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) ```

Financial Data and Key Metrics Changes - The company generated $547 million in revenue, representing a 32% growth over Q2 of the previous year, and a 34% growth when excluding revenue true-ups [6][8] - Gross margin increased to 63.4% compared to approximately 59% in the same quarter last year, with consistent margins sequentially versus Q1 [7][14] - The revenue guidance for the year has been raised by $80 million, now expecting revenues in the range of $2.1 billion to $2.2 billion [8][56] Business Line Data and Key Metrics Changes - The company processed 189,000 oncology tests in the quarter, marking a growth of nearly 20,000 units compared to Q1, setting a new milestone [7][11] - Significant growth was noted in the Signatera product line, with new patient starts doubling the previous quarterly record [7][12] - Women's health products had their second-best volume quarter ever, despite seasonal trends [10] Market Data and Key Metrics Changes - The company is seeking Medicare reimbursement for additional tumor types, which could yield approximately $250 million to $300 million in annual revenue [13] - The company reported a record low in Days Sales Outstanding (DSOs) at 57 days, indicating improved cash collection efficiency [15] Company Strategy and Development Direction - The company is focused on expanding its product offerings, including the launch of Fetal Focus, a new NIPT for inherited conditions [9][26] - Investments are being made in artificial intelligence to enhance diagnostic capabilities and operational efficiency [25][46] - The company aims to maintain operating expenses while increasing revenue, indicating a strategy of scaling without proportional increases in costs [20][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory, citing strong data and increased adoption of products [6][8] - The company is positioned to leverage its existing infrastructure to expand its market presence and improve patient outcomes [75] - Management highlighted the importance of upcoming clinical trial readouts, which could significantly impact practice guidelines [66][68] Other Important Information - The company exited its legacy paternity business, which had previously contributed to volume numbers [10] - The PEDAL study published in a high-impact journal demonstrates the potential of donor-derived cfDNA in predicting kidney transplant outcomes [30][31] Q&A Session Summary Question: What drove the record Signatera volumes? - Management noted strong data presentations at ASCO and significant growth in new patient starts, indicating a broad adoption of the product across various tumor types [61][63] Question: What are the key upcoming clinical trials? - Management highlighted the INVIGOR-11 trial and several colorectal trials that could influence guidelines and practice [66][68] Question: How is the company addressing the competitive landscape in early cancer detection? - Management emphasized their in-house R&D capabilities and the alignment of their PROCEED trial with FDA protocols, aiming for a strong performance readout [79][80]

Financial Data and Key Metrics Changes - The company generated $547 million in revenue, representing a 32% growth year-over-year, and a 34% growth when excluding revenue true-ups [5][6] - Gross margin increased to 63.4% compared to approximately 59% in the same quarter last year [6][15] - The company raised its revenue guidance by $80 million, now expecting revenues in the range of $2.1 billion to $2.2 billion [7][58] Business Line Data and Key Metrics Changes - The company processed 189,000 oncology tests in the quarter, marking a sequential growth of 20,000 units, which is a new milestone [6][11] - Signatera saw record growth in both sequential growth and new patient starts, with new patient starts being double the previous quarterly record [6][12] - Women's health products had the second-best volume quarter ever, following a strong Q1 [10] Market Data and Key Metrics Changes - The company is seeking Medicare reimbursement for additional tumor types, which could represent an annual revenue opportunity of $250 million to $300 million [13] - The company reported a significant increase in cash collections, with days sales outstanding (DSOs) down to 57 days, a record low [16] Company Strategy and Development Direction - The company is focused on launching new products, including Fetal Focus, a new NIPT for inherited conditions, and expanding its oncology data pipeline [8][30] - Investments are being made in artificial intelligence to develop new diagnostic biomarkers and improve operational efficiencies [19][47] - The company aims to maintain operating expenses while increasing revenue, indicating a strategy of scaling without proportional increases in costs [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory, citing strong data and new patient starts as key drivers [6][12] - The company is committed to maintaining cash flow positivity while investing in growth opportunities [60] - Management highlighted the importance of upcoming clinical trial readouts and their potential impact on market positioning [70][81] Other Important Information - The company exited its legacy paternity business, which had historically contributed to volume numbers [10] - The PEDAL study published in a high-impact journal demonstrated the utility of donor-derived cfDNA in predicting long-term outcomes after kidney transplant rejection [30][31] Q&A Session Summary Question: What drove the record Signatera volumes? - Management noted strong data presentations at ASCO and significant growth in colorectal and breast cancer monitoring as key drivers, along with a record increase in new patient starts [62][63] Question: What are the important upcoming clinical trials? - Management highlighted the INVIGOR-11 trial and several colorectal trials that could influence guidelines and practice [66][70] Question: How is the company addressing the competitive landscape in early cancer detection? - Management emphasized their in-house R&D capabilities and the alignment of their PROCEED trial with FDA protocols as a strategic advantage [80][81]

Financial Performance - Natera's Q2 2025 revenue reached approximately $547 million, a 32% increase compared to approximately $413 million in Q2 2024[10] - The company processed approximately 853,000 total tests in Q2 2025, reflecting a 12% year-over-year growth from approximately 760,000 tests in Q2 2024[10] - Gross margin was approximately 63% in Q2 2025, up from approximately 59% in Q2 2024, and the company generated approximately $24 million in cash inflow[10] - Natera is increasing its 2025 revenue outlook by $80 million, projecting revenue between $202 billion and $21 billion, with a gross margin between 61% and 64%, and positive cash flow generation[10] Oncology Business - Oncology tests processed in Q2 2025 totaled approximately 189,000, a 51% increase compared to approximately 125,000 in Q2 2024[10] - Clinical oncology experienced growth of approximately 20,000 units over Q1 2025[10] - Signatera demonstrated rapid growth, with clinical test volumes increasing by approximately 20,000 units[15] Product Development and Clinical Trials - Natera launched Fetal Focus, a new NIPT for 5 genes, and reported positive data from the PEDAL clinical trial in organ health[10, 35] - The DARE trial showed that over 99% of 400+ patients who remained Signatera-negative had recurrence-free survival (RFS) with a median follow-up of 274 months[48] - Natera is investing over $150 million in breast cancer clinical trials[55] AI Initiatives - Natera launched AI-based foundation models to support biomarker development, molecular therapeutics, and clinical decision-making[10] - The company is targeting approximately $200 million in value through AI-driven efficiencies[68]

[Company Overview](index=1&type=section&id=Company%20Overview) Natera is a global leader in cell-free DNA and genetic testing, focusing on oncology, women's health, and organ health [About Natera](index=2&type=section&id=About%20Natera) Natera is a global leader in cell-free DNA and genetic testing, integrating personalized diagnostics into standard care across oncology, women's, and organ health - Natera is a **global leader** in cell-free DNA and genetic testing, specializing in oncology, women's health, and organ health[13](index=13&type=chunk) - The company's mission is to make personalized genetic testing and diagnostics a **standard part of care** to facilitate earlier, more targeted interventions[13](index=13&type=chunk) - Natera's tests are validated by **over 300 peer-reviewed publications** and are processed in ISO 13485-certified and CAP-accredited CLIA laboratories in Austin, Texas, and San Carlos, California[13](index=13&type=chunk) [Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Natera reported strong Q2 2025 financial results, driven by record Signatera growth and robust performance across all product lines [Recent Financial Highlights](index=1&type=section&id=Recent%20Financial%20Highlights) Natera reported outstanding Q2 2025 results, driven by record Signatera growth and an increased 2025 annual revenue outlook - Natera delivered **outstanding results in Q2 2025**, with record Signatera growth and continued strength across women's health and organ health product lines[3](index=3&type=chunk) - The company is raising its 2025 annual revenue outlook by **$80 million at the midpoint**, from $1.94 billion - $2.02 billion to **$2.02 billion - $2.10 billion**[7](index=7&type=chunk) - Natera achieved **positive cash flow of approximately $24.3 million** in the second quarter of 2025[7](index=7&type=chunk) [Detailed Financial Results](index=1&type=section&id=Detailed%20Financial%20Results) Natera's Q2 2025 showed substantial revenue growth and improved gross margin, but increased operating expenses led to a higher net loss [Revenue and Gross Profit](index=1&type=section&id=Revenue%20and%20Gross%20Profit) Q2 2025 revenue and gross profit saw significant increases, driven by higher product volumes and improved average selling prices Q2 2025 vs Q2 2024 Revenue and Gross Profit | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total Revenues | $546.6 | $413.4 | 32.2% | | Product Revenues | $544.4 | $411.4 | 32.3% | | Gross Profit | $346.6 | $243.2 | 42.5% | | Gross Margin | 63.4% | 58.8% | +4.6 pp | - The increase in total revenues was primarily driven by a **32.3% increase in product revenues**, attributed to higher volume, average selling price improvements, and cash receipts in excess of initial revenue estimates for prior quarters[3](index=3&type=chunk) - Higher gross margin in Q2 2025 was a result of **increased revenues**, continued progress in reducing cost of revenues, and incremental cash receipts[6](index=6&type=chunk) [Operating Expenses and Net Loss](index=1&type=section&id=Operating%20Expenses%20and%20Net%20Loss) Operating expenses significantly increased in Q2 2025 due to investments and legal accruals, leading to a substantial rise in net loss Q2 2025 vs Q2 2024 Operating Expenses and Net Loss | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | | Total Operating Expenses| $457.0 | $287.1 | 59.2% | | Loss from Operations | ($110.4) | ($43.9) | 151.5% | | Net Loss | ($100.9) | ($37.5) | 169.1% | | Diluted EPS | ($0.74) | ($0.30) | 146.7% | - The significant increase in total operating expenses was primarily driven by **higher salary and related compensation expenditures**, including stock-based compensation, to support new product offerings, as well as increases in accruals for legal matters[6](index=6&type=chunk) - The net loss per diluted share of **($0.74)** in Q2 2025 was impacted by legal accruals of approximately **$19.8 million** and a stock-based compensation expense change in estimate of approximately **$9.2 million**, contributing approximately **($0.21) per diluted share**[9](index=9&type=chunk) [Test Volume Summary](index=1&type=section&id=Test%20Volume%20Summary) Natera experienced strong operational growth in Q2 2025, with overall test volumes increasing and oncology tests showing particularly robust growth Q2 2025 vs Q2 2024 Test Volume Summary | Metric | Q2 2025 | Q2 2024 | Change (%) | | :----------------- | :-------- | :-------- | :--------- | | Tests Processed | 853,100 | 760,300 | 12.2% | | Tests Accessioned | 839,300 | 744,000 | 12.8% | | Tests Reported | 812,900 | 725,200 | 12.1% | | Oncology Tests | 188,800 | 125,400 | 50.6% | - The increase in tests processed and reported reflects **strong operational growth**, with oncology tests showing particularly robust growth of **50.6% year-over-year**[4](index=4&type=chunk)[5](index=5&type=chunk)[7](index=7&type=chunk) [Liquidity and Capital Resources](index=2&type=section&id=Liquidity%20and%20Capital%20Resources) Natera maintained a strong liquidity position as of June 30, 2025, with over $1 billion in cash and investments and a low outstanding debt balance Cash and Debt Position | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------------------------- | :----------------------- | :--------------------------- | | Cash, cash equivalents, short-term investments, and restricted cash | $1,016.0 | $968.3 | | Total Outstanding Debt Balance | $80.3 | N/A | - Natera's cash, cash equivalents, short-term investments, and restricted cash increased by **$47.7 million** from December 31, 2024, to June 30, 2025[10](index=10&type=chunk) - The company had a total outstanding debt balance of **$80.3 million** under its line of credit with UBS at a variable interest rate of 30-day SOFR plus 50 bps[10](index=10&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) Natera has raised its 2025 total revenue guidance and provided estimates for key financial metrics, reflecting confidence in continued growth [2025 Guidance](index=2&type=section&id=2025%20Guidance) Natera raised its 2025 total revenue guidance and provided estimates for gross margin, operating expenses, and positive cash flow 2025 Financial Outlook | Metric | 2025 Guidance (Range) | | :----------------------------------- | :-------------------- | | Total Revenue | $2.02 billion - $2.10 billion | | Gross Margin (as % of revenues) | 61% - 64% | | Selling, General and Administrative | $0.975 billion - $1.05 billion | | Research and Development | $550 million - $590 million | | Net Cash Inflow | Positive | - The company maintains its current outlook for operating expenses while raising the revenue guidance[7](index=7&type=chunk)[11](index=11&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents Natera's consolidated financial statements, including balance sheets and statements of operations, for the reported periods [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Natera's balance sheet as of June 30, 2025, shows increased total assets, liabilities, and stockholders' equity, driven by higher cash and equivalents Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total Current Assets | $1,431,596 | $1,375,820 | | Total Assets | $1,757,066 | $1,660,735 | | Total Current Liabilities | $384,836 | $344,045 | | Total Liabilities | $510,884 | $465,315 | | Total Stockholders' Equity | $1,246,182 | $1,195,420 | - Cash, cash equivalents, and restricted cash increased from **$945,587 thousand** at December 31, 2024, to **$1,000,021 thousand** at June 30, 2025[22](index=22&type=chunk) - Outstanding common stock shares increased from approximately **132.6 million** at December 31, 2024, to **136.8 million** at June 30, 2025[23](index=23&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Natera's Q2 and YTD June 2025 statements show strong revenue growth but also significantly increased operating expenses, leading to higher net losses Consolidated Statements of Operations Highlights (in thousands) | Metric (Three months ended June 30) | 2025 | 2024 | Change (%) | | :---------------------------------- | :---------- | :---------- | :--------- | | Total Revenues | $546,600 | $413,351 | 32.2% | | Cost of Product Revenues | $199,531 | $169,850 | 17.5% | | Research and Development | $146,427 | $89,109 | 64.3% | | Selling, General and Administrative | $310,549 | $197,965 | 56.9% | | Loss from Operations | ($110,372) | ($43,902) | 151.4% | | Net Loss | ($100,938) | ($37,464) | 169.4% | | Basic and Diluted Net Loss Per Share| ($0.74) | ($0.30) | 146.7% | Consolidated Statements of Operations Highlights (Six months ended June 30) | Metric (Six months ended June 30) | 2025 | 2024 | Change (%) | | :---------------------------------- | :------------ | :------------ | :--------- | | Total Revenues | $1,048,431 | $781,092 | 34.2% | | Cost of Product Revenues | $384,143 | $328,683 | 16.9% | | Research and Development | $275,504 | $177,746 | 55.0% | | Selling, General and Administrative | $577,414 | $392,243 | 47.2% | | Loss from Operations | ($189,547) | ($118,216) | 60.3% | | Net Loss | ($167,874) | ($105,063) | 59.8% | | Basic and Diluted Net Loss Per Share| ($1.24) | ($0.86) | 44.2% | - Weighted-average shares used in computing basic and diluted net loss per share increased to **136,388 thousand** for Q2 2025 from **122,853 thousand** for Q2 2024[26](index=26&type=chunk) [Supplementary Information](index=2&type=section&id=Supplementary%20Information) This section provides details for the Q2 2025 conference call, forward-looking statements, and definitions of key financial metrics [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Details for Natera's Second Quarter 2025 Financial Results Conference Call, including date, time, and access information, are provided Conference Call Information | Event | Natera's Second Quarter 2025 Financial Results Conference Call | | :------------ | :------------------------------------------------------------- | | Date | Thursday, August 7, 2025 | | Time | 1:30 p.m. PT (4:30 p.m. ET) | | Live Dial-In | 1-888-770-7321 (Domestic), 1-929-201-7107 (International) | | Conference ID | 7684785 | | Webcast Link | https://events.q4inc.com/attendee/169947359 | [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) Natera's forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially - The press release contains forward-looking statements regarding market opportunity, anticipated products, reimbursement, partnerships, clinical trials, and business strategies, based on **current plans and expectations**[15](index=15&type=chunk) - These statements are subject to **known and unknown risks and uncertainties**, including challenges in achieving financial projections, competition, product performance, regulatory compliance (e.g., FDA regulations for LDTs), and litigation, which could cause actual results to differ materially[16](index=16&type=chunk) - Natera advises against undue reliance on forward-looking statements and undertakes **no obligation to update them publicly**, except as required by law[18](index=18&type=chunk) [Definitions and Contacts](index=3&type=section&id=Definitions%20and%20Contacts) This section provides definitions for key financial metrics and contact information for investor relations and media inquiries - Positive cash flow for the quarter ended June 30, 2025, is derived from **GAAP net cash provided by operating activities ($37.6 million)** and **financing activities ($12.6 million)**, offset by net cash used in investing activities for property and equipment purchases **($25.9 million)**[19](index=19&type=chunk) - Gross profit is calculated as **GAAP total revenues less GAAP cost of revenues**, and gross margin is **gross profit divided by GAAP total revenues**[20](index=20&type=chunk) - Contact information for Investor Relations (**Mike Brophy, CFO**) and Media (**Lesley Bogdanow, VP of Corporate Communications**) is provided[20](index=20&type=chunk)

Financial Data and Key Metrics Changes - The company achieved over $500 million in revenue for the first time, marking a significant milestone [7] - Gross margins improved by more than 100 basis points sequentially from Q4 [8] - The company generated substantial cash flow in Q1, reaffirming its goal to be cash flow breakeven for the year [38][39] Business Line Data and Key Metrics Changes - Signatera saw record growth with approximately 165,000 units in Q1, indicating a strong annualized potential of around 720,000 units [15] - The women's health business experienced high single-digit growth sequentially from Q4, benefiting from market consolidation and increased volume from competing labs exiting the space [5][30] - Oregon Health reported over 50% year-on-year growth within its franchise [6] Market Data and Key Metrics Changes - The NIPT market is maturing, with Natera capturing significant volume from competitors that have exited the market [5][30] - The company noted a shift in the mix of Signatera volumes, with expectations for a gradual increase in recurrence monitoring as more patients remain on the test over time [21][22] Company Strategy and Development Direction - The core growth driver for Signatera is the unmet clinical need for MRD testing, with a focus on delivering high-quality prospective outcomes data [14][16] - The company plans to launch a tumor-naive MRD test to address a segment of patients who are not suitable for tumor-informed tests [19] - Natera is targeting a launch in Japan by 2027, with expectations for rapid adoption due to the prevalence of colorectal cancer and existing guidelines for MRD usage [28][66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing growth of Signatera despite increased competition, emphasizing the importance of solving clinical problems for patients [56][59] - The company is committed to investing in R&D and commercial operations to maintain its competitive edge and address the unmet needs in the MRD market [37][50] Other Important Information - The company highlighted the importance of customer service and innovation in driving growth within the women's health segment [34][36] - Management noted that the competitive landscape is evolving, with established companies entering the MRD market, but they view this as an opportunity for overall improvement in patient outcomes [56][58] Q&A Session Summary Question: What are the main growth drivers for Signatera? - The main growth driver is the clinical problem of MRD, with significant room for adoption as efficacy data continues to support its use [14][15] Question: How is the mix between adjuvant and recurring volumes changing? - The mix has historically been balanced, but there is an expectation for a shift towards more recurring volumes as patients continue monitoring over time [21][22] Question: What is driving the momentum towards achieving an ASP of $2,000 for Signatera? - The momentum is driven by improving reimbursement rates among Medicare Advantage patients and potential launches in new markets like Japan [23][24][28] Question: How does the company view competition in the MRD market? - Competition is seen as a positive force that can lead to better solutions for patients, and the company is focused on addressing clinical needs rather than solely defending market share [56][59] Question: What is the strategy for R&D investments moving forward? - The company plans to increase R&D investments, particularly in generating evidence for MRD and recurrence monitoring, while also exploring partnerships for clinical trials [46][50]