Company Overview - Natera is a genetic testing company focusing on oncology, women's health, and organ health [1] - The company's signature product, Signatera, is designed to predict the efficacy of various cancer treatments [1] Investment Insights - The author emphasizes the importance of studying earnings reports to identify potential investment opportunities, highlighting a successful investment strategy during the pandemic [1] - The author mentions identifying future winners such as OPRX, OTRK, FUBO, and PLUG through careful analysis of earnings transcripts and reports [1]

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights the presence of forward-looking statements in the report, their inherent risks, and the company's disclaimer of obligation to update them - The report contains forward-looking statements, primarily in 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations', identifiable by terms like 'believe,' 'may,' 'will,' 'estimate,' 'continue,' 'anticipate,' 'expect,' etc[7](index=7&type=chunk) - Forward-looking statements cover expectations regarding revenue, expenses, operating results, demand and reimbursement for tests (Panorama, Horizon, Signatera), ability to develop new products, regulatory compliance (including FDA's LDT rule), litigation outcomes, cost of goods sold, addressable markets, intellectual property, competition, reliance on collaborators/suppliers, adoption rates, clinical studies (SMART, CIRCULATE-Japan), acquisitions, operating expenses, financial results, and anticipated business trends[8](index=8&type=chunk)[12](index=12&type=chunk) - These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially, as discussed in Part II, Item 1A, 'Risk Factors' in this report and the Annual Report on Form 10-K for the year ended December 31, 2024[9](index=9&type=chunk) - The company disclaims any obligation to publicly update these forward-looking statements, or the reasons actual results could differ, unless required by law[10](index=10&type=chunk) [Part I – Financial Information](index=7&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and comprehensive notes for Q1 2025 and 2024, covering balance sheets, operations, equity, and cash flows [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets | Asset/Liability/Equity | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $973,768 | $945,587 | | Short-term investments | $17,832 | $22,689 | | Accounts receivable, net | $318,233 | $314,165 | | Inventory | $50,367 | $44,744 | | Prepaid expenses and other current assets, net | $56,185 | $48,635 | | Total current assets | $1,416,385 | $1,375,820 | | Property and equipment, net | $180,453 | $162,046 | | Operating lease right-of-use assets | $94,631 | $86,149 | | Other assets | $40,897 | $36,720 | | **Total assets** | **$1,732,366** | **$1,660,735** | | **Liabilities** | | | | Accounts payable | $39,240 | $34,922 | | Accrued compensation | $47,086 | $62,114 | | Other accrued liabilities | $178,449 | $146,893 | | Deferred revenue, current portion | $20,557 | $19,754 | | Short-term debt financing | $80,345 | $80,362 | | Total current liabilities | $365,677 | $344,045 | | Deferred revenue, long-term portion and other liabilities | $23,958 | $24,682 | | Operating lease liabilities, long-term portion | $103,056 | $96,588 | | **Total liabilities** | **$492,691** | **$465,315** | | **Stockholders' Equity** | | | | Common stock | $14 | $12 | | Additional paid-in capital | $3,874,656 | $3,763,614 | | Accumulated deficit | $(2,634,798) | $(2,567,862) | | Accumulated other comprehensive loss | $(197) | $(344) | | **Total stockholders' equity** | **$1,239,675** | **$1,195,420** | | **Total liabilities and stockholders' equity** | **$1,732,366** | **$1,660,735** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This table outlines the company's financial performance, including revenues, expenses, and net loss for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric | Three Months Ended March 31, 2025 (in thousands, except per share data) | Three Months Ended March 31, 2024 (in thousands, except per share data) | | :------------------------------------ | :-------------------------------------------------------------------- | :-------------------------------------------------------------------- | | Product revenues | $500,036 | $364,672 | | Licensing and other revenues | $1,794 | $3,069 | | **Total revenues** | **$501,830** | **$367,741** | | Cost of product revenues | $184,613 | $158,833 | | Cost of licensing and other revenues | $452 | $307 | | Research and development | $129,078 | $88,637 | | Selling, general and administrative | $266,864 | $194,278 | | **Total cost and expenses** | **$581,007** | **$442,055** | | **Loss from operations** | **$(79,177)** | **$(74,314)** | | Interest expense | $(1,005) | $(3,124) | | Interest and other income, net | $13,419 | $10,267 | | **Loss before income taxes** | **$(66,763)** | **$(67,171)** | | Income tax expense | $(173) | $(428) | | **Net loss** | **$(66,936)** | **$(67,599)** | | Unrealized gain on available-for-sale securities, net of tax | $147 | $893 | | **Comprehensive loss** | **$(66,789)** | **$(66,706)** | | Basic and diluted net loss per share | $(0.50) | $(0.56) | | Weighted-average shares used in computing basic and diluted net loss per share | 134,750 | 120,814 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This table details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Stockholders' Equity | Item | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance as of December 31 | $1,195,420 | $765,327 | | Issuance of common stock upon exercise of stock options | $544 | $6,466 | | Vesting of restricted stock units | $2 | $1 | | Stock-based compensation | $78,435 | $64,952 | | Issuance of common stock for bonus | $32,063 | $24,071 | | Unrealized gain on available-for-sale securities | $147 | $893 | | Net loss | $(66,936) | $(67,599) | | **Balance as of March 31** | **$1,239,675** | **$794,111** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Cash Flows | Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash provided by operating activities | $44,452 | $27,001 | | Cash provided by (used in) investing activities | $(16,815) | $138,255 | | Cash provided by financing activities | $544 | $6,466 | | **Net change in cash, cash equivalents and restricted cash** | **$28,181** | **$171,722** | | Cash, cash equivalents and restricted cash, beginning of period | $945,587 | $642,095 | | **Cash, cash equivalents and restricted cash, end of period** | **$973,768** | **$813,817** | [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited interim condensed consolidated financial statements [1. Description of Business](index=11&type=section&id=1.%20Description%20of%20Business) This note describes Natera, Inc.'s core business as a diagnostics company utilizing cell-free DNA technology across women's health, oncology, and organ health - Natera, Inc. is a diagnostics company utilizing proprietary molecular and bioinformatics cell-free DNA (cfDNA) technology to identify genetic variations for serious conditions with high accuracy[24](index=24&type=chunk) - The company focuses on three main healthcare areas: women's health (e.g., Down syndrome screening), oncology (e.g., molecular residual disease detection), and organ health (e.g., transplant rejection assessment)[24](index=24&type=chunk) - Key product offerings include Panorama (Non-Invasive Prenatal Test), Horizon (Carrier Screening), Signatera (molecular residual disease test), and Prospera (organ transplant rejection test)[25](index=25&type=chunk) - Natera also offers Constellation, a cloud-based software platform enabling laboratory customers to access its algorithms and bioinformatics for their own tests[25](index=25&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's key accounting principles, estimates, and recent accounting pronouncements, noting no material changes in Q1 2025 - No material changes to the company's significant accounting policies were made during the three months ended March 31, 2025[26](index=26&type=chunk) - The company incurred a net loss of **$66.9 million** for Q1 2025 and has an accumulated deficit of **$2.6 billion** as of March 31, 2025, but believes existing cash and marketable securities will be sufficient for at least 12 months[28](index=28&type=chunk)[32](index=32&type=chunk) - Significant accounting estimates include stock-based compensation, fair value of options, and expected consideration from customer contracts[34](index=34&type=chunk) - Investments are primarily debt securities classified as available-for-sale and short-term, carried at fair value with unrealized gains/losses reported in accumulated other comprehensive income (loss)[35](index=35&type=chunk) - The allowance for expected credit losses for trade accounts receivable is based on collectability assessment; no incremental credit loss is needed for insurance/patient payors due to average selling price calculations[38](index=38&type=chunk)[39](index=39&type=chunk) - Inventory is recorded at the lower of cost or net realizable value (FIFO) and consists of supplies for genetic testing services, with write-downs for obsolete inventory[40](index=40&type=chunk)[41](index=41&type=chunk) Accumulated Other Comprehensive Loss | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $(344) | $(3,085) | | Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment | $147 | $893 | | Ending balance | $(197) | $(2,192) | - The company recognizes revenue under ASC 606 using a five-step process, estimating variable consideration based on historical cash collections and current expectations[44](index=44&type=chunk)[45](index=45&type=chunk) - Related party transactions include investments in MyOme (preferred shares and warrants) where Natera executives/directors hold positions, and a collaboration agreement with MyOme involving warrants and royalty payments[48](index=48&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) MyOme Investment and Warrant Fair Value | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Carrying amount of preferred shares in MyOme | $6,600 | $4,900 | | Fair market value of MyOme warrants | $12,700 | $11,200 | - Credit risk is limited by placing cash in high-credit-rating financial institutions; no single customer exceeded **10%** of total revenues or accounts receivable[54](index=54&type=chunk)[55](index=55&type=chunk) - Medicare accounted for **14.0%** of total revenue in Q1 2025, up from **11.6%** in Q1 2024[56](index=56&type=chunk) - ASU 2020-04 (Reference Rate Reform) was adopted on January 1, 2025, with no material impact[58](index=58&type=chunk) - ASU 2023-09 (Income Taxes) is effective after December 15, 2024, and is not expected to have a significant impact[59](index=59&type=chunk) - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) is effective after December 15, 2026, and its impact is being evaluated[60](index=60&type=chunk) [3. Revenue Recognition](index=22&type=section&id=3.%20Revenue%20Recognition) This note details the company's revenue recognition policies, including disaggregation by payer type and geographic area, and changes in deferred revenues - Product revenues are derived from genetic testing services, with performance obligations satisfied upon delivery of test results, including whole-exome sequencing and Signatera tests for pharmaceutical companies[62](index=62&type=chunk)[63](index=63&type=chunk) - Revenue recognized from changes in estimates for tests delivered in prior periods increased by a net of **$34.3 million** in Q1 2025, compared to **$33.7 million** in Q1 2024[70](index=70&type=chunk) - The net allowance for future refunds reduced revenue by **$3.5 million** in Q1 2025, compared to **$1.5 million** in Q1 2024[73](index=73&type=chunk) - Licensing and other revenues are recognized from the cloud-based Constellation service and strategic collaboration agreements, such as with BGI Genomics and Foundation Medicine[74](index=74&type=chunk)[75](index=75&type=chunk) - For the BGI Genomics Agreement, **$20.0 million** in prepaid royalties for oncology assay interpretation services remain, with **$0.1 million** recognized in Q1 2025, compared to **$0.3 million** in Q1 2024[80](index=80&type=chunk) Disaggregation of Revenues by Payer Type | Payer Type | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------- | :-------------------------------- | :-------------------------------- | | Insurance carriers | $472,647 | $341,028 | | Laboratory partners | $20,832 | $20,276 | | Patients | $8,351 | $6,437 | | **Total revenues** | **$501,830** | **$367,741** | Disaggregation of Revenues by Geographic Area | Geographic Area | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | United States | $492,305 | $359,413 | | Americas, excluding U.S. | $1,692 | $1,481 | | Europe, Middle East, India, Africa | $6,049 | $5,178 | | Asia Pacific and Other | $1,784 | $1,669 | | **Total revenues** | **$501,830** | **$367,741** | Accounts Receivable and Deferred Revenues | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Accounts receivable, net | $318,233 | $314,165 | | Deferred revenue, current portion | $20,557 | $19,754 | | Deferred revenue, long-term portion | $16,705 | $16,838 | | **Total deferred revenues** | **$37,262** | **$36,592** | Changes in Deferred Revenues | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $36,592 | $35,740 | | Increase in deferred revenues | $10,163 | $7,941 | | Revenue recognized during the period included in deferred revenues at the beginning of the period | $(9,418) | $(7,048) | | Revenue recognized from performance obligations satisfied within the same period | $(75) | $(100) | | **Ending balance** | **$37,262** | **$36,533** | [4. Fair Value Measurements](index=29&type=section&id=4.%20Fair%20Value%20Measurements) This note explains the fair value hierarchy for financial assets and liabilities, classifying them into Level 1, 2, or 3 based on input observability - Financial assets and liabilities are classified into Level 1 (quoted prices in active markets), Level 2 (observable market-based inputs), or Level 3 (unobservable inputs) for fair value measurement[83](index=83&type=chunk) - MyOme warrants are classified as **Level 3** investments due to the use of unobservable inputs in their valuation[85](index=85&type=chunk) Fair Value Hierarchy for Financial Assets | Asset | March 31, 2025 (Total, in thousands) | December 31, 2024 (Total, in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash, cash equivalents and restricted cash (Level 1) | $973,768 | $945,587 | | Municipal securities (Level 2) | $17,832 | $22,689 | | **Total financial assets** | **$991,600** | **$968,276** | - The estimated fair value of the Credit Line debt approximates its carrying value due to its short-term duration and variable interest rate, based on observable Level 2 inputs[87](index=87&type=chunk) [5. Financial Instruments](index=30&type=section&id=5.%20Financial%20Instruments) This note describes the company's investment portfolio, primarily short-term available-for-sale debt securities, and associated credit risk - The company's investment portfolio consists of U.S. Treasuries, U.S. agency, and high-quality municipal bonds, all classified as available-for-sale and short-term[88](index=88&type=chunk)[90](index=90&type=chunk) - No allowance for expected credit losses on investments was recorded due to the low-risk, investment-grade nature of the securities and the company's ability and intention to hold them until maturity[90](index=90&type=chunk) - Gross unrealized losses were not material as of March 31, 2025, primarily due to changes in interest rates rather than credit deterioration[90](index=90&type=chunk) Debt Securities Available-for-Sale in Unrealized Loss Position (as of March 31, 2025) | Security Type | Fair Value (in thousands) | Unrealized Loss (in thousands) | | :---------------- | :------------------------ | :----------------------------- | | Municipal securities | $17,832 | $(177) | | **Total** | **$17,832** | **$(177)** | - All available-for-sale securities in the portfolio have contractual maturities less than or equal to one year as of March 31, 2025[92](index=92&type=chunk) [6. Balance Sheet Components](index=31&type=section&id=6.%20Balance%20Sheet%20Components) This note provides detailed breakdowns of key balance sheet items, including accounts receivable, property and equipment, and other accrued liabilities Allowance for Expected Credit Losses (Trade Accounts Receivable) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Beginning balance | $7,259 | $6,481 | | Provision for expected credit losses | $195 | $929 | | Write-offs | $(20) | $(158) | | **Total** | **$7,434** | **$7,252** | Property and Equipment, net | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Machinery and equipment | $129,005 | $117,076 | | Computer equipment | $3,287 | $3,178 | | Purchased and capitalized software held for internal use | $14,587 | $13,178 | | Leasehold improvements | $48,883 | $48,569 | | Construction-in-process | $71,271 | $58,461 | | Less: Accumulated depreciation and amortization | $(86,580) | $(78,416) | | **Total property and equipment, net** | **$180,453** | **$162,046** | - Depreciation expense for Q1 2025 was **$8.2 million**, up from **$6.3 million** in Q1 2024[95](index=95&type=chunk) - No impairment charges were incurred[95](index=95&type=chunk) Other Accrued Liabilities | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Reserves for refunds to insurance carriers | $10,171 | $11,276 | | Accrued charges for third-party testing | $16,963 | $12,321 | | Testing and laboratory materials from suppliers | $10,754 | $7,893 | | Marketing and corporate affairs | $17,898 | $16,548 | | Legal, audit and consulting fees | $66,097 | $54,208 | | Accrued shipping charges | $1,945 | $1,625 | | Sales and income tax payable | $5,602 | $4,416 | | Accrued third-party service fees | $8,812 | $9,046 | | Clinical trials and studies | $10,788 | $10,097 | | Operating lease liabilities, current portion | $12,199 | $10,168 | | Property and equipment purchases | $9,525 | $7,098 | | Other accrued expenses | $7,695 | $2,197 | | **Total other accrued liabilities** | **$178,449** | **$146,893** | Reserve Balance and Activities for Refunds to Insurance Carriers | Metric | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $11,276 | $23,245 | | Additional (reversals) reserves | $(622) | $227 | | Refunds to carriers | $0 | $(3,095) | | Reserves released to revenue | $(483) | $(2,354) | | **Ending balance** | **$10,171** | **$18,023** | [7. Leases](index=33&type=section&id=7.%20Leases) This note details the company's lease agreements, including new premises, lease liabilities, and the weighted-average remaining lease term and discount rate - The company entered into new lease agreements for additional premises in Austin (**57,100 sq ft**) and San Carlos (**40,700 sq ft**) in March 2025 and January 2025, respectively, extending terms through March 2033 and November 2028[98](index=98&type=chunk)[99](index=99&type=chunk) - Noncash operating activities related to additional right-of-use assets totaled **$10.9 million** in Q1 2025, significantly up from **$0.3 million** in Q1 2024[103](index=103&type=chunk) Operating Lease Liabilities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Operating lease liabilities, current portion | $12,199 | $10,168 | | Operating lease liabilities, long-term portion | $103,056 | $96,588 | | **Total operating lease liabilities** | **$115,255** | **$106,756** | - As of March 31, 2025, the weighted-average remaining lease term was **7.38 years**, and the weighted-average discount rate was **7.1%**[104](index=104&type=chunk) - Total lease expense recognized was **$4.4 million** in Q1 2025, compared to **$3.6 million** in Q1 2024[105](index=105&type=chunk) Present Value of Future Minimum Lease Payments (as of March 31, 2025) | Year | Operating Leases (in thousands) | | :-------------------- | :----------------------------- | | 2025 (remaining 9 months) | $14,794 | | 2026 | $20,287 | | 2027 | $19,673 | | 2028 | $19,779 | | 2029 | $18,291 | | 2030 and thereafter | $56,602 | | **Total future minimum lease payments** | **$149,426** | | Less: imputed interest | $(34,171) | | **Operating lease liabilities** | **$115,255** | [8. Commitments and Contingencies](index=35&type=section&id=8.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, including intellectual property and class action lawsuits, and material contractual commitments - The company is involved in various legal matters, including intellectual property litigation, false advertising claims, and class action lawsuits, with an aggregate accrual for probable and reasonably estimable legal contingencies of approximately **$22.6 million** as of March 31, 2025[107](index=107&type=chunk)[108](index=108&type=chunk) - In the CareDx Patent Case, Natera's asserted patents were invalidated in February 2025, overturning a **$96.3 million** jury verdict, which Natera is appealing[109](index=109&type=chunk) - In the ArcherDX Case, Natera was awarded **$19.35 million** for patent infringement, and a permanent injunction was granted against the PCM test, which is under appeal[110](index=110&type=chunk) - In the Ravgen lawsuit, a jury found Natera liable for non-willful infringement and awarded **$57 million** in damages, which Natera intends to appeal[111](index=111&type=chunk) - In the NeoGenomics lawsuit, Natera secured a preliminary injunction (affirmed on appeal) and a permanent injunction against NeoGenomics' RaDaR test, which was subsequently withdrawn from the market[116](index=116&type=chunk) - In a false advertising suit against CareDx, a jury found Natera liable for **$44.9 million**, but the Court later ruled CareDx not entitled to damages; both parties are appealing[117](index=117&type=chunk) - In lawsuits against Guardant Health, a jury found Natera liable for false advertising and awarded **$292.5 million** in damages in November 2024, which Natera plans to appeal[118](index=118&type=chunk) - Guardant also filed a new suit alleging trade secret misappropriation[118](index=118&type=chunk) - Multiple class action lawsuits have been filed against Natera regarding patient billing and Panorama marketing, with one class certified[119](index=119&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk)[125](index=125&type=chunk) - Shareholder derivative complaints were filed in October 2023 and January 2024, alleging management made materially false or misleading statements[123](index=123&type=chunk) - The company has unlimited potential future payments under director and officer indemnifications, but insurance policies may limit exposure[126](index=126&type=chunk) Material Contractual Commitments (as of March 31, 2025) | Party | Commitments (in thousands) | Expiry Date | | :-------------------------- | :------------------------- | :------------ | | Laboratory instruments supplier | $21,443 | December 2027 | | Material suppliers | $70,395 | December 2026 | | Application service providers | $4,733 | January 2028 | | Cloud platform service provider | $27,430 | December 2028 | | Other material suppliers | $44,570 | Various | | **Total** | **$168,571** | | - An additional **$50.0 million** in potential payments for clinical samples and data for oncology development is contingent on compliance approvals and commercial volume milestones, not included in the contractual commitments table[129](index=129&type=chunk) [9. Stock-Based Compensation](index=42&type=section&id=9.%20Stock-Based%20Compensation) This note details stock-based compensation expense, stock option activity, and unvested restricted stock unit and performance share unit activity Stock-Based Compensation Expense | Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cost of revenues | $5,270 | $3,777 | | Research and development | $26,511 | $20,649 | | Selling, general and administrative | $46,046 | $40,021 | | **Total** | **$77,827** | **$64,447** | Stock Option Activity | Metric | December 31, 2024 (in thousands, except for per share data) | March 31, 2025 (in thousands, except for per share data) | | :-------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Number of Shares Outstanding | 3,875 | 3,822 | | Weighted Average Exercise Price | $30.22 | $30.47 | Unvested RSU and PSU Activity | Metric | December 31, 2024 (in thousands, except for per share data) | March 31, 2025 (in thousands, except for per share data) | | :-------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Shares Balance | 10,593 | 9,974 | | Weighted Average Grant Date Fair Value | $61.28 | $86.75 | - The company granted **0.4 million** performance-based awards in Q1 2025, compared to **0.8 million** in Q1 2024, with an aggregate grant date fair value of **$64.9 million**, compared to **$55.0 million**[134](index=134&type=chunk) - Expected remaining stock-based compensation expense for performance-based awards is **$142.1 million**[134](index=134&type=chunk) [10. Debt](index=43&type=section&id=10.%20Debt) This note describes the company's Credit Line with UBS and the redemption of its Convertible Senior Notes due 2027 - The Credit Line with UBS provides a **$100.0 million** revolving line of credit, secured by money market and marketable securities, requiring a minimum of **$150.0 million** collateral[136](index=136&type=chunk) - The interest rate for the Credit Line was changed to the 30-day SOFR average plus **0.5%** in October 2023[136](index=136&type=chunk) - As of March 31, 2025, the total principal amount outstanding with accrued interest on the Credit Line was **$80.3 million**, with **$20.0 million** remaining available[136](index=136&type=chunk)[137](index=137&type=chunk) - Interest expense on the Credit Line was **$1.0 million** in Q1 2025, down from **$1.2 million** in Q1 2024[137](index=137&type=chunk) - The **$287.5 million** aggregate principal amount of 2.25% Convertible Senior Notes due 2027 were fully redeemed on October 11, 2024, primarily through physical settlement with approximately **7.5 million** shares of common stock[31](index=31&type=chunk)[140](index=140&type=chunk) - Interest expense related to the Convertible Notes was **$0** in Q1 2025, compared to **$1.945 million** in Q1 2024, due to their redemption[141](index=141&type=chunk) [11. Income Taxes](index=44&type=section&id=11.%20Income%20Taxes) This note details income tax expense, the full valuation allowance against deferred tax assets, and the absence of uncertain tax positions - Income tax expense was **$173 thousand** in Q1 2025, down from **$428 thousand** in Q1 2024, primarily attributable to state and foreign income tax[142](index=142&type=chunk) - A full valuation allowance is maintained against all deferred tax assets due to the company's history of cumulative operating losses[142](index=142&type=chunk) - There were no accrued interest and penalties related to uncertain tax positions as of March 31, 2025, and December 31, 2024[143](index=143&type=chunk) [12. Net Loss per Share](index=44&type=section&id=12.%20Net%20Loss%20per%20Share) This note presents the potentially dilutive shares excluded from the diluted net loss per share calculation due to the company's net loss Potentially Dilutive Shares Excluded from Diluted Loss per Share | Category | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Options to purchase common stock | 3,822 | 4,709 | | Performance-based awards and restricted stock units | 9,974 | 11,901 | | Employee stock purchase plan | 98 | 221 | | Convertible Notes | 0 | 7,411 | | **Total** | **13,894** | **24,242** | [13. Segment Reporting](index=46&type=section&id=13.%20Segment%20Reporting) This note confirms the company operates as a single reporting segment, with the CEO as the Chief Operating Decision Maker, and provides gross margin details - The company operates as a single reporting segment, focusing on the development and commercialization of molecular testing services[145](index=145&type=chunk) - The Chief Executive Officer (CEO) is the Chief Operating Decision Maker (CODM) and relies on consolidated financial statements to evaluate performance and make resource allocation decisions[145](index=145&type=chunk) Gross Margin | Metric | March 31, 2025 (in thousands except percentages) | March 31, 2024 (in thousands except percentages) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $501,830 | $367,741 | | Cost of product revenues | $184,613 | $158,833 | | Cost of licensing and other revenues | $452 | $307 | | Gross margin | $316,765 | $208,601 | | Gross margin percentage | 63.1% | 56.7% | [14. Subsequent Events](index=46&type=section&id=14.%20Subsequent%20Events) This note states that no material subsequent events were reported after the balance sheet date - No material subsequent events were reported[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, business overview, revenue and expense analysis, critical accounting policies, and liquidity for Q1 2025 and 2024 [Overview](index=47&type=section&id=Overview) This section provides a high-level description of Natera's diagnostics business, its technology, product offerings, sales channels, and key financial highlights for the period - Natera is a diagnostics company leveraging proprietary molecular and bioinformatics cell-free DNA (cfDNA) technology to provide personalized genetic testing and diagnostics across women's health, oncology, and organ health[149](index=149&type=chunk)[150](index=150&type=chunk) - The company processes tests in CLIA-certified laboratories and through third-party labs, marketing via a direct sales force and laboratory distribution partners, with most revenue from in-network insurers[151](index=151&type=chunk) - The Constellation cloud-based platform allows laboratory licensees to run molecular workflows and access Natera's bioinformatics, leading to lower revenue and gross profit per test but also reduced processing costs[152](index=152&type=chunk) Tests Processed Volume | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total tests processed | 855,100 | 735,800 | | Accessioned in laboratory | 840,800 | 718,700 | - The increase in test volume is primarily due to continued commercial growth of Signatera, Panorama, and Horizon[155](index=155&type=chunk) Revenue Distribution by Sales Channel | Channel | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | U.S. direct sales force | 96% | 94% | | U.S. laboratory distribution partners | 2% | 5% | | International laboratory distribution partners and other international sales | 2% | 2% | - Revenues from customers outside the United States were **$9.5 million** (approximately **2%** of total revenues) in Q1 2025, up from **$8.3 million** (approximately **2%** of total revenues) in Q1 2024[157](index=157&type=chunk) - Net loss for Q1 2025 was **$66.9 million**, including **$77.8 million** in non-cash stock compensation expense[158](index=158&type=chunk) [Components of the Results of Operations](index=49&type=section&id=Components%20of%20the%20Results%20of%20Operations) This section breaks down the key drivers of the company's financial performance, analyzing revenues, cost of revenues, and operating expenses [Revenues](index=49&type=section&id=Revenues) This subsection details the sources of product and licensing revenues, factors influencing their growth, and the impact of in-network contracts and the Constellation platform - Product revenues are primarily generated from sales of Panorama and Horizon tests through direct sales force and laboratory partners[159](index=159&type=chunk) - Licensing and other revenues include those from the Constellation model and strategic partnership agreements[160](index=160&type=chunk)[164](index=164&type=chunk) - Revenue growth depends on market penetration, new test development, obtaining reimbursement from additional third-party payers, and increasing reimbursement rates, particularly for microdeletions testing[161](index=161&type=chunk) - In-network contracts, while crucial for growth, typically result in lower negotiated fees and may adversely impact revenues and gross margins[163](index=163&type=chunk) - The Constellation cloud-based platform may lead to lower revenues per test because the company does not perform the molecular biology analysis in its own laboratory[165](index=165&type=chunk) [Cost of Product Revenues](index=51&type=section&id=Cost%20of%20Product%20Revenues) This subsection outlines the components of product revenue costs, including materials, personnel, and overhead, and factors influencing their changes - Components include material and service costs, impairment charges, personnel costs (including stock-based compensation), equipment and infrastructure expenses, shipping, third-party test processing fees, and allocated overhead[166](index=166&type=chunk) - Cost of product revenues is expected to increase in absolute dollars as the number of tests performed increases[166](index=166&type=chunk) - Improvements in the molecular and bioinformatics process for Panorama have reduced sequencing reagents, test steps, labor costs, and the frequency of blood redraws, while increasing accuracy[167](index=167&type=chunk) [Cost of Licensing and Other Revenues](index=51&type=section&id=Cost%20of%20Licensing%20and%20Other%20Revenues) This subsection describes the cost components for licensing and other revenues, primarily related to Constellation services and strategic partnerships - Components include material costs for test kits sold to Constellation clients and development/support services for strategic partnership agreements[168](index=168&type=chunk) - Cost of licensing and other revenues for the Constellation software platform is considered relatively low, leading to an expectation of higher associated gross margins, and is expected to increase with volume growth[169](index=169&type=chunk) [Expenses](index=52&type=section&id=Expenses) This subsection details the various operating expenses, including research and development, selling, general and administrative, interest, and other income/expense - Research and development expenses include personnel costs (including stock-based compensation), prototype materials, laboratory supplies, consulting, regulatory costs, EMR setup, clinical study costs, and allocated overhead, and are expected to increase with investment in new products[170](index=170&type=chunk) - Selling, general and administrative expenses include personnel costs (including stock-based compensation) for executive, sales, marketing, legal, finance, HR, billing, and client services, as well as direct marketing, audit, legal, consulting, training, payer outreach, and allocated overhead[171](index=171&type=chunk) - Interest expense is attributable to borrowings under the Credit Line and Convertible Senior Notes (prior to redemption)[172](index=172&type=chunk) - Interest income and other (expense) income, net, comprises interest on cash, realized gains/losses on investments, sublease rental income, and warrant, preferred shares, and foreign currency remeasurement gains/losses[173](index=173&type=chunk) [Critical Accounting Policies](index=52&type=section&id=Critical%20Accounting%20Policies) This section identifies the company's most significant accounting policies and estimates, specifically revenue recognition and stock-based compensation - The critical accounting policies and estimates are revenue recognition and stock-based compensation attributable to performance-based awards[174](index=174&type=chunk) - There have been no material changes to other critical accounting policies and estimates compared to the disclosures in the Annual Report on Form 10-K for the year ended December 31, 2024[175](index=175&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the potential impact of recently issued accounting standards updates on the company's financial statements - ASU 2023-09, 'Income Taxes - Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, is not expected to have a significant impact on consolidated financial statements[176](index=176&type=chunk) - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), effective for fiscal years beginning after December 15, 2026, is currently being evaluated for its impact[178](index=178&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial results for the three months ended March 31, 2025, and 2024 Comparison of Three Months Ended March 31, 2025 and 2024 | Metric | 2025 (in thousands except percentage) | 2024 (in thousands except percentage) | Change Amount (in thousands) | Change Percent | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :--------------------------- | :------------- | | Product revenues | $500,036 | $364,672 | $135,364 | 37.1% | | Licensing and other revenues | $1,794 | $3,069 | $(1,275) | (41.5)% | | **Total revenues** | **$501,830** | **$367,741** | **$134,089** | **36.5%** | | Cost of product revenues | $184,613 | $158,833 | $25,780 | 16.2% | | Cost of licensing and other revenues | $452 | $307 | $145 | 47.2% | | Research and development | $129,078 | $88,637 | $40,441 | 45.6% | | Selling, general and administrative | $266,864 | $194,278 | $72,586 | 37.4% | | **Total cost and expenses** | **$581,007** | **$442,055** | **$138,952** | **31.4%** | | Loss from operations | $(79,177) | $(74,314) | $(4,863) | (6.5)% | | Interest expense | $(1,005) | $(3,124) | $2,119 | 67.8% | | Interest and other income, net | $13,419 | $10,267 | $3,152 | 30.7% | | Loss before income taxes | $(66,763) | $(67,171) | $408 | 0.6% | | Income tax expense | $(173) | $(428) | $255 | 59.6% | | **Net loss** | **$(66,936)** | **$(67,599)** | **$663** | **1.0%** | - Total reported units processed increased to approximately **804,800** in Q1 2025 from **679,400** in Q1 2024, with oncology units processed increasing to **167,700** from **114,800**[181](index=181&type=chunk) - Product revenues increased primarily due to continued revenue growth from increased test volumes and average selling price improvements[182](index=182&type=chunk) - Licensing and other revenues decreased mainly due to a decrease in revenue from collaborative agreements[183](index=183&type=chunk) - Cost of product revenues increased due to higher inventory consumption (**$11.6 million**), third-party fees (**$5.3 million**), and labor, overhead, and other related costs (**$8.9 million**)[184](index=184&type=chunk) - Research and development expenses increased due to higher salary and related compensation (**$24.9 million**, including **$6.0 million** in stock-based compensation), lab and clinical trial expenses (**$7.5 million**), and other expenses (**$8.0 million**)[186](index=186&type=chunk) - Selling, general and administrative expenses increased due to higher salary and related compensation (**$38.4 million**, including **$6.0 million** in stock-based compensation), consulting and legal expenses (**$8.1 million**), and other operational costs[187](index=187&type=chunk) - Interest expense decreased due to the redemption of the Convertible Notes in October 2024[188](index=188&type=chunk) - Interest and other income increased primarily due to a **$3.2 million** gain on revaluation of warrants and preferred shares[189](index=189&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing cash flows, debt, and capital needs - The company has incurred net losses since inception, with a net loss of **$66.9 million** for Q1 2025 and an accumulated deficit of **$2.6 billion** as of March 31, 2025[190](index=190&type=chunk) - As of March 31, 2025, the company had **$973.8 million** in cash, cash equivalents, and restricted cash, **$17.8 million** in marketable securities, and an **$80.3 million** outstanding balance on its Credit Line[190](index=190&type=chunk) - The company believes its existing cash and marketable securities will be sufficient to meet anticipated cash requirements for at least **12 months** after May 8, 2025[193](index=193&type=chunk) - The Credit Line with UBS is a **$100.0 million** revolving line of credit, secured by investments, with an interest rate of 30-day SOFR average plus **0.5%**[194](index=194&type=chunk) - The **$287.5 million** aggregate principal amount of 2.25% Convertible Notes due 2027 were fully redeemed on October 11, 2024, primarily through physical settlement with common stock[196](index=196&type=chunk) Condensed Consolidated Cash Flows Summary | Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash provided by operating activities | $44,452 | $27,001 | | Cash provided by (used in) investing activities | $(16,815) | $138,255 | | Cash provided by financing activities | $544 | $6,466 | | **Net change in cash, cash equivalents and restricted cash** | **$28,181** | **$171,722** | | Cash, cash equivalents and restricted cash, beginning of period | $945,587 | $642,095 | | **Cash, cash equivalents and restricted cash, end of period** | **$973,768** | **$813,817** | - Cash provided by operating activities in Q1 2025 was **$44.5 million**, driven by non-cash charges offsetting net loss and cash inflows from operating liabilities, partially offset by cash outflows from operating assets[198](index=198&type=chunk) - Cash used in investing activities in Q1 2025 was **$16.8 million**, primarily due to **$21.8 million** in property and equipment acquisitions, partially offset by **$5.0 million** from investment maturities[200](index=200&type=chunk) - Cash provided by financing activities in Q1 2025 was **$0.5 million**, solely from proceeds from the exercise of stock options[202](index=202&type=chunk) - The company has contractual obligations related to lease commitments, the Credit Line, commercial supply agreements, and other operational agreements[203](index=203&type=chunk) - The company does not have any off-balance sheet arrangements[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily related to interest rate fluctuations affecting its Credit Line and investment portfolio, and foreign currency exchange rate changes, noting that inflation has not had a material effect to date - The Credit Line has a variable interest rate (30-day SOFR average + **0.5%**); an incremental **100 basis point** increase in borrowing rate would increase annual interest expense by **$0.8 million**[208](index=208&type=chunk) - The investment portfolio has a relatively short average maturity; an incremental **100 basis point** increase in investment yield would increase annual interest income by approximately **$0.2 million**[208](index=208&type=chunk) - Foreign currency exchange rate fluctuations may affect results as international operations expand, but the company has not historically hedged this risk[209](index=209&type=chunk) - Inflation has not had a material effect on the business, financial condition, or results of operations to date[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the period, while acknowledging the inherent limitations of any control system - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[213](index=213&type=chunk) - There have been no material changes in internal control over financial reporting during the three months ended March 31, 2025[214](index=214&type=chunk) - Management acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance and may be circumvented[215](index=215&type=chunk) [Part II – Other Information](index=62&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides additional disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8, 'Commitments and Contingencies—Legal Proceedings,' in the Notes to Unaudited Interim Condensed Consolidated Financial Statements for detailed information on ongoing legal proceedings, acknowledging the inherent uncertainties and potential adverse impacts from defense costs, settlements, and resource diversion - For information regarding current legal proceedings, refer to 'Note 8—Commitments and Contingencies—Legal Proceedings' in the Notes to Unaudited Interim Condensed Consolidated Financial Statements[218](index=218&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, emphasizing that investing in common stock involves high risk and that additional unknown risks may also exist - Investing in the company's common stock involves a **high degree of risk**[220](index=220&type=chunk) - Readers should carefully consider the risk factors discussed in Part I, Item 1A, 'Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2024[220](index=220&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also materially adversely affect the business, financial condition, or results of operations[220](index=220&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&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 or purchases of equity securities by the issuer or affiliated purchasers during the period, and the section on use of proceeds is not applicable - There were no unregistered sales of equity securities during the period[221](index=221&type=chunk) - The section on use of proceeds is not applicable[221](index=221&type=chunk) - There were no purchases of equity securities by the issuer and affiliated purchasers[221](index=221&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports that there were no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[222](index=222&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that this item is not applicable to the company - This item is not applicable to the company[223](index=223&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) This section discloses Rule 10b5-1 Trading Plans adopted or amended by Matthew Rabinowitz and Daniel Rabinowitz in March 2025 for the sale of common stock between June 2025 and December 2025/August 2026 - Matthew Rabinowitz, co-founder and executive chairman, adopted a Rule 10b5-1 Trading Plan on March 14, 2025, for the sale of **80,000 shares** of common stock between June 13, 2025, and December 13, 2025[224](index=224&type=chunk) - Daniel Rabinowitz, chief legal officer and secretary, amended a Rule 10b5-1 Trading Plan on March 14, 2025, for the sale of **19,908 shares** of common stock between June 13, 2025, and August 15, 2026[225](index=225&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section provides a detailed index of exhibits filed with the report, including certifications, XBRL documents, and an amendment to a supply agreement, noting specific filing details and incorporation by reference status - The exhibits include certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[227](index=227&type=chunk) - XBRL documents (Instance, Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase) are included as Exhibits 101.INS through 101.PRE[227](index=227&type=chunk) - Exhibit 10.1*+ is the Tenth Amendment to Supply Agreement, dated January 10, 2025, by and between the Registrant and Illumina, Inc[227](index=227&type=chunk) [Signatures](index=68&type=section&id=SIGNATURES) This section lists the principal executive and financial officers who signed the report and the date of signing - The report was signed on May 8, 2025, by Steve Chapman, Chief Executive Officer, President, and Director (Principal Executive Officer), and Michael Brophy, Chief Financial Officer (Principal Financial and Accounting Officer)[235](index=235&type=chunk)

Company Performance - Natera reported a quarterly loss of $0.50 per share, which was better than the Zacks Consensus Estimate of a loss of $0.59, and an improvement from a loss of $0.56 per share a year ago, representing an earnings surprise of 15.25% [1] - The company posted revenues of $501.83 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 13.19%, and showing a significant increase from year-ago revenues of $367.74 million [2] - Natera has surpassed consensus EPS estimates in all four of the last quarters [2] Stock Outlook - The immediate price movement of Natera's stock will largely depend on management's commentary during the earnings call and future earnings expectations [3] - Natera shares have increased by approximately 1.1% since the beginning of the year, contrasting with a decline of -4.3% in the S&P 500 [3] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is -$0.52 on revenues of $460.85 million, and for the current fiscal year, it is -$2.02 on revenues of $1.92 billion [7] - The estimate revisions trend for Natera is mixed, resulting in a Zacks Rank 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Industry Context - The Medical Services industry, to which Natera belongs, is currently ranked in the top 22% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, IceCure Medical Ltd. (ICCM), is expected to report a quarterly loss of $0.08 per share, with revenues projected at $0.75 million, reflecting a 1.4% increase from the year-ago quarter [9]

Financial Data and Key Metrics Changes - The company generated $520 million in revenue for Q1 2025, representing approximately 37% growth compared to $368 million in Q1 2024 [7][32] - Gross margins improved to 63% in Q1 2025, up from 52% a year ago, with underlying gross margin improvement of about 110 basis points from Q4 2024 [8][33] - The company generated $23 million in cash during the quarter while increasing investments in growth [8][20] Business Line Data and Key Metrics Changes - Women's Health volumes increased significantly, with over 40,000 units processed sequentially in Q1 2025 compared to Q4 2024 [14][81] - Organ Health saw over 50% year-on-year growth, driven by interest in donor-derived cell-free DNA tests [14] - Signatera clinical volumes grew 52% year-on-year, with a record increase of approximately 16,500 units compared to Q4 2024 [8][15] Market Data and Key Metrics Changes - The company processed 855,000 tests in Q1 2025, an 8% sequential increase over Q4 2024 [13] - The oncology segment is seeing significant growth, with over 45% of oncologists in the U.S. ordering Signatera tests last quarter [16] - The company expects revenues for the full year to be in the range of $1.94 billion to $2.02 billion, reflecting a $70 million increase from prior guidance [9] Company Strategy and Development Direction - The company is focused on expanding clinical utility and innovating to help more patients, particularly in oncology [16][21] - There is a strategic emphasis on increasing average selling prices (ASPs) through improved reimbursement operations and expanding into new tumor types [18][20] - The company aims to achieve gross margins above 70% over time, with significant potential opportunities identified [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of volume growth and ASP improvements, despite potential short-term headwinds from new product launches [35][36] - The company views 2025 as a crucial investment year, particularly for Signatera, with expectations of continued strong cash flow generation [20][37] - Management highlighted the importance of upcoming clinical data presentations at major conferences, which are expected to drive further growth [25][29] Other Important Information - The company has maintained a strong balance sheet with nearly $1 billion in cash and no debt outside of a line of credit [33] - The DEFINE study in heart transplantation demonstrated Prospera's ability to predict clinical outcomes, outperforming traditional biopsy methods [10][22] - The company is preparing for significant data presentations at ASCO, with nearly 30 abstracts planned across multiple tumor types [28][29] Q&A Session Summary Question: What drove the sequential volume growth in Signatera? - Management noted that strong clinical utility and data performance resonated with physicians, contributing to record growth [42] Question: Which clinical studies should be focused on for potential market impact? - Management highlighted the I SPY two trial and the DARE study as significant upcoming studies that could influence market volumes [45][46] Question: Were there any disruptions in Q1 due to weather or calendar dynamics? - Management acknowledged weather challenges but indicated that patient demand for tests remained strong, minimizing impact on volumes [54][56] Question: What is the outlook for ASPs and reimbursement? - Management expects stable ASPs in women's and organ health, with modest improvements in Signatera driven by increased Medicare Advantage coverage [74] Question: Can you provide an update on the colorectal screening front? - Management confirmed that the PRESIDE study has met its enrollment goals and will report results by the end of the year, with an FDA enabling study also underway [67][68]

Financial Data and Key Metrics Changes - The company generated $520 million in revenue for Q1 2025, representing approximately 37% growth compared to $368 million in Q1 2024 [5][6][14] - Gross margins improved to 63% in Q1 2025, up from 39% in previous quarters, with an underlying gross margin improvement of about 110 basis points from 59.3% in Q4 2024 to 60.4% in Q1 2025 [15][16][30] - The company generated $23 million in cash during the quarter, indicating strong cash flow generation despite increased investments in growth [6][17][30] Business Line Data and Key Metrics Changes - Women's Health volumes grew significantly, with over 40,000 units processed sequentially in Q1 2025, continuing strong growth from 2024 [12][30] - Organ Health saw over 50% year-on-year growth, driven by interest in donor-derived cell-free DNA and germline tests [12][30] - Signatera clinical volumes grew 52% year-on-year, with a record increase of approximately 16,500 units compared to Q4 2024 [6][13][14] Market Data and Key Metrics Changes - The company processed 855,000 tests in Q1 2025, an 8% sequential increase over Q4 2024 [11][12] - The oncology market is expanding, with over 45% of oncologists in the U.S. ordering Signatera tests last quarter [13][14] - The company anticipates that Signatera could eventually generate more than $5 billion in annual revenue, reflecting significant market potential [17][30] Company Strategy and Development Direction - The company is focused on expanding clinical utility and innovating to help more patients, particularly in oncology and women's health [13][17] - The company plans to continue funding high return on invested capital (ROIC) investments in commercial operations, clinical trials, and product improvements [17][30] - The company aims to achieve gross margins above 70% over time, with ongoing improvements in average selling prices (ASPs) and cost of goods sold (COGS) [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of revenue growth, driven by strong clinical utility and data generated from studies [41][42] - The company is optimistic about upcoming data presentations at major conferences, which are expected to enhance market presence and drive future growth [43][44] - Management highlighted the importance of maintaining cash flow breakeven while investing in growth opportunities, particularly in oncology [30][34] Other Important Information - The company raised its revenue guidance for 2025 to a range of $1.94 billion to $2.02 billion, reflecting a $70 million increase from previous guidance [7][31] - The company is preparing for significant data presentations at ASCO and ESMO conferences, with nearly 30 abstracts planned [25][26] - The company is also pursuing expansion into new histologies, including sarcoma, which presents a significant clinical unmet need [24][25] Q&A Session Summary Question: What drove the sequential volume growth in Signatera? - Management noted that strong clinical utility and a large commercial presence contributed to the record sequential growth, with expectations for continued utilization [40][41] Question: Which clinical studies should be focused on for potential volume growth? - Management highlighted the I SPY two trial and the DARE study as significant upcoming studies that could impact volumes positively [42][43] Question: Did weather or calendar dynamics affect Q1 performance? - Management acknowledged that weather challenges existed but did not significantly impact volumes, as patients still sought necessary tests [54][56] Question: What is the outlook for ASPs and reimbursement? - Management indicated stable ASPs in women's health and organ health, with modest improvements expected in Signatera due to increased reimbursement rates [71][75] Question: What is the status of the colorectal screening study? - Management confirmed that the PRESIDE study has met its enrollment goals and results are expected by the end of the year [67][68]

Financial Performance - Revenue reached $502 million in Q1 2025, a 37% increase compared to $368 million in Q1 2024[9] - Gross margin was 63% in Q1 2025, up from 57% in Q1 2024, with approximately $23 million in cash inflow generated[9] - The company is increasing its 2025 financial outlook, projecting revenue of $1.94 billion - $2.02 billion, representing a pro-forma revenue growth of approximately 26%, with a gross margin of 60% - 64% and positive cash flow generation[9] Volume and Test Growth - Total tests processed in Q1 2025 reached 855K, a 16% increase compared to 736K in Q1 2024[9] - Clinical oncology tests saw significant growth, with 161K tests in Q1 2025, a 52% increase compared to 106K in Q1 2024[9] - Signatera clinical units experienced substantial sequential growth, increasing by approximately 165K units compared to Q4 2024[14] Product and Clinical Data Highlights - Prospera Heart demonstrated strong performance with donor quantity score (DQS) in detecting allograft rejection, as published in the American Journal of Transplantation, showing an 8357% specificity[22] - The DEFINE-HT clinical trial showed that patients with elevated Prospera had a significantly higher risk for adverse events (HR: 256, p=00299)[24] - In the I-SPY 2 breast cancer trial, Signatera quantification was identified as a significant risk factor for recurrence[30] - A sarcoma study with over 200 patients and 2100 samples showed 89% sensitivity and 100% specificity overall, and 93% sensitivity and 100% specificity for Leiomyosarcoma[33]

[Overview and Highlights](index=1&type=section&id=Recent%20Strategic%20and%20Financial%20Highlights) [Q1 2025 Highlights](index=1&type=section&id=Recent%20Strategic%20and%20Financial%20Highlights) Natera reported strong Q1 2025 results, with revenue up 36.5% to $501.8 million, gross margin at 63.1%, and positive cash flow - CEO highlighted strong volume growth, including record Signatera test performance, driven by technology and clinical data strength[3](index=3&type=chunk) Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues (Millions USD) | $501.8 | $367.7 | +36.5% | | Gross Margin (%) | 63.1% | 56.7% | +6.4 p.p. | | Total Tests Processed (Units) | ~855,100 | ~735,800 | +16.2% | | Oncology Tests Performed (Units) | ~167,700 | ~114,800 | +46.1% | | Cash Flow (Millions USD) | $23.2 | N/A | N/A | [Financial Performance](index=1&type=section&id=First%20Quarter%20Ended%20March%2031%2C%202025%20Financial%20Results) [Q1 2025 Financial Results](index=1&type=section&id=First%20Quarter%20Ended%20March%2031%2C%202025%20Financial%20Results) Natera's Q1 2025 revenues grew 36.5% to $501.8 million, gross margin expanded to 63.1%, and net loss was $66.9 million Q1 2025 vs Q1 2024 Financial Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues (Thousands USD) | $501,830 | $367,741 | | Gross Profit (Thousands USD) | $316,800 | $208,600 | | Gross Margin (%) | 63.1% | 56.7% | | Loss from Operations (Thousands USD) | ($79,177) | ($74,314) | | Net Loss (Thousands USD) | ($66,936) | ($67,599) | | Diluted Net Loss per Share (USD) | ($0.50) | ($0.56) | - Product revenue growth was driven by higher test volumes, improved average selling price, and prior period cash collections[3](index=3&type=chunk) - Operating expenses increased due to headcount growth for new products, along with higher consulting and legal costs[7](index=7&type=chunk) [Test Volume Analysis](index=1&type=section&id=Test%20Volume%20Summary) Q1 2025 test volumes grew, with total tests processed up 16.2% to 855,100 and tests reported increasing 18.5% Test Volume Breakdown (Q1 2025 vs Q1 2024) | Unit | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Tests processed (Units) | 855,100 | 735,800 | +16.2% | | Tests accessioned (Units) | 840,800 | 718,700 | +17.0% | | Tests reported (Units) | 804,800 | 679,400 | +18.5% | - Oncology tests significantly drove growth, increasing **46.1% year-over-year** to approximately **167,700 tests** in Q1 2025[4](index=4&type=chunk) [Financial Position and Cash Flow](index=1&type=section&id=Financial%20Position%20and%20Cash%20Flow) Natera ended Q1 2025 with strong liquidity of $991.6 million in cash and equivalents, achieving positive cash flow - Achieved positive cash flow of approximately **$23.2 million** in Q1 2025, from **$44.5 million** operating cash flow and **$0.5 million** financing cash flow, offset by **$21.8 million** capital expenditures[4](index=4&type=chunk)[19](index=19&type=chunk) Cash and Debt Position | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, equivalents, investments, restricted cash (Millions USD) | $991.6 | $968.3 | | Total outstanding debt (Millions USD) | $80.3 | N/A | [2025 Financial Outlook](index=2&type=section&id=Financial%20Outlook) [Full-Year 2025 Guidance](index=2&type=section&id=Financial%20Outlook) Natera projects 2025 total revenues of **$1.94 billion to $2.02 billion**, gross margins of **60-64%**, and positive net cash inflow 2025 Financial Guidance | Metric | 2025 Guidance | | :--- | :--- | | Total Revenue (Billions USD) | $1.94 to $2.02 | | Gross Margin (% of Revenues) | ~60% to 64% | | Selling, General & Administrative Costs (Billions USD) | $0.975 to $1.05 | | Research & Development Costs (Millions USD) | $550 to $590 | | Net Cash Inflow | Positive | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, Natera's total assets were **$1.73 billion**, liabilities **$492.7 million**, and stockholders' equity **$1.24 billion** Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets (Thousands USD) | $1,416,385 | $1,375,820 | | **Total assets (Thousands USD)** | **$1,732,366** | **$1,660,735** | | Total current liabilities (Thousands USD) | $365,677 | $344,045 | | **Total liabilities (Thousands USD)** | **$492,691** | **$465,315** | | **Total stockholders' equity (Thousands USD)** | **$1,239,675** | **$1,195,420** | [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q1 2025 total revenues were **$501.8 million**, with a net loss of **$66.9 million**, an improvement from **$67.6 million** net loss in Q1 2024 Statement of Operations Summary (in thousands, except per share data) | Account | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues (Thousands USD) | $501,830 | $367,741 | | Total cost and expenses (Thousands USD) | $581,007 | $442,055 | | Loss from operations (Thousands USD) | ($79,177) | ($74,314) | | **Net loss (Thousands USD)** | **($66,936)** | **($67,599)** | | **Net loss per share (USD)** | **($0.50)** | **($0.56)** | [Other Information](index=3&type=section&id=Other%20Information) [About Natera](index=3&type=section&id=About%20Natera) Natera is a global leader in cell-free DNA and genetic testing, focusing on oncology, women's health, and organ health - Natera's core business areas include oncology, women's health, and organ health, leveraging cell-free DNA and genetic testing[12](index=12&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements) Forward-looking statements are subject to risks including financial goals, competition, product performance, reimbursement, and FDA LDT regulations - Report projections are forward-looking, based on current estimates, and not guarantees of future performance[14](index=14&type=chunk) - Significant risks include competition, reimbursement challenges, product liability, and compliance costs with governmental regulations like FDA LDT rules[15](index=15&type=chunk)

Group 1 - Natera Inc. (NTRA) demonstrates strong growth potential as evidenced by its recent earnings release for 4Q24, highlighting a robust genetic testing portfolio that supports high margins and continued double-digit growth rates [1] - The company's strategy includes reinvestments aimed at sustaining its growth trajectory, indicating a focus on long-term value creation [1] Group 2 - The article emphasizes the importance of identifying undervalued stocks, suggesting that Natera Inc. may be a candidate for investment consideration due to its growth story [1]

Group 1 - Natera reported revenue of $476.06 million for the quarter ended December 2024, reflecting a 53% increase year-over-year [1] - The company's EPS was -$0.41, an improvement from -$0.64 in the same quarter last year [1] - Revenue exceeded the Zacks Consensus Estimate of $471.92 million by 0.88%, and EPS also surpassed the consensus estimate of -$0.42 by 2.38% [1] Group 2 - The volume of tests processed was 792,800, exceeding the average estimate of 771,561 based on three analysts [4] - Licensing and other revenues were reported at $3.15 million, below the four-analyst average estimate of $3.48 million, representing a year-over-year decline of 18.3% [4] - Product revenues reached $472.90 million, significantly higher than the average estimate of $406.47 million, marking a year-over-year increase of 53.9% [4] Group 3 - Natera's stock has returned -19.2% over the past month, compared to a -5.6% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Revenues for Q4 2024 were $476 million, representing a 53% year-on-year increase and exceeding the pre-announcement of $472 million by $4 million [10] - Volumes increased by 26% compared to Q4 of the previous year, with gross margins improving to 63% from 51% a year ago [10][19] - Cash flow generated in Q4 was approximately $46 million, contributing to a total of about $86 million for the full year [11][21] Business Line Data and Key Metrics Changes - Women's health saw strong organic growth, bolstered by new features and datasets, while organ health volumes rose nearly 50% year-on-year [14] - Signatera clinical volumes surged approximately 60% compared to Q4 2023, with nearly 15,000 units growth over Q3 2024 [15] - Average selling prices (ASPs) for Signatera improved to roughly $1,100 in Q4, with steady progress noted for Panorama and Horizon ASPs [16] Market Data and Key Metrics Changes - The company reported significant advancements in reimbursement coverage, including a strong increase in the Medicare ADLT rate and new coverage policies from commercial health plans [24][26] - The NCCN guidelines have strengthened the position of cell-free DNA testing across various tumor types, enhancing the accessibility of Signatera [13][45] Company Strategy and Development Direction - The company aims to reinvest generated cash flows into the business to enhance growth profiles in 2026 and beyond, focusing on expanding payer coverage and leveraging data insights [22][23] - Natera is deploying AI tools to optimize claims processing and improve operational efficiency, which is expected to enhance customer experience and product performance [29][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing momentum into 2025, with expectations for continued volume growth and stable ASPs across business lines [70] - The guidance for 2025 anticipates revenues between $1.87 billion and $1.95 billion, based on positive trends observed in recent quarters [69] Other Important Information - The company retired convertible notes early in Q4, leaving it with nearly $1 billion in cash and effectively no debt aside from a line of credit [68] - Significant clinical trial results are anticipated in 2025, which could further drive adoption and revenue growth [52] Q&A Session Summary Question: Potential for Signatera ASPs to reach around $2,000 - Management indicated that as more coverage policies are established, revenue per test could effectively double, aligning with the potential for higher ASPs over time [87] Question: Volume growth expectations for Signatera in 2025 - Management noted that while the guidance is set above the previous target of 8,000 to 10,000 units per quarter, they expect to see strong volume growth, potentially reaching levels seen in 2024 [100][102] Question: True-ups and their impact on future guidance - Management explained that true-ups are expected to moderate over time as cash collections improve, but they do not guide on true-ups due to their unpredictable nature [108][109] Question: Feedback on genome-based products from the oncology community - Positive feedback has been received from both the academic and pharmaceutical communities regarding the new genome-based products, which are seen as valuable for clinical research [118]