Core Insights - Natera has achieved significant growth since its IPO, with stock prices increasing nearly 10 times from $18 to around $170 and revenues expanding from $190 million to $2 billion, reflecting a 44% revenue growth over the last twelve months [3][11]. Company Overview - Natera specializes in molecular diagnostics, particularly in cancer detection and monitoring, positioning itself as a leader in medical intelligence [4]. - The company's flagship product, Signatera, is a personalized tumor-informed test that utilizes a simple blood draw to detect circulating tumor DNA, revolutionizing cancer monitoring [5][6]. Product and Technology - Natera's technology allows for non-invasive liquid biopsies, providing doctors with critical insights into cancer progression and recurrence risk [6]. - In addition to Signatera, Natera offers Altera for genomic profiling and Empower for hereditary cancer screening, creating a comprehensive suite for cancer care [6]. Market Potential - In the latest quarter, Natera processed over 850,000 tests, generating $546.6 million in revenue, with oncology-related tests growing at 50% year-over-year [9]. - The cell-free DNA testing market is projected to nearly double from $11 billion to around $20 billion in five years, indicating substantial growth potential for Natera [12]. Financial Projections - Natera is expected to sustain 25% annual revenue growth over the next few years, potentially increasing revenue from $1.7 billion last year to approximately $7 billion by 2030 [11]. - If Natera achieves $7 billion in revenue while maintaining a price-to-sales multiple of 13x, the stock price could reach about $700, even with potential multiple compressions [13]. Growth Opportunities - Key areas for growth include expanding the oncology market, scaling internationally, entering adjacent markets, and increasing volume and penetration within existing markets [17]. - Broader insurance coverage and clinical evidence supporting test adoption are critical for expanding market size and pricing power [18]. Competitive Landscape - Natera competes with major players like Roche, Danaher, and Abbott, which have significantly higher revenues, indicating that Natera is still in the early stages of its growth story [12]. - The company must navigate challenges such as reimbursement issues, competitive pressure, regulatory hurdles, and the pace of international adoption [18].

Group 1 - The company has experienced record sequential volume growth for Signatera, indicating strong demand and interest in the product [1][2] - There has been a notable shift in physician mentality towards minimal residual disease (MRD) testing, with increased visibility and discussions at major conferences such as ASCO [1] - The company is positioned as the market leader in MRD testing, holding a significant majority of market share, which is contributing to its growth [2]

Group 1 - The investment approach focuses on long-term investments while incorporating short-term shorts to uncover alpha opportunities [1] - The analysis is based on bottom-up evaluation, emphasizing the fundamental strengths and weaknesses of individual companies [1] - The goal is to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Summary of Natera Conference Call Company Overview - **Company**: Natera (NasdaqGS:NTRA) - **Industry**: Life Sciences and Diagnostics Key Points Signatera Performance - Natera reported record sequential volume growth for Signatera, with an upgraded volume growth outlook [3][4] - There is a significant increase in interest in minimal residual disease (MRD) testing, with Natera being the market leader [4][5] - The company noted strong data from the ASCO GI conference, particularly regarding colorectal cancer, which has driven growth [5][6] - New patient starts for Signatera doubled the previous record and tripled the normal figures, indicating robust demand despite competition [7][8] Market Penetration and Growth Potential - Current penetration in the MRD setting is described as low single digits, suggesting substantial growth potential [8][9] - Colorectal cancer is highlighted as a key area for growth due to its clinical utility in decision-making for adjuvant settings and recurrence monitoring [9][10] - Natera is capturing new patients from both newly diagnosed and prevalent populations, indicating a broad market opportunity [10][11] Physician Engagement and Education - Approximately 40% to 50% of oncologists in the U.S. are ordering Signatera, with ongoing efforts to educate more physicians about its benefits [18][19] - The company is expanding its commercial team to enhance physician engagement and increase adoption rates [18][19] Medicare Coverage and Revenue Potential - Natera has seven Medicare coverages and anticipates submitting for an additional ten indications over the next couple of years, potentially generating $250 million to $300 million in incremental revenue [21][24] - The company has a strong track record of quality studies, which is crucial for obtaining Medicare coverage [22][23] International Expansion - Natera is preparing for a commercial launch in Japan, expected in 2027, following FDA approval and pricing discussions with the national health system [28][31] - The colorectal cancer opportunity in Japan is comparable to that in the U.S., with significant unmet needs in the market [30][31] Women's Health and NIPT Market - Natera holds over 50% market share in the NIPT space, with a penetration rate of approximately 65% [32][33] - The company is launching new tests, including a fetal focus test that allows for direct detection of disorders in the fetus without needing the father's sample [36][37] Early Detection Initiatives - The PRESEDE CRC trial is set to provide data on early detection of colorectal cancer, with results expected soon [43][44] - Natera aims to be a major player in early cancer detection, with plans to launch its FIND study by 2027 [45] Financial Outlook - Natera reported a strong second quarter, raising revenue outlook while maintaining operational expense guidance [46][47] - The company is investing in product launches and clinical trials, anticipating significant growth in 2026 as the commercial team matures [48][50] Future Opportunities - The primary opportunities identified include continued growth of Signatera and advancements in AI and data initiatives, which have garnered interest from pharmaceutical partners [51][52] Additional Insights - Natera's focus on high-quality clinical trials and innovative technologies positions it well for future growth in both existing and new markets [40][41]

Summary of Conference Call Company Overview - The conference call involved Natera, a company focused on genetic testing and diagnostics, particularly in oncology and women's health [1][2]. Key Industry Insights Oncology Sector - Significant volume and revenue growth in 2025, particularly in organ health and oncology [2]. - Record growth in new patients for the Signatera product, indicating strong interest from the physician community [2]. - The mRD market penetration is still in the low single digits, with reimbursement for approximately seven indications [5]. - Approximately 30% of Signatera's overall volume is in unreimbursed indications, presenting an opportunity for future growth as data supporting Medicare coverage is developed [7][8]. - Muscle-invasive bladder cancer (MIBC) has about 20,000 new patients diagnosed annually, with ongoing trials showing positive results in disease-free and overall survival [10]. - The company is seeing increased interest in incorporating mRD into clinical trials, potentially changing treatment paradigms [14]. Product Innovations - Launch of innovative products such as Signatera Genome and Fetal Focus NIPT, which allows for testing without needing paternal DNA [3]. - Continued investment in clinical data and product launches to drive growth [2][3]. Competitive Landscape - Despite new competitors entering the oncology market, Natera has maintained strong volume growth and competitive advantages in clinical data and analytical performance [4]. Financial Performance - The average selling price (ASP) for Signatera is currently just under $1,200, with expectations to reach $2,000 through improved reimbursement compliance and market expansion [22][24]. - The company has over $1 billion in cash, with plans for capital allocation focused on high-return investments in technology and clinical trials [52]. Women's Health Sector - Natera has become the market leader in non-invasive prenatal testing (NIPT) with over 50% market share, driven by strong customer service and innovative technology [41]. - The ASP for NIPT is in the high $300s, showing improvement since the company went public [48]. - The Fetal Focus product has generated significant interest, allowing for direct detection of disorders without paternal testing [42]. Regulatory and Market Dynamics - Positive guideline support for donor-derived cell-free DNA and chronic kidney disease sequencing is contributing to growth in these areas [50]. - Approximately half of the U.S. population lives in states with laws mandating equal coverage for commercial patients as Medicare patients, which is expected to drive ASP contributions [19][20]. Future Outlook - The company is optimistic about the potential for growth in both oncology and women's health, with ongoing innovations and market expansions planned [40][41]. - The upcoming data readouts from clinical trials are anticipated to further validate the efficacy of Natera's products and drive adoption [10][30]. Additional Considerations - The integration of AI and data strategies is positioned to enhance Natera's capabilities in diagnostics and partnerships with pharmaceutical companies [34][39]. - The company is focused on addressing unmet needs in early cancer detection, particularly for patients who are unlikely to undergo traditional screening methods [32][33].

Core Insights - Albert Anthony is a Croatian-American business author and media contributor with a focus on real estate investment trusts (REITs) [1] - He has a background in IT analysis for Fortune 500 companies and experience in financial services with Charles Schwab [1] - Anthony is launching a book on REITs in 2025 and operates his own equities research firm remotely [1] Background and Experience - The author has over 1,000 followers on Seeking Alpha and writes for various financial platforms [1] - He has participated in numerous business and innovation conferences in the EU and has a degree from Drew University [1] - Currently enrolled in the CMSA certification program at the Corporate Finance Institute [1] Media and Digital Presence - Albert Anthony is active on YouTube, where he plans to discuss REITs [1] - He has also been involved in regional media in Croatia and has appeared in multiple productions [1] - The author does not engage with non-publicly traded companies or small-cap stocks [1]

Core Viewpoint - The District Court for the Middle District of North Carolina ruled against Natera Inc.'s patent claims against NeoGenomics, allowing NeoGenomics to commercialize its RaDaR ST assay [1][3]. Company Developments - Natera is considering its options following the court's decision, including an appeal and further enforcement of other patents, but the ruling does not affect the validity of U.S. Patent No. 11,519,035 [1][2]. - NeoGenomics has launched the RaDaR ST assay for biopharma customers and is seeking clinical reimbursement coverage from the Centers for Medicare & Medicaid Services [3][4]. Market Reaction - Analysts view the court's decision as a positive development for NeoGenomics, with expectations for the RaDaR ST launch as early as Q4 2025 [5]. - Following the news, NeoGenomics' stock price surged by 24.55%, reaching $8.98 [6].

Core Insights - Natera, Inc. (NTRA) has launched a proprietary AI foundation model platform aimed at enhancing precision oncology, integrating a vast multimodal oncology dataset with a billion-parameter core model for biomarker development and patient stratification [1][10]. Company Developments - The AI platform includes applications such as a Digital Patient Simulator, Real-Time Trial Matching, and NeoPredict, which are designed to optimize treatment, improve trial efficiency, and predict immunotherapy responses [2][11]. - Early pilot results indicate strong performance of these applications, suggesting a transformative potential for clinical decision-making and patient outcomes in oncology [2][11]. - Following the announcement, NTRA's shares increased by 2.3%, with a year-to-date gain of 4.6%, outperforming the industry growth of 0.9% [3]. Financial Outlook - Natera has a market capitalization of $22.7 billion and anticipates an earnings growth of 70% for the next year [5]. Industry Context - The global AI in healthcare market is projected to grow from $26.57 billion in 2024 to $187.69 billion by 2030, with a CAGR of 38.62% from 2025 to 2030, driven by the demand for improved efficiency and patient outcomes in healthcare [12].

Summary of Natera (NTRA) FY Conference Call - August 12, 2025 Company Overview - Natera is a leader in cell-free DNA-based testing focused on women's health, oncology, and organ health [1] Key Points Performance Metrics - In Q2, Natera achieved a record of approximately 189,000 total units, with a sequential growth of about 20,000 units from Q1 [5][6] - Clinical units specifically for Signatera reached about 180,000, marking a significant increase compared to the average growth of 13,000 to 14,000 units per quarter in the previous year [6][7] - New patient starts contributed significantly to growth, with around 6,000 new starts in Q2, compared to an expected 2,500 [7][8] Market Dynamics - The company noted a competitive landscape with several new MRD tests entering the market, but expressed confidence in Signatera's unique value proposition [15][16] - Natera's strategy includes welcoming competition as it validates the market and enhances patient care [16][17] Clinical Data and Product Development - Recent clinical trial data, particularly in colorectal cancer, has driven interest and adoption of Signatera [10][12] - Natera is expanding its product offerings, including a genome backbone version of Signatera and a tumor-naive MRD assay [19][20] - The company anticipates significant revenue opportunities from new indications reimbursed by Medicare, estimating an incremental revenue potential of $250 million to $300 million [28][29] Financial Outlook - Natera raised its revenue guidance significantly while maintaining operating expense guidance, indicating a focus on sustainable cash flow generation [41][42] - The company aims for long-term gross margins of around 70%, having improved from 39% to 63% over the past two years [46][48] Future Opportunities - Natera is preparing for the launch of an FDA-approved screening test for colon cancer by 2028, which could align with USPSTF guidelines [34][35] - The company is optimistic about upcoming clinical trial data that could further enhance its market position and treatment paradigms in oncology [52][53] Strategic Focus - Natera emphasizes a patient-centric approach, focusing on addressing unmet needs and expanding its product portfolio based on customer feedback [50][51] - The company is committed to maintaining a balance between investment in growth and generating returns for investors [49][50] Additional Insights - The company is leveraging its existing NIPT database to inform its early cancer detection (ECD) assays, which could enhance its competitive edge [39] - Natera's operational strategy includes a focus on long-term clinical trial outcomes to support guideline adoption for its tests [31][32] This summary encapsulates the critical insights and data points from the Natera conference call, highlighting the company's performance, market dynamics, product development, financial outlook, and strategic focus.

```markdown [PART I – FINANCIAL INFORMATION](index=7&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This section presents Natera, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter and six months ended June 30, 2025 [ITEM 1. FINANCIAL STATEMENTS (unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Natera, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, financial instruments, commitments, and other financial details [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section presents Natera's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Balance Sheet Data | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $1,000.0 million | $945.6 million | | Total current assets | $1,431.6 million | $1,375.8 million | | Total assets | $1,757.1 million | $1,660.7 million | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $384.8 million | $344.0 million | | Total liabilities | $510.9 million | $465.3 million | | Total stockholders' equity | $1,246.2 million | $1,195.4 million | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section details Natera's financial performance, including revenues, expenses, and net loss for the reported periods Statements of Operations Data | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total revenues | $546.6 million | $413.4 million | $1,048.4 million | $781.1 million | | Total cost and expenses | $657.0 million | $457.3 million | $1,238.0 million | $899.3 million | | Loss from operations | ($110.4 million) | ($43.9 million) | ($189.5 million) | ($118.2 million) | | Net loss | ($100.9 million) | ($37.5 million) | ($167.9 million) | ($105.1 million) | | Basic and diluted net loss per share | ($0.74) | ($0.30) | ($1.24) | ($0.86) | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section outlines changes in Natera's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Stockholders' Equity Data | Metric | Balance as of Dec 31, 2024 (in thousands) | Balance as of Jun 30, 2025 (in thousands) | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Common Stock (Shares) | 132,646 | 136,757 | | Common Stock (in thousands) | $12 thousand | $14 thousand | | Additional Paid-in Capital | $3,763.6 million | $3,982.2 million | | Accumulated Deficit | ($2,567.9 million) | ($2,735.7 million) | | Total Stockholders' Equity | $1,195.4 million | $1,246.2 million | - Stock-based compensation for the six months ended June 30, 2025, was **$172.6 million**, contributing significantly to additional paid-in capital[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section details Natera's cash inflows and outflows from operating, investing, and financing activities Cash Flow Data | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | | Cash provided by operating activities | $82.0 million | $31.0 million | | Cash (used in) provided by investing activities | ($40.7 million) | $106.2 million | | Cash provided by financing activities | $13.1 million | $17.5 million | | Net change in cash, cash equivalents and restricted cash | $54.4 million | $154.7 million | | Cash, cash equivalents and restricted cash, end of period | $1,000.0 million | $796.8 million | [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section presents Natera, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, financial instruments, commitments, and other financial details [1. Description of Business](index=12&type=section&id=1.%20Description%20of%20Business) This section describes Natera, Inc.'s core business as a diagnostics company leveraging cell-free DNA technology across women's health, oncology, and organ health - Natera, Inc. is a diagnostics company leveraging proprietary molecular and bioinformatics technology, specifically cell-free DNA (cfDNA), to transform disease management globally[26](index=26&type=chunk) - The company focuses on three main healthcare areas: women's health (e.g., Panorama NIPT, Horizon Carrier Screening), oncology (e.g., Signatera molecular residual disease test), and organ health (e.g., Prospera transplant rejection test)[26](index=26&type=chunk)[27](index=27&type=chunk) - Natera also offers Constellation, a cloud-based software platform, enabling laboratory customers to access its algorithms and bioinformatics for their own test development[27](index=27&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines Natera's key accounting principles, including revenue recognition, financial instruments, and liquidity management - Natera incurred a net loss of **$167.9 million** for the six months ended June 30, 2025, and has an accumulated deficit of **$2.7 billion**, indicating ongoing net losses since inception[30](index=30&type=chunk) Liquidity and Credit Line | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | Cash, cash equivalents, and restricted cash | $1,000.0 million | $945.6 million | | Marketable securities | $16.0 million | $22.7 million | | Outstanding Credit Line balance | $80.3 million | $80.4 million | | Available Credit Line | $20.0 million | N/A | - The company believes its existing cash and marketable securities will be sufficient to meet anticipated cash requirements for at least **12 months** after August 7, 2025[34](index=34&type=chunk) - Natera classifies its investment portfolio, primarily debt securities, as available-for-sale and short-term, carried at fair value with unrealized gains/losses in other comprehensive income[38](index=38&type=chunk) - The allowance for expected credit losses for trade accounts receivable is based on collectability assessment, while for insurance and patient payors, credit loss is incorporated into average selling price calculations[41](index=41&type=chunk)[42](index=42&type=chunk) - Inventory is recorded at the lower of cost or net realizable value (FIFO basis) and consists entirely of supplies for genetic testing services[43](index=43&type=chunk) - Natera uses the expected value method for estimating variable consideration in revenue recognition, adjusting for historical cash collections, reimbursement trends, and estimated refunds[48](index=48&type=chunk) - The company has related party transactions with MyOme, Inc., including preferred share investments and warrants, with key executives and directors holding positions or investments in MyOme[51](index=51&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Medicare accounted for approximately **14.1%** of total revenue for the six months ended June 30, 2025, and **12.5%** of accounts receivable as of June 30, 2025[58](index=58&type=chunk) - Natera adopted ASU 2020-04 (Reference Rate Reform) on January 1, 2025, with no material impact, and is evaluating ASU 2023-09 (Income Taxes) and ASU 2025-05 (Credit Losses for Accounts Receivable) for future impact[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [3. Revenue Recognition](index=23&type=section&id=3.%20Revenue%20Recognition) This section details Natera's revenue sources, recognition policies, and disaggregation by payer type and geographic area - Product revenues are recognized upon delivery of genetic test results to customers (laboratories or patients), including whole-exome sequencing and Signatera tests for pharmaceutical companies[65](index=65&type=chunk)[66](index=66&type=chunk) - Revenue estimates are constrained for potential reversals, such as estimated refunds to insurance carriers, which decreased revenue by **$5.8 million** for the six months ended June 30, 2025[70](index=70&type=chunk)[74](index=74&type=chunk) - Changes in estimates for prior period collections increased revenue by **$79.6 million** for the six months ended June 30, 2025[73](index=73&type=chunk) - Licensing and other revenues are derived from the Constellation cloud-based service, granting licenses for proprietary IP and software, and strategic collaboration agreements (e.g., BGI Genomics, Foundation Medicine)[76](index=76&type=chunk)[77](index=77&type=chunk) Revenue by Payer Type | Payer Type | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :---------------- | :----------------------------------------- | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Insurance carriers | $517.0 million | $384.1 million | $989.6 million | $725.2 million | | Laboratory partners | $22.2 million | $22.3 million | $43.0 million | $42.5 million | | Patients | $7.4 million | $7.0 million | $15.8 million | $13.4 million | | Total revenues | $546.6 million | $413.4 million | $1,048.4 million | $781.1 million | Revenue by Geographic Area | Geographic Area | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | United States | $537.8 million | $404.9 million | $1,030.1 million | $764.3 million | | Americas, excluding U.S. | $1.6 million | $1.6 million | $3.3 million | $3.1 million | | Europe, Middle East, India, Africa | $5.4 million | $5.4 million | $11.5 million | $10.6 million | | Asia Pacific and Other | $1.8 million | $1.4 million | $3.6 million | $3.1 million | | Total revenues | $546.6 million | $413.4 million | $1,048.4 million | $781.1 million | Accounts Receivable and Deferred Revenue | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | Accounts receivable, net | $309.2 million | $314.2 million | | Deferred revenue, current portion | $21.6 million | $19.8 million | | Deferred revenue, long-term portion | $16.5 million | $16.8 million | | Total deferred revenues | $38.1 million | $36.6 million | - During the six months ended June 30, 2025, **$14.9 million** of revenue was recognized from deferred revenue balances at the beginning of the period, with **$0.4 million** from BGI Genomics and Foundation Medicine, and **$14.5 million** from genetic testing services[86](index=86&type=chunk) [4. Fair Value Measurements](index=30&type=section&id=4.%20Fair%20Value%20Measurements) This section describes Natera's fair value hierarchy for financial assets and liabilities, including cash, marketable securities, and debt - Natera classifies financial assets and liabilities measured at fair value into Level 1 (quoted prices in active markets), Level 2 (observable market-based inputs), and Level 3 (unobservable inputs)[87](index=87&type=chunk) - MyOme warrants are classified as Level 3 derivatives due to unobservable inputs in their valuation[89](index=89&type=chunk) Financial Assets Fair Value | Financial Assets (in millions) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | Total (June 30, 2025) | | :-------------------------------- | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | Cash, cash equivalents and restricted cash | $1,000.0 million | $— | $— | $1,000.0 million | | Municipal securities | $— | $16.0 million | $— | $16.0 million | | Total financial assets | $1,000.0 million | $16.0 million | $— | $1,016.0 million | - The fair value of the Credit Line debt (**$80.3 million** as of June 30, 2025) approximates its carrying value due to its short-term duration and variable interest rate, based on Level 2 inputs[90](index=90&type=chunk) [5. Financial Instruments](index=31&type=section&id=5.%20Financial%20Instruments) This section provides details on Natera's investment portfolio, including cash, cash equivalents, and municipal securities, and their fair value measurements Investment Portfolio | Investment Type (in millions) | Amortized Cost (June 30, 2025) | Gross Unrealized Loss (June 30, 2025) | Estimated Fair Value (June 30, 2025) | | :-------------------------------- | :----------------------------- | :------------------------------------ | :----------------------------------- | | Cash, cash equivalents and restricted cash | $1,000.0 million | $— | $1,000.0 million | | Municipal securities | $16.0 million | ($25 thousand) | $16.0 million | | Total | $1,016.0 million | ($25 thousand) | $1,016.0 million | - Natera's investment portfolio consists of U.S. Treasuries, U.S. agency, and high-quality municipal bonds, all maturing at par value and paying coupons on schedule, leading to no credit loss allowance[93](index=93&type=chunk) - Gross unrealized losses on available-for-sale securities were not material as of June 30, 2025, primarily due to interest rate changes rather than credit deterioration[93](index=93&type=chunk) - All available-for-sale securities have remaining contractual maturities of **one year or less** as of June 30, 2025[95](index=95&type=chunk) [6. Balance Sheet Components](index=32&type=section&id=6.%20Balance%20Sheet%20Components) This section provides detailed breakdowns of key balance sheet items, including allowance for credit losses, property and equipment, and other accrued liabilities Allowance for Expected Credit Losses | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance (Allowance for Expected Credit Losses) | $7.3 million | $6.5 million | | Provision for expected credit losses | $0.6 million | $0.7 million | | Write-offs | ($42 thousand) | ($204 thousand) | | Ending balance (Allowance for Expected Credit Losses) | $7.8 million | $7.0 million | Property and Equipment, Net | Property and Equipment (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Machinery and equipment | $139.8 million | $117.1 million | | Computer equipment | $3.3 million | $3.2 million | | Purchased and capitalized software | $14.9 million | $13.2 million | | Leasehold improvements | $49.1 million | $48.6 million | | Construction-in-process | $73.7 million | $58.5 million | | Total gross property and equipment | $280.9 million | $240.5 million | | Less: Accumulated depreciation and amortization | ($91.7 million) | ($78.4 million) | | Total property and equipment, net | $189.2 million | $162.0 million | - Depreciation expense for the six months ended June 30, 2025, was **$17.1 million**, up from **$13.3 million** in the prior year[98](index=98&type=chunk) Other Accrued Liabilities | Other Accrued Liabilities (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Reserves for refunds to insurance carriers | $9.7 million | $11.3 million | | Accrued charges for third-party testing | $17.2 million | $12.3 million | | Legal, audit and consulting fees | $84.7 million | $54.2 million | | Operating lease liabilities, current portion | $13.1 million | $10.2 million | | Total other accrued liabilities | $191.0 million | $146.9 million | - The reserve for refunds to insurance carriers decreased from **$11.276 million** at December 31, 2024, to **$9.7 million** at June 30, 2025[99](index=99&type=chunk) [7. Leases](index=33&type=section&id=7.%20Leases) This section details Natera's lease agreements, liabilities, and future minimum lease payments for its operating facilities - Natera has expanded its Austin, Texas, lease agreement through March 2033, adding approximately **57,100** rentable square feet in March 2025[100](index=100&type=chunk) - The San Carlos, California, lease was extended to October 2032, with annual rent increasing to approximately **$9.7 million** starting January 2025, and an additional **40,700** rentable square feet leased in January 2025[101](index=101&type=chunk) Operating Lease Liabilities | Lease Liabilities (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Operating lease liabilities, current portion | $13.1 million | $10.2 million | | Operating lease liabilities, long-term portion | $102.7 million | $96.6 million | | Total operating lease liabilities | $115.8 million | $106.8 million | - Total lease expense for the six months ended June 30, 2025, was **$9.3 million**, up from **$7.2 million** in the prior year[107](index=107&type=chunk) Future Minimum Lease Payments | Future Minimum Lease Payments (in millions) | Amount | | :-------------------------------- | :----------- | | 2025 (remaining 6 months) | $10.3 million | | 2026 | $21.1 million | | 2027 | $20.5 million | | 2028 | $20.4 million | | 2029 | $18.8 million | | 2030 and thereafter | $57.5 million | | Total future minimum lease payments | $148.6 million | | Less: imputed interest | ($32.8 million) | | Operating lease liabilities | $115.8 million | [8. Commitments and Contingencies](index=35&type=section&id=8.%20Commitments%20and%20Contingencies) This section outlines Natera's legal proceedings, accruals for contingencies, and contractual obligations with suppliers and service providers - Natera is involved in various legal matters, including intellectual property litigation, false advertising claims, and class action lawsuits related to patient billing and marketing[109](index=109&type=chunk)[111](index=111&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) - As of June 30, 2025, the aggregate accrual for probable and reasonably estimable legal contingencies was approximately **$40.6 million**, significantly up from **$12.6 million** at December 31, 2024[110](index=110&type=chunk) - In the second CareDx Patent Case, a jury awarded Natera **$96.3 million** in damages in January 2024, but the Court later invalidated Natera's patents in February 2025, which Natera is appealing[111](index=111&type=chunk) - In the ArcherDX Case, a jury awarded Natera **$19.35 million** in damages in May/June 2023, and a permanent injunction was granted against the PCM test, which is under appeal[112](index=112&type=chunk) - In the Ravgen lawsuit, a jury found Natera liable for non-willful infringement and awarded **$57 million** in damages in January 2024; Natera intends to appeal[113](index=113&type=chunk) - In the NeoGenomics lawsuit, Natera secured a preliminary injunction against the RaDaR test in December 2023, which was affirmed on appeal, leading to a permanent injunction and withdrawal of the test from the market[118](index=118&type=chunk) - In the Guardant lawsuit, a jury found Natera liable for false advertising and awarded **$292.5 million** in damages in November 2024, which Natera plans to appeal[120](index=120&type=chunk) Contractual Commitments | Contractual Commitments (in millions) | Amount | Expiry Date | | :-------------------------------- | :----------- | :------------ | | Laboratory instruments supplier | $23.5 million | December 2027 | | Material suppliers | $80.8 million | December 2026 | | Application service providers | $5.7 million | May 2028 | | Cloud platform service provider | $27.4 million | December 2028 | | Other material suppliers | $39.3 million | Various | | Total | $176.7 million | | - Natera has an obligation to pay an additional **$6.0 million** for clinical samples and data for oncology development, with potential future payments of **$50.0 million** contingent on compliance approvals and commercial volume milestones[132](index=132&type=chunk) [9. Stock-Based Compensation](index=43&type=section&id=9.%20Stock-Based%20Compensation) This section details Natera's stock-based compensation expenses, stock option activity, and restricted stock unit awards Stock-Based Compensation Expense | Expense Category (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $6.2 million | $4.0 million | $11.5 million | $7.8 million | | Research and development | $30.8 million | $22.0 million | $57.3 million | $42.6 million | | Selling, general and administrative | $56.4 million | $41.4 million | $102.4 million | $81.4 million | | Total stock-based compensation expense | $93.4 million | $67.4 million | $171.2 million | $131.9 million | Stock Options Activity | Stock Options Activity (in thousands) | Shares Outstanding | Weighted Average Exercise Price | | :-------------------------------- | :----------------- | :------------------------------ | | December 31, 2024 | 3,875 | $30.22 | | Options exercised | (69) | $13.01 | | Options forfeited/cancelled | (2) | $3.78 | | June 30, 2025 | 3,804 | $30.54 | RSU and PSU Activity | RSU and PSU Activity (in thousands) | Shares | Weighted Average Grant Date Fair Value | | :-------------------------------- | :----- | :------------------------------------- | | Balance at December 31, 2024 | 10,593 | $61.28 | | Awards granted | 3,009 | $170.07 | | Awards vested | (3,926) | $59.65 | | Awards forfeited/cancelled | (178) | $81.90 | | Balance at June 30, 2025 | 9,498 | $90.89 | - Natera expects to recognize **$178.3 million** in remaining stock-based compensation expense for outstanding performance-based awards, which can vest up to **200%** of target based on performance criteria[138](index=138&type=chunk) - Total performance-based stock compensation recognized for the six months ended June 30, 2025, was **$48.5 million**, including a **$9.2 million** change in estimate due to increased performance target expectations[139](index=139&type=chunk) [10. Debt](index=44&type=section&id=10.%20Debt) This section describes Natera's Credit Line, outstanding debt, and interest expense, including the redemption of Convertible Notes - Natera's Credit Line with UBS was reduced to **$100.0 million** in June 2023, with an interest rate of 30-day SOFR average plus **0.5%** since October 2023[140](index=140&type=chunk) - As of June 30, 2025, **$80.0 million** was drawn on the Credit Line, with **$20.0 million** remaining available, and the interest rate was **4.82%**[140](index=140&type=chunk) Interest Expense | Interest Expense (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contractual interest expense (Convertible Notes) | $— | $1.6 million | $— | $3.2 million | | Amortization of debt discount and issuance cost (Convertible Notes) | $— | $330 thousand | $— | $658 thousand | | Total interest expense (Convertible Notes) | $— | $1.9 million | $— | $3.9 million | - Natera redeemed all outstanding **$287.5 million** Convertible Senior Notes due 2027 on October 11, 2024, primarily through physical settlement with approximately **7.5 million** shares of common stock[144](index=144&type=chunk) [11. Income Taxes](index=47&type=section&id=11.%20Income%20Taxes) This section outlines Natera's income tax expense, deferred tax assets, and the impact of new tax legislation Income Tax Expense | Income Tax Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total income tax expense | $275 thousand | $892 thousand | $448 thousand | $1.3 million | - Income tax expense is primarily due to state and foreign income taxes, with a full valuation allowance maintained against deferred tax assets due to a history of cumulative operating losses[147](index=147&type=chunk) - The recently enacted 'The One Big Beautiful Bill Act of 2025' is not expected to significantly impact Natera's financial statements due to expected losses and the full valuation allowance[149](index=149&type=chunk) [12. Net Loss per Share](index=47&type=section&id=12.%20Net%20Loss%20per%20Share) This section presents Natera's basic and diluted net loss per share, along with potentially dilutive shares excluded from calculations Potentially Dilutive Shares | Potentially Dilutive Shares (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Options to purchase common stock | 3,804 | 4,423 | | Performance-based awards and restricted stock units | 9,498 | 11,338 | | Employee stock purchase plan | 39 | 41 | | Convertible Notes | — | 7,411 | | Total | 13,341 | 23,213 | - All potentially dilutive shares were excluded from the computation of diluted loss per share as their effect would be anti-dilutive[150](index=150&type=chunk) [13. Segment Reporting](index=48&type=section&id=13.%20Segment%20Reporting) This section confirms Natera operates as a single reporting segment, with consolidated financial statements used for performance evaluation and resource allocation - Natera operates as a single reporting segment, with the CEO as the Chief Operating Decision Maker (CODM), relying on consolidated financial statements to evaluate performance and allocate resources[151](index=151&type=chunk) Segment Revenue and Gross Margin | Metric (in millions except percentages) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $546.6 million | $413.4 million | $1,048.4 million | $781.1 million | | Cost of product revenues | $199.5 million | $169.9 million | $384.1 million | $328.7 million | | Cost of licensing and other revenues | $465 thousand | $329 thousand | $917 thousand | $636 thousand | | Gross margin | $346.6 million | $243.2 million | $663.4 million | $451.8 million | | Gross margin percentage | 63.4% | 58.8% | 63.3% | 57.8% | [14. Subsequent Events](index=48&type=section&id=14.%20Subsequent%20Events) This section confirms no subsequent events requiring disclosure occurred after the reporting period - There were no subsequent events requiring disclosure as of the filing date[152](index=152&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Natera's business, a detailed analysis of its financial performance for the three and six months ended June 30, 2025, compared to the prior year, and a discussion of its liquidity and capital resources. Key highlights include significant revenue growth driven by increased test volumes, particularly in oncology, alongside rising operating expenses and continued net losses. The company maintains sufficient liquidity for the next 12 months but anticipates needing additional financing for future growth [Overview](index=49&type=section&id=Overview) This section provides an overview of Natera's business, its diagnostic technologies, and operational footprint across various healthcare areas - Natera is a diagnostics company utilizing cell-free DNA (cfDNA) technology and bioinformatics to offer personalized genetic testing across women's health (Panorama, Horizon), oncology (Signatera, Empower), and organ health (Prospera)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company operates CLIA-certified laboratories in Austin, Texas, and San Carlos, California, and distributes tests through a direct sales force, laboratory partners, and its cloud-based Constellation platform[156](index=156&type=chunk)[157](index=157&type=chunk) - Total tests processed increased to approximately **1,708,200** for the six months ended June 30, 2025, up from **1,496,000** in the prior year, driven by growth in Signatera, Panorama, and Horizon[159](index=159&type=chunk) Financial Performance Summary | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,048.4 million | $781.1 million | | Product revenues | $1,044.5 million | $776.0 million | | Net loss | $167.9 million | $105.1 million | | Non-cash stock compensation expense | $171.2 million | $131.9 million | | Accumulated deficit (as of June 30, 2025) | $2.7 billion | N/A | - U.S. direct sales force accounted for **96%** of revenues for the six months ended June 30, 2025, an increase from **95%** in the prior year, while U.S. laboratory distribution partners decreased to **2%**[160](index=160&type=chunk) [Components of the Results of Operations](index=51&type=section&id=Components%20of%20the%20Results%20of%20Operations) [Revenues](index=51&type=section&id=Revenues) This section details Natera's revenue streams, including product and licensing revenues, and factors influencing their growth and recognition - Product revenues are primarily from Panorama and Horizon tests, with sales through direct sales force (billing patients/insurers) and laboratory partners (fixed price or percentage of collections)[163](index=163&type=chunk)[164](index=164&type=chunk) - Revenue growth depends on market penetration, new test development, increased third-party payer reimbursement, and improved reimbursement rates, particularly for microdeletions testing[165](index=165&type=chunk) - In-network contracts are crucial for growth and long-term success, offering predictable pricing and broader access, though negotiated fees may be lower than list prices[166](index=166&type=chunk) - Licensing and other revenues come from the Constellation cloud-based model and strategic partnership agreements, which yield lower revenues per test but also lower processing costs[167](index=167&type=chunk)[168](index=168&type=chunk) [Cost of Product Revenues](index=52&type=section&id=Cost%20of%20Product%20Revenues) This section describes the components of Natera's cost of product revenues and factors affecting their fluctuations, such as test volumes and process improvements - Cost of product revenues includes material and service costs, impairment charges, personnel costs (including stock-based compensation), equipment, infrastructure, shipping, third-party processing fees, and allocated overhead[169](index=169&type=chunk) - Natera expects cost of product revenues to increase in absolute dollars with higher test volumes[169](index=169&type=chunk) - Improvements in Panorama's molecular and bioinformatics process have reduced sequencing reagents, test steps, and labor costs, while increasing accuracy and reducing redraws[170](index=170&type=chunk) [Cost of Licensing and Other Revenues](index=54&type=section&id=Cost%20of%20Licensing%20and%20Other%20Revenues) This section outlines the costs associated with Natera's licensing and other revenue streams, primarily from its Constellation platform and strategic partnerships - Cost of licensing and other revenues comprises material costs for test kits sold to Constellation clients, and development and support services for strategic partnership agreements[171](index=171&type=chunk) - The Constellation software platform is expected to have relatively low costs and higher associated gross margins, with licensing costs anticipated to increase with volume growth[172](index=172&type=chunk) [Expenses](index=54&type=section&id=Expenses) This section details Natera's operating expenses, including research and development, selling, general and administrative, and interest expenses - Research and development expenses include personnel costs (including stock-based compensation), materials, consulting, regulatory costs, and clinical study expenses, expected to increase with product development[173](index=173&type=chunk) - Selling, general and administrative expenses cover executive, sales, marketing, legal, finance, HR, billing, and client services, including personnel costs (with stock-based compensation), marketing, audit, and consulting fees[174](index=174&type=chunk) - Interest expense is primarily from the Credit Line, while interest and other income includes earnings on cash, investment gains/losses, sublease income, and foreign currency adjustments[175](index=175&type=chunk)[176](index=176&type=chunk) [Critical Accounting Policies](index=54&type=section&id=Critical%20Accounting%20Policies) This section highlights Natera's key accounting policies and estimates that require significant management judgment, such as revenue recognition and stock-based compensation - Natera's critical accounting policies and estimates include revenue recognition and stock-based compensation attributable to performance-based awards, which involve significant management judgment and assumptions[177](index=177&type=chunk) [Recent Accounting Pronouncements](index=55&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the impact and evaluation of recently adopted and issued accounting pronouncements on Natera's financial statements - Natera does not expect ASU 2023-09 (Income Taxes - Improvements to Income Tax Disclosures), effective after December 15, 2024, to significantly impact its consolidated financial statements[179](index=179&type=chunk) - The company is evaluating the impact of Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), effective after December 15, 2026, on its consolidated financial statements[180](index=180&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of Natera's financial performance for the three and six months ended June 30, 2025 and 2024 [Comparison of the three months ended June 30, 2025 and 2024](index=55&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202025%20and%202024) This section compares Natera's financial results for the three months ended June 30, 2025, against the same period in the prior year, highlighting key changes in revenues and expenses Financial Performance Summary | Metric (in millions except percentage) | June 30, 2025 | June 30, 2024 | Change Amount | Change Percent | | :-------------------------------- | :------------ | :------------ | :------------ | :------------- | | Total revenues | $546.6 million | $413.4 million | $133.2 million | 32.2% | | Product revenues | $544.4 million | $411.4 million | $133.1 million | 32.3% | | Licensing and other revenues | $2.2 million | $2.0 million | $186 thousand | 9.4% | | Total cost and expenses | $657.0 million | $457.3 million | $199.7 million | 43.7% | | Loss from operations | ($110.4 million) | ($43.9 million) | ($66.5 million) | (151.4)% | | Net loss | ($100.9 million) | ($37.5 million) | ($63.5 million) | (169.4)% | - Total reported units increased to approximately **812,900** for Q2 2025, up from **725,200** in Q2 2024, with oncology units rising to **188,800** from **125,400**[183](index=183&type=chunk) - Cost of product revenues increased by **$29.7 million** (**17.5%**), driven by higher third-party fees, inventory consumption, and equipment/labor costs[186](index=186&type=chunk) - Research and development expenses surged by **$57.3 million** (**64.3%**), primarily due to increased compensation, consulting, and lab/clinical trial expenses[188](index=188&type=chunk) - Selling, general and administrative expenses rose by **$112.6 million** (**56.9%**), mainly from higher compensation, consulting, marketing, and legal expenses[189](index=189&type=chunk) - Interest expense decreased by **$2.1 million** (**67.1%**) due to the redemption of Convertible Notes in October 2024[190](index=190&type=chunk) [Comparison of the six months ended June 30, 2025 and 2024](index=59&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section compares Natera's financial results for the six months ended June 30, 2025, against the same period in the prior year, detailing changes in revenues, costs, and net loss Financial Performance Summary | Metric (in millions except percentage) | June 30, 2025 | June 30, 2024 | Change Amount | Change Percent | | :-------------------------------- | :------------ | :------------ | :------------ | :------------- | | Total revenues | $1,048.4 million | $781.1 million | $267.3 million | 34.2% | | Product revenues | $1,044.5 million | $776.0 million | $268.4 million | 34.6% | | Licensing and other revenues | $4.0 million | $5.1 million | ($1.1 million) | (21.5)% | | Total cost and expenses | $1,238.0 million | $899.3 million | $338.7 million | 37.7% | | Loss from operations | ($189.5 million) | ($118.2 million) | ($71.3 million) | (60.3)% | | Net loss | ($167.9 million) | ($105.1 million) | ($62.8 million) | (59.8)% | - Total reported units increased to approximately **1,617,700** for H1 2025, up from **1,404,600** in H1 2024, with oncology units rising to **356,500** from **240,200**[194](index=194&type=chunk) - Cost of product revenues increased by **$55.5 million** (**16.9%**), driven by higher third-party fees, inventory consumption, and shipping/equipment/labor costs[197](index=197&type=chunk) - Research and development expenses increased by **$97.8 million** (**55.0%**), mainly due to higher compensation, consulting, and lab-related expenses[199](index=199&type=chunk) - Selling, general and administrative expenses increased by **$185.2 million** (**47.2%**), primarily from higher compensation, consulting, marketing, and legal expenses[200](index=200&type=chunk) - Interest expense decreased by **$4.2 million** (**67.5%**) due to the redemption of Convertible Notes in October 2024[201](index=201&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Natera's financial position, cash flows, and ability to meet its short-term and long-term obligations, including future financing needs - Natera incurred a net loss of **$167.9 million** for the six months ended June 30, 2025, and expects continued losses, with an accumulated deficit of **$2.7 billion**[203](index=203&type=chunk) Liquidity Position | Metric | June 30, 2025 (in millions) | | :-------------------------------- | :-------------------------- | | Cash, cash equivalents and restricted cash | $1,000.0 million | | Marketable securities | $16.0 million | | Outstanding Credit Line balance | $80.3 million | | Available Credit Line | $20.0 million | - The company believes its existing cash and marketable securities are sufficient for at least **12 months** after August 7, 2025, but anticipates needing additional equity or debt financing for future growth[204](index=204&type=chunk)[206](index=206&type=chunk) - The Credit Line with UBS has an outstanding principal of **$80.3 million** as of June 30, 2025, with an interest rate of 30-day SOFR average plus **0.5%**[207](index=207&type=chunk) - Natera redeemed its **$287.5 million** Convertible Notes in October 2024, primarily through physical settlement with common stock, which did not materially affect liquidity[209](index=209&type=chunk) Cash Flow Summary | Cash Flow Activity (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $82.0 million | $31.0 million | | Cash (used in) provided by investing activities | ($40.7 million) | $106.2 million | | Cash provided by financing activities | $13.1 million | $17.5 million | | Net change in cash, cash equivalents and restricted cash | $54.4 million | $154.7 million | - Operating cash flow for H1 2025 was **$82.0 million**, driven by non-cash charges (depreciation, stock-based compensation, lease expense) and increases in accrued liabilities, partially offset by net loss and inventory/prepaid asset increases[211](index=211&type=chunk) - Investing activities used **$40.7 million** in H1 2025, primarily for property and equipment acquisitions, compared to providing **$106.2 million** in H1 2024 due to investment maturities[213](index=213&type=chunk)[214](index=214&type=chunk) - Financing activities provided **$13.1 million** in H1 2025, mainly from stock option exercises and employee stock purchase plan issuances[215](index=215&type=chunk) Contractual Commitments | Contractual Commitments (in millions) | Amount | | :-------------------------------- | :----------- | | Laboratory instruments supplier | $23.5 million | | Material suppliers | $80.8 million | | Application service providers | $5.7 million | | Cloud platform service provider | $27.4 million | | Other material suppliers | $39.3 million | | Total | $176.7 million | [Off-Balance Sheet Arrangements](index=68&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements for Natera during the reported periods - Natera does not have any off-balance sheet arrangements for the periods presented[221](index=221&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Natera's exposure to market risks, primarily related to interest rates, foreign currency exchange rates, and inflation. The company's interest rate risk is mitigated by a short average maturity for its investment portfolio, while foreign currency risk has been minimal to date. Inflation has not had a material effect on the business [Interest Rate Risk](index=68&type=section&id=Interest%20Rate%20Risk) This section assesses Natera's exposure to interest rate fluctuations on its debt and investment portfolio, and strategies for mitigation - An incremental **100 basis point** increase in the Credit Line borrowing rate would increase annual interest expense by **$0.8 million**, based on the **$80.3 million** outstanding debt as of June 30, 2025[222](index=222&type=chunk) - The investment portfolio's exposure to interest rate risk is mitigated by maintaining a relatively short average maturity[222](index=222&type=chunk) - A **100 basis point** increase in investment yield would increase annual interest income by approximately **$0.2 million** based on short-term investments as of June 30, 2025[222](index=222&type=chunk) [Foreign Currency Exchange Rate Fluctuations](index=68&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Fluctuations) This section evaluates Natera's exposure to foreign currency exchange rate risks, noting minimal impact to date but potential future effects from international expansion - Natera's foreign currency risk has been minimal to date, with most revenues denominated in U.S. dollars, though some revenue is generated in Euros and Singapore Dollars[223](index=223&type=chunk) - Future international expansion could subject operations and cash flows to fluctuations from foreign currency exchange rates, potentially increasing foreign currency-based expenses if the U.S. dollar declines[223](index=223&type=chunk) [Inflation Risk](index=68&type=section&id=Inflation%20Risk) This section discusses the potential impact of inflation on Natera's business, financial condition, and operating results - As of the filing date, inflation has not had a material effect on Natera's business, financial condition, or results of operations[224](index=224&type=chunk) - Significant inflationary pressures could harm the business if higher costs cannot be offset by revenue increases or if demand for product offerings is negatively affected[224](index=224&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Natera's disclosure controls and procedures as of June 30, 2025, with no material changes to internal control over financial reporting during the period. It also acknowledges the inherent limitations of any control system [Evaluation of Disclosure Controls and Procedures](index=68&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of Natera's disclosure controls and procedures as assessed by management - Natera's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[226](index=226&type=chunk) [Changes in Internal Control over Financial Reporting](index=70&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes to Natera's internal control over financial reporting during the period - There have been no changes in Natera's internal control over financial reporting during the period ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[227](index=227&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=70&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) This section acknowledges the inherent limitations of any control system, emphasizing that reasonable assurance is the maximum achievable - Management acknowledges that control systems provide only reasonable, not absolute, assurance and can be subject to inherent limitations such as faulty judgments, simple errors, circumvention by individual acts, collusion, or management override[228](index=228&type=chunk) [PART II – OTHER INFORMATION](index=70&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This section provides additional disclosures including legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures [ITEM 1. LEGAL PROCEEDINGS](index=70&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8 of the financial statements for detailed information on Natera's current legal proceedings, emphasizing the inherent uncertainties and potential adverse impacts of such matters - Information regarding current legal proceedings is incorporated by reference from "Note 8—Commitments and Contingencies—Legal Proceedings" in the Notes to Unaudited Interim Condensed Consolidated Financial Statements[231](index=231&type=chunk) [ITEM 1A. RISK FACTORS](index=70&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2024, highlighting that investing in Natera's common stock involves a high degree of risk - Investors should carefully consider the risk factors discussed in Part I, Item 1A, "Risk Factors" in Natera's Annual Report on Form 10-K for the year ended December 31, 2024[232](index=232&type=chunk) - The occurrence of any described risks could materially and adversely affect the business, financial condition, results of operations, and prospects, potentially leading to a decline in common stock price[232](index=232&type=chunk) [ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities and no applicable use of proceeds during the reporting period - There were no recent sales of unregistered securities[233](index=233&type=chunk) - The use of proceeds section is not applicable[233](index=233&type=chunk) [ITEM 3 DEFAULTS UPON SENIOR SECURITIES](index=71&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[234](index=234&type=chunk) [ITEM 4 MINE SAFETY DISCLOSURES](index=71&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to Natera's operations - Mine safety disclosures are not applicable to Natera[235](index=235&type=chunk) [ITEM 5 OTHER INFORMATION](index=71&type=section&id=Item%205.%20Other%20Information) This section discloses that Natera's Chief Financial Officer, Mike Brophy, adopted a Rule 10b5-1 Trading Plan for the sale of company common stock [Securities Trading Plans of Directors and Executive Officers](index=71&type=section&id=Securities%20Trading%20Plans%20of%20Directors%20and%20Executive%20Officers) This section discloses the adoption of a Rule 10b5-1 Trading Plan by Natera's Chief Financial Officer for the sale of common stock - On June 10, 2025, CFO Mike Brophy adopted a Rule 10b5-1 Trading Plan to sell up to **122,596** shares of common stock between February 2, 2026, and February 8, 2028[236](index=236&type=chunk) [ITEM 6 EXHIBITS](index=72&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including certifications and XBRL documents [INDEX TO EXHIBITS](index=72&type=section&id=INDEX%20TO%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include Amended Compensation Program for Non-Employee Directors, Certifications of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[239](index=239&type=chunk) [SIGNATURES](index=74&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission on behalf of Natera, Inc. by its Chief Executive Officer and Chief Financial Officer - The report is signed by Steve Chapman, Chief Executive Officer, President, and Director, and Michael Brophy, Chief Financial Officer, on August 7, 2025[244](index=244&type=chunk) ```