UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________

FORM 10-Q

_____________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ 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.)

~~505 Penobscot Dr.~~3000 Hanover Street

~~Redwood City,~~Palo Alto, California, ~~94063~~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 ~~October~~April 29, ~~2021,~~2022, the registrant had ~~101,656,348~~101,923,322 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	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity	87
	Condensed Consolidated Statements of Cash Flows	98
	Notes to the Unaudited Condensed Consolidated Financial Statements	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3935
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5445
Item 4.	Controls and Procedures	5546

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	5647
Item 1A.	Risk Factors	5647
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5647
Item 3.	Defaults Upon Senior Securities	5647
Item 4.	Mine Safety Disclosures	5647
Item 5.	Other Information	5647
Item 6.	Exhibits	5748
	Signatures	5849

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, ~~2020,~~2021, 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.

Table of Contents

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)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	832,370	$	832,977	Cash and cash equivalents	$	573,604	$	492,202
Short-term marketable securities	Short-term marketable securities	653,601		961,903		Short-term marketable securities	388,662		440,546
Accounts receivable, net	Accounts receivable, net	60,744		53,299		Accounts receivable, net	84,331		97,652
Inventory	Inventory	24,739		22,716		Inventory	36,613		30,674
Prepaid expenses and other current assets, net	Prepaid expenses and other current assets, net	21,958		17,466		Prepaid expenses and other current assets, net	30,070		53,052
Total current assets	Total current assets	1,593,412		1,888,361		Total current assets	1,113,280		1,114,126
Long-term marketable securities	Long-term marketable securities	250,226		246,597		Long-term marketable securities	588,453		698,034
Property and equipment, net	Property and equipment, net	106,156		62,782		Property and equipment, net	151,322		124,461
Right-of-use assets		196,436		37,343
Right-of-use assets, net						Right-of-use assets, net	188,607		189,443
Intangible assets, net	Intangible assets, net	14,698		16,155		Intangible assets, net	13,727		14,207
Goodwill	Goodwill	3,290		3,290		Goodwill	3,290		3,290

Other assets, net	Other assets, net	61,316		17,253		Other assets, net	70,919		60,938
Total Assets(1)	Total Assets(1)	$	2,225,534	$	2,271,781	Total Assets(1)	$	2,129,598	$	2,204,499
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	15,674	$	7,340	Accounts payable	$	32,230	$	17,580
Accrued compensation	Accrued compensation	38,838		28,280		Accrued compensation	56,158		42,496
Accrued expenses	Accrued expenses	40,475		22,639		Accrued expenses	51,851		45,285
Noncontrolling interest liability						Noncontrolling interest liability	78,000		78,000
Deferred revenue	Deferred revenue	7,317		8,550		Deferred revenue	10,570		11,326

Total current liabilities	Total current liabilities	102,304		66,809		Total current liabilities	228,809		194,687
Convertible senior notes, net	Convertible senior notes, net	1,134,180		806,292		Convertible senior notes, net	1,135,463		1,134,821
Long-term operating lease liabilities	Long-term operating lease liabilities	216,806		41,565		Long-term operating lease liabilities	225,377		226,053

Other long-term liabilities	Other long-term liabilities	3,424		1,520		Other long-term liabilities	6,909		3,933
Total Liabilities(1)	Total Liabilities(1)	1,456,714		916,186		Total Liabilities(1)	1,596,558		1,559,494

Redeemable noncontrolling interest		59,400		57,100

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of September 30, 2021, and December 31, 2020; 101,623,257 and 100,213,985 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively		1		1
Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021						Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of March 31, 2022, and December 31, 2021; 101,895,835 and 101,767,446 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively						Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of March 31, 2022, and December 31, 2021; 101,895,835 and 101,767,446 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively	1		1
Additional paid-in capital	Additional paid-in capital	1,626,926		1,902,389		Additional paid-in capital	1,682,406		1,657,593
Accumulated other comprehensive income		(593)		2,697
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(18,314)		(4,764)
Accumulated deficit	Accumulated deficit	(916,914)		(606,592)		Accumulated deficit	(1,131,053)		(1,007,825)
Total Stockholders’ Equity	Total Stockholders’ Equity	709,420		1,298,495		Total Stockholders’ Equity	533,040		645,005
Total Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity		$	2,225,534	$	2,271,781
Total Liabilities and Stockholders’ Equity						Total Liabilities and Stockholders’ Equity	$	2,129,598	$	2,204,499

(1) As of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020,~~2021, this balance includes ~~$24.8~~$16.9 million and ~~$35.0~~$20.4 million of assets, respectively, that can be used only to settle obligations of the consolidated variable interest entity, ~~(“VIE”)~~or VIE and VIE’s subsidiaries, and ~~$3.8~~$4.3 million and ~~$4.9~~$4.3 million ~~respectively,~~ of liabilities of the consolidated VIE and VIE’s subsidiaries, respectively, for which their creditors do not have recourse to the general credit of the Company. See Note 3, Investment in Joint Venture.

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

Table of Contents

Guardant Health, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021

Revenue:	Revenue:									Revenue:
Precision oncology testing	Precision oncology testing	$	79,272	$	60,384	$	215,605	$	171,621	Precision oncology testing		$	84,136	$	63,729
Development services and other	Development services and other	15,507		14,185		49,940		36,793		Development services and other		11,963		14,936
Total revenue	Total revenue	94,779		74,569		265,545		208,414		Total revenue		96,099		78,665
Costs and operating expenses:	Costs and operating expenses:									Costs and operating expenses:
Cost of precision oncology testing	Cost of precision oncology testing	29,665		16,699		78,142		52,699		Cost of precision oncology testing		30,684		23,590
Cost of development services and other	Cost of development services and other	1,151		4,488		11,348		11,429		Cost of development services and other		1,297		5,157
Research and development expense	Research and development expense	70,968		36,245		190,200		109,580		Research and development expense		81,757		55,508
Sales and marketing expense	Sales and marketing expense	50,228		25,095		132,282		75,225		Sales and marketing expense		64,432		34,338
General and administrative expense	General and administrative expense	50,055		66,294		166,366		123,265		General and administrative expense		41,267		67,935
Total costs and operating expenses	Total costs and operating expenses	202,067		148,821		578,338		372,198		Total costs and operating expenses		219,437		186,528
Loss from operations	Loss from operations	(107,288)		(74,252)		(312,793)		(163,784)		Loss from operations		(123,338)		(107,863)
Interest income	Interest income	689		2,313		3,277		8,271		Interest income		778		1,551
Interest expense	Interest expense	(644)		(8)		(1,934)		(30)		Interest expense		(644)		(646)
Other income (expense), net	Other income (expense), net	(187)		345		(720)		2,421		Other income (expense), net		(48)		(290)

Loss before provision for income taxes	Loss before provision for income taxes	(107,430)		(71,602)		(312,170)		(153,122)		Loss before provision for income taxes		(123,252)		(107,248)
Provision for income taxes		96		68		289		116
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes		(24)		110
Net loss	Net loss	(107,526)		(71,670)		(312,459)		(153,238)		Net loss		(123,228)		(107,358)
Adjustment of redeemable noncontrolling interest	Adjustment of redeemable noncontrolling interest	—		(6,000)		(2,300)		(6,800)		Adjustment of redeemable noncontrolling interest		—		(2,300)
Net loss attributable to Guardant Health, Inc. common stockholders	Net loss attributable to Guardant Health, Inc. common stockholders	$	(107,526)	$	(77,670)	$	(314,759)	$	(160,038)	Net loss attributable to Guardant Health, Inc. common stockholders		$	(123,228)	$	(109,658)
Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	$	(1.06)	$	(0.78)	$	(3.11)	$	(1.66)	Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted		$	(1.21)	$	(1.09)
Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	101,420		99,554		101,184		96,659		Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted		101,853		100,955

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

Table of Contents

Guardant Health, Inc.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

(in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021

Net loss	Net loss	$	(107,526)	$	(71,670)	$	(312,459)	$	(153,238)	Net loss		$	(123,228)	$	(107,358)
Other comprehensive income (loss), net of tax impact:
Unrealized gain (loss) on available-for-sale securities		(513)		(1,721)		(2,097)		2,512
Other comprehensive loss, net of tax impact:										Other comprehensive loss, net of tax impact:
Unrealized loss on available-for-sale securities										Unrealized loss on available-for-sale securities		(12,758)		(706)
Foreign currency translation adjustments	Foreign currency translation adjustments	(113)		191		(1,193)		239		Foreign currency translation adjustments		(792)		(1,087)
Other comprehensive income (loss)		(626)		(1,530)		(3,290)		2,751
Other comprehensive loss										Other comprehensive loss		(13,550)		(1,793)
Comprehensive loss	Comprehensive loss	$	(108,152)	$	(73,200)	$	(315,749)	$	(150,487)	Comprehensive loss		$	(136,778)	$	(109,151)
Comprehensive income (loss) attributable to redeemable noncontrolling interest		—		(6,000)		(2,300)		(6,800)
Comprehensive loss attributable to redeemable noncontrolling interest										Comprehensive loss attributable to redeemable noncontrolling interest		—		(2,300)
Comprehensive loss attributable to Guardant Health, Inc.	Comprehensive loss attributable to Guardant Health, Inc.	$	(108,152)	$	(79,200)	$	(318,049)	$	(157,287)	Comprehensive loss attributable to Guardant Health, Inc.		$	(136,778)	$	(111,451)

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

Guardant Health, Inc.

Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity (unaudited)

(in thousands, except share data)


		Three Months Ended September 30, 2021																									Three Months Ended March 31, 2022
		Redeemable Noncontrolling Interest				Common Stock						Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity						Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
				Shares			Amount																Shares			Amount		Additional Paid-in Capital
Balance as of June 30, 2021				$	59,400		101,265,100			$	1			$	1,597,419		$	33		$	(809,388)			$	788,065
Balance as of January 1, 2022																							Balance as of January 1, 2022				101,767,446			$	1		$	1,657,593		$	(4,764)		$	(1,007,825)		$	645,005

Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	—				257,535		—				1,677			—			—			1,677		Issuance of common stock upon exercise of stock options				105,218		—			963			—			—			963
Vesting of restricted stock units	Vesting of restricted stock units	—				100,622		—				—			—			—			—		Vesting of restricted stock units				23,171		—			—			—			—			—
Vesting of common stock exercised early	Vesting of common stock exercised early	—				—		—				13			—			—			13		Vesting of common stock exercised early				—		—			8			—			—			8

Taxes paid related to net share settlement of restricted stock units	Taxes paid related to net share settlement of restricted stock units	—				—		—				(7,199)			—			—			(7,199)		Taxes paid related to net share settlement of restricted stock units				—		—			(957)			—			—			(957)
Stock-based compensation	Stock-based compensation	—				—		—				35,016			—			—			35,016		Stock-based compensation				—		—			24,799			—			—			24,799

Other comprehensive loss, net of tax impact		—				—		—				—			(626)			—			(626)
Other comprehensive loss																							Other comprehensive loss				—		—			—			(13,550)			—			(13,550)
Net loss	Net loss	—				—		—				—			—			(107,526)			(107,526)		Net loss				—		—			—			—			(123,228)			(123,228)
Balance as of September 30, 2021		$	59,400			101,623,257		$	1			$	1,626,926		$	(593)		$	(916,914)		$	709,420
Balance as of March 31, 2022																							Balance as of March 31, 2022				101,895,835		$	1		$	1,682,406		$	(18,314)		$	(1,131,053)		$	533,040

Three Months Ended September 30, 2020
Redeemable Noncontrolling Interest Common Stock Additional
Paid-in
Capital Accumulated Other
Comprehensive Income (Loss) Accumulated
Deficit Total Stockholders’ Equity
Shares Amount
Balance as of June 30, 2020 $ 50,400 99,312,237 $ 1 $ 1,544,373 $ 5,392 $ (435,177) $ 1,114,589
Issuance of common stock upon exercise of stock options — 533,962 — 3,851 — — 3,851
Vesting of restricted stock units — 50,989 — — — — —
Vesting of common stock exercised early — — — 13 — — 13
Taxes paid related to net share settlement of restricted stock units — — — (2,247) — — (2,247)
Stock-based compensation — — — 55,198 — — 55,198
Adjustment of redeemable noncontrolling interest 6,000 — — — — (6,000) (6,000)
Other comprehensive loss, net of tax impact — — — — (1,530) — (1,530)
Net loss — — — — — (71,670) (71,670)
Balance as of September 30, 2020 $ 56,400 99,897,188 $ 1 $ 1,601,188 $ 3,862 $ (512,847) $ 1,092,204

Nine Months Ended September 30, 2021
Redeemable Noncontrolling Interest Common Stock Additional
Paid-in
Capital Accumulated Other
Comprehensive Income (Loss)
Accumulated
Deficit Total Stockholders’ Equity
Shares Amount
Balance as of December 31, 2020 $ 57,100 100,213,985 $ 1 $ 1,902,389 $ 2,697 $ (606,592) $ 1,298,495
Cumulative effect adjustment for ASU 2020-06 adoption — — — (330,403) — 4,437 (325,966)
Issuance of common stock upon exercise of stock options — 629,246 — 7,065 — — 7,065
Vesting of restricted stock units — 719,128 — — — — —
Vesting of common stock exercised early — — — 39 — — 39
Common stock issued under employee stock purchase plan — 60,898 — 5,401 — — 5,401
Taxes paid related to net share settlement of restricted stock units — — — (82,157) — — (82,157)
Stock-based compensation — — — 124,592 — — 124,592
Adjustment of redeemable noncontrolling interest 2,300 — — — — (2,300) (2,300)
Other comprehensive loss, net of tax impact — — — — (3,290) — (3,290)
Net loss — — — — — (312,459) (312,459)
Balance as of September 30, 2021 $ 59,400 101,623,257 $ 1 $ 1,626,926 $ (593) $ (916,914) $ 709,420


		Nine Months Ended September 30, 2020																									Three Months Ended March 31, 2021
		Redeemable Noncontrolling Interest				Common Stock						Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity			Redeemable Noncontrolling Interest			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
				Shares			Amount																Shares				Amount
Balance as of December 31, 2019				$	49,600		94,261,414			$	1			$	1,150,090		$	1,111		$	(352,809)				$	798,393
Issuance of common stock in public offering, net of offering costs of $1,130		—				4,312,500		—				354,600			—			—			354,600

Balance as of January 1, 2021																							Balance as of January 1, 2021	$	57,100		100,213,985	$	1	$	1,902,389	$	2,697	$	(606,592)	$	1,298,495
Cumulative effect adjustment for ASU 2020-06 adoption																							Cumulative effect adjustment for ASU 2020-06 adoption	—			—	—		(330,403)		—		4,437		(325,966)

Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	—				1,188,519		—				7,399			—			—			7,399		Issuance of common stock upon exercise of stock options	—			282,879	—		4,462		—		—		4,462
Vesting of restricted stock units	Vesting of restricted stock units	—				76,591		—				—			—			—			—		Vesting of restricted stock units	—			588,789	—		—		—		—		—
Vesting of common stock exercised early	Vesting of common stock exercised early	—				—		—				39			—			—			39		Vesting of common stock exercised early	—			—	—		13		—		—		13
Common stock issued under employee stock purchase plan		—				58,164		—				3,956			—			—			3,956
Taxes paid related to net share settlement of restricted stock units	Taxes paid related to net share settlement of restricted stock units	—				—		—				(2,247)			—			—			(2,247)		Taxes paid related to net share settlement of restricted stock units	—			—	—		(73,576)		—		—		(73,576)
Stock-based compensation	Stock-based compensation	—				—		—				87,351			—			—			87,351		Stock-based compensation	—			—	—		55,069		—		—		55,069
Adjustment of redeemable noncontrolling interest	Adjustment of redeemable noncontrolling interest	6,800				—		—				—			—			(6,800)			(6,800)		Adjustment of redeemable noncontrolling interest	2,300			—	—		—		—		(2,300)		(2,300)
Other comprehensive loss, net of tax impact	Other comprehensive loss, net of tax impact	—				—		—				—			2,751			—			2,751		Other comprehensive loss, net of tax impact	—			—	—		—		(1,793)		—		(1,793)
Net loss	Net loss	—				—		—				—			—			(153,238)			(153,238)		Net loss	—			—	—		—		—		(107,358)		(107,358)
Balance as of September 30, 2020		$	56,400			99,897,188		$	1			$	1,601,188		$	3,862		$	(512,847)		$	1,092,204
Balance as of March 31, 2021																							Balance as of March 31, 2021	$	59,400		101,085,653	$	1	$	1,557,954	$	904	$	(711,813)	$	847,046

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)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021

OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net loss	Net loss	$	(312,459)	$	(153,238)	Net loss	$	(123,228)	$	(107,358)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	16,181		11,462		Depreciation and amortization	7,201		5,010
Non-cash operating lease costs	Non-cash operating lease costs	17,782		3,349		Non-cash operating lease costs	6,949		3,932
Charge of in-process research and development costs with no alternative future use		—		8,500

Re-valuation of contingent consideration	Re-valuation of contingent consideration	1,845		(120)		Re-valuation of contingent consideration	2,390		—
Non-cash stock-based compensation	Non-cash stock-based compensation	124,592		87,351		Non-cash stock-based compensation	24,799		55,069
Amortization of debt issuance costs	Amortization of debt issuance costs	1,922		—		Amortization of debt issuance costs	642		641
Amortization of premium (discount) on marketable securities	Amortization of premium (discount) on marketable securities	9,546		1,636		Amortization of premium (discount) on marketable securities	2,449		3,259

Credit loss adjustment and others		8		8,056
Other						Other	21		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(7,445)		11,581		Accounts receivable, net	13,299		5,260
Inventory	Inventory	(2,023)		(12,550)		Inventory	(5,937)		(6,160)
Prepaid expenses and other current assets		(5,758)		491
Other assets		(3,226)		(7,571)
Prepaid expenses and other current assets, net						Prepaid expenses and other current assets, net	21,882		521
Other assets, net						Other assets, net	3,846		1,202
Accounts payable	Accounts payable	6,939		846		Accounts payable	(753)		11,986
Accrued compensation	Accrued compensation	10,558		5,480		Accrued compensation	13,662		8,900
Accrued expenses and other liabilities	Accrued expenses and other liabilities	10,484		(1,514)		Accrued expenses and other liabilities	8,022		4,399
Operating lease liabilities	Operating lease liabilities	258		(3,523)		Operating lease liabilities	(3,106)		(2,762)
Deferred revenue	Deferred revenue	(1,233)		(4,940)		Deferred revenue	(757)		(190)
Net cash used in operating activities	Net cash used in operating activities	(132,029)		(44,704)		Net cash used in operating activities	(28,619)		(16,291)
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchases of marketable securities		(334,082)		(580,172)
Purchase of marketable securities						Purchase of marketable securities	(163,742)		(70,654)
Maturity of marketable securities	Maturity of marketable securities	627,110		307,548		Maturity of marketable securities	310,000		204,110
Purchase of non-marketable equity and other related investments	Purchase of non-marketable equity and other related investments	(39,076)		—		Purchase of non-marketable equity and other related investments	(12,750)		—

Purchases of property and equipment		(50,410)		(28,891)
Purchase of intangible assets and capitalized license obligations		—		(17,886)
Purchase of property and equipment						Purchase of property and equipment	(22,700)		(9,586)

Net cash provided by (used in) investing activities		203,542		(319,401)

Net cash provided by investing activities						Net cash provided by investing activities	110,808		123,870
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:

Payments made on finance lease obligations	Payments made on finance lease obligations	(129)		(125)		Payments made on finance lease obligations	(18)		(55)
Proceeds from issuance of common stock upon exercise of stock options	Proceeds from issuance of common stock upon exercise of stock options	7,065		7,399		Proceeds from issuance of common stock upon exercise of stock options	963		4,462
Proceeds from issuances of common stock under employee stock purchase plan		5,401		3,956

Taxes paid related to net share settlement of restricted stock units	Taxes paid related to net share settlement of restricted stock units	(82,157)		(2,247)		Taxes paid related to net share settlement of restricted stock units	(957)		(73,576)
Proceeds from public offering, net of underwriting discounts and commissions		—		355,730
Payment of offering costs related to public offering		—		(1,130)

Payment of offering costs related to borrowings on convertible senior notes	Payment of offering costs related to borrowings on convertible senior notes	(784)		—		Payment of offering costs related to borrowings on convertible senior notes	—		(784)

Net cash (used in) provided by financing activities		(70,604)		363,583
Net cash used in financing activities						Net cash used in financing activities	(12)		(69,953)
Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash						Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(792)		(1,087)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	81,385		36,539
Cash, cash equivalents and restricted cash—Beginning of period						Cash, cash equivalents and restricted cash—Beginning of period	492,288		832,977
Cash, cash equivalents and restricted cash—End of period						Cash, cash equivalents and restricted cash—End of period	$	573,673	$	869,516
Supplemental Disclosures of Cash Flow Information:						Supplemental Disclosures of Cash Flow Information:
Operating lease liabilities arising from obtaining right-of-use assets						Operating lease liabilities arising from obtaining right-of-use assets	$	3,940	$	170,847

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Nine Months Ended September 30,
2021 2020
Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (1,193) 239
Net increase in cash, cash equivalents and restricted cash (284) (283)
Cash and cash equivalents—Beginning of period 832,977 143,228
Cash, cash equivalents and restricted cash—End of period $ 832,693 $ 142,945
Supplemental Disclosures of Cash Flow Information:
Operating lease liabilities arising from obtaining right-of-use assets $ 171,068 $ 10,463
Supplemental Disclosures of Noncash Investing and Financing Activities:
Purchases of property and equipment included in accounts payable and accrued expenses $ 9,589 $ 4,301
Issuance costs related to purchase of non-marketable equity and other related investments included in accounts payable and accrued expenses $ 346 $ —
Property and equipment acquired under finance leases $ 238 $ 47
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents $ 832,370 $ 142,945
Restricted cash – included in other assets, net 323 —
Total cash, cash equivalents and restricted cash $ 832,693 $ 142,945


	Three Months Ended March 31,
	2022		2021

Supplemental Disclosures of Noncash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	$	19,751	$	5,881



Property and equipment acquired under finance leases	$	—	$	238

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	573,604	$	869,372

Restricted cash – included in other assets, net	69		144
Total cash, cash equivalents and restricted cash	$	573,673	$	869,516

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. ~~(the “Company”)~~, or the Company, is a leading precision oncology company focused on helping conquer cancer globally through use of its proprietary tests, vast data sets and advanced analytics. ~~The key~~Today the Company's proprietary tests are helping to ~~conquering cancer is unprecedented access to its molecular information throughout~~realize the full potential of precision oncology by providing patients and their doctors critical insights that can inform decisions at all stages of the disease, ~~which~~from detecting early signs of cancer, to monitoring cancer recurrence, to guiding treatment decisions. By looking at the unique dimensions of cancer found in blood, including genomic alterations, methylation, and fragmentomics, the Company ~~enables by a liquid or tissue biopsy. The Guardant Health Oncology Platform~~ is designed to leverage the Company’s capabilities in technology, clinical development, regulatory and reimbursement to drive commercial adoption, accelerate drug development, improve patient clinical outcomes and lower healthcare costs. In pursuit of its goal to manage cancerunlocking insights that can increasingly help patients across all stages of ~~the disease, the~~cancer, including at its earliest, when it’s most treatable. The Company provides its ~~Guardant360,~~ Guardant360 LDT, Guardant360 CDx and GuardantOMNI ~~liquid biopsy-based~~blood-based tests and Guardant360 TissueNext tissue-based tests for advanced stage ~~cancer. In February 2021, the Company launched its~~cancer, Guardant Reveal ~~liquid biopsy-based~~blood-based tests ~~for~~to detect residual and recurring ~~cancer to first address the need~~disease in Stage II-III colorectal ~~cancer.~~cancer patients, and Guardant360 Response blood-based tests to predict patient response to immunotherapy or targeted therapy 8 weeks earlier than current standard-of-care imaging. In ~~June 2021,~~April 2022, the Company presented new data from its broad portfolio of blood tests at the American Association for Cancer Research Annual Meeting which demonstrated the ability of the Company’s investigational next-generation Guardant SHIELD multi-cancer assay to accurately detect early-stage cancers and identify the tumor tissue of origin with high accuracy. To help identify cancer at the earliest stages, in May 2022, the Company launched ~~Guardant360 TissueNext, the Company's first tissue-based~~Shield LDT, a blood-based test ~~which will be used~~ to ~~identify patients with advanced~~detect early signs of colorectal cancer in average-risk adults age 45 or older who ~~may benefit from biomarker-informed treatment,~~show no symptoms and ~~Guardant360 Response which will be used to measure early indications to patients' response to treatment~~are not up to ~~eight weeks earlier than response evaluation criteria~~date with recommended screening guidelines. From a simple blood draw, the test uses a novel multimodal approach to detect colorectal cancer signals in ~~solid~~the bloodstream, including DNA that is shed by tumors. The Company is also developing tests from its LUNAR program which aims to address the needs of early stage cancer patients with neoadjuvant and adjuvant treatment selection, cancer survivors with surveillance, and asymptomatic individuals eligible for cancer screening and individuals at a higher risk for developing cancer with early detection. Using data collected from the Company's tests, the Company has also developed the GuardantINFORM platform to further accelerate precision oncology drug development by biopharmaceutical companies by offering them an in-silico research platform to further unlock insights into tumor evolution and treatment resistance across various biomarker-driven cancers.

The Company was incorporated in Delaware in December 2011 and is headquartered in ~~Redwood City,~~Palo Alto, California. In May 2018, the Company formed and capitalized Guardant Health AMEA, Inc. ~~(the “Joint Venture”)~~, or the Joint Venture, in the United States with an affiliate of SoftBank Vision Fund (AIV M1) L.P. ~~(“SoftBank”).~~, or SoftBank. Under the terms of the joint venture agreement, the Company holds a 50% ownership interest in the Joint Venture. ~~As of September 30,~~In November 2021, the Company exercised its call right contained in the Joint Venture ~~has subsidiaries in Singapore~~agreement with SoftBank to purchase all of the shares held by SoftBank and ~~Japan~~its affiliates (see Note 3, Investment in Joint ~~Venture) and the Company has a subsidiary in Switzerland, which was incorporated in 2019.~~Venture).

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, ~~(“GAAP”).~~or GAAP. The accompanying condensed consolidated financial statements include the accounts of Guardant Health, Inc., its consolidated Joint Venture and majority owned ~~subsidiary.~~subsidiaries. Other stockholders’ interests in the Joint Venture are shown in the condensed consolidated financial statements as ~~redeemable~~ noncontrolling ~~interest.~~interest liability. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company believes that its existing cash and cash equivalents and marketable securities as of ~~September 30, 2021,~~March 31, 2022, will be sufficient to allow the Company to fund its current operating plan through at least a period of one year after the date the accompanying condensed consolidated financial statements are issued. As the Company continues to incur losses, its transition to profitability is dependent upon a level of revenues adequate to support the Company’s cost structure. If the Company’s transition to profitability is not consistent with its current operating plan, the Company may have to seek additional capital.

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,

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goodwill and identifiable intangible assets, stock-based compensation, incremental borrowing rate for operating leases, contingencies, certain inputs into the provision for (benefit from) income taxes, including related reserves, valuation of ~~non-~~

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~~marketable~~non-marketable securities, valuation of redeemable noncontrolling interest and noncontrolling interest liability, 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.

The extent to which the coronavirus 2019, or COVID-19 pandemic, will ultimately impact the Company’s business, results of operations, financial conditions, or cash flows continues to be highly uncertain. The severity of the impact on the Company's business for the remainder of calendar year ~~2021~~2022 and beyond will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, and the impact of any variants of the virus, the extent and severity of the impact on the Company's customers and suppliers, the continued disruption to demand for the Company's products and services, and the impact of the global business and economic environment on liquidity and the availability of capital, all of which are uncertain and cannot be predicted.

Unaudited Interim Condensed Financial Statements

The accompanying condensed consolidated balance sheet as of ~~September 30, 2021,~~March 31, 2022, the condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ the condensed consolidated statements of comprehensive loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ the condensed consolidated statements of redeemable noncontrolling interest and stockholders’ equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ and cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ and the related interim condensed consolidated disclosures are unaudited. 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, ~~(the “Securities Act”).~~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, ~~2020.~~2021.

Foreign Currency

The functional currency of the subsidiaries of the consolidated Joint Venture is the local currency. The assets and liabilities of the subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive loss within stockholders’ equity. Income and expense accounts are translated at average exchange rates during the period. Foreign currency transaction gains and losses resulting from transactions denominated in a currency other than the functional currency are recognized in the condensed consolidated statements of operations. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ foreign currency transaction gains and losses were immaterial.

Restricted Cash

Restricted cash consists of payroll withholding related to the Company's enrollment in certain voluntary disability insurance plan. Restricted cash balance was $0.1 million and $0.1 million as of ~~September 30,~~March 31, 2022, and December 31, 2021, ~~was $0.3 million,~~respectively, which was included in other assets in the accompanying condensed consolidated balance sheets. ~~The Company did not have any restricted cash as of December 31, 2020.~~

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 investee. The Company's non-marketable equity and other related investments totaled $52.2 million and $39.4 million as of ~~September 30,~~March 31, 2022, and December 31, 2021, respectively, and are included in other assets, net on the accompanying condensed consolidated balance sheets. ~~The Company did not have such non-marketable equity and other related investments as of December 31, 2020.~~ Non-marketable securities are 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 of the investee; changes in operating structure or

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management of the investee; additional funding requirements; and the investee’s ability to remain in business. Pursuant to one of the investments in non-marketable

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securities purchased by the Company, ~~and subject to the Company purchasing additional non-marketable securities from the same investee,~~ 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. As of ~~September 30, 2021,~~March 31, 2022, 0 impairment or downward adjustments to the carrying value of non-marketable securities have been recorded. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.

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 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 in the United States and are primarily with biopharmaceutical companies with 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 at net amount.

A significant customer is a biopharmaceutical customer or a clinical testing payer 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
		Revenue								Accounts Receivable, Net					Three Months Ended March 31,					March 31, 2022	December 31, 2021
		Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2021		December 31, 2020			2022		2021
		2021		2020		2021		2020
															(unaudited)				(unaudited)
		(unaudited)								(unaudited)
Customer A	Customer A	*		*		*		11	%	*		11	%	Customer A	30	%	25	%			10	%	13	%
Customer B	Customer B	31	%	28	%	28	%	24	%	11	%	13	%	Customer B	*		*				11	%	10	%

Customer C	Customer C	*		*		*		*		*		12	%	Customer C	*		*				*		13	%
Customer D	Customer D	*		*		*		*		*		11	%	Customer D	*		*				16	%	*

* less than 10%

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The Company is also subject to credit risk from its other receivables and other assets. The Company's other receivables and other assets include payments due from a third-party in relation to the settlement of a patent dispute reached in August 2020 for $8.0 million payable over a period of 6 years. In December 2020, the Company received the first installment payment of $1.0 million, and in December 2021, the Company received the second installment payment of $1.1 million. The Company has evaluated and recorded a credit loss for the remaining ~~$7.0~~$5.9 million considering the third-party's credit worthiness and lack of financial history.

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The following table presents the receivable and the related credit loss amounts:

Gross Amount Allowance for Credit Losses Net Amount
September 30, 2021 December 31, 2020 Three and Nine Months Ended September 30, 2021 September 30, 2021 December 31, 2020
Beginning Balance Charged to (Reversed from) Other Income (Expense), Net Reclassi
fication Ending Balance
(unaudited) (unaudited) (unaudited)
(in thousand)
Prepaid expenses and other current assets $ 1,100 $ — $ — $ — $ (1,100) $ (1,100) $ — $ —
Other assets 5,900 7,000 (7,000) — 1,100 (5,900) — $ —


	March 31, 2022		December 31, 2021

	(unaudited)
	(in thousands)
Prepaid expenses and other current assets:
Gross Amount	$	1,100	$	—
Allowance for Credit Losses	(1,100)		—
Net Amount	$	—	$	—
Other assets:
Gross Amount	$	4,800	$	5,900
Allowance for Credit Losses	(4,800)		(5,900)
Net Amount	$	—	$	—

The following table summarizes the allowance for credit losses activities:


	Three Months Ended March 31,
	2022		2021

	(unaudited)
	(in thousands)
Prepaid expenses and other current assets:
Allowance for credit losses—Beginning of period	$	—	$	—

Reclassification	1,100		1,100
Allowance for credit losses—End of period	$	1,100	$	1,100
Other assets:
Allowance for credit losses—Beginning of period	$	5,900	$	7,000

Reclassification	(1,100)		(1,100)
Allowance for credit losses—End of period	$	4,800	$	5,900

Accounts Receivable, Net

Accounts receivable represent valid claims against commercial and governmental payers, biopharmaceutical companies, research institutes and international ~~distributors.~~ 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 March 31, 2022, and December 31, 2021, the Company had unbilled receivables of $3.1 million and $5.7 million, respectively.

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. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Company had immaterial allowance for credit losses related to its accounts receivable.

Contract assets are presented under accounts receivable, net and other assets, net on the Company’s condensed consolidated balance sheets and include balances due from commercial and governmental payers, and biopharmaceutical customers. Contract assets consists primarily of: i) precision oncology testing revenues to clinical customers that are recognized upon delivery of the test results prior to cash collection; and ii) development services and other revenues to biopharmaceutical customers that are recognized upon the achievement of performance-based milestones but prior to the establishment of billing rights. Contract assets are relieved when the Company receives payments from clinical customers, or when it invoices the biopharmaceutical customers when milestones are achieved, thereby reclassifying the balances from contract assets to accounts receivable. As of September 30, 2021, the Company had contract assets of $30.9 million which was recorded in accounts receivable, net. As of December 31, 2020, the Company had contract assets of $15.6 million which was recorded in accounts receivable, net, which included $8.4 million of unbilled receivable relating to Guardant360 CDx.

Asset Acquisition

If an acquisition of an asset or group of assets does not meet the definition of a business, the transaction is accounted for as an asset acquisition rather than a business combination. An asset acquisition does not result in the recognition of goodwill and transaction costs are capitalized as part of the cost of the asset or group of assets acquired. Transaction costs allocated to in-process research and development technology with no future alternate use is expensed as incurred. The total consideration is allocated to the various intangible assets acquired on a relative fair value basis. Cash paid in connection of purchase of in-process research and development technology in an asset acquisition is presented within the investing section of the condensed consolidated statement of cash flows.

Goodwill and Intangible Assets, net

Intangible assets related to in-process research and development costs, (“or IPR~~&D”)~~&D, acquired in a business combination are considered to be indefinite-lived until the completion or abandonment of the associated research

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and development efforts. If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. Prior to completion of the research and development efforts, the assets are considered indefinite-lived. During this period, the assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if we

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~~become~~the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts.

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill and IPR&D are not amortized but are tested for impairment at least annually during the fourth fiscal quarter, or if circumstances indicate their value may no longer be recoverable. The Company continues to operate in 1 segment, which is considered to be the sole reporting unit and, therefore, goodwill was tested for impairment at the enterprise level. As of ~~September 30, 2021,~~March 31, 2022, there has been no impairment of goodwill or IPR&D.

Intangible assets are carried at cost, net of accumulated amortization. The Company does not have intangible assets with indefinite useful lives other than goodwill and the acquired IPR&D. Amortization is recorded on a straight-line basis over the intangible asset's useful life, which is approximately 6—12 years.

Post-acquisition Contingent Consideration

Post-acquisition contingent consideration is recognized over the service period, subject to meeting the respective service requirements and performance metrics. For the three months ended March 31, 2022, and 2021, the Company recorded post-acquisition contingent consideration expense of $2.1 million and 0, respectively, in research and development expenses on the Company's condensed consolidated statement of operations.

Leases

The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use, ~~(“ROU”)~~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

In accounting for the issuance of the convertible senior notes, the Company separates the notes into liability and equity components. The carrying amount of the liability component is calculated by measuring the fair value of a similar liability that does not have an associated convertible feature, using a discounted cash flow model with a risk adjusted yield. The carrying amount of the equity component representing the conversion option is determined by deducting the fair value of the liability component from the par value of the notes as a whole. This difference represents a debt discount that is amortized to interest expense using the effective interest method over the term of the notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the issuance of the notes, the Company allocated the total amount incurred to the liability and equity components based on their relative fair values. Transaction costs attributable to the liability component are netted with the liability component and amortized to interest expense using the effective interest method over the term of the notes. Transaction costs attributable to the equity component are netted with the equity component of the notes in additional paid-in capital in the condensed consolidated balance sheets. Starting January 1, 2021, uponUpon early adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equityon January 1, 2021, the Company reclassified the carrying amount of the equity component of the cash conversion feature including the allocated debt issuance costs ~~were reclassified~~ from additional paid-in capital to convertible senior notes, net. 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 provided to its ordering physicians and biopharmaceutical customers, as well as from biopharmaceutical research and development services provided to its biopharmaceutical customers. Precision oncology testing services include genomic profiling and the delivery of other genomic information derived from the Company’s platform. Development services and other include companion diagnostic development, clinical ~~trial~~study setup, monitoring and maintenance, information solutions and laboratory services, and other miscellaneous revenue streams. 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 and international 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. ASC 606 provides for a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract,

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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 ~~liquid biopsy~~ 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. For the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ the Company recorded ~~$3.2~~$2.0 million and $11.4 million as revenue, respectively, resulting from cash collections exceeding the estimated variable consideration related to samples processed in previous periods, including revenue received from successful appeals of reimbursement denials, net of recoupments. For the nine months ended September 30, 2021, and 2020, the Company recorded $17.8 million and $21.9$5.1 million as revenue, respectively, resulting from cash collections exceeding the estimated variable consideration related to samples processed in previous periods, including revenue received from successful appeals of reimbursement denials, net of recoupments.

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 ~~liquid biopsy~~ 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 pharmaceutical 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 ~~liquid biopsy~~testing panels. Under these collaborations, the Company generates revenue from achievement of milestones, as well as provision of on-going support. For development 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 the Company's development services 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

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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 development 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 has other miscellaneous revenue streams that are recognized in addition to development services noted above such as clinical ~~trial~~study setup, monitoring and maintenance, ~~liquid biopsy~~ testing development and support, GuardantConnect, GuardantINFORM, and kits fulfillment related revenues. Revenues related to clinical ~~trial~~study setup, monitoring and maintenance, ~~referral fees, liquid biopsy~~ testing development and support, GuardantConnect, and GuardantINFORM are generally recognized over time based on an input method to measure progress in the period when the associated services have been performed. Kits fulfillment related revenues are recognized when such products are delivered. In addition, the Company derives sales-based royalty revenues from licensing its technologies. Royalty revenues are recognized in the period when royalty-bearing sales occur.

Contracts with multiple performance obligations

Contracts with biopharmaceutical customers may include multiple distinct performance obligations, such as provision of precision oncology testing, biopharmaceutical research and development services, and clinical ~~trial~~study enrollment assistance, among others. The Company evaluates the terms and conditions included within its contracts with biopharmaceutical customers 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.

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 ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the deferred revenue balance was ~~$7.3~~$10.6 million and ~~$8.6~~$11.3 million, respectively, which included $0.6 million and $3.0 million, respectively, related to collaboration development efforts with pharmaceutical companies to be recognized as the Company performs research and development services in the future periods.respectively. Revenue recognized in the ~~nine~~three months ended ~~September 30,~~March 31, 2022 that was included in the deferred revenue balance as of December 31, 2021 was $3.5 million, and revenue recognized in the three months ended March 31, 2021 that was included in the deferred revenue balance as of December 31, 2020 was ~~$8.0~~$5.0 million, of which $3.0 million represented revenue from provision of development services under the collaboration agreements with biopharmaceutical customers. Revenue recognized in the nine months ended September 30, 2020, that was included in the deferred revenue balance as of December 31, 2019, was $8.8 million, which primarily represented revenue from provision of development services under the collaboration agreements with biopharmaceutical customers.

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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 12 months.

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Costs of Precision Oncology Testing

Cost of precision oncology testing generally consists of cost of materials, direct labor including bonus, benefit and stock-based compensation, equipment and infrastructure expenses associated with processing ~~liquid biopsy~~ test samples (including sample accessioning, library preparation, sequencing, quality control analyses and shipping charges to transport blood samples), freight, curation of test results for physicians and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, rent 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. Royalties for licensed technology calculated as a percentage of revenues generated using the associated technology are recorded as expense at the time the related revenues are recognized. One-time royalty payments related to signing of license agreements or other milestones, such as issuance of new patents, are amortized to expense over the expected useful life of the applicable patent rights.

Cost of Development Services and Other

Cost of development service and other primarily includes costs incurred for the performance of development services requested by the Company’s biopharmaceutical customers and other revenues included as noted above. 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 are comprised of costs incurred to develop technology and include compensation and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services and other outside costs. 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 the Company’s technology capabilities are recorded as research and development 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 and the Joint Venture'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.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted under the 2012 Stock Plan, the 2018 Incentive Award Plan, and the Joint Venture's 2020 Equity Incentive 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 board of directors of the Joint Venture has determined the fair value of common stock of the Joint Venture. Forfeitures are accounted for as they occur.

For market-based restricted stock units, the Company derives the requisite service period using the Monte Carlo simulation model and the related compensation expense is recognized over the derived service period using an accelerated attribution model commencing on the grant date. Stock-based compensation expense will be recorded regardless of whether the market conditions are achieved or not. If the related market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense will be accelerated, and a cumulative catch-up expense will be recorded during the period in which the market condition is met.

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The Company measures the grant date fair value of its service-based and performance-based restricted stock units issued to 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 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.

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Net Loss Per Share Attributable to Common Stockholders

The Company calculates basic net loss per share attributable to common stockholders by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to common stockholders 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, shares subject to repurchase from early exercised options 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 attributable to common stockholders as their effect is anti-dilutive.

~~Accounting Pronouncements Adopted~~

~~Convertible Instruments and Contracts in an Entity’s Own Equity~~

~~In August 2020, the FASB issued ASU No. 2020-06,~~ ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06)~~, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, ~~Derivatives and Hedging,~~ or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The Company early adopted ASU 2020-06 in the first quarter of fiscal 2021 using the modified retrospective approach which resulted in the re-classification of the carrying amount of the equity component of the cash conversion feature including the allocated debt issuance costs as of December 31, 2020, from additional paid-in capital to convertible senior notes, net.

3. Investment in Joint Venture

Variable Interest Entity, ~~(“VIE”)~~or VIE

In May 2018, the Company and an affiliate of SoftBank formed and capitalized the Joint Venture for the sale, marketing and distribution of the Company’s tests in all areas worldwide, outside of North America, Central America, South America, the United Kingdom, all other member states of the European Union as of May 9, 2017, Iceland, Norway, Switzerland and Turkey. The Company expects to rely on the Joint Venture to accelerate commercialization of its products in Asia, the Middle East and Africa.

Under the terms of the joint venture agreement, the Company paid $9.0 million for 40,000 shares of common stock, or 50% ownership interest, of the Joint Venture, and the affiliate of SoftBank contributed $41.0 million for 40,000 shares of common stock, or the other 50% ownership interest, of the Joint Venture. In June 2020, an amended and restated certificate of incorporation of the Joint Venture, as approved by the board of directors of the Joint Venture, was filed with the Secretary of State of the State of Delaware. The amended and restated certificate of incorporation, among other things, increased the number of authorized shares of common stock to 89,000,000 shares consisting of 80,000,000 shares of Class A common stock and 9,000,000 shares of Class B (non-voting) common stock; and authorized 80,000,000 shares of Series A preferred stock. Pursuant to the amended and restated certificate of incorporation, each share of common stock held by the Company and the affiliate of SoftBank was reclassified and exchanged for 1,000 shares of Series A preferred stock. As a result, each of the Company and the affiliate of

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SoftBank held 40,000,000 shares of Series A preferred stock. The holders of Series A preferred stock are entitled to receive dividends at the rate of $0.05 per share if and when declared by the board of directors of the Joint Venture. In June 2020, the board of directors of the Joint Venture authorized the adoption of the Joint Venture’s 2020 Equity Incentive Plan pursuant to which 4,595,555 shares of Class B common stock have been reserved for issuance. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, 313,331~~2021, 1,184,428 and no602,408 shares of Class B common stock have been issued and outstanding, respectively, and no shares of Class A common stock have been issued and outstanding. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 80,000,000 shares of Series A preferred stock have been issued and outstanding.

Under the terms of the joint venture agreement, neither party is obligated to make any further capital contribution, in cash or otherwise, to the Joint Venture. The Joint Venture is deemed to be a ~~variable interest entity (“VIE”)~~VIE and the Company has been identified as the VIE’s primary beneficiary. As the primary beneficiary, the Company has consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances have been eliminated in consolidation.

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Joint Venture had total assets of approximately ~~$24.8~~$16.9 million and ~~$35.0~~$20.4 million, respectively, which were primarily comprised of cash, property and equipment and right-of-use ~~assets and security deposits.~~assets. Although the Company consolidates the Joint Venture, the legal structure of the Joint Venture limits the recourse that its creditors will have over the Company’s general credit or assets. Similarly, the assets held in the Joint Venture can be used only to settle obligations of the Joint Venture. As of ~~September 30,~~March 31, 2022, and December 31, 2021, the Company has not provided financial or other support to the Joint Venture that was not previously contracted or required.

Put-call arrangements

The joint venture agreement includes a put-call arrangement with respect to the shares of the Joint Venture held by SoftBank and its affiliates. Under certain specified circumstances and on terms specified in the joint venture agreement, including timely written notice, SoftBank has the right to cause the Company to purchase all shares of the Joint Venture held by SoftBank and its affiliates, ~~(the “put right”),~~or the put right, and the Company has a right to purchase all such shares, ~~(the “call right”).~~or the call right.

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In November 2021, the Company ~~and SoftBank may exercise~~exercised its ~~respective put-call rights for the Company to purchase all shares of the Joint Venture held by SoftBank~~call right contained in ~~the event of (i) certain material disagreements relating to the Joint Venture or its business that may seriously affect the ability of the Joint Venture to perform its obligations under~~ the joint venture agreement ~~or may otherwise seriously impair the ability~~with SoftBank to purchase all of the Joint Venture to conduct its business in an effective matter, other than one relating to the Joint Venture’s business plan or to factual matters that may be capable of expert determination; (ii) the effectiveness of the Company’s initial public offering, a change in control of the Company, the seventh anniversary of the formation of the Joint Venture, or each subsequent anniversary of each of the foregoing events; or (iii) a material breach of the joint venture agreement by the other party that goes unremedied within 20 business days. Unless the shares of the Joint Venture are publicly traded and listed on a nationally recognized stock exchange, the purchase price per share of the Joint Venture in these situations will be determined by a third-party valuation firm on the assumption that the sale is on an arm’s-length basis on the date of the put or call notice. The third-party valuation firm may evaluate a range of factors and employ assumptions that are subjective in nature, which could result in the fair value of SoftBank’s interests in the Joint Venture being determined to be materially different from what has been recorded in the Company’s condensed consolidated financial statements.

In the event the Company exercises its call right, the fair value of the Joint Venture will be deemed to be no less than an amount that yields a 20% internal rate of return on each tranche of capital investedheld by SoftBank and its affiliates in consideration for the ~~Joint Venture, taking into account all proceeds received by~~payment of the aggregate purchase price to be determined based on an independent third-party valuation. Upon the Company's exercise of the call right in November 2021, SoftBank ~~and its affiliates arising from their shares through such date.~~

Inno longer has the ~~event SoftBank exercises~~option to exercise its put ~~right~~right. The Company and SoftBank have initiated a process to determine the ~~fair value~~independent valuation of the Joint Venture, ~~is determined~~which includes the appointment of independent appraisers by both SoftBank and the Company. As of March 31, 2022, the estimated aggregate purchase price was $78.0 million, which represented the minimum contractual purchase price and was recorded in current liabilities in the Company’s condensed consolidated balance sheet. The minimum aggregate purchase price has been calculated based on a 20% annual internal rate of return on the $41.0 million of capital invested by SoftBank in May 2018 as stipulated in the joint venture agreement up through the date the Company exercised the call right. The Company expects to ~~be greater than 40%~~complete this transaction before the end of the ~~fair value~~second quarter of the Company, the Company will only be required to purchase the number of shares of the Joint Venture held by SoftBank and its affiliates having an aggregate value equal to the product of 40% of the Company's fair value and the pro rata portion of the outstanding shares of the Joint Venture held by SoftBank and its affiliates.2022.

The Company may pay the purchase price for the shares of the Joint Venture in cash, in shares of its capital stock (which may be a non-voting security with senior preferences to all other classes of its equity or, if its common stock is publicly traded on a national exchange, its common stock), or in a combination ~~thereof. In the event the Company exercises the call right, SoftBank will choose the form of consideration. In the event SoftBank exercises the put~~thereof, based on SoftBank’s election.

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~~right, the Company will choose the form of consideration. On~~Prior to November 1, 2021, the ~~Company elected to exercise the call right and provided its intent to purchase all shares held by SoftBank pursuant to a time-based trigger, see Note 17.~~

~~The~~ noncontrolling interest held by SoftBank ~~contains~~contained embedded put-call redemption features that ~~are~~were not solely within the Company’s control and ~~has~~had been classified outside of permanent equity in the consolidated balance sheets. The put-call feature embedded in the redeemable noncontrolling interest dodid not ~~currently~~ require bifurcation as it ~~does~~did not meet the definition of a derivative and iswas considered to be clearly and closely related to the redeemable noncontrolling interest. The noncontrolling interest is considered probable of becoming redeemable as SoftBank has the option to exercise its put right to sell its equity ownership in the Joint Venture to the Company on or after the seventh anniversary of the formation of the Joint Venture, on each subsequent anniversary of the Company’s initial public offering (the “IPO”) and under certain other circumstances. The Company elected to recognize the ~~change~~changes in redemption value immediately as they occur as if the put-call redemption feature were exercisable at the end of the reporting period. The carrying value of the redeemable noncontrolling interest iswas first adjusted for the earnings or losses attributable to the redeemable noncontrolling interest based on the percentage of the economic or ownership interest retained in the consolidated VIE by the noncontrolling parties, and then adjusted to equal to its redemption amount, or the fair value of the noncontrolling interest held by SoftBank, as if the redemption ~~were to occur~~occurred at the end of the reporting date. The adjustment of redeemable noncontrolling interest was recorded as an adjustment to net loss attributable to Guardant Health, Inc. common stockholders in the Company's condensed consolidated statement of operations.

4. Condensed Consolidated Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consist of the following:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited)					(unaudited)
		(in thousands)					(in thousands)
Machinery and equipment	Machinery and equipment	$	56,553	$	40,216	Machinery and equipment	$	69,583	$	63,022
Leasehold improvements	Leasehold improvements	35,681		34,037		Leasehold improvements	75,295		38,702
Computer hardware	Computer hardware	16,067		10,862		Computer hardware	21,787		16,685
Construction in progress(1)	Construction in progress(1)	42,295		7,833		Construction in progress(1)	37,104		55,873
Furniture and fixtures	Furniture and fixtures	3,598		3,043		Furniture and fixtures	7,596		3,683
Computer software	Computer software	1,246		1,136		Computer software	1,439		1,320
Property and equipment, gross	Property and equipment, gross	$	155,440	$	97,127	Property and equipment, gross	$	212,804	$	179,285
Less: accumulated depreciation	Less: accumulated depreciation	(49,284)		(34,345)		Less: accumulated depreciation	(61,482)		(54,824)
Property and equipment, net	Property and equipment, net	$	106,156	$	62,782	Property and equipment, net	$	151,322	$	124,461

(1) As of March 31, 2022, and December 31, 2021, $16.2 million and $45.8 million of construction in progress was related to leasehold improvements, furniture and equipment for the office in Palo Alto, California, respectively. In February 2022, part of the Palo Alto office was put in service and related construction in progress was transferred to fixed assets.

Depreciation expense related to property and equipment was ~~$5.0~~$6.7 million and ~~$3.8~~$4.5 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $14.6 million and $10.0 million for the nine months ended September 30, 2021, and 2020,~~ respectively.

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Accrued Expenses

Accrued expenses consist of the following:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited)					(unaudited)
		(in thousands)					(in thousands)
Operating lease liabilities	Operating lease liabilities	$	8,253	$	6,632	Operating lease liabilities	$	16,556	$	12,856
Accrued tax liabilities	Accrued tax liabilities	4,077		4,634		Accrued tax liabilities	4,401		4,223
Accrued professional services	Accrued professional services	6,815		3,397		Accrued professional services	8,410		6,994
Accrued clinical trials and studies		3,351		1,264
Accrued clinical studies						Accrued clinical studies	5,151		3,332
Accrued legal expenses	Accrued legal expenses	5,878		2,875		Accrued legal expenses	6,429		4,166

Purchases of property and equipment included in accrued expenses	Purchases of property and equipment included in accrued expenses	7,144		1,156		Purchases of property and equipment included in accrued expenses	1,349		5,893
Accrued royalty obligations		195		146

Others	Others	4,762		2,535		Others	9,555		7,821
Total accrued expenses	Total accrued expenses	$	40,475	$	22,639	Total accrued expenses	$	51,851	$	45,285

5. 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, accounts payable and accrued expenses. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, net, accounts payable and accrued expenses 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.

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.

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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:

~~Table of Contents~~


	March 31, 2022
	Fair Value		Level 1		Level 2		Level 3

	(unaudited)
	(in thousands)
Financial Assets:
Money market funds	$	447,032	$	447,032	$	—	$	—
Total cash equivalents	$	447,032	$	447,032	$	—	$	—


U.S. government debt securities	$	388,662	$	—	$	388,662	$	—
Total short-term marketable securities	$	388,662	$	—	$	388,662	$	—

U.S. government debt securities	$	588,453	$	—	$	588,453	$	—
Total long-term marketable securities	$	588,453	$	—	$	588,453	$	—
Total	$	1,424,147	$	447,032	$	977,115	$	—

Financial Liabilities:
Contingent consideration	$	6,015	$	—	$	—	$	6,015
Total	$	6,015	$	—	$	—	$	6,015

September 30, 2021
Fair Value Level 1 Level 2 Level 3
(unaudited)
(in thousands)
Financial Assets:
Money market funds $ 735,719 $ 735,719 $ — $ —
Total cash equivalents $ 735,719 $ 735,719 $ — $ —
U.S. government debt securities $ 653,601 $ — $ 653,601 $ —
Total short-term marketable securities $ 653,601 $ — $ 653,601 $ —
U.S. government debt securities $ 250,227 $ — $ 250,227 $ —
Total long-term marketable securities $ 250,227 $ — $ 250,227 $ —
Total $ 1,639,547 $ 735,719 $ 903,828 $ —
Financial Liabilities:
Contingent consideration $ 3,090 $ — $ — $ 3,090
Total $ 3,090 $ — $ — $ 3,090


		December 31, 2020									December 31, 2021
		Fair Value		Level 1		Level 2		Level 3			Fair Value		Level 1		Level 2		Level 3

		(in thousands)									(in thousands)
Financial Assets:	Financial Assets:									Financial Assets:
Money market funds	Money market funds	$	620,630	$	620,630	$	—	$	—	Money market funds	$	357,785	$	357,785	$	—	$	—
Total cash equivalents	Total cash equivalents	$	620,630	$	620,630	$	—	$	—	Total cash equivalents	$	357,785	$	357,785	$	—	$	—

U.S. government debt securities	U.S. government debt securities	$	961,902	$	—	$	961,902	$	—	U.S. government debt securities	$	440,546	$	—	$	440,546	$	—
Total short-term marketable securities	Total short-term marketable securities	$	961,902	$	—	$	961,902	$	—	Total short-term marketable securities	$	440,546	$	—	$	440,546	$	—

U.S. government debt securities	U.S. government debt securities	$	246,597	$	—	$	246,597	$	—	U.S. government debt securities	$	698,034	$	—	$	698,034	$	—
Total long-term marketable securities	Total long-term marketable securities	$	246,597	$	—	$	246,597	$	—	Total long-term marketable securities	$	698,034	$	—	$	698,034	$	—
Total	Total	$	1,829,129	$	620,630	$	1,208,499	$	—	Total	$	1,496,365	$	357,785	$	1,138,580	$	—

Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Contingent consideration	Contingent consideration	$	1,245	$	—	$	—	$	1,245	Contingent consideration	$	3,625	$	—	$	—	$	3,625
Total	Total	$	1,245	$	—	$	—	$	1,245	Total	$	3,625	$	—	$	—	$	3,625

The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. 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.

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

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Acquisition-related contingent consideration is measured at fair value on a quarterly basis and change in estimated contingent consideration to be paid are included in operating expenses 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 ~~September 30, 2021, and December~~March 31, ~~2020,~~2022, the Company recorded contingent consideration liability of ~~$3.1~~$6.0 million, ~~and~~

~~Table~~ of ~~Contents~~

~~$1.2~~which $4.5 million ~~respectively,~~is considered long-term and was recorded within other long-term liabilities on the accompanying condensed consolidated balance sheets. As of December 31, 2021, the Company recorded contingent consideration liability of $3.6 million within other long-term liabilities on the accompanying condensed consolidated balance sheets.

~~The Company considers~~As of March 31, 2022, and December 31, 2021, the fair value of the ~~redeemable~~ noncontrolling interest ~~as of September 30, 2021, and December 31, 2020,~~liability is considered to be a Level 3 ~~measurement. The fair value of the redeemable noncontrolling interest~~measurement and was determined ~~using a~~based on an annual internal rate of return of 20% on the ~~income approach and~~initial amount of $41.0 million invested by SoftBank in May 2018, to the ~~market approach, and estimates and assumptions include future revenue growth rates, gross profit margins, EBITDA margins, future capital expenditures, weighted-average costs~~date of ~~capital and future market conditions, among others.~~Company's exercising the call right in November 2021.

The following table summarizes the activities for the Level 3 financial ~~instruments for the three and nine months ended September 30, 2021, and 2020:~~instruments:


		Redeemable Noncontrolling Interest								Contingent Consideration									Noncontrolling Interest Liability		Redeemable Noncontrolling Interest	Contingent Consideration
		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,			Three Months Ended March 31,		Three Months Ended March 31,
		2021		2020		2021		2020		2021		2020		2021		2020			2022			2021		2022		2021

		(unaudited)																	(unaudited)
		(in thousands)																	(in thousands)
Fair value — beginning of period	Fair value — beginning of period	$	59,400	$	50,400	$	57,100	$	49,600	$	2,120	$	1,175	$	1,245	$	1,365	Fair value — beginning of period	$	78,000		$	57,100	$	3,625	$	1,245

Increase (decrease) in fair value		1,920		7,407		7,852		10,566		970		70		1,845		(120)
Increase in fair value																		Increase in fair value	—			4,287		2,390		—
Net loss for the period	Net loss for the period	(1,920)		(1,407)		(5,552)		(3,766)		—		—		—		—		Net loss for the period	—			(1,987)		—		—

Fair value — end of period	Fair value — end of period	$	59,400	$	56,400	$	59,400	$	56,400	$	3,090	$	1,245	$	3,090	$	1,245	Fair value — end of period	$	78,000		$	59,400	$	6,015	$	1,245

The Company considers the fair value of the Convertible Notes as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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 8,7, Debt, for additional information related to the fair value of the Convertible Notes.

Cash Equivalents and Marketable Securities

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


		September 30, 2021									March 31, 2022
		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value			Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value

		(unaudited)									(unaudited)
		(in thousands)									(in thousands)
Money market fund	Money market fund	$	735,719	$	—	$	—	$	735,719	Money market fund	$	447,032	$	—	$	—	$	447,032

U.S. government debt securities	U.S. government debt securities	903,749		187		(108)		903,828		U.S. government debt securities	993,465		—		(16,350)		977,115
Total	Total	$	1,639,468	$	187	$	(108)	$	1,639,547	Total	$	1,440,497	$	—	$	(16,350)	$	1,424,147

December 31, 2020
Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value
(in thousands)
Money market fund $ 620,630 $ — $ — $ 620,630
U.S. government debt securities 1,206,195 2,339 (35) 1,208,499
Total $ 1,826,825 $ 2,339 $ (35) $ 1,829,129

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	December 31, 2021
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value

	(in thousands)
Money market fund	$	357,785	$	—	$	—	$	357,785

U.S. government debt securities	1,142,172		2		(3,594)		1,138,580
Total	$	1,499,957	$	2	$	(3,594)	$	1,496,365

There have been no material realized gains or losses on marketable securities for the periods presented. None of the Company’s investments in marketable securities has been in an unrealized loss position for more than one year. The Company determined that it did have the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery and the loss position was temporary due to market volatility, thus there has been no recognition of credit losses in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. The maturities of the Company’s long-term marketable securities range from ~~1.3~~1.0 to ~~2.0~~1.8 years as of ~~September 30, 2021.~~

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~~6. Patent License Acquisition~~

~~In January 2017, the Company entered into a license agreement with a biotechnology company, KeyGene N.V. (“KeyGene”). An arbitration was initiated between the parties in 2018. In~~ March 2020, the Company and KeyGene entered into a settlement and patent license agreement (the “SPLA”) to resolve the dispute and to acquire an extended worldwide non-exclusive license to certain patent rights with respect to KeyGene’s Next Generation Sequencing technologies along with certain covenant rights and research and development technology for a one-time payment of $18.5 million, ending all future royalty obligations to KeyGene. This transaction was accounted for as an asset acquisition as the purchase did not meet the definition of a business. The total consideration, including $0.6 million of certain capitalizable transaction costs, was allocated to various components of the SPLA.

The Company allocated $9.4 million to the patent and covenant rights granted under the SPLA, which have useful lives in the range of 6-12 years. The Company allocated $8.5 million to IPR&D technology, which have no alternative future use and was included in research and development expenses for the nine months ended September 30, 2020. The remaining $1.2 million was allocated to the settlement of the prior dispute between the parties and was included in general and administrative expenses for the nine months ended September 30, 2020.31, 2022.

7.6. Intangible Assets, Net and Goodwill

The following table presents details of purchased intangible assets as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


		September 30, 2021								March 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life

		(unaudited)								(unaudited)
		(in thousands)						(in years)		(in thousands)						(in years)
Intangible assets subject to amortization:	Intangible assets subject to amortization:								Intangible assets subject to amortization:
Acquired license	Acquired license	$	11,886	$	(2,194)	$	9,692	9.0	Acquired license	$	11,886	$	(2,746)	$	9,140	8.5
Non-compete agreements and other covenant rights	Non-compete agreements and other covenant rights	5,100		(1,694)		3,406		4.2	Non-compete agreements and other covenant rights	5,100		(2,113)		2,987		3.7
Total intangible assets subject to amortization	Total intangible assets subject to amortization	16,986		(3,888)		13,098			Total intangible assets subject to amortization	16,986		(4,859)		12,127
Intangible assets not subject to amortization:	Intangible assets not subject to amortization:								Intangible assets not subject to amortization:
IPR&D	IPR&D	1,600		—		1,600			IPR&D	1,600		—		1,600
Goodwill	Goodwill	3,290		—		3,290			Goodwill	3,290		—		3,290
Total purchased intangible assets	Total purchased intangible assets	$	21,876	$	(3,888)	$	17,988		Total purchased intangible assets	$	21,876	$	(4,859)	$	17,017


		December 31, 2020								December 31, 2021
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Weighted-Average Useful Life

		(in thousands)						(in years)		(in thousands)						(in years)
Intangible assets subject to amortization:	Intangible assets subject to amortization:								Intangible assets subject to amortization:
Acquired license	Acquired license	$	11,886	$	(1,367)	$	10,519	9.8	Acquired license	$	11,886	$	(2,473)	$	9,413	8.8
Non-compete agreements		5,100		(1,064)		4,036		4.9
Non-compete agreements and other covenant rights									Non-compete agreements and other covenant rights	5,100		(1,906)		3,194		3.9
Total intangible assets subject to amortization	Total intangible assets subject to amortization	16,986		(2,431)		14,555			Total intangible assets subject to amortization	16,986		(4,379)		12,607
Intangible assets not subject to amortization:	Intangible assets not subject to amortization:								Intangible assets not subject to amortization:
IPR&D	IPR&D	1,600		—		1,600			IPR&D	1,600		—		1,600
Goodwill	Goodwill	3,290		—		3,290			Goodwill	3,290		—		3,290
Total purchased intangible assets	Total purchased intangible assets	$	21,876	$	(2,431)	$	19,445		Total purchased intangible assets	$	21,876	$	(4,379)	$	17,497

2523

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Amortization of finite-lived intangible assets was $0.5 million and $0.5 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $1.5 million and $1.3 million for the nine months ended September 30, 2021, and 2020,~~ respectively.

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


Year Ending December 31,	Year Ending December 31,			Year Ending December 31,
		(unaudited)			(unaudited)
		(in thousands)			(in thousands)
Remainder of 2021		$	491
2022		1,947
Remainder of 2022				Remainder of 2022	$	1,467
2023	2023	1,947		2023	1,947
2024	2024	1,953		2024	1,953
2025	2025	1,705		2025	1,670
2026 and thereafter		5,055
2026				2026	1,212
2027 and thereafter				2027 and thereafter	3,878
Total	Total	$	13,098	Total	$	12,127

8.7. Debt

Convertible Senior Notes

In November 2020, the Company issued $1.15 billion principal amount of its 0% Convertible Senior Notes due 2027, ~~(the “2027 Notes”).~~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.

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, ~~(the “sale~~or the sale price ~~condition”);~~condition;

•during the 5 consecutive business days immediately after any 10 consecutive trading day period, ~~(the “measurement 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

~~Table of Contents~~

of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days,

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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.

In accounting for the 2027 Notes, the Company separated the 2027 Notes into liability and equity components. The carrying amount of the liability component was calculated using a Black-Scholes model by measuring the fair value of a similar instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2027 Notes as a whole. This difference represents a debt discount that is amortized as interest expense using an effective interest over the term of the 2027 Notes. Effective January 1, 2021, the Company early adopted ASU 2020-06 which resulted in the re-classification of the equity component representing the associated convertible feature and the related debt issuance costs into long-term liabilities with a corresponding impact to retained earnings.

Since the 2027 Notes were not convertible as of ~~September 30, 2021,~~March 31, 2022, the net carrying amount of the 2027 Notes was classified as a long-term liability.

The following table sets forth the ~~components~~net carrying amounts of the 2027 Notes as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:

September 30, 2021 December 31, 2020
(unaudited)
(in thousands)
Liability component:
Principal $ 1,150,000 $ 1,150,000
Less: debt discount, net of amortization — (331,074)
Less: debt issuance costs, net of amortization (15,820) (12,634)
Net carrying amount $ 1,134,180 $ 806,292
Equity component recorded at issuance:
2027 Notes $ — $ 335,667
Less: issuance costs — (5,264)
Net amount recorded in equity $ — $ 330,403


	March 31, 2022		December 31, 2021
	(unaudited)
	(in thousands)
Liability component:
Principal	$	1,150,000	$	1,150,000

Less: debt issuance costs, net of amortization	(14,537)		(15,179)
Net carrying amount	$	1,135,463	$	1,134,821

The total estimated fair value of the 2027 Notes was ~~$1.3~~$0.9 billion and ~~$1.3~~$1.2 billion as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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 ~~$1.9~~$0.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, respectively, which represented an effective interest rate of 0.2% and 0.2% ~~and~~ for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022, and 2021, 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, ~~(the "2027~~or the 2027 Note ~~Hedges")~~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

~~Table of Contents~~

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.

9.8. Leases

The Company has entered into various operating lease agreements for office space, data center, lab and warehouse use, with remaining terms ranging from 1 year to 12 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

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operational flexibility and the Company is not reasonably certain it will exercise these renewal options at the time of the lease commencement. In July 2020, the Company entered into 2 lease agreements for additional office space in Palo Alto, California, ("or the Palo Alto ~~Lease")~~Lease, and in San Diego, California, ("or the San Diego ~~Lease").~~Lease. The San Diego Lease has a term of 8 years with rent payments commencing in May 2022. The Palo Alto Lease has a term of 12 years with an option to renew the lease term for an additional ten years which has not been considered in the determination of ROU or the lease liability as the Company does not consider it reasonably certain of exercising the renewal option. ~~Rent~~After the initial payment of $0.9 million in February 2022, the remaining rent payments for the Palo Alto Lease will commence in ~~October 2021.~~June 2022. Both leases consist of fixed and variable payments and are being accounting for as operating leases. The Company took possession of these facilities in March 2021. The Company estimated the incremental borrowing rate to determine the present value of lease payments for the San Diego and Palo Alto leases using trading data of the Company's convertible debt adjusted for credit rating and market yield curves.

Operating lease expense was $6.9 million and ~~immaterial~~$3.9 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $17.8 million and $3.3 million for the nine months ended September 30, 2021, and 2020,~~ respectively, which includes both lease and non-lease components (primarily common area maintenance charges and property taxes).

September 30, 2021 December 31, 2020
(unaudited)
Weighted-average remaining lease term (in years) 10.1 5.5
Weighted-average discount rate 4.09 % 8.07 %

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	March 31, 2022		December 31, 2021
	(unaudited)
Weighted-average remaining lease term (in years)	9.7		10.0
Weighted-average discount rate	4.02	%	4.01	%

The following table summarizes the Company's future principal contractual obligations for operating lease commitments as of ~~September 30, 2021:~~March 31, 2022:


Year Ending December 31,	Year Ending December 31,			Year Ending December 31,
		(unaudited)			(unaudited)
		(in thousands)			(in thousands)
Remainder of 2021		$	2,737
2022		21,495
Remainder of 2022				Remainder of 2022	$	17,030
2023	2023	28,972		2023	30,363
2024	2024	31,525		2024	32,891
2025	2025	32,081		2025	32,238
2026 and thereafter		177,400
2026				2026	27,753
2027 and thereafter				2027 and thereafter	149,637
Total operating lease payments	Total operating lease payments	$	294,210	Total operating lease payments	$	289,912
Less: imputed interest	Less: imputed interest	(52,473)		Less: imputed interest	(47,979)
Less: lease incentives		(16,678)

Total operating lease liabilities	Total operating lease liabilities	$	225,059	Total operating lease liabilities	$	241,933

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

~~10.~~9. 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

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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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~~Patent~~Intellectual Property Disputes

In November 2017, the Company filed a lawsuit against Foundation Medicine, Inc. (“Foundation Medicine”) in the United States District Court for the District of Delaware. The Company has alleged that Foundation Medicine has infringed 4 of the Company’s digital sequencing technology patents. Foundation Medicine has asserted counterclaims of patent invalidity, unenforceability under the doctrine of inequitable conduct, license and non-infringement. The parties are seeking damages, injunctive relief and attorneys’ fees. Discovery in the lawsuit has closed, and a number of pre-trial motions were filed in September and October 2020.

Foundation Medicine also filed 6 petitions for inter partes review with the PTAB, challenging the patentability of all 4 of the patents asserted by the Company. The PTAB denied institution of inter partes review for 4 of the 6 petitions filed by Foundation Medicine and instituted inter partes review for the remaining 2 petitions.

In November 2020, the Company filed a lawsuit against Foundation Medicine in the United States District Court for the District of Delaware, wherein the Company alleged that Foundation Medicine infringes 7 of the Company’s patents. Foundation Medicine has asserted counterclaims of patent invalidity, unenforceability under the doctrine of inequitable conduct, license, non-infringement, and that the Company has violated Section 2 of Sherman Act. In December 2020, the Company filed a Motion for a Preliminary Injunction to prohibit Foundation Medicine from practicing 2 of the asserted patents.

In March 2021, the Company filed 2 lawsuits against Foundation Medicine GmbH in the District Court of Munich I in Germany, wherein the Company alleged that Foundation Medicine GmbH infringes two of the Company’s patents. Final hearings on this matter are scheduled for December 2021.

In May 2021, the Company entered into a binding term sheet with Foundation Medicine, which upon execution of a definitive settlement agreement, will result in the dismissal of all pending patent litigation worldwide between the parties.

In August 2020, the Company and Personal Genome Diagnostics, Inc. settled the patent infringement lawsuit brought by the Company. Under the terms of the confidential settlement, the lawsuit and counterclaims, as well as other challenges to the Company’s patents, have been dismissed.

In August 2021, TwinStrand Biosciences, Inc. (“, or TwinStrand ~~Biosciences”)~~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.~~allegations and asserted counterclaims of invalidity, unenforceability due to inequitable conduct and infringement of 4 of the Company’s patents. Discovery in the case is ongoing and trial is scheduled to commence in November 2023.

In March 2022, Illumina Inc., or Illumina, filed suit in the United States District Court for the District of Delaware against the Company and its Co-Chief Executive Officers, Dr. Helmy Eltoukhy, or Dr. Eltoukhy, and Dr. AmirAli Talasaz, or Dr. Talasaz, or collectively the Defendants, alleging that Illumina is the owner of certain of the Company’s patents and patent applications, and that the Defendants allegedly misappropriated Illumina trade secrets. Illumina also alleges that Drs. Eltoukhy and Talasaz breached various Illumina employment contracts, company policies, and implied covenants of good faith and fair dealing as part of their former employment with Illumina prior to starting the Company. Illumina is requesting unspecified compensatory and punitive damages, attorneys’ fees, and specific performance in the form of a declaration of ownership and assignment of intellectual property filed for or obtained by the Defendants that derives from the alleged misuse of Illumina confidential information. The Defendants deny the allegations of misconduct. The court has not yet entered a ~~case~~ scheduling order.

False Advertising Dispute

In May 2021, the Company also filed a lawsuit against Natera, Inc. ~~(“Natera”)~~, 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 ~~a Preliminary Injunction~~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. ~~Discovery is ongoing and the court has scheduled a hearing for November 2021 to hear argument on the Company’s motion~~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. Discovery is ongoing and trial is scheduled to commence in February 2023.

Civil Investigative Demand

In January 2022, the Company received a Civil Investigative Demand, or CID, from the United States Attorney for ~~a case management conference.~~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.

~~11.~~10. Common Stock

The Company’s common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors, ~~(the “Board~~or the Board of ~~Directors”).~~Directors. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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:

September 30, 2021 December 31, 2020
(unaudited)
Shares underlying outstanding stock options 2,516,868 3,101,181
Shares underlying unvested restricted stock units 1,128,147 1,118,655
Market-based restricted stock units 2,260,764 3,391,148
Performance-based restricted stock units 383,341 377,922
Shares available for issuance under the 2018 Incentive Award Plan 5,803,707 1,819,223
Shares available for issuance under the 2018 Employee Stock Purchase Plan 1,475,593 1,536,491
Total 13,568,420 11,344,620

~~Follow-on Public Offering~~

In June 2020, the Company completed an underwritten public offering, in which it issued and sold 4,312,500 shares of its common stock at a price of $84.00 per share. The Company received net proceeds of $354.6 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.


	March 31, 2022	December 31, 2021
	(unaudited)
Shares underlying outstanding stock options	2,509,506	2,624,974
Shares underlying unvested restricted stock units	1,506,378	1,498,553
Market-based restricted stock units	2,260,764	2,260,764
Performance-based restricted stock units	345,082	374,596
Shares available for issuance under the 2018 Incentive Award Plan	8,925,158	5,231,624
Shares available for issuance under the 2018 Employee Stock Purchase Plan	1,426,264	1,426,264
Total	16,973,152	13,416,775

~~12.~~11. Stock-Based Compensation

Stock Option Activity

A summary of the Company’s stock option activity under the 2012 Stock Plan (as amended and ~~restated,~~restated), or the ~~“2012 Plan”)~~2012 Plan, and the 2018 Incentive Award Plan, ~~(the “2018 Plan”)~~or the 2018 Plan, and related information is as follows:


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

		(unaudited)								(unaudited)
							(in thousands)								(in thousands)
Balance as of December 31, 2020		1,819,223	3,101,181	$	15.80	6.9	$	350,670
Balance as of January 1, 2022									Balance as of January 1, 2022	5,231,624	2,624,974	$	29.17	6.5	$	193,014
2018 Plan annual increase(1)	2018 Plan annual increase(1)	3,689,000	—						2018 Plan annual increase(1)	3,689,000	—
Granted	Granted	(164,147)	164,147	122.52					Granted	(7,252)	7,252	62.10
Exercised	Exercised	—	(629,246)	10.93					Exercised	—	(105,218)	5.94
Canceled	Canceled	63,286	(119,214)	49.16					Canceled	13,268	(17,502)	74.71
Restricted stock units granted	Restricted stock units granted	(398,117)	—	—					Restricted stock units granted	(128,855)	—	—
Restricted stock units canceled	Restricted stock units canceled	241,627	—	—					Restricted stock units canceled	97,859	—	—

Market-based restricted stock units canceled		558,254	—	—
Performance-based restricted stock units granted		(52,917)	—	—

Performance-based restricted stock units canceled	Performance-based restricted stock units canceled	47,498	—	—					Performance-based restricted stock units canceled	29,514	—	—
Balance as of September 30, 2021		5,803,707	2,516,868	$	22.40	6.5	$	259,451
Vested and Exercisable as of September 30, 2021			1,943,159	$	10.36	6.1	$	222,786
Balance as of March 31, 2022									Balance as of March 31, 2022	8,925,158	2,509,506	$	29.92	6.3	$	115,462
Vested and Exercisable as of March 31, 2022									Vested and Exercisable as of March 31, 2022		1,957,910	$	12.56	5.6	$	109,604

(1)Effective as of January 1, ~~2021,~~2022, 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 ~~$28.4~~$7.3 million and ~~$46.8~~$38.3 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $77.8 million and $97.1 million for the nine months ended September 30, 2021, and 2020,~~ respectively.

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The weighted-average grant date fair value of options granted was ~~$65.17~~$36.32 and ~~$49.73~~$101.21 per share for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $72.14 and $46.85 per share for the nine months ended September 30, 2021, and 2020,~~ respectively.

Future stock-based compensation for unvested options as of ~~September 30, 2021~~March 31, 2022 was ~~$22.7~~$27.9 million, which is expected to be recognized over a weighted-average period of ~~2.8~~2.9 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 and the 2018 Plan and related information is as follows:


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

		(unaudited)				(unaudited)
Balance as of December 31, 2020		1,118,655	$	92.89
Balance as of January 1, 2022					Balance as of January 1, 2022	1,498,553	$	109.72
Granted	Granted	398,117	130.30		Granted	128,855	62.10
Vested and released	Vested and released	(146,998)	89.37		Vested and released	(23,171)	105.58
Canceled	Canceled	(241,627)	94.64		Canceled	(97,859)	108.53
Balance as of September 30, 2021		1,128,147	$	106.17
Balance as of March 31, 2022					Balance as of March 31, 2022	1,506,378	$	105.78

Future stock-based compensation for unvested restricted stock units as of ~~September 30, 2021,~~March 31, 2022 was ~~$105.2~~$130.1 million, which is expected to be recognized over a weighted-average period of 3.0 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, ~~(“PSUs”)~~or PSUs, under the 2018 Plan. The PSUs granted to employees consist of financial and operational metrics to be met over a performance period of 4 years and an additional service period requirement of six months after the 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 4 years to 4.5 years subject to meeting the respective performance metrics and service requirements. As of ~~September 30, 2021,~~March 31, 2022, a significant portion of these PSUs are not expected to achieve the related performance metrics, and therefore, no stock-based compensation expense was recorded for the PSUs that were not probable to vest.

A summary of the Company’s performance-based restricted stock unit 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 December 31, 2020 377,922 $ 113.40
Granted 52,917 135.94
Canceled (47,498) 113.40
Balance as of September 30, 2021 383,341 $ 116.51


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

	(unaudited)
Balance as of January 1, 2022	374,596	$	116.58


Canceled	(29,514)	113.40
Balance as of March 31, 2022	345,082	$	116.86

Stock-based compensation recorded for the PSUs ~~for the three and nine months ended September 30, 2021,~~ was $0.3 million and ~~$1.0~~$0.3 million for the three months ended March 31, 2022, and 2021, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of ~~September 30, 2021~~March 31, 2022 was ~~$4.4~~$3.5 million, which is expected to be recognized over a weighted-average period of ~~3.4~~2.9 years.

Market-based Restricted Stock Units

In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, ~~(“MSUs”)~~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~~3 separate tranches

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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 share price goal can be met any time during the seven-year performance period from the date of grant. Upon vesting, the MSUs must be held for a period of six to twelve months depending on the time of vesting within the seven-year performance period. The vesting of the MSUs can also be triggered upon a change in control event and achievement of a certain change in

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control price goal, or when there is a qualifying termination or in the event of death or disability. The following table presents additional information relating to each MSU award:

Tranche

Price Goal

Number of RSUs

Tranche 1

$120 per share

565,192

Tranche 2

$150 per share

565,191

Tranche 3

$200 per share

565,191

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 is recognized based on an accelerated attribution method over the estimated derived service period. If the related share price goal is achieved earlier than its expected derived service period, the stock-based compensation expense will be recognized as a cumulative catch-up expense from the grant date to that point in time in achieving the share price goal. The derived service period is 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. The Monte Carlo valuation model uses assumptions such as volatility, risk-free interest rate, cost of equity and dividend estimated for the performance period of the MSU. The weighted-average grant date fair value of the MSUs was $67.00 per share and the weighted-average derived service period was estimated to be in the range of 0.83 – 2.07 years.

On January 1, 2021, Tranche 1 of the MSUs became vested because it ~~has~~had met both service requirement and market-based performance metrics as the predetermined share price goal of $120 per share was achieved for a period of 30 consecutive calendar days. ~~A summary~~As of ~~the Company’s~~March 31, 2022 and December 31, 2021, 2,260,764 shares of market-based restricted stock ~~unit activity~~units, with a weighted-average grant date fair value of $65.20 per share, were outstanding under the 2018 ~~Plan and related information is as follows:~~

Market-based Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value
(unaudited)
Balance as of December 31, 2020 3,391,148 $ 67.00
Vested and released (572,130) 70.58
Canceled (1)
(558,254) 70.58
Balance as of September 30, 2021 2,260,764 $ 65.20

~~(1)Represented shares withheld by~~Plan. No MSUs were granted, vested or canceled during the ~~Company for MSU holders' tax obligation upon release of vested MSUs.~~three months ended March 31, 2022.

Stock-based compensation for the MSUs was ~~$22.6~~$8.5 million and ~~$46.8~~$43.9 million, for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $88.9 million and $65.1 million, for the nine months ended September 30, 2021, and 2020,~~ respectively, which was recorded in general and administrative expenses on the Company's condensed consolidated statement of operations. Future stock-based compensation for unvested MSUs as of ~~September 30, 2021~~March 31, 2022 was ~~$26.4~~$7.6 million, which is expected to be recognized over a weighted-average period of ~~0.7~~0.2 years. In the event of a change in control, a qualifying termination, death, disability or the share price goal occurring earlier than the estimated derived service period, the stock-based compensation relating to these MSUs could be accelerated. Any MSUs that remain unvested at the end of the seven-year performance period will automatically be forfeited and terminated without further consideration.

AMEA 2020 Equity Incentive Plan

In August 2020, the board of directors of the Joint Venture approved its 2020 Equity Incentive Plan, ~~(the “AMEA~~or the AMEA 2020 ~~Plan”),~~Plan, under which the Joint Venture may grant equity incentive awards such as stock options, restricted stock, restricted stock units, stock appreciation rights and cash-based awards to its employees and non-employees. Stock options granted may be either incentive stock options or nonstatutory stock options. Incentive stock options may be granted only to employees of the Joint Venture or its affiliates. Nonstatutory stock options may be granted to

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employees, directors and non-employee consultants. Stock options may be granted at an exercise price of not less than the fair market value of the Joint Venture's common stock on the date of grant, determined by the board of directors of the Joint Venture. Options generally vest over 4 years and expire as determined by the board of directors of the Joint Venture, provided that the term of options may not exceed 10 years from the date of grant. For individuals holding more than 10% of the total combined voting power of all classes of stock of the Joint Venture, the exercise price of an option will not be less than 110% of the fair market value of the Joint Venture's common stock on the date of grant, and the term of the option will not exceed 5 years. A total of 4,595,555 shares of the Joint

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Venture's Class B common stock are initially reserved for issuance under the AMEA 2020 Plan, and the number of shares may be increased in accordance with the terms of the AMEA 2020 Plan.

A summary of the Joint Venture's stock option activity under the AMEA 2020 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 December 31, 2020 542,220 4,053,335 $ 0.58 9.6 $ —
Granted (826,667) 826,667 0.58
Exercised — (313,331) 0.58
Canceled 382,780 (382,780) 0.58
Balance as of September 30, 2021 98,333 4,183,891 $ 0.58 9.0 $ —
Vested and Exercisable as of September 30, 2021 2,341,259 $ 0.58 8.9 $ —


		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, 2022	340,928	3,652,219	$	0.58	8.8	$	—


Exercised	—	(582,020)	0.58
Canceled	74,999	(74,999)	0.58
Balance as of March 31, 2022	415,927	2,995,200	$	0.58	8.6	$	—
Vested and Exercisable as of March 31, 2022		1,809,430	$	0.58	8.4	$	—

NaN stock options were granted under the AMEA 2020 Plan for the three months ended March 31, 2022. The weighted-average grant date fair value of options granted under the AMEA 2020 Plan was $0.33 per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021. Future stock-based compensation for unvested options as of ~~September 30, 2021~~March 31, 2022 was ~~$0.6~~$0.3 million, which is expected to be recognized over a weighted-average period of ~~2.5~~2.4 years.

Stock-Based Compensation Expense

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(unaudited)
(in thousands)
Cost of precision oncology testing $ 676 $ 428 $ 2,316 $ 1,138
Research and development expense 4,416 2,369 13,280 7,355
Sales and marketing expense 3,991 2,320 10,309 6,285
General and administrative expense 25,933 50,081 98,687 72,573
Total stock-based compensation expense $ 35,016 $ 55,198 $ 124,592 $ 87,351

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	Three Months Ended March 31,
	2022		2021

	(unaudited)
	(in thousands)
Cost of precision oncology testing	$	1,164	$	767
Research and development expense	5,343		4,300
Sales and marketing expense	5,525		2,880
General and administrative expense	12,767		47,122
Total stock-based compensation expense	$	24,799	$	55,069

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 including the Joint Venture:

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
March 31,

2021

2020

2021

2020

2022

2021

(unaudited)

Expected term (in years)

5.94 – 6.04

5.95 – 6.04

5.49 – 6.04

5.50 – 6.10

Expected term (in years)

5.97

6.01 – 6.04

Expected volatility

63.6% – 66.0%

63.6% – 68.4%

63.6% – 66.7%

63.6% – 73.3%

Expected volatility

63.3%

63.6% – 66.4%

Risk-free interest rate

0.3% – 0.8%

0.3% – 0.4%

0.3% – 1.1%

0.3% – 1.6%

Risk-free interest rate

1.9%

0.3% – 0.8%

Expected dividend yield

—%

Expected dividend yield

—%

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The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of common stock of the Company and the Joint Venture, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as ~~follows~~:follows:

Fair Value of Common Stock

The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market. The grant date fair value of the Joint Venture's common stock has been determined by the board of directors of the Joint Venture. The grant date fair value of the Joint Venture’s common stock was determined using valuation methodologies which utilize certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability. In determining the fair value of the Joint Venture’s common stock, the methodologies used to estimate the enterprise value of the Joint Venture were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Expected Term

The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.

Expected Volatility

Prior to the commencement of trading of the Company’s common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with the IPO, there was no active trading market for the Company's common stock. Due to limited historical data for the trading of the Company’s common stock, expected volatility is estimated based on the average volatility for comparable publicly traded peer group companies in the same industry plus the Company's expected volatility for the available periods. The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty.

The Joint Venture derived the expected volatility from the average historical volatility over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Joint Venture does not have any trading history for its common stock. The Joint Venture will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury rate, with maturities similar to the expected term of the stock options.

Expected Dividend Yield

The Company and the Joint Venture does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero.

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~~Valuation of MSUs~~

The estimated fair value of the MSUs was determined using a Monte Carlo simulation model. The valuation assumptions used were substantially consistent with the assumption used to value stock options with the exception of the following:

~~Expected Volatility~~

Due to limited historical data for the trading of the Company’s common stock, expected volatility is estimated based on the average volatility for comparable publicly traded peer group companies and implied volatility of publicly traded options in the same industry plus the Company's expected volatility for the available periods. The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty.

~~Expected Term~~

~~The expected term represents the derived service period for the respective tranches which has been estimated using the Monte Carlo simulation model.~~

~~Risky Rate~~

~~The risky rate represents the Company's cost of equity.~~

~~Discount for Lack of Marketability~~

~~The discount for lack of marketability represents the discount applied for post vest term restrictions and has been derived using the Monte Carlo simulation model.~~

The following assumptions were used to calculate the stock-based compensation for MSUs: a weighted-average expected term of 0.83 – 2.07 years; expected volatility of 65.5%; a risk-free interest rate of 0.53%; a 0 dividend yield; a risky rate (cost of equity) of 16%; and a discount for post-vesting restrictions of 10.4% – 14.5%.

2018 Employee Stock Purchase Plan

In September 2018, the Company’s Board of Directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan, ~~(the “ESPP”).~~or the ESPP. A total of 922,250 shares of common stock were initially reserved for issuance under the ESPP. Effective as of January 1, 2020, an additional 942,614 shares of common stock became available for issuance under the ~~ESPP, as a result of the operation of an automatic annual increase provision therein.~~ESPP.

Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 10% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The price at which common stock is purchased under the ESPP is equal to 85% of the fair market value of the Company’s common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods beginning on May 15 and November 15 of each year.

~~Shares of common stock~~NaN ESPP shares were granted or purchased ~~under the ESPP were nil~~ for the three months ended ~~September 30, 2021,~~March 31, 2022 and ~~2020, respectively, and 60,898 and 58,164 for the nine months ended September 30, 2021, and 2020, respectively.~~2021. The total compensation expense related to the ESPP was ~~$0.9~~$1.0 million and ~~$0.7~~$0.8 million for the three months ended March 31, 2022, and 2021, respectively.

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~~September 30, 2021, and 2020, respectively, and $2.5 million and $2.3 million for the nine months ended September 30, 2021, and 2020, respectively.~~

The fair value of the stock purchase right granted under the ESPP was estimated on the first day of each offering period using the Black-Scholes option pricing model. The valuation assumptions used were substantially consistent with the assumption used to value stock options with the exception of the expected term which was based on the term of each purchase period.

No ESPP shares were issued for the three months ended September 30, 2021, and 2020. The grant date fair value of the stock purchase right granted under the ESPP was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:

Nine Months Ended September 30,
2021 2020
(unaudited)
Expected term (in years) 0.50 0.50
Expected volatility 50.8% 73.2%
Risk-free interest rate —% 0.2%
Expected dividend yield —% —%

As of ~~September 30, 2021,~~March 31, 2022, the unrecognized stock-based compensation expense related to the ESPP was ~~$0.4~~$0.5 million, which is expected to be recognized over the remaining term of the offering period of 0.1 years.

~~13.~~12. Net Loss Per Share Attributable to Guardant Health, Inc. Common Stockholders

The following table sets forth the computation of the basic and diluted net loss per share attributable to Guardant Health, Inc. common stockholders:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021

		(unaudited)									(unaudited)
		(in thousands, except per share data)									(in thousands, except per share data)
Net loss	Net loss	$	(107,526)	$	(71,670)	$	(312,459)	$	(153,238)	Net loss	$	(123,228)	$	(107,358)
Adjustment of redeemable noncontrolling interest	Adjustment of redeemable noncontrolling interest	—		(6,000)		(2,300)		(6,800)		Adjustment of redeemable noncontrolling interest	—		(2,300)
Net loss attributable to Guardant Health, Inc. common stockholders, basic and diluted	Net loss attributable to Guardant Health, Inc. common stockholders, basic and diluted	$	(107,526)	$	(77,670)	$	(314,759)	$	(160,038)	Net loss attributable to Guardant Health, Inc. common stockholders, basic and diluted	$	(123,228)	$	(109,658)
Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	$	(1.06)	$	(0.78)	$	(3.11)	$	(1.66)	Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	$	(1.21)	$	(1.09)
Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	101,420		99,554		101,184		96,659		Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted	101,853		100,955

Since the Company was in a loss position for all periods presented, basic net loss per share attributable to Guardant Health, Inc. common stockholders is the same as diluted net loss per share attributable to Guardant Health, Inc. common stockholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share attributable to Guardant Health, Inc. common stockholders for the periods presented as they had an anti-dilutive effect:

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		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020		2022	2021

		(unaudited)					(unaudited)
		(in thousands)					(in thousands)
Stock options issued and outstanding (1)	Stock options issued and outstanding (1)	2,628	3,662	2,753	4,021	Stock options issued and outstanding (1)	2,550	2,912
Restricted stock units	Restricted stock units	1,185	650	1,151	563	Restricted stock units	1,484	1,120
MSUs	MSUs	2,261	3,391	2,389	1,577	MSUs	2,261	2,646
PSUs	PSUs	395	—	404	—	PSUs	357	407
ESPP obligation	ESPP obligation	51	38	47	39	ESPP obligation	84	47
Common stock subject to repurchase	Common stock subject to repurchase	6	17	9	20	Common stock subject to repurchase	—	11
Convertible senior notes	Convertible senior notes	8,225	—	8,225	—	Convertible senior notes	8,225	8,225
Total	Total	14,751	7,758	14,978	6,220	Total	14,961	15,368

(1) Excludes outstanding stock options to purchase 2,995,200 shares of ~~4,183,891 shares outstanding~~the Joint Venture's Class B common stock under the AMEA 2020 Plan as of ~~September 30, 2021.~~March 31, 2022.

~~14.~~13. Income Taxes

The income tax expense for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. The difference between the Company’s effective income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, foreign income taxes, the effect of certain permanent differences, and full valuation allowance against net deferred tax assets.

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The income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ relates primarily to state minimum income tax and income tax on the Company’s earnings in foreign jurisdictions.

~~15.~~14. Segment and Geographic Information

The Company operates as ~~one~~1 operating segment. The Company's chief operating decision makers are its Co-Chief Executive Officers, who review financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance and allocating resources.

The following table sets forth the Company’s revenue by geographic areas based on the customers’ locations:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021

		(unaudited)									(unaudited)
		(in thousands)									(in thousands)
United States	United States	$	90,421	$	65,613	$	250,589	$	191,648	United States	$	90,871	$	72,300
International (1)	International (1)	4,358		8,956		14,956		16,766		International (1)	5,228		6,365
Total revenue	Total revenue	$	94,779	$	74,569	$	265,545	$	208,414	Total revenue	$	96,099	$	78,665

(1) No single country outside of the United States accounted for more than 10% of total revenue during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively.

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 98% and ~~94%~~98%, respectively, of the Company’s long-lived assets and right-of-use assets are located in the United States.

~~16.~~15. Related Party Transactions

As discussed in Note 3, Investment in Joint Venture, the Company and an affiliate of SoftBank formed and capitalized the Joint Venture to accelerate commercialization of its products in Asia, the Middle East and Africa. The Company has consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances have been eliminated in consolidation.

The Company and its subsidiaries may, in the ordinary course of business, have transactions with unaffiliated companies of which certain of the Company’s directors are directors and/or executive officers. The Company believes that such transactions are on the same terms generally offered by such other companies to other entities in comparable transactions. The Company does not consider the amounts involved in such transactions to be material in relation to its businesses, the businesses of such other companies or the interests of the directors involved.

~~17. Subsequent Events~~

On November 1, 2021, the Company exercised its call right contained in its joint venture agreement with SoftBank. As a result of the exercise of these rights, the Company will purchase all Joint Venture shares held by SoftBank at a price to be negotiated between the parties or established by a third-party valuation firm utilizing the financial and operating assumptions outlined in the joint venture agreement. Pursuant to the joint venture agreement, the fair value of the Joint Venture will be no less than an amount that yields a 20% internal rate of return on each tranche of capital invested by SoftBank and its affiliates in the Joint Venture. Settlement of the aggregate purchase price will be in cash, shares, or a combination of cash and shares, at SoftBank’s discretion. The Company expects to purchase all shares held by SoftBank in the Joint Venture on or before the end of the second quarter of 2022. No changes to the fair value of the redeemable noncontrolling interest have been reflected as of end of September 30, 2021.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, beliefs, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and in Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Overview

We are a leading precision oncology company focused on helping conquer cancer globally through use of our proprietary tests, vast data sets and advanced analytics. Today our proprietary tests are helping to realize the full potential of precision oncology by providing patients and their doctors critical insights that can inform decisions at all stages of the disease, from detecting early signs of cancer, to monitoring cancer recurrence, to guiding treatment decisions. We believe that the key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease, which we intend to enable by ~~a liquid~~our tests. By looking at the unique dimensions of cancer found in blood, including genomic alterations, methylation, and tissue biopsy. Our Guardant Health Oncology Platform is designed to leverage our capabilities in technology, clinical development, regulatory and reimbursement to drive commercial adoption, accelerate drug development, improve patient clinical outcomes and lower healthcare costs. In pursuit of our goal to manage cancerfragmentomics, we are unlocking insights that can increasingly help patients across all stages of ~~the disease, we~~cancer, including at its earliest, when it’s most treatable. We provide our ~~Guardant360,~~ Guardant360 LDT, Guardant360 CDx and GuardantOMNI ~~liquid biopsy-based~~blood-based tests and Guardant360 TissueNext tissue-based tests for advanced stage ~~cancer.~~cancer, Guardant Reveal blood-based tests to detect residual and recurring disease in Stage II-III colorectal cancer patients, and Guardant360 Response blood-based tests to predict patient response to immunotherapy or targeted therapy 8 weeks earlier than current standard-of-care imaging. Our Guardant360 CDx test was 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, patients who may benefit~~NSCLC. In April 2022, we presented new data from ~~treatment~~our broad portfolio of blood tests at the American Association for Cancer Research Annual Meeting which demonstrated the ability of our investigational next-generation Guardant SHIELD multi-cancer assay to accurately detect early-stage cancers and identify the tumor tissue of origin with ~~osimertinib (EGFR exon 19~~ ~~deletions,~~ ~~exon 20 T790M or exon 21 L858R~~ ~~mutations), amivantamab-vmjw (EGFR exon 20~~ ~~insertion mutations), and sotorasib (KRAS G12C~~ ~~mutations), which have been developed by our biopharmaceutical customers AstraZeneca, Janssen Biotech and Amgen, respectively. In February 2021,~~high accuracy. To help identify cancer at the earliest stages, in May 2022, we launched ~~our Guardant Reveal liquid biopsy-based tests for residual~~Shield LDT, a blood-based test to detect early signs of colorectal cancer in average-risk adults age 45 and recurring cancer to first address the need in Stage II-III colorectal cancer. In June 2021, we launched Guardant360 TissueNext, our first tissue-based test which will be used to identify patients with advanced cancerolder who ~~may benefit from biomarker-informed treatment,~~show no symptoms and ~~Guardant360 Response which will be used to measure early indications to patients' response to treatment~~are not up to ~~eight weeks earlier than response evaluation criteria~~date with recommended screening guidelines. From a simple blood draw, the test uses a novel multimodal approach to detect colorectal cancer signals in ~~solid~~the bloodstream, including DNA that is shed by tumors. ~~We are developing~~Using data collected from our tests, under our LUNAR program which aims to address the needs of early stage cancer patients with neoadjuvant and adjuvant treatment selection, cancer survivors with surveillance, asymptomatic individuals eligible for cancer screening, and individuals at a higher risk for developing cancer with early detection. Wewe have also developed our GuardantINFORM platform to further accelerate precision oncology drug development by biopharmaceutical companies by offering them an in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.

We currently perform our tests in our clinical laboratory located in Redwood City, California. Our Redwood City laboratory is certified pursuant to the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, permitted by the New York State Department of Health, or NYSDOH, and licensed in California and four other states.

Our San Diego laboratory is CLIA-certified, and we expect to commence testing in the San Diego laboratory by the end of June 2022, upon receipt of CAP accreditation for research and limited clinical purposes. In February 2022, we received CAP accreditation for our laboratory in Japan where we expect to commence processing samples following receipt of additional certification for processing In Vitro Diagnostic, or IVD, samples and reimbursement approval.

We generated total revenue of ~~$94.8~~$96.1 million and ~~$74.6~~$78.7 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $265.5 million and $208.4 million for the nine months ended September 30, 2021, and 2020,~~ respectively. We also incurred net losses of ~~$107.5~~$123.2 million and ~~$71.7~~$107.4 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and $312.5 million and $153.2 million for the nine months ended September 30, 2021, and 2020,~~ respectively. We have funded our operations to date principally from the sale of our stock, convertible senior notes, and revenue from our precision oncology testing and development services and other. As of ~~September 30, 2021,~~March 31, 2022, we had cash, cash equivalents and marketable securities of ~~$1.7~~approximately $1.6 billion.

Factors affecting our performance

We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations, including:

•Testing volume, pricing and customer mix. Our revenue and costs are affected by the volume of testing and mix of customers from period to period. We evaluate both the volume of tests that we perform for patients on behalf of clinicians and the number of tests we perform for biopharmaceutical companies. Our performance

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depends on our ability to retain and broaden adoption with existing customers, as well as attract new customers. We believe that the test volume we receive from clinicians and biopharmaceutical companies are indicators of growth in each of these customer verticals. Customer mix for our tests has the potential to significantly affect

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our results of operations, as the average selling price for biopharmaceutical sample testing is currently higher than our average reimbursement for clinical tests because we are not a contracted provider for, or our tests are not covered by clinical patients’ insurance for, the majority of the tests that we perform for patients on behalf of clinicians. Revenue from clinical tests for patients covered by Medicare represented approximately ~~48%~~44% and ~~44%~~39% of our precision oncology revenue from clinical customers during the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and approximately 44% and 39% of our~~ ~~precision oncology revenue from clinical customers~~ ~~during the nine months ended September 30, 2021, and 2020,~~ respectively.

•Payer coverage and reimbursement.Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payers, including both commercial and government payers. Precision oncology revenue from tests for clinical customers is calculated based on our expected cash collections, using the estimated variable consideration. The variable consideration is estimated based on historical collection patterns as well as the potential for changes in future reimbursement behavior by one or more payers. Estimation of the impact of the potential for changes in reimbursement requires significant judgment and considers payers' past patterns of changes in reimbursement as well as any stated plans to implement changes. Any cash collections over the expected reimbursement period exceeding the estimated variable consideration isare recorded in future periods based on actual cash received. Payment from commercial payers can vary depending on whether we have entered into a contract with the payers as a “participating provider” or do not have a contract and are considered a “non-participating provider”. Payers often reimburse non-participating providers, if at all, at a lower amount than participating providers. Because we are not contracted with these payers, they determine the amount that they are willing to reimburse us for any of our tests and they can prospectively and retrospectively adjust the amount of reimbursement, adding to the complexity in estimating the variable consideration. When we contract with a payer to serve as a participating provider, reimbursements by the payer are generally made pursuant to a negotiated fee schedule and are limited to only covered indications or where prior approval has been obtained. Becoming a participating provider can result in higher reimbursement amounts for covered uses of our tests and, potentially, no reimbursement for non-covered uses identified under the payer’s policies or the contract. As a result, the potential for more favorable reimbursement associated with becoming a participating provider may be offset by a potential loss of reimbursement for non-covered uses of our tests. Current Procedural Terminology, or CPT, coding plays a significant role in how our tests are reimbursed both from commercial and governmental payers. In addition, Z-Code Identifiers are used by certain payers, including under Medicare's Molecular Diagnostic Services Program, or MolDx, to supplement CPT codes for our molecular diagnostics tests. Changes to the codes used to report to payers may result in significant changes in its reimbursement. If their policies were to change in the future to cover additional cancer indications, we anticipate that our total reimbursement would increase. In March 2020, we began to receive reimbursement from Medicare for claims submitted, with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC. In May 2020, Noridian issued a coverage article and confirmed limited Medicare coverage for our Guardant360 test for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin who meet the criteria of Medicare’s National Coverage Determination for Next Generation Sequencing established in March 2018. ~~Following the FDA approval of our Guardant360 CDx test, a new Z-Code Identifier was issued in August 2020. In~~ January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx with an effective date in April 2021. Additionally, based on this new PLA code, we applied to the Centers for Medicare and Medicaid Services or CMS for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT. In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which ~~would allow~~Medicare paid us ~~to bill Medicare~~ at the lowest available commercial rate ~~for the first three quarters~~per test, from April 1, 2021 to December 31, 2021. ~~After the initial three quarters, we can bill~~Effective January 1, 2022, Medicare ~~for~~has started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial ~~payers.~~payers and this rate will apply until December 2023. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, has conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination. The policy covers our Guardant360 TissueNext test for Medicare fee-for-service patients with advanced solid tumor cancers. We are in the process of negotiating reimbursement for our Guardant Reveal and Guardant Response ~~and Guardant360 TissueNext~~ tests from commercial and governmental payers. Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received differs from the revenue recorded. Due to this variability and unpredictability, previously recorded revenue adjustments are not indicative of future revenue adjustments from actual cash collections, which may fluctuate significantly. Additionally, if coding changes were to occur, payments for certain uses of our tests could be reduced, put on hold, or eliminated. This variability and unpredictability could increase the risk of future revenue reversal and result in our failing to meet any previously publicly stated guidance we may provide.

•Biopharmaceutical customers. Our revenue also depends on our ability to attract, maintain and expand relationships with biopharmaceutical customers. As we continue to develop these relationships, we expect to support a growing number of clinical ~~trials~~studies globally and continue to have opportunities to offer our platform to such customers for development services, including companion diagnostic development, novel target discovery

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and validation, as well as clinical ~~trial~~study enrollment. For example, our tests are being developed as companion diagnostics under collaborations with biopharmaceutical companies, including AstraZeneca, Amgen, Daiichi Sankyo, Janssen Biotech, and Radius Health.

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•Research and development. A significant aspect of our business is our investment in research and development, including the development of new products. In particular, we have invested heavily in clinical studies as we believe these studies are critical to gaining physician adoption and driving favorable coverage decisions by payers. With respect to ~~our LUNAR program,~~Guardant Reveal, in October 2021, we initiated a 1,000-patient prospective, observational, multi-center study, which we refer to as the ORACLE study, designed to evaluate the performance of our Guardant Reveal liquid biopsy test to predict cancer recurrence after curative intent treatment, across 11 solid tumor types. With respect to Shield, in December 2021, we completed enrollment toward a prospective screening study, which we refer to as the ECLIPSE ~~trial,~~study, aiming to ~~recruit approximately 13,000 patients and~~ evaluate the performance of our ~~LUNAR-2~~Shield assay in detecting colorectal cancer in average-risk adults. In addition, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD study, to evaluate the performance of our next-generation Guardant SHIELD assay in detecting lung cancer in high-risk individuals ages 50-80 and the study is anticipated to run in approximately 100 centers in the United States and Europe. We have expended considerable resources, and expect to increase such expenditures over the next few years, to support our research and development programs with the goal of fueling further innovation.

•International expansion. A component of our long-term growth strategy is to expand our commercial footprint internationally, and we expect to increase our sales and marketing expense to execute on this strategy. We currently offer our tests in countries outside the United States primarily through distributor relationships, or direct contracts with hospitals or partnerships with research organizations. In May 2018, we formed and capitalized a joint venture, Guardant Health AMEA, Inc., which we refer to as the Joint Venture, with SoftBank, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe. We expect to rely on the Joint Venture to accelerate commercialization of our products in Asia, the Middle East and Africa.In February 2021, an affiliate of the Joint Venture with SoftBank, submitted an application to Ministry of Health, Labour and Welfare, or the MHLW, for regulatory approval of Guardant360 CDx. In December 2021, MHLW granted regulatory approval of Guardant360 CDx as a companion diagnostic for identifying patients with metastatic NSCLC who may benefit from treatment with LUMAKRAS™ (sotorasib). In March 2022, MHLW granted regulatory approval of Guardant360® CDx in patients with advanced solid tumors. MHLW also approved Guardant360 CDx as a companion diagnostic to identify patients with microsatellite instability-high (MSI-High) solid tumors who may benefit from Keytruda® (pembrolizumab) and patients with MSI-High advanced colorectal cancer who may benefit from Opdivo® (nivolumab).

In November 2021, we exercised our call right contained in the joint venture agreement with SoftBank to purchase all of the shares held by SoftBank and its affiliates in consideration for the payment of the aggregate purchase price to be determined based on an independent third-party valuation. The aggregate purchase price will be no less than $78.0 million, which was determined based on 20% internal rate of return on the $41.0 million of capital invested by SoftBank in May 2018 as stipulated in the joint venture agreement. SoftBank and us have initiated a process to determine the independent valuation of the Joint Venture, which includes the appointment of independent appraisers by both SoftBank and us. We expect to complete this transaction before the end of the second quarter of 2022.

•Sales and marketing expense. Our financial results have historically, and will likely continue to, fluctuate significantly based upon the impact of our sales and marketing expense, increase in headcount, and in particular, our various marketing programs around existing and new product introductions.

•General and administrative expense. Our financial results have historically, and will likely continue to, fluctuate significantly based upon the impact of our general and administrative expense, and in particular, our stock-based compensation expense. Our equity awards, including market-based and performance-based restricted stock units, are intended to retain and incentivize employees to lead us to sustained, long-term superior financial and operational performance.

•COVID-19 Global Pandemic. The global ~~outbreak of~~ coronavirus 2019, or COVID-19, has disrupted, and we expect will continue to disrupt, our operations. To protect the health and well-being of our workforce, partners, vendors and customers, we have provided free COVID-19 testing for all of our employees, contractors and their dependents, implemented social distance and building entry policies at work, and followed California’s public health orders and the guidance from the Centers for Disease Control and Prevention. The COVID-19 global pandemic has negatively affected, and we expect will continue to negatively affect, our revenue and our clinical studies. For example, our biopharmaceutical customers are facing challenges in recruiting patients and in conducting clinical ~~trials~~studies to advance their pipelines, for which our tests could be utilized. In addition, disruptions caused by the pandemic have adversely affected the quantity and quality of certain sequencers, reagents, blood tubes and other similar materials that are critical to our commercial and research and development programs. We currently have a limited amount of stock of these components. Failure in the future to secure sufficient supply of critical

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components could materially and adversely affect our ability to manufacture or supply marketed products and product candidates or complete our ongoing research and development programs on the timelines previously established, which could materially and adversely affect our business and future prospects. The severity of the impact on our business ~~for the remainder of calendar year 2021 and beyond~~ will depend on a number of factors, including the duration and severity of the pandemic and the impact of any variants of the virus on us, our customers, and our suppliers. In August 2020, we launched our Guardant-19 test and received the FDA’s emergency use authorization for use in the detection of the novel coronavirus. The test was being offered to our employees and to select partner organizations via our CLIA-certified clinical laboratory. Effective August 2021, we have discontinued offering the test to third parties.

While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q, for more information.

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Components of results of operations

Revenue

We derive our revenue from two sources: (i) precision oncology testing and (ii) development services and other.

Precision oncology testing. Precision oncology testing revenue is generated from sales of our tests to clinical and biopharmaceutical customers. In the United States, through ~~September 30, 2021,~~March 31, 2022, we generally performed tests as an out-of-network service provider without contracts with health insurance companies. We submit claims for payment for tests performed for patients covered by U.S. private payers. We submit claims to Medicare for reimbursement for Guardant360 clinical testing performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin and for Guardant360 CDx clinical testing performed for qualifying patients diagnosed with solid tumor cancers who meet the criteria of Medicare’s National Coverage Determination for Next Generation Sequencing established since March 2018. Revenue from clinical tests for patients covered by Medicare represented approximately ~~48%~~44% and ~~44%~~39% of our precision oncology revenue from clinical customers during the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and 44% and 39% of our precision oncology revenue from clinical customers during the nine months ended September 30, 2021, and 2020,~~ respectively.

Development services and other. Development services and other revenue primarily represents services, other than precision oncology testing, that we provide to biopharmaceutical companies and large medical institutions. It includes companion diagnostic development and regulatory approval services, clinical trial setup, monitoring and maintenance, liquid biopsy testing development and support, as well as GuardantConnect, GuardantINFORM, and kits fulfillment related revenues. We collaborate with biopharmaceutical companies in the development and clinical ~~trials~~studies of new drugs. As part of these collaborations, we provide services related to regulatory filings to support companion diagnostic device submissions for our ~~liquid biopsy~~test panels. Under these arrangements, we generate revenue from progression of our collaboration efforts, as well as from provision of on-going support. In addition to companion diagnostic development and regulatory approval services, we also provide clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect, GuardantINFORM, and kits fulfillment related services for our biopharmaceutical customers. In addition, we derive royalty revenues from licensing our technologies. Development services and other revenue can vary over time as different projects start and complete.

Costs and operating expenses

Cost of precision oncology testing. Cost of precision oncology testing generally consists of cost of materials, inventory write-downs, direct labor, including employee benefits, bonus, and stock-based compensation; equipment and infrastructure expenses associated with processing ~~liquid biopsy~~ test samples, such as sample accessioning, library preparation, sequencing, quality control analyses and shipping charges to transport blood samples; freight; curation of test results for physicians; and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, rent costs, depreciation of leasehold improvements and information technology costs. Costs associated with performing our tests are recorded as the tests are performed regardless of whether revenue was recognized with respect to the tests. Royalties for licensed technology are calculated as a percentage of revenues generated using the associated technology and recorded as expense at the time the related revenue is recognized. One-time royalty payments related to signing of license agreements or other milestones, such as issuance of new patents, are amortized to expense over the expected useful life of the patents. While we do not believe the technologies underlying these licenses are necessary to permit us to provide our tests, we do believe these technologies are potentially valuable and of possible strategic importance to us or our competitors.

We expect the cost of precision oncology testing to generally increase in line with the increase in the number of tests we perform, but we expect the cost per test to decrease modestly over time due to the efficiencies we may gain as test volume increases, and from automation and other cost reductions.

Cost of development services and other. Cost of development services and other primarily includes costs incurred for the performance of development services requested by our customers comprising of direct labor and material costs including any inventory write-downs. 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

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reported as cost of revenue. Cost of development services and other will vary depending on the nature, timing and scope of customer projects.

~~Table of Contents~~

Research and development expense. 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 allocated facility occupancy and information technology costs, contract services, other outside costs and costs to develop our 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 our technology capabilities are recorded as research and development unless they meet the criteria to be capitalized as internal-use software costs.

We expect that our research and development expenses will continue to increase in absolute dollars as we continue to innovate and develop additional products, expand our genomic and medical data management resources and conduct our ongoing and new clinical ~~trials.~~studies.

Sales and marketing expense. Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing and reimbursement, medical affairs, as well as business development personnel who are focused on our biopharmaceutical customers. These expenses consist primarily of salaries, commissions, bonuses, employee benefits, travel expenses and stock-based compensation, as well as marketing, sales incentives, and educational activities and allocated overhead expenses.

We expect our sales and marketing expenses to increase in absolute dollars as we expand our sales force, increase our presence within and outside of the United States, and increase our marketing activities to drive further awareness and adoption of our tests.

General and administrative expense. Our general and administrative expenses include costs for our executive, accounting and finance, information technology, legal and human resources functions. These expenses consist principally of salaries, bonuses, employee benefits, travel expenses and stock-based compensation, as well as professional services fees such as consulting, audit, tax and legal fees, and general corporate costs and allocated overhead expenses.

We expect that our general and administrative expenses will continue to increase ~~in absolute dollars, primarily due~~as we incur additional costs to ~~increased stock-based compensation expense, including resulting from~~support the ~~market-based restricted stock units granted to~~growth of our ~~Co-Chief Executive Officers in May 2020.~~business. These expenses, though expected to increase in absolute dollars, are expected to decrease modestly as a percentage of revenue in the long term, though they may fluctuate as a percentage of revenue from period to period due to the timing and extent of these expenses being incurred.

Interest income

Interest income consists of interest earned on our cash, cash equivalents and marketable securities.

Interest expense

Interest expense consists primarily of charges relating to amortization of debt issuance costs.

Other income (expense), net

Other income (expense), net consists of foreign currency exchange gains and losses, non-recurring payments due and received in relation to the settlement of alicense and patent ~~dispute,~~disputes, net of credit losses, and the relief fund grant from the Department of Health and Human Services, or HHS, under the U.S. Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

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Results of operations

The following ~~table~~tables set forth the significant components of our results of operations for the periods presented.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021

		(unaudited)									(unaudited)
		(in thousands)									(in thousands)
Revenue:	Revenue:									Revenue:
Precision oncology testing	Precision oncology testing	$	79,272	$	60,384	$	215,605	$	171,621	Precision oncology testing	$	84,136	$	63,729
Development services and other	Development services and other	15,507		14,185		49,940		36,793		Development services and other	11,963		14,936
Total revenue	Total revenue	94,779		74,569		265,545		208,414		Total revenue	96,099		78,665
Costs and operating expenses:	Costs and operating expenses:									Costs and operating expenses:
Cost of precision oncology testing(1)	Cost of precision oncology testing(1)	29,665		16,699		78,142		52,699		Cost of precision oncology testing(1)	30,684		23,590
Cost of development services and other	Cost of development services and other	1,151		4,488		11,348		11,429		Cost of development services and other	1,297		5,157
Research and development expense(1)	Research and development expense(1)	70,968		36,245		190,200		109,580		Research and development expense(1)	81,757		55,508
Sales and marketing expense(1)	Sales and marketing expense(1)	50,228		25,095		132,282		75,225		Sales and marketing expense(1)	64,432		34,338
General and administrative expense(1)	General and administrative expense(1)	50,055		66,294		166,366		123,265		General and administrative expense(1)	41,267		67,935
Total costs and operating expenses	Total costs and operating expenses	202,067		148,821		578,338		372,198		Total costs and operating expenses	219,437		186,528
Loss from operations	Loss from operations	(107,288)		(74,252)		(312,793)		(163,784)		Loss from operations	(123,338)		(107,863)
Interest income	Interest income	689		2,313		3,277		8,271		Interest income	778		1,551
Interest expense	Interest expense	(644)		(8)		(1,934)		(30)		Interest expense	(644)		(646)
Other income (expense), net	Other income (expense), net	(187)		345		(720)		2,421		Other income (expense), net	(48)		(290)

Loss before provision for income taxes	Loss before provision for income taxes	(107,430)		(71,602)		(312,170)		(153,122)		Loss before provision for income taxes	(123,252)		(107,248)
Provision for income taxes		96		68		289		116
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	(24)		110
Net loss	Net loss	$	(107,526)	$	(71,670)	$	(312,459)	$	(153,238)	Net loss	$	(123,228)	$	(107,358)

(1)Amounts include stock-based compensation expense as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021

		(unaudited)									(unaudited)
		(in thousands)									(in thousands)
Cost of precision oncology testing	Cost of precision oncology testing	$	676	$	428	$	2,316	$	1,138	Cost of precision oncology testing	$	1,164	$	767
Research and development expense	Research and development expense	4,416		2,369		13,280		7,355		Research and development expense	5,343		4,300
Sales and marketing expense	Sales and marketing expense	3,991		2,320		10,309		6,285		Sales and marketing expense	5,525		2,880
General and administrative expense	General and administrative expense	25,933		50,081		98,687		72,573		General and administrative expense	12,767		47,122
Total stock-based compensation expense	Total stock-based compensation expense	$	35,016	$	55,198	$	124,592	$	87,351	Total stock-based compensation expense	$	24,799	$	55,069

Comparison of the Three Months Ended March 31, 2022 and 2021

Revenue


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Precision oncology testing	$	84,136	$	63,729	$	20,407	32	%
Development services and other	11,963		14,936		(2,973)		(20)	%
Total revenue	$	96,099	$	78,665	$	17,434	22	%

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~~Comparison of the Three Months Ended September 30, 2021 and 2020~~

~~Revenue~~

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Precision oncology testing $ 79,272 $ 60,384 $ 18,888 31 %
Development services and other 15,507 14,185 1,322 9 %
Total revenue $ 94,779 $ 74,569 $ 20,210 27 %

Total revenue was ~~$94.8~~$96.1 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$74.6~~$78.7 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$20.2~~$17.4 million, or ~~27%~~22%.

Precision oncology testing revenue increased to ~~$79.3~~$84.1 million for the three months ended ~~September 30, 2021,~~March 31, 2022, from ~~$60.4~~$63.7 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$18.9~~$20.4 million, or ~~31%~~32%. ~~This increase in precision oncology testing revenue was primarily due to an increase in sample volume.~~

Precision oncology revenue from tests for clinical customers ~~increased to $61.3~~was $66.0 million infor the three months ended ~~September 30, 2021,~~March 31, 2022, up 32% from ~~$48.3~~$49.8 million infor the three months ended ~~September 30, 2020,~~March 31, 2021. This increase in clinical testing revenue was driven primarily ~~due to~~by an increase in ~~the number of~~sample volume related to our Guardant360 CDx and Guardant360 LDT tests and revenue from products launched in 2021, including Guardant Reveal, Guardant360 Response and Guardant 360 TissueNext, and an overall increase in the average selling price per Guardant360 CDx test ~~offset by a decrease of $8.2 million in cash collections exceeding the estimated variable consideration related~~primarily due to ~~samples processed in previous periods. Tests~~advanced diagnostic laboratory test, or ADLT, status being received from Medicare effective April 1, 2021. Total tests for clinical customers increased to ~~22,806~~27,100 for the three months ended ~~September 30, 2021,~~March 31, 2022, from ~~16,950~~18,390 for the three months ended ~~September 30, 2020.~~March 31, 2021.

Precision oncology revenue from tests for biopharmaceutical customers was ~~$17.9~~$18.1 million infor the three months ended ~~September 30, 2021,~~March 31, 2022, and ~~$12.0~~$13.9 million infor the three months ended ~~September 30, 2020,~~March 31, 2021, respectively. ~~Tests~~This increase in revenue was primarily due to an increase in tests. Total tests for biopharmaceutical customers increased to ~~4,839~~5,100 for the three months ended ~~September 30, 2021,~~March 31, 2022, from ~~3,071~~3,522 for the three months ended ~~September 30, 2020,~~March 31, 2021, primarily due to an increase in the number of biopharmaceutical customers and their contracted projects.

Development services and other revenue ~~increased~~decreased to ~~$15.5~~$12.0 million for the three months ended ~~September 30, 2021~~March 31, 2022, from ~~$14.2~~$14.9 million for the three months ended ~~September 30, 2020, an increase~~March 31, 2021, a decrease of ~~$1.3~~$3.0 million, or 9%20%. This ~~increase~~decrease in development services and other revenue was primarily due to the progression of collaboration projects ~~from~~with biopharmaceutical customers for companion diagnostic development and regulatory approval services, and discontinuation of our Guardant-19 tests in August 2021, partially offset by royalty revenues earned during the three months ended ~~September 30, 2021.~~March 31, 2022.

Our revenue may be adversely impacted by the COVID-19 pandemic in future periods depending on the duration and severity of the pandemic and the impact of any variants of the virus.

Cost of Revenue ~~and Gross Margin~~

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Cost of revenue $ 30,816 $ 21,187 $ 9,629 45 %
Gross profit $ 63,963 $ 53,382
Gross margin 67 % 72 %


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Cost of precision oncology testing	$	30,684	$	23,590	$	7,094	30	%
Cost of development services and other	1,297		5,157		(3,860)		(75)	%
Total cost of revenue	$	31,981	$	28,747	$	3,234	11	%

Cost of revenue was ~~$30.8~~$32.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$21.2~~$28.7 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$9.6~~$3.2 million, or ~~45%~~11%.

Cost of precision oncology testing ~~revenue~~ was ~~$29.7~~$30.7 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$16.7~~$23.6 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$13.0~~$7.1 million, or ~~78%~~30%. This increase in cost of precision oncology testing was primarily ~~due~~attributable to an increase in sample volumes, resulting in a ~~$7.0~~$3.0 million increase in production labor and overhead costs, a $2.6 million increase in material costs, ~~$4.8 million increase in labor and manufacturing overhead costs,~~ and a ~~$1.3~~$1.6 million increase in other costs, including costs related to kits, freight and curation of test results for physicians.

~~Table of Contents~~

Cost of development services and other was ~~$1.2~~$1.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$4.5~~$5.2 million for the three months ended ~~September 30, 2020,~~March 31, 2021, a decrease of ~~$3.3~~$3.9 million, or ~~74%~~75%. This decrease in cost of development services and other was primarily due to ~~timing~~a decrease in labor costs and materials, related to the progression of ~~work performed on our~~ companion diagnostic development and regulatory approval service ~~contracts.~~contracts, and discontinuation of our Guardant-19 tests in August 2021.

Gross margin for the three months ended September 30, 2021, was 67% compared to 72% for the three months ended September 30, 2020. The decrease in gross margin is primarily due to higher average cost per test resulting from the varied product mix

Table of precision oncology testing, partially offset by gross margin improvement of development services and other. Our gross margin may be adversely impacted by the COVID-19 pandemic for the affected periods.Contents

Operating Expenses

Research and development expense

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Research and development $ 70,968 $ 36,245 $ 34,723 96 %


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Research and development	$	81,757	$	55,508	$	26,249	47	%

Research and development expenses were ~~$71.0~~$81.8 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$36.2~~$55.5 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$34.7~~$26.2 million, or ~~96%~~47%. This increase ~~in research and development expense~~ was primarily ~~due~~related to continued investment in our clinical studies and next-generation technologies, resulting in an increase of ~~$13.2~~$9.7 million in personnel-related costs for employees in our research and development group, including a ~~$2.0~~$1.0 million increase in stock-based compensation, ~~as we increased our headcount to support continued investment in our technology and clinical studies. The increase is also attributable to~~ an increase of ~~$9.9 million in material costs, an increase of $6.3~~$8.3 million in outside service fees related to clinical studies and product development, an increase of $4.1 million related to allocated facility and information technology infrastructure costs, and an increase of ~~$3.5~~$2.1 million in post-acquisition related contingent consideration.

Sales and marketing expense


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Sales and marketing	$	64,432	$	34,338	$	30,094	88	%

Selling and marketing expenses were $64.4 million for the three months ended March 31, 2022, compared to $34.3 million for the three months ended March 31, 2021, an increase of $30.1 million, or 88%. This increase was primarily related to commercial infrastructure buildout and marketing activities to support existing products and new product launch, resulting in an increase of $22.6 million in personnel-related costs, including a $2.6 million increase in stock-based compensation, an increase of $2.8 million in professional service expenses related to marketing activities, an increase of $2.4 million in office administrative costs, and an increase of $2.2 million related to allocated facilities and information technology infrastructure costs.

~~Sales~~General and ~~marketing~~administrative expense

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Sales and marketing $ 50,228 $ 25,095 $ 25,133 100 %


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
General and administrative	$	41,267	$	67,935	$	(26,668)	(39)	%

~~Selling~~General and ~~marketing~~administrative expenses were ~~$50.2~~$41.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$25.1~~$67.9 million for the three months ended September 30, 2020, an increase of $25.1 million, or 100%. This increase was primarily due to an increase of $18.6 million in personnel-related costs, including a $1.7 million increase in stock-based compensation, associated with the expansion of our commercial organization. The increase is also attributable to an increase of $3.2 million related to allocated facilities and information technology infrastructure costs, and an increase of $2.4 million related to marketing activities.

~~General and administrative expense~~

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
General and administrative $ 50,055 $ 66,294 $ (16,239) (24) %

~~General and administrative expenses were $50.1 million for the three months ended September 30,~~March 31, 2021, ~~compared to $66.3 million for the three months ended September 30, 2020,~~ a decrease of ~~$16.2~~$26.7 million, or ~~24%~~39%. This decrease was primarily due to ~~the vesting~~a decrease of ~~Tranche~~$34.4 million in stock-based compensation, as tranche 1 ~~shares~~and tranche 2 of the market-based restricted stock units ~~on January 1, 2021, granted~~issued to our Co-Chief Executive Officers ~~which resulted in a reduction~~were fully expensed as of ~~stock-based compensation expense in the amount of $24.1 million,~~March 31, 2021 and December 31, 2021, respectively. This decrease was offset by an increase of ~~$3.7~~$3.1 million in professional service expenses related to outside legal, accounting, consulting and IT services, an increase of $2.4 million in acquisition related contingent consideration, and an increase of ~~$1.8~~$2.2 million related to allocated facilities and information technology infrastructure costs.

Interest income


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Interest income	$	778	$	1,551	$	(773)	(50)	%

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Interest income

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Interest income $ 689 $ 2,313 $ (1,624) (70) %

~~Interest income~~ was ~~$0.7~~$0.8 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$2.3~~$1.6 million for the three months ended ~~September 30, 2020,~~March 31, 2021, a decrease of ~~$1.6~~$0.8 million, or ~~70%~~50%. This decrease was primarily due to a ~~significant~~ decrease in cash and cash equivalents and marketable securities balances, partially offset by an increase in interest rate as the U.S. Federal Reserve ~~lowered~~increased the risk-free interest ~~rate~~rate.

Interest expense


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Interest expense	$	(644)	$	(646)	$	2	*

* Not meaningful

Interest expense was primarily attributable to ~~nearly zero, partially offset by an increase in cash, cash equivalents and marketable securities~~amortization of debt issuance costs related to ~~the receipt of cash proceeds from borrowings on~~ our convertible senior notes issued in November ~~2020.~~

~~Interest expense~~

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Interest expense $ (644) $ (8) $ (636) *

* Not meaningful

~~Interest expense was $0.6 million~~2020, for the three months ended ~~September 30, 2021, primarily due to the amortization of debt issuance costs. Interest expense was immaterial for the three months ended September 30, 2020.~~March 31, 2022, and 2021.

Other income (expense), net

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Other income (expense), net $ (187) $ 345 $ (532) *


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Other income (expense), net	$	(48)	$	(290)	$	242	*

* Not meaningful

Other income (expense), net ~~included foreign currency exchange losses of $0.1 million~~was immaterial for the three months ended ~~September 30,~~March 31, 2022, and 2021. ~~For the three months ended September 30, 2020, other income (expense), net included foreign currency exchange gains of $0.3 million.~~

Provision for income taxes

Three Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Provision for income taxes $ 96 $ 68 $ 28 41 %


	Three Months Ended March 31,				Change
	2022		2021		$		%

	(unaudited)
	(in thousands)
Provision for (benefit from) income taxes	$	(24)	$	110	$	(134)	(122)	%

Provision for (benefit from) income taxes was immaterial for the three months ended ~~September 30, 2021,~~March 31, 2022, and ~~2020.~~

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~~Comparison of the Nine Months Ended September 30, 2021 and 2020~~

~~Revenue~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Precision oncology testing $ 215,605 $ 171,621 $ 43,984 26 %
Development services and other 49,940 36,793 13,147 36 %
Total revenue $ 265,545 $ 208,414 $ 57,131 27 %

~~Total revenue was $265.5 million for the nine months ended September 30, 2021, compared to $208.4 million for the nine months ended September 30, 2020, an increase of $57.1 million, or 27%.~~

Precision oncology testing revenue increased to $215.6 million for the nine months ended September 30, 2021 from $171.6 million for the nine months ended September 30, 2020, an increase of $44.0 million, or 26%. This increase in precision oncology testing revenue was primarily due to an increase in sample volume.

Precision oncology revenue from tests for clinical customers increased to $172.2 million for the nine months ended September 30, 2021, from $125.9 million for the nine months ended September 30, 2020, mainly due to an increase in the number of physicians ordering Guardant360 tests and an overall increase in average selling price per test, offset by a decrease of $4.1 million in excess cash collections exceeding the estimated variable consideration related to samples processed in previous periods. Tests for clinical customers increased to 62,026 for the nine months ended September 30, 2021, from 45,901 for the nine months ended September 30, 2020.

Precision oncology revenue from tests for biopharmaceutical customers was $43.4 million in the nine months ended September 30, 2021, and $45.7 million in the nine months ended September 30, 2020, respectively. The decrease in revenue was primarily due to a decrease in average selling price per test, partially offset by an increase in tests. Tests for biopharmaceutical customers increased to 12,014 for the nine months ended September 30, 2021, from 11,142 for the nine months ended September 30, 2020, primarily due to an increase in the number of biopharmaceutical customers and their contracted projects.

Development services and other revenue increased to $49.9 million for the nine months ended September 30, 2021, from $36.8 million for the nine months ended September 30, 2020, an increase of $13.1 million, or 36%. This increase in development services and other revenue was primarily due to progression of collaboration projects from biopharmaceutical customers for companion diagnostic development services and receipt of regulatory approval of two of our companion diagnostic programs during the nine months ended September 30, 2021.

~~Our revenue may be adversely impacted by the COVID-19 pandemic in future periods depending on the duration and severity of the pandemic and the impact of any variants of the virus.~~

~~Cost of Revenue and Gross Margin~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(dollars in thousands)
Cost of revenue $ 89,490 $ 64,128 $ 25,362 40 %
Gross profit $ 176,055 $ 144,286
Gross margin 66 % 69 %

~~Cost of revenue was $89.5 million for the nine months ended September 30, 2021, compared to $64.1 million for the nine months ended September 30, 2020, an increase of $25.4 million, or 40%.~~

Cost of precision oncology testing revenue was $78.1 million for the nine months ended September 30, 2021, compared to $52.7 million for the nine months ended September 30, 2020, an increase of $25.4 million, or 48%. This increase in cost of precision oncology testing was attributable to an increase in sample volumes and was primarily due to a $15.1 million increase in material costs, an $8.0 million increase in production labor and overhead

~~Table of Contents~~

~~costs, and a $3.0 million increase in other costs including costs related to freight and curation of test results for physicians, offset by a $0.6 million decrease in royalties.~~

Cost of development services and other was $11.3 million for the nine months ended September 30, 2021, compared to $11.4 million for the nine months ended September 30, 2020, a decrease of $0.1 million, or 1%.

Gross margin for the nine months ended September 30, 2021 was 66% compared to 69% for the nine months ended September 30, 2020. The decrease in gross margin is primarily due to higher average cost per test resulting from the varied product mix of precision oncology testing, partially offset by gross margin improvement of development services and other. Our gross margin may be adversely impacted by the COVID-19 pandemic depending on how long the pandemic lasts and the severity of the situation in coming quarters.

~~Operating Expenses~~

~~Research and development expense~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Research and development $ 190,200 $ 109,580 $ 80,620 74 %

Research and development expenses were $190.2 million for the nine months ended September 30, 2021, compared to $109.6 million for the nine months ended September 30, 2020, an increase of $80.6 million, or 74%. This increase in research and development expense was primarily due to an increase of $37.0 million in personnel-related costs for employees in our research and development group, including a $5.9 million increase in stock-based compensation, as we increased our headcount to support continued investment in our technology and clinical studies, an increase of $23.6 million in material costs related to various programs, an increase of $14.2 million in outside service costs, and an increase of $10.0 million related to allocated facility and information technology infrastructure costs, offset by a decrease of $8.5 million relating to in-process research and development (IPR&D) technology expensed in connection with a patent license acquisition that occurred in March 2020.

~~Sales and marketing expense~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Sales and marketing $ 132,282 $ 75,225 $ 57,057 76 %

Selling and marketing expenses were $132.3 million for the nine months ended September 30, 2021, compared to $75.2 million for the nine months ended September 30, 2020, an increase of $57.1 million, or 76%. This increase was primarily due to an increase of $38.7 million in personnel-related costs, including a $4.0 million increase in stock-based compensation, associated with the expansion of our commercial organization, an increase of $8.8 million related to allocated facility and information technology infrastructure costs and an increase of $7.5 million related to marketing activities.

~~General and administrative expense~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
General and administrative $ 166,366 $ 123,265 $ 43,101 35 %

General and administrative expenses were $166.4 million for the nine months ended September 30, 2021, compared to $123.3 million for the nine months ended September 30, 2020, an increase of $43.1 million, or 35%. This increase was primarily due to an increase of $33.6 million in personnel-related costs, including a $26.1 million increase in stock-based compensation primarily in connection with the issuance of market-based restricted stock units to our Co-Chief Executive Officers as well as an increase in our headcount, an increase of $6.0 million in professional

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service expenses related to outside legal, accounting, consulting and IT services, and an increase of $4.0 million related to allocated facilities and information technology infrastructure costs, offset by a decrease of $1.2 million related to settlement costs in connection with a patent license acquisition that occurred in March 2020.

~~Interest income~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Interest income $ 3,277 $ 8,271 $ (4,994) (60) %

Interest income was $3.3 million for the nine months ended September 30, 2021, compared to $8.3 million for the nine months ended September 30, 2020, a decrease of $5.0 million, or 60%. This decrease was primarily due to a significant decrease in interest rate as the U.S. Federal Reserve lowered the risk-free interest rate to nearly zero, partially offset by a significant increase in cash, cash equivalents and marketable securities related to the receipt of cash proceeds from our follow-on public offering completed in June 2020 and borrowings on our convertible senior notes issued in November 2020.

~~Interest expense~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Interest expense $ (1,934) $ (30) $ (1,904) *

* Not meaningful

Interest expense was $1.9 million for the nine months ended September 30, 2021, primarily due to the amortization of debt issuance costs. Interest expense was immaterial for the nine months ended September 30, 2020.

~~Other income (expense), net~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Other income (expense), net $ (720) $ 2,421 $ (3,141) *

* Not meaningful

Other income (expense), net included asset management fees of $0.5 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2020, other income (expense), net included receipt of $1.8 million received from HHS’s relief fund under the CARES Act.

~~Provision for income taxes~~

Nine Months Ended September 30, Change
2021 2020 $ %
(unaudited)
(in thousands)
Provision for income taxes $ 289 $ 116 $ 173 149 %

~~Provision for income taxes was immaterial for the nine months ended September 30, 2021, and 2020.~~

Liquidity and capital resources

We have incurred losses and negative cash flows from operations since our inception, and as of ~~September 30, 2021,~~March 31, 2022, we had an accumulated deficit of ~~$916.9 million.~~$1.1 billion. We expect to incur additional operating losses in the near future

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and our operating expenses will increase as we continue to invest in clinical ~~trials~~studies and develop new products, expand our sales organization, and increase our marketing efforts to drive market adoption of our tests. As demand for our tests are expected to continue to increase from physicians and biopharmaceutical companies, we anticipate that our capital expenditure requirements could also increase if we require additional laboratory capacity.

We have funded our operations to date principally from the sale of stock, convertible debt and through revenue from precision oncology testing and development services and other. As of ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~$832.4~~$573.6 million and marketable securities of ~~$903.8~~$977.1 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to provide liquidity while ensuring capital preservation. ~~Currently, our~~Additionally, we have investments ~~are~~ held in marketable securities consisting of United States treasury securities ~~and non-marketable securities in the form of private equity investments.~~that can be immediately liquid.

Based on our current business plan, we believe our current cash, cash equivalents and marketable securities and anticipated cash flows from operations, will be sufficient to meet our anticipated cash requirements for more than 12 months from the date of this ~~report.~~Quarterly Report on Form 10-Q. We may consider raising additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons. As revenue from precision oncology testing and development services and other is expected to grow long-term, we

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expect our accounts receivable and inventory balances to increase. Any increase in accounts receivable and inventory may not be completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements.

If our available cash, cash equivalents and marketable securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products as a result of lower than currently expected rates of reimbursement from our customers or other risks described in our Form 10-K for the year ended December 31, ~~2020,~~2021, we may seek to sell additional common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us. Additional capital may not be available to us on reasonable terms, or at all.

Cash flows

The following table summarizes our cash flows for the periods presented:

Nine Months Ended September 30,
2021 2020
(unaudited)
(in thousands)
Net cash used in operating activities $ (132,029) $ (44,704)
Net cash provided by (used in) investing activities $ 203,542 $ (319,401)
Net cash (used in) provided by financing activities $ (70,604) $ 363,583


	Three Months Ended March 31,
	2022		2021

	(unaudited)
	(in thousands)
Net cash used in operating activities	$	(28,619)	$	(16,291)
Net cash provided by investing activities	$	110,808	$	123,870
Net cash used in financing activities	$	(12)	$	(69,953)

Operating activities

Cash used in operating activities during the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was ~~$132.0~~$28.6 million, which resulted from a net loss of ~~$312.5~~$123.2 million, partially offset by non-cash charges of ~~$171.9~~$44.5 million and net change in our operating assets and liabilities of ~~$8.6~~$50.2 million. Non-cash charges primarily consisted of ~~$124.6~~$24.8 million of stock-based compensation, ~~$17.8~~$7.2 million of depreciation and amortization, $6.9 million of non-cash operating lease costs, ~~$16.2 million of depreciation and amortization, $9.5~~$2.4 million of amortization of premium on marketable investments, and ~~$1.9~~$2.4 million of ~~amortization of debt issuance costs.~~revaluation adjustments to contingent consideration. The net change in our operating assets and liabilities was primarily the result of a ~~$10.6~~$21.9 million decrease in prepaid expenses and other current assets, primarily driven by a $25.0 million one-time payment pursuant to a settlement and license agreement entered into in December 2021, a $13.7 million increase in accrued compensation due to increased personnel, a ~~$10.5~~$13.3 million decrease in accounts receivable primarily driven by collection from our clinical and biopharmaceutical customers and receipt of royalty payments, a $8.0 million increase in accrued ~~expenses~~expense and other liabilities, and a ~~$6.9~~$3.8 million ~~increase~~decrease in ~~accounts payable,~~other assets, partially offset by a ~~$7.4 million increase in accounts receivable, net, a $5.8 million increase in prepaid expenses and other current assets, a $3.2 million increase in other assets, net, and a $2.0~~$5.9 million increase in inventory due to higher testing ~~volumes.~~volumes, and a $3.1 million payment of operating lease liabilities net of receipt of tenant improvement allowance.

Cash used in operating activities during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$44.7~~$16.3 million, which resulted from a net loss of ~~$153.2~~$107.4 million, partially offset by non-cash charges of $67.9 million and net change in our operating assets and liabilities of ~~$11.7 million,~~

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~~partially offset by non-cash charges of $120.2~~$23.2 million. Non-cash charges primarily consisted of ~~$87.4~~$55.1 million of stock-based compensation, ~~$11.5~~$5.0 million of depreciation and amortization, ~~$8.5 million of charge of in-process research and development costs with no alternative future use, $8.1 million of credit loss adjustment and others, $3.3~~$3.9 million of non-cash operating lease costs, and ~~$1.6~~$3.3 million of amortization of premium on investment. The net change in our operating assets and liabilities was primarily the result of a ~~$12.6~~$12.0 million increase in accounts payable, a $8.9 million increase in accrued compensation due to increased personnel, a $5.3 million decrease in accounts receivables and a $4.4 million increase in accrued expenses and other liabilities, partially offset by a $6.2 million increase in inventory due to higher testing volumes, a $7.6 million increase in other assets for long-term portions of payments due from a third-party in relation to the settlement of a patent dispute reached in the three months ended September 30, 2020, a $4.9 million decrease in deferred revenue, and a ~~$3.5~~$2.8 million payment of operating lease liabilities net of receipt of tenant improvement ~~allowance, partially offset by a $11.6 million decrease in accounts receivables, and a $5.5 million increase in accrued compensation due to increased personnel.~~allowance.

Investing activities

Cash provided by investing activities during the ~~nine~~three months ended ~~September 30,~~March 31, 2022, was $110.8 million, which resulted primarily from proceeds from the maturities of marketable securities of $310.0 million, partially offset by purchases of marketable securities of $163.7 million, purchases of property and equipment of $22.7 million, and purchases of non-marketable equity and other related investments of $12.8 million.

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Cash provided by investing activities during the three months ended March 31, 2021, was ~~$203.5~~$123.9 million, which resulted primarily from maturities of marketable securities of ~~$627.1~~$204.1 million, partially offset by purchases of marketable securities of ~~$334.1~~$70.7 million, and purchases of property and equipment of ~~$50.4 million and purchase of non-marketable equity and other related investments of $39.1 million.~~

Cash used in investing activities during the nine months ended September 30, 2020, was $319.4 million, which resulted primarily from purchases of marketable securities of $580.2 million, purchases of property and equipment of $28.9 million and purchases of intangible assets and capitalized license obligations of $17.9 million, partially offset by maturities of marketable securities of $307.5$9.6 million.

Financing activities

Cash used in financing activities during the ~~nine~~three months ended ~~September 30,~~March 31, 2022, was immaterial, which was primarily due to taxes paid related to net share settlement of restricted stock units of $1.0 million, partially offset by proceeds from exercise of stock options of $1.0 million.

Cash used in financing activities during the three months ended March 31, 2021, was ~~$70.6~~$70.0 million, which was primarily due to taxes paid related to net share settlement of restricted stock units of ~~$82.2~~$73.6 million, partially offset by proceeds from exercise of stock options of ~~$7.1 million and proceeds from issuances of common stock under employee stock purchase plan of $5.4~~$4.5 million.

Cash provided by financing activities during the nine months ended September 30, 2020, was $363.6 million, which was primarily due to proceeds from a follow-on offering of our common stock, net of underwriting discounts and commissions and offering expenses payable by us, of $354.6 million, proceeds from exercise of stock options of $7.4 million, and proceeds from issuances of common stock under employee stock purchase plan of $4.0 million, partially offset by taxes paid related to net share settlement of restricted stock units of $2.2 million.

~~Contractual obligations and commitments~~

~~Except as set forth in Note 10,~~ ~~Commitments and Contingencies~~, of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in “~~Management~~’~~s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020.~~

~~Off-balance sheet arrangements~~

~~As of September 30, 2021, we have not had any off-balance sheet arrangements as defined in the rules and regulations of the SEC.~~

Critical accounting policies and estimates

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, ~~(“GAAP”).~~or GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the consolidated financial statements, as well as revenue and expenses recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, there were no material changes to our critical accounting policies from those discussed previously.

Recent accounting pronouncements

~~See Note 2,~~ ~~Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.~~Not applicable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Interest rate risk

We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents, marketable securities and our indebtedness. As of ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~$832.4~~$573.6 million held primarily in cash deposits and money market funds. Our marketable securities are held in U.S. government debt securities. As of ~~September 30, 2021,~~March 31, 2022, we had short-term marketable securities of ~~$653.6~~$388.7 million and long-term marketable securities of ~~$250.2~~$588.5 million. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. As of ~~September 30, 2021,~~March 31, 2022, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate ~~$6.1~~$10.8 million decline of the fair value of our available-for-sale securities and a hypothetical 100 basis point decrease in interest rates would have resulted in an approximate ~~$1.1~~$10.8 million increase of the fair value of our available-for-sale securities. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.

Foreign currency risk

The majority of our revenue is generated in the United States. Through ~~September 30, 2021,~~March 31, 2022, we have generated an insignificant amount of revenues denominated in foreign currencies. As we expand our presence in the international market, our results of operations and cash flows are expected to increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. As of ~~September 30, 2021,~~March 31, 2022, the effect of a hypothetical 10% change in foreign currency exchange rates would not be material to our financial condition or results of operations. To date, we have not entered into any

hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.

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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our Co-Chief Executive Officers, or Co-CEOs, and our Chief Financial Officer, or CFO with the participation of other members of our management, have evaluated the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”))~~or Exchange Act) as of ~~September 30, 2021~~March 31, 2022, and our Co-CEOs and our CFO have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Changes in internal control

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that a number of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Limitations on effectiveness of controls and procedures

Our management, including our Co-CEOs and our CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information under the caption “Commitments and Contingencies – Legal Proceedings” in Note 109 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, concerning certain legal proceedings in which we are involved, is hereby incorporated by reference. The resolution of any such legal proceeding is subject to inherent uncertainty and could have a material adverse effect on our financial condition, cash flows or results of operations.

Item 1A. Risk Factors

Our business, financial condition and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or the healthcare industry as well as risks that affect businesses in general. In addition to the information set forth in this Quarterly Report on Form 10-Q, you should consider carefully the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on February ~~25, 2021.~~24, 2022. The risks and uncertainties disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows or results of operations and thus our stock price. During the first quarter of fiscal ~~2021,~~2022, there were no material changes to our previously disclosed risk factors. Besides risk factors disclosed in the Annual Report and this Quarterly Report, additional risks and uncertainties not currently known or we currently deem to be immaterial may also materially adversely affect our business, financial condition or results of operations.

These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. Because of such risk factors, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

5647

Item 6. Exhibits.

Exhibit Number

Description

Form

File No.

Exhibit

Filing Date

Filed/Furnished Herewith

3.1

Amended and Restated Certificate of Incorporation

8-K

001-38683

3.1

10/9/2018

3.2

Amended and Restated Bylaws

8-K

001-38683

3.2

10/9/2018

31.1

Certification of the Co-Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

31.3

Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

___________________________

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized


		GUARDANT HEALTH, INC.

Dated:	~~November 4, 2021~~May 5, 2022	By:	/s/ Helmy Eltoukhy
		Name:	Helmy Eltoukhy
		Title:	Co-Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

Dated:	~~November 4, 2021~~May 5, 2022	By:	/s/ AmirAli Talasaz
		Name:	AmirAli Talasaz
		Title:	Co-Chief Executive Officer and Director (Principal Executive Officer)

Dated:	~~November 4, 2021~~May 5, 2022	By:	/s/ Michael Bell
		Name:	Michael Bell
		Title:	Chief Financial Officer ~~(Principal~~ (Principal Accounting Officer and Principal Financial Officer)

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	Three Months Ended September 30, 2020
	Redeemable Noncontrolling Interest		Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
			Shares	Amount
Balance as of June 30, 2020	$	50,400	99,312,237	$	1	$	1,544,373	$	5,392	$	(435,177)	$	1,114,589

Issuance of common stock upon exercise of stock options	—		533,962	—		3,851		—		—		3,851
Vesting of restricted stock units	—		50,989	—		—		—		—		—
Vesting of common stock exercised early	—		—	—		13		—		—		13
Taxes paid related to net share settlement of restricted stock units	—		—	—		(2,247)		—		—		(2,247)
Stock-based compensation	—		—	—		55,198		—		—		55,198
Adjustment of redeemable noncontrolling interest	6,000		—	—		—		—		(6,000)		(6,000)
Other comprehensive loss, net of tax impact	—		—	—		—		(1,530)		—		(1,530)
Net loss	—		—	—		—		—		(71,670)		(71,670)
Balance as of September 30, 2020	$	56,400	99,897,188	$	1	$	1,601,188	$	3,862	$	(512,847)	$	1,092,204


	Nine Months Ended September 30, 2021
	Redeemable Noncontrolling Interest		Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
			Shares	Amount
Balance as of December 31, 2020	$	57,100	100,213,985	$	1	$	1,902,389	$	2,697	$	(606,592)	$	1,298,495

Cumulative effect adjustment for ASU 2020-06 adoption	—		—	—		(330,403)		—		4,437		(325,966)
Issuance of common stock upon exercise of stock options	—		629,246	—		7,065		—		—		7,065
Vesting of restricted stock units	—		719,128	—		—		—		—		—
Vesting of common stock exercised early	—		—	—		39		—		—		39
Common stock issued under employee stock purchase plan	—		60,898	—		5,401		—		—		5,401
Taxes paid related to net share settlement of restricted stock units	—		—	—		(82,157)		—		—		(82,157)
Stock-based compensation	—		—	—		124,592		—		—		124,592
Adjustment of redeemable noncontrolling interest	2,300		—	—		—		—		(2,300)		(2,300)
Other comprehensive loss, net of tax impact	—		—	—		—		(3,290)		—		(3,290)
Net loss	—		—	—		—		—		(312,459)		(312,459)
Balance as of September 30, 2021	$	59,400	101,623,257	$	1	$	1,626,926	$	(593)	$	(916,914)	$	709,420