UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-38943 Personalis, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 27-5411038 (State or ...

Financial Data and Key Metrics Changes - Revenues for Q2 2020 were $19.5 million, up 23% from $15.8 million in the same period last year, marking a new record high for quarterly revenues [33][41] - Gross margin improved to 24% from 21.1% in the prior quarter, despite a negative impact of approximately 80 basis points from COVID-19 related higher labor costs [36][41] - Net loss for Q2 was $9.3 million, compared to a net loss of $5.9 million for the same period last year, with a net loss per share of $0.29 [41][43] Business Line Data and Key Metrics Changes - The company sequenced about 14,000 whole human genomes in Q2, a 70% increase from Q2 last year [8] - Revenue from the NeXT platform exceeded $2 million in Q2, contributing to overall revenue growth despite a decline from biobank customers [34] - Revenue from pharmaceutical customers increased by more than 20% sequentially, offsetting declines from biobank and biotech customers [10][33] Market Data and Key Metrics Changes - VA MVP revenue was $14.8 million, flat from the prior quarter but up 73% from $8.5 million in the same period last year [35] - Unfulfilled orders from the VA MVP at the end of Q2 totaled $39.3 million, expected to convert to revenue over the next two to three quarters [35] Company Strategy and Development Direction - The company is expanding its liquid biopsy product line, which is designed to complement its tissue biopsy offerings, enhancing its competitive position [11][14] - A new lab and commercial operations are being established in China to support international pharmaceutical companies conducting clinical trials [18][20] - The company aims to leverage its experience with the VA MVP program to explore new opportunities in population sequencing globally [23][91] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth, citing strong order levels from biopharma customers and the successful launch of the NeXT Liquid Biopsy [15][30] - The company anticipates challenges due to the ongoing pandemic but remains optimistic about future revenue streams and product adoption [43][30] Other Important Information - The company has expanded its commercial team in the U.S. and Europe to engage with more biopharma companies for potential companion diagnostic development [20] - The population sequencing business is on track to reach 100,000 whole human genome sequences by the end of the year, a significant milestone [21] Q&A Session Summary Question: Integration of electronic health record data with VA MVP project - Management confirmed that the VA MVP has a significant advantage due to the integration of electronic health records, which are already in electronic format [46][50] Question: Strategy for partnership with Berry Genomics in China - The company aims to set up sequencing capabilities in China to comply with local regulations, driven by requests from international pharmaceutical customers [51] Question: Differentiation of the liquid biopsy program in the market - The liquid biopsy product is designed to be used alongside tissue biopsy, providing comprehensive data across all 20,000 human genes, which is a significant differentiator [56][58] Question: Average order size and contract structure for NeXT - Orders typically cover all samples collected during clinical trials, which can be hundreds or even thousands of samples, with some contracts set up as blanket orders [66][68] Question: Impact of increased enrollment in the VA MVP - The increase in target enrollment to 2 million is expected to take about 10 years, with ongoing support for the program anticipated [81][84]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2020, shows total assets decreased to **$145.5 million**, primarily due to reduced cash Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $25.0 | $55.0 | | Total current assets | $120.1 | $139.6 | | Total assets | $145.5 | $157.3 | | Total current liabilities | $43.0 | $50.0 | | Total liabilities | $52.4 | $50.6 | | Total stockholders' equity | $93.1 | $106.7 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenues increased in Q2 and H1 2020, but net losses widened to **$9.3 million** and **$18.4 million** respectively Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $19.5 | $15.8 | $38.7 | $29.9 | | Loss from operations | $(9.5) | $(4.1) | $(19.1) | $(9.5) | | Net loss | $(9.3) | $(5.9) | $(18.4) | $(11.6) | | Net loss per share | $(0.29) | $(0.89) | $(0.58) | $(2.38) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to **$24.0 million** in H1 2020, leading to a **$30.0 million** decrease in cash Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(24.0) | $(10.8) | | Net cash used in investing activities | $(7.7) | $(2.8) | | Net cash provided by financing activities | $1.6 | $157.2 | | Net change in cash and cash equivalents | $(30.0) | $143.5 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, business operations, significant customer concentration, revenue recognition, and stock-based compensation - The company's primary business is providing sequencing and data analysis services for cancer therapy development and population sequencing initiatives, with the majority of revenues coming from the latter[33](index=33&type=chunk) Significant Customer Concentration | Customer | % of Revenues (H1 2020) | % of Revenues (H1 2019) | % of A/R (June 30, 2020) | | :--- | :--- | :--- | :--- | | VA MVP | 76% | 56% | 17% | | Pfizer Inc. | * | 20% | 44% | *Less than 10% - As of June 30, 2020, the company had **$39.3 million** in contracted but not yet recognized revenues, which are expected to be recognized within the next nine months[77](index=77&type=chunk) - Total stock-based compensation expense for the six months ended June 30, 2020 was **$3.1 million**, an increase from **$2.3 million** in the prior-year period[120](index=120&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting **29%** revenue growth driven by VA MVP, rising costs, and COVID-19 impacts [Overview](index=28&type=section&id=Overview) Personalis, a cancer genomics company, provides molecular data services, with significant revenue from VA MVP, impacted by COVID-19 - The company's NeXT Platform is designed to provide comprehensive information on all **~20,000 human genes** to support biopharmaceutical customers[135](index=135&type=chunk) - The COVID-19 pandemic and related shelter-in-place orders have negatively impacted productivity, disrupted business operations, and slowed research and development activities. Several customers were delayed in sending samples during the second quarter[138](index=138&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) H1 2020 revenues increased **29%** to **$38.7 million**, driven by VA MVP, but rising costs led to a **$19.1 million** operating loss Revenues by Customer Type (in millions) | Customer Type | H1 2020 | H1 2019 | % Change | | :--- | :--- | :--- | :--- | | VA MVP | $29.5 | $16.9 | 75% | | All other customers | $9.2 | $13.0 | (30)% | | **Total revenues** | **$38.7** | **$29.9** | **29%** | - Cost of revenues increased by **50%** in H1 2020, primarily due to a **$7.4 million** increase in production materials for higher VA MVP volumes and a **$1.1 million** increase in personnel-related costs[159](index=159&type=chunk) - Selling, general and administrative expenses increased by **55%** in H1 2020, driven by a **$3.3 million** increase in personnel costs to expand the commercial team and a **$1.9 million** increase in professional services related to being a public company[163](index=163&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, the company had **$105.2 million** in cash and investments, with **$24.0 million** net cash used in operations - The company held **$25.0 million** in cash and cash equivalents and **$80.2 million** in short-term investments as of June 30, 2020[168](index=168&type=chunk) - Net cash used in operating activities increased to **$24.0 million** in H1 2020 from **$10.8 million** in H1 2019[168](index=168&type=chunk)[174](index=174&type=chunk) - The company paid off its Growth Capital Loan in August 2019 and has had no outstanding debt since[172](index=172&type=chunk)[179](index=179&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[189](index=189&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were effective[190](index=190&type=chunk) - There were no changes in internal control over financial reporting during the second quarter of 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[191](index=191&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that would materially affect its business - As of the report date, the company is not involved in any material legal proceedings[193](index=193&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including net losses, customer concentration, competition, regulatory changes, and supplier reliance [Risks Related to Our Business and Strategy](index=36&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) The company faces business risks including net losses, high customer concentration with VA MVP, COVID-19 disruptions, and sole supplier reliance - The company has a history of net losses, with a net loss of **$18.4 million** for the six months ended June 30, 2020, and an accumulated deficit of **$159.0 million**[195](index=195&type=chunk) - The company has substantial customer concentration, with the VA MVP accounting for **76%** of revenues in the first half of 2020. The loss of this customer would have a material adverse effect[209](index=209&type=chunk) - The COVID-19 pandemic poses a significant risk, with shelter-in-place orders having already disrupted operations, slowed R&D, and delayed customer sample shipments[200](index=200&type=chunk)[202](index=202&type=chunk) - The company relies on Illumina as the sole supplier for its sequencers and associated reagents, and any disruption in this supply chain could significantly impact laboratory operations[216](index=216&type=chunk) [Risks Related to Government Regulation](index=49&type=section&id=Risks%20Related%20to%20Government%20Regulation) The company faces regulatory risks from potential FDA regulation of LDTs as medical devices, and compliance with CLIA and state licensing - The FDA has historically exercised enforcement discretion for LDTs, but it may change this policy, which could require the company to seek premarket clearance or approval for its tests[269](index=269&type=chunk) - If the FDA were to regulate its tests as medical devices, the company could face a lengthy and costly 510(k) or PMA process, potentially delaying or halting sales[272](index=272&type=chunk)[274](index=274&type=chunk) - The company must comply with CLIA and various state licensing requirements. Failure to maintain these certifications and licenses could result in the inability to perform tests and lead to significant penalties[282](index=282&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk) [Risks Related to Our Intellectual Property](index=57&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on protecting its intellectual property, facing risks from infringement claims, patent law uncertainty, and trade secrets - The company may face intellectual property infringement claims from third parties, which could block its ability to perform tests or result in substantial expenses and diversion of resources[301](index=301&type=chunk) - Recent court decisions regarding the patentability of natural phenomena and laws of nature create uncertainty and may adversely affect the company's ability to obtain and enforce patents on its genetic diagnostic tests[310](index=310&type=chunk) - The company relies on trade secrets and confidentiality agreements to protect proprietary information, but these measures may not be adequate to prevent unauthorized disclosure or use by employees, collaborators, or competitors[325](index=325&type=chunk)[326](index=326&type=chunk) [Risks Related to Our Common Stock](index=66&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Risks related to common stock include price volatility, insider control, potential future stock sales, no dividends, and reduced reporting as an EGC - The market price of the company's common stock may be volatile due to factors such as fluctuating operating results, analyst reports, and general market conditions[343](index=343&type=chunk) - Directors, executive officers, and major shareholders exercise significant influence over corporate matters, which could delay or prevent a change of control[348](index=348&type=chunk) - The company is an "emerging growth company" under the JOBS Act, allowing it to comply with reduced public company reporting requirements[368](index=368&type=chunk) - The company has never paid dividends and does not expect to in the foreseeable future, meaning investment returns are dependent on stock price appreciation[352](index=352&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There has been no material change in the planned use of proceeds from the company's Initial Public Offering - There has been no material change in the planned use of proceeds from the company's IPO[377](index=377&type=chunk) [Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[378](index=378&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[379](index=379&type=chunk) [Other Information](index=72&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[380](index=380&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including amendments, plans, and certifications - The report includes several exhibits, such as an amendment to a lease, an amendment to an employment letter, the 2020 Inducement Plan, and required CEO/CFO certifications[385](index=385&type=chunk)

Personalis, Inc. (NASDAQ:PSNL) Q1 2020 Earnings Conference Call May 7, 2020 5:00 PM ET Company Participants Caroline Corner – Westwicke ICR John West – President and Chief Executive Officer Aaron Tachibana – Chief Financial Officer Conference Call Participants Subbu Nambi – Cowen & Company Kevin DeGeeter – Oppenheimer Operator Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 Personalis Earnings Conference Call. At this time, all participant lines are in listen-only mode. After the ...

[SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements about future operations, financial condition, business strategy, and plans - This report contains forward-looking statements about future operations, financial condition, business strategy, and plans[9](index=9&type=chunk) - Actual events or results may differ materially from forward-looking statements due to risks, uncertainties, and assumptions detailed in the "Risk Factors" section[10](index=10&type=chunk) - The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the report date, except as required by law[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Personalis, Inc.'s unaudited condensed consolidated financial statements and detailed accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | (in thousands) | March 31, 2020 | December 31, 2019 | | :------------- | :------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $46,694 | $55,046 | | Short-term investments | $73,339 | $73,243 | | Total current assets | $135,416 | $139,578 | | Total assets | $151,878 | $157,291 | | **Liabilities & Equity** | | | | Total current liabilities | $52,120 | $49,962 | | Total liabilities | $52,676 | $50,601 | | Total stockholders' equity | $99,202 | $106,690 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | (in thousands, except per share data) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $19,161 | $14,075 | | Costs of revenues | $15,122 | $10,091 | | Research and development | $6,390 | $5,245 | | Selling, general and administrative | $7,274 | $4,170 | | Total costs and expenses | $28,786 | $19,506 | | Loss from operations | $(9,625) | $(5,431) | | Net loss | $(9,139) | $(5,685) | | Net loss per share, basic and diluted | $(0.29) | $(1.84) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(9,139) | $(5,685) | | Other comprehensive income (loss), net of tax | | | | Foreign currency translation adjustment | $(5) | $15 | | Change in unrealized gain on available-for-sale debt securities | $84 | — | | Comprehensive loss | $(9,060) | $(5,670) | [Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) | (in thousands, except share data) | Balance—December 31, 2019 | Balance—March 31, 2020 | | :-------------------------------- | :------------------------ | :--------------------- | | Common Stock Shares | 31,243,029 | 31,530,443 | | Common Stock Amount | $3 | $3 | | Additional Paid-In Capital | $247,282 | $248,854 | | Accumulated Other Comprehensive Loss | $(6) | $73 | | Accumulated Deficit | $(140,589) | $(149,728) | | Total Stockholders' Equity | $106,690 | $99,202 | - The accumulated deficit increased to **$149.7 million** as of March 31, 2020, from **$140.6 million** at December 31, 2019, primarily due to the net loss incurred[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(8,643) | $66 | | Net cash used in investing activities | $(35) | $(960) | | Net cash provided by financing activities | $323 | $14,386 | | Net change in cash and cash equivalents | $(8,352) | $13,493 | | Cash and cash equivalents, end of period | $46,694 | $33,237 | - Net cash used in operating activities was **$8.6 million** in Q1 2020, a significant shift from **$0.1 million** provided in Q1 2019[27](index=27&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Company and Nature of Business](index=9&type=section&id=Note%201.%20Company%20and%20Nature%20of%20Business) - Personalis, Inc. is a cancer genomics company providing sequencing and data analysis services for next-generation cancer therapies and population sequencing initiatives[29](index=29&type=chunk) - The company has incurred **losses since inception** and expects to continue investing resources in business development, product development, and sales and marketing[30](index=30&type=chunk) - Services are sold primarily to pharmaceutical/biopharmaceutical companies, universities, non-profits, and government entities, with population sequencing initiatives (e.g., VA MVP) accounting for the majority of revenues[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, with certain information condensed or omitted[31](index=31&type=chunk) - The company completed an IPO on June 20, 2019, issuing **9,109,725 shares** of common stock at **$17.00 per share**, generating net proceeds of **$139.8 million**[35](index=35&type=chunk) | Significant Customers | Revenues (Q1 2020) | Revenues (Q1 2019) | Accounts Receivable (Mar 31, 2020) | Accounts Receivable (Dec 31, 2019) | | :------------------ | :----------------- | :----------------- | :--------------------------------- | :--------------------------------- | | VA MVP | 77% | 59% | 36% | 19% | | Pfizer Inc. | <10% | 17% | 12% | 23% | | Indivumed GmbH | <10% | <10% | 22% | 30% | [Note 3. Revenues](index=14&type=section&id=Note%203.%20Revenues) | Customer Type | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :------------ | :----------------------------------------------- | :----------------------------------------------- | | VA MVP | $14,756 | $8,343 | | All other customers | $4,405 | $5,732 | | Total | $19,161 | $14,075 | - Revenues from countries outside the United States increased from approximately **2% in Q1 2019 to 9% in Q1 2020**[70](index=70&type=chunk) - Contracted not recognized revenues were **$54.0 million** as of March 31, 2020, expected to be recognized over the next 12 months[73](index=73&type=chunk) [Note 4. Balance Sheet Details](index=15&type=section&id=Note%204.%20Balance%20Sheet%20Details) | (in thousands) | March 31, 2020 | December 31, 2019 | | :------------- | :------------- | :---------------- | | **Inventory and other deferred costs** | | | | Raw materials | $3,919 | $1,424 | | Other deferred costs | $2,519 | $3,182 | | Total | $6,438 | $4,606 | | (in thousands) | March 31, 2020 | December 31, 2019 | | :------------- | :------------- | :---------------- | | **Accrued and other current liabilities** | | | | Accrued compensation | $5,399 | $4,147 | | Operating lease liabilities | $1,107 | $1,361 | | Accrued taxes | $57 | $210 | | Accrued liabilities | $268 | $689 | | Other current liabilities | $544 | $241 | | Total | $7,375 | $6,648 | - Depreciation and amortization expense increased from **$1.0 million in Q1 2019 to $1.4 million in Q1 2020**[75](index=75&type=chunk) [Note 5. Fair Value Measurements](index=15&type=section&id=Note%205.%20Fair%20Value%20Measurements) | (in thousands) | March 31, 2020 Fair Value | December 31, 2019 Fair Value | | :------------- | :------------------------ | :--------------------------- | | **Cash and cash equivalents** | | | | Cash | $4,015 | $1,271 | | Money market funds | $25,042 | $12,495 | | Commercial paper | $17,637 | $41,280 | | Total cash and cash equivalents | $46,694 | $55,046 | | **Short-term investments** | | | | Commercial paper | $17,636 | $17,892 | | U.S. government securities | $2,008 | $4,011 | | Corporate debt securities | $12,894 | $13,948 | | U.S. agency securities | $38,603 | $32,794 | | Asset-backed securities | $2,198 | $4,598 | | Total short-term investments | $73,339 | $73,243 | | Total assets measured at fair value | $120,033 | $128,289 | - The company began investing in marketable debt securities in Q3 2019 and has **not recorded any impairment charges** related to other-than-temporary declines in market value[78](index=78&type=chunk) [Note 6. Borrowings](index=17&type=section&id=Note%206.%20Borrowings) - No amounts were outstanding under financing arrangements as of **March 31, 2020**, or **December 31, 2019**[83](index=83&type=chunk) - The Revolving Loan was repaid in full on **March 22, 2019**, and the Growth Capital Loan was paid off in its entirety on **August 14, 2019**[87](index=87&type=chunk)[90](index=90&type=chunk) [Note 7. Leases](index=18&type=section&id=Note%207.%20Leases) - Operating lease cost increased from **$0.2 million in Q1 2019 to $0.3 million in Q1 2020**[95](index=95&type=chunk) - As of March 31, 2020, the weighted average remaining lease term for operating leases was **1.6 years**, with a weighted average incremental borrowing rate of **7.2%**[95](index=95&type=chunk) | Future Minimum Lease Payments (in thousands) | Amount | | :--------------------------------------- | :----- | | 2020 (remaining nine months) | $1,039 | | 2021 | $403 | | 2022 | $319 | | Total future minimum lease payments | $1,761 | | Less: imputed interest | $(98) | | Present value of future minimum lease payments | $1,663 | | Less: current portion of operating lease liability | $(1,107) | | Operating lease liabilities - noncurrent | $556 | [Note 8. Redeemable Convertible Preferred Stock](index=19&type=section&id=Note%208.%20Redeemable%20Convertible%20Preferred%20Stock) - All outstanding Redeemable Convertible Preferred Stock automatically converted into **18,474,703 shares** of common stock immediately prior to the IPO closing[99](index=99&type=chunk) [Note 9. Stock-Based Compensation](index=19&type=section&id=Note%209.%20Stock-Based%20Compensation) | Stock-Based Compensation Expense (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Costs of revenues | $143 | $85 | | Research and development | $259 | $164 | | Selling, general and administrative | $847 | $360 | | Total stock-based compensation expense | $1,249 | $609 | - As of March 31, 2020, unrecognized stock-based compensation cost for unvested options was **$10.5 million** (expected over **2.7 years**) and for unvested RSUs was **$2.4 million** (expected over **2.9 years**)[106](index=106&type=chunk)[113](index=113&type=chunk) - A performance-based stock option (PSO) was granted to the CEO in March 2020 for **421,000 shares**, vesting upon a market price condition, with an estimated fair value of **$3.31 per share**[108](index=108&type=chunk)[110](index=110&type=chunk) [Note 10. Redeemable Convertible Preferred Stock Warrants](index=22&type=section&id=Note%2010.%20Redeemable%20Convertible%20Preferred%20Stock%20Warrants) - Redeemable convertible preferred stock warrants automatically converted to common stock warrants immediately prior to the IPO closing[123](index=123&type=chunk) - The fair value of the preferred stock warrant liability (**$2.1 million**) was reclassified to additional paid-in capital upon conversion, with no further remeasurements[123](index=123&type=chunk) [Note 11. Common Stock Warrants](index=23&type=section&id=Note%2011.%20Common%20Stock%20Warrants) - A warrant to purchase **188,643 shares** of common stock was exercised in June 2019 prior to the IPO and is no longer outstanding[125](index=125&type=chunk) - A warrant to purchase **65,502 shares** of common stock was issued in connection with the Growth Capital Loan on March 22, 2019, at an exercise price of **$9.16 per share**, and remains outstanding as of March 31, 2020[126](index=126&type=chunk) [Note 12. Commitments and Contingencies](index=23&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) - The company is subject to claims and assessments in the ordinary course of business but was not involved in any material legal proceedings as of March 31, 2020[127](index=127&type=chunk) - The company enters into contracts with indemnification provisions, but exposure is unknown, and no claims have been paid to date[128](index=128&type=chunk) [Note 13. Net Loss per Share Attributable to Common Stockholders](index=24&type=section&id=Note%2013.%20Net%20Loss%20per%20Share%20Attributable%20to%20Common%20Stockholders) | (in thousands, except share and per share data) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to common stockholders | $(9,139) | $(5,685) | | Weighted-average shares outstanding (basic and diluted) | 31,345,029 | 3,091,342 | | Net loss per share (basic and diluted) | $(0.29) | $(1.84) | - Potentially dilutive securities were excluded from diluted net loss per share calculation for both periods as their inclusion would have been **antidilutive** due to net losses[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations for Q1 2020, including COVID-19 impacts [Overview](index=25&type=section&id=Overview) - Personalis is a cancer genomics company transforming therapy development by providing comprehensive molecular data via its NeXT Platform for biopharmaceutical customers and population sequencing initiatives[133](index=133&type=chunk) | Financial Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change (%) | | :--------------- | :-------------------------------- | :-------------------------------- | :--------- | | Revenues | $19.2 million | $14.1 million | 36% | | Net Loss | $9.1 million | $5.7 million | 60% | - The COVID-19 pandemic has impacted operations, leading to limited laboratory access, delayed sample submissions from customers, and restricted in-person meetings, potentially affecting productivity and financial results[137](index=137&type=chunk)[138](index=138&type=chunk) - The company expects its **$120.0 million** in cash and short-term investments as of March 31, 2020, to sustain operations for at least the next **12 months**[136](index=136&type=chunk) [Components of Operating Results](index=26&type=section&id=Components%20of%20Operating%20Results) [Revenues](index=26&type=section&id=Revenues_Components) - Revenues are primarily derived from sequencing and data analysis services for next-generation cancer therapies and large-scale genetic research programs[140](index=140&type=chunk) - The company's ability to increase revenues depends on further market penetration, developing new products, advancing operational infrastructure, and expanding marketing efforts[141](index=141&type=chunk) [Costs and Expenses](index=26&type=section&id=Costs%20and%20Expenses_Components) - Costs of revenues include production materials, personnel, consumables, laboratory supplies, depreciation, and IT/facility costs, expected to increase with revenue but decrease per unit due to economies of scale[143](index=143&type=chunk) - Research and development expenses, consisting of payroll, consumables, and facility costs, are expensed as incurred and are expected to increase with new product development and lab automation[144](index=144&type=chunk)[145](index=145&type=chunk) - Selling, general and administrative expenses, including personnel, marketing, and professional services, are expected to increase as the company expands commercial capabilities and scales operations[146](index=146&type=chunk)[148](index=148&type=chunk) [Interest Income](index=27&type=section&id=Interest%20Income_Components) - Interest income primarily from cash, cash equivalents, and short-term investments, increased significantly in late 2019 and Q1 2020 due to IPO proceeds[149](index=149&type=chunk) - Interest income is expected to decline throughout the remainder of 2020 due to recent declines in yields on debt securities[149](index=149&type=chunk) [Interest Expense](index=27&type=section&id=Interest%20Expense_Components) - Interest expense was **immaterial in Q1 2020** as all outstanding debt was paid off in August 2019 following the IPO[150](index=150&type=chunk) [Other Income (Expense), Net](index=27&type=section&id=Other%20Income%20(Expense),%20Net_Components) - Other income (expense), net primarily consists of foreign currency exchange gains and losses[151](index=151&type=chunk) - Changes in fair value of convertible preferred stock warrant liability are no longer recorded through income since the IPO[151](index=151&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) [Revenues](index=28&type=section&id=Revenues_Results) | Customer Type | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Percentage Change | | :------------ | :----------------------------------------------- | :----------------------------------------------- | :---------------- | | VA MVP | $14,756 | $8,343 | 77% | | All other customers | $4,405 | $5,732 | (23)% | | Total revenues | $19,161 | $14,075 | 36% | - The **77% increase** in VA MVP revenues was driven by higher sample volume, partially offset by lower average prices per sample[154](index=154&type=chunk) - The **23% decrease** in revenues from all other customers was due to lower sample volume, following large pharmaceutical orders fulfilled in 2018-2019, partially offset by new customer samples in Q1 2020[155](index=155&type=chunk) [Costs and Expenses](index=28&type=section&id=Costs%20and%20Expenses_Results) | Expense Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Percentage Change | | :--------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------- | | Costs of revenues | $15,122 | $10,091 | 50% | | Research and development | $6,390 | $5,245 | 22% | | Selling, general and administrative | $7,274 | $4,170 | 74% | | Total costs and expenses | $28,786 | $19,506 | 48% | - The **50% increase** in costs of revenues was primarily due to a **$3.0 million** increase in production materials, a **$0.9 million** increase in depreciation/maintenance, a **$0.7 million** increase in consumables/lab supplies, and a **$0.4 million** increase in personnel costs[157](index=157&type=chunk) - The **22% increase** in R&D expenses was mainly due to a **$1.1 million** increase in personnel-related costs to support new product development and lab automation[158](index=158&type=chunk) - The **74% increase** in SG&A expenses was driven by a **$2.0 million** increase in personnel-related costs (headcount) and a **$1.0 million** increase in professional services (public company-related costs)[159](index=159&type=chunk) [Interest Income, Interest Expense, and Other Income (Expense), Net](index=29&type=section&id=Interest%20Income,%20Interest%20Expense,%20and%20Other%20Income%20(Expense),%20Net_Results) | Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Percentage Change | | :------- | :----------------------------------------------- | :----------------------------------------------- | :---------------- | | Interest income | $510 | $84 | 507% | | Interest expense | $(2) | $(184) | (99)% | | Other income (expense), net | $8 | $(152) | 105% | | Total | $516 | $(252) | 305% | - Interest income significantly increased by **507%** due to higher average cash and investment balances following the June 2019 IPO[161](index=161&type=chunk) - Interest expense decreased by **99%** due to the repayment of all outstanding debt in August 2019[162](index=162&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) | (in thousands) | As of March 31, 2020 | As of March 31, 2019 | | :------------- | :------------------- | :------------------- | | Cash and cash equivalents, and short-term investments | $120,033 | $33,237 | | Contract liabilities | $34,408 | $44,315 | | Working capital | $83,296 | $(15,348) | | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(8,643) | $66 | | Net cash used in investing activities | $(35) | $(960) | | Net cash provided by financing activities | $323 | $14,386 | - The company has funded operations primarily from **$144.0 million** in net IPO proceeds, **$89.6 million** from redeemable convertible preferred stock issuances, and debt financing[164](index=164&type=chunk) - Existing cash and cash equivalents and marketable securities are anticipated to fund operations for at least the next **12 months**, but additional capital may be sought if needed[165](index=165&type=chunk)[166](index=166&type=chunk) [Investments in Property and Equipment](index=30&type=section&id=Investments%20in%20Property%20and%20Equipment) - Capital expenditures were **$0.1 million** during Q1 2020, primarily for sequencing and data analysis equipment[174](index=174&type=chunk) - The relatively low Q1 2020 spending was due to uncertainty from the COVID-19 pandemic, with expectations to increase spending later in 2020 to meet or exceed 2019 totals[174](index=174&type=chunk) [Debt](index=30&type=section&id=Debt) - All debt, including the Growth Capital Loan, was paid off after the IPO, resulting in **zero outstanding debt balances**[175](index=175&type=chunk) [Contractual Obligations](index=31&type=section&id=Contractual%20Obligations) - As a smaller reporting company, Personalis, Inc. is not required to provide disclosure on contractual obligations[177](index=177&type=chunk) [Off-balance Sheet Arrangements](index=31&type=section&id=Off-balance%20Sheet%20Arrangements) - The company had no off-balance sheet arrangements as of March 31, 2020[178](index=178&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies include revenue recognition, valuation of common stock warrants and convertible preferred stock warrants, convertible instruments, stock-based compensation, and income taxes[180](index=180&type=chunk) - No material changes to critical accounting policies were noted, except for a new estimate related to a performance-based stock option granted to the CEO in Q1 2020[181](index=181&type=chunk)[182](index=182&type=chunk) [JOBS Act Accounting Election](index=32&type=section&id=JOBS%20Act%20Accounting%20Election) - As an emerging growth company, Personalis irrevocably elected not to use the extended transition period for complying with new or revised financial accounting standards[184](index=184&type=chunk) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) - The company is currently evaluating the impact of ASU 2016-13 (Credit Losses) on its consolidated financial statements, with an effective date for smaller reporting companies in Q1 2023[68](index=68&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Personalis, Inc. is exempt from market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company[186](index=186&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and reported no material changes in internal control over financial reporting in Q1 2020 [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were **effective at a reasonable assurance level** as of March 31, 2020[187](index=187&type=chunk) [Changes in Internal Control Over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were **no changes in internal control over financial reporting** during the first quarter of 2020 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[188](index=188&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings adversely affecting its business or financial condition - The company is not presently a party to any legal proceedings that, if determined unfavorably, would have a **material adverse effect** on its business, financial condition, operating results, or cash flows[191](index=191&type=chunk) - Litigation, regardless of outcome, can adversely impact the company due to defense and settlement costs, diversion of management resources, and other factors[191](index=191&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Outlines risks and uncertainties that could materially affect the company's business, financial condition, and results of operations [Risks Related to Our Business and Strategy](index=33&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) - The company has a history of net losses and expects to incur **significant losses for the foreseeable future**, with an accumulated deficit of **$149.7 million** as of March 31, 2020[193](index=193&type=chunk) - The ongoing COVID-19 pandemic poses risks to operations, including potential negative impacts on productivity, disruptions to the supply chain, and delays from customers and partners due to shelter-in-place orders[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk) - The company faces substantial customer concentration, with the VA MVP accounting for **77% of Q1 2020 revenues**, posing risks if demand or funding is substantially reduced[205](index=205&type=chunk)[206](index=206&type=chunk) - Reliance on a limited number of sole suppliers (e.g., Illumina for sequencers and reagents) creates supply chain risks; transitioning to new suppliers would be **time-consuming and expensive**[212](index=212&type=chunk)[213](index=213&type=chunk) - The company's inability to raise additional capital on acceptable terms in the future may limit its ability to continue operations and expand, potentially requiring **delays or reductions in R&D or sales/marketing initiatives**[216](index=216&type=chunk)[218](index=218&type=chunk) [Risks Related to Government Regulation](index=46&type=section&id=Risks%20Related%20to%20Government%20Regulation) - The company's laboratory developed tests (LDTs) may become subject to increased FDA regulation as medical devices, potentially requiring premarket clearance or approval and compliance with extensive regulatory requirements[261](index=261&type=chunk)[262](index=262&type=chunk)[265](index=265&type=chunk) - Failure to comply with federal, state, and foreign laboratory licensing requirements (e.g., CLIA, New York State Department of Health) could result in **loss of ability to perform tests**, business disruptions, and administrative or judicial sanctions[276](index=276&type=chunk)[278](index=278&type=chunk) - Compliance with numerous federal and state fraud and abuse laws (e.g., Anti-Kickback Statute, Stark Law, False Claims Act) is complex and expensive; violations could lead to **substantial penalties and reputational harm**[281](index=281&type=chunk)[283](index=283&type=chunk) - Expansion into international markets would subject the company to increased regulatory oversight, economic, social, health, and political uncertainties, and anti-bribery laws like the FCPA[284](index=284&type=chunk)[285](index=285&type=chunk) - Changes in healthcare policy, such as the ACA and PAMA, could increase costs, decrease revenues, and impact sales and reimbursement for tests[288](index=288&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) [Risks Related to Our Intellectual Property](index=53&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - The company faces risks of third-party claims of intellectual property infringement, misappropriation, or other violations, which could lead to **costly litigation, injunctions, and substantial damages**[295](index=295&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - Inability to license necessary third-party technologies on reasonable terms could prevent commercialization of new products and **adversely affect the business**[301](index=301&type=chunk)[302](index=302&type=chunk) - Developments or uncertainty in patent law (e.g., AIA, patent case law) may impact the validity, scope, or enforceability of patent rights, impairing the ability to protect products[304](index=304&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Failure to obtain and enforce broad patent protection, or challenges to existing patents, could allow competitors to develop similar technologies, harming the company's competitive position[310](index=310&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk) - Inability to protect the confidentiality of trade secrets and know-how, or their independent development by competitors, would harm the company's business and competitive position[322](index=322&type=chunk)[324](index=324&type=chunk) [Risks Related to Our Common Stock](index=62&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - The market price of common stock may be volatile or decline significantly due to fluctuations in operating results, analyst expectations, competition, and general market conditions, including the COVID-19 pandemic[341](index=341&type=chunk)[343](index=343&type=chunk) - Future sales of shares by existing stockholders, or the perception of such sales, could cause the stock price to decline due to **dilution or increased supply**[347](index=347&type=chunk)[348](index=348&type=chunk) - The company does not currently intend to pay dividends, so investment returns will depend on appreciation of the common stock's value[350](index=350&type=chunk) - Delaware law and provisions in the company's amended and restated certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the trading price of common stock[356](index=356&type=chunk)[357](index=357&type=chunk) - Material weaknesses in internal control over financial reporting, if identified and not remediated, could lead to **inaccurate or untimely financial reporting**, SEC sanctions, and reputational damage[370](index=370&type=chunk)[373](index=373&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No material change in the planned use of IPO proceeds from the final prospectus filed on June 20, 2019 - There has been no material change in the planned use of proceeds from the company's IPO as described in its final prospectus[376](index=376&type=chunk) [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[377](index=377&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - The company reported no mine safety disclosures[378](index=378&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) CEO John West's employment agreement was amended, replacing disability benefits and a bonus with a performance-based stock option - The employment agreement of CEO John West was amended to replace special short- and long-term disability benefits with standard disability benefits and a long-term bonus with a **performance-based stock option**[379](index=379&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including corporate documents, CEO employment amendment, and officer certifications - Key exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and an Amendment to Employment Terms Letter for John West[381](index=381&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) are included, with **32.1 and 32.2 not deemed filed with the SEC**[381](index=381&type=chunk)[383](index=383&type=chunk) [Signatures](index=70&type=section&id=Signatures) The report was signed by Aaron Tachibana, Chief Financial Officer, on May 7, 2020 - The report was signed by Aaron Tachibana, Chief Financial Officer, on May 7, 2020[387](index=387&type=chunk)[388](index=388&type=chunk)

Personalis, Inc. (NASDAQ:PSNL) Q4 2019 Earnings Conference Call March 25, 2020 5:00 PM ET Company Participants Caroline Corner - Westwicke ICR John West - President and CEO Aaron Tachibana - CFO Clinton Musil - Chief Business Officer Conference Call Participants Derik De Bruin - Bank of America Merrill Lynch Doug Schenkel - Cowen & Company Kevin DeGeeter - Oppenheimer Operator Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2019 Personalis Earnings Conference Call. At this ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38943 Personalis, Inc. (Exact name of Registrant as specified in its Charter) | Delaware | 27-5411038 | | --- | --- | | (State or other jurisdic ...

Personalis, Inc. (NASDAQ:PSNL) Q3 2019 Earnings Conference Call November 13, 2019 5:00 PM ET Company Participants Caroline Corner - Westwicke John West - President & CEO Aaron Tachibana - CFO Clinton Musil - Chief Business Officer Conference Call Participants Yih-Ming Tu - Morgan Stanley Xiaoxiao Ma - Bank of America Doug Schenkel - Cowen & Company Kevin DeGeeter - Oppenheimer Operator Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2019 Personalis Earnings Conference Call. ...

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements for the period ended September 30, 2019, reflect significant asset and equity growth post-IPO, despite increased revenues and a wider net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2019, the balance sheet reflects substantial increases in cash and total assets, driven by IPO proceeds, alongside decreased liabilities and a significant shift to stockholders' equity surplus Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $87,013 | $19,744 | +$67,269 | | Total current assets | $140,298 | $29,559 | +$110,739 | | Total assets | $159,691 | $41,670 | +$118,021 | | **Liabilities & Equity** | | | | | Total liabilities | $48,299 | $58,654 | -$10,355 | | Redeemable convertible preferred stock | $0 | $89,404 | -$89,404 | | Total stockholders' equity (deficit) | $111,392 | $(106,388) | +$217,780 | - In June 2019, the company completed its IPO, raising net proceeds of **$139.8 million** after deducting underwriting discounts, commissions, and offering expenses[33](index=33&type=chunk)[41](index=41&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three and nine months ended September 30, 2019, revenues significantly increased, but a substantial rise in operating expenses led to a wider net loss for both periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $17,153 | $11,654 | $47,053 | $24,617 | | Loss from operations | $(5,730) | $(1,751) | $(15,222) | $(10,622) | | Net loss | $(6,885) | $(3,641) | $(18,439) | $(16,331) | | Net loss per share | $(0.22) | $(1.19) | $(1.35) | $(5.33) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2019, operating cash flow shifted to a significant use, investing activities increased, and substantial IPO proceeds from financing led to a net increase in cash Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(20,474) | $2,369 | | Net cash used in investing activities | $(46,731) | $(7,181) | | Net cash provided by (used in) financing activities | $134,477 | $(629) | | **Net increase (decrease) in cash** | **$67,269** | **$(5,442)** | - Financing activities were dominated by **$144.0 million** in proceeds from the IPO, net of underwriting discounts, and **$20.0 million** from borrowings, offset by **$25.0 million** in debt repayments and **$3.95 million** in IPO-related costs[29](index=29&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, single segment operations, significant customer concentration, the June 2019 IPO, preferred stock conversion, and the repayment of a **$20.0 million** loan resulting in a **$1.7 million** loss on debt extinguishment - The company operates as one reportable segment: the sale of sequencing and data analysis services[31](index=31&type=chunk) Significant Customer Revenue Concentration (as % of Total Revenues) | Customer | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | VA MVP | 75% | 56% | 63% | 51% | | Pfizer Inc. | 11% | 10% | 17% | * | - On August 14, 2019, the company repaid its Growth Capital Loan in its entirety, recognizing a **$1.7 million** loss on debt extinguishment[98](index=98&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **91%** year-over-year revenue growth to increased VA MVP volume, noting significant increases in operating expenses, while liquidity was substantially strengthened by **$144.0 million** in net IPO proceeds Revenue Comparison (in millions) | Period | 2019 | 2018 | Increase | % Change | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended Sep 30** | $17.2 | $11.7 | $5.5 | 47% | | **Nine Months Ended Sep 30** | $47.0 | $24.6 | $22.5 | 91% | - The increase in revenues from the VA MVP was driven by a higher volume of samples tested, partially offset by lower prices per sample[147](index=147&type=chunk)[148](index=148&type=chunk) - Selling, general, and administrative expenses for the nine months ended Sep 30, 2019 increased by **$8.1 million (107%)** year-over-year, primarily due to a **$5.0 million** increase in personnel-related expenses and a **$2.4 million** increase in professional services related to public company costs[154](index=154&type=chunk) - The company closed its IPO on June 24, 2019, receiving net proceeds of **$144.0 million**. As of September 30, 2019, cash, cash equivalents, and marketable securities totaled **$127.3 million**[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its **$127.3 million** in cash and marketable securities, with a **100 basis point** rate increase potentially causing a **$0.3 million** fair value decline, while foreign currency risk is minimal - The company's primary market risk is interest income sensitivity related to its cash, cash equivalents, and short-term marketable debt securities[189](index=189&type=chunk) - A hypothetical **100 basis point** increase in interest rates would lead to an estimated **$0.3 million** decline in the fair value of the company's marketable debt securities as of September 30, 2019[189](index=189&type=chunk) - Foreign currency risk is minimal as the majority of revenues are generated in the U.S., with an insignificant amount denominated in foreign currencies[190](index=190&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2019, management concluded disclosure controls were not effective due to an un-remediated material weakness in internal control over financial reporting, stemming from insufficient accounting staff and lack of proper segregation of duties, despite ongoing remediation efforts - Management identified a material weakness in internal controls due to a lack of sufficient full-time accounting staff with the requisite experience and technical knowledge for complex accounting and proper segregation of duties[191](index=191&type=chunk)[338](index=338&type=chunk) - As of September 30, 2019, the material weakness was not fully remediated, leading to the conclusion that disclosure controls and procedures were not effective[192](index=192&type=chunk) - Remediation efforts include hiring a new Chief Financial Officer in March 2019 and four additional accounting resources in Q2 and Q3 2019[193](index=193&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, or operating results - As of the report date, the company is not involved in any material legal proceedings[198](index=198&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of net losses, high customer concentration, potential regulatory changes for LDTs, and an identified material weakness in internal controls - The company has a history of net losses, with an accumulated deficit of **$133.9 million** as of September 30, 2019, and expects to incur significant losses for the foreseeable future[200](index=200&type=chunk) - There is substantial customer concentration, with the VA MVP accounting for **75%** of revenues in Q3 2019. The loss of this customer would have a material adverse effect[214](index=214&type=chunk) - The company's tests are marketed as Laboratory Developed Tests (LDTs), which are currently subject to FDA enforcement discretion. A change in this policy could subject the tests to more onerous regulation, increasing costs and time to market[261](index=261&type=chunk) - A material weakness in internal controls over financial reporting was identified due to a lack of sufficient experienced accounting staff, which could result in a material misstatement of financial statements[337](index=337&type=chunk)[338](index=338&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details the use of **$139.8 million** net proceeds from its June 2019 IPO, confirming no material change from the planned use described in its final prospectus - The company's IPO closed on June 24, 2019, yielding net proceeds of approximately **$139.8 million** after discounts and expenses[366](index=366&type=chunk) - There has been no material change in the planned use of IPO proceeds as described in the final prospectus[367](index=367&type=chunk) [Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None [Other Information](index=69&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None [Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - Lists exhibits filed with the report, including officer certifications (31.1, 31.2, 32.1, 32.2) and XBRL instance documents[372](index=372&type=chunk)

Financial Data and Key Metrics Changes - Revenues for Q2 2019 were $15.8 million, an increase of 80% from $8.8 million in the same period last year, marking a new record high for quarterly revenue [18] - Gross margin for Q2 was 37.3%, an increase of 10.1 percentage points from 27.2% in the same period last year [21] - Net loss for Q2 was $5.9 million, compared to a net loss of $7.3 million for the same period last year, with net loss per share of $0.89 [23] Business Line Data and Key Metrics Changes - Biopharma customer revenue represented $7.3 million, while the Million Veteran Program (MVP) accounted for $8.5 million in Q2 [11][18] - The MVP is expected to continue being the largest single customer for the next few years, with significant contributions to revenue growth [11][12] Market Data and Key Metrics Changes - The MVP is one of the largest and fastest-growing population sequencing efforts globally, with over 770,000 enrollees [10] - The pharmaceutical industry spends approximately $60,000 per patient in oncology clinical trials, indicating a substantial market opportunity for Personalis [6] Company Strategy and Development Direction - The company aims to expand its research and development and build out its commercial infrastructure to deliver high-value genomic information [5] - Personalis is focused on innovating and scaling operational know-how and infrastructure to grow capacity, with plans to launch a diagnostic for biopharma customers later this year [12][14] - The company is also investing in new product innovations and enhancements to maintain its leading position in the market [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of both biopharma and MVP business lines over the long term, despite potential quarterly variability [12][19] - The company expects total consolidated revenue to grow sequentially in Q3, driven by the MVP [20] Other Important Information - The company raised $140 million in its IPO, strengthening its balance sheet and providing capital for future growth [5][24] - Operating expenses totaled $10 million, a decrease as a percentage of revenue compared to the previous year, indicating improved operational efficiency [22] Q&A Session Summary Question: Expectations for MVP in Q3 and Q4 - Management indicated that MVP sample volume has been strong and could continue to increase, while biopharma revenue may be lower in Q3 due to sample delays from Q1 [29] Question: Customer feedback on ImmunoID NeXT and liquid biopsy launch - Feedback on ImmunoID NeXT has been encouraging, with customers impressed by its comprehensive analytics; the liquid biopsy product is on track for a 2020 launch [30][32] Question: Existing pharma customers' purchasing behavior - The whole genome sequencing business is primarily for the VA, while the company is focused on expanding its offerings to meet diverse customer needs [36] Question: Customer concentration and new customer additions - Customer concentration is expected to diminish over time as the company broadens its customer base, with ongoing efforts to add new customers [50][51] Question: Steps to launch liquid biopsy product - The product development involves multiple steps, with a focus on ensuring the assay and informatics are robust before market release [41] Question: Contribution of new diagnostic assay to 2019 guidance - The new diagnostic assay is expected to be introduced in 2019 but may not significantly impact revenue until 2020 [49]