholders’ equity, each for the three and six months ended June 30, 2026 and 2025; and the condensed consolidated statements of cash flows for the six months ended June 30, 2026 and 2025 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, 2026, the results of our consolidated operations for the three and six months ended June 30, 2026 and 2025 and our consolidated cash flows for the six months ended June 30, 2026 and 2025. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2026 and 2025 are also unaudited. The results for the three and six months ended June 30, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period. The balance sheet as of December 31, 2025 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited condensed 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, 2025 filed with the Securities and Exchange Commission on February 26, 2026.
8
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Use of Estimates
Cash and Cash Equivalents including Concentrations of Credit Risk
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 income within total stockholders’ equity, net of any related deferred income tax effects, on the condensed consolidated balance sheets. Debt securities that are classified as held-to-maturity (“HTM”) are reported at amortized cost in accordance 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 condensed 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 the condensed consolidated statements of operations. See Notes 5 and 11 for further details.
9
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 (“Previse”), 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. During the six months ended June 30, 2026, we made aggregate Earnout Payments of $1.0 million upon the achievement of certain commercial milestones.
Revenue Recognition
Collaborative Arrangements
We assess whether our licensing and other agreements are collaborative arrangements based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. For arrangements that we determine are collaborations, we identify each unit of account and then determine whether a customer relationship exists for that unit of account. If we determine that a performance obligation within the collaborative arrangement is with a customer, we apply ASC 606.
If a portion of a distinct bundle of goods or services within the collaborative arrangement is not with a customer, we apply recognition and measurement based on an analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. To the extent the arrangement is within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”), we assess whether aspects of the arrangement are within the scope of other accounting literature.
In June 2025, we entered into a Collaboration and License Agreement with SciBase Holding AB (“SciBase”). Following approval under the Swedish Screening of Foreign Direct Investments Act in the third quarter of 2025, we completed our investment in SciBase. The agreement aims to jointly develop products for dermatologic diseases, initially focused on atopic dermatitis, by combining SciBase’s Electrical Impedance Spectroscopy technology with our diagnostic and development expertise. Under the arrangement, we hold development and commercialization rights in North America, while SciBase retains rights in certain other territories. SciBase is entitled to royalties on our product sales, a mark-up on product sales to us, and a milestone payment upon achieving specified sales thresholds. Development costs are shared; however, SciBase deferred its initial clinical development costs for the initial indication and we will recover those costs through future royalty payments reductions.
We determined the agreement is a collaborative arrangement under ASC 808. Certain elements of the arrangement, including license rights and sales-based royalty provisions, represent transactions with a customer and are therefore accounted for under ASC 606. Other elements, such as shared development activities and cost reimbursements, are accounted for in accordance with ASC 808 and presented as reductions to research and development (“R&D”) expenses.
10
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Accounts Receivable and Allowance for Credit Losses
We classify accounts receivable balances that are expected to be paid more than one year from the condensed 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. We have elected the practical expedient under ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”) to assume that current conditions as of the balance sheet date do not change for the remaining life of our accounts receivable. Accordingly, management’s estimates are 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
Convertible Loan Receivable
On November 7, 2025, we entered into a Convertible Loan Agreement with SciBase (the “Convertible Loan Receivable”), pursuant to which we loaned SEK 20.0 million, approximately $2.1 million based on the exchange rate in effect on November 7, 2025. The Convertible Loan Receivable bears interest at a rate of 2.00 % plus the three-month Stockholm Interbank Offered Rate (“STIBOR”), payable quarterly. SciBase may prepay all or a portion of the Convertible Loan Receivable at any time. The Convertible Loan Receivable matures on November 7, 2030, at which time we have the option, at our sole discretion, to convert the outstanding principal plus accrued interest into shares of SciBase that are listed on the Nasdaq First North Growth Market in Sweden, receive full repayment in cash, or receive a combination of cash and shares.
We accounted for the convertible loan as a receivable within the scope of ASC Topic 310, Receivables. The carrying amount of the convertible loan is presented at amortized cost, within other assets - long-term in the condensed consolidated balance sheets. The Convertible Loan Agreement is remeasured into U.S. dollars using exchange rates in effect at each balance sheet date in accordance with ASC 830 with changes in exchange rates recognized in earnings. In addition, the embedded conversion feature to shares of SciBase did not meet the definition of a derivative and was not bifurcated from the host contract under ASC Topic 815, Derivatives and Hedging. We have determined that expected credit losses associated with the loan are insignificant and, accordingly, have not recorded a credit loss allowance under ASC Topic 326-20, Financial Instruments - Credit Losses.
Interest income on the Convertible Loan Receivable is recognized quarterly and included in interest income in the condensed consolidated statements of operations. Accrued interest receivable is recorded within prepaid expenses and other current assets in the condensed consolidated balance sheets.
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 related assets, generally ranging from 5 to 39 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the term of the lease. Leasehold improvements primarily relate to office and laboratory facilities in Phoenix, Arizona and Pittsburgh, Pennsylvania, and are generally depreciated over the remaining lease terms, which expire in 2034 and 2033, respectively.
Maintenance and repairs are expensed 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 condensed consolidated balance sheets and any resulting gain or loss is reflected in the condensed consolidated statements of operations in the period realized.
11
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 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 condensed 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, 2026 and December 31, 2025, we accrued approximately $17.4 million and $28.1 million, respectively, for liabilities associated with these bonus plans. These amounts are classified as current accrued liabilities in the 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
Comprehensive (Loss) Income
Comprehensive (loss) income is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive (loss) income is made up of net (loss) income plus net unrealized (loss) on marketable investment securities, which is our only other item of other comprehensive (loss) income.
12
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Practical Expedient for Certain Current Receivables (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from transactions under ASC 606. The practical expedient allows entities to assume that current conditions remain unchanged over the remaining life of the receivables. ASU 2025-05 is effective for annual periods beginning after December 15, 2025, including interim periods within those annual periods. We adopted the standard effective January 1, 2026, with no impact on our consolidated financial statements.
Accounting Pronouncements Yet to be Adopted
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.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which modernizes the accounting for internal-use software costs. The amendments in ASU 2025-06 remove all references to prescriptive and sequential software development stages throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, including interim periods within those annual periods. 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 TissueCypher® test for patients diagnosed with Barrett’s esophagus and our DecisionDx®-Melanoma test for cutaneous melanoma. We also provide our DecisionDx®-UM test for uveal melanoma, MyPath® Melanoma test for patients with melanocytic lesions and our DecisionDx®-SCC test for cutaneous squamous cell carcinoma. IDgenetix®, a pharmacogenomics testing service focused on mental health, was previously offered and discontinued in May 2025.
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.
13
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 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, 2026 and 2025 were $3.7 million and less than $0.1 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, 2026 and 2025 were $1.3 million and $2.0 million of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.
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, 2026 and December 31, 2025.
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Dermatologic(1) | $ | $ | $ | $ | |||||||||||||||||||
Non-Dermatologic(2) | |||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | |||||||||||||||||||
(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and MyPath Melanoma.
14
CASTLE BIOSCIENCES, INC.
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 chief operating decision maker (“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, each of which accounted for more than 10% of total revenues and accounts receivable balances were as follows:
| Percentage of Revenues | Percentage of Accounts Receivable (current) as of | Percentage of Accounts Receivable (noncurrent) as of | |||||||||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||
| Medicare | % | % | % | % | * | * | |||||||||||||||||||||||||||||
| Payor A | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Payor B | * | * | % | % | * | % | |||||||||||||||||||||||||||||
* Less than 10%
4. (Loss) Earnings Per Share
Basic (loss) earnings per share is computed by dividing net (loss) earnings for the period by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings 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 (loss) earnings 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) earnings per share when their effect is antidilutive.
15
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The following table shows the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic | |||||||||||||||||||||||
| Assumed exercise of stock options | |||||||||||||||||||||||
| Assumed vesting of RSUs | |||||||||||||||||||||||
| Assumed vesting of PSUs | |||||||||||||||||||||||
| Assumed issuance of shares under the ESPP | |||||||||||||||||||||||
| Weighted-average common shares outstanding, diluted | |||||||||||||||||||||||
| (Loss) earnings per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Due to the Company reporting a net loss for the three and six months ended June 30, 2026 and 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 (loss) earnings per share for the three and six months ended June 30, 2026 and 2025 because to do so would be antidilutive. In 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 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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| RSUs and PSUs | |||||||||||||||||||||||
| ESPP | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
16
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, 2026 | December 31, 2025 | ||||||||||
| Current marketable investment securities: | |||||||||||
| Equity securities | $ | $ | |||||||||
| Debt securities - AFS | |||||||||||
Debt securities - HTM | |||||||||||
| Total current marketable investment securities | $ | $ | |||||||||
On January 26, 2026, in connection with SciBase’s rights offering, we completed an amendment to our previously disclosed subscription commitment. We increased our commitment to subscribe for shares without subscription rights from 115.0 million shares to 125.0 million shares. This amendment was intended to achieve an outcome substantially similar to full participation under our subscription rights. In addition, we purchased subscription rights for another 30.5 million shares from a separate SciBase shareholder. These purchased rights, together with our shares without subscription rights, aggregated to a total share purchase of 155.5 million shares for $3.6 million. On June 4, 2026, SciBase announced a 1-for-100 reverse share split. Following the reverse share split, our total share purchase now represents 1.55 million shares.
During the six months ended June 30, 2026, all of our HTM investments matured.
Equity Securities
The portion of unrealized gains and losses related to equity securities still held during the period is as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net (losses) gains on equity securities | $ | ( | $ | $ | $ | ( | |||||||||||||||||
| Less: Net (loss) recognized on equity securities sold | ( | ( | |||||||||||||||||||||
| Net unrealized (losses) gains recognized on equity securities still held | $ | ( | $ | $ | $ | ( | |||||||||||||||||
17
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Debt Securities
The following tables present our debt securities (in thousands):
| June 30, 2026 | |||||||||||||||||||||||
| Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
| U.S. government securities - AFS | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total debt securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
| U.S. government securities - AFS | $ | $ | $ | ( | $ | ||||||||||||||||||
U.S. government securities - HTM | |||||||||||||||||||||||
| Total debt securities | $ | $ | $ | ( | $ | ||||||||||||||||||
Our 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. As of June 30, 2026 and December 31, 2025, all of our AFS securities had contractual maturities of one year or less.
As of December 31, 2025, we classified our HTM investments as current assets, as we had 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 impairment model guidance and determined our investment portfolio is comprised of low-risk, investment grade securities.
For the three and six months ended June 30, 2026 and 2025, unrealized losses on our AFS 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
There were no no
Accrued interest receivable for our AFS U.S. government securities is included in prepaid expenses and other current assets in the condensed consolidated balance sheets. As of June 30, 2026 and December 31, 2025, the accrued interest receivable related to AFS securities was $1.4 million and $1.1 million, respectively. Accrued interest receivable related to HTM securities was immaterial as of December 31, 2025.
Additional information relating to the fair value of marketable investment securities can be found in Note 11.
18
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | ||||||||||
| Land | $ | $ | |||||||||
Building | |||||||||||
| Lab equipment | |||||||||||
| Leasehold improvements | |||||||||||
| Computer equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Construction-in-progress | |||||||||||
| Total | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
In 2025, construction-in-progress related primarily to construction of our new headquarters in Friendswood, Texas, which was substantially completed in February 2026. Upon completion, we commenced depreciation of the capitalized construction costs of the building over an estimated useful life of 39 years. As of June 30, 2026, construction-in-progress related primarily to leasehold improvements for our office and laboratory facilities in Scottsdale, Arizona.
Depreciation expense was recorded in the condensed consolidated statements of operations as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
7. Goodwill and Other Intangible Assets, Net
Goodwill
We had a single reportable segment consisting of a single operating segment where the operating segment and the single reporting unit were the same as of June 30, 2026 and December 31, 2025, where all goodwill was allocated. As of June 30, 2026 and December 31, 2025, our goodwill was $10.7 no
19
CASTLE BIOSCIENCES, INC.
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, 2026 | |||||||||||||||||||||||
| Gross carrying value | Accumulated amortization | Net | Weighted-Average Remaining Life (in years) | ||||||||||||||||||||
| Developed technology | $ | $ | ( | $ | |||||||||||||||||||
| Assembled workforce | ( | ||||||||||||||||||||||
| Total other intangible assets, net | $ | $ | ( | $ | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Gross carrying value | Accumulated amortization | Net | Weighted-Average Remaining Life (in years) | ||||||||||||||||||||
| Developed technology | $ | $ | ( | $ | |||||||||||||||||||
| Assembled workforce | ( | ||||||||||||||||||||||
| Total other intangible assets, net | $ | $ | ( | $ | |||||||||||||||||||
Amortization expense of intangible assets was $2.3 million and $4.5 million for the three and six months ended June 30, 2026, respectively, and $2.0 million and $30.3 million for the three and six months ended June 30, 2025, respectively.
8. Other Accrued and Current Liabilities
Other accrued and current liabilities consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | ||||||||||
| Accrued service fees | $ | $ | |||||||||
| Self-insurance liability | |||||||||||
| Clinical studies | |||||||||||
| ESPP contributions | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
9. Long-Term Debt
Our long-term debt is presented in the table below (in thousands):
| June 30, 2026 | December 31, 2025 | ||||||||||
| Term debt | $ | $ | |||||||||
| Unamortized discount | ( | ( | |||||||||
| Total debt, net | |||||||||||
| Less: Current portion of long-term debt | ( | ( | |||||||||
| Total long-term debt | $ | $ | |||||||||
20
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Future maturities of principal amounts on long-term debt as of June 30, 2026 were as follows (in thousands):
| Years Ending December 31, | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| Total | $ | ||||
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) a term loan in the principal amount of $10.0 million, which was drawn on the Closing Date (the “2024 Term Loan”), and (ii) a $25.0 million line of credit which expired undrawn on September 30, 2025.
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. Amounts repaid may not be reborrowed.
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, 2026, 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 2024 Term Loan was interest-only from the Closing Date through November 30, 2025, however, on August 26, 2025, we elected to exercise our option to extend the interest-only period to December 1, 2026. Beginning in December 2026, the principal payments will be made in equal monthly installments through the maturity date of November 1, 2028.
In addition, we are required to make a final payment equal to 2.00 % of the aggregate original principal amounts of the 2024 Term Loan, due at maturity or upon full repayment.
2024 Term Loan
On the Closing Date, we drew $10.0 million under the 2024 Term Loan. 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, 2026, no payment on principal has been made and the weighted-average effective interest rate for all outstanding debt under the 2024 Term Loan was 7.69 %.
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest expense on long term debt | $ | $ | $ | $ | |||||||||||||||||||
| Less: Capitalized interest | ( | ( | ( | ||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Capitalized interest on construction-in-progress was not material following the substantial completion of our new headquarters in Friendswood, Texas as remaining construction-in-progress balances are not associated with outstanding borrowings.
21
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
10. Leases
Unit 1 Pittsburgh Lease
On March 19, 2026, we entered into a lease agreement with Faros ACA RE, LLC for approximately 21,000 square feet of additional office and laboratory space in Pittsburgh, Pennsylvania within a building we already partially occupy (the “Unit 1 Pittsburgh Lease”). The lease has an initial term of approximately 11 years and will commence upon completion of landlord-provided leasehold improvements. The lease includes tenant improvement allowances and provides for an extension option and a one -time early termination option, each subject to certain conditions.
As of June 30, 2026, the lessor had not made the underlying asset available for use, and accordingly, we have not recognized a right-of-use asset or lease liability in our condensed consolidated balance sheet.
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. For equity securities traded on foreign exchanges, fair values are determined based on quoted market prices in the applicable foreign markets and are remeasured into U.S. dollars using exchange rates in effect at each balance sheet date in accordance with ASC Topic 830, Foreign Currency Matters. The use of different assumptions, exchange rates, and/or estimation methodologies may have a material effect on estimated 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, 2026 and December 31, 2025 (in thousands):
| As of June 30, 2026 | |||||||||||||||||||||||
| 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) | $ | $ | $ | $ | |||||||||||||||||||
U.S. government securities - AFS(2) | $ | $ | $ | $ | |||||||||||||||||||
Equity securities(2) | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
Term Debt(3)(4) | $ | $ | $ | $ | |||||||||||||||||||
22
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| As of December 31, 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) | $ | $ | $ | $ | |||||||||||||||||||
U.S. government securities - AFS(2) | $ | $ | $ | $ | |||||||||||||||||||
Equity securities(2) | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
Term Debt(3)(4) | $ | $ | $ | $ | |||||||||||||||||||
(1)Classified as “Cash and cash equivalents” in the condensed consolidated balance sheets.
(2)Classified as “Marketable investment securities” in the condensed consolidated balance sheets.
(3)Classified as “Current portion of long-term debt” and “Long term debt” in the condensed consolidated balance sheets.
(4)Borrowings approximate their fair value as the interest rate is variable and reflects market rates.
As of December 31, 2025 we held U.S. government securities that were classified as HTM investments and carried at amortized costs. The fair value of our HTM investments was 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.
The Convertible Loan Receivable with SciBase is carried at amortized cost which approximates fair value due to the variable interest rate and market-based terms of the instrument. Fair value is estimated using a discounted cash flow model. The inputs used to fair value the Convertible Loan Receivable are classified as Level 2 in the fair value hierarchy and include a three-month STIBOR and a market credit spread. For additional information on the carrying amount and estimated fair value of our Convertible Loan Receivable, see Note 2.
12. Commitments and Contingencies
From time to time, we may be involved in legal proceedings arising in the ordinary course of business. On February 1, 2024, we received a subpoena from the U.S. 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 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 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, 2026, an additional 1,484,315 shares became available under the 2019 Plan. As of June 30, 2026, 1,443,825 shares remained available for grant under the 2019 Plan.
23
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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, 2026, there were 574,512 shares available for grant under the amended Inducement Plan.
Stock Options
Stock option activity under our stock plans for the six months ended June 30, 2026 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, 2025 | $ | ||||||||||||||||||||||
| Granted | $ | ||||||||||||||||||||||
| Exercised | ( | $ | |||||||||||||||||||||
| Forfeited/Cancelled | ( | $ | |||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | |||||||||||||||||||||
Exercisable as of June 30, 2026 | $ | $ | |||||||||||||||||||||
Restricted Stock Units
The following table summarizes our RSU activity for the six months ended June 30, 2026:
| Restricted Stock Units Outstanding | Weighted-Average Grant Date Fair Value | ||||||||||
Balance as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
Vested(1) | ( | $ | |||||||||
| Forfeited/Cancelled | ( | $ | |||||||||
Balance as of June 30, 2026 | $ | ||||||||||
(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 240,690 for the six months ended June 30, 2026.
Performance-Based Restricted Stock Units
The following table summarizes our PSU activity for the six months ended June 30, 2026:
| Performance-Based Restricted Stock Units Outstanding | Weighted-Average Grant Date Fair Value | ||||||||||
Balance as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
Vested(1) | ( | $ | |||||||||
| Forfeited/Cancelled | $ | ||||||||||
Balance as of June 30, 2026 | $ | ||||||||||
(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 28,797 for the six months ended June 30, 2026.
24
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 296,863 shares becoming available under the ESPP effective January 1, 2026. During the six months ended June 30, 2026, we issued 94,420 shares of common stock pursuant to scheduled purchases under the ESPP. As of June 30, 2026, 1,373,056 shares remained available for issuance under the ESPP.
Determining Fair Value - Summary of Assumptions
The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP:
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Average expected term (years) | |||||||||||
Expected stock price volatility | |||||||||||
| Risk-free interest rate | |||||||||||
| Dividend yield | |||||||||||
We use the closing price of our common stock on the date of grant to determine the fair value of RSUs and PSUs.
Fair Value
There were no stock options granted for the six months ended June 30, 2026 and 2025. For the six months ended June 30, 2026 and 2025, the weighted-average grant date fair value of the purchase rights granted under the ESPP was $11.27 and $9.43 per share, respectively.
Stock-Based Compensation Expense
Stock-based compensation expense is included in the condensed consolidated statements of operations as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Included in total stock-based compensation expense is $0.8 million and $0.2 million for the three months ended June 30, 2026 and 2025, respectively, and $1.0 million and $0.5 million for the six months ended June 30, 2026 and 2025, respectively, from the accelerated recognition of expense for modifications of awards falling in scope of the Retirement Policy.
14. Income Taxes
Our effective tax rate was (21.9 )% and (3.0 )% for the three and six months ended June 30, 2026. The effective rate for the three and six months ended June 30, 2026 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.
25
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 Previse, which resulted in deferred tax liabilities related to acquired intangible assets. 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 the period activity including the acquisition of Previse, state income taxes and the non-deductibility of other permanent items.
15. Segment and Related Information
We derive revenues through the delivery of test reports for our molecular diagnostic tests. All of our operations are located within the U.S. and our business is focused on the U.S. market.
We have a single reportable segment consisting of a single operating segment.
The measures of segment profit or loss for our single reportable segment were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Net revenues from external customers(1) | $ | $ | $ | $ | |||||||||||||||||||
Significant segment expenses: | |||||||||||||||||||||||
| Personnel costs | |||||||||||||||||||||||
| Organizational and marketing costs | |||||||||||||||||||||||
| Inventory usage | |||||||||||||||||||||||
| Clinical studies and publication costs | |||||||||||||||||||||||
| Professional services | |||||||||||||||||||||||
| Other segment items | |||||||||||||||||||||||
| Segment (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
(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, including 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 equity securities, realized gains or losses on investment securities, administrative costs, expense for use of prepaids, including insurance premiums and warranties for lab equipment, public company costs (less audit fees), interest and other non-operating loss or 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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | |||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||
| Net (losses) gains on equity securities | ( | ( | |||||||||||||||||||||
26
CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Total assets for our reportable segment were located in the U.S. and were $561.2 million and $578.6 million as of June 30, 2026 and December 31, 2025, respectively. Expenditures for additions to long-lived assets were $5.6 million and $12.9 million for the three months ended June 30, 2026 and 2025, respectively, and $10.8 million and $18.6 million for the six months ended June 30, 2026, and 2025, 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, 2025, and 2024 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, 2025 (the “2025 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2026. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “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,” “could”, “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “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 2025 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, Inc. is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), atopic dermatitis (“AD”), and uveal melanoma (“UM”).
Our Test Portfolio
We currently offer six commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology, ophthalmology, and most recently includes a test to guide systemic treatment decisions in moderate-to-severe atopic dermatitis.
Our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our TissueCypher risk stratification test for BE.
All of our MAAA tests, excluding our recently launched AdvanceAD-Tx test, 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.
Test Overview
Our Dermatology Tests
DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test designed to predict the likelihood of a positive sentinel lymph node and the risk of metastasis or recurrence for patients diagnosed with invasive CM. In a typical year, we estimate that approximately 130,000 patients are diagnosed with invasive CM in the U.S., 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.
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AdvanceAD-Tx is a non-invasive GEP test designed to guide systemic treatment selection for patients aged 12 years and older with moderate-to-severe AD. The test evaluates the expression of 487 genes across 12 known immune, inflammatory and skin-related pathways to identify the underlying biology driving an individual patient’s disease. Results classify patients into one of two molecular profiles: Janus Kinase (“JAK”) Inhibitor Responder Profile or T helper 2 (“Th2”) Molecular Profile. Using multiple data sources focused on one-year prevalence, we estimate that there are approximately 10 million individuals ages 12 and older in the U.S. with moderate-to-severe AD, representing an estimated U.S. TAM of approximately $33 billion. We commenced a limited access launch of the AdvanceAD-Tx test in November 2025.
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 patients, or approximately 200,000 annually in the U.S., are classified as high risk, representing an estimated U.S. TAM of approximately $820 million.
MyPath Melanoma is our proprietary, diagnostic GEP test for use in patients with difficult-to-diagnose melanocytic lesions. Of the 2 million suspicious pigmented lesions biopsied annually in the U.S., we estimate that approximately 300,000 of those present difficult-to-diagnose melanocytic lesion, representing an estimated U.S. TAM of approximately $600 million.
Our Gastroenterology Tests
TissueCypher is our proprietary risk stratification spatialomics test designed to predict future development of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE. We estimate a U.S. TAM of approximately $1 billion. In May 2025, we expanded our BE capabilities through the acquisition of Capsulomics, Inc., d/b/a Previse (“Previse”), which includes methylation-based intellectual property and the Esopredict risk-stratification test. We expect these assets to support the future development of TissueCypher and enable the potential incorporation of additional molecular modalities. Beginning in the first quarter of 2026, we began offering Esopredict as a supplemental option when TissueCypher does not produce an actionable result. Revenue and test volume from Esopredict have not been material to date.
Our Ophthalmology Test
DecisionDx-UM is our 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.
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, TissueCypher, MyPath Melanoma and DecisionDx-UM tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries. DecisionDx-SCC previously received Medicare coverage, which was subsequently impacted by LCD changes finalized in 2025.
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 2025 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” or “LCDs”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto and Noridian.
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CMS reviewed and approved DecisionDx-Melanoma for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024. Our rate for 2024 and 2025 was $7,193 per test and remains $7,193 per test for 2026.
TissueCypher
Our TissueCypher tests are processed in our Phoenix and Pittsburgh laboratories. Palmetto’s MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering Medicare claims for test reports issued by our Phoenix laboratory. Novitas is the MAC responsible for administering Medicare claims for test reports issued by our Pittsburgh laboratory.
CMS reviewed and approved TissueCypher for ADLT status in 2022. Effective January 1, 2023, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for TissueCypher was set at $4,950 per test and 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 has been set annually based on the median private payor rate for the first half of the second preceding calendar year. The rate for 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024. Our rate for 2025 was $4,950 per test and remains $4,950 per test for 2026.
DecisionDx‑SCC
We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix laboratories. Palmetto’s MolDX (“MolDX”) program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering Medicare claims for test reports issued by our Phoenix laboratory. Novitas is the MAC responsible for administering Medicare claims for test reports issued by our Pittsburgh laboratory.
CMS reviewed and approved DecisionDx-SCC for ADLT status in 2023. 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, we continued receiving reimbursement at a rate of $8,500 per test, set by CMS using median private payor rate data for the period July 1, 2023 and November 30, 2023, and this rate remained effective through December 31, 2025. Our rate for 2025 was $8,500 per test and remains $8,500 per test for 2026.
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.
In July 2025, we submitted reconsideration requests for both the Novitas and MolDX LCDs. Both Novitas and MolDX subsequently confirmed that our requests were valid. These confirmations represent an important procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome.
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.
CMS reviewed and approved MyPath for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024. Our rate for 2024 and 2025 was $1,950 per test and remains $1,950 per test for 2026.
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.
CMS reviewed and approved DecisionDx-UM for ADLT status in 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 2026 was set using median private payor rate data from January 1, 2024 to June 30, 2024. Our rate for 2024 and 2025 was $7,776 per test and remains $7,776 per test for 2026.
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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:
| Six Months Ended June 30, 2026 | |||||||||||||||||
| Q1 | Q2 | Total | |||||||||||||||
DecisionDx-Melanoma | 10,021 | 10,280 | 20,301 | ||||||||||||||
DecisionDx‑SCC | 3,702 | 4,011 | 7,713 | ||||||||||||||
| MyPath Melanoma | 973 | 1,061 | 2,034 | ||||||||||||||
| Dermatologic Total | 14,696 | 15,352 | 30,048 | ||||||||||||||
| TissueCypher | 11,745 | 14,988 | 26,733 | ||||||||||||||
DecisionDx-UM | 492 | 482 | 974 | ||||||||||||||
| Grand Total | 26,933 | 30,822 | 57,755 | ||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||
| Q1 | Q2 | Total | |||||||||||||||
DecisionDx-Melanoma | 8,621 | 9,981 | 18,602 | ||||||||||||||
DecisionDx‑SCC | 4,375 | 4,762 | 9,137 | ||||||||||||||
| MyPath Melanoma | 926 | 1,166 | 2,092 | ||||||||||||||
| Dermatologic Total | 13,922 | 15,909 | 29,831 | ||||||||||||||
| TissueCypher | 7,432 | 9,170 | 16,602 | ||||||||||||||
DecisionDx-UM | 470 | 468 | 938 | ||||||||||||||
IDgenetix(1) | 2,578 | 1,027 | 3,605 | ||||||||||||||
| Grand Total | 24,402 | 26,574 | 50,976 | ||||||||||||||
(1)The IDgenetix test was discontinued effective May 2025.
For the three and six months ended June 30, 2026, our test report volume increased by 16% and 13%, respectively, compared to the same periods in 2025. The increase primarily reflects continued growth in our core revenue drivers, TissueCypher and DecisionDx-Melanoma. TissueCypher test report volume increased by 63% and 61% for the three and six months ended June 30, 2026, respectively, reflecting continued commercial adoption. We continue to invest in expanding our Pittsburgh laboratory operations to increase TissueCypher testing capacity and support future growth. DecisionDx-Melanoma test report volume increased by 3% and 9% for the three and six months ended June 30, 2026, respectively. Dermatologic test report volume decreased by 4% for the three months June 30, 2026 but increased by 1% for the six months ended June 30, 2026, primarily reflecting lower DecisionDx-SCC test report volume, partially offset by continued growth in DecisionDx-Melanoma. For a discussion of how we recognize revenue derived from our tests, refer to “Components of Results of Operations—Net Revenues” below.
For our AdvanceAD-Tx product line, we received approximately 1,000 and 1,650 orders during the three and six months ended June 30, 2026, respectively, while still in the initial limited access phase. We believe early adoption reflects clinician interest in integrating AdvanceAD-Tx into existing AD treatment pathways. We plan to expand availability in a phased manner throughout the remainder of 2026.
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, 2026, approximately 68% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.
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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, including the conflict between the U.S., Iran, and Israel, the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, recent shutdowns of the federal government including regulatory agencies, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns at, and potential 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 (loss) income 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 (“R&D”) staff;
•add additional operational, financial and management information systems and personnel; and
•make additional capital expenditures to support business growth and sustain existing operations.
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.
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•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 R&D 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 TissueCypher, DecisionDx-Melanoma and DecisionDx-SCC. 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 products, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed.
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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 Six Months Ended June 30, 2026 and 2025” for details.
Research and Development
R&D 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 R&D costs in the periods in which they are incurred. We expect our R&D expenses to increase in absolute dollars as we continue to invest in R&D 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, and Previse 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.
Net (Losses) Gains on Equity Securities
Net (losses) gains on equity securities are primarily attributable to realized and 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.
Other Loss
Other loss is primarily attributable to unrealized foreign currency losses and gains on our foreign currency-denominated investments and loan receivable, which are presented as marketable investment securities and other assets, respectively.
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Income Tax Expense (Benefit)
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 R&D credits and other tax credits.
As of December 31, 2025, we had federal NOL carryforwards of $134.8 million, of which $52.9 million will begin to expire in 2032 if not utilized to offset federal taxable income, and $81.9 million may be carried forward indefinitely. Also, as of December 31, 2025, we also had state NOL carryforwards of $113.0 million, which begin to expire in 2030 if not utilized to offset state taxable income.
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Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| NET REVENUES | $ | 103,546 | $ | 86,188 | $ | 17,358 | 20.1 | % | |||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | 23,700 | 17,626 | 6,074 | 34.5 | % | ||||||||||||||||||
| Research and development | 14,543 | 12,787 | 1,756 | 13.7 | % | ||||||||||||||||||
| Selling, general and administrative | 66,122 | 58,065 | 8,057 | 13.9 | % | ||||||||||||||||||
| Amortization of acquired intangible assets | 2,251 | 1,961 | 290 | 14.8 | % | ||||||||||||||||||
| Total operating expenses, net | 106,616 | 90,439 | 16,177 | 17.9 | % | ||||||||||||||||||
| Operating loss | (3,070) | (4,251) | 1,181 | 27.8 | % | ||||||||||||||||||
| Interest income | 2,356 | 2,944 | (588) | (20.0) | % | ||||||||||||||||||
| Net (losses) gains on equity securities | (630) | 1,185 | (1,815) | (153.2) | % | ||||||||||||||||||
| Interest expense | (193) | (21) | (172) | (819.0) | % | ||||||||||||||||||
| Other loss | (153) | — | (153) | NA | |||||||||||||||||||
| Loss before income taxes | (1,690) | (143) | (1,547) | NM | |||||||||||||||||||
| Income tax expense (benefit) | 370 | (4,666) | 5,036 | 107.9 | % | ||||||||||||||||||
| Net (loss) income | $ | (2,060) | $ | 4,523 | $ | (6,583) | (145.5) | % | |||||||||||||||
NA = Not applicable
NM = Not meaningful
Net Revenues
The following table provides a disaggregation of net revenues by type (in thousands):
| Three Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
Dermatologic(1) | $ | 48,704 | $ | 56,297 | $ | (7,593) | |||||||||||
Non-Dermatologic(2) | 54,842 | 29,891 | 24,951 | ||||||||||||||
| Total net revenues | $ | 103,546 | $ | 86,188 | $ | 17,358 | |||||||||||
(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and MyPath Melanoma.
(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.
Net revenues for the three months ended June 30, 2026 increased by $17.4 million, or 20.1%, to $103.5 million compared to the three months ended June 30, 2025, primarily driven by a $25.0 million increase in revenue from our non-dermatologic tests, partially offset by a $7.6 million decrease in revenue from our dermatologic tests.
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The $25.0 million increase in net revenues from our non-dermatologic tests was primarily attributable to higher test report volumes for our TissueCypher Barrett’s Esophagus test and, to a lesser extent, a higher realized average selling price (“ASP”). The 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 34.7% for the three months ended June 30, 2025 to 53.0% for the three months ended June 30, 2026.
The $7.6 million decrease in net revenues for our dermatologic tests was primarily attributable to our DecisionDx-SCC test, driven by lower realized ASP and lower test report volumes. The reduction in ASP was primarily driven by the loss of Medicare LCD coverage in April 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, 2026 increased by $6.1 million, or 34.5%, compared to the three months ended June 30, 2025, primarily due to higher expenses for lab supplies, higher personnel costs, and higher lab services costs. The increase in lab supplies and lab services costs reflects higher test report volumes. 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.
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 expenses 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.
Gross Margin
The following table presents the calculation of gross margin (in thousands, except percentages):
| Three Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Net revenues | $ | 103,546 | $ | 86,188 | $ | 17,358 | |||||||||||
| Less: Cost of sales (exclusive of amortization of acquired intangible assets) | 23,700 | 17,626 | 6,074 | ||||||||||||||
| Less: Amortization of acquired intangible assets | 2,251 | 1,961 | 290 | ||||||||||||||
| Gross margin | $ | 77,595 | $ | 66,601 | $ | 10,994 | |||||||||||
| Gross margin percentage | 74.9 | % | 77.3 | % | (2.4) | % | |||||||||||
Our gross margin percentage was 74.9% for the three months ended June 30, 2026, compared to 77.3% for the same period in 2025. The decrease primarily reflects higher expenses for lab supplies, higher personnel costs and higher lab services costs reflecting the shift in the mix of reports issued partially offset by the spread of fixed laboratory costs over higher test report volumes.
Research and Development
R&D expenses increased by $1.8 million, or 13.7%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to higher personnel costs driven by increased headcount to support continued business growth, as well as increased advisory board, clinical trial, and travel costs related to our pipeline initiatives.
We expect to continue incurring R&D 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.
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Selling, General and Administrative
The following table provides a breakdown of SG&A expenses (in thousands):
| Three Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Sales and marketing | $ | 40,915 | $ | 35,123 | $ | 5,792 | |||||||||||
| General and administrative | 25,207 | 22,942 | 2,265 | ||||||||||||||
| Total selling, general and administrative expense | $ | 66,122 | $ | 58,065 | $ | 8,057 | |||||||||||
Sales and marketing expenses increased by $5.8 million, or 16.5%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to higher personnel costs, higher expenses associated with travel, and higher business admin costs. Stock-based compensation expense included in sales and marketing was $3.9 million for both the three months ended June 30, 2026 and the three months ended June 30, 2025.
General and administrative expenses increased by $2.3 million, or 9.9%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase is primarily due to higher personnel costs. Higher personnel costs reflect headcount expansions in our administrative functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $4.6 million for the three months ended June 30, 2026, compared to $3.9 million for the three months ended June 30, 2025.
Interest Income
Interest income decreased by $0.6 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to lower interest earned on our money market funds and marketable securities, as well as lower premium amortization and discount accretion recognized on our marketable securities.
Net (Losses) Gains on Equity Securities
Net (losses) gains on equity securities decreased by $1.8 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The decrease was primarily due to the absence of unrealized gains recognized on other equity securities during the prior-year period, as those securities were subsequently sold and were no longer held during the three months ended June 30, 2026. The decrease also reflected an unrealized loss recognized on our equity investment in SciBase during the current-year period, which we did not hold during the prior-year period.
Income Tax Expense
Our income tax expense of $0.4 million for the three months ended June 30, 2026 consisted of income taxes related to state jurisdictions in which we conduct business. Our income tax benefit for the three months ended June 30, 2025 was $4.7 million primarily due to a reduction of the valuation allowance previously recorded against our federal deferred tax assets. The release resulted in a credit to income tax expense and was based on new deferred tax liabilities recognized upon consolidating Capsulomics.
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Stock-Based Compensation Expense
The following table indicates the amount of stock-based compensation expense (non-cash) included in the condensed consolidated statements of operations (in thousands):
| Three Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 1,420 | $ | 1,422 | $ | (2) | |||||||||||
| Research and development | 1,678 | 1,962 | (284) | ||||||||||||||
| Selling, general and administrative | 8,491 | 7,824 | 667 | ||||||||||||||
| Total stock-based compensation expense | $ | 11,589 | $ | 11,208 | $ | 381 | |||||||||||
Stock-based compensation expense which is allocated among cost of sales, R&D expense and SG&A expense totaled $11.6 million and $11.2 million for the three months ended June 30, 2026 and 2025, respectively. We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of June 30, 2026, we had 1,002 employees, compared to 798 as of June 30, 2025. As of June 30, 2026, the total unrecognized stock-based compensation cost related to outstanding awards was $90.4 million, which is expected to be recognized over a weighted-average period of 2.7 years.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| NET REVENUES | $ | 187,225 | $ | 174,176 | $ | 13,049 | 7.5 | % | |||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | 44,233 | 34,009 | 10,224 | 30.1 | % | ||||||||||||||||||
| Research and development | 28,971 | 25,375 | 3,596 | 14.2 | % | ||||||||||||||||||
| Selling, general and administrative | 131,021 | 116,685 | 14,336 | 12.3 | % | ||||||||||||||||||
| Amortization of acquired intangible assets | 4,477 | 30,286 | (25,809) | (85.2) | % | ||||||||||||||||||
| Total operating expenses, net | 208,702 | 206,355 | 2,347 | 1.1 | % | ||||||||||||||||||
| Operating loss | (21,477) | (32,179) | 10,702 | 33.3 | % | ||||||||||||||||||
| Interest income | 4,901 | 6,043 | (1,142) | (18.9) | % | ||||||||||||||||||
| Net gains (losses) on equity securities | 1,392 | (240) | 1,632 | 680.0 | % | ||||||||||||||||||
| Interest expense | (327) | (38) | (289) | (760.5) | % | ||||||||||||||||||
| Other loss | (592) | — | (592) | NA | |||||||||||||||||||
| Loss before income taxes | (16,103) | (26,414) | 10,311 | 39.0 | % | ||||||||||||||||||
| Income tax expense (benefit) | 479 | (5,089) | 5,568 | 109.4 | % | ||||||||||||||||||
| Net (loss) income | $ | (16,582) | $ | (21,325) | $ | 4,743 | 22.2 | % | |||||||||||||||
NA = Not applicable
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Net Revenues
The following table provides a disaggregation of net revenues by type (in thousands):
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
Dermatologic(1) | $ | 89,809 | $ | 119,259 | $ | (29,450) | |||||||||||
Non-Dermatologic(2) | 97,416 | 54,917 | 42,499 | ||||||||||||||
| Total net revenues | $ | 187,225 | $ | 174,176 | $ | 13,049 | |||||||||||
(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and MyPath Melanoma.
(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.
Net revenues for the six months ended June 30, 2026 increased by $13.0 million, or 7.5%, to $187.2 million compared to the six months ended June 30, 2025, primarily driven by a $42.5 million increase in revenue from our non-dermatologic tests, partially offset by a $29.5 million decrease in revenue from our dermatologic tests.
The $42.5 million increase in revenues from our non-dermatologic tests was primarily attributable to a 61% increase in test report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP. The increase in TissueCypher test report volumes reflects continued growth driven by our sales force efforts. Net revenues from our non-dermatologic tests as a percentage of total net revenues increased from 31.5% for the six months ended June 30, 2025 to 52.0% for the six months ended June 30, 2026.
The $29.5 million decrease in revenues from our dermatologic tests was primarily attributable to our DecisionDx-SCC test, driven by lower realized ASP and lower test report volumes following the loss of Medicare coverage effective April 24, 2025. The decrease was partially offset by higher DecisionDx-Melanoma revenues, which were primarily driven by a 9% increase in test report volumes and, to a lesser extent, a higher realized ASP.
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, 2026 increased by $10.2 million, or 30.1%, compared to the six months ended June 30, 2025, primarily due to higher expenses for lab supplies, higher personnel costs, higher lab services costs, and higher depreciation expense. The increase in expenses for lab supplies and lab services costs was driven by higher test report volumes reflecting the shift in the mix of reports issued. 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 higher 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 expenses 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
The following table presents the calculation of gross margin (in thousands, except percentages):
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Net revenues | $ | 187,225 | $ | 174,176 | $ | 13,049 | |||||||||||
| Less: Cost of sales (exclusive of amortization of acquired intangible assets) | 44,233 | 34,009 | 10,224 | ||||||||||||||
| Less: Amortization of acquired intangible assets | 4,477 | 30,286 | (25,809) | ||||||||||||||
| Gross margin | $ | 138,515 | $ | 109,881 | $ | 28,634 | |||||||||||
| Gross margin percentage | 74.0 | % | 63.1 | % | 10.9 | % | |||||||||||
Our gross margin percentage was 74.0% for the six months ended June 30, 2026, compared to 63.1% for the six months ended June 30, 2025. The increase was primarily driven by significantly lower amortization of acquired intangible assets. Amortization expense was elevated in the prior-year period due to accelerated amortization related to the IDgenetix test, which was fully amortized as of March 31, 2025 following the decision to discontinue IDgenetix, resulting in no amortization expense associated with this asset in the current period.
Research and Development
R&D expenses increased by $3.6 million, or 14.2%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth and increases in clinical studies costs reflect investment in our pipeline products.
We expect to continue incurring R&D 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, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Sales and marketing | $ | 81,950 | $ | 71,931 | $ | 10,019 | |||||||||||
| General and administrative | 49,071 | 44,754 | 4,317 | ||||||||||||||
| Total selling, general and administrative expense | $ | 131,021 | $ | 116,685 | $ | 14,336 | |||||||||||
Sales and marketing expenses increased by $10.0 million, or 13.9%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase is primarily due to higher personnel costs and higher sales related travel expenses. Increases in personnel costs reflect a higher headcount driven by sales force expansion as well as merit and annual inflationary wage adjustment for existing employees. Higher sales related travel expenses reflect increased field activity to support growing test report volumes. Stock-based compensation expense included in sales and marketing expense was $7.4 million for the six months ended June 30, 2026, compared to $7.9 million for the six months ended June 30, 2025.
General and administrative expenses increased by $4.3 million, or 9.6%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase is primarily due to higher personnel costs and higher information technology-related costs partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $8.2 million for the six months ended June 30, 2026, compared to $7.0 million for the six months ended June 30, 2025.
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Amortization of Acquired Intangible Assets
Amortization expense decreased by approximately $25.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025. As a result of this decision, we revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025. The decrease is partially offset by amortization of the developed technology intangible asset recognized in association with the Esopredict test following our acquisition of Previse in May 2025.
Interest Income
Interest income decreased by $1.1 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to lower interest earned on our money market funds and marketable securities, as well as lower premium amortization and discount accretion recognized on our marketable securities.
Net Gains (Losses) on Equity Securities
Net gains (losses) on equity securities increased by $1.6 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase was primarily driven by unrealized gains on our investment in SciBase, partially offset by realized losses on other equity securities sold during the period.
Other Loss
Other loss increased by $0.6 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to unrealized foreign currency losses on foreign currency-denominated assets. There were no comparable losses in the prior-year period.
Income Tax Expense (Benefit)
Income tax expense was $0.5 million for the six months ended June 30, 2026 and primarily consisted of income taxes related to state jurisdictions in which we conduct business. Our income tax benefit was $5.1 million for the six months ended June 30, 2025, primarily due to a reduction of the valuation allowance previously recorded against our federal deferred tax assets. The 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
The following table indicates the amount of stock-based compensation expense (non-cash) included in the condensed consolidated statements of operations (in thousands):
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| (unaudited) | |||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 2,677 | $ | 2,878 | $ | (201) | |||||||||||
| Research and development | 3,121 | 3,857 | (736) | ||||||||||||||
| Selling, general and administrative | 15,567 | 15,652 | (85) | ||||||||||||||
| Total stock-based compensation expense | $ | 21,365 | $ | 22,387 | $ | (1,022) | |||||||||||
Stock-based compensation expense, which is allocated among cost of sales, R&D expense and SG&A expense, totaled $21.4 million for the six months ended June 30, 2026, compared to $22.4 million for the six months ended June 30, 2025. The decrease was primarily attributable to higher fair value awards granted in prior periods having substantially vested, resulting in a lower mix of higher fair value awards in the current period.
We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of June 30, 2026, we had 1,002 employees compared to 798 as of June 30, 2025. As of June 30, 2026, the total unrecognized stock-based compensation cost related to outstanding awards was $90.4 million, which is expected to be recognized over a weighted-average period of 2.7 years.
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Liquidity and Capital Resources
Sources of Liquidity
Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities and cash generated from the sale of our products. All of our marketable investment securities are considered investment grade and are readily available for use in current operations. As of June 30, 2026 and December 31, 2025, we had marketable investment securities of $204.7 million and $182.8 million, respectively. Additionally, as of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $62.1 million and $116.7 million, respectively.
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 R&D 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 R&D 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. 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.
In February 2024, we purchased a plot of land in Friendswood, Texas and soon thereafter began development of the land and construction of a commercial office building which now serves as our corporate headquarters. Over the duration of this project, we incurred significant capital expenditures through payments to the developer under a percentage-of-completion basis. We completed the portions of the building that serve as our headquarters in February 2026, at which time we began occupying the building. Capital expenditures related to this development project were $0.4 million and $3.1 million during the three and six months ended June 30, 2026, respectively, compared to $8.8 million and $14.0 million during the corresponding periods in 2025. As of June 30, 2026, the development project was substantially complete.
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, 2025, we recognized a net loss of $24.2 million, and generated positive operating cash flow of $64.3 million, however, we may be unable to sustain profitability and positive cash flows in future periods. Medicare coverage for our DecisionDx-SCC test was discontinued in April 2025, which reduced revenues and cash inflows from this test during 2025. We expect this impact to continue unless our reconsideration requests related to both the MolDX and Novitas LCDs are approved. 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 continue to incur 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 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;
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•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 2025 10-K, Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 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, 2026 | December 31, 2025 | ||||||||||
| (unaudited) | |||||||||||
| Term debt | $ | 10,200 | $ | 10,200 | |||||||
| Unamortized discount | (125) | (143) | |||||||||
| Total debt, net | 10,075 | 10,057 | |||||||||
| Less: Current portion of long-term debt | (2,917) | (417) | |||||||||
| Total long-term debt | $ | 7,158 | $ | 9,640 | |||||||
2024 Loan and Security Agreement
On March 26, 2024 (the “Closing Date”), we entered into the 2024 LSA, as amended in April 2025, 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) a term loan in the principal amount of $10.0 million, which was drawn on the Closing Date (the “2024 Term Loan”), and (ii) a $25.0 million line of credit which expired undrawn on September 30, 2025.
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. Amounts repaid may not be reborrowed.
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, 2026, 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 2024 Term Loan was interest-only from the Closing Date through November 30, 2025, however, on August 26, 2025, we elected to exercise our option to extend the interest-only period to December 1, 2026. Beginning in December 2026, the principal payments will be made in equal monthly installments through the maturity date of November 1, 2028.
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In addition, we are required to make a final payment equal to 2.00% of the aggregate original principal amounts of the 2024 Term Loan, due at maturity or upon full repayment.
2024 Term Loan
On the Closing Date, we drew $10.0 million under the 2024 Term Loan. 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, 2026, no payment on principal has been made and the weighted-average effective interest rate for all outstanding debt under the 2024 Term Loan was 7.69%.
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, 2026 totaled approximately $38.6 million, of which $1.3 million is payable through the remainder of 2026 and $37.3 million is payable through early 2037. The leases expire on various dates through 2037 and provide certain options to renew for additional periods. On March 19, 2026, we entered into a new lease agreement with an initial term of approximately 11 years for laboratory and office space located in Pittsburgh, Pennsylvania. As of June 30, 2026, the lease had not yet commenced. Upon commencement, we expect the leases to increase our undiscounted future minimum payment obligations by a total of approximately $7.7 million.
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| (unaudited) | |||||||||||
| Net cash (used in) provided by operating activities | $ | (6,928) | $ | 14,785 | |||||||
| Net cash used in investing activities | (41,766) | (50,809) | |||||||||
| Net cash used in financing activities | (5,919) | (1,452) | |||||||||
| Net change in cash and cash equivalents | (54,613) | (37,476) | |||||||||
| Cash and cash equivalents, beginning of period | 116,729 | 119,709 | |||||||||
| Cash and cash equivalents, end of period | $ | 62,116 | $ | 82,233 | |||||||
Operating Activities
Net cash used in operating activities was $6.9 million for the six months ended June 30, 2026. The net loss of $16.6 million includes non-cash charges of stock-based compensation expense of $21.4 million, depreciation and amortization of $8.0 million, offset by net gains on equity securities of $1.4 million. Cash used as a result of changes in operating assets and liabilities was $18.2 million, primarily due to decreases in accrued compensation of $11.4 million, increases in prepaid expenses and other current assets of $7.5 million, increases in accounts receivable of $4.7 million, offset by increases in other accrued and current liabilities of $5.3 million and increases in accounts payable of $0.9 million.
Net cash provided by operating activities was $14.8 million for the six months ended June 30, 2025. The net loss of $21.3 million includes non-cash charges of depreciation and amortization of $33.2 million, stock-based compensation expense of $22.4 million, offset by deferred income taxes of $5.4 million and accretion of discounts on marketable investment securities of $2.6 million. Cash used as a result of changes in operating assets and liabilities was $11.9 million, primarily due to decreases in accrued compensation of $7.6 million, increases in prepaid expenses and other current assets of $4.7 million and increases in accounts receivable of $1.3 million, partially offset by decreases in account payable of $1.7 million.
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The $21.7 million increase in net cash used in operating activities for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily due to increases in operating expenditures and the timing of working capital changes, including higher payments of annual bonuses and employee benefits. Cash used during the six months ended June 30, 2026 included $28.8 million of such payments, compared to $22.5 million in the prior-year period, and these payments are not expected to recur in the remainder of 2026.
Investing Activities
Net cash used in investing activities was $41.8 million for the six months ended June 30, 2026 and consisted primarily of purchases of marketable investment securities of $109.6 million, purchases of property and equipment of $21.1 million, partially offset by $80.1 million of proceeds from maturities of marketable investment securities, $5.6 million of proceeds from maturities of debt securities classified as held-to-maturity and $3.2 million of proceeds from the sale of equity securities.
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 Previse for $18.7 million, purchases of property and equipment of $14.0 million and purchases of debt securities classified as held-to-maturity of $5.6 million, partially offset by the maturity of marketable investment securities of $80.3 million.
The $9.0 million decrease in cash used in investing activities for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily due to $18.7 million of acquisition related activity in the prior period with no comparable activity in the current period, $5.6 million of proceeds from held-to-maturity securities, offset by $16.8 million in higher purchases of marketable securities and $7.1 million of higher purchases of property and equipment.
Financing Activities
Net cash used in financing activities was $5.9 million for the six months ended June 30, 2026, and consisted primarily of $7.4 million of payments for employee taxes related to the vesting of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”) and $1.0 million of payments related to contingent consideration, partially offset by $2.1 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”).
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 RSUs, partially offset by the $1.5 million of proceeds from contributions to our ESPP and $0.2 million of proceeds from lease incentives received.
Critical Accounting Estimates
During the six months ended June 30, 2026, 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 2025 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 rate fluctuations. As of June 30, 2026, we had cash and cash equivalents of $62.1 million, consisting of bank deposits and money market funds. We had marketable investment securities of $204.7 million, primarily invested in U.S. government securities. Due to the nature of these instruments, we believe our exposure to interest rate risk is not material.
As of June 30, 2026, we had outstanding term debt of $10.1 million under a term loan that bears interest at a floating rate based on the WSJ Prime Rate, subject to an interest rate floor of 6.00%, which exposes us to interest rate risk.
A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.
Foreign Currency Risk
We are exposed to foreign currency exchange rate risk primarily related to a loan receivable and certain equity securities denominated in Swedish Krona (“SEK”). As of June 30, 2026, this loan had a principal balance of SEK 20 million and bears interest at a rate of 2.00% plus the three-month Stockholm Interbank Offered Rate. We do not currently hedge our foreign currency exposure. A hypothetical 10% change in foreign currency exchange rates
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would increase or decrease the value of our foreign currency-denominated assets by approximately $1.0 million, which we do not consider material to 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 depend on the duration and severity of inflationary trends, which we are unable to predict. If inflationary pressures persist or increase, our operating expenses may rise and we may utilize our capital resources sooner than expected. Additionally, due to the reimbursement environment in which we operate, our payors may be unwilling or unable to adjust reimbursement rates to offset inflationary cost increases.
Equity Price Risk
As of June 30, 2026, we held equity securities with a total fair value of $6.8 million. A hypothetical 10% decrease in the market price of these securities would result in an approximate $0.7 million decrease in fair value. These securities are subject to market-related risks that could materially impact their value.
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, 2026. 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 2026 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 U.S. 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 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. 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 2025 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 2025 10-K other than the updates to the risk factors or new risk factors set forth below.
We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.
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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, 2025, we had net loss of $24.2 million, and as of December 31, 2025, we had an accumulated deficit of $224.3 million. For the six months ended June 30, 2026, we had net loss of $16.6 million, and as of June 30, 2026, we had an accumulated deficit of $240.9 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 ongoing conflicts in the Middle East, including the conflict between the U.S., Iran, and Israel, the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, recent shutdowns of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns, and the potential failures of banks or other disruptions in the banking system or financial markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets 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 lesser portion of our 2025 revenues compared to prior years following the discontinuance of Medicare reimbursement as of April 24, 2025, and we expect it will continue to be a smaller portion of our 2026 operating results. See “—Risks Related to Our Business—Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, TissueCypher, and DecisionDx-SCC 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 2025 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 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 TissueCypher, DecisionDx-Melanoma and DecisionDx-SCC tests, and we will need to generate sufficient revenue from these products and other products to grow our business.
Our revenue in 2025 was primarily derived from the sale of our DecisionDx-Melanoma, TissueCypher, and DecisionDx-SCC 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 2025 revenues but are not expected to be so in our 2026 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.
In July 2025, we submitted reconsideration requests for both the Novitas and MolDX LCDs. Novitas subsequently confirmed that our request for DecisionDx-SCC was valid. MolDX also subsequently confirmed that our request for DecisionDx-SCC was valid and that the test has been placed on its waiting list, with an Open Meeting date to be determined. These confirmations represent an important procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome.
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.
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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 financial markets and adverse macroeconomic developments. U.S. and global economic and financial conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, the ongoing conflicts in the Middle East, including recent actions by Iran, Israel, and the U.S., the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, recent shutdowns of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns, and the potential failures of bank or other disruptions in the banking system or financial markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets 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, foreign currency exchange rates, 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 U.S., 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 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.
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Financial markets around the world are experiencing volatility following the conflict between the U.S. and Iran in February 2026 and the invasion of Ukraine by Russia in February 2022. As a result of the conflicts in the Middle East, the U.S., UK, Canada, Australia, Japan, South Korea, Israel, and the European Union have placed sanctions and export controls on Iran. Due to the escalation of the ongoing conflicts in the Middle East, including the conflict between the U.S., Iran, and Israel, the closure and risk of closure of the Strait of Hormuz has imposed significant constraints on global oil and energy transportation and production. Additionally, in response to the invasion of Ukraine, the U.S., 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 the U.S. and Iran and the conflict between Ukraine and Russia, 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.
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, 2026, 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.
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Item 5. Other Information.
Insider Trading Arrangements
On May 28, 2026 , Tobin Juvenal , our Chief Commercial Officer , adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 85,524 shares of our common stock and up to 100% of the shares of our common stock issued upon the settlement of 63,029 shares of RSUs and PSUs, less the number of shares withheld to cover tax withholding obligations in connection with the vesting and settlement of such RSUs and PSUs. 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 September 14, 2026 until the earlier of all transaction under the trading arrangement being completed or March 19, 2027 .
On June 2, 2026 , Derek J. 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 202,966 shares of our common stock and up to 100% of the shares of our common stock issued upon the settlement of 180,459 shares of RSUs and PSUs, less the number of shares withheld to cover tax withholding obligations in connection with the vesting and settlement of such RSUs and PSUs. 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 September 11, 2026 until the earlier of all transaction under the trading arrangement being completed or March 19, 2027 .
No other directors or officers, as defined in Rule 16a-1(f), adopted and/or terminated
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Item 6. Exhibits.
| Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | ||||||||
| 10.1*^ | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 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
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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: | July 30, 2026 | By: | /s/ Derek J. Maetzold | |||||||||||
| Derek J. Maetzold President and Chief Executive Officer (Principal Executive Officer) | ||||||||||||||
| Date: | July 30, 2026 | By: | /s/ Frank Stokes | |||||||||||
| Frank Stokes Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||||||||
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