Natera(NTRA) - 2023 Q1 - Quarterly Report

Part I — Financial Information Financial Statements (unaudited) This section provides Natera, Inc.'s unaudited condensed consolidated financial statements and related notes for the first quarter of 2023 and 2022 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $403,154 | $466,091 | | Total current assets | $1,129,468 | $1,211,817 | | Total assets | $1,318,880 | $1,394,474 | | Total current liabilities | $290,969 | $310,499 | | Total liabilities | $668,307 | $688,730 | | Total stockholders' equity | $650,573 | $705,744 | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenues | $241,756 | $194,133 | | Cost of product revenues | $147,754 | $102,670 | | Loss from operations | ($138,301) | ($137,130) | | Net loss | ($136,937) | ($138,595) | | Net loss per share (Basic and diluted) | ($1.23) | ($1.45) | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $705.7 million at December 31, 2022, to $650.6 million at March 31, 2023. The decrease was primarily driven by a net loss of $136.9 million, partially offset by stock-based compensation of $40.7 million and proceeds from stock issuances[22] Condensed Consolidated Statements of Cash Flows Cash Flow Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($80,890) | ($137,277) | | Net cash provided by investing activities | $15,652 | $207,033 | | Net cash provided by financing activities | $2,301 | $4,156 | | Net change in cash | ($62,937) | $73,912 | Notes to Unaudited Interim Condensed Consolidated Financial Statements - The company operates as a single segment focused on developing and commercializing molecular testing services in women's health, oncology, and organ health. Key products include Panorama, Horizon, Signatera, and Prospera[26][27] - The company has a history of net losses, with a net loss of $136.9 million for Q1 2023 and an accumulated deficit of $2.1 billion. However, management believes existing cash and marketable securities are sufficient to meet cash requirements for at least 12 months from May 9, 2023[31][37] Revenue Disaggregation by Payer (in thousands) | Payer Type | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Insurance carriers | $210,378 | $164,742 | | Laboratory and other partners | $22,805 | $20,737 | | Patients | $8,573 | $8,654 | | Total revenues | $241,756 | $194,133 | - In a false advertising lawsuit with CareDx, a jury returned a verdict against Natera with damages of $44.9 million in March 2022. Natera has filed a motion to set aside the verdict and does not consider a loss related to this matter to be probable and estimable at this time[127] - As of March 31, 2023, the company had $80.4 million outstanding on its revolving Credit Line and $287.5 million in principal amount of 2.25% Convertible Senior Notes due 2027[156][158][164] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results for Q1 2023, highlighting revenue growth driven by increased test volumes and its liquidity position - The company processed approximately 626,200 tests in Q1 2023, a significant increase from 489,300 tests in Q1 2022. This volume growth, particularly in Panorama and HCS tests, is the primary driver of revenue increases[179] Results of Operations Comparison (in thousands) | Line Item | Q1 2023 | Q1 2022 | Change % | | :--- | :--- | :--- | :--- | | Total revenues | $241,756 | $194,133 | 24.5% | | Cost of product revenues | $147,754 | $102,670 | 43.9% | | Research and development | $82,306 | $80,414 | 2.4% | | Selling, general and administrative | $149,627 | $147,634 | 1.3% | | Loss from operations | ($138,301) | ($137,130) | 0.9% | - Cost of product revenues increased by $45.1 million (43.9%) YoY, primarily due to a $16.9 million increase in third-party fees, an $11.1 million increase in inventory consumption from higher test volumes, and a $12.7 million increase in labor and overhead costs[203] - The company believes its existing cash and marketable securities of approximately $812.1 million (as of March 31, 2023) are sufficient to meet its anticipated cash requirements for at least 12 months from May 9, 2023[209][212] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to interest rate changes, which affect its variable-rate Credit Line and its investment portfolio. Foreign currency and inflation risks are also monitored but are considered to have had a minimal impact to date - The company is exposed to interest rate risk on its variable-rate debt and investment portfolio. A hypothetical 100 basis point (1%) increase in borrowing rates would increase annual interest expense by $0.8 million, while a 100 basis point increase in investment yields would increase annual interest income by approximately $4.1 million[231] - Foreign currency risk is currently minimal as operations are primarily conducted in the United States. Inflation is not believed to have had a material effect on the business as of the report filing date[232][233] Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of March 31, 2023. The report also confirms that there were no material changes in the company's internal control over financial reporting during the quarter - As of March 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[237] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[238] Part II — Other Information Legal Proceedings This section refers to Note 8 in the Notes to Unaudited Interim Condensed Consolidated Financial Statements for detailed information regarding the company's current legal proceedings - For detailed information on legal proceedings, the report refers to "Note 8—Commitments and Contingencies—Legal Proceedings" in the financial statements[242] Risk Factors The company states there have been no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022. Investors are directed to that filing for a comprehensive discussion of risks - The report refers to the risk factors discussed in Part I, Item 1A of the company's Annual Report on Form 10-K for the year ended December 31, 2022, indicating no material changes[243] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the quarter ended March 31, 2023 - There were no recent sales of unregistered securities during the period[244] Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - There were no defaults upon senior securities[245] Mine Safety Disclosures This item is not applicable to the company's business - This section is not applicable[246] Other Information The company did not report any other information under this item for the period - There is no information to report for this item[247] Exhibits This section provides an index of the exhibits filed with the Form 10-Q, including an Amended Compensation Program for Non-Employee Directors, certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL data files - The report includes an index of exhibits, notably CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[249][250] Signatures - The report was duly signed on May 9, 2023, by Steve Chapman, Chief Executive Officer, and Michael Brophy, Chief Financial Officer[257]