Guardant Health, Inc. [GH] Filings

10-Q 1 gh-20240630.htm 10-Q gh-20240630

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 June 30, 2024

☐ 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: 001-38683

_____________________

GUARDANT HEALTH, INC.

(Exact Name of Registrant as Specified in its Charter)

_____________________


Delaware						45-4139254
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3100 Hanover Street

Palo Alto, California, 94304

Registrant’s telephone number, including area code: (855) 698-8887

_______________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	GH	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2024, the registrant had 123,022,076 shares of common stock, $0.00001 par value per share, outstanding.

GUARDANT HEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS


	PART I – FINANCIAL INFORMATION
		Page
Item 1.	Unaudited Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to the Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
	Signatures	52

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are based on our current expectations, estimates, forecasts and projections as well as the current beliefs and assumptions of our management, including about our business, our financial condition, our results of operations, our cash flows, and the industry and environment in which we operate. Statements that include words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “would,” “could,” “should,” “intend” and “expect,” variations of these words, and similar expressions, are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A,“Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2023, in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the U.S. Securities and Exchange Commission, or the SEC. While forward-looking statements are based on the reasonable expectations of our management at the time that they are made, you should not rely on them. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as may be required by law.

Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Guardant Health, Inc., a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated.

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PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Guardant Health, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share data)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	1,035,239	$	1,133,537

Short-term marketable debt securities	—		35,097
Accounts receivable, net	100,519		88,783
Inventory, net	66,984		61,948
Prepaid expenses and other current assets, net	87,232		27,741
Total current assets	1,289,974		1,347,106

Property and equipment, net	132,317		145,096
Right-of-use assets, net	146,111		157,616
Intangible assets, net	7,742		8,979
Goodwill	3,290		3,290

Other assets, net	29,906		124,334
Total Assets	$	1,609,340	$	1,786,421
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,447	$	51,741
Accrued compensation	59,067		72,736
Accrued expenses	70,680		63,475
Deferred revenue	29,375		17,965

Total current liabilities	201,569		205,917
Convertible senior notes, net	1,141,256		1,139,966
Long-term operating lease liabilities	172,194		185,848

Other long-term liabilities	95,934		96,006
Total Liabilities	1,610,953		1,627,737
Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of June 30, 2024, and December 31, 2023; 122,969,580 and 121,629,861 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively	1		1
Additional paid-in capital	2,363,501		2,304,220
Accumulated other comprehensive loss	(5,640)		(3,675)
Accumulated deficit	(2,359,475)		(2,141,862)
Total Stockholders’ (Deficit) Equity	(1,613)		158,684
Total Liabilities and Stockholders’ (Deficit) Equity	$	1,609,340	$	1,786,421

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Guardant Health, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Revenue:
Precision oncology testing	$	166,518	$	125,244	$	322,747	$	238,637
Development services and other	10,717		11,906		22,979		27,227
Total revenue	177,235		137,150		345,726		265,864
Costs and operating expenses:
Cost of precision oncology testing	65,715		49,357		125,021		94,463
Cost of development services and other	6,706		4,491		12,696		12,458
Research and development expense	83,102		90,359		166,904		183,487
Sales and marketing expense	81,867		71,043		162,292		147,166
General and administrative expense	40,463		41,516		79,114		81,961

Total costs and operating expenses	277,853		256,766		546,027		519,535
Loss from operations	(100,618)		(119,616)		(200,301)		(253,671)
Interest income	13,913		6,727		28,781		9,787
Interest expense	(645)		(645)		(1,290)		(1,289)
Other income (expense), net	(15,145)		41,259		(44,265)		39,605

Loss before provision for income taxes	(102,495)		(72,275)		(217,075)		(205,568)
Provision for income taxes	133		496		538		736


Net loss	$	(102,628)	$	(72,771)	$	(217,613)	$	(206,304)
Net loss per share, basic and diluted	$	(0.84)	$	(0.67)	$	(1.78)	$	(1.95)
Weighted-average shares used in computing net loss per share, basic and diluted	122,447		108,808		122,080		105,752

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Guardant Health, Inc.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Net loss	$	(102,628)	$	(72,771)	$	(217,613)	$	(206,304)
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale securities	(4)		4,933		10		12,468
Foreign currency translation adjustments	(837)		(1,252)		(1,975)		(1,415)
Other comprehensive (loss) income	(841)		3,681		(1,965)		11,053
Comprehensive loss	$	(103,469)	$	(69,090)	$	(219,578)	$	(195,251)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Guardant Health, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)

(in thousands, except share data)


		Three Months Ended June 30, 2024
		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares		Amount

Balance as of April 1, 2024		121,787,297		$	1	$	2,329,930	$	(4,799)	$	(2,256,847)	$	68,285

Issuance of common stock upon exercise of stock options		540,561		—		2,364		—		—		2,364
Vesting of restricted stock units		269,896		—		—		—		—		—
Common stock issued under employee stock purchase plan		371,826		—		7,212		—		—		7,212
Taxes paid related to net share settlement of restricted stock units		—		—		(3,240)		—		—		(3,240)
Stock-based compensation		—		—		27,235		—		—		27,235


Other comprehensive loss		—		—		—		(841)		—		(841)
Net loss		—		—		—		—		(102,628)		(102,628)
Balance as of June 30, 2024		122,969,580		$	1	$	2,363,501	$	(5,640)	$	(2,359,475)	$	(1,613)


		Three Months Ended June 30, 2023
		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders’ (Deficit) Equity
	Shares		Amount

Balance as of April 1, 2023		102,708,305		$	1	$	1,763,544	$	(12,150)	$	(1,795,946)	$	(44,551)

Issuance of common stock in public offering, net of offering costs of $21,131		14,375,000		—		381,369		—		—		381,369
Issuance of common stock upon exercise of stock options		10,830		—		63		—		—		63
Vesting of restricted stock units		269,218		—		—		—		—		—
Common stock issued under employee stock purchase plan		298,781		—		6,697		—		—		6,697
Taxes paid related to net share settlement of restricted stock units		—		—		(4,116)		—		—		(4,116)
Stock-based compensation		—		—		22,354		—		—		22,354

Other comprehensive income		—		—		—		3,681		—		3,681
Net loss		—		—		—		—		(72,771)		(72,771)
Balance as of June 30, 2023		117,662,134		$	1	$	2,169,911	$	(8,469)	$	(1,868,717)	$	292,726


		Six Months Ended June 30, 2024
		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares		Amount

Balance as of January 1, 2024		121,629,861		$	1	$	2,304,220	$	(3,675)	$	(2,141,862)	$	158,684



Issuance of common stock upon exercise of stock options		577,352		—		2,577		—		—		2,577
Vesting of restricted stock units		390,541		—		—		—		—		—
Common stock issued under employee stock purchase plan		371,826		—		7,212		—		—		7,212
Taxes paid related to net share settlement of restricted stock units		—		—		(4,784)		—		—		(4,784)
Stock-based compensation		—		—		54,276		—		—		54,276


Other comprehensive loss		—		—		—		(1,965)		—		(1,965)
Net loss		—		—		—		—		(217,613)		(217,613)
Balance as of June 30, 2024		122,969,580		$	1	$	2,363,501	$	(5,640)	$	(2,359,475)	$	(1,613)


		Six Months Ended June 30, 2023
		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares		Amount

Balance as of January 1, 2023		102,619,383		$	1	$	1,742,114	$	(19,522)	$	(1,662,413)	$	60,180

Issuance of common stock in public offering, net of offering costs of $21,131		14,375,000		—		381,369		—		—		381,369


Issuance of common stock upon exercise of stock options		31,879		—		220		—		—		220
Vesting of restricted stock units		337,091		—		—		—		—		—
Common stock issued under employee stock purchase plan		298,781		—		6,697		—		—		6,697
Taxes paid related to net share settlement of restricted stock units		—		—		(5,109)		—		—		(5,109)
Stock-based compensation		—		—		44,620		—		—		44,620

Other comprehensive income		—		—		—		11,053		—		11,053
Net loss		—		—		—		—		(206,304)		(206,304)
Balance as of June 30, 2023		117,662,134		$	1	$	2,169,911	$	(8,469)	$	(1,868,717)	$	292,726

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Guardant Health, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Six Months Ended June 30,
	2024		2023

OPERATING ACTIVITIES:
Net loss	$	(217,613)	$	(206,304)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	21,335		20,976
Operating lease costs	15,226		14,708



Stock-based compensation	54,276		44,620
Amortization of debt issuance costs	1,290		1,287
Amortization of premium (discount) on marketable debt securities	107		(3,085)
Unrealized losses (gains) on marketable equity securities	45,539		(67,879)
Impairment of non-marketable equity securities and other related assets	—		29,054

Other	1,385		108
Cash effect of changes in operating assets and liabilities:
Accounts receivable, net	(11,737)		10,695
Inventory, net	(5,035)		(8,931)
Prepaid expenses and other current assets, net	(8,661)		(891)
Other assets, net	(130)		1,700
Accounts payable and accrued liabilities	(15,025)		16,512
Operating lease liabilities	(17,696)		(14,970)
Deferred revenue	12,453		(6,056)
Net cash used in operating activities	(124,286)		(168,456)
INVESTING ACTIVITIES:
Purchase of marketable debt securities	—		(561,339)
Maturity of marketable debt securities	35,000		492,700
Purchase of non-marketable equity securities and other related assets	—		(1,227)
Purchase of property and equipment	(12,011)		(14,037)



Net cash provided by (used in) investing activities	22,989		(83,903)
FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon exercise of stock options	2,577		220
Proceeds from issuances of common stock under employee stock purchase plan	7,212		6,697
Taxes paid related to net share settlement of restricted stock units	(4,784)		(5,109)
Proceeds from follow-on public offering	—		402,500
Payment of offering costs related to follow-on public offering	—		(21,271)



Other	(181)		(37)


Net cash provided by financing activities	4,824		383,000
Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(1,975)		(1,415)
Net (decrease) increase in cash, cash equivalents and restricted cash	(98,448)		129,226
Cash, cash equivalents and restricted cash—Beginning of period	1,133,687		141,948
Cash, cash equivalents and restricted cash—End of period	$	1,035,239	$	271,174












Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	933,694	$	271,073

Restricted cash – included in cash, cash equivalents and restricted cash	101,545		101
Total cash, cash equivalents and restricted cash	$	1,035,239	$	271,174

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Guardant Health, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business

Guardant Health, Inc., or the Company, is a leading precision oncology company focused on guarding wellness and giving every person more time free from cancer. The Company is transforming patient care by providing critical insights into what drives disease through its advanced blood and tissue tests, and real-world data. The Company's tests help improve outcomes across all stages of care, including screening to find cancer early, monitoring for recurrence in early-stage cancer, and helping doctors select the best treatment for patients with advanced cancer. For patients with advanced stage cancer, the Company has commercially launched Guardant360 LDT and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. The Company has also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging.

The Company also collaborates with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from its tests, the Company has also developed its GuardantINFORM platform to help biopharmaceutical companies accelerate precision oncology drug development through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.

For early cancer detection, in May 2022, the Company launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In December 2022, the Company announced that the ECLIPSE study, a registrational study evaluating the performance of its Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. In addition, in March 2023, the Company submitted a premarket approval application, or PMA, for its Shield blood test to the FDA. In July 2024, the Company received FDA approval of its Shield blood test for colorectal cancer screening in adults age 45 and older who are at average risk for the disease, and in August 2024, the Company's Shield blood test became commercially available in the U.S. as the first blood test approved by the FDA for primary colorectal cancer screening, meaning healthcare providers can offer Shield in a manner similar to all other non-invasive methods recommended in screening guidelines. Shield is also the first blood test for colorectal cancer screening that meets coverage requirements by Medicare.

The Company was incorporated in Delaware in December 2011 and is headquartered in Palo Alto, California.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and in conjunction with the rules and regulations of the Securities and Exchange Commission, or the SEC. The accompanying condensed consolidated financial statements include the accounts of Guardant Health, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company adjusted the accompanying condensed consolidated balance sheet as of December 31, 2023 to separately present accounts payable and accrued expenses, inclusive of accrued compensation. In addition, certain other reclassifications of prior period amounts were made to conform with the current period presentation. The Company determined the adjustment is immaterial based on consideration of quantitative and qualitative factors.

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimation of variable consideration, estimation of credit losses, standalone selling price allocation included in contracts with multiple performance obligations, goodwill and identifiable intangible assets, stock-based compensation, incremental borrowing rate for operating leases, contingencies, certain inputs into the provision for income taxes, including related reserves, valuation of non-marketable securities, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates.

Unaudited Interim Condensed Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Act of 1933, as amended, or the Securities Act. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring accruals that the Company believes are necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with GAAP. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Restricted Cash

As of June 30, 2024, the Company had restricted cash balance of $101.5 million, included in cash, cash equivalents and restricted cash on the Company's condensed consolidated balance sheets, of which substantially all was related to cash held as collateral under surety bond requirements related to the intellectual property dispute with TwinStrand Biosciences, Inc. and the University of Washington, as described in Note 8 Commitments and Contingencies - Legal Proceedings to the Company's condensed consolidated financial statements.

Non-Marketable Securities

The Company acquires certain equity investments in private companies to promote business and strategic objectives. The Company's investments in non-marketable equity securities do not give the Company the ability to control or exercise significant influence over the investees. One of the investees is concluded to be a variable interest entity, or VIE, but the Company is deemed not to be the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance. The Company's non-marketable equity and other related investments totaled $11.1 million and $8.6 million as of June 30, 2024, and December 31, 2023, respectively, and are included in other assets, net on the accompanying condensed consolidated balance sheets.

Non-marketable securities are recorded at cost, subject to periodic impairment reviews and adjustments for observable price changes from orderly transactions. The Company's evaluation of impairment of such non-marketable securities is based on adverse changes in market conditions and the regulatory or economic environment, qualitative and quantitative analysis of the operating performance and financial condition of the investee; changes in operating structure or management of the investee; and additional funding requirements of the investee. As a result of the evaluation, for one of its non-marketable equity security investments, the Company recorded an impairment of $16.6 million and $22.1 million for the three and six months ended June 30, 2023, included in other income (expense), net on the Company's condensed consolidated statements of operations. In addition, in connection with the investment in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the investee, on or before December 31, 2022. In September 2022, the Company decided not to exercise such rights to purchase the investee and recorded an impairment of $5.3 million for the year ended December 31, 2022, included in other income (expense), net on the Company's condensed consolidated statements of operations.

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Pursuant to another investment in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the Company, on or before October 1, 2023, and acquired rights to obtain the exclusive license of the investee's certain technologies. In June 2023, the Company decided not to exercise such rights and recorded an impairment of $7.0 million for the three months ended June 30, 2023, included in other income (expense), net on the Company's condensed consolidated statements of operations.

No other impairment or downward adjustments to the carrying value of the Company's non-marketable securities have been otherwise recorded.

Concentration of Risk

The Company is subject to credit risk from its portfolio of cash equivalents held at one commercial bank and investments in marketable debt securities. The Company limits its exposure to credit losses by investing in money market funds through a U.S. bank with high credit ratings. The Company’s cash may consist of deposits held with banks that may at times exceed federally insured limits, however, its exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the condensed consolidated balance sheets. The Company performs evaluations of the relative credit standing of these financial institutions to limit the amount of credit exposure.

The Company also invests in investment-grade debt instruments and has policy limits for the amount it can invest in any one type of security, except for securities issued or guaranteed by the U.S. government. The goals of the Company’s investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, investment type and issuer, as a result, the Company is not exposed to any significant concentrations of credit risk from these financial instruments.

The Company is subject to credit risk from its accounts receivable. The majority of the Company’s accounts receivable arises from the provision of precision oncology services, and development services and other, primarily with biopharmaceutical companies and international laboratory partners, all of which have high credit ratings. The Company has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Accounts receivable are recorded net of allowance for credit losses, if any.

A significant customer is any biopharmaceutical customer, clinical testing payer, or international laboratory partner that represents 10% or more of the Company’s total revenue or accounts receivable balance. Revenue attributable to each significant customer, including its affiliated entities, as a percentage of the Company’s total revenue, for the respective period, and accounts receivable balance attributable to each significant customers, including its affiliated entities, as a percentage of the Company’s total accounts receivable balance, at the respective condensed consolidated balance sheet date, are as follows:


	Revenue								Accounts Receivable, Net
	Three Months Ended June 30,				Six Months Ended June 30,				June 30, 2024		December 31, 2023
	2024		2023		2024		2023

	(unaudited)								(unaudited)
Customer A	12	%	*		*		*		24	%	12	%
Customer B	29	%	32	%	30	%	32	%	*		12	%



Customer C	*		*		*		*		*		10	%

* less than 10%

Accounts Receivable, Net

Accounts receivable represent valid claims against commercial and governmental payers, biopharmaceutical companies, research institutes, international laboratory partners and distributors, including unbilled receivables, and royalty payments due from third parties for licensing the Company’s technologies. Unbilled receivables include balances due from biopharmaceutical customers related to development services and other revenues that are recognized upon the achievement of performance-based milestones but prior to the achievement of contractual billing rights. As of June 30, 2024, and December 31, 2023, the Company had unbilled receivables of $5.6 million and $4.9 million, respectively.

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The Company evaluates the collectability of its accounts receivable based on historical collection trends, the financial condition of payment partners, and external market factors and provides for an allowance for potential credit losses based on management’s best estimate of the amount of probable credit losses. The Company recorded immaterial credit losses related to its accounts receivable for the three and six months ended June 30, 2024, and 2023.

Goodwill and Intangible Assets, net

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill is not amortized but is tested for impairment at least annually during the fourth fiscal quarter, or if circumstances indicate its value may no longer be recoverable. The Company continues to operate in one segment, which is considered to be the sole reporting unit and, therefore, goodwill is tested for impairment at the enterprise level. As of June 30, 2024, there has been no impairment of goodwill.

Intangible assets with finite useful lives are carried at cost, net of accumulated amortization. The Company does not have intangible assets with indefinite useful lives other than goodwill. Amortization is recorded on a straight-line basis over the intangible asset's useful life, which is approximately 2—12 years.

Leases

The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use, or ROU, assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received or receivable. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities, as the Company's leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less.

Convertible Senior Notes

Convertible senior notes are accounted for as a liability and measured at their amortized cost. Transaction costs related to the issuance of the notes are netted with the liability and are amortized to interest expense over the term of the notes, using an effective interest rate method.

Revenue Recognition

The Company derives revenue from the provision of precision oncology testing services, as well as from development services and other. Precision oncology testing revenue includes amounts derived from the delivery of the Company’s precision oncology tests, including those tests delivered by labs operated by our strategic partners. Development services include companion diagnostic development and regulatory approval, clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. Other revenue includes amounts derived from licensing the Company's technologies, and kit fulfillment. The Company currently receives payments from third-party commercial and governmental payers, certain hospitals and oncology centers and individual patients, as well as biopharmaceutical companies, research institutes, international laboratory partners and distributors.

Revenues are recognized when control of services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. FASB ASC Topic 606, Revenue from Contracts with Customers, provides for a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

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Precision oncology testing

The Company recognizes revenue from the sale of its precision oncology tests for clinical customers, including certain hospitals, cancer centers, other institutions and patients, at the time results of the test are reported to physicians. Most precision oncology tests requested by clinical customers are sold without a written agreement; however, the Company determines an implied contract exists with its clinical customers. The Company identifies each sale of its test to a clinical customer as a single performance obligation. With the exception of certain limited contracted arrangements with insurance carriers and other institutions where the transaction price is fixed, a stated contract price does not exist and the transaction price for each implied contract with clinical customers represents variable consideration. The Company estimates the variable consideration under the portfolio approach and considers the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data. The Company monitors the estimated amount to be collected in the portfolio at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the estimate and any subsequent revision contain uncertainty and require the use of significant judgment in the estimation of the variable consideration and application of the constraint for such variable consideration. The Company analyzes its actual cash collections over the expected reimbursement period and compares it with the estimated variable consideration for each portfolio and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal.

Revenue from sales of precision oncology tests to biopharmaceutical customers are based on a negotiated price per test or on the basis of an agreement to provide certain testing volume over a defined period. The Company identifies its promise to transfer a series of distinct tests to biopharmaceutical customers as a single performance obligation. Precision oncology tests to biopharmaceutical customers are generally billed at a fixed price for each test performed. For agreements involving testing volume to be satisfied over a defined period, revenue is recognized over time based on the number of tests performed as the performance obligation is satisfied over time. Results of the Company’s precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by the Company or billed to customers.

Development services and other

The Company performs development services for its biopharmaceutical customers utilizing its precision oncology information platform. Development services typically represent a single performance obligation as the Company performs a significant integration service, such as analytical validation and regulatory submissions. The individual promises are not separately identifiable from other promises in the contracts and, therefore, are not distinct. However, under certain contracts, a biopharmaceutical customer may engage the Company for multiple distinct development services which are both capable of being distinct and separately identifiable from other promises in the contracts and, therefore, distinct performance obligations.

The Company collaborates with biopharmaceutical companies in the development of new drugs. As part of these collaborations, the Company provides services related to regulatory filings to support companion diagnostic device submissions for the Company’s testing panels. Under these collaborations, the Company generates revenue from achievement of milestones, as well as provision of on-going support. For the companion diagnostic development and regulatory approval services performed, the Company is compensated through a combination of an upfront fee and performance-based, non-refundable regulatory and other developmental milestone payments. The transaction price of these contracts typically represents variable consideration. Application of the constraint for variable consideration to milestone payments is an area that requires significant judgment. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be managed to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone. In making this assessment, the Company considers its historical experience with similar milestones, the degree of complexity and uncertainty associated with each milestone, and whether achievement of the milestone is dependent on parties other than the Company. The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved. Application of the constraint for variable consideration is assessed and updated at each reporting period as a revision to the estimated transaction price.

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The Company recognizes companion diagnostic development and regulatory approval services revenue over the period in which biopharmaceutical research and development services are provided. Specifically, the Company recognizes revenue using an input method to measure progress, utilizing costs incurred to-date relative to total expected costs as its measure of progress. The Company assesses the changes to the total expected cost estimates as well as any incremental fees negotiated resulting from changes to the scope of the original contract in determining the revenue recognition at each reporting period. For development of new products or services under these arrangements, costs incurred before technological feasibility is reached are included as research and development expenses in the Company’s condensed consolidated statements of operations, while costs incurred thereafter are recorded as cost of development services and other.

The Company also recognizes revenue from other development services, in addition to companion diagnostic development and regulatory approval services noted above, such as clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. These revenues are generally recognized over time based on an input method to measure progress in the period when the associated services have been performed.

In addition, the Company licenses its digital sequencing technologies to its domestic customers and international laboratory partners. For the licensed technology, the Company is compensated through royalty-based payments, non-refundable upfront payments, guaranteed minimum payments, and/or sample milestone payments. Depending on the nature of the technology licensing arrangements, and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur, when the technology transfer is complete, or over the technology transfer period. Other revenue also includes kit fulfillment, which is recognized when such products are delivered.

For the three and six months ended June 30, 2024, the Company recorded $15.2 million and $24.9 million, respectively, as revenue related to performance obligations satisfied in prior periods. For the three and six months ended June 30, 2023, the Company recorded $2.8 million and $4.5 million, respectively, as revenue related to performance obligations satisfied in prior periods.

Contracts with multiple performance obligations

Contracts with biopharmaceutical customers and international laboratory partners may include multiple distinct performance obligations, such as provision of precision oncology testing, the above-mentioned development services, and digital sequencing technology licensing, among others. The Company evaluates the terms and conditions included within its contracts with biopharmaceutical customers and international laboratory partners to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. The Company first identifies material promises, in contrast to immaterial promises or administrative tasks, under the contract, and then evaluates whether these promises are both capable of being distinct and distinct within the context of the contract. In assessing whether a promised service is capable of being distinct, the Company considers whether the customer could benefit from the service either on its own or together with other resources that are readily available to the customer, including factors such as the research, development, and commercialization capabilities of a third party as well as the availability of the associated expertise in the general marketplace. In assessing whether a promised service is distinct within the context of the contract, the Company considers whether it provides a significant integration of the services, whether the services significantly modify or customize one another, or whether the services are highly interdependent or interrelated.

For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines standalone selling price by considering the historical selling price of these performance obligations in similar transactions as well as other factors, including, but not limited to, the price that customers in the market would be willing to pay, competitive pricing of other vendors, industry publications and current pricing practices, and expected costs of satisfying each performance obligation plus appropriate margin; or by using the residual approach if standalone selling price is not observable, by reference to the total transaction price less the sum of the observable standalone selling prices of other performance obligations promised in the contract.

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Deferred revenue

Deferred revenue, which is a contract liability, consists primarily of payments received in advance of revenue recognition from contracts with customers. For example, development services and other contracts with biopharmaceutical customers often contain upfront payments which results in the recording of deferred revenue to the extent cash is received prior to the Company's performance of the related services. Contract liabilities are relieved as the Company performs its obligations under the contract and revenue is consequently recognized. As of June 30, 2024 and December 31, 2023, the deferred revenue balance was $35.4 million and $22.9 million, respectively, of which $6.0 million and $5.0 million was considered long-term and recorded within other long-term liabilities on the accompanying condensed consolidated balance sheets. Revenue recognized in the six months ended June 30, 2024 that was included in the deferred revenue balance as of December 31, 2023 was $9.3 million, and revenue recognized in the six months ended June 30, 2023 that was included in the deferred revenue balance as of December 31, 2022 was $11.8 million, respectively.

Transaction price allocated to the remaining performance obligations

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. The Company expects to recognize substantially all of the remaining transaction price in the next 1-2 years.

Costs of Precision Oncology Testing

Cost of precision oncology testing generally consists of cost of materials, cost of labor, including bonus, benefit and stock-based compensation, equipment and infrastructure expenses associated with processing test samples (including sample accessioning, library preparation, sequencing, and quality control analyses), freight, curation of test results for physicians, phlebotomy, and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, lease costs, amortization of leasehold improvements, and information technology costs. Costs associated with performing the Company’s tests are recorded as the tests are performed regardless of whether revenue was recognized with respect to that test.

Cost of Development Services and Other

Cost of development services and other primarily includes costs incurred for the performance of development services requested by the Company’s biopharmaceutical customers, and costs associated with the Company's partnership agreements and delivery of screening tests. For development of new products, costs incurred before technological feasibility has been achieved are reported as research and development expenses, while costs incurred thereafter are reported as cost of development services and other.

Research and Development Expenses

Research and development expenses consist of costs incurred to develop technology and include salaries and benefits including stock-based compensation, reagents and supplies used in research and development laboratory work, infrastructure expenses, including facility occupancy and information technology costs, contract services, other outside costs and costs to develop the Company's technology capabilities. Research and development expenses also include costs related to activities performed under contracts with biopharmaceutical companies before technological feasibility has been achieved. Research and development costs are expensed as incurred. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Costs to develop technology capabilities are recorded as research and development expenses unless they meet the criteria to be capitalized as internal-use software costs.

Stock-Based Compensation

Stock-based compensation related to stock options granted to the Company’s employees, directors and nonemployees is measured at the grant date based on the fair value of the award. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards. Compensation expense for stock options with performance metrics is calculated based upon expected achievement of the metrics specified in the grant.

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The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted under the 2012 Stock Plan (as amended and restated), or the 2012 Plan, the 2018 Incentive Award Plan, or the 2018 Plan, the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, and stock purchase rights granted under the 2018 Employee Stock Purchase Plan. The Black-Scholes option-pricing model requires assumptions to be made related to the expected term of an award, expected volatility, risk-free rate and expected dividend yield.

The Company measures the grant date fair value of its service-based and performance-based restricted stock units issued to employees and non-employees based on the closing market price of the common stock on the date of grant. For restricted stock units with only service-based vesting conditions, compensation expense is recognized in the Company’s condensed consolidated statement of operations on a straight-line basis over the requisite service period. Compensation expense for restricted stock units with performance metrics, or PSUs, is calculated based upon expected achievement of the metrics specified in the grant, and is recognized in the Company’s condensed consolidated statement of operations using an accelerated attribution model over the requisite service period for each separately vesting portion of the award. No stock-based compensation expense is recorded for PSUs, unless it is determined to be probable that the related performance metrics will be met. In addition, a cumulative adjustment will be recorded in the period when the probability of achieving the related performance metrics is adjusted. Any PSUs that remain unvested at the end of the performance period will be forfeited. Forfeitures are accounted for as they occur.

Net Loss Per Share

The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method or the as-if converted method, as appropriate. For purposes of this calculation, stock options, restricted stock units, shares issuable pursuant to the employee stock purchase plan, and contingently issuable shares under the convertible senior notes are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.

New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board, or FASB, issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the annual reporting periods beginning the year ended December 31, 2024, and for interim reporting periods beginning January 1, 2025, with early adoption permitted, and should be applied retrospectively. The Company expects to provide required disclosures upon the effective date.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amended existing income tax disclosure guidance, primarily requiring more detailed disclosures on the effective tax rate reconciliation and income taxes paid. This guidance will be effective for annual reporting periods beginning the year ended December 31, 2025, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company expects to provide required disclosures upon the effective date.

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3. Condensed Consolidated Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consist of the following:


	June 30, 2024		December 31, 2023
	(unaudited)
	(in thousands)
Machinery and equipment	$	123,738	$	118,117
Leasehold improvements	103,126		102,298
Computer hardware	35,167		34,417
Construction in progress	7,376		7,508
Furniture and fixtures	7,904		7,999
Computer software	2,016		2,065
Property and equipment, gross	$	279,327	$	272,404
Less: accumulated depreciation	(147,010)		(127,308)
Property and equipment, net	$	132,317	$	145,096

Depreciation expense related to property and equipment was $10.1 million and $9.9 million for the three months ended June 30, 2024, and 2023, respectively, and $20.1 million and $19.6 million for the six months ended June 30, 2024, and 2023, respectively.

Accrued Expenses

Accrued expenses consist of the following:


	June 30, 2024		December 31, 2023
	(unaudited)
	(in thousands)
Operating lease liabilities	$	27,663	$	27,950



Other	43,017		35,525
Total accrued expenses	$	70,680	$	63,475

4. Fair Value Measurements, Cash Equivalents and Marketable Securities

Financial instruments consist of cash equivalents, marketable securities, accounts receivable, net, prepaid expenses and other current assets, net, and accounts payable and accrued liabilities. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, net, and accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

Fair value is defined as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

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Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:


	June 30, 2024
	Fair Value		Level 1		Level 2		Level 3

	(unaudited)
	(in thousands)
Financial Assets:
Money market funds	$	15,061	$	15,061	$	—	$	—
Fixed income bond funds	101,115		—		101,115		—

U.S. government debt securities	884,891		—		884,891		—
Total cash equivalents and restricted cash	$	1,001,067	$	15,061	$	986,006	$	—









Short-term marketable equity securities	$	52,463	$	52,463	$	—	$	—
Total	$	1,053,530	$	67,524	$	986,006	$	—

Financial Liabilities:
Contingent consideration	$	6,960	$	—	$	—	$	6,960
Total	$	6,960	$	—	$	—	$	6,960


	December 31, 2023
	Fair Value		Level 1		Level 2		Level 3

	(in thousands)
Financial Assets:
Money market funds	$	1,032,500	$	1,032,500	$	—	$	—

Total cash equivalents	$	1,032,500	$	1,032,500	$	—	$	—


U.S. government debt securities	$	35,097	$	—	$	35,097	$	—
Total short-term marketable debt securities	$	35,097	$	—	$	35,097	$	—




Long-term marketable equity securities	$	98,002	$	98,002	$	—	$	—
Total	$	1,165,599	$	1,130,502	$	35,097	$	—

Financial Liabilities:
Contingent consideration	$	6,540	$	—	$	—	$	6,540
Total	$	6,540	$	—	$	—	$	6,540

The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Fixed income bond funds and U.S. government debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data and other observable inputs.

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In July 2022, one of the Company's equity investees, Lunit Inc., or Lunit, completed its initial public offering, or IPO, subsequent to which, the Company started to account for the investment in Lunit at fair value on a recurring basis, and classified the investment as marketable equity securities within Level 1 of the fair value hierarchy as the investment is valued using the quoted market price. The Company is subject to a 2-year lock-up period from Lunit's IPO date, during which the Company shall not transfer Lunit's shares between accounts, establish or cancel pledges, sell, or withdraw such shares, without approval from the Korea Exchange. In November 2023, Lunit issued bonus shares to its existing shareholders by allocating one new share for each existing share, and the Company is subject to the same lock-up period with the same restrictions for these bonus shares which expired in July 2024. As of June 30, 2024 and December 31, 2023, the balance of the investment in Lunit was $52.5 million and $98.0 million, included in prepaid expenses and other current assets, net, and other assets, net, respectively, on the Company's condensed consolidated balance sheets. In addition, the Company recorded $15.5 million and $45.5 million unrealized losses on the investment in Lunit for the three and six months ended June 30, 2024, respectively, and recorded $64.0 million and $67.9 million unrealized gains on the investment in Lunit for the three and six months ended June 30, 2023, respectively, included in other income (expense), net on the Company's condensed consolidated statement of operations.

There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.

Acquisition-related contingent consideration is measured at fair value on a quarterly basis and changes in estimated contingent consideration to be paid are included in general and administrative expense in the condensed consolidated statements of operations. The fair value of acquisition-related contingent consideration is estimated using a multiple-outcome discounted cash flow valuation technique. Contingent consideration is classified within Level 3 of the fair value hierarchy, as it is based on a probability that includes significant unobservable inputs. The significant unobservable inputs include a probability-weighted estimate of achievement of certain commercialization milestones, and discount rate to present value the expected payments. A significant change in any of these input factors in isolation could have a material impact to fair value measurement. As of June 30, 2024 and December 31, 2023, the Company's acquisition-related contingent consideration liability was $7.0 million and $6.5 million, respectively, of which $3.5 million and $5.0 million was considered long-term and recorded within other long-term liabilities on the Company's condensed consolidated balance sheets.

The following table summarizes the activities for the Level 3 financial instruments:


	Contingent Consideration
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(unaudited)
	(in thousands)
Fair value — beginning of period	$	6,660	$	6,130	$	6,540	$	6,430

Increase in fair value	300		310		420		10


Fair value — end of period	$	6,960	$	6,440	$	6,960	$	6,440

The Company considers the fair value of the Convertible Notes as of June 30, 2024, and December 31, 2023, to be a Level 2 measurement. The fair value of the Convertible Notes is primarily affected by the trading price of the Company's common stock and market interest rates. As such, the carrying value of the Convertible Notes does not reflect the market rate. See Note 6, Debt, for additional information related to the fair value of the Convertible Notes.

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The following tables summarize the Company’s cash equivalents, restricted cash and marketable debt securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category:


	June 30, 2024
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value

	(unaudited)
	(in thousands)
Money market funds	$	15,061	$	—	$	—	$	15,061
Fixed income bond funds	101,115		—		—		101,115


U.S. government debt securities	884,892		2		(3)		884,891
Total	$	1,001,068	$	2	$	(3)	$	1,001,067


	December 31, 2023
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value

	(in thousands)
Money market funds	$	1,032,500	$	—	$	—	$	1,032,500


U.S. government debt securities	35,108		—		(11)		35,097
Total	$	1,067,608	$	—	$	(11)	$	1,067,597

None of the Company’s marketable debt securities had been in a continuous unrealized loss position for more than one year as of June 30, 2024 and December 31, 2023, respectively.

There have been no material realized gains or losses on marketable debt securities for the periods presented. In addition, there has been no recognition of credit losses for the three and six months ended June 30, 2024, and 2023.

5. Intangible Assets, Net and Goodwill

The following table presents details of purchased intangible assets as of June 30, 2024, and December 31, 2023:


	June 30, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life

	(unaudited)
	(in thousands)						(in years)
Intangible assets subject to amortization:
Acquired license	$	11,886	$	(5,237)	$	6,649	6.3
Non-compete agreements and other covenant rights	5,100		(4,007)		1,093		1.5
Acquired technology	1,600		(1,600)		—		0.0
Total intangible assets subject to amortization	$	18,586	$	(10,844)	$	7,742
Intangible assets not subject to amortization:

Goodwill	3,290		—		3,290
Total purchased intangible assets	$	21,876	$	(10,844)	$	11,032

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	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life

	(in thousands)						(in years)
Intangible assets subject to amortization:
Acquired license	$	11,886	$	(4,686)	$	7,200	6.8
Non-compete agreements and other covenant rights	5,100		(3,588)		1,512		1.9
Acquired technology	1,600		(1,333)		267		0.3
Total intangible assets subject to amortization	$	18,586	$	(9,607)	$	8,979
Intangible assets not subject to amortization:

Goodwill	3,290		—		3,290
Total purchased intangible assets	$	21,876	$	(9,607)	$	12,269

Amortization of finite-lived intangible assets was $0.6 million and $0.7 million for the three months ended June 30, 2024, and 2023, respectively, and $1.2 million and $1.4 million for the six months ended June 30, 2024, and 2023, respectively.

The following table summarizes estimated future amortization expense of finite-lived intangible assets, net:


Year Ending December 31,
	(unaudited)
	(in thousands)
Remainder of 2024	$	982
2025	1,670
2026	1,212
2027	1,107
2028	1,109
2029 and thereafter	1,662

Total	$	7,742

6. Debt

Convertible Senior Notes

In November 2020, the Company issued $1.15 billion principal amount of its 0% Convertible Senior Notes due 2027, or the 2027 Notes. The 2027 Notes do not bear interest, and the principal amount of the Notes will not accrete. However, special interest and additional interest may accrue on the 2027 Notes at a rate per annum not exceeding 0.50% (subject to certain exceptions) upon the occurrence of certain events such as the failure to file certain reports to the Securities and Exchange Commission, or to remove certain restrictive legends from the Notes. The Notes will mature on November 15, 2027, unless repurchased, redeemed or converted earlier.

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Before August 15, 2027, holders of the 2027 Notes will have the right to convert their 2027 Notes only under the following circumstances:

•during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on March 31, 2021, if the last reported sale price of the Company's common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, or the sale price condition;

•during the five consecutive business days immediately after any ten consecutive trading day period, or the measurement period, if the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Company's common stock on such trading day and the conversion rate on such trading day; or

•upon the occurrence of specified corporate events

From and after August 15, 2027, holders of the 2027 Notes may convert their 2027 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate is 7.1523 shares of common stock per $1,000 principal amount of 2027 Notes, which represents an initial conversion price of approximately $139.82 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Company may not redeem the 2027 Notes at its option at any time before November 20, 2024. The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after November 20, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” occur, then, subject to a limited exception for certain cash mergers, holders of Notes may require the Company to repurchase their 2027 Notes at a cash repurchase price equal to the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

Since the 2027 Notes were not convertible as of June 30, 2024 and December 31, 2023, the net carrying amount of the 2027 Notes was classified as a long-term liability.

The following table sets forth the net carrying amounts of the 2027 Notes as of June 30, 2024, and December 31, 2023:


	June 30, 2024		December 31, 2023
	(unaudited)
	(in thousands)
Principal	$	1,150,000	$	1,150,000

Less: debt issuance costs, net of amortization	(8,744)		(10,034)
Net carrying amount	$	1,141,256	$	1,139,966

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The total estimated fair value of the 2027 Notes was $885.5 million and $809.3 million as of June 30, 2024, and December 31, 2023, respectively. The fair value was determined based on the closing trading price per $100 of the 2027 Notes as of the last day of trading for the period.

The interest expense recognized in relation to amortization of debt issuance costs was $0.6 million and $1.3 million for the three and six months ended June 30, 2024 and 2023, respectively, which represented an effective interest rate of 0.2% and 0.2% for the three and six months ended June 30, 2024, and 2023, respectively.

Note Hedges

To minimize the impact of potential economic dilution upon conversion of the 2027 Notes, the Company entered into convertible note hedge transactions, or the 2027 Note Hedges, with respect to its common stock concurrent with the issuance of the Notes. The 2027 Note Hedges cover, subject to customary adjustments, the number of shares of common stock initially underlying the Notes. The strike price of the 2027 Note Hedges will initially be approximately $182.60 per share, which represents a premium of 75% over the last reported sale price of the Company’s common stock of $104.34 per share on November 16, 2020, and is subject to certain adjustments under the terms of the 2027 Note Hedges.

The 2027 Note Hedges will expire upon maturity of the 2027 Notes. The 2027 Note Hedges are separate transactions and are not part of the terms of the 2027 Notes. Holders of the 2027 Notes will not have any rights with respect to the 2027 Note Hedges. The shares receivable related to the 2027 Note Hedges are excluded from the calculation of diluted earnings per share as they are anti-dilutive.

As these transactions meet certain accounting criteria, the 2027 Note Hedges are recorded in stockholders’ equity and are not accounted for as derivatives. The Company paid an aggregate amount of $90.0 million for the 2027 Note Hedges, which has been recorded as a reduction to additional paid-in capital and will not be remeasured.

7. Leases

The Company has entered into various operating lease agreements for office space, data center, lab and warehouse use, with remaining terms ranging from 0.3 to 9.0 years, some of which include one or more options to renew. As leases approach maturity, the Company considers various factors such as market conditions and the terms of any renewal options that may exist to determine whether it will renew the lease, as such, the Company does not include renewal options in its lease terms for calculating its lease liability, as the renewal options allow it to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options at the time of the lease commencement.

Operating lease expense was $7.6 million and $7.4 million for the three months ended June 30, 2024, and 2023, respectively, and $15.2 million and $14.7 million for the six months ended June 30, 2024, and 2023, respectively, which includes both lease and non-lease components (primarily common area maintenance charges and property taxes).


	June 30, 2024		December 31, 2023
	(unaudited)
Weighted-average remaining lease term (in years)	7.9		8.3
Weighted-average discount rate	3.77	%	3.87	%

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The following table summarizes the Company's future principal contractual obligations for operating lease commitments as of June 30, 2024:


Year Ending December 31,
	(unaudited)
	(in thousands)
Remainder of 2024	$	17,697
2025	33,163
2026	28,132
2027	24,479
2028	23,321
2029 and thereafter	101,835
Total operating lease payments	$	228,627
Less: imputed interest	(28,770)

Total operating lease liabilities	$	199,857

Finance leases are not material to the Company's condensed consolidated financial statements.

8. Commitments and Contingencies

Legal Proceedings

In addition to commitments and obligations incurred in the ordinary course of business, from time to time the Company may be subject to a variety of claims and legal proceedings, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. For example, the Company has received, and may in the future continue to receive letters, claims or complaints from others alleging false advertising, patent infringement, violation of employment practices and trademark infringement. The Company has also instituted, and may in the future institute, additional legal proceedings to enforce its rights and seek remedies, such as monetary damages, injunctive relief and declaratory relief. The Company cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on the Company because of diversion of management time and attention as well as the financial costs related to resolving such disputes.

The Company and its affiliates are parties to the legal claims and proceedings described below. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If the Company is unsuccessful in defending, or if it determines to settle, any of these matters, it may be required to pay substantial sums, be subject to injunction and/or be forced to change how it operates its business, which could have a material adverse impact on its financial position or results of operations.

Unless otherwise stated, the Company is unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for the Company to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over a number of years. The Company reviews loss contingencies at least quarterly to determine whether the loss probability has changed and whether it can make a reasonable estimate of the possible loss or range of loss. When the Company determines that a loss from a claim is probable and reasonably estimable, it records a liability in the amount of its estimate for the ultimate loss. The Company also provides disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed its recorded liability.

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Intellectual Property Disputes

In August 2021, TwinStrand Biosciences, Inc., or TwinStrand Biosciences, and the University of Washington filed a patent infringement suit in the United States District Court for the District of Delaware alleging that the Company infringes U.S. Patent Nos. 10,287,631; 10,689,699; 10,752,951; and 10,760,127. The Company answered the complaint in October 2021, denying TwinStrand Biosciences’ allegations and asserted counterclaims of invalidity, unenforceability due to inequitable conduct and infringement of four of the Company’s patents. Discovery in the case has concluded. In October 2023, the District Court dismissed with prejudice TwinStrand’s infringement claims related to U.S. Patent Nos. 10,689,699 and 10,752,951.

On November 14, 2023, a jury verdict was entered in favor of TwinStrand Biosciences and the University of Washington and against the Company. The jury found that the Company willfully infringed U.S. Patent Nos. 10,287,631 and 10,760,127, and awarded TwinStrand Biosciences and the University of Washington $83.4 million in damages, representing a 6% royalty on past sales. As a result, the Company recorded a liability of $83.4 million in the fourth quarter of 2023, which was reflected as a charge to other operating expense on its consolidated statements of operations, and as a component of other long-term liabilities on its consolidated balance sheets. Post-trial motions were filed on March 4, 2024, where the Company moved to overturn the jury’s verdict, seek a new trial, and/or amend the judgment, and TwinStrand Biosciences moved for enhanced damages based on the jury's finding of willful infringement, pre- and post-judgment interest, and a go-forward running royalty. A hearing date has not yet been set on the post-trial motions. The Company strongly disagrees with the jury verdict and will vigorously contest the verdict and judgment through post-trial motions in the District Court, and if needed, through appeal to the U.S. Court of Appeals for the Federal Circuit.

On August 1, 2023, the Company publicly announced that it entered into a Collaboration and Settlement Agreement, or the Collaboration Agreement, with Illumina, Inc., or Illumina. Under the terms of the Collaboration Agreement, the parties have agreed to extend their long-standing commercial relationship by agreeing to collaborate on the sharing of specimen samples in order to advance cancer research, and by entering into a new long-term purchase and supply commitment. Furthermore, the parties agreed to dismiss with prejudice the March 2022 lawsuit filed by Illumina in the U.S. District Court for the District of Delaware, Illumina, Inc. v. Guardant Health, Inc. et al, Case No. 1:22-cv-00334-GBW-CJB, including any allegations related to the subject intellectual property.

On June 11, 2024, the Company filed a patent infringement suit against Tempus AI, Inc., or Tempus, in the United States District Court for the District of Delaware alleging that Tempus infringes U.S. Patent Nos. 11,149,306; 9,902,992; 10,501,810; 10,793,916; and 11,643,693. The Company is seeking an injunction to stop Tempus’ infringement and compensatory damages. The case Guardant Health, Inc. v. Tempus AI, Inc., Case No. 1:24-cv-00687, has been assigned to Judge Richard Andrews and does not yet have a scheduling order.

False Advertising Dispute

In May 2021, the Company also filed a lawsuit against Natera, Inc., or Natera, in the United States District Court for the Northern District of California, wherein the Company alleged that Natera is misleading healthcare providers about the performance of the Company’s new oncology test, Guardant Reveal, by suggesting the test is inaccurate and/or insensitive, and inferior to Natera’s Signatera assay. The Company is seeking an injunction to prevent Natera from continuing to make false and misleading statements and to require Natera to take corrective actions. Natera has asserted counterclaims of false and misleading statements, false advertising, unlawful trade practices and unfair competition. The Company moved to dismiss Natera’s counterclaims, and in January 2022, the court granted in part and denied in part the Company's motion to dismiss. The Company and Natera have both moved for summary judgment on various claims, with the court granting in part non-dispositive motions brought by each party. Trial is scheduled to commence in November 2024.

Civil Investigative Demand

In January 2022, the Company received a Civil Investigative Demand, or CID, from the United States Attorney for the Northern District of California in connection with an investigation under the False Claims Act. The CID requests information and documents regarding billing of government-funded programs for the Company’s panel of genetic tests known as Guardant360. The Company is fully cooperating with the investigation. At this time, the Company is unable to predict the outcome of this investigation.

9. Common Stock

The Company’s common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors, or the Board of Directors. As of June 30, 2024, and December 31, 2023, no dividends on the Company's common stock had been declared by the Board of Directors.

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The Company’s common stock has been reserved for the following potential future issuances:


	June 30, 2024	December 31, 2023
	(unaudited)
Shares underlying outstanding stock options	3,750,726	4,012,903
Shares underlying unvested restricted stock units	5,171,148	4,346,785
Shares underlying unvested market-based restricted stock units	—	2,260,764
Shares underlying unvested performance-based restricted stock units	1,291,889	412,490
Shares available for issuance under the 2018 Incentive Award Plan	11,273,559	7,053,406
Shares available for issuance under the 2018 Employee Stock Purchase Plan	2,414,509	1,679,635
Shares available for issuance under the 2023 Employment Inducement Incentive Award Plan	4,270,121	4,949,988
Total	28,171,952	24,715,971

Equity Offering

In May 2023, the Company completed a follow-on underwritten public offering, in which it issued and sold 14,375,000 shares of its common stock at a price of $28.00 per share, and received net proceeds of $381.4 million after deducting underwriting discounts and commissions and other offering costs of $21.1 million. In December 2023, the Company completed a registered direct offering with an investment management firm, in which it issued and sold 3,387,446 shares of its common stock at a price of $26.77 per share, and received net proceeds of $90.6 million.

10. Stock-Based Compensation

2023 Employment Inducement Incentive Award Plan

In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, under which the Company may exclusively grant awards to its new employees as an inducement material to the employee’s entry into employment with the Company. The 2023 Plan was approved by the Company's Board of Directors without stockholder approval in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules.

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Stock Option Activity

A summary of the Company’s stock option activity under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows:


		Options Outstanding
	Shares Available for Grant	Shares Subject to Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value

	(unaudited)
						(in thousands)
Balance as of January 1, 2024	12,003,394	4,012,903	$	31.76	6.6	$	39,115
2018 Plan annual increase(1)	3,689,000	—

Granted	(427,767)	427,767	23.23

Exercised	—	(577,352)	4.46
Canceled	112,592	(112,592)	45.93
Restricted stock units granted	(1,699,265)	—	—
Restricted stock units canceled	486,612	—	—

Market-based restricted stock units canceled	2,260,764	—	—
Performance-based restricted stock units granted	(870,268)	—	—
Performance-based restricted stock units adjusted for performance achievement	(48,234)	—	—
Performance-based restricted stock units canceled	36,852	—	—
Balance as of June 30, 2024	15,543,680	3,750,726	$	34.56	6.9	$	31,292
Vested and Exercisable as of June 30, 2024		2,087,390	$	34.05	5.3	$	26,747

(1)Effective as of January 1, 2024, an additional 3,689,000 shares of common stock became available for issuance under the 2018 Plan, as a result of the operation of an automatic annual increase provision therein.

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised was $8.4 million and $0.3 million for the three months ended June 30, 2024, and 2023, respectively, and $9.0 million and $0.7 million for the six months ended June 30, 2024, and 2023, respectively.

The weighted-average grant date fair value of options granted was $16.85 and $20.90 per share for the three months ended June 30, 2024, and 2023, respectively, and $14.87 and $20.75 per share for the six months ended June 30, 2024, and 2023, respectively.

Future stock-based compensation for unvested options as of June 30, 2024 was $34.2 million, which is expected to be recognized over a weighted-average period of 2.1 years.

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Restricted Stock Units

A summary of the Company’s restricted stock unit activity excluding the performance-based and market-based restricted stock units under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows:


	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value

	(unaudited)
Balance as of January 1, 2024	4,346,785	$	42.63
Granted	1,699,265	20.49

Vested and released	(388,290)	50.31
Canceled	(486,612)	45.55
Balance as of June 30, 2024	5,171,148	$	34.51

Future stock-based compensation for unvested restricted stock units as of June 30, 2024 was $137.6 million, which is expected to be recognized over a weighted-average period of 2.1 years.

Performance-based Restricted Stock Units

Since November 2020, the Compensation Committee of the Board of Directors started to approve, and the Company started to grant performance-based restricted stock units, or PSUs, to its employees and non-employees. The PSUs granted to employees consist of financial and/or operational metrics to be met over a performance period of approximately 0.6 to 4 years and an additional service period requirement of up to 2 years after the performance metrics are met. In addition, granted units might be adjusted when certain performance metrics are met. The PSUs granted to a consultant consistent of operational metrics to be met over a performance period of 4 years. The PSUs are expected to be expensed over a period of approximately 0.6 to 4.5 years subject to meeting the respective performance metrics and service requirements.

In November 2020 and May 2021, and as part of these PSU programs, the Company granted PSUs consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met. As of June 30, 2024, these PSUs had a grant-date fair value of approximately $25.6 million, net of forfeitures, however no compensation expense for these PSUs has been recorded to-date since the achievement of the performance metrics did not meet the criteria for accrual as of June 30, 2024.

A summary of the Company’s PSU activity under the 2018 Plan and related information is as follows:


	Performance-based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value

	(unaudited)
Balance as of January 1, 2024	412,490	$	91.25
Granted	870,268	18.09
Vested and released	(2,251)	32.86
Adjusted for performance achievement	48,234	32.84
Canceled	(36,852)	76.65
Balance as of June 30, 2024	1,291,889	$	40.30

Stock-based compensation recorded for the PSUs was $2.2 million and $0.2 million for the three months ended June 30, 2024, and 2023, respectively, and $3.6 million and $0.5 million for the six months ended June 30, 2024, and 2023, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of June 30, 2024 was $14.1 million, which is expected to be recognized over a weighted-average period of 2.2 years.

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Market-based Restricted Stock Units

In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, or MSUs, under the 2018 Plan to each of the Company's Co-Chief Executive Officers, which is subject to the achievement of market-based share price goals established by the Board of Directors. The MSUs consist of three separate tranches and the vesting of each tranche is subject to the Company's common stock closing price being maintained at or above a predetermined share price goal for a period of 30 consecutive calendar days. The grant date fair values of the MSUs were determined using a Monte Carlo valuation model for each tranche. The related stock-based compensation expense for each tranche was recognized based on an accelerated attribution method over the estimated derived service period, which was the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model.

On January 1, 2021, Tranche 1 of the MSUs became vested because it had met both service requirement and market-based performance metrics. All three tranches of the MSUs were fully expensed as of June 30, 2022. As of December 31, 2023, 2,260,764 shares of the MSUs, with a weighted-average grant date fair value of $65.20 per share, were outstanding under the 2018 Plan. In March 2024, the Board of Directors approved to cancel the unvested MSUs and concurrently approved to grant new awards to the Co-Chief Executive Officers, which was accounted for as a modification, however no stock-based compensation expense was reversed as the Company's Co-Chief Executive Officers had fulfilled the service requirement.

Stock-Based Compensation Expense

The following table presents the effect of employee and non-employee related stock-based compensation expense:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(unaudited)
	(in thousands)
Cost of precision oncology testing	$	1,275	$	1,176	$	2,536	$	2,378
Cost of development services and other	495		477		990		951
Research and development expense	9,838		8,221		19,770		16,899
Sales and marketing expense	7,162		5,823		14,418		13,326
General and administrative expense	8,465		6,657		16,562		11,066
Total stock-based compensation expense	$	27,235	$	22,354	$	54,276	$	44,620

Valuation of Stock Options

The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023

	(unaudited)
Expected term (in years)

Guardant Health, Inc. [GH] Filings
10-Q	[2024-08-07]
10-Q	[2024-05-09]
10-K	[2024-02-22]
10-Q	[2023-11-06]
10-Q	[2023-08-03]
10-Q	[2023-05-09]
10-K	[2023-02-23]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-03-02]
10-Q	[2019-11-07]
10-Q	[2019-08-07]
S-1	[2019-05-20]
10-Q	[2019-05-10]
10-K	[2019-03-19]
10-Q	[2018-11-19]
S-1	[2018-09-06]