Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part I, Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and elsewhere in this Annual Report on Form 10-K.
Overview
We develop, market, and sell advanced cancer genomic testing services. Our testing services are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. Our testing services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. We also provide whole exome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives.
We are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our testing services and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors. Because of the ultra-high analytical sensitivity of our technology, we are primarily focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring. We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); Criterium and the Academic Breast Cancer Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network, that will focus on building the evidence-base for our technology and these indications.
Today, our testing services are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing services to ModernaTX, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus to commercialize our NeXT Personal Dx test. In late 2024, we expanded our collaboration partnership with Tempus to enable Tempus to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study. In July 2025, we further expanded our collaboration partnership with Tempus to authorize Tempus to market NeXT Personal Dx for colorectal cancer and extend the term of the Tempus Agreement through November 25, 2029. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale. We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases. To date, we have sequenced approximately 571,000 human samples, of which approximately 219,000 were whole human genomes.
2025 Highlights
Total revenue of $69.6 million decreased 18%, or $15.0 million, during 2025 compared to 2024, primarily due to lower expected revenue from Enterprise sales, which was primarily Natera. Revenue from Enterprise sales was $5.9 million in 2025 compared to $25.4 million in 2024 and the decline was due to the winding down of the project with Natera. This decrease was partially offset by higher revenue from population sequencing, which increased $4.3 million, or 58%.
Key business accomplishments and financial updates in 2025 and early 2026 include:
Secured Milestone Medicare Coverages for Breast & Lung Cancer : Received Medicare coverage approval in the fourth quarter for the surveillance of cancer recurrence in breast cancer patients, and also, received Medicare coverage for Stage I to III NSCLC in the first quarter of 2026; both are expected to be key catalysts for clinical revenue generation and market share growth in the MRD space
Published Landmark TRACERx Data: Highlighted data from one of the largest and most comprehensive NSCLC patient cohorts to date in the journal Cell, demonstrating the clinical importance of Personalis’ ultrasensitive MRD approach
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Validated ctDNA Dynamics: Published VHIO data in Clinical Cancer Research titled "Broad Utility of Ultrasensitive Analysis of ctDNA Dynamics across Solid Tumors Treated with Immunotherapy," further reinforcing the clinical validity of the NeXT Personal ® platform in a broad array of cancer types
Clinical Momentum: Clinical test revenue of $2.0 million, more than double the $0.8 million in 2024
Volume Performance: Clinical test volume reached 16,233 tests, a nearly 400% increase over the 3,285 test volume in 2024
Strong Cash Position: Ended the year with approximately $240.0 million in cash, cash equivalents, and short-term investments. This includes approximately $109.0 million in net proceeds from our At-The-Market (ATM) sales program, executed at a weighted-average price of $8.43 per share
Factors Affecting Our Performance
There are several important factors that we expect to impact our operating performance and results of operations, including:
The adoption of ultrasensitive MRD testing. We are pioneering the ultrasensitive MRD testing market with the belief that an ultrasensitive approach will lead to earlier intervention and the ability to better trust that a negative MRD patient is likely cancer-free. There are no assurances that the market will value ultrasensitive testing over other ways to monitor cancer and look for recurrence and disease.
The continued development of the market for genomic-based tests. Our performance depends on the willingness of pharmaceutical companies, enterprise customers, and oncologists to continue to seek more comprehensive molecular information to develop more efficacious cancer therapies.
Increasing adoption of our testing services and solutions by existing bio-pharma customers. Our performance depends on our ability to retain and broaden adoption with existing customers. Because our technology is novel, some customers begin using our testing services by initiating pilot studies involving a small number of samples to gain experience with our service. As a result, historically a significant portion of our revenue has come from existing customers. We believe that our ability to convert initial pilots into larger orders from existing customers has the potential to drive substantial long-term revenue. We expect there may be some variation in the number of samples they choose to test each quarter.
Adoption of our testing services by new customers. While new customers initially may not account for significant revenue, we believe that they have the potential to grow substantially over the long term as they gain confidence in our testing services. Our ability to engage new customers is critical to our long-term success. Our publications, posters and presentations at scientific conferences lead to engagement at the scientific level with potential customers who often make the initial decision to gain experience with our testing services. Accessing these new customers through scientific engagement and marketing to gain initial buy-in is critical to our success and gives us the opportunity to demonstrate the utility of our testing services.
Obtaining coverage and reimbursement status of our diagnostic tests. We believe having our tests covered by Medicare is important to—and a key catalyst for—clinical revenue and market share growth in the MRD testing market. Our NeXT Personal Dx test received Medicare coverage for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer in November 2025, with an effective date of October 7, 2025. Our NeXT Personal Dx test also received Medicare coverage for surveillance of patients with Stage I to III NSCLC in February 2026, with an effective date of January 9, 2026. Coverage decision for one additional indication is pending. We may not be able to establish the medical necessity of this additional indication (coverage) or payment rates that cover our costs (reimbursement).
Our revenues and costs are affected by the volume of samples we receive from customers from period to period. The timing and size of sample shipments received after orders have been placed is variable. Since sample shipments can be large, and are often received from a third party, the timing of arrival can be difficult to predict over the short term. Although our long-term performance is not affected, we see quarter-to-quarter volatility due to these factors. Samples arriving later than expected may not be processed in the quarter proposed and result in revenue the following quarter. Since many of our customers request defined turnaround times, we employ project managers to coordinate and manage the complex process from sample receipt to sequencing and delivery of results.
Investment in service innovation to support growth. Investment in research and development, including the development of new services and capabilities is critical to establish and maintain our leading position. We have invested significantly in our NeXT platform, introducing new services and additional capabilities. We are also collaborating with KOLs to support the clinical utility of our testing services. We believe this work is critical to gaining customer adoption and expect our investments in these efforts to continue.
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Leverage our operational infrastructure. We have invested significantly in our sample processing capabilities and commercial infrastructure. With our current operating model and infrastructure, we can increase our production and commercialize new generations of our testing services. We expect to grow our revenue and spread our costs over a larger volume of services.
Components of Operating Results
Revenue
We derive our revenue primarily from sales of genomic testing services to the following five customer types:
Pharma testing services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their oncology drug development programs.
Enterprise sales includes sales of tumor profiling and diagnostic tests directly to another business as an input to their products. Revenue from our partnership with Natera to provide advanced tumor analysis for use in Natera's MRD test currently makes up substantially all of the revenue in this category.
Population sequencing includes sales of genomic sequencing services and data analytics to support large-scale genetic research programs. All of the revenue in this category is from our partnership with the VA MVP.
Clinical diagnostic includes sales of comprehensive tumor profiling test that is used to help select therapy for a cancer patient and identify potential clinical trials for a patient, and sales of ultrasensitive, tumor-informed diagnostic tests, ordered by healthcare providers for cancer patients. Revenue in this category is derived from Medicare and private insurance reimbursements.
Other includes sales of genomic tests and analytics to universities and non-profits. Other also includes royalty payments for the patents licensed by the Company.
Our ability to increase revenue will depend on our ability to further increase sales to these groups of customers and expand our customer base within each group. To do this, we are developing a growing set of state-of-the-art services; advancing our operational infrastructure; building our regulatory credentials; focusing our marketing efforts on large pharmaceutical companies; building and publishing the clinical evidence-base to support our testing services in our key indications, pursuing reimbursement coverage from Medicare and other payors; and seeking additional partnerships. We market to biopharma customers and doctors through a small direct sales force. In late 2023, we entered into an agreement with Tempus to commercialize NeXT Personal Dx in the clinical diagnostics market and will be leveraging Tempus' significantly larger sales force as a key vector to grow our clinical diagnostic business. In late 2024, we expanded our collaboration partnership with Tempus to enable Tempus to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study. In July 2025, we further expanded our collaboration partnership with Tempus to authorize Tempus to market NeXT Personal Dx for colorectal cancer and extend the term of the Tempus Agreement through November 25, 2029.
We have one reportable segment which is to provide advanced cancer genomic testing services for precision oncology applications, personalized testing and other tests. Most of our revenue to date has been derived from sales in the United States.
Costs and Expenses
Cost of Revenue
Cost of revenue consists of raw materials costs, personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, depreciation and maintenance on equipment, allocated facilities and information technology (“IT”) costs and clinical diagnostic test costs. We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilities such as automation of laboratory workflows, processing of diagnostic tests for the clinical market while we work to secure reimbursement, and costs related to our Fremont facility. Over the long-term, we anticipate higher gross margins as growing revenue leads to economies of scale.
Research and Development Expenses
Research and development expenses consist of costs incurred for the research and development of our testing services and costs related to conducting studies and collaborations with partners to validate the clinical utility of our offerings. The expenses primarily consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits); laboratory supplies and consumables; costs of processing samples for research, product development, collaborations and studies; depreciation and maintenance on equipment; and allocated facilities and IT costs. We include in research and development expenses the costs to further develop software we use to operate our laboratory, analyze the data it generates, and automate our operations.
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We expense our research and development costs in the period in which they are incurred. We expect research and development expenses to increase over time to support the growth of our clinical diagnostic offerings.
Selling, General and Administrative Expenses
Selling expenses consist of personnel costs (salaries, commissions, bonuses, stock-based compensation, payroll taxes, and benefits), customer support expenses, direct marketing expenses, and market research. Our general and administrative expenses include costs for our executive, accounting, finance, legal, and human resources functions. These expenses consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), corporate insurance, audit and legal expenses, consulting costs, and allocated facilities and IT costs. We expense all selling, general and administrative costs as incurred.
We expect selling, general and administrative expenses to increase over time to support the growth of our clinical diagnostic offerings and expected gain of market share.
Interest Income and Interest Expense
Interest income consists primarily of interest earned on our cash, cash equivalents, and short-term investments. Interest expense is the recognition of imputed interest on noninterest bearing loans.
Other Income (Expense), Net
Other income (expense), net includes foreign currency exchange gains and losses. Other income (expense), net during the year ended December 31, 2024 consisted primarily of a noncash loss related to the remeasurement of the warrants issued in connection with our November 2023 agreement with Tempus, which was exercised in full and settled in August 2024.
Trend Financial Information
The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto in Item 8 of Part II, “Financial Statements and Supplementary Data”. Historical results are not necessarily indicative of future results.
Year Ended December 31,
Consolidated Statements of Operations:
(in thousands, except share and per share data)
Revenue (1)
Costs and expenses
Cost of revenue
Research and development
Selling, general and administrative (2)
Lease impairment
Restructuring and other charges
Total costs and expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net (3)
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share, basic and diluted
Weighted-average shares outstanding, basic and diluted
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(1) Includes related party revenue of $5.4 million and $2.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(2) Includes related party sales and marketing expenses of $4.6 million and $0.5 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(3) Includes related party other expense of $18.3 million in connection with the change in fair value of Tempus Warrants for the year ended December 31, 2024.
December 31,
(in thousands)
Cash and cash equivalents, and short-term investments
Working capital
Total assets (1)
Total debt
Long-term obligations
Total liabilities (2)
Total stockholders' equity
(1) Includes related party accounts receivable of $2.5 million as of December 31, 2025 and December 31, 2024.
(2) Includes related party liabilities of $5.7 million and $2.9 million as of December 31, 2025 and December 31, 2024, respectively.
Results of Operations
This section discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
Revenue
The following table shows revenue by customer type (in thousands, except percentages):
Years Ended December 31,
Change
Pharma testing services (1)
Enterprise sales
Population sequencing
Clinical diagnostic
Other
Total revenue
(1) Includes related party revenue of $5.4 million and $2.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
The following table shows customers that made up at least 10% of total revenue in each year presented:
Year Ended December 31,
Moderna, Inc.
VA MVP
Natera, Inc.
* Less than 10% of revenue
Pharma testing services
The decrease in pharma testing services revenue in 2025 was primarily due to a decrease in the clinical trial samples processed for Moderna in addition to a small decline in selling prices. This decline was primarily due to conclusion of the patient enrollment for Moderna’s Phase 3 melanoma trial in 2024. We expect variability in revenue from pharmaceutical companies in the future due to the timing of their patient enrollment for clinical trials or project schedules.
Enterprise sales
The decrease in revenue from enterprise sales in 2025 was mainly due to the expected decrease in the number of samples processed for Natera after the second quarter of 2025 when the minimum volume commitments in our agreement with Natera expired. We no longer have a material commercial relationship with Natera and do not expect to have one going forward.
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Population sequencing
Revenue recognized each period from population sequencing is impacted by timing of our fulfillment of samples under each annual task order. The increase in revenue in 2025 was due to an increase in the total number of samples we processed. Our annual task orders received in 2025 and 2024 were $13.5 million and $7.5 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times. Therefore, we may modulate the volume of samples processed from the VA MVP to accommodate sample volumes from other customers, which can vary from period to period. We anticipate fulfilling the new task order received in August 2025 during the first three quarters of 2026.
Clinical diagnostic
Clinical diagnostic test revenue is generated from Medicare and private insurance payors. In January 2024, we received a Medicare coverage determination for NeXT Dx, our ultra-comprehensive tumor genomic profiling assay. In November 2025, we received Medicare coverage determination for NeXT Personal Dx for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer, with an effective date of October 7, 2025. In February 2026, we also received Medicare coverage for NeXT Personal Dx for surveillance of patients with Stage I to III NSCLC, with an effective date of January 9, 2026. The increase in clinical diagnostic revenue was mainly attributable to an increase in NeXT Dx test volume and NeXT Personal Dx reimbursements received from certain private payors.
Other
The increase in other revenue was mainly due to royalty payments for patents licensed by the Company.
Costs and Expenses
The following table shows costs and expenses (in thousands, except percentages):
Year Ended December 31,
Change
Cost of revenue
Research and development
Selling, general and administrative
Total costs and expenses
Cost of revenue
The decrease in cost of revenue in 2025 was primarily due to lower revenue levels (revenue decreased 18% over the same period). Cost of revenue decreased at a lesser rate as compared to the corresponding revenue decreases, primarily due to lower fixed overhead absorption and increased clinical diagnostic test costs where the corresponding revenue and reimbursement amounts were less than the cost of the testing services due to selling testing services in advance of reimbursement in order to gain market share.
Specific components of the decrease were a $10.3 million decrease in direct material costs due to lower biopharma revenue levels, a $0.7 million decrease in depreciation expenses resulting from capital equipment spend timing, partially offset by a $4.6 million increase in diagnostic test costs, a $1.5 million increase in laboratory supplies, a $0.7 million increase in equipment repairs and maintenance and a $0.3 million increase in personnel costs.
Research and development
The increase in research and development expenses in 2025 was primarily due to an increase in expenses related to collaborations and development of clinical evidence to support reimbursement initiatives, technology development, automation of laboratory processes, personnel-related costs and professional service, partially offset by decrease in lab supplies utilized.
Specific components of the increase were a $1.6 million increase in research and development collaboration costs, a $0.6 million increase in personnel and personnel-related costs driven by increased headcount in 2025, a $0.3 million increase in professional service, a $0.3 million increase in repairs and maintenance and a $0.1 million increase in depreciation expense, partially offset by a $1.5 million decrease in lab supplies utilized.
Selling, general and administrative
The increase in selling, general and administrative expenses was primarily due to an increase in commercial related expenses associated with increases in testing volume for NeXT Personal Dx.
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Specific components of the increase were a $4.5 million increase in marketing and marketing-related expenses such as trade show expenses and Tempus' sales & marketing expenses, a $2.3 million increase in personnel and personnel-related costs driven by increased headcount in 2025, a $1.3 million increase in costs for marketing to physicians, a $0.6 million increase in office expenses, partially offset by a $0.6 million decrease in depreciation costs, a $0.4 million decrease in repairs and maintenance costs, and a $0.3 million decrease in facilities expenses.
Interest Income, Interest Expense and Other Income (Expense), Net
The following table shows interest income and expense, and other income (expense), net (in thousands, except percentages):
Year Ended December 31,
Change
Interest income
Interest expense
Other income (expense), net
Total
Interest income and interest expense
The increase in interest income was driven by higher average investment balances, partially offset by decreased yields. Interest expense is the recognition of imputed interest on noninterest bearing loans.
Other income (expense), net
Other income (expense), net in 2025, consisted mainly of foreign currency remeasurements. Other income (expense), net in 2024, consisted mainly of an $18.3 million noncash loss, recognized as a result of remeasurement of the Tempus Warrants, which were exercised in full in August 2024.
Liquidity and Capital Resources
The following table presents selected financial information (in thousands):
December 31,
Cash and cash equivalents, and short-term investments
Contract liabilities
Working capital
From our inception through December 31, 2025, we have funded our operations primarily from net proceeds from issuance of redeemable convertible preferred stock, IPO, follow-on equity offerings, At-the-Market ("ATM") facility (see Note 2, "Summary of Significant Accounting Policies" for additional information), Tempus exercising warrants and purchasing additional shares under an investment agreement, and Merck purchasing shares under an investment agreement (see Note 8, "Related Party Transactions" in our consolidated financial statements for additional information), as well as debt financings. As of December 31, 2025, we had cash and cash equivalents of $124.2 million and short-term investments of $115.7 million.
We have incurred net losses since our inception. We anticipate that our current cash and cash equivalents and short-term investments are sufficient to fund our near-term capital and operating needs for at least the next 12 months.
We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our testing services or other risks described in this Annual Report on Form 10-K, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We filed a sales agreement prospectus supplement in November 2025, pursuant to which we offered and sold $100.0 million of shares of our common stock through our ATM facility. As of December 31, 2025, approximately $21.3 million remained available for sale, which was subsequently sold in January 2026. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to
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a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all.
Our short-term investments portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.
Cash Flows
Year Ended December 31,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
The increase in cash used in operating activities was primarily due to working capital needs and lower revenue with reduced gross margin.
The decrease in cash used in investing activities was due to a $15.6 million decrease in investment of our cash into short-term investments, partially offset by a $3.1 million increase in capital expenditures.
The increase in cash provided by financing activities was due to $96.7 million higher net proceeds from sales of common stock under our ATM facility, $2.6 million higher proceeds from loans, $2.4 million higher proceeds from issuance of common stock under our equity incentive plans, and $1.0 million lower payments of costs associated with the Tempus and Merck investments, partially offset by $50.0 million in net proceeds from sale of common stock under the Merck investment agreement and $36.2 million in net proceeds of the Tempus warrant exercise and stock sale in 2024, and a $0.9 million higher repayments of loans.
Material Cash Requirements
Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other. We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $240.0 million as of December 31, 2025, as well as anticipated cash receipts from customers. To fund our material cash requirements in the short-term and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.
Variable costs of revenue . From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of raw materials, laboratory supplies and consumables to be used in the sequencing of customer samples. However, we generally do not have binding and enforceable purchase orders beyond the short term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project. We currently expect spending in this area to remain similar to the levels in 2025 to support expected higher levels of revenue.
Operating expenditures . Our primary use of cash relates to employee compensation, spend on professional services, spend related to research and development projects, and other costs related to our research and development, selling, general and administrative functions. We currently expect our spending in these areas to increase compared to the levels in 2025 to support the growth of our clinical diagnostic offerings. On a long-term basis, we manage future cash requirements relative to our long-term business plans.
Capital expenditures . Capital expenditures are expected to increase from 2025 levels as we expect to expand NeXT Personal Dx capacity. Going forward, our capital expenditures are expected to consist primarily of laboratory equipment and computer equipment. We currently expect capital expenditures to be between $8 million to $10 million in 2026 and between $10 million to $12 million in each of the years 2027 and 2028.
Property leases . Our noncancelable operating lease payments were $62.4 million as of December 31, 2025. The timing of these future payments, by year, can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 7, “Leases.”
Other . As of December 31, 2025, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory. We owe a total of $2.1 million, of which $1.2 million was paid in January 2026 and $0.9 million is payable in 2027. Further discussion of this loan can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 6, “Loans.”
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are
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reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that the assumptions and estimates associated with revenue recognition, leases, and common stock warrants have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
Revenue Recognition
We generate our revenue from the sale of genomic testing services. We agree to provide services to our customers through a contract, which may be in the form of a combination of a signed agreement, statement of work and/or a purchase order.
We have evaluated the performance obligations contained in contracts with customers to determine whether any of the performance obligations are distinct, such that the customers can benefit from the obligations on their own, and whether the obligations can be separately identifiable from other obligations in the contract. For the significant majority of our contracts to date, the customer orders a specified quantity of sequencing and the delivery of each test to the customer is accounted for as one performance obligation.
Fees for our genomic testing services are predominantly based on a fixed price per sample. The fixed prices identified in the arrangements only change if a pricing amendment is agreed with a customer. In some cases, we provide our customers a discount if samples received above a certain volume are purchased. In such cases, the discount applies prospectively. We have analyzed such discounts if they represent a material right provided to a customer. We have concluded that such discounts generally do not represent a material right provided to a customer since they are not deemed to be incremental to the pricing offered to the customer or are not enforceable options to acquire additional goods. As a result, these discounts do not constitute a material right and do not meet the definition of a separate performance obligation. We do not offer retrospective discounts or rebates.
Leases
Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives, using a discount rate based on our current borrowing rate at the lease commencement date (the incremental borrowing rate), unless the rate implicit in the lease is readily determinable.
In August 2021, we entered into a 13.5-year lease for our corporate headquarters in Fremont, California. We estimated our incremental borrowing rate as the rate implicit in the lease was not readily determinable. To determine the incremental borrowing rate, we estimated our credit rating by comparing certain financial ratios and metrics of the Company to those of other issuers with publicly-available credit ratings from Standard & Poor’s (S&P). We then adjusted yields from publicly traded corporate bonds of companies of similar size and credit rating over a term approximating the term of our lease for the nature of the collateral. In September 2022, the lease commencement date for our facility in Fremont, California was delayed from the original intended date due to delays in the completion of the work necessary for us to move into the facility, which resulted in a reassessment of the lease term. Our concluded incremental borrowing rate for this remeasured lease was 10.5%, which resulted in a lease liability and right-of-use asset of $31.8 million.
During the third quarter of 2023, we completed the move of our laboratory operations from our Menlo Park facility to our Fremont facility, resulting in a lease impairment charge at that time. We are actively marketing the Menlo Park space for sublease.
In September 2025, we entered into an agreement to lease lab equipment for 36 months with 33 monthly payments of $0.1 million, commencing in January 2026. We classified this as a finance lease because the agreement contains an early buyout option that we are reasonably certain to exercise. Accordingly, we recognized a finance lease asset and a finance lease liability at the lease commencement date. In accordance with the agreement, in January 2026, we exercised the purchase option and paid $2.1 million.
Common Stock Warrants
In November 2023, we entered into an agreement with Tempus to commercialize NeXT Personal Dx in the clinical diagnostics market. In connection with this agreement, we issued to Tempus two warrants to purchase, in the aggregate, up to 9,218,800 shares of our common stock. In August 2024, Tempus exercised the warrants in full to purchase 9,218,800 shares of our common stock for $18.4 million in cash, at an average exercise price of $2.00 per share.
The Tempus Warrants included a provision under which the total number of shares issuable upon settlement were subject to adjustment. Consequently, prior to the exercise, the Tempus Warrants were classified as liability instruments while outstanding and subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense), net in the consolidated statements of operations. Fair values of the warrants were estimated using the Black-Scholes option-pricing model. Estimating fair value using the Black-Scholes option-pricing model requires a number of assumptions. Changes in the assumptions can materially affect the fair value and ultimately how much other income (or expense) is recognized. The inputs generally require analysis to develop.
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Expected Term —The expected term assumption represents the contractual period of each of the two warrants.
Expected Volatility —Expected volatility was based on the actual historical volatility of our common stock over the expected terms of the warrants.
Expected Dividend Yield —The Black-Scholes option-pricing valuation model calls for a single expected dividend yield as an input. We currently have no history or expectation of paying cash dividends on our common stock.
Risk-Free Interest Rate —The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the warrants.
Recent Accounting Pronouncements
See the sections titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our consolidated financial statements for additional information.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk.
As a “smaller reporting company”, we are not required to provide the information under this item.
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Item 8. Financial Statement s and Supplementary Data.
PERSONALIS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1. Company and Nature of Business
Note 2. Summary of Significant Accounting Policies
Note 3. Revenue
Note 4. Balance Sheet Details
Note 5. Fair Value Measurements
Note 6. Loans
Note 7. Leases
Note 8. Related Party Transactions
Note 9. Stock-Based Compensation
Note 10. Segment and Geographic Information
Note 11. Commitments and Contingencies
Note 12. Basic and Diluted Net Loss Per Common Share
Note 13. Income Taxes
Note 14. Subsequent Events
Report of Independent Registered Public Accounting Firm
(BDO USA, P.C., PCAOB ID: 243 )
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PERSONALIS, INC.
CONSOLIDATED BALAN CE SHEETS
(in thousands, except share and per value data)
December 31, 2025
December 31, 2024
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net (1)
Inventory and other deferred costs
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (2)
Accrued and other current liabilities (2)
Contract liabilities
Total current liabilities
Long-term operating lease liabilities
Other long-term liabilities (3)
Total liabilities
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $ 0.0001 par value — 10,000,000 shares authorized; none issued
Common stock, $ 0.0001 par value — 200,000,000 shares authorized; 102,475,891 and 85,171,146 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
(1) Includes related party accounts receivable of $ 2.5 million as of December 31, 2025 and December 31, 2024, respectively.
(2) Includes related party liabilities of $ 5.7 million and $ 1.7 million as of December 31, 20 25 and December 31, 2024, respectively.
(3) Includes related party liabilities of $ 1.2 million as of December 31, 2024.
See Notes to the Consolidated Financial Statements.
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PERSONALIS, INC.
CONSOLIDATED STATEM ENTS OF OPERATIONS
(in thousands, except share and per share data)
Year Ended December 31,
Revenue (1)
Costs and expenses
Cost of revenue
Research and development
Selling, general and administrative (2)
Total costs and expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net (3)
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share, basic and diluted
Weighted-average shares outstanding, basic and diluted
(1) Includes related party revenue of $ 5.4 million and $ 2.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(2) Includes related party sales and marketing expenses of $ 4.6 million and $ 0.5 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(3) Includes related party other expense of $ 18.3 million in connection with the change in fair value of Tempus Warrants for the year ended December 31, 2024.
See Notes to the Consolidated Financial Statements.
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PERSONALIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Year Ended December 31,
Net loss
Other comprehensive income (loss), net of tax
Changes in foreign currency translation adjustments:
Change during period
Reclassification of adjustments to net loss due to dissolution of Personalis (Shanghai) Ltd
Net changes in foreign currency translation adjustments
Change in unrealized gain on available-for-sale debt securities
Comprehensive loss
See Notes to the Consolidated Financial Statements.
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PERSONALIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Accumulated
Additional
Other
Total
Common Stock
Paid-In
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Capital
Income (Loss)
Deficit
Equity
Balance—December 31, 2023
Proceeds from sale of common stock under Merck Investment Agreement, net of issuance costs
Exercise of Tempus Warrants
Proceeds from sale of common stock under Tempus Investment Agreement, net of issuance costs
Proceeds from sales of common stock under ATM facility, net of commissions
Proceeds from exercise of stock options
Proceeds from ESPP
Restricted stock units vested
Stock-based compensation
Foreign currency translation adjustment
Unrealized gain on available-for-sale debt securities
Net loss
Balance—December 31, 2024
Proceeds from sales of common stock under ATM facility, net of commissions
Proceeds from exercise of stock options
Proceeds from ESPP
Restricted stock units vested
Stock-based compensation
Foreign currency translation adjustment
Unrealized gain on available-for-sale debt securities
Net loss
Balance—December 31, 2025
See Notes to the Consolidated Financial Statements.
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PERSONALIS, INC.
CONSOLIDATED STATEM ENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense
Depreciation and amortization
Noncash operating lease cost
Noncash gain related to liability classified Tempus Warrants
Amortization of discount on short-term investments
Other
Changes in operating assets and liabilities
Accounts receivable
Inventories and other deferred costs
Prepaid expenses and other assets
Accounts payable (1)
Accrued and other current liabilities (1)
Contract liabilities
Operating lease liabilities
Other long-term liabilities (1)
Net cash used in operating activities
Cash flows from investing activities:
Purchases of available-for-sale debt securities
Proceeds from maturities of available-for-sale debt securities
Purchases of property and equipment
Proceeds from sales of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from sales of common stock under ATM facility, net of commissions
Proceeds from exercise of Tempus Warrants
Proceeds from sale of common stock under Tempus Investment Agreement
Proceeds from sale of common stock under Merck Investment Agreement
Payment of costs related to Tempus and Merck Investment Agreements
Proceeds from loans
Repayments of loans
Proceeds from issuance of common stock under equity incentive plans
Net cash provided by financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents
Restricted cash, included in other long-term assets
Total cash, cash equivalents and restricted cash
Supplemental cash flow information:
Cash paid for income taxes, net of refunds
Acquisition of property and equipment included in accounts payable and accrued liabilities
Finance lease assets obtained in exchange for finance lease liabilities
(1) Includes a change in related party liabilities of $ 2.8 million for the year ended December 31, 2025.
See Notes to the Consolidated Financial Statements.
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PERSONALIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Company and Nature of Business
Personalis, Inc. (the "Company" or "Personalis") develops, markets, and sells advanced cancer genomic testing services. The testing services are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. The testing services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. The Company also provides whole exome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives. The principal markets for the Company’s testing services are in the United States and Europe.
The Company is expanding its business model to offer genomic testing services directly to cancer patients in a clinical setting. However, revenue generated from clinical customers was not significant for any periods presented in these consolidated financial statements.
The Company was incorporated in Delaware in February 2011 and began operations in September 2011. The Company formed a wholly owned subsidiary, Personalis (UK) Ltd., in August 2013 and a wholly owned subsidiary, Shanghai Personalis Biotechnology Co., Ltd., which is referred to as “Personalis (Shanghai) Ltd” herein, in October 2020. During the first half of 2023, the Company terminated its operations in China and the Company completed the process of dissolving the Personalis (Shanghai) Ltd entity in February 2024. The Company operates and manages its business as one reportable operating segment, which is to provide advanced cancer genomic testing services for precision oncology applications, personalized testing, and other tests.
The Company has incurred losses to date and expects to incur additional losses for the foreseeable future. The Company continues to invest the majority of its resources in the development and growth of its business, including investments in research and development and sales and marketing efforts. The Company’s activities have been financed to date primarily through the sale of its equity securities and cash from operations.
Note 2. Summary of Significant Ac counting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding annual reporting. The consolidated financial statements include the accounts of Personalis, Inc. and its wholly owned subsidiaries, Personalis (UK) Ltd. and Personalis (Shanghai) Ltd (the latter entity until its dissolution during the first quarter of 2024) . All intercompany balances and transactions have been eliminated in consolidation. Upon dissolution of Personalis (Shanghai) Ltd during the first quarter of 2024, an accumulated foreign currency translation adjustment of $ 0.2 million was reclassified from accumulated other comprehensive loss to net loss within Other income (expense), net.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The estimates include, but are not limited to, revenue recognition, useful lives assigned to long-lived assets, discount rates for lease accounting, the valuation of stock options, the valuation of common stock warrants, provisions for income taxes, and fair value of lease right-of-use assets. Actual results could differ from these estimates, and such diff erences could be material to the Company’s consolidated financial position and results of operations.
Concentration of Credit Risk and Other Risks and Uncertainties
The Company is subject to credit risk from its portfolio of cash and cash equivalents. The Company’s cash and cash equivalents are deposited with high-quality financial institutions. Deposits at these institutions may, at times, exceed federally insured limits. Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists.
The Company also invests in investment ‑ grade debt instruments and has policy limits for the amount it can invest in any one type of security, except for securities issued or guaranteed by the U.S. government. The goals of the Company’s investment policy are as follows: preservation of principal; liquidity of investments sufficient to meet cash flow requirements; avoidance of inappropriate concentration and credit risk; competitive after ‑ tax rate of returns; and fiduciary control of cash and investments. Under its investment policy, the Company limits the amounts invested in such securities by credit rating, maturity, investment type, and issuer. As a result, management believes that these financial instruments do not expose the Company to any significant concentrations of credit risk.
The Company purchases various reagents and sequencing materials from sole-source suppliers. Any extended interruption in the supply of these materials could result in the Company’s inability to secure sufficient materials to conduct business and meet customer demand.
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The Company routinely assesses the creditworthiness of its customers and does not require collateral. Historically, the Company has not experienced significant credit losses from accounts receivable. Multiple customers have provided more than 10% of total revenue in the periods presented, or accounted for more than 10% of accounts receivable at each respective balance sheet date, as follows:
Revenue
Accounts Receivable
Year Ended December 31,
December 31,
Moderna, Inc.
VA MVP
US Department of Veterans Affairs
Merck & Co., Inc.
AstraZeneca UK Ltd
Pfizer Inc.
Natera, Inc.
* Less than 10 % of revenue or accounts receivable
Revenue Recognition
The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, (“ASC Topic 606”).
The Company derives revenue from the sale of genomic testing services. Contracts are in the form of a combination of signed agreements, statements of work, and/or purchase orders. The Company accounts for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled.
The genomic testing services are the only distinct services that meet the definition of a performance obligation and are accounted for as one performance obligation. Revenue is recognized at a point in time when test results are transferred to the customer. The Company has elected to exclude all sales and value added taxes from the measurement of the transaction price.
Standar d payment terms are typically 90 days or less from the invoice date, but they may vary. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised services to the customer will be one year or less. After assessing each of its revenue-generating arrangements to determine whether a significant financing component exists, the Company concluded that a significant financing component does n ot exist in any of its arrangements. The primary purpose of the Company's invoicing terms is to provide customers with simplified and predictable ways of purchasing services and to provide payment protection for the Company.
Practical Expedients and Exemptions
As a practical expedient, the Company recognizes the incremental costs of obtaining contracts, such as sales commissions, as an expense when incurred since the amortization period of the asset the Company otherwise would have recognized is one year or less. Sales commissions are recorded within selling, general and administrative expenses in the consolidated statements of operations.
Cost of Revenue
Cost of revenue consists of raw materials costs, personnel costs (salaries, bonuses, benefits, payroll taxes, and stock-based compensation), laboratory supplies and consumables, depreciation and maintenance on equipment, allocated facilities and information technology (“IT”) costs and clinical diagnostic test costs .
Research and Development Expenses
The Company charges research and development costs to expenses as incurred, including lab and automation development costs. The expenses primarily consist of personnel costs (salaries, bonuses, benefits, payroll taxes, and stock-based compensation); laboratory supplies and consumables; costs of processing samples for research, product development, collaborations, and studies; depreciation and maintenance on equipment; and allocated facilities and IT costs.
Stock-Based Compensation
The Company measures and recognizes compensation cost for all share-based awards, including service-based stock options, performance-based stock options ("PSOs"), restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs"), performance-based restricted stock unit awards ("PSUs"), performance stock awards ("PSAs") and employee stock purchases related to the Employee Stock Purchase Plan ("ESPP"). For options granted to employees, non-employees, and directors, stock-based compensation is measured at grant date based on the fair value of the award. The Company determines the grant-date fair value of options using the Black-Scholes option-pricing model, except for certain performance-based awards for which an alternative valuation method may be used. The Company
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determines the fair value of restricted stock unit awards using the closing market price of the Company’s common stock on the date of grant. Grant-date fair value of awards is amortized over the employees’ requisite service period on a straight-line basis, or the non-employees’ vesting period as the goods are received or services rendered. Forfeitures are accounted for as they occur. The Company’s 2019 ESPP is deemed to be a compensatory plan and therefore is included in stock-based compensation expense.
Inputs used in Black-Scholes option-pricing models to measure fair value of options are summarized as follows:
Expected Term. The expected term is calculated using the simplified method, which is available if there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting tranche for awards with graded vesting. The midpoint of the vesting date and the contractual expiration date is used as the expected term under this method. For awards with multiple vesting tranches, the assumed period for each tranche is computed separately and then averaged together to determine the expected term for the award.
Expected Volatility. The Company used an average historical stock price volatility of its own stock price as well as a peer group of publicly traded companies to be representative of its expected future stock price volatility. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size, and financial leverage of potential comparable companies. For each grant, the Company measured historical volatility over a period equivalent to the expected term.
Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of a stock award.
Expected Dividend Rate. The Company has not paid and does not anticipate paying any dividends in the near future. Accordingly, estimated dividend yield is zero .
Foreign Currency Translation
The Company considers the functional currencies of its foreign subsidiaries to be the local currency. Assets and liabilities recorded in foreign currencies are translated at the exchange rate as of the balance sheet date, and costs and expenses are translated at average exchange rates in effect during the period. Equity transactions are translated using historical exchange rates. The effects of foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in the consolidated balance sheets.
Comprehensive Loss
Comprehensive loss includes all changes in equity (net assets) during the period from nonowner sources. Comprehensive loss consists of net loss, cumulative translation adjustments, and unrealized gains or losses on available-for-sale debt securities.
Income Taxes
The Company uses the asset and liability method under ASC Topic 740, Income Taxes , ("ASC Topic 740"), in accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expenses or benefits are the result of changes in the deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized.
ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC Topic 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon audit, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. ASC Topic 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included within the related liability line in the consolidated balance sheets.
Undistributed earnings of foreign subsidiaries are assumed to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities at the time of purchase of three months or less. Cash equivalents include bank demand deposits and money market accounts that invest primarily in cash, U.S. Treasury bills, notes, and other obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities, and repurchase agreements secured by such obligations or cash. Cash equivalents also include commercial paper and U.S. Treasury bills, which are marketable debt securities recorded at fair value and accounted for in the same manner as other marketable debt securities described below.
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Restricted Cash
Restricted cash includes cash pledged as collateral for a standby letter of credit related to a property lease. The letter of credit is required to be maintained throughout the term of the lease. If the date of availability or disbursement is less than one year, restricted cash is reported within prepaid expenses and other current assets on the consolidated balance sheets. If the date of availability or disbursement is longer than one year and the balances are maintained under an agreement that legally restricts the use of such funds, restricted cash is reported within other assets on the consolidated balance sheets. As of December 31, 2025, no amount has been drawn under the letter of credit. As of December 31, 2025 and 2024, the Company had restricted cash balances of $ 1.8 million.
Short-term Investments
Investments in marketable debt securities are classified as available-for-sale and recorded at fair value. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are also classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. Short-term investments primarily consist of U.S. Treasury notes, U.S. Treasury bills, commercial paper, corporate debt securities, and U.S. government agency bonds.
Any discount or premium arising at purchase is accreted or amortized to interest income or expense. Unrealized gains and losses are included within accumulated other comprehensive income (loss) in the consolidated statements of stockholders’ equity. Realized gains and losses are reported within other income (expense), net in the consolidated statements of operations. Accrued interest is excluded from both the fair value and amortized cost basis of debt securities and included in prepaid expenses and other current assets in the consolidated balance sheets. When securities are sold, any associated unrealized gain or loss initially recorded as a separate component of stockholders’ equity is reclassified out of stockholders’ equity on a specific-identification basis and recorded in earnings for the period. If an available-for-sale debt security's fair value is less than its amortized cost basis, the Company evaluates whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses.
Fair Value Measurements
Financial assets and liabilities are recorded at fair value. 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 an orderly transaction between market participants at the reporting date. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect market assumptions made by the reporting entity.
The three-level hierarchy for the inputs to valuation techniques used to measure fair value is briefly summarized as follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
Quoted prices for similar assets and liabilities in active markets.
Quoted prices for identical or similar assets or liabilities in markets that are not active.
Observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals).
Inputs that are derived principally from or are corroborated by observable market data by correlation or other means.
Level 3 — Unobservable inputs for the assets or liabilities (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable, accrued expenses and other current liabilities are carried at cost, which approximates their fair value because of their short-term nature.
Accounts Receivable, Net
Trade accounts receivable are recorded at the invoiced amount and are noninterest bearing. The Company maintains an allowance for credit losses, consisting of known specific troubled accounts as well as an amount based on overall estimated potential uncollectible accounts receivable based on historical experience and review of their current credit quality. Expected credit losses are recorded as part of selling, general and administrative expenses in the consolidated statements of operations.
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Inventory and Other Deferred Costs
Inventory consists of raw materials and supplies used to fulfill customer contracts and the Company's research and development activities, and is valued at the lower of cost or net realizable value. Cost is determined using actual costs, on a first-in, first-out basis. Other deferred costs relate to materials consumed and work performed on customer orders that have yet to be completed and recognized as revenue and cost of revenue. Other deferred costs are also comprised of direct labor and overhead costs incurred.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation and amortization, and are depreciated on a straight-line basis over the estimated useful lives of the related assets, which is generally three to five years for computer equipment, two years for software, three years for furniture and equipment, and five years for machinery and equipment. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheet, and the resulting gain or loss is reflected in the consolidated statements of operations. Maintenance and repairs that are not considered improvements and do not extend the useful lives of the assets are charged to expense as incurred.
Construction-in-process assets consist primarily of laboratory equipment and computer equipment that have not yet been placed in service. These assets are stated at cost and are not depreciated. Once the assets are placed into service, assets are reclassified to the appropriate asset class based on their nature and depreciated in accordance with the useful lives above. The Company periodically assesses the useful lives of the assets to determine whether events or circumstances may indicate that a revision to the useful life is warranted .
Impairment of Long-Lived Assets
The Company evaluates long-lived assets, including operating lease right-of-use assets, annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such events or circumstances arise, the Company will compare the carrying amount of the asset group comprising the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the asset group. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the asset group, an impairment charge is recorded as the amount by which the carrying amount of the asset group exceeds the fair value of the assets, as based on the expected discounted future cash flows attributable to those assets. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. There were no impairments of long-lived assets during the years ended December 31, 2025 and December 31, 2024, respectively .
Leases
The Company determines if an arrangement includes a lease at inception and categorizes leases with contractual terms longer than 12 months as either operating or finance leases. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. All other leases are categorized as operating leases.
Certain lease contracts include obligations to pay for other services, such as maintenance. The Company elected to account for these other services as a component of the lease (i.e., the Company elected the practical expedient not to separate lease and non-lease components).
Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate at the lease commencement date, adjusted for various factors including level of collateralization and term (the “incremental borrowing rate”), unless the rate implicit in the lease is readily determinable. The current portion of operating lease liabilities and finance lease liabilities is included in “Accrued and other current liabilities." The long-term portions of operating lease liabilities and finance lease liabilities are included in "Long-term operating lease liabilities" and "Other long-term liabilities," respectively. At the lease commencement date, lease assets are recognized based on the initial present value of the fixed lease payments plus any direct costs from executing the leases and any lease prepayments. Operating lease assets and finance lease assets are included in “Operating lease right-of-use assets” and "Other long-term assets," respectively, and are classified as long-term assets. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.
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The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from leases with a term of 12 months or less. Fixed lease payments are recognized as an expense on a straight-line basis over the lease term. Variable lease costs are amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period. The Company has also elected to include expenses related to leases with a term of one month or less in the short-term lease cost disclosure.
Warrant Liability
Changes in fair value of liability classified warrants are recognized within other income (expense), net in the consolidated statements of operations. Warrant liabilities are classified as short-term or long-term based on their remaining contractual periods. Cash proceeds in connection with the issuance of warrants for the Company's common stock are presented as financing activities in the consolidated statements of cash flows.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer ("CEO"). The Company has determined that it operates in one operating and reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. See Note 10 , Segment and Geographic Information, for additional information.
Recent Accounting Pronouncements
New Accounting Pronouncements Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09") , which modifies the rules on income tax disclosures to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company adopted the new guidance retrospectively in fiscal year 2025 .
New Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03") , which requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item on an interim and annual basis. ASU 2024-03 also requires disclosure of the total amount of selling expenses and the Company's definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. Although the new standard requires comparative disclosures for all periods presented, entities will be permitted to begin applying the guidance prospectively. Therefore, comparative disclosures are not required for reporting periods beginning before the effective date. Entities can elect to apply the new standard retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact that adoption of ASU 2024-03 will have on its financial statement disclosures.
Note 3. Rev enue
The Company disaggregates revenue by the following five customer types:
Pharma testing services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their oncology drug development programs. Contracts typically contemplate a single project and involve a range of tests and analytics to fulfill the requirements of each particular project.
Enterprise sales includes sales of tumor profiling and diagnostic tests directly to another business as an input to their products. The Company is typically contracted to deliver specified tests and analytics in high volume over time. Revenue from the Company's partnership with Natera to provide advanced tumor analysis for use in Natera's MRD test makes up substantially all of the revenue in this category.
Population sequencing includes sales of genomic sequencing services and data analytics to support large-scale genetic research programs. The Company is typically contracted to perform whole genome sequencing and provide data that can be used for analysis across a large volume of samples. All of the revenue within this category is from the Company's partnership with the VA MVP.
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Clinical diagnostic includes sales of ultrasensitive, tumor-informed diagnostics tests, ordered by healthcare providers for cancer patients, that can detect cancer recurrence earlier and aids in treatment decision-making. Revenue is derived from Medicare and private insurance reimbursements.
Other includes sales of genomic tests and analytics to universities and non-profits. Other also includes royalty payments for patents licensed by the Company.
The following table presents the Company's revenue disaggregated by customer type (in thousands):
Pharma testing services (1)
Enterprise sales
Population sequencing
Clinical diagnostic
Other
Total revenue
(1) Includes related party revenue of $ 5.4 million and $ 2.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
Contract Assets and Liabilities
The opening and closing balances of receivables and contract liabilities from contracts with customers are shown below (in thousands). Contract assets were immaterial for all periods presented.
December 31,
Opening balances:
Accounts receivable, net
Short-term contract liabilities
Long-term contract liabilities (included in other long-term liabilities)
Total contract liabilities
Closing balances:
Accounts receivable, net
Short-term contract liabilities
Total contract liabilities
Remaining Performance Obligations
Amounts collected in advance of services being provided are deferred as contract liabilities in the consolidated balance sheets. The associated revenue is recognized, and the contract liability is reduced, as the services are subsequently performed. Remaining performance obligations are comprised mainly of contract liabilities, and to a lesser extent, non-cancellable contracts for which the Company has not invoiced and has an obligation to perform, and for which revenue has not yet been recognized in the financial statements. As of December 31, 2025, amounts related to unfulfilled services under contracts with an original expected duration of more than one year were immaterial . Revenue recognized that was included in the contract liability balance at the beginning of each reporting period was $ 1.9 milli on and $ 4.7 million for the years ended December 31, 2025 and 2024, respectively.
Note 4. Balance Sheet Details
Inventory and other deferred costs consist of the following (in thousands):
December 31,
Raw materials
Other deferred costs
Total inventory and other deferred costs
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Property and equipment, net consists of the following (in thousands):
December 31,
Machinery and equipment
Computer equipment
Computer software
Furniture and fixtures
Construction in progress
Leasehold improvements
Total
Less: accumulated depreciation and amortization
Property and equipment, net
Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $ 9.8 million and $ 10.9 million, respectively.
Accrued and other current liabilities consist of the following (in thousands):
December 31,
Accrued compensation
Operating lease liabilities
Loans—current portion (Note 6)
Market Development Fees received from Tempus (Note 8)
Employee ESPP contributions
Other current liabilities
Total accrued and other current liabilities
Note 5. Fair Value Measurements
The following tables show financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used in such measurements as of December 31, 2025 and 2024 (in thousands):
December 31, 2025
Adjusted Cost
Unrealized Gains
Unrealized Losses
Fair Value
Fair Value Level
Assets
Cash
Money market funds
Level 1
Commercial paper
Level 1
Commercial paper
Level 2
Total cash and cash equivalents
Short-term investments:
Commercial paper
Level 1
Commercial paper
Level 2
Corporate debt securities
Level 1
U.S. agency securities
Level 2
U.S. government securities
Level 2
Total short-term investments
Total assets measured at fair value
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December 31, 2024
Adjusted Cost
Unrealized Gains
Unrealized Losses
Fair Value
Fair Value Level
Assets
Cash and cash equivalents:
Cash
Money market funds
Level 1
Commercial paper
Level 2
U.S. agency securities
Level 2
Total cash and cash equivalents
Short-term investments:
Commercial paper
Level 2
Corporate debt securities
Level 2
U.S. agency securities
Level 2
U.S. government securities
Level 2
Total short-term investments
Total assets measured at fair value
The amortized costs and fair value of marketable debt securities (excluding cash and money market funds), by contractual maturity, at December 31, 2025 are as follows (in thousands):
December 31, 2025
Amortized Cost
Fair Value
Less than 1 year
1 to 5 years
Total
Unrealized losses have not been recognized as losses in the consolidated statements of operations as the Company neither intends to sell, nor anticipates that it is more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis. The declines in fair value are due primarily to changes in market interest rates, rather than credit losses.
Tempus Warrants
The Black-Scholes option-pricing model was used to estimate fair value of the warrants issued to Tempus at the date of issuance, November 28, 2023, and at each subsequent balance sheet date prior to their exercises in full in August 2024. Assumptions used are listed below, which are Level 3 fair value inputs. Expected term is equal to the remaining contractual periods of each of the two warrants. Expected volatility was based on the Company's actual historical volatility over the expected terms of the warrants. The risk-free interest rate was based on the U.S. Treasury yield curve over the expected term of the warrants. Refer to Note 8, Related Party Transactions, for further information about the warrants issued to Tempus.
As of December 31,
Expected term (in years)
Volatility
Risk-free interest rate
Dividend yield
Total fair value of Tempus Warrants (in thousands)
The following table sets forth a summary of the changes in fair value of the Company's Level 3 financial instruments (in thousands):
Year ended December 31,
Warrant Liabilities
Beginning balance
Change in fair value—recognized as loss within Other income (expense), net in the consolidated statements of operations
Derecognition of warrant liabilities due to exercise in full
Ending balance
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Note 6. L oans
Amounts outstanding under loans are as follows (in thousands):
December 31,
Principal
Less: unamortized discount
Total carrying amount
Less: current portion (included in accrued and other current liabilities)
Long-term portion (included in other long-term liabilities)
Equipment and Software Loans
In July 2022, the Company entered into a secured payment agreement with a financing entity to finance the purchase of internal use software licenses and related ongoing support from a vendor. As of December 31, 2024, $ 0.4 million was outstanding, which was waived entirely in January 2025 as part of a settlement agreement with the vendor related to a service claim on the ongoing support component of the agreement. The $ 0.4 million settlement was recognized as a gain and presented as an offset to maintenance costs upon the settlement, included as part of selling, general and administrative expenses in the consolidated statements of operations.
In January 2025, the Company entered into another secured payment agreement to finance the purchase of $ 2.8 million of internal use software licenses and related ongoing support (the "January 2025 Agreement"). The Company agreed to repay the financed amount in three payments of $ 0.7 million in February of 2025, $ 1.2 million in February 2026, and $ 0.9 million in February 2027. The financing entity and vendor are not related. The payment agreement is noninterest bearing and the Company concluded that the stated zero interest rate did not represent fair and adequate compensation to the financing entity for the use of the related funds. Accordingly, the Company approximated the rate at which it could obtain financing of a similar nature from other sources at the date of the transaction. The resulting imputed interest rate was 8.9 % and was used to establish the present value of the payment agreement.
The total initial present value of the January 2025 Agreement was $ 2.6 million. The discount of $ 0.2 million is being recognized as interest expense in the consolidated statements of operations over the life of the payment agreement. The first repayment of $ 0.7 million was billed in March 2025 and paid in April 2025. The second repayment of $ 1.2 million was billed and paid in January 2026. Interest expense was immaterial for the year ended December 31, 2025.
Lab Equipment Loan
In November 2023, the Company purchased lab equipment from one of its main vendors for $ 3.4 million. Extended payment terms were provided to the Company through a financial solutions partner of the vendor. Terms included a 30 % down payment and 24 equal monthly payments for the remaining balance, with such monthly payments commencing in January 2024 and the last payment due in January 2026, which the Company paid in December 2025, and no interest or financing charges. Title for the lab equipment transferred immediately upon delivery to the Company. The financial solutions partner retained a security interest until the Company completed the monthly payments in December 2025. The purchase price for the lab equipment was equal to the cash price and thus the impact of imputing interest would have been de minimis. Repay ments were $ 1.3 million and $ 1.1 million during the years ended December 31, 2025 and 2024, respectively.
Note 7. Le ases
In 2021, the Company entered into a noncancelable operating lease for approximately 100,000 square feet in Fremont, California used for laboratory operations and its corporate headquarters. The lease term is 13.5 years and commenced in October 2022. The Company gained early access to the premises for the purpose of constructing and installing tenant improvements, for which the landlord contributed $ 15.1 million. Such contributions were accounted for as lease incentives and are recognized as reductions to lease expense over the lease term. The lease expires at the end of March 2036 and includes two options to extend the term for a period of five-years per option at market rates. The Company determined the extension options are not reasonably certain to be exercised. The lease includes escalating rent payments.
The Company has a noncancelable operating lease expiring in November 2027 for 31,280 square feet in Menlo Park, California previously used for laboratory operations and its former corporate headquarters. The lease includes escalating rent payments. The Company moved all laboratory operations to the Fremont facility during the third quarter of 2023, resulting in a lease impairment charge at that time. The Company is actively marketing the vacated Menlo Park space for sublease.
The Company has noncancelable operating leases for data center space expiring between 2025 and 2026 . The leases include renewal options that the Company determined are not reasonably certain to be exercised . Separately, the Company also has various other short-term leases.
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As of December 31, 2025 and 2024, operating leases had a weighted-average remaining lease term of 9.4 years and 9.9 years, respectively, and a weighted-average discount rate of 10.6 % for each year. Discount rates are based on estimates of the Company's incremental borrowing rate, as the discount rates implicit in the leases cannot be readily determined. Future lease payments under operating leases as of December 31, 2025 were as follows (in thousands):
Amount
2031 and thereafter
Total future minimum lease payments
Less: imputed interest
Present value of future minimum lease payments
Less: current portion of operating lease liability (included in accrued and other current liabilities)
Long-term operating lease liabilities
Cash paid for operating lease liabilities, included in cash flows from operating activities in the consolidated statements of cash flows, was $ 8.1 million for each of the years ended December 31, 2025 and 2024.
Components of lease cost were as follows (in thousands):
Year Ended December 31,
Lease cost
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
In September 2025, the Company entered into an agreement to lease lab equipment for 36 months with 33 monthly payments of $ 0.1 million, commencing in January 2026 . The Company classified this lease as a finance lease as the agreement contains an early buyout option which the Company was reasonably certain to exercise. Pursuant to the early buyout option, the Company can purchase the equipment and simultaneously terminate the agreement by paying the purchase price of $ 2.1 million in January 2026. In accordance with the agreement, in January 2026, the Company exercised the purchase option and paid $ 2.1 million. The purchase price was recognized as part of finance lease assets and finance lease liabilities. As of December 31, 2025, finance lease assets and liabilities were $ 3.1 million and $ 3.2 million, respectively. Finance lease cost was immaterial for the year ended December 31, 2025. As of December 31, 2024, the Company had no finance leases.
Finance lease liabilities with payments due within one year are classified as short-term liabilities and reported within the "Accrued and other current liabilities" line in the consolidated balance sheets. Finance lease liabilities with payments due beyond one year are classified as long-term liabilities and reported with the "Other long-term liabilities" line in the consolidated balance sheets. The classification of the finance lease liabilities as of December 31, 2025 is as follows (in thousands):
December 31,
Finance lease liabilities - current
Finance lease liabilities - non-current
Total finance lease liabilities
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Note 8. Related Party Transactions
The Company determined that Tempus and Merck Sharp & Dohme LLC ("Merck") are related parties because they own more than 10 % of the Company's common stock.
Tempus
Tempus acquired its ownership stake in August 2024 by exercising the Tempus Warrants and purchasing additional shares under the Investment Agreement (defined below).
Overview of Tempus Agreement
In November 2023, the Company entered into a Commercialization and Reference Laboratory Agreement (as amended by Amendment No. 1, dated August 16, 2024, Amendment No. 2, dated September 20, 2024, Amendment No. 3, dated December 13, 2024, Amendment No. 4, dated July 8, 2025 and Amendment No. 5, dated September 11, 2025, collectively, the “Tempus Agreement”) with Tempus pursuant to which Tempus markets the Company's NeXT Personal Dx test in the United States. The Company performs tests ordered by patients through Tempus and the Company bills the patients or payors. The Company compensates Tempus for orders obtained and results delivered on a per-test basis. The term of the Tempus Agreement is six years, which may be extended for successive one-year terms. Either party may terminate the Tempus Agreement for convenience upon 30 months' prior written notice.
Under the Tempus Agreement, the Company conducted development activities to analytically validate NeXT Personal Dx in three indications: breast cancer, lung cancer and immuno-oncology monitoring. In consideration of the Company performing such development activities, in addition to the activation and first milestone fees, Tempus ag reed to pay the Company a second milestone fee of $ 6.0 million (the "Market Development Fee"), payable in six equal quarterly installments.
Separately, the parties are performing co-promotion activities, and the Company is compensating Tempus for promotional and commercialization services through the end of 2026.
The Tempus Agreement also granted Tempus access to initial and longitudinal genomic data derived from performance of the tests and Tempus will have the right to use such data. If Tempus licenses such data to a third party and Tempus recognizes revenue from such license, Tempus will pay the Company a percentage of its gross revenues attributable to such license that is in the range of 10 % to 20 %. Such revenue share shall be payable during the term of the agreement and for 10 years thereafter. There was no revenue share recognized for the years ended December 31, 2025 and December 31, 2024.
Additionally, as partial consideration of Tempus' obligations to the Company under the Tempus Agreement, the Company issued warrants to Tempus. See "Tempus Warrants" section below.
In July 2025, the Company and Tempus entered into an amendment to the Tempus Agreement pursuant to which the Company authorized Tempus to market NeXT Personal Dx in a fourth indication, colorectal cancer, on the same terms as Tempus’ marketing of the other indications covered by the Tempus Agreement and the parties extended the term of the Tempus Agreement through November 25, 2029.
In addition, the amendment extended the time period to December 31, 2028, during which the Company will not allow any third party (other than an acquiror of the Company or any affiliates of such acquiror) to market NeXT Personal Dx in any of the indications and Tempus will not market another tumor-informed molecular residual disease assay indicated for use in such indications (whether its own or that of a third party), in each case subject to certain exceptions and to the extent they do not expire earlier (the “Exclusivity Period”).
The amendment modified the term of certain customary standstill restrictions agreed to by Tempus in the Tempus Agreement such that they will automatically expire on the earlier of (i) June 4, 2027 and (ii) the expiration or termination of the Exclusivity Period.
In September 2025, the Company and Tempus entered into an amendment to the Tempus Agreement, pursuant to which the existing standstill was amended to allow Tempus to acquire shares of the Company's common stock in open market purchases as long as Tempus's beneficial ownership of the Company's common stock does not exceed 19.99 %.
Tempus Warrants
In consideration of Tempus’ obligations to Personalis under the Tempus Agreement, on November 28, 2023, the Company issued to Tempus two warrants to purchase up to 9,218,800 shares of Personalis common stock at an average exercise price of $ 2.00 per share (the “Tempus Warrants”). In August 2024, concurrently with the execution of the Tempus Investment Agreement (described below), Tempus exercised in full the Tempus Warrants for $ 18.4 million in cash.
The Tempus Warrants included a provision under which the total number of shares issuable upon settlement were subject to adjustment, which caused the Tempus Warrants to be classified as liability instruments while outstanding and subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense), net in the consolidated statements of operations. Fair values of the warrants were estimated using the Black-Scholes option-pricing model. See Note 5, Fair Value
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Measurements for discussion of inputs used in the measurements of the Tempus Warrants and the resulting noncash loss recognized in the consolidated statements of operations. For the year ended December 31, 2024, the Company recognized noncash losses of $ 18.3 million for the change in fair value of the Tempus Warrants.
Investment Agreement with Tempus
In August 2024, the Company entered into an investment agreement (the "Tempus Investment Agreement") with Tempus under w hich the Company issued and sold 3,500,000 shares of common stock at a price per share of $ 5.07 and received $ 17.7 million of cash from the sale of the shares.
Impact of Tempus Agreement on the Financial Statements
For the year ended December 31, 2025, the Company recognized revenue of $ 0.5 million related to the Tempus Agreement and recorded it in its consolidated statement of operations. As of December 31, 2025, $ 0.4 million was outstanding as a receivable from Tempus and is included in accounts receivable in the consolidated balance sheet. For the year ended December 31, 2024, the Company recognized no revenue from Tempus and had no outstanding accounts receivable.
The Market Development Fee for the second milestone is recorded as a liability when received and offset against promotional fees as they are paid by the Company to Tempus. As of December 31, 2025, all of the $ 6.0 million Market Development Fee for the second milestone has been received.
Amounts of transactions with Tempus during each income statement period presented, along with amounts due from or to Tempus as of the balance sheet date, follows (in thousands):
Income Statement
Year ended December 31, 2025
Year ended December 31, 2024
Orders and results delivery fees and net promotional fees — Selling, general and administrative expenses
Noncash loss from remeasurement of Tempus Warrants—Other income (expense), net
Balance Sheet
December 31, 2025
December 31, 2024
Accounts payable and accrued and other current liabilities:
Unamortized Market Development Fees
Accounts payable and accrued liabilities to Tempus
Total accounts payable and accrued and other current liabilities
Other long-term liabilities:
Unamortized Market Development Fees
Total other long-term liabilities
Merck Sharp & Dohme LLC
Investment Agreement with Merck
On December 19, 2024, the Company entered into an investment agreement (the "Merck Investment Agreement") with Merck under which the Company issued and sold 14,044,943 shares of common stock at a price per share of $ 3.56 , representing the last reported closing price of the common stock. The Company received $ 50.0 million of cash from the sale of the shares and incurred $ 0.3 million of issuance costs directly related to the sale. Pursuant to the terms of the Merck Investment Agreement, the Company agreed to reserve $ 10.0 million of the proceeds to open an ISO-certified laboratory in a region outside of the United States, with such region mutually agreed upon by the Company and Merck. This cash was not legally restricted under the Merck Investment Agreement and therefore included in cash and cash equivalents as of December 31, 2025 and December 31, 2024.
Before Merck became a related party in December 2024, the Company entered into a Master Service Agreement (the “Master Agreement”), in June 2017, as amended from time to time, with Merck for the performance of DNA and RNA sequencing analysis and data interpretation services, as well as synthesis and/or analysis of chemical compounds, genetic material and related samples for preclinical research purposes. In February 2024, the Company entered into an amendment whereby Merck engaged the Company to provide clinical laboratory services in connection with Merck's clinical studies.
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For the years ended December 31, 2025 and December 31, 2024, the Company invoiced $ 4.9 million and $ 2.0 million, respectively, pursuant to the terms of the Master Agreement and recorded as revenue in its consolidated statement of operations. As of December 31, 2025 and December 31, 2024, $ 2.0 million and $ 2.5 million, respectively, was outstanding as a receivable from Merck and included in accounts receivable in the consolidated balance sheets.
Note 9. S tock-Based Compensation
The Company maintains the following equity incentive plans:
2011 Equity Incentive Plan
In 2011, the Company established its 2011 Equity Incentive Plan (the “2011 Plan”) that provided for the granting of stock options to employees and nonemployees of the Company. Under the 2011 Plan, the Company had the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights ("SARs"), RSAs, and RSUs. Options under the 2011 Plan could be granted for periods of up to 10 years. The ISOs could be granted at a price per share not less than the fair value at the date of grant.
2019 Equity Incentive Plan
The Company’s board of directors adopted and the Company’s stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”) in May 2019 and June 2019, respectively. The 2019 Plan became effective in June 2019 in connection with the Company’s IPO, and serves as the successor to the 2011 Plan. Pursuant to the 2019 Plan, 7,440,524 shares of common stock were initially reserved for grant, including any shares that were reserved and available for issuance under the 2011 Plan at the time the 2019 Plan became effective, and any shares that become available upon forfeiture or repurchase by the Company under the 2011 Plan, will be reserved for future issuance. No further grants were made under the 2011 Plan after the adoption of 2019 Plan.
The 2019 Plan provides for the grant of ISOs, NSOs, SARs, RSAs, RSUs, PSAs, performance cash awards, and other forms of equity compensation. ISOs may be granted only to the Company’s employees and to any of the Company’s parent or subsidiary corporation’s employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and any of the Company’s affiliates. The exercise price of a stock option generally cannot be less than 100 % of the fair market value of the Company’s common stock on the date of grant. Options under the 2019 Plan may be granted for periods of up to 10 years. In addition, the number of shares of the Company's common stock available for grant and issuance shall be increased on January 1 of each calendar year during the term of the Plan by the lesser of (i) five percent ( 5 %) of the number of shares of the common stock issued and outstanding on each December 31 immediately prior to the date of increase, or (ii) such number of shares determined by the Board.
2020 Inducement Plan
The Compensation Committee of the Company’s board of directors adopted the 2020 Inducement Plan (the “Inducement Plan”) in May 2020, which became effective upon adoption. The Inducement Plan was adopted without stockholder approval, as permitted by the Nasdaq Stock Market rules. The Inducement Plan provides for the grant of equity-based awards, including NSOs, SARs, RSAs, RSUs, PSAs, and other forms of equity compensation, and its terms are substantially similar to the stockholder-approved 2019 Plan. In accordance with relevant Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals' entry into employment with the Company. These Awards must be approved by either a majority of the Company’s independent directors or the Company’s compensation committee, provided such committee comprises solely independent directors (the “Independent Compensation Committee”) in order to comply with the exemption from the stockholder approval requirement for inducement grants provided under the Nasdaq Marketplace Rules. Pursuant to the Inducement Plan, which was last amended in February 2026, the aggregate number of shares of Common Stock that may be issued will not exceed 2 ,050,000 shares.
2019 Employee Stock Purchase Plan
The Company’s board of directors adopted and the Company’s stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”) in May 2019 and June 2019, respectively. Pursuant to the ESPP, 250,000 shares of common stock were initially reserved for future issuance. In addition, on each January 1 for the first ten calendar years after the first offering date, the aggregate number of common stock reserved for issuance under the ESPP shall be increased automatically by the number of shares equal to the lesser of (i) one percent ( 1 %) of the total number of outstanding shares of common stock on the immediately preceding December 31, or (ii) 500,000 shares of common stock. Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 15 % of their earnings for the purchase of the Company’s common stock at a discounted price per share. The price at which common stock is purchased under the ESPP is equal to 85 % of the fair market value of the Company’s common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods beginning on May 1 and November 1 of each year.
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Shares of common stock available for issuance under the Company’s equity incentive plans at December 31, 2025 were as follows:
December 31, 2025
Outstanding stock awards
Reserved for future award grants
Reserved for future ESPP
Total common stock reserved for stock awards
Service-Based Stock Option Activity
A summary of the Company’s stock option activity (excluding performance-based stock option activity, which is presented separately below) for the years ended December 31, 2025 and 2024 is as follows:
Outstanding Options
(in thousands, except share and per share data)
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
Balance—December 31, 2023
Options granted
Options exercised
Options forfeited or expired
Balance—December 31, 2024
Options granted
Options exercised
Options forfeited or expired
Balance—December 31, 2025
Options vested and exercisable as of December 31, 2025
Options granted to new hires generally vest over a four-year period, with 25 % vesting at the end of one year and the remaining vesting monthly thereafter. Options granted as merit awards generally vest monthly over a three - or four-year period .
The aggregate intrinsic value of unexercised stock options is calculated as the difference between the closing price of the Company’s common stock of $ 7.96 on December 31, 2025 and the exercise prices of the underlying stock options. Out-of-the money stock options are excluded from aggregate intrinsic value.
The weighted-average grant date fair value of options granted was $ 3.20 and $ 1.53 per share for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2025 and 2024, the total intrinsic value of options exercised was $ 1.6 million and $ 0.2 million, respectively. The income tax benefit related to the stock options exercised was $ 0.3 million and immaterial for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the unrecognized stock-based compensation of unvested options was $ 14.2 million, which is expected to be recognized over a weighted-average period of 2.1 years.
Valuation of Service-Based Stock Options
The Company estimated the fair value of stock options using the Black-Scholes option-pricing model. F air value of stock options is recognized as compensation expense on a straight-line basis over the requisite service periods of the awards. Fair value of stock options was estimated using the following range of assumptions:
Year Ended December 31,
Expected term (in years)
Volatility
Risk-free interest rate
Dividend yield
Performance-Based Stock Option Activity
During 2024, the Company granted performance-based stock options ("PSOs") to the executive leadership team. Vesting of the PSOs is based upon attainment of certain Medicare reimbursement coverages by the end of 2025 and subject to continuous service by the executives. Fair value was estimated using the Black-Scholes option-pricing model. Total grant-date fair value of the PSOs was $ 0.3
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million. As of December 31, 2025, not all the Medicare reimbursement coverages were obtained and the Company canceled a portion of the PSOs. Accordingly, the Company reversed previously recognized stock-based compensation expense associated with the performance conditions that were not met. As of December 31, 2025, the recognized stock-based compensation cost related to vested PSOs was immaterial.
A summary of the Company’s performance-based stock option activity for the years ended December 31, 2025 and 2024 is as follows:
Outstanding Performance-Based Options
(in thousands, except share and per share data)
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
Balance—December 31, 2023
Options granted
Balance—December 31, 2024
Options forfeited or expired
Balance—December 31, 2025
Options vested and exercisable as of December 31, 2025
Restricted Stock Units ("RSU") Activity and Valuation
A summary of the Company’s RSU activity for the years ended December 31, 2025 and 2024 is as follows:
Unvested Restricted Stock Units
(in thousands, except share and per share data)
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Aggregate
Fair Value
Balance—December 31, 2023
RSUs vested
RSUs forfeited
Balance—December 31, 2024
RSUs vested
RSUs forfeited
Balance—December 31, 2025
The Company grants RSUs to employees to receive shares of the Company’s common stock. The RSUs awarded are subject to the individual’s continued service to the Company through each applicable vesting date. RSUs granted to new hires generally vest annually over a four-year period. RSUs granted as merit awards generally vest semi-annually over a three - or four-year period. The Company accounts for the fair value of RSUs using the closing market price of the Company’s common stock on the date of grant.
The aggregate fair value of unvested RSUs is calculated using the closing price of the Company’s common stock of $ 7.96 on December 31, 2025. During the year ended December 31, 2025 and 2024, the total fair value of shares vested was $ 1.8 million and $ 1.7 million, respectively. The income tax benefit related to vested RSUs was $ 0.4 million for each of the years ended December 31, 2025 and 2024. As of December 31, 2025, the unrecognized stock-based compensation cost of unvested RSUs was $ 0.3 million, which is expected to be recognized over a weighted-average period of 0.8 years.
The Company’s default tax withholding method for RSUs is the sell-to-cover method, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the holder of the RSUs upon vesting and settlement to cover the tax withholding liability and the cash proceeds from such sales are remitted by the Company to taxing authorities.
Performance-Based RSU Activity
In March 2025, the Company granted performance-based RSUs ("PSUs") to the executive leadership team. A percentage of the number of RSUs will vest based upon achieving the Company's operational target as of the end of 2026, and subject to continuous service by the executives throughout March 2028. Fifty percent of the aggregate number of achieved PSUs (if any) will vest upon certification in March 2027, with the remaining fifty percent vesting in March 2028. The total grant-date fair value of the PSUs was $ 2.1 million. As of December 31, 2025, the Company no longer considered the achievement of the operational target to be probable. Accordingly, the Company reversed previously recognized stock-based compensation expense and no stock-based compensation cost was recognized for the year ended December 31, 2025.
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Unvested Performance-Based Restricted Stock Units
(in thousands, except share and per share data)
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Aggregate
Fair Value
Balance—December 31, 2024
PSUs granted
Balance—December 31, 2025
ESPP Activity and Valuation
During the years ended December 31, 2025 and 2024, 381,415 and 583,695 shares of common stock were purchased under the ESPP, respectively. The fair value of stock purchase rights granted under the ESPP was estimated using the following range of assumptions:
Year Ended December 31,
Expected term (in years)
Volatility
Risk-free interest rate
Dividend yield
Fair value
Stock-based Compensation Expense
The following is a summary of stock-based compensation expense by function (in thousands):
Year Ended December 31,
Cost of revenue
Research and development
Selling, general and administrative
Total stock-based compensation expense
The following is a summary of stock-based compensation expense by award type (in thousands):
Year Ended December 31,
Service-based stock options
Performance-based stock options
Service-based RSUs
Performance-based RSUs
ESPP
Total stock-based compensation expense
At-the-Market Equity Offerings
In December 2021, the Company entered into an At-the-Market ("ATM") Sales Agreement with BTIG, LLC (“BTIG”), as amended in December 2023 (the “Sales Agreement”), under which it was permitted to offer and sell its common stock from time to time through BTIG as its sales agent. BTIG agreed to use commercially reasonable efforts to sell the Company’s common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company agreed to pay BTIG a commission of up to 3 % of the gross sales proceeds of any common stock sold through BTIG under the Sales Agreement. The Company was not obligated to make any sales of common stock under the Sales Agreement.
In December 2024, the Company entered into an Amended and Restated At-the-Market Sales Agreement (the “Amended Sales Agreement”) with Piper Sandler & Co. (“Piper”) and BTIG. The Amended Sales Agreement amends and restates the Sales Agreement with BTIG, previously entered into in December 2021, as amended in December 2023, to add Piper as a sales agent (Piper and BTIG, together, the “Sales Agents”), among certain other changes. The Sales Agents have agreed to use commercially reasonable efforts to sell the Company’s common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay the applicable Sales Agent a commission
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of up to 3 % of the gross sales proceeds of any common stock sold through such Sales Agent under the Amended Sales Agreement. The Company is not obligated to make any sales of common stock under the Amended Sales Agreement.
The Company issued and sold 16,196,287 and 6,660,731 shares of its common stock at a weighted-average price of $ 7.95 and $ 4.61 per share under the Sales Agreement and received $ 126.8 million and $ 30.1 million in proceeds, net of commissions, during 2025 and 2024, respectively.
Note 10. Segment and Geographic Information
The Company operates in one reportable segment, which is to provide advanced cancer genomic testing services for precision oncology and personalized testing. The Company develops, markets, and sells testing services to pharmaceutical companies, biopharmaceutical companies, diagnostic companies, universities, non-profits, governme nt entities and cancer patients. It derives revenue primarily in the United States from the sale of genomic testing services and man ages its business activities on a consolidated basis. The Company does not have intra-entity sales or transfers. The Company’s CODM is its CEO , who reviews consolidated operating results, accompanied by disaggregated information about net revenues by customer types, as presented below, to make decisions about allocating resources and assessing performance for the entire Company.
Consolidated net loss is used to monitor actual performance compared to plans and forecasts. The CODM assesses performance based on revenue growth which is reported on the consolidated statements of operations. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on the consolidated balance sheet as total assets. Substantially all of the Company’s long-lived assets are located in the United States.
The Company attributes revenues to geographic region based on the billing addresses of customers. The following table presents net revenues by geographic region:
Year ended December 31,
United States
Others
The following table provides information about reported segment revenue, segment loss, and significant segment expenses (in thousands):
Year ended December 31,
Revenue
Less:
Payroll and related costs
Lab supplies and outside services
Facility costs
Professional services
Repairs and maintenance
Change in fair value of the Tempus Warrants
Depreciation and amortization
Other segment items (a)
Interest income
Segment and consolidated net loss
(a) Other segment items included in segment net loss include materials cost related to cost of revenue, marketing expenses, office expenses, foreign currency exchange gain and losses, and other overhead expenses.
Note 11. Commitments and Contingencies
Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. For example, the Company has received, and may in the future continue to receive letters, claims or complaints from others alleging false advertising, intellectual property infringement, and/or violation of employment practices. Accruals for litigation and loss contingencies are reflected in the consolidated financial statements based on management’s assessment, including the advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential losses from any claims or legal proceedings are considered probable and the amounts can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment due to the
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uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s consolidated results of operations in a given period. As of December 31, 2025, the Company was not involved in any material legal proceedings.
Indemnification
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.
In accordance with the Company's bylaws and/or pursuant to indemnification agreements entered into with directors, officers and certain employees, the Company has indemnification obligations to its directors, officers and employees for claims brought against these persons arising out of certain events or occurrences while they are serving in such a capacity. The Company maintains a director and officer liability insurance coverage to reduce its exposure to such obligations, and payments made under these agreements. To date, there have been no indemnification claims by these directors, officers and employees.
Note 12. Basic and Diluted Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed using net loss and the weighted-average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of outstanding stock options, assumed release of outstanding RSUs, and assumed issuance of common stock under the ESPP. The Company incurred net losses in the periods presented, and as a result, potential common shares from stock options, RSUs, and ESPP issuances were not included in the diluted shares used to calculate net loss per share, as their inclusion would have been anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):
Year Ended December 31,
Net loss
Weighted-average common shares outstanding—basic and diluted
Net loss per common share—basic and diluted
The following table sets forth the potentially dilutive shares excluded from the computation of diluted net loss per common share because their effect was anti-dilutive:
For the Year Ended December 31,
Options to purchase common stock
Unvested RSUs
ESPP
Total
Note 13. In come Taxes
We account for income taxes under the liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained
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upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
For financial reporting purposes, income (loss) before income taxes includes the following components (in thousands):
Year Ended December 31,
Domestic
Foreign
Loss before income taxes
Income Taxes Paid
Income taxes paid, net of refunds received (in thousands):
Year Ended December 31,
U.S. state and local
New Jersey
Other state and local
Foreign
United Kingdom
Other foreign jurisdictions
Total income taxes paid
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Provision for Income Taxes
The provision (benefit) for income taxes consists of the following (in thousands):
Year Ended December 31,
Current tax expense:
Federal
State
Foreign
Total current tax expense
Deferred tax benefit:
Federal
State
Foreign
Total deferred tax benefit
Total income tax expense
Federal
State
Foreign
Total provision for income taxes
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Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21 % to pretax loss as follows (in thousands):
Year Ended December 31,
At statutory rate
Effect of:
State income taxes, net of federal effect
Change in valuation allowance
Nontaxable or nondeductible items
Stock-based compensation
Warrant revaluation
Other nontaxable or nondeductible items
Changes in tax laws or rates
Tax credits
Federal research and development credits
Cross-border tax laws
Worldwide changes in unrecognized tax benefits
Other
Foreign tax effects
Foreign jurisdictions
Total
In 2025, state and local income taxes in California comprised the majority of the state and local income tax expenses, net of federal effect category. In 2024, state and local income taxes in California comprised the majority of the state and local income taxes, net of federal effect category.
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands):
Year ended December 31,
Deferred tax assets:
Net operating loss carryforwards
Research and development credits
Capitalized research and development
Deferred revenue
Property and equipment
Accruals and reserves
Stock-based compensation
Operating lease liabilities
Other intangibles
Other
Total gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Operating lease right-of-use assets
Total deferred tax liabilities
Net deferred tax assets
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of the Company’s lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $ 11.8 million and $ 16.8 million during the years ended December 31, 2025 and 2024, respectively.
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As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):
December 31,
Beginning balance
Change charged to income tax expense
Changes charged to OCI
Ending balance
Undistributed earnings of the Company’s foreign subsidiary in the UK are considered to be permanently reinvested and accordingly, no deferred U.S. income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income tax. At the present time it is not practicable to estimate the amount of U.S. income taxes that might be payable if these earnings were repatriated.
Net Operating Loss and Tax Credit Carryforwards
As of December 31, 2025, the Company had a net operating loss carryforward for federal income tax purposes of $ 509.5 million, of which $ 86.0 million is subject to expiration beginning in 2031 . The Company had a total state net operating loss carryforward of approximately $ 392.3 million, which will begin to expire in 2031 . Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.
As of December 31, 2025, the Company has federal credits of approximately $ 9.9 million, which will begin to expire in 2031 and state research credits of approximately $ 9.1 million, which have no expiration date. These tax credits are subject to the same limitations discussed above.
Unrecognized Tax Benefits
The Company has incurred net operating losses since inception and does not have any significant unrecognized tax benefits. The Company’s policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision for taxes in the consolidated statements of operations. If the Company is eventually able to recognize its uncertain positions, the effective tax rate would be reduced. The Company currently has a full valuation allowance against its net deferred tax assets, which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. Any adjustments to the Company’s uncertain tax positions would result in an adjustment of net operating loss or tax credit carryforwards rather than resulting in a cash outlay.
The Company has the following activity relating to unrecognized tax benefits (in thousands):
December 31,
Beginning balance
Gross increase—tax positions in prior periods
Gross decrease—tax positions in prior periods
Gross increase—tax positions in current period
Ending balance
During the years ended December 31, 2025 and 2024, no interest or penalties were required to be recognized relating to unrecognized tax benefits.
The Company files income tax returns in the U.S. and the UK. We are currently under examination in the U.S. for tax year 2023. Because of net operating losses and research credit carryovers, substantially all the Company’s tax years remain open to examination.
Note 14. S ubsequent Events
At-the-Market Equity Offerings
In January 2026, the Company issued and sold 2,127,155 of its common stock at an average price of $ 10.00 per share under the Sales Agreement and received $ 21.0 million, net of commissions.
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Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Personalis, Inc.
Fremont, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Personalis, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Transactions
As described in Notes 2 and 3 to the consolidated financial statements, the Company derives revenue from the sale of genomic testing services. The genomic testing services are the only distinct services that meet the definition of a performance obligation and are accounted for as one performance obligation. Revenue is recognized at a point in time when test results are transferred to the customer. The Company’s consolidated revenue was $69.6 million for the year ended December 31, 2025.
We identified the auditing of the occurrence of revenue transactions as a critical audit matter. Auditing the occurrence of revenue was especially challenging due to the significant audit effort involved in performing procedures related to the occurrence of revenue transactions, given the significance of revenue, the large volume of transactions, and the evaluation of the sufficiency of audit evidence.
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The primary procedures we performed to address this critical audit matter included:
Evaluating the occurrence of revenue transactions, on a sample basis, by obtaining and inspecting invoices, customer purchase orders, delivery data from various sources including confirmation of transactions with customers, and cash receipts from customers, where applicable.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2023.
San Jose, California
February 26, 2026
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