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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, 2023
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to                        
Commission File Number: 001-38683
_____________________
GUARDANT HEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________
Delaware
45-4139254
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3100 Hanover Street
Palo Alto, California, 94304
Registrant’s telephone number, including area code: (855) 698-8887
_______________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.00001 par value per share
GH
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated filer
☐
Non-accelerated filer
☐ 
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


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

As of October 31, 2023, the registrant had 117,992,240 shares of common stock, $0.00001 par value per share, outstanding.


GUARDANT HEALTH, INC.
FORM 10-Q
TABLE OF CONTENTS
Page

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, 2022, 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, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$457,339 $141,647 
Short-term marketable debt securities
697,482 869,584 
Accounts receivable, net
88,801 97,256 
Inventory, net
77,036 51,598 
Prepaid expenses and other current assets, net
26,239 31,509 
Total current assets
1,346,897 1,191,594 
Property and equipment, net
147,671 167,920 
Right-of-use assets, net
161,668 174,001 
Intangible assets, net
9,670 11,727 
Goodwill
3,290 3,290 
Other assets, net
128,035 61,453 
Total Assets
$1,797,231 $1,609,985 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$205,266 $175,817 
Deferred revenue
21,485 17,403 
Total current liabilities
226,751 193,220 
Convertible senior notes, net1,139,322 1,137,391 
Long-term operating lease liabilities
192,677 210,015 
Other long-term liabilities
10,182 9,179 
Total Liabilities
1,568,932 1,549,805 
Commitments and contingencies (Note 9)

Stockholders’ equity:
Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022
— — 
Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of September 30, 2023, and December 31, 2022; 117,849,155 and 102,619,383 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively
1 1 
Additional paid-in capital
2,188,797 1,742,114 
Accumulated other comprehensive loss
(5,680)(19,522)
Accumulated deficit
(1,954,819)(1,662,413)
Total Stockholders’ Equity
228,299 60,180 
Total Liabilities and Stockholders’ Equity
$1,797,231 $1,609,985 
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,
2023202220232022
Revenue:
Precision oncology testing
$133,423 $102,054 $372,060 $278,252 
Development services and other9,607 15,350 36,834 44,395 
Total revenue
143,030 117,404 408,894 322,647 
Costs and operating expenses:
Cost of precision oncology testing53,648 39,434 148,111 104,493 
Cost of development services and other3,966 1,062 16,424 4,711 
Research and development expense93,851 100,017 277,338 267,229 
Sales and marketing expense68,934 80,370 216,100 218,405 
General and administrative expense36,174 41,121 118,135 126,068 
Total costs and operating expenses
256,573 262,004 776,108 720,906 
Loss from operations
(113,543)(144,600)(367,214)(398,259)
Interest income11,690 1,754 21,477 3,919 
Interest expense(644)(644)(1,933)(1,933)
Other income (expense), net16,885 (18,389)56,490 (18,059)
Fair value adjustments of noncontrolling interest liability— — — (99,785)
Loss before provision for income taxes
(85,612)(161,879)(291,180)(514,117)
Provision for income taxes
490 115 1,226 537 
Net loss
$(86,102)$(161,994)$(292,406)$(514,654)
Net loss per share, basic and diluted
$(0.73)$(1.58)$(2.66)$(5.04)
Weighted-average shares used in computing net loss per share, basic and diluted
117,736 102,289 109,791 102,065 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
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,
2023202220232022
Net loss
$(86,102)$(161,994)$(292,406)$(514,654)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities
3,315 (2,062)15,783 (19,348)
Foreign currency translation adjustments(526)(529)(1,941)(2,740)
Other comprehensive income (loss)2,789 (2,591)13,842 (22,088)
Comprehensive loss
$(83,313)$(164,585)$(278,564)$(536,742)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Guardant Health, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)
(in thousands, except share data)
Three Months Ended September 30, 2023
Common Stock Additional
Paid-in
Capital		Accumulated Other
Comprehensive Income (Loss)		Accumulated
Deficit		Total Stockholders’
Equity
SharesAmount
Balance as of July 1, 2023
117,662,134 $1 $2,169,911 $(8,469)$(1,868,717)$292,726 
Issuance of common stock upon exercise of stock options8,989 — 70 — — 70 
Vesting of restricted stock units178,032 — — — — — 
Taxes paid related to net share settlement of restricted stock units— — (3,003)— — (3,003)
Stock-based compensation— — 21,819 — — 21,819 
Other comprehensive income— — — 2,789 — 2,789 
Net loss— — — — (86,102)(86,102)
Balance as of September 30, 2023
117,849,155 $1 $2,188,797 $(5,680)$(1,954,819)$228,299 

Three Months Ended September 30, 2022
Common StockAdditional
Paid-in
Capital		Accumulated Other
Comprehensive Income (Loss)		Accumulated
Deficit		Total Stockholders’ Equity
SharesAmount
Balance as of July 1, 2022
102,186,856 $1 $1,703,832 $(24,261)$(1,360,485)$319,087 
Issuance of common stock upon exercise of stock options51,338 — 347 — — 347 
Vesting of restricted stock units175,444 — — — — — 
Taxes paid related to net share settlement of restricted stock units— — (4,340)— — (4,340)
Stock-based compensation— — 20,639 — — 20,639 
Tender offer issued in connection with the Joint Venture Acquisition and acquisition related costs— — (4,403)— — (4,403)
Other comprehensive loss— — — (2,591)— (2,591)
Net loss— — — — (161,994)(161,994)
Balance as of September 30, 2022
102,413,638 $1 $1,716,075 $(26,852)$(1,522,479)$166,745 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


Nine Months Ended September 30, 2023
Common Stock Additional
Paid-in
Capital		Accumulated Other
Comprehensive Income (Loss)		 
Accumulated
Deficit		Total Stockholders’ Equity
SharesAmount
Balance as of January 1, 2023
102,619,383 $1 $1,742,114 $(19,522)$(1,662,413)$60,180 
Issuance of common stock upon follow-on public offering, net of offering costs of $21,131
14,375,000 — 381,369 — — 381,369 
Issuance of common stock upon exercise of stock options40,868 — 290 — — 290 
Vesting of restricted stock units515,123 — — — — — 
Common stock issued under employee stock purchase plan298,781 — 6,697 — — 6,697 
Taxes paid related to net share settlement of restricted stock units— — (8,112)— — (8,112)
Stock-based compensation— — 66,439 — — 66,439 
Other comprehensive income— — — 13,842 — 13,842 
Net loss— — — — (292,406)(292,406)
Balance as of September 30, 2023
117,849,155 $1 $2,188,797 $(5,680)$(1,954,819)$228,299 

Nine Months Ended September 30, 2022
Common Stock Additional
Paid-in
Capital		Accumulated Other
Comprehensive Income (Loss)		 
Accumulated
Deficit		Total Stockholders’ Equity
SharesAmount
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 options207,353 — 2,504 — — 2,504 
Vesting of restricted stock units250,729 — — — — — 
Vesting of common stock exercised early— — 8 — — 8 
Common stock issued under employee stock purchase plan188,110 — 5,742 — — 5,742 
Taxes paid related to net share settlement of restricted stock units— — (6,519)— — (6,519)
Stock-based compensation— — 70,982 — — 70,982 
Tender offer issued in connection with the Joint Venture Acquisition and acquisition related costs— — (14,235)— — (14,235)
Other comprehensive loss— — — (22,088)— (22,088)
Net loss— — — — (514,654)(514,654)
Balance as of September 30, 2022
102,413,638 $1 $1,716,075 $(26,852)$(1,522,479)$166,745 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
Guardant Health, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine Months Ended September 30,
20232022
OPERATING ACTIVITIES:
Net loss
$(292,406)$(514,654)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization32,013 25,793 
Operating lease costs
22,146 21,394 
Contingent consideration230 4,195 
Stock-based compensation66,439 70,982 
Amortization of debt issuance costs1,931 1,926 
Amortization of (discount) premium on marketable debt securities(10,913)3,366 
Unrealized (gains) losses on marketable equity securities(84,513)13,230 
Impairment of non-marketable equity securities and other related assets29,054 5,261 
Fair value adjustments of noncontrolling interest liability— 99,785 
Other104 23 
Cash effect of changes in operating assets and liabilities:
Accounts receivable, net8,360 11,431 
Inventory, net(25,435)(32,375)
Prepaid expenses and other current assets, net(2,558)28,387 
Other assets, net2,280 4,770 
Accounts payable and accrued liabilities26,577 46,713 
Operating lease liabilities(22,724)(12,993)
Deferred revenue3,168 4,052 
Net cash used in operating activities(246,247)(218,714)
INVESTING ACTIVITIES:
Purchase of marketable debt securities(629,902)(238,601)
Maturity of marketable debt securities828,700 398,000 
Purchase of non-marketable equity securities and other related assets(5,593)(12,750)
Purchase of property and equipment (16,409)(67,460)
Net cash provided by investing activities176,796 79,189 
FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon exercise of stock options 290 2,505 
Proceeds from issuances of common stock under employee stock purchase plan6,697 5,742 
Taxes paid related to net share settlement of restricted stock units(8,112)(6,519)
Proceeds from follow-on public offering402,500 — 
Payment of offering costs related to follow-on public offering (20,478)— 
Joint Venture Acquisition— (177,785)
Tender offer issued in connection with the Joint Venture Acquisition and acquisition related costs— (14,236)
Other5,910 (1,118)
Net cash provided by (used in) financing activities386,807 (191,411)
Net effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(1,941)(2,740)
Net increase (decrease) in cash, cash equivalents and restricted cash
315,415 (333,676)
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Table of Contents
Nine Months Ended September 30,
20232022
Cash, cash equivalents and restricted cash—Beginning of period
141,948 492,288 
Cash, cash equivalents and restricted cash—End of period
$457,363 $158,612 
Supplemental Disclosures of Noncash Investing and Financing Activities:
Operating lease liabilities arising from obtaining right-of-use assets
$3,716 $4,073 
Purchase of property and equipment included in accounts payable and accrued liabilities
$1,805 $8,914 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
$457,339 $158,310 
Restricted cash – included in other assets, net24 302 
Total cash, cash equivalents and restricted cash$457,363 $158,612 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
 Guardant Health, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1.    Description of Business
Guardant Health, Inc., or the Company, is a leading precision oncology company focused on helping conquer cancer globally through the use of its proprietary tests, vast data sets and advanced analytics. The Company believes its tests can transform cancer care by unlocking insights that will help patients at all stages of the disease, including at its earliest stages, when it’s most treatable. For patients with advanced stage cancer, the Company has commercially launched Guardant360 LDT and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. The Company has also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging. In addition, the Company has developed Guardant Galaxy suite of advanced analytical technologies to enhance the performance and clinical utility of its portfolio of cancer tests, and to power the next generation of biomarker and drug discovery.
The Company also collaborates with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from its tests, the Company has also developed its GuardantINFORM platform to help biopharmaceutical companies accelerate precision oncology drug development through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.
For early cancer detection, the Company has launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In December 2022, the Company announced that the ECLIPSE study, an over 40,000 patient registrational study evaluating the performance of its Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. In addition, in March 2023, the Company submitted a premarket approval application for its Shield blood test to the FDA.
The Company was incorporated in Delaware in December 2011 and is headquartered in Palo Alto, California.
2.    Summary of Significant Accounting Policies
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. The accompanying condensed consolidated financial statements include the accounts of Guardant Health, Inc., its consolidated Joint Venture (see Note 3, Joint Venture), and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications of prior period amounts were made to conform with the current period presentation.
11
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimation of variable consideration, estimation of credit losses, standalone selling price allocation included in contracts with multiple performance obligations, goodwill and identifiable intangible assets, stock-based compensation, incremental borrowing rate for operating leases, contingencies, certain inputs into the provision for income taxes, including related reserves, valuation of non-marketable securities, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates.
Unaudited Interim Condensed Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Act of 1933, as amended, or the Securities Act. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring accruals that the Company believes are necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with GAAP. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.
The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Non-Marketable Securities
The Company acquires certain equity investments in private companies to promote business and strategic objectives. The Company's investments in non-marketable equity securities do not give the Company the ability to control or exercise significant influence over the investees. One of the investees is concluded to be a variable interest entity, or VIE, but the Company is deemed not to be the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance. The Company's non-marketable equity and other related investments totaled $8.6 million and $25.0 million as of September 30, 2023, and December 31, 2022, respectively, and are included in other assets, net on the accompanying condensed consolidated balance sheets.
Non-marketable securities are recorded at cost, subject to periodic impairment reviews and adjustments for observable price changes from orderly transactions. The Company's evaluation of impairment of such non-marketable securities is based on adverse changes in market conditions and the regulatory or economic environment, qualitative and quantitative analysis of the operating performance and financial condition of the investee; changes in operating structure or management of the investee; and additional funding requirements of the investee. As a result of the evaluation, the Company recorded an impairment of $22.1 million for the nine months ended September 30, 2023 for one of its non-marketable equity security investments, included in other income (expense), net on the Company's condensed consolidated statement of operations. In addition, pursuant to one of the investments in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the investee, on or before December 31, 2022. In September 2022, the Company decided not to exercise such rights to purchase the investee and recorded an impairment of $5.3 million based on an independent third-party valuation. Pursuant to another investment in non-marketable securities purchased by the Company, the Company acquired rights to purchase the investee at a pre-determined price subject to additional adjustments based on the performance of the Company, on or before October 1, 2023, and acquired rights to obtain the exclusive license of the investee's certain technologies. In June 2023, the Company decided not to exercise such rights and recorded an impairment of $7.0 million, included in other income (expense), net on the Company's condensed consolidated statement of operations for the nine months ended September 30, 2023. No other impairment or downward adjustments to the carrying value of non-marketable securities have been otherwise recorded.
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Concentration of Risk
The Company is subject to credit risk from its portfolio of cash equivalents held at one commercial bank and investments in marketable debt securities. The Company limits its exposure to credit losses by investing in money market funds through a U.S. bank with high credit ratings. The Company’s cash may consist of deposits held with banks that may at times exceed federally insured limits, however, its exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the condensed consolidated balance sheets. The Company performs evaluations of the relative credit standing of these financial institutions to limit the amount of credit exposure.
The Company also invests in investment-grade debt instruments and has policy limits for the amount it can invest in any one type of security, except for securities issued or guaranteed by the U.S. government. The goals of the Company’s investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, investment type and issuer, as a result, the Company is not exposed to any significant concentrations of credit risk from these financial instruments.
The Company is subject to credit risk from its accounts receivable. The majority of the Company’s accounts receivable arises from the provision of precision oncology services, and development services and other, primarily with biopharmaceutical companies and international laboratory partners, all of which have high credit ratings. The Company has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Accounts receivable are recorded net of allowance for credit losses, if any.
A significant customer is any biopharmaceutical customer, clinical testing payer, or international laboratory partner that represents 10% or more of the Company’s total revenue or accounts receivable balance. Revenue attributable to each significant customer, including its affiliated entities, as a percentage of the Company’s total revenue, for the respective period, and accounts receivable balance attributable to each significant customers, including its affiliated entities, as a percentage of the Company’s total accounts receivable balance, at the respective condensed consolidated balance sheet date, are as follows:
RevenueAccounts Receivable, Net
Three Months Ended September 30,Nine Months Ended September 30,September 30, 2023December 31, 2022
2023202220232022
(unaudited)(unaudited)
Customer A
*****12 %
Customer B
33 %30 %32 %30 %12 %11 %
Customer C
****12 %*
*    less than 10%
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, 2021 and 2022, the Company received the first, second and third installment payments of $1.0 million, $1.1 million and $1.1 million, respectively. The Company has evaluated and recorded a credit loss for the remaining $4.8 million considering the third-party's credit worthiness and lack of financial history.
13
The following table presents the receivable and the related credit loss amounts:
September 30, 2023
December 31, 2022
(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
$3,700 $4,800 
Allowance for Credit Losses
(3,700)(4,800)
Net Amount
$— $— 
There were no activities for the allowance for credit losses during the three months ended September 30, 2023 and 2022. The following table summarizes the allowance for credit losses activities for the nine months ended September 30, 2023 and 2022:
Nine Months Ended September 30,
20232022
(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
$4,800 $5,900 
Reclassification
(1,100)(1,100)
Allowance for credit losses—End of period
$3,700 $4,800 
Accounts Receivable, Net
Accounts receivable represent valid claims against commercial and governmental payers, biopharmaceutical companies, research institutes, international laboratory partners and distributors, including unbilled receivables, and royalty payments due from third parties for licensing the Company’s technologies. Unbilled receivables include balances due from biopharmaceutical customers related to development services and other revenues that are recognized upon the achievement of performance-based milestones but prior to the achievement of contractual billing rights. As of September 30, 2023, and December 31, 2022, the Company had unbilled receivables of $5.6 million and $5.4 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, 2023, and December 31, 2022, the Company had an immaterial allowance for credit losses related to its accounts receivable.
14
Goodwill and Intangible Assets, net
Intangible assets related to in-process research and development costs, or IPR&D, acquired in a business combination are considered to be indefinite-lived until the completion or abandonment of the associated research 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 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. In connection with the launch of Shield LDT in May 2022, the Company's IPR&D of $1.6 million was reclassified as an intangible asset with a useful life of 2 years.
Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill is not amortized but is tested for impairment at least annually during the fourth fiscal quarter, or if circumstances indicate its value may no longer be recoverable. The Company continues to operate in one segment, which is considered to be the sole reporting unit and, therefore, goodwill is tested for impairment at the enterprise level. As of September 30, 2023, there has been no impairment of goodwill.
Intangible assets are carried at cost, net of accumulated amortization. The Company does not have intangible assets with indefinite useful lives other than goodwill. Amortization is recorded on a straight-line basis over the intangible asset's useful life, which is approximately 2—12 years.
Post-acquisition Contingent Consideration
Post-acquisition contingent consideration is recognized over the service period, subject to meeting the respective service requirements and performance metrics. The Company recorded post-acquisition contingent consideration expense of $0.5 million and $0.4 million, for the three months ended September 30, 2023, and 2022, respectively, and $1.6 million and $2.7 million for the nine months ended September 30, 2023, and 2022, 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, or ROU, assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received or receivable. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities, as the Company's leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less.
Convertible Senior Notes
Convertible senior notes are accounted for as a liability and measured at their amortized cost. Transaction costs related to the issuance of the notes are netted with the liability and are amortized to interest expense over the term of the notes, using an effective interest rate method.
Revenue Recognition
The Company derives revenue from the provision of precision oncology testing services, as well as from development services and other. Precision oncology testing services include genomic profiling and the delivery of other genomic information derived from the Company’s platform. Development services include companion diagnostic development and regulatory approval, clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. Other revenue includes amounts derived from licensing the Company's technologies, kit fulfillment and screening services. The Company currently receives payments from third-party commercial and governmental payers, certain hospitals and oncology centers and individual patients, as well as biopharmaceutical companies, research institutes, international laboratory partners and distributors.
15
Revenues are recognized when control of services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. FASB ASC Topic 606, Revenue from Contracts with Customers, provides for a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
Precision oncology testing
The Company recognizes revenue from the sale of its precision oncology tests for clinical customers, including certain hospitals, cancer centers, other institutions and patients, at the time results of the test are reported to physicians. Most precision oncology tests requested by clinical customers are sold without a written agreement; however, the Company determines an implied contract exists with its clinical customers. The Company identifies each sale of its test to a clinical customer as a single performance obligation. With the exception of certain limited contracted arrangements with insurance carriers and other institutions where the transaction price is fixed, a stated contract price does not exist and the transaction price for each implied contract with clinical customers represents variable consideration. The Company estimates the variable consideration under the portfolio approach and considers the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data. The Company monitors the estimated amount to be collected in the portfolio at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the estimate and any subsequent revision contain uncertainty and require the use of significant judgment in the estimation of the variable consideration and application of the constraint for such variable consideration. The Company analyzes its actual cash collections over the expected reimbursement period and compares it with the estimated variable consideration for each portfolio and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal.
Revenue from sales of precision oncology tests to biopharmaceutical customers are based on a negotiated price per test or on the basis of an agreement to provide certain testing volume over a defined period. The Company identifies its promise to transfer a series of distinct tests to biopharmaceutical customers as a single performance obligation. Precision oncology tests to biopharmaceutical customers are generally billed at a fixed price for each test performed. For agreements involving testing volume to be satisfied over a defined period, revenue is recognized over time based on the number of tests performed as the performance obligation is satisfied over time. Results of the Company’s precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by the Company or billed to customers.
Development services and other
The Company performs development services for its biopharmaceutical customers utilizing its precision oncology information platform. Development services typically represent a single performance obligation as the Company performs a significant integration service, such as analytical validation and regulatory submissions. The individual promises are not separately identifiable from other promises in the contracts and, therefore, are not distinct. However, under certain contracts, a biopharmaceutical customer may engage the Company for multiple distinct development services which are both capable of being distinct and separately identifiable from other promises in the contracts and, therefore, distinct performance obligations.
The Company collaborates with biopharmaceutical companies in the development of new drugs. As part of these collaborations, the Company provides services related to regulatory filings to support companion diagnostic device submissions for the Company’s testing panels. Under these collaborations, the Company generates revenue from achievement of milestones, as well as provision of on-going support. For the companion diagnostic development and regulatory approval services performed, the Company is compensated through a combination of an upfront fee and performance-based, non-refundable regulatory and other developmental milestone payments. The transaction price of these contracts typically represents variable consideration. Application of the constraint for variable consideration to milestone payments is an area that requires significant judgment. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be managed to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone. In making this assessment, the Company considers its historical experience with similar milestones, the degree of complexity and uncertainty associated with each milestone, and whether achievement of the milestone is dependent on parties other than the Company. The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved. Application of the constraint for variable consideration is assessed and updated at each reporting period as a revision to the estimated transaction price.
16
The Company recognizes companion diagnostic development and regulatory approval services revenue over the period in which biopharmaceutical research and development services are provided. Specifically, the Company recognizes revenue using an input method to measure progress, utilizing costs incurred to-date relative to total expected costs as its measure of progress. The Company assesses the changes to the total expected cost estimates as well as any incremental fees negotiated resulting from changes to the scope of the original contract in determining the revenue recognition at each reporting period. For development of new products or services under these arrangements, costs incurred before technological feasibility is reached are included as research and development expenses in the Company’s condensed consolidated statements of operations, while costs incurred thereafter are recorded as cost of development services and other.
The Company also recognizes revenue from other development services, in addition to companion diagnostic development and regulatory approval services noted above, such as clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. These revenues are generally recognized over time based on an input method to measure progress in the period when the associated services have been performed.
In addition, other revenue includes amounts derived from licensing the Company's digital sequencing technologies to its domestic customers and international laboratory partners, kit fulfillment and screening services. For the licensed technology, the Company is compensated through royalty-based payments, non-refundable upfront payments, guaranteed minimum payments, and/or sample milestone payments. Depending on the nature of the technology licensing arrangements, and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur, when the technology transfer is complete, or over the technology transfer period. Kit fulfillment related revenues are recognized when such products are delivered.
Contracts with multiple performance obligations
Contracts with biopharmaceutical customers and international laboratory partners may include multiple distinct performance obligations, such as provision of precision oncology testing, the above-mentioned development services, and digital sequencing technology licensing, among others. The Company evaluates the terms and conditions included within its contracts with biopharmaceutical customers and international laboratory partners to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. The Company first identifies material promises, in contrast to immaterial promises or administrative tasks, under the contract, and then evaluates whether these promises are both capable of being distinct and distinct within the context of the contract. In assessing whether a promised service is capable of being distinct, the Company considers whether the customer could benefit from the service either on its own or together with other resources that are readily available to the customer, including factors such as the research, development, and commercialization capabilities of a third party as well as the availability of the associated expertise in the general marketplace. In assessing whether a promised service is distinct within the context of the contract, the Company considers whether it provides a significant integration of the services, whether the services significantly modify or customize one another, or whether the services are highly interdependent or interrelated.
For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines standalone selling price by considering the historical selling price of these performance obligations in similar transactions as well as other factors, including, but not limited to, the price that customers in the market would be willing to pay, competitive pricing of other vendors, industry publications and current pricing practices, and expected costs of satisfying each performance obligation plus appropriate margin; or by using the residual approach if standalone selling price is not observable, by reference to the total transaction price less the sum of the observable standalone selling prices of other performance obligations promised in the contract.
17
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, 2023 and December 31, 2022, the deferred revenue balance was $24.4 million and $21.2 million, respectively, of which $2.9 million and $3.8 million is considered long-term and was recorded within other long-term liabilities on the accompanying condensed consolidated balance sheets. Revenue recognized in the nine months ended September 30, 2023 that was included in the deferred revenue balance as of December 31, 2022 was $12.7 million, and revenue recognized in the nine months ended September 30, 2022 that was included in the deferred revenue balance as of December 31, 2021 was $7.7 million, respectively.
Transaction price allocated to the remaining performance obligations
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. The Company expects to recognize substantially all of the remaining transaction price in the next 1-2 years.
Costs of Precision Oncology Testing
Cost of precision oncology testing generally consists of cost of materials, cost of labor, including bonus, benefit and stock-based compensation, equipment and infrastructure expenses associated with processing test samples (including sample accessioning, library preparation, sequencing, and quality control analyses), freight, curation of test results for physicians, phlebotomy, and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, lease costs, amortization of leasehold improvements, and information technology costs. Costs associated with performing the Company’s tests are recorded as the tests are performed regardless of whether revenue was recognized with respect to that test.
Cost of Development Services and Other
Cost of development services and other primarily includes costs incurred for the performance of development services requested by the Company’s biopharmaceutical customers, and costs associated with the Company's partnership agreements and screening services. 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 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 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 (as amended and restated), or the 2012 Plan, and the 2018 Incentive Award Plan, or the 2018 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.
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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 and non-employees based on the closing market price of the common stock on the date of grant. For restricted stock units with only service-based vesting conditions, compensation expense is recognized in the Company’s condensed consolidated statement of operations on a straight-line basis over the requisite service period. Compensation expense for restricted stock units with performance metrics, or PSUs, is calculated based upon expected achievement of the metrics specified in the grant, and is recognized in the Company’s condensed consolidated statement of operations using an accelerated attribution model over the requisite service period for each separately vesting portion of the award. No stock-based compensation expense is recorded for PSUs, unless it is determined to be probable that the related performance metrics will be met. Any PSUs that remain unvested at the end of the performance period will be forfeited. Forfeitures are accounted for as they occur.
Net Loss Per Share
The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method or the as-if converted method, as appropriate. For purposes of this calculation, stock options, restricted stock units, shares issuable pursuant to the employee stock purchase plan, and contingently issuable shares under the convertible senior notes are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.
3.    Joint Venture
In May 2018, the Company and an affiliate of SoftBank formed and capitalized Guardant Health AMEA, Inc., the Joint Venture, for the sale, marketing and distribution of the Company’s tests generally outside the Americas and Europe, and to accelerate commercialization of its products in Asia, the Middle East and Africa. Under the terms of the joint venture agreement, each party held an approximately 50% ownership interest in the Joint Venture and two seats on the board of the Joint Venture.
In June 2022, the Company purchased all of the shares of the Joint Venture, or the Joint Venture Acquisition, held by SoftBank and its affiliates in consideration for a cash payment of the aggregate purchase price of $177.8 million, which resulted in $99.8 million of fair value adjustments to the noncontrolling interest liability. In connection with the Joint Venture Acquisition, the Company also issued a tender offer to purchase the Joint Venture's Class B common stock issued and issuable upon exercise of vested Joint Venture's stock options held by the Joint Venture's employees.
Prior to the completion of the Joint Venture Acquisition, the Joint Venture was deemed to be a VIE, and the Company had been identified as the VIE’s primary beneficiary. As the primary beneficiary, the Company had consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances had been eliminated in consolidation. Upon completion of the Joint Venture Acquisition and the tender offer, Guardant Health AMEA, Inc. became the Company's wholly owned subsidiary.
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4.     Condensed Consolidated Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consist of the following:
September 30, 2023December 31, 2022
(unaudited)
(in thousands)
Machinery and equipment
$113,777 $95,764 
Leasehold improvements
102,957 99,781 
Computer hardware
32,606 29,744 
Construction in progress
4,958 20,598 
Furniture and fixtures
8,719 8,367 
Computer software
2,308 1,797 
Property and equipment, gross
$265,325 $256,051 
Less: accumulated depreciation
(117,654)(88,131)
Property and equipment, net
$147,671 $167,920 
Depreciation expense related to property and equipment was $10.3 million and $9.1 million for the three months ended September 30, 2023, and 2022, respectively, and $29.9 million and $23.9 million for the nine months ended September 30, 2023, and 2022, respectively.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
September 30, 2023December 31, 2022
(unaudited)
(in thousands)
Accounts payable$77,828 $68,911 
Accrued compensation62,676 55,788 
Operating lease liabilities
26,356 21,878 
Others
38,406 29,240 
Total accounts payable and accrued liabilities
$205,266 $175,817 
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, and accounts payable and accrued liabilities. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, net, and accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.
Fair value is defined as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
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Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:
September 30, 2023
Fair ValueLevel 1Level 2Level 3
(unaudited)
(in thousands)
Financial Assets:
Money market funds
$375,756 $375,756 $— $— 
Total cash equivalents
$375,756 $375,756 $— $— 
Commercial paper$124,469 $— $124,469 $— 
U.S. government debt securities
573,013 — 573,013 — 
Total short-term marketable debt securities
$697,482 $— $697,482 $— 
Long-term marketable equity securities
$102,804 $102,804 $— $— 
Total
$1,176,042 $478,560 $697,482 $— 
Financial Liabilities:
Contingent consideration
$6,660 $— $— $6,660 
Total
$6,660 $— $— $6,660 
December 31, 2022
Fair ValueLevel 1Level 2Level 3
(in thousands)
Financial Assets:
Money market funds
$3,104 $3,104 $— $— 
U.S. government debt securities
14,987 — 14,987 — 
Total cash equivalents
$18,091 $3,104 $14,987 $— 
U.S. government debt securities
$869,584 $— $869,584 $— 
Total short-term marketable debt securities
$869,584 $— $869,584 $— 
Long-term marketable equity securities
$18,291 $18,291 $— $— 
Total
$905,966 $21,395 $884,571 $— 
Financial Liabilities:
Contingent consideration
$6,430 $— $— $6,430 
Total
$6,430 $— $— $6,430 
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The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Commercial paper and U.S. government debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data and other observable inputs.
In July 2022, one of the Company's equity investees, Lunit Inc., or Lunit, completed its initial public offering, or IPO, subsequent to which, the Company started to account for the investment in Lunit at fair value on a recurring basis, and classified the investment as marketable equity securities within Level 1 of the fair value hierarchy as the investment is valued using the quoted market price. The Company is subject to a 2-year lock-up period from Lunit's IPO date, during which the Company shall not transfer Lunit's shares between accounts, establish or cancel pledges, sell, or withdraw such shares, without approval from the Korea Exchange. As of September 30, 2023 and December 31, 2022, the balance of the investment in Lunit was $102.8 million and $18.3 million, respectively, included in other assets, net on the Company's condensed consolidated balance sheets. In addition, the Company recorded $16.6 million and $84.5 million unrealized gains on the investment in Lunit for the three and nine months ended September 30, 2023, respectively, and recorded $13.2 million unrealized losses on the investment in Lunit for the three and nine months ended September 30, 2022, respectively, included in other income (expense), net on the Company's condensed consolidated statement of operations.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
Acquisition-related contingent consideration is measured at fair value on a quarterly basis and 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, 2023 and December 31, 2022, the Company's contingent consideration liability was $6.7 million and $6.4 million, respectively, of which $5.2 million and $4.9 million is considered long-term and was recorded within other long-term liabilities on the accompanying condensed consolidated balance sheets.
Prior to the completion of the Joint Venture Acquisition in June 2022, the fair value of the noncontrolling interest liability was considered to be a Level 3 measurement and was determined based on an annual internal rate of return of 20% on the initial amount of $41.0 million invested by SoftBank in May 2018, to the date of Company's exercising the call right in November 2021. The noncontrolling interest liability was fully paid by June 30, 2022 (see Note 3, Joint Venture).
The following table summarizes the activities for the Level 3 financial instruments:
Noncontrolling Interest Liability
Contingent Consideration
Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20222023202220232022
(unaudited)
(in thousands)
Fair value — beginning of period
$78,000 $6,440 $7,430 $6,430 $3,625 
Increase in fair value 99,785 220 390 230 4,195 
Settlement(177,785)— (1,500)— (1,500)
Fair value — end of period
$— $6,660 $6,320 $6,660 $6,320 
The Company considers the fair value of the Convertible Notes as of September 30, 2023, and December 31, 2022, 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 7, Debt, for additional information related to the fair value of the Convertible Notes.
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The following tables summarize the Company’s cash equivalents and marketable debt securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category:
September 30, 2023
Amortized CostGross Unrealized GainGross Unrealized LossEstimated Fair Value
(unaudited)
(in thousands)
Money market fund
$375,756 $— $— $375,756 
Commercial paper124,469 — — 124,469 
U.S. government debt securities
574,001 31 (1,019)573,013 
Total
$1,074,226 $31 $(1,019)$1,073,238 
December 31, 2022
Amortized CostGross Unrealized GainGross Unrealized LossEstimated Fair Value
(in thousands)
Money market fund
$3,104 $— $— $3,104 
U.S. government debt securities
901,342 8 (16,779)884,571 
Total
$904,446 $8 $(16,779)$887,675 
The following tables present the estimated fair values and gross unrealized losses of the Company's marketable debt securities that have been in a continuous unrealized loss position as of September 30, 2023 and December 31, 2022.
September 30, 2023
Less Than 12 Months12 Months or GreaterTotal
Estimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized Loss
(unaudited)
(in thousands)
U.S. government debt securities
$96,885 $(92)$161,618 $(927)$258,503 $(1,019)
Total
$96,885 $(92)$161,618 $(927)$258,503 $(1,019)
December 31, 2022
Less Than 12 Months12 Months or GreaterTotal
Estimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized LossEstimated Fair ValueGross Unrealized Loss
(in thousands)
U.S. government debt securities
$170,975 $(2,958)$685,754 $(13,821)$856,729 $(16,779)
Total
$170,975 $(2,958)$685,754 $(13,821)$856,729 $(16,779)
There have been no material realized gains or losses on marketable debt securities for the periods presented. The Company determined that it did have the ability and intent to hold all marketable debt 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 for the three and nine months ended September 30, 2023, and 2022, respectively.
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6.    Intangible Assets, Net and Goodwill
The following table presents details of purchased intangible assets as of September 30, 2023, and December 31, 2022:
September 30, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountRemaining Weighted-Average Useful Life
(unaudited)
(in thousands)(in years)
Intangible assets subject to amortization:
Acquired license$11,886 $(4,407)$7,479 7.0
Non-compete agreements and other covenant rights
5,100 (3,376)1,724 2.2
Acquired technology1,600 (1,133)467 0.6
Total intangible assets subject to amortization
18,586 (8,916)9,670 
Intangible assets not subject to amortization:
Goodwill3,290 — 3,290 
Total purchased intangible assets
$21,876 $(8,916)$12,960 
December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountRemaining Weighted-Average Useful Life
(in thousands)(in years)
Intangible assets subject to amortization:
Acquired license$11,886 $(3,579)$8,307 7.8
Non-compete agreements and other covenant rights
5,100 (2,747)2,353 2.9
Acquired technology1,600 (533)1,067 1.4
Total intangible assets subject to amortization
18,586 (6,859)11,727 
Intangible assets not subject to amortization:
Goodwill3,290 — 3,290 
Total purchased intangible assets
$21,876 $(6,859)$15,017 
Amortization of finite-lived intangible assets was $0.7 million and $0.7 million for the three months ended September 30, 2023, and 2022, respectively, and $2.1 million and $1.8 million for the nine months ended September 30, 2023, and 2022, respectively.
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The following table summarizes estimated future amortization expense of finite-lived intangible assets, net:
Year Ending December 31,
(unaudited)
(in thousands)
Remainder of 2023
$690 
20242,219 
20251,670 
20261,212 
20271,107 
2028 and thereafter
2,772 
Total$9,670 
7. Debt
Convertible Senior Notes
In November 2020, the Company issued $1.15 billion principal amount of its 0% Convertible Senior Notes due 2027, or the 2027 Notes. The 2027 Notes do not bear interest, and the principal amount of the Notes will not accrete. However, special interest and additional interest may accrue on the 2027 Notes at a rate per annum not exceeding 0.50% (subject to certain exceptions) upon the occurrence of certain events such as the failure to file certain reports to the Securities and Exchange Commission, or to remove certain restrictive legends from the Notes. The Notes will mature on November 15, 2027, unless repurchased, redeemed or converted earlier.
Before August 15, 2027, holders of the 2027 Notes will have the right to convert their 2027 Notes only under the following circumstances:
•during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on March 31, 2021, if the last reported sale price of the Company's common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, or the sale price condition;
•during the five consecutive business days immediately after any ten consecutive trading day period, or the measurement period, if the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Company's common stock on such trading day and the conversion rate on such trading day; or
•upon the occurrence of specified corporate events
From and after August 15, 2027, holders of the 2027 Notes may convert their 2027 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.
The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.
The initial conversion rate is 7.1523 shares of common stock per $1,000 principal amount of 2027 Notes, which represents an initial conversion price of approximately $139.82 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.
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The Company may not redeem the 2027 Notes at its option at any time before November 20, 2024. The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after November 20, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
If certain corporate events that constitute a “Fundamental Change” occur, then, subject to a limited exception for certain cash mergers, holders of Notes may require the Company to repurchase their 2027 Notes at a cash repurchase price equal to the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
Since the 2027 Notes were not convertible as of September 30, 2023 and December 31, 2022, the net carrying amount of the 2027 Notes was classified as a long-term liability.
The following table sets forth the net carrying amounts of the 2027 Notes as of September 30, 2023, and December 31, 2022:
September 30, 2023December 31, 2022
(unaudited)
(in thousands)
Liability component:
Principal$1,150,000 $1,150,000 
Less: debt issuance costs, net of amortization(10,678)(12,609)
Net carrying amount$1,139,322 $1,137,391 
The total estimated fair value of the 2027 Notes was $794.3 million and $717.5 million as of September 30, 2023, and December 31, 2022, 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 million for the three and nine months ended September 30, 2023 and 2022, respectively, which represented an effective interest rate of 0.2% and 0.2% for the three and nine months ended September 30, 2023, and 2022, respectively.
Note Hedges
To minimize the impact of potential economic dilution upon conversion of the 2027 Notes, the Company entered into convertible note hedge transactions, or the 2027 Note Hedges, with respect to its common stock concurrent with the issuance of the Notes. The 2027 Note Hedges cover, subject to customary adjustments, the number of shares of common stock initially underlying the Notes. The strike price of the 2027 Note Hedges will initially be approximately $182.60 per share, which represents a premium of 75% over the last reported sale price of the Company’s common stock of $104.34 per share on November 16, 2020, and is subject to certain adjustments under the terms of the 2027 Note Hedges.
The 2027 Note Hedges will expire upon maturity of the 2027 Notes. The 2027 Note Hedges are separate transactions and are not part of the terms of the 2027 Notes. Holders of the 2027 Notes will not have any rights with respect to the 2027 Note Hedges. The shares receivable related to the 2027 Note Hedges are excluded from the calculation of diluted earnings per share as they are anti-dilutive.
As these transactions meet certain accounting criteria, the 2027 Note Hedges are recorded in stockholders’ equity and are not accounted for as derivatives. The Company paid an aggregate amount of $90.0 million for the 2027 Note Hedges, which has been recorded as a reduction to additional paid-in capital and will not be remeasured.
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8. Leases
The Company has entered into various operating lease agreements for office space, data center, lab and warehouse use, with remaining terms of up to 10 years, some of which include one or more options to renew. As leases approach maturity, the Company considers various factors such as market conditions and the terms of any renewal options that may exist to determine whether it will renew the lease, as such, the Company does not include renewal options in its lease terms for calculating its lease liability, as the renewal options allow it to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options at the time of the lease commencement.
Operating lease expense was $7.4 million and $7.2 million for the three months ended September 30, 2023, and 2022, respectively, and $22.1 million and $21.4 million for the nine months ended September 30, 2023, and 2022, respectively, which includes both lease and non-lease components (primarily common area maintenance charges and property taxes).
September 30, 2023December 31, 2022
(unaudited)
Weighted-average remaining lease term (in years)
8.59.1
Weighted-average discount rate
3.89 %3.93 %
The following table summarizes the Company's future principal contractual obligations for operating lease commitments as of September 30, 2023:
Year Ending December 31,
(unaudited)
(in thousands)
Remainder of 2023
$8,632 
202434,158 
202533,195 
202628,148 
202724,479 
2028 and thereafter
125,157 
Total operating lease payments$253,769 
Less: imputed interest(34,736)
Total operating lease liabilities$219,033 
Finance leases are not material to the Company's condensed consolidated financial statements.
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.
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The Company and its affiliates are parties to the legal claims and proceedings described below. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If the Company is unsuccessful in defending, or if it determines to settle, any of these matters, it may be required to pay substantial sums, be subject to injunction and/or be forced to change how it operates its business, which could have a material adverse impact on its financial position or results of operations.
Unless otherwise stated, the Company is unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for the Company to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over a number of years. The Company reviews loss contingencies at least quarterly to determine whether the loss probability has changed and whether it can make a reasonable estimate of the possible loss or range of loss. When the Company determines that a loss from a claim is probable and reasonably estimable, it records a liability in the amount of its estimate for the ultimate loss. The Company also provides disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed its recorded liability.
Intellectual Property Disputes
In August 2021, TwinStrand Biosciences, Inc., or TwinStrand Biosciences, and the University of Washington filed a patent infringement suit in the United States District Court for the District of Delaware alleging that the Company infringes U.S. Patent Nos. 10,287,631; 10,689,699; 10,752,951; and 10,760,127. The Company answered the complaint in October 2021, denying TwinStrand Biosciences’ allegations and asserted counterclaims of invalidity, unenforceability due to inequitable conduct and infringement of four of the Company’s patents. Discovery in the case has concluded. In October 2023, the court dismissed with prejudice TwinStrand’s infringement claims related to U.S. Patent Nos. 10,689,699 and 10,752,95. The parties have filed summary judgment motions, which are still pending, and trial is scheduled to commence in November 2023.
On August 1, 2023, the Company publicly announced that it entered into a Collaboration and Settlement Agreement, or the Collaboration Agreement, with Illumina, Inc., or Illumina. Under the terms of the Collaboration Agreement, the parties have agreed to extend their long-standing commercial relationship by agreeing to collaborate on the sharing of specimen samples in order to advance cancer research, and by entering into a new long-term purchase and supply commitment. Furthermore, the parties agreed to dismiss with prejudice the March 2022 lawsuit filed by Illumina in the U.S. District Court for the District of Delaware, Illumina, Inc. v. Guardant Health, Inc. et al, Case No. 1:22-cv-00334-GBW-CJB, including any allegations related to the subject intellectual property.
False Advertising Dispute
In May 2021, the Company also filed a lawsuit against Natera, Inc., or Natera, in the United States District Court for the Northern District of California, wherein the Company alleged that Natera is misleading healthcare providers about the performance of the Company’s new oncology test, Guardant Reveal, by suggesting the test is inaccurate and/or insensitive, and inferior to Natera’s Signatera assay. The Company is seeking an injunction to prevent Natera from continuing to make false and misleading statements and to require Natera to take corrective actions. Natera has asserted counterclaims of false and misleading statements, false advertising, unlawful trade practices and unfair competition. The Company moved to dismiss Natera’s counterclaims, and in January 2022, the court granted in part and denied in part the Company's motion to dismiss. The Company and Natera have both moved for summary judgment on various claims, with the court granting in part non-dispositive motions brought by each party. Trial is scheduled to commence in March 2024.
Civil Investigative Demand
In January 2022, the Company received a Civil Investigative Demand, or CID, from the United States Attorney for the Northern District of California in connection with an investigation under the False Claims Act. The CID requests information and documents regarding billing of government-funded programs for the Company’s panel of genetic tests known as Guardant360. The Company is fully cooperating with the investigation. At this time, the Company is unable to predict the outcome of this investigation.
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10.    Common Stock
The Company’s common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors, or the Board of Directors. As of September 30, 2023, and December 31, 2022, no dividends on the Company's common stock had been declared by the Board of Directors.
The Company’s common stock has been reserved for the following potential future issuances:
September 30, 2023December 31, 2022
(unaudited)
Shares underlying outstanding stock options
3,701,3313,402,574
Shares underlying unvested restricted stock units
3,112,9753,687,888
Market-based restricted stock units2,260,7642,260,764
Performance-based restricted stock units424,177341,713
Shares available for issuance under the 2018 Incentive Award Plan8,764,2605,438,296
Shares available for issuance under the 2018 Employee Stock Purchase Plan1,845,7241,118,311
Shares available for issuance under the 2023 Employment Inducement Incentive Award Plan
5,000,000—
Total25,109,23116,249,546
Follow-on Public Offering
In May 2023, the Company completed a follow-on underwritten public offering, in which it issued and sold 14,375,000 shares of its common stock at a price of $28.00 per share, and received net proceeds of $381.4 million after deducting underwriting discounts and commissions and other offering costs of $21.1 million.
11.    Stock-Based Compensation
2023 Employment Inducement Incentive Award Plan
In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, under which the Company reserved 5,000,000 shares of its common stock to be used exclusively for grants of awards to its new employees as an inducement material to the employee’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2023 Plan was approved by the Board of Directors without stockholder approval in accordance with such rule. In addition, the Company will continue to grant equity incentive awards to its employees and non-employees under the 2018 Plan.
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Stock Option Activity
A summary of the Company’s stock option activity under the 2012 Plan, the 2018 Plan, and the 2023 Plan and related information is as follows:
Options Outstanding
Shares
Available for Grant 		Shares Subject to Options OutstandingWeighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
(unaudited)
(in thousands)
Balance as of January 1, 2023
5,438,2963,402,574$34.34 6.8$39,749 
2018 Plan annual increase(1)
3,689,000—
Shares authorized under the 2023 Plan5,000,000—
Granted(534,552)534,55234.55 
Exercised—(40,868)7.08 
Canceled194,190(194,927)65.89 
Restricted stock units granted
(724,469)—— 
Restricted stock units canceled
787,694—— 
Performance-based restricted stock units granted(126,041)—— 
Performance-based restricted stock units canceled40,142—— 
Balance as of September 30, 2023
13,764,2603,701,331$33.01 6.5$43,284 
Vested and Exercisable as of September 30, 2023
2,253,535$23.79 4.9$42,275 
(1)Effective as of January 1, 2023, 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 $0.2 million and $2.3 million for the three months ended September 30, 2023, and 2022, respectively, and $0.9 million and $11.5 million for the nine months ended September 30, 2023, and 2022, respectively.
The weighted-average grant date fair value of options granted was $24.42 and $33.66 per share for the three months ended September 30, 2023, and 2022, respectively, and $22.39 and $26.49 per share for the nine months ended September 30, 2023, and 2022, respectively.
Future stock-based compensation for unvested options as of September 30, 2023 was $38.9 million, which is expected to be recognized over a weighted-average period of 2.6 years.
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 OutstandingWeighted-Average Grant Date Fair Value
(unaudited)
Balance as of January 1, 2023
3,687,888$60.70 
Granted724,46932.38 
Vested and released(511,688)62.83 
Canceled(787,694)60.16 
Balance as of September 30, 2023
3,112,975$53.90 
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Future stock-based compensation for unvested restricted stock units as of September 30, 2023 was $135.2 million, which is expected to be recognized over a weighted-average period of 2.5 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 PSUs, under the 2018 Plan. The PSUs granted to employees consist of financial and/or operational metrics to be met over a performance period of approximately 0.3 to 4 years and an additional service period requirement of up to 2 years 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 0.3 to 4.5 years subject to meeting the respective performance metrics and service requirements.
In November 2020, and as part of these PSU programs, the Company granted PSUs consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met. As of September 30, 2023, these PSUs had a grant-date fair value of approximately $25.7 million, net of forfeitures, however no compensation expense for these PSUs has been recorded to-date since the achievement of the performance metrics was not determined to be probable as of September 30, 2023.
A summary of the Company’s PSU activity under the 2018 Plan and related information is as follows:
PSUs OutstandingWeighted-Average Grant Date Fair Value
(unaudited)
Balance as of January 1, 2023
341,713$110.64 
Granted126,04132.84 
Vested and released(3,435)32.86 
Canceled(40,142)94.56 
Balance as of September 30, 2023
424,177$89.67 
Stock-based compensation recorded for the PSUs was $0.8 million and $0.4 million for the three months ended September 30, 2023, and 2022, respectively, and $1.3 million and $1.0 million for the nine months ended September 30, 2023, and 2022, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of September 30, 2023 was $4.2 million, which is expected to be recognized over a weighted-average period of 1.9 years.
Market-based Restricted Stock Units
In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, or MSUs, under the 2018 Plan to each of the Company's Co-Chief Executive Officers, which is subject to the achievement of market-based share price goals established by the Board of Directors. The MSUs consist of three separate tranches and the vesting of each tranche is subject to the Company's common stock closing price being maintained at or above a predetermined share price goal for a period of 30 consecutive calendar days. The 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 control price goal, or when there is a qualifying termination or in the event of death or disability. Any MSUs that remain unvested at the end of the seven-year performance period will automatically be forfeited and terminated without further consideration. The following table presents additional information relating to each MSU award:
TranchePrice GoalNumber of RSUs
Tranche 1
$120 per share
565,192
Tranche 2
$150 per share
565,191
Tranche 3
$200 per share
565,191
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The grant date fair values of the MSUs were determined using a Monte Carlo valuation model for each tranche. The related stock-based compensation expense for each tranche was recognized based on an accelerated attribution method over the estimated derived service period. The derived service period was the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. The Monte Carlo valuation model used 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 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. As of September 30, 2023 and December 31, 2022, 2,260,764 shares of market-based restricted stock units, with a weighted-average grant date fair value of $65.20 per share, were outstanding under the 2018 Plan. No MSUs were granted, vested or canceled during the nine months ended September 30, 2023.
All three tranches of the MSUs were fully expensed as of June 30, 2022. Stock-based compensation for the MSUs was $16.1 million for the nine months ended September 30, 2022, which was recorded in general and administrative expenses on the Company's condensed consolidated statement of operations.
AMEA 2020 Equity Incentive Plan
In August 2020, the board of directors of the Joint Venture approved its 2020 Equity Incentive Plan, or the AMEA 2020 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.
In June 2022, in connection with the Joint Venture Acquisition, the Company issued a tender offer to purchase the Joint Venture's Class B common stock issued and issuable upon exercise of vested Joint Venture's stock options, at a price of $4.44 per share determined pursuant to an independent valuation. In July 2022, the Company settled the tender offer with the 39 grantees for a total amount of $13.7 million. In addition, in connection with the Joint Venture Acquisition, the unvested Joint Venture's stock options were cancelled and such grantees received replacement awards covering a number of shares of the Company's common stock. The replacement awards, valued at $4.1 million, are subject to the same vesting schedule that applied to the unvested Joint Venture's stock option immediately prior to the close of the Joint Venture Acquisition transaction, to be recognized over a weighted-average period of 2.2 years. The Company accounted for this as a modification which resulted in an immaterial incremental stock-based compensation expense. After the settlement of the tender offer in July 2022, the Company cancelled the AMEA 2020 Plan.
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,
2023202220232022
(unaudited)
(in thousands)
Cost of precision oncology testing
$1,092 $1,316 $3,470 $3,695 
Cost of development services and other436 — 1,387 — 
Research and development expense
8,491 7,044 25,390 18,503 
Sales and marketing expense
5,061 6,466 18,387 17,978 
General and administrative expense
6,739 5,813 17,805 30,806 
Total stock-based compensation expense
$21,819 $20,639 $66,439 $70,982 
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Valuation of Stock Options
The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(unaudited)
Expected term (in years)
5.97
5.94 – 6.02
5.50 – 6.10
5.50 – 6.10
Expected volatility
69.4%
66.8% – 67.3%
69.4% – 70.5%
63.3% – 67.3%
Risk-free interest rate
4.2%
2.9%
3.4% – 4.2%
1.9% – 3.4%
Expected dividend yield
—%
—%
—%
—%
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, 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:
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.
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.
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 does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero.
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, 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 and March 2, 2023, an additional 942,614 and 1,026,194 shares of common stock became available for issuance under the 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.
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Shares of common stock purchased under the ESPP were nil for the three months ended September 30, 2023, and 2022, respectively, and 298,781 and 188,110 for the nine months ended September 30, 2023, and 2022, respectively. The total compensation expense related to the ESPP was $0.8 million and $0.9 million for the three months ended September 30, 2023, and 2022, respectively, and $3.8 million and $3.2 million for the nine months ended September 30, 2023, and 2022, 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 stock purchase rights were granted for the three months ended September 30, 2023, and 2022. 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 assumptions:
Nine Months Ended September 30,
20232022
(unaudited)
Expected term (in years)
0.50
0.50
Expected volatility
76.6%
92.0%
Risk-free interest rate
5.2%
1.5%
Expected dividend yield
—%
—%
As of September 30, 2023, the unrecognized stock-based compensation expense related to the ESPP was $0.4 million, which is expected to be recognized over the remaining term of the offering period of 0.1 years.
12.    Net Loss Per Share
The following table sets forth the computation of the basic and diluted net loss per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(unaudited)
(in thousands, except per share data)
Net loss, basic and diluted$(86,102)$(161,994)$(292,406)$(514,654)
Net loss per share, basic and diluted$(0.73)$(1.58)$(2.66)$(5.04)
Weighted-average shares used in computing net loss per share, basic and diluted117,736 102,289 109,791 102,065 
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Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share, 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 for the periods presented as they had an anti-dilutive effect:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(unaudited)
(in thousands)
Stock options issued and outstanding (1)
3,6622,8613,4852,662
Restricted stock units3,2192,7893,3822,009
MSUs2,2612,2612,2612,261
PSUs438363379356
ESPP obligation132118191104
Convertible senior notes8,2258,2258,2258,225
Total17,93716,61717,92315,617
(1)    Excludes stock options of 483,693 shares of the Joint Venture's Class B common stock granted under the AMEA 2020 Plan before the settlement of the tender offer in July 2022.
13.    Income Taxes
The income tax expense for the three and nine months ended September 30, 2023 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.
The income tax expense for the three and nine months ended September 30, 2023, and 2022, relates primarily to state minimum income tax and income tax on the Company’s earnings in foreign jurisdictions.
14.    Segment and Geographic Information
The Company operates as one 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,
2023202220232022
(unaudited)
(in thousands)
United States$135,735 $111,096 $383,908 $302,803 
International (1)
7,295 6,308 24,986 19,844 
Total revenue
$143,030 $117,404 $408,894 $322,647 
(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, 2023, and 2022, respectively.
As of September 30, 2023, and December 31, 2022, 98% and 99%, respectively, of the Company’s long-lived assets and right-of-use assets are located in the United States.
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15.    Related Party Transactions
As discussed in Note 3, Joint Venture, in May 2018, 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. Prior to the completion of the Joint Venture Acquisition in June 2022, the Company had consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances had been eliminated in consolidation.
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, 2022 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 the use of our proprietary tests, vast data sets and advanced analytics. We believe our tests can transform cancer care by unlocking insights that will help patients at all stages of the disease, including at its earliest stages, when it’s most treatable. For patients with advanced-stage cancer, we have commercially launched Guardant360 LDT and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. We have also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging. In addition, we have developed Guardant Galaxy suite of advanced analytical technologies to enhance the performance and clinical utility of our portfolio of cancer tests, and to power the next generation of biomarker and drug discovery.
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from our tests, we have also developed our GuardantINFORM platform to help biopharmaceutical companies accelerate precision oncology drug development through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.
For early cancer detection, we have launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In December 2022, we announced that the ECLIPSE study, an over 40,000 patient registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. In addition, in March 2023, we submitted a premarket approval application for our Shield blood test to the FDA. We also expect to expand into lung and multi-cancer screening with our investigational, next-generation Shield assay.
We currently perform our tests in our laboratories located in Redwood City, California, and San Diego, 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 CAP-accredited, CLIA-certified and licensed in California. In addition, our Palo Alto, California laboratory is currently operated as a center for our research and technology development. We have also received CAP accreditation, and In Vitro Diagnostic, or IVD, sample processing approval from Japan's Ministry of Health, Labour and Welfare, or the MHLW, for our laboratory in Japan.

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We generated total revenue of $143.0 million and $117.4 million for the three months ended September 30, 2023, and 2022, respectively, and $408.9 million and $322.6 million for the nine months ended September 30, 2023, and 2022, respectively. We also incurred net losses of $86.1 million and $162.0 million for the three months ended September 30, 2023, and 2022, respectively, and $292.4 million and $514.7 million for the nine months ended September 30, 2023, and 2022, 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. In May 2023, we completed a follow-on underwritten public offering, in which we issued and sold 14,375,000 shares of our common stock at a price of $28.00 per share and received net proceeds of $381.4 million after deducting underwriting discounts and commissions and other offering costs of $21.1 million. As of September 30, 2023, we had cash, cash equivalents and marketable debt securities of approximately $1.2 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 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 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 45% and 46% of our precision oncology revenue from clinical customers during the three months ended September 30, 2023, and 2022, respectively, and approximately 44% and 45% of our precision oncology revenue from clinical customers for the nine months ended September 30, 2023, and 2022, 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 are 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 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 Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021. Effective January 1, 2022, Medicare has started to reimburse
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Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, 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. In July 2022, Palmetto GBA conveyed coverage for our Guardant Reveal test for fee-for-service Medicare patients in the United States with stage II or III colorectal cancer whose testing is initiated within three months following curative intent therapy, with an effective date of December 2021. In April 2023, Palmetto GBA conveyed coverage for our Guardant360 Response test for fee-for-service Medicare patients in the U.S. with metastatic or inoperable solid tumors who are on an immune checkpoint inhibitor therapy, tested four to ten weeks from therapy initiation. In July 2023, the MHLW granted national reimbursement approval for our Guardant360 CDx test for patients with advanced or metastatic solid tumor cancers in Japan. 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 studies globally and continue to have opportunities to offer our platform to such customers for development services, including companion diagnostic development, novel target discovery and validation, as well as clinical study enrollment. For example, our tests are being developed as companion diagnostics under collaborations with biopharmaceutical companies.
•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 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. In addition, with respect to Guardant Reveal, in December 2022, we entered into a partnership with Susan G. Komen®, the world’s leading breast cancer organization, to bring the patient perspective to the development of clinical studies that help identify early-stage breast cancer patients who are at high risk of disease recurrence and may benefit from additional monitoring or therapy. With respect to Shield, in December 2022, we announced that the ECLIPSE study, an over 40,000 patient registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. The test demonstrated 83% sensitivity in detecting individuals with colorectal cancer. Specificity was 90% in both individuals without advanced neoplasia and in those who had a negative colonoscopy result. These results exceed the performance criteria set forth by the CMS for reimbursement. This test also demonstrated 13% sensitivity in detecting advanced adenomas. Based on these study results, in March 2023, we submitted a premarket approval application for our Shield blood test to the FDA. In addition, to evaluate the performance of our investigational, next-generation Shield assay in detecting lung cancer in high-risk individuals ages 50-80, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study. 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, direct contracts with hospitals or partnerships with research organizations.
In May 2018, we formed and capitalized Guardant Health AMEA, Inc., with SoftBank, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe, and to accelerate commercialization of our products in Asia, the Middle East and Africa. In June 2022, we purchased all of the shares held by SoftBank and its affiliates, and upon completion of the transaction, we obtained full control over operations of Guardant Health AMEA, Inc. throughout the Asia, Middle East and Africa region.
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In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our digital sequencing platform became available at the VHIO testing facility in Spain. In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, or Royal Marsden, a premier cancer center within the United Kingdom for patient care, research and teaching of all types of cancer, and in April 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Royal Marsden testing facility in the United Kingdom.
In June 2022, we signed a strategic partnership agreement with Adicon Holdings Limited, a leading independent clinical laboratory company based in China, to offer our industry-leading comprehensive genomic profiling tests to biopharmaceutical companies conducting clinical studies in China. We expect the partnership to help biopharmaceutical companies bring the next generation of cancer therapies to patients in the region.
The success of our international expansion strategy depends on a number of factors, including the internal and external constraints placed on our international laboratory partners and biopharmaceutical companies in the context of broader global, regional and U.S. economic and geopolitical conditions. For example, deterioration in the bilateral relationship between the United States and China may impact international trade, government spending, regional stability and macroeconomic conditions. The impact of these potential developments, including any resulting sanctions, export controls or other restrictive actions that may be imposed against governmental or other entities in, for example, China, may contribute to disruption of our international partnerships and instability and volatility in the global markets, which in turn could adversely impact our operations and weaken our financial results.
•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.
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, 2022, and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q, for more information.
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, 2023, 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 also submit claims to Medicare for reimbursement for our Guardant360 CDx, Guardant360 LDT, Guardant360 TissueNext, Guardant Reveal and Guardant360 Response clinical testing performed for qualifying patients. Revenue from clinical tests for patients covered by Medicare represented approximately 45% and 46% of our precision oncology revenue from clinical customers during the three months ended September 30, 2023, and 2022, respectively, and 44% and 45% of our precision oncology revenue from clinical customers during the nine months ended September 30, 2023, and 2022, respectively.
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Development services and other. Development services revenue primarily represents services that we provide to biopharmaceutical companies, large medical institutions and international laboratory partners. We collaborate with biopharmaceutical companies in the development and clinical studies of new drugs. As part of these collaborations, we provide services related to regulatory filings to support companion diagnostic device submissions for our 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 other development services, including clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. Other revenue includes amounts derived from licensing our technologies, kit fulfillment and screening services.
Costs and operating expenses
Cost of precision oncology testing. Cost of precision oncology testing generally consists of cost of materials, including inventory write-downs; cost of labor, including employee benefits, bonus, and stock-based compensation; equipment and infrastructure expenses associated with processing test samples, such as sample accessioning, library preparation, sequencing, and quality control analyses; freight; curation of test results for physicians; phlebotomy; and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, 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. While we do not believe the technologies underlying the third-party 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 biopharmaceutical customers, and costs associated with our partnership agreements and screening services, which comprise of 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 reported as cost of revenue. Cost of development services and other will vary depending on the nature, timing and scope of customer projects.
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 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 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 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.
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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 overhead expenses. In addition, our general and administrative expenses also include severance costs related to workforce reduction. We expect that our general and administrative expenses will continue to increase as we incur additional costs to support the growth of our 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 debt 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, fair value adjustments of marketable equity securities, impairment of non-marketable equity securities and other related assets, and non-recurring payments due and received in relation to the settlement of license and patent disputes. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Results of operations
The following 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,
2023202220232022
(unaudited)
(in thousands)
Revenue:
Precision oncology testing$133,423 $102,054 $372,060 $278,252 
Development services and other9,607 15,350 36,834 44,395 
Total revenue
143,030 117,404 408,894 322,647 
Costs and operating expenses:
Cost of precision oncology testing(1)
53,648 39,434 148,111 104,493 
Cost of development services and other(1)
3,966 1,062 16,424 4,711 
Research and development expense(1)
93,851 100,017 277,338 267,229 
Sales and marketing expense(1)
68,934 80,370 216,100 218,405 
General and administrative expense(1)
36,174 41,121 118,135 126,068 
Total costs and operating expenses
256,573 262,004 776,108 720,906 
Loss from operations
(113,543)(144,600)(367,214)(398,259)
Interest income11,690 1,754 21,477 3,919 
Interest expense(644)(644)(1,933)(1,933)
Other income (expense), net16,885 (18,389)56,490 (18,059)
Fair value adjustments of noncontrolling interest liability— — — (99,785)
Loss before provision for income taxes
(85,612)(161,879)(291,180)(514,117)
Provision for income taxes
490 115 1,226 537 
Net loss
$(86,102)$(161,994)$(292,406)$(514,654)
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(1)Amounts include stock-based compensation expense as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(unaudited)
(in thousands)
Cost of precision oncology testing$1,092 $1,316 $3,470 $3,695 
Cost of development services and other436 — 1,387 — 
Research and development expense8,491 7,044 25,390 18,503 
Sales and marketing expense5,061 6,466 18,387 17,978 
General and administrative expense6,739 5,813 17,805 30,806 
Total stock-based compensation expense
$21,819 $20,639 $66,439 $70,982 
In November 2020, we granted restricted stock units with certain performance metrics, or PSUs, consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met. As of September 30, 2023, these PSUs had a grant-date fair value of approximately $25.7 million, net of forfeitures, however no compensation expense for these PSUs has been recorded to-date since the achievement of the performance metrics was not determined to be probable as of September 30, 2023. At each reporting date, we will continue to assess the likelihood of the performance criteria being met and will record a cumulative catch-up adjustment should the achievement of the performance metrics be determined to be probable. For example, had the achievement of the performance metrics been determined to be probable as of September 30, 2023, we would have recorded a total charge of $16.6 million, of which $1.6 million would have been recorded to cost of development services and other, and $6.2 million, $5.3 million and $3.5 million would have been recorded as components of research and development expense, sales and marketing expense, and general and administrative expense, respectively, in the condensed consolidated statements of operations for the three months ended September 30, 2023. In addition, any of these PSUs that remain unvested at the end of the performance period would be forfeited.
Comparison of the Three Months Ended September 30, 2023 and 2022
Revenue
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Precision oncology testing
$133,423 $102,054 $31,369 31 %
Development services and other
9,607 15,350 (5,743)(37)%
Total revenue
$143,030 $117,404 $25,626 22 %
Total revenue was $143.0 million for the three months ended September 30, 2023, compared to $117.4 million for the three months ended September 30, 2022, an increase of $25.6 million, or 22%.
Precision oncology testing revenue increased to $133.4 million for the three months ended September 30, 2023, from $102.1 million for the three months ended September 30, 2022, an increase of $31.4 million, or 31%.
Precision oncology revenue from tests for clinical customers was $103.9 million for the three months ended September 30, 2023, up 34% from $77.8 million for the three months ended September 30, 2022. This increase in clinical testing revenue was driven primarily by an increase in sample volume. Total tests for clinical customers increased to approximately 43,900 for the three months ended September 30, 2023, from approximately 32,400 for the three months ended September 30, 2022. In addition, our clinical testing revenue for the three months ended September 30, 2023 includes a payment of $3.6 million from Medicare related to a successful appeal for claims dated between 2018 and 2020.
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Precision oncology revenue from tests for biopharmaceutical customers was $29.5 million for the three months ended September 30, 2023, up 22% from $24.2 million for the three months ended September 30, 2022. This increase in revenue was due to an increase in sample volume and an increase in average selling price which was primarily resulted from the change in product mix. Total tests for biopharmaceutical customers increased to approximately 7,500 for the three months ended September 30, 2023, from approximately 6,750 for the three months ended September 30, 2022.
Development services and other revenue decreased to $9.6 million for the three months ended September 30, 2023, from $15.4 million for the three months ended September 30, 2022, a decrease of $5.7 million. This decrease in development services and other revenue was primarily due to the timing and amount of milestones related to our partnership agreements and companion diagnostics collaboration projects with biopharmaceutical customers, as well as a reduction in royalty revenue during the three months ended September 30, 2023.
Cost of Revenue
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Cost of precision oncology testing$53,648 $39,434 $14,214 36 %
Cost of development services and other3,966 1,062 2,904 273 %
Total cost of revenue $57,614 $40,496 $17,118 42 %
Total cost of revenue was $57.6 million for the three months ended September 30, 2023, compared to $40.5 million for the three months ended September 30, 2022, an increase of $17.1 million, or 42%.
Cost of precision oncology testing was $53.6 million for the three months ended September 30, 2023, compared to $39.4 million for the three months ended September 30, 2022, an increase of $14.2 million, or 36%. This increase in cost of precision oncology testing was primarily attributable to an increase in sample volume, resulting in a $7.4 million increase in material costs, and a $5.2 million increase in production labor and overhead costs.
Cost of development services and other was $4.0 million for the three months ended September 30, 2023, compared to $1.1 million for the three months ended September 30, 2022, an increase of $2.9 million. This increase in cost of development services and other was primarily due to costs associated with providing screening testing services during the three months ended September 30, 2023.
Operating Expenses
Research and development expense
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Research and development
$93,851 $100,017 $(6,166)(6)%
Research and development expenses were $93.9 million for the three months ended September 30, 2023, compared to $100.0 million for the three months ended September 30, 2022, a decrease of $6.2 million, or 6%. This decrease was primarily due to a decrease of $6.1 million in facility and information technology infrastructure costs, a decrease of $2.0 million in material costs, and a decrease of $1.3 million in personnel costs, partially offset by an increase of $2.1 million in office and administrative costs.
Sales and marketing expense
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Sales and marketing
$68,934 $80,370 $(11,436)(14)%
43
Selling and marketing expenses were $68.9 million for the three months ended September 30, 2023, compared to $80.4 million for the three months ended September 30, 2022, a decrease of $11.4 million, or 14%. This decrease was primarily due to a decrease of $2.7 million in personnel costs, a decrease of $2.2 million in marketing activity related costs, and a decrease of $2.0 million in facility and information technology infrastructure costs.
General and administrative expense
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
General and administrative
$36,174 $41,121 $(4,947)(12)%
General and administrative expenses were $36.2 million for the three months ended September 30, 2023, compared to $41.1 million for the three months ended September 30, 2022, a decrease of $4.9 million, or 12%. This decrease was primarily due to a decrease of $4.4 million in professional service expenses related to outside legal, accounting, consulting and IT services.
Interest income
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Interest income
$11,690 $1,754 $9,936 566 %
Interest income was $11.7 million for the three months ended September 30, 2023, compared to $1.8 million for the three months ended September 30, 2022, an increase of $9.9 million, primarily attributable to higher interest rates.
Interest expense
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Interest expense
$(644)$(644)$— — %
Interest expense was primarily attributable to the amortization of debt issuance costs related to our convertible senior notes issued in November 2020, for the three months ended September 30, 2023, and 2022.
Other income (expense), net
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Other income (expense), net
$16,885 $(18,389)$35,274 *
*    Not meaningful
Other income (expense), net was a $16.9 million income for the three months ended September 30, 2023, primarily attributable to $16.6 million of unrealized gains recorded for our marketable equity security investment in Lunit, Inc. during the period. Other income (expense), net was a $18.4 million expense for the three months ended September 30, 2022, primarily due to $13.2 million of unrealized losses recorded for our marketable equity security investment in Lunit, Inc., and $5.3 million of impairment recorded for our non-marketable security investments during the period.
Provision for income taxes
44
Three Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Provision for income taxes
$490 $115 $375 326 %
*    Not meaningful
Provision for income taxes was immaterial for the three months ended September 30, 2023, and 2022.
Comparison of the Nine Months Ended September 30, 2023 and 2022
Revenue
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Precision oncology testing
$372,060 $278,252 $93,808 34 %
Development services and other
36,834 44,395 (7,561)(17)%
Total revenue
$408,894 $322,647 $86,247 27 %
Total revenue was $408.9 million for the nine months ended September 30, 2023, compared to $322.6 million for the nine months ended September 30, 2022, an increase of $86.2 million, or 27%.
Precision oncology testing revenue increased to $372.1 million for the nine months ended September 30, 2023, from $278.3 million for the nine months ended September 30, 2022, an increase of $93.8 million, or 34%.
Precision oncology revenue from tests for clinical customers was $295.7 million for the nine months ended September 30, 2023, up 38% from $214.3 million for the nine months ended September 30, 2022. This increase in clinical testing revenue was driven primarily by an increase in sample volume. Total tests for clinical customers increased to approximately 126,500 for the nine months ended September 30, 2023, from approximately 88,800 for the nine months ended September 30, 2022. In addition, our clinical testing revenue for the nine months ended September 30, 2023 includes a payment of $3.6 million from Medicare related to a successful appeal for claims dated between 2018 and 2020.
Precision oncology revenue from tests for biopharmaceutical customers was $76.4 million for the nine months ended September 30, 2023, up 20% from $63.9 million for the nine months ended September 30, 2022. This increase in revenue was primarily due to an increase in sample volume. Total tests for biopharmaceutical customers increased to approximately 20,350 for the nine months ended September 30, 2023, from approximately 17,850 for the nine months ended September 30, 2022.
Development services and other revenue decreased to $36.8 million for the nine months ended September 30, 2023, from $44.4 million for the nine months ended September 30, 2022, a decrease of $7.6 million. This decrease in development services and other revenue was primarily due to the timing and amount of milestones related to our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers and a reduction in royalty revenue, partially offset by revenue increase from our partnership agreements during the nine months ended September 30, 2023.

Cost of Revenue
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(dollars in thousands)
Cost of precision oncology testing$148,111 $104,493 $43,618 42 %
Cost of development services and other16,424 4,711 11,713 249 %
Total cost of revenue$164,535 $109,204 $55,331 51 %
45
Total cost of revenue was $164.5 million for the nine months ended September 30, 2023, compared to $109.2 million for the nine months ended September 30, 2022, an increase of $55.3 million, or 51%.
Cost of precision oncology testing was $148.1 million for the nine months ended September 30, 2023, compared to $104.5 million for the nine months ended September 30, 2022, an increase of $43.6 million, or 42%. This increase in cost of precision oncology testing was primarily attributable to an increase in sample volume, resulting in a $24.0 million increase in material costs, a $15.2 million increase in production labor and overhead costs, and a $3.8 million increase in other costs, including costs related to collection kits, freight and professional services.
Cost of development services and other was $16.4 million for the nine months ended September 30, 2023, compared to $4.7 million for the nine months ended September 30, 2022, an increase of $11.7 million. This increase in cost of development services and other was primarily due to costs associated with providing screening testing services and our partnership agreements, partially offset by costs associated with our companion diagnostics collaboration projects with biopharmaceutical customers during the nine months ended September 30, 2023.
Operating Expenses
Research and development expense
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Research and development
$277,338 $267,229 $10,109 4 %
Research and development expenses were $277.3 million for the nine months ended September 30, 2023, compared to $267.2 million for the nine months ended September 30, 2022, an increase of $10.1 million, or 4%. This increase in research and development expense was primarily related to continued investment in the development of our technologies and products, and our clinical studies, resulting in an increase of $14.0 million in outside service fees, an increase of $6.9 million in stock-based compensation, an increase of $5.0 million in office and administrative costs, and an increase of $2.4 million in depreciation and amortization, partially offset by a decrease of $9.0 million in facility and information technology infrastructure costs, and a decrease of $8.6 million in material costs.
Sales and marketing expense
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Sales and marketing
$216,100 $218,405 $(2,305)(1)%
Selling and marketing expenses were $216.1 million for the nine months ended September 30, 2023, compared to $218.4 million for the nine months ended September 30, 2022, a decrease of $2.3 million, or 1%. This decrease was primarily due to a decrease of $3.7 million in marketing activity related costs, and a decrease of $2.2 million in facility and information technology infrastructure costs, partially offset by an increase of $3.2 million in travel and accommodation costs.
46
General and administrative expense
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
General and administrative
$118,135 $126,068 $(7,933)(6)%
General and administrative expenses were $118.1 million for the nine months ended September 30, 2023, compared to $126.1 million for the nine months ended September 30, 2022, a decrease of $7.9 million, or 6%. This decrease was primarily due to a decrease of $13.0 million in stock-based compensation, of which $16.1 million decrease was related to the market-based restricted stock units issued to our Co-Chief Executive Officers which were fully expensed as of June 30, 2022, and $2.3 million decrease was related to forfeitures, respectively, a decrease of $4.0 million in acquisition related contingent consideration, and a decrease of $2.1 million in facility and information technology infrastructure costs, partially offset by an increase of $7.5 million in severance costs related to a workforce reduction incurred in the first quarter of 2023, an increase of $3.4 million in personnel cost in line with our business expansion, and an increase of $3.0 million in other legal expenses.
Interest income
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Interest income
$21,477 $3,919 $17,558 448 %
Interest income was $21.5 million for the nine months ended September 30, 2023, compared to $3.9 million for the nine months ended September 30, 2022, an increase of $17.6 million, primarily attributable to higher interest rates.
Interest expense
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Interest expense
$(1,933)$(1,933)$— — %
Interest expense was primarily attributable to the amortization of debt issuance costs related to our convertible senior notes issued in November 2020, for the nine months ended September 30, 2023, and 2022.
Other income (expense), net
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Other income (expense), net
$56,490 $(18,059)$74,549 *
*    Not meaningful
Other income (expense), net was a $56.5 million income for the nine months ended September 30, 2023, primarily attributable to $84.5 million of unrealized gains recorded for our marketable equity security investment in Lunit, Inc., partially offset by $29.1 million of impairment recorded for our non-marketable equity security investments and other related assets during the period. Other income (expense), net was a $18.1 million expense for the nine months ended September 30, 2022, primarily due to $13.2 million of unrealized losses recorded for our marketable equity security investment in Lunit, Inc., and $5.3 million of impairment recorded for our non-marketable security investments during the period.
47
Fair value adjustments of noncontrolling interest liability
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Fair value adjustments of noncontrolling interest liability
$— $(99,785)$99,785 (100)%
Fair value adjustments of noncontrolling interest liability for the nine months ended September 30, 2022 was made as a result of the Joint Venture Acquisition completed in June 2022.
Provision for income taxes
Nine Months Ended September 30,
Change
20232022
$
%
(unaudited)
(in thousands)
Provision for income taxes
$1,226 $537 $689 128 %
Provision for income taxes was immaterial for the nine months ended September 30, 2023, and 2022.
Liquidity and capital resources
We have incurred losses and negative cash flows from operations since our inception, and as of September 30, 2023, we had an accumulated deficit of $2.0 billion. We expect to incur additional operating losses in the near future and our operating expenses will increase as we continue to invest in clinical 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, 2023, we had cash and cash equivalents of $457.3 million and marketable debt securities of $697.5 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. Additionally, we have investments held in marketable debt securities consisting of United States treasury securities and commercial paper that can be immediately liquid.
Based on our current business plan, we believe our current cash, cash equivalents and marketable debt 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 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 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 liabilities, which could impact our working capital balances.
If our available cash, cash equivalents and marketable debt securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements 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 this Quarterly Report on Form 10-Q and in our Form 10-K for the year ended December 31, 2022, 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.
48
Cash flows
The following table summarizes our cash flows for the periods presented:
Nine Months Ended September 30,
20232022
(unaudited)
(in thousands)
Net cash used in operating activities$(246,247)$(218,714)
Net cash provided by investing activities$176,796 $79,189 
Net cash provided by (used in) financing activities$386,807 $(191,411)
Operating activities
Cash used in operating activities during the nine months ended September 30, 2023, was $246.2 million, which resulted from a net loss of $292.4 million, and cash effect of net change in our operating assets and liabilities of $10.3 million, partially offset by non-cash charges of $56.5 million. Non-cash charges primarily consisted of $66.4 million of stock-based compensation, $32.0 million of depreciation and amortization, $29.1 million of impairment on non-marketable equity security investments and other related assets, and $22.1 million of operating lease costs, partially offset by $84.5 million of unrealized gains on marketable equity security investment in Lunit, inc., and $10.9 million of amortization of discount on marketable debt securities. The cash effect of net change in our operating assets and liabilities was primarily the result of a $25.4 million increase in inventory, net, due to forecasted higher testing volumes, and a $22.7 million payment of operating lease liabilities net of receipt of tenant improvement allowance, partially offset by a $26.6 million increase in accounts payable and accrued liabilities, primarily due to increased purchases of goods and services, a $8.4 million decrease in accounts receivable, net, and a $3.2 million increase in deferred revenue.
Cash used in operating activities during the nine months ended September 30, 2022 was $218.7 million, which resulted from a net loss of $514.7 million, partially offset by non-cash charges of $246.0 million and cash effect of net change in our operating assets and liabilities of $50.0 million. Non-cash charges primarily consisted of $99.8 million of fair value adjustments of noncontrolling interest liability in connection with the Joint Venture Acquisition, $71.0 million of stock-based compensation, $25.8 million of depreciation and amortization, $21.4 million of operating lease costs, $13.2 million of unrealized losses on marketable equity security investment in Lunit, inc., $5.3 million of impairment on non-marketable equity security investments, $4.2 million of revaluation adjustments to acquisition related contingent consideration, and $3.4 million of amortization of premium on marketable debt securities. The cash effect of net change in our operating assets and liabilities was primarily the result of a $46.7 million increase in accounts payable and accrued liabilities, primarily due to increased purchases of goods and services and increased personnel, a $28.4 million decrease in prepaid expenses and other current assets, net, primarily driven by a $25.0 million one-time payment pursuant to a settlement and license agreement entered into in December 2021, a $11.4 million decrease in accounts receivable, a $4.8 million decrease in other assets, net, and a $4.1 million increase in deferred revenue, partially offset by a $32.4 million increase in inventory, net, due to forecasted higher testing volumes, and increased inventory level to offset potential disruption in supply chain, and a $13.0 million payment of operating lease liabilities net of receipt of tenant improvement allowance.
Investing activities    
Cash provided by investing activities during the nine months ended September 30, 2023, was $176.8 million, which resulted primarily from maturities of marketable debt securities of $828.7 million, partially offset by purchases of marketable debt securities of $629.9 million, purchases of property and equipment of $16.4 million, and purchases of non-marketable equity securities and other related assets of $5.6 million.
Cash provided by investing activities during the nine months ended September 30, 2022, was $79.2 million, which resulted primarily from maturities of marketable debt securities of $398.0 million, partially offset by purchases of marketable debt securities of $238.6 million, purchases of property and equipment of $67.5 million, and purchases of non-marketable equity securities and other related assets of $12.8 million.
49
Financing activities
Cash provided by financing activities during the nine months ended September 30, 2023, was $386.8 million, which was primarily attributable to gross proceeds from the follow-on public offering of $402.5 million, and proceeds from issuances of common stock under our employee stock purchase plan of $6.7 million, partially offset by payment of offering costs related to the follow-on public offering of $20.5 million, and taxes paid related to net share settlement of restricted stock units of $8.1 million.
Cash used in financing activities during the nine months ended September 30, 2022, was $191.4 million, which was primarily attributable to consideration payment for the Joint Venture Acquisition of $177.8 million, payment for the tender offer in connection with the Joint Venture Acquisition and acquisition related costs of $14.2 million, and taxes paid related to net share settlement of restricted stock units of $6.5 million, partially offset by proceeds from issuances of common stock under our employee stock purchase plan of $5.7 million.
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, 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, 2022. During the three and nine months ended September 30, 2023, there were no material changes to our critical accounting policies from those discussed previously.
Recent accounting pronouncements
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 debt securities and our indebtedness. As of September 30, 2023, we had cash and cash equivalents of $457.3 million held primarily in cash deposits and money market funds. Our marketable debt securities are held in U.S. government debt securities and commercial paper. As of September 30, 2023, we had short-term marketable debt securities of $697.5 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, 2023, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $0.9 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 $0.9 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.
50

Foreign currency risk
The majority of our revenue is generated in the United States. Through September 30, 2023, 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, 2023, 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.
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, or Exchange Act) as of September 30, 2023, 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.
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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Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information under the caption “Commitments and Contingencies – Legal Proceedings” in Note 9 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, 2022, filed with the SEC on February 23, 2023. 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 third quarter of fiscal 2023, there were no material changes to our previously disclosed risk factors.
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.
52

Item 6. Exhibits.
Exhibit NumberDescriptionFormFile No.ExhibitFiling DateFiled/Furnished Herewith
3.18-K001-386833.110/9/2018
3.28-K001-386833.210/9/2018
10.1#*
10.2#*
31.1*
31.2*
31.3*
32.1**
32.2**
32.3**
101.INSInline 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
*
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)*
___________________________
*    Filed herewith.
**    Furnished herewith.
#    Indicates management contract or compensatory plan.

53
Table of Contents
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 6, 2023By:/s/ Helmy Eltoukhy
Name:
Helmy Eltoukhy
Title:
Co-Chief Executive Officer
(Principal Executive Officer)
Dated:November 6, 2023By:/s/ AmirAli Talasaz
Name:
AmirAli Talasaz
Title:
Co-Chief Executive Officer
(Principal Executive Officer)
Dated:November 6, 2023By:/s/ Michael Bell
Name:Michael Bell
Title:Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)
54

GUARDANT HEALTH, INC.
2023 Employment Inducement Incentive Award Plan
(Effective as of August 2, 2023)
1.Purpose.
The Plan’s purpose is to enhance the Company’s ability to attract and retain Eligible Individuals who are expected to make important contributions to the Company by providing these individuals with equity ownership opportunities. Capitalized terms used in the Plan are defined in Section 11.
2.Eligibility.
Eligible Individuals are eligible to be granted Awards under the Plan, subject to the limitations described herein. Only Eligible Individuals may receive Awards under the Plan.
3.Administration and Delegation.
(a)Administration. The Plan is administered by the Committee and, unless otherwise determined by the Board, shall consist solely of two or more Directors appointed by and holding office at the pleasure of the Board, each of whom is a Non-Employee Director and an Independent Director. The Board may abolish the Committee or re-vest in itself any previously delegated authority at any time; provided, however, that any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors. The Administrator has authority to determine which Eligible Individuals receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award or Award Agreement as it deems necessary or appropriate to administer the Plan and any Awards. In addition, the Administrator may adopt procedures from time to time intended to ensure that an individual is an Eligible Individual prior to the granting of any Awards to such individual under the Plan (including without limitation a requirement, if any, that each such individual certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by or a director of the Company or an Affiliate, or if previously employed, has had a bona fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or an Affiliate). The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award. Notwithstanding anything to the contrary provided herein (i) Awards shall be approved by (A) the Committee comprised of a majority of the Company’s Independent Directors or (B) a majority of the Company’s Independent Directors, and (ii) the authority to grant Awards shall not be delegated under any circumstances.
(b)Actions Required Upon Grant of Award. Following the issuance of any Award under the Plan, the Company shall, in accordance with the listing requirements of the applicable securities exchange, (i) promptly issue a press release disclosing the material terms of the grant, including the recipient(s) of the grant and the number of shares involved, and (ii) provide any required written notice to the applicable securities exchange.
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4.Stock Available for Awards.
(a)Number of Shares. Subject to adjustment under Section 8 and the terms of this Section 4, Awards may be made under the Plan covering up to the Overall Share Limit. Shares issued under the Plan may consist of authorized but unissued Shares or treasury Shares.
(b)Share Recycling. Except as provided in subsection (c) below, if all or any part of an Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award for less than Fair Market Value or not issuing any Shares covered by the Award, the unused Shares covered by the Award will, as applicable, become or again be available for Award grants under the Plan. In addition, Shares tendered by a Participant or withheld by the Company in payment of the exercise price of an Option or to satisfy any tax withholding obligation with respect to an Award will, as applicable, become or again be available for Award grants under the Plan.
(c)Limitation on Share Recycling. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 4(a) and shall not be available for future grants of Awards:
(i)Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; and
(ii)Shares purchased on the open market with the cash proceeds from the exercise of Options.
5.Stock Options and Stock Appreciation Rights.
(a)General. The Administrator may grant Options or Stock Appreciation Rights to Eligible Individuals subject to the limitations in the Plan. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations of the Plan or as the Administrator may impose. All Options granted under the Plan shall be Non-Qualified Stock Options.
(b)Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right.
(c)Duration of Options. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years.
2

(d)Exercise; Notification of Disposition. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5(e)for the number of Shares for which the Award is exercised and (ii) as specified in Section 9(e) for any applicable withholding taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.
(e)Payment Upon Exercise. The exercise price of an Option must be paid in cash or by check payable to the order of the Company or, subject to Section 10(h), any Company insider trading policy (including blackout periods) and Applicable Laws, by:
(i)if there is a public market for Shares at the time of exercise, unless the Administrator otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price;
(ii)delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value, provided (A) such payment method is then permitted under Applicable Laws, (B) such Shares, if acquired directly from the Company, were owned by the Participant for a minimum time period that the Company may establish and (C) such Shares are not subject to repurchase, forfeiture, unfulfilled vesting or other similar requirements;
(iii)surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(iv)to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or
(v)any combination of the above permitted payment forms (including cash or check).
6.Restricted Stock; Restricted Stock Units.
(a)General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Eligible Individual, subject to the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares if issued at no cost) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Eligible Individuals Restricted Stock Units, which may be subject to vesting and forfeiture conditions during applicable restriction period or periods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.
3

(b)Restricted Stock.
(i)Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Notwithstanding anything to the contrary herein, with respect to any award of Restricted Stock, dividends which are paid to holders of Common Stock prior to vesting shall only be paid out to the Participant holding such Restricted Stock to the extent that the vesting conditions are subsequently satisfied. All such dividend payments will be made no later than March 15 of the calendar year following the calendar year in which the right to the dividend payment becomes nonforfeitable.
(ii)Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.
(c)Restricted Stock Units.
(i)Settlement. When a Restricted Stock Unit vests, the Participant will be entitled to receive from the Company one Share, an amount of cash or other property equal to the Fair Market Value of one Share on the settlement date or a combination of both, as the Administrator determines and as provided in the Award Agreement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.
(ii)Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.
7.Other Stock or Cash Based Awards; Dividend Equivalents.
(a)Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other period or long-term cash bonus awards (whether based on specified performance criteria or otherwise), in each case subject to the conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the performance criteria), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement.
4

(b)Dividend Equivalents. If the Administrator provides, a grant of Restricted Stock Units or an Other Stock Award may provide a Participant with the right to receive Dividend Equivalents, and no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with respect to which the Dividend Equivalents are paid and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, Dividend Equivalents with respect to an Award shall only be paid out to the Participant to the extent that the vesting conditions are subsequently satisfied. All such Dividend Equivalent payments will be made no later than March 15 of the calendar year following the calendar year in which the right to the Dividend Equivalent payment becomes nonforfeitable, unless determined otherwise by the Administrator.
8.Adjustments for Changes in Common Stock and Certain Other Events.
(a)In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Section 8, the Administrator will equitably adjust each outstanding Award as it deems appropriate to effect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8(a) will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
(b)In the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award, then the Administrator may, in such manner as it may deem equitable, adjust any or all of:
(i)the number and kind of shares (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments to the Overall Share Limit) and the kind of shares which may be issued;
(ii)the number and kind of shares (or other securities or property) subject to outstanding Awards;
(iii)the grant or exercise price with respect to any Award; and
(iv)the terms and conditions of any Awards (including, without limitation, any applicable financial or other performance “targets” specified in an Award Agreement).
(c)In the event of any transaction or event described in Section 8(b) (including without limitation any Change in Control) or any unusual or nonrecurring transaction or event affecting the Company or the financial statements of the Company, or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the
5

following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:
(i)To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the vested portion of such Award may be terminated without payment;
(ii)To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(iii)To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;
(iv)To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;
(v)To replace such Award with other rights or property selected by the Administrator; and/or
(vi)To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
(d)Notwithstanding Section 8(b) or 8(c), if a Change in Control occurs and a Participant’s then-outstanding Awards are not continued, converted, assumed, or replaced with a substantially similar award by (i) the Company or (ii) a successor entity or its parent or subsidiary (an “Assumption”), then immediately before the Change in Control such Awards will become fully vested, exercisable and payable, as applicable, and all forfeiture, repurchase and other restrictions on such Awards will lapse. Such Awards will be canceled upon the Change in Control in exchange for the right to receive the Change in Control consideration payable to other holders of Common Stock, which (A) may be on such terms and conditions generally applicable to holders of Common Stock under the Change in Control documents (including any escrow, earn-out or other deferred consideration provisions) or such other terms and conditions as the Administrator may provide, and (B) is determined based on the number of Shares subject to such Awards and net of any applicable exercise price; provided that if any Awards constitute “nonqualified deferred compensation” not payable upon the Change in Control without the imposition of taxes under Section 409A, the timing of such payments will be governed by the Award Agreement (subject to any deferred consideration provisions under the Change in Control documents); and provided, further, that if the amount to which a Participant would be entitled upon the settlement or exercise of such Award upon the Change in Control is zero or less, then such Award may be terminated without payment. The Board has the authority to determine in its sole discretion whether an Assumption of an Award has occurred in connection with a Change in Control.
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(e)In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to 60 days before or after such transaction.
(f)Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8(a) or the Administrator’s action under the Plan, no issuance by the Company of shares of any class, or securities convertible into shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Section 8.
(g)No action shall be taken under this Section 8 which shall cause an Award to fail to comply with Section 409A of the Code or the Treasury Regulations thereunder, to the extent applicable to such Award.
9.General Provisions Applicable to Awards.
(a)Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise, in accordance with Applicable Laws (and subject to the applicable requirements for Shares underlying Awards to be registered on Form S-8 under the Securities Act), Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a DRO, and, during the life of the Participant, will be exercisable only by the Participant. Any permitted transfer of an Award hereunder shall be without consideration, except as required by Applicable Law. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves under Applicable Laws.
(b)Documentation. Each Award will be evidenced in an Award Agreement, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c)Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
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(d)Termination of Status. The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
(e)Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by Applicable Law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. In satisfaction of the foregoing requirement or in satisfaction of any additional tax withholding, the Company may satisfy, or may allow a Participant to satisfy, such obligations by any payment means described in Section 5(e), including, without limitation, by withholding, or allowing such Participant to elect to have the Company or an affiliate withhold, Shares otherwise issuable under an Award (or allow the surrender of Shares). The number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a fair market value on the date of withholding or repurchase no greater than the aggregate amount of such liabilities based on the maximum individual statutory withholding rates in the applicable jurisdiction, in accordance with Company policies and at the discretion of the Administrator. The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.
(f)Amendment of Award. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, and changing the exercise or settlement date. The Participant’s consent to such action will be required unless (i) the Administrator determines that the action, taking into account any related action, would not materially and adversely affect the Participant, or (ii) the change is permitted under Section 8 or pursuant to Section 10(f).
(g)Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.
(h)Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
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(i)Repricing. Subject to Section 8, the Administrator shall have the authority, without the approval of the stockholders of the Company, to (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. In addition, subject to Section 8, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
(j)Cash Settlement. Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.
10.Miscellaneous.
(a)No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement.
(b)No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.
(c)Effective Date and Term of Plan. The Plan will become effective on the day the Board adopts the Plan, and shall remain in effect until terminated by the Administrator.
(d)Amendment of Plan. Subject to Section 9(i), the Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
(e)Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
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(f)Section 409A.
(i)General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10(f) or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant, “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A. Furthermore, notwithstanding any contrary provision of the Plan or any Award Agreement, any payment of "nonqualified deferred compensation” under the Plan that may be made in installments shall be treated as a right to receive a series of separate and distinct payments.
(ii)Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
(iii)Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
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(g)Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.
(h)Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to 180 days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.
(i)Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this paragraph by and among the Company and its Affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10(i) in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 10(i). For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
(j)Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
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(k)Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Affiliate) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.
(l)Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.
(m)Claw-back Provisions. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy implemented by the Company, including any claw-back policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, as set forth in such claw-back policy or the Award Agreement.
(n)Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
(o)Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.
(p)Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate except as expressly provided in writing in such other plan or an agreement thereunder.
(q)Stockholder Approval Not Required. It is expressly intended that approval of the Company’s stockholders not be required as a condition of the effectiveness of the Plan, and the Plan’s provisions shall be interpreted in a manner consistent with such intent for all purposes. Specifically, Nasdaq Stock Market Rule 5635(c) generally requires stockholder approval for stock option plans or other equity compensation arrangements adopted by companies whose securities are listed on the Nasdaq Stock Market pursuant to which stock awards or stock may be acquired by officers, directors, employees or consultants of such companies. Nasdaq Stock Market Rule 5635(c)(4) provides an exemption in certain circumstances for “employment inducement” awards (within the meaning of Nasdaq Stock Market Rule 5635(c)(4)). Notwithstanding anything to the contrary herein, if the Company’s securities are traded on the Nasdaq Stock Market, then Awards under the Plan may only be made to Employees who have not previously been an Employee or Director of the Company or an Affiliate, or following a bona fide period of non-employment by the Company or an Affiliate, in each case as an inducement material to the Employee’s entering into employment with the Company or an Affiliate. Awards under the Plan will be approved by (a) the Committee comprised entirely of Independent Directors or (b) a majority of the Company’s Independent Directors. Accordingly, pursuant to Nasdaq Stock Market Rule 5635(c)(4), the issuance of Awards and the shares of Stock issuable upon exercise or vesting of such Awards pursuant to the Plan are not subject to the approval of the Company’s stockholders.
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11.Definitions. As used in the Plan, the following words and phrases will have the following meanings:
(a)“Administrator” means the Committee, unless the Board has assumed the authority for administration of the Plan as provided in Section 3(a).
(b)“Affiliate” means (a) any Subsidiary, (b) any Parent and (c) any domestic eligible entity that is disregarded, under Treasury Regulation Section 301.7701-3, as an entity separate from either (i) the Company, (ii) any Subsidiary or (iii) any Parent.
(c)“Applicable Accounting Standards” means the U.S. Generally Accepted Accounting Principles, International Financial Reporting Standards or other accounting principles or standards applicable to the Company’s financial statements under U.S. federal securities laws.
(d)“Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.
(e)“Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock or Cash Based Awards.
(f)“Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
(g)“Board” means the Board of Directors of the Company.
(h)“Change in Control” means (i) the Company’s merger or consolidation with or into any other corporation, entity or person, (ii) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company’s assets, or (iii) any other transaction or series of related transactions, including the Company’s sale of new shares of its capital stock or a transfer of existing shares of its capital stock, which causes a third party not affiliated with the Company or its stockholders (or a group of third parties not affiliated with the Company or its stockholders) immediately before such transaction or series of related transactions to acquire or hold capital stock of the Company representing a majority of the Company’s outstanding voting power immediately following such transaction or series of related transactions; provided that the following events will not constitute a “Change in Control”: (A) a transaction (other than a sale of all or substantially all of the Company’s assets) in which the holders of the Company’s voting securities immediately before the merger or consolidation hold, directly or indirectly, at least a majority of the voting securities in the successor corporation or its parent immediately after the merger or consolidation; (B) a sale, lease, exchange or other transaction in one transaction or a series of related transactions of all or substantially all of the Company’s assets to a Company affiliate; (C) a reincorporation of the Company solely to change its jurisdiction; or (D) a transaction primarily undertaken to create a holding company that will be owned in substantially the same proportion by the persons who held the Company’s securities immediately before such transaction.
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Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any portion of an Award that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change in Control with respect to such Award (or portion thereof) must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)) to trigger the payment event for such Award, to the extent required by Section 409A.
(i)“Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
(j)“Committee” means the Compensation Committee of the Board comprised of two or more Directors, each of whom is intended to qualify as a Non-Employee Director and an Independent Director.
(k)“Common Stock” means the common stock of the Company.
(l)“Company” means Guardant Health, Inc., a Delaware corporation, or any successor.
(m)“Consultant” means any person, including any adviser, engaged by the Company or its parent or Affiliate to render services to such entity if the consultant or adviser: (i) renders bona fide services to the Company; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) is a natural person.
(n)“Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies or becomes incapacitated. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.
(o)“Director” means a Board member.
(p)“Dividend Equivalents” means a right granted to a Participant under Section 7(b) to receive the equivalent value (in cash or Shares) of dividends paid on Shares.
(q)“DRO” means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.
(r)“Eligible Individuals” means any prospective Employee who has not previously been an Employee or Director of the Company or an Affiliate, or who is commencing employment with the Company or an Affiliate following a bona fide period of non-employment by the Company or an Affiliate, if he or she is granted an Award in connection with his or her commencement of employment with the Company or an Affiliate and such grant is an inducement material to his or her entering into employment with the Company or an Affiliate (within the meaning of Nasdaq Stock Market Rule IM-5636-1 or any successor rule, if the Company’s securities are traded on the Nasdaq Stock Market, and/or the applicable requirements of any other established stock exchange on which the Company’s securities are traded, as applicable, as such rules and requirements may be amended from time to time).
(s)“Employee” means any employee of the Company or its Affiliates.
(t)“Equity Restructuring” means, as the Administrator determines, a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, affecting the Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causing a change in the per share value of the Common Stock underlying outstanding Awards.
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(u)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(v)“Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the first market trading day immediately before such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the date immediately before such date on which sales prices are reported, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.
(w)“Independent Director” means a Director of the Company who is not an Employee and who qualifies as “independent” within the meaning of Nasdaq Stock Market Rule 5605(a)(2), or any successor rule, if the Company’s securities are traded on the Nasdaq Stock Market, and/or the applicable requirements of any other established stock exchange on which the Company’s securities are traded, as applicable, as such rules and requirements may be amended from time to time.
(x)“Non-Employee Director” means a “non-employee director” within the meaning of Rule 16b-3.
(y)“Non-Qualified Stock Option” means an Option, or portion thereof, not intended or not qualifying as an “incentive stock option” within the meaning of Section 422 of the Code.
(z)“Option” means an option to purchase Shares. All Options granted under the Plan shall be Non-Qualified Stock Options.
(aa)“Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise denominated in, based on or linked to, Shares or other property.
(bb)“Overall Share Limit” means 5,000,000 Shares.
(cc)“Parent” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
(dd)“Participant” means an Eligible Individual who has been granted an Award.
(ee)“Plan” means this 2023 Employment Inducement Incentive Award Plan.
(ff)“Restricted Stock” means Shares awarded to a Participant under Section 6 subject to certain vesting conditions and other restrictions.
(gg)“Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such payment date, subject to certain vesting conditions and other restrictions.
(hh)“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.
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(ii)“Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
(jj)“Securities Act” means the Securities Act of 1933, as amended.
(kk)“Service Provider” means an Employee, Consultant or Director.
(ll)“Shares” means shares of Common Stock.
(mm)“Stock Appreciation Right” means a stock appreciation right granted under Section 5.
(nn)“Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
(oo)“Termination of Service” means the date the Participant ceases to be a Service Provider.
* * *
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GUARDANT HEALTH, INC.
2023 EMPLOYMENT INDUCEMENT INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE
Guardant Health, Inc., a Delaware corporation (the “Company”) has granted to the participant listed below (“Participant”) the stock option (the “Option”) described in this Stock Option Grant Notice (the “Grant Notice”), subject to the terms and conditions of the 2023 Employment Inducement Incentive Award Plan (as amended from time to time, the “Plan”) and the Stock Option Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference. Capitalized terms not specifically defined in this Grant Notice or the Agreement have the meanings given to them in the Plan.
Participant:
Grant Date:
Exercise Price per Share:
Shares Subject to the Option:
Final Expiration Date:[Can be no later than 10th anniversary of Grant Date]
Vesting Commencement Date:
Vesting Schedule:[To be specified in individual award agreements]
Type of OptionNon-Qualified Stock Option
By accepting (whether in writing, electronically or otherwise) the Option, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
GUARDANT HEALTH, INC.PARTICIPANT
By:
Name:[Participant Name]
Title:


Exhibit A
STOCK OPTION AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1    Grant of Option. The Company has granted to Participant the Option effective as of the grant date set forth in the Grant Notice (the “Grant Date”). The Option is intended to constitute an “employment inducement” award under Nasdaq Stock Market (“Nasdaq”) Rule 5635(c)(4), and consequently is intended to be exempt from the Nasdaq rules regarding stockholder approval of stock option plans or other equity compensation arrangements. This Agreement and the terms and conditions of the Award shall be interpreted in accordance with and consistent with such exemption.
1.2    Incorporation of Terms of Plan. The Option is subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
ARTICLE II.
PERIOD OF EXERCISABILITY
2.1    Commencement of Exercisability. The Option will vest and become exercisable according to the vesting schedule in the Grant Notice (the “Vesting Schedule”) except that any fraction of a Share as to which the Option would be vested or exercisable will be accumulated and will vest and become exercisable only when a whole Share has accumulated. Notwithstanding anything in the Grant Notice, the Plan or this Agreement to the contrary, unless the Administrator otherwise determines, the Option will immediately expire and be forfeited as to any portion that is not vested and exercisable as of Participant’s Termination of Service for any reason.
2.2    Duration of Exercisability. The Vesting Schedule is cumulative. Any portion of the Option which vests and becomes exercisable will remain vested and exercisable until the Option expires. The Option will be forfeited immediately upon its expiration.
2.3    Expiration of Option. The Option may not be exercised to any extent by anyone after, and will expire on, the first of the following to occur:
(a)    The final expiration date in the Grant Notice;
(b)    Except as the Administrator may otherwise approve, the expiration of three months from the date of Participant’s Termination of Service, unless Participant’s Termination of Service is for Cause or by reason of Participant’s death or Disability;
(c)    Except as the Administrator may otherwise approve, the expiration of one year from the date of Participant’s Termination of Service by reason of Participant’s death or Disability; and
(d)    Except as the Administrator may otherwise approve, Participant’s Termination of Service for Cause.

Exhibit A
As used in this Agreement, “Cause” means (i) if Participant is a party to a written employment or consulting agreement with the Company or an Affiliate in which the term “cause” is defined (a “Relevant Agreement”), “Cause” as defined in the Relevant Agreement, and (ii) if no Relevant Agreement exists, (A) the Administrator’s determination that Participant failed to substantially perform Participant’s duties (other than a failure resulting from Participant’s Disability); (B) the Administrator’s determination that Participant failed to carry out, or comply with any lawful and reasonable directive of the Board or Participant’s immediate supervisor; (C) Participant’s conviction, plea of nolo contendere, or imposition of unadjudicated probation for any felony or indictable offense or crime involving moral turpitude; (D) Participant’s unlawful use (including being under the influence) or possession of illegal drugs on the premises of the Company or any of its Affiliates or while performing Participant’s duties and responsibilities for the Company or any of its Affiliates; or (E) Participant’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its Affiliates.
ARTICLE III.
EXERCISE OF OPTION
3.1    Person Eligible to Exercise. During Participant’s lifetime, only Participant may exercise the Option. After Participant’s death, any exercisable portion of the Option may, prior to the time the Option expires, be exercised by Participant’s Designated Beneficiary as provided in the Plan.
3.2    Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised, in whole or in part, according to the procedures in the Plan at any time prior to the time the Option or portion thereof expires, except that the Option may only be exercised for whole Shares.
3.3    Tax Withholding.
(a)    The Company shall withhold, or cause to be withheld, Shares otherwise vesting or issuable under this Option in satisfaction of any applicable withholding tax obligations. The number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a fair market value on the date of withholding no greater than the aggregate amount of such liabilities based on the maximum individual statutory withholding rates in Participant’s applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income.
(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Option, regardless of any action the Company or any Affiliate takes with respect to any tax withholding obligations that arise in connection with the Option. Neither the Company nor any Affiliate makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company and the Affiliates do not commit and are under no obligation to structure the Option to reduce or eliminate Participant’s tax liability.
ARTICLE IV.
OTHER PROVISIONS
4.1    Adjustments. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
A-2
Exhibit A
4.2    Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant (or, if Participant is then deceased, to the person entitled to exercise the Option) at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
4.3    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.4    Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
4.5    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.6    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Option will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b‑3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
4.7    Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.8    Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.9    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.
A-3
Exhibit A
4.10    Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Affiliate or interferes with or restricts in any way the rights of the Company and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or an Affiliate and Participant.
4.11    Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
* * * * *
A-4

GUARDANT HEALTH, INC.
2023 EMPLOYMENT INDUCEMENT INCENTIVE AWARD PLAN
RESTRICTED STOCK UNIT GRANT NOTICE
Guardant Health, Inc., a Delaware corporation (the “Company”), has granted to the participant listed below (“Participant”) the Restricted Stock Units (the “RSUs”) described in this Restricted Stock Unit Grant Notice (this “Grant Notice”), subject to the terms and conditions of the 2023 Employment Inducement Incentive Award Plan (as amended from time to time, the “Plan”) and the Restricted Stock Unit Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference. Capitalized terms not specifically defined in this Grant Notice or the Agreement have the meanings given to them in the Plan.
Participant:
Grant Date:
Number of RSUs:
Vesting Commencement Date:
Vesting Schedule:[To be specified in individual award agreements]
By accepting (whether in writing, electronically or otherwise) the RSUs, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
GUARDANT HEALTH, INC.PARTICIPANT
By:
Name:[Participant Name]
Title:

Exhibit A
RESTRICTED STOCK UNIT AGREEMENT
Capitalized terms not specifically defined in this Restricted Stock Unit Agreement (this “Agreement”) have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
5.1    Award of RSUs and Dividend Equivalents.
(a)    The Company has granted the RSUs to Participant effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”). Each RSU represents the right to receive one Share as set forth in this Agreement. Participant will have no right to the distribution of any Shares until the time (if ever) the RSUs have vested. The RSUs are intended to constitute an “employment inducement” award under Nasdaq Stock Market (“Nasdaq”) Rule 5635(c)(4), and consequently are intended to be exempt from the Nasdaq rules regarding stockholder approval of stock option plans or other equity compensation arrangements. This Agreement and the terms and conditions of the Award shall be interpreted in accordance with and consistent with such exemption.
(b)    The Company hereby grants to Participant, with respect to each RSU, a Dividend Equivalent for ordinary cash dividends paid to substantially all holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable RSU is settled, forfeited or otherwise expires. Each Dividend Equivalent entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share. The Company will establish a separate Dividend Equivalent bookkeeping account (a “Dividend Equivalent Account”) for each Dividend Equivalent and credit the Dividend Equivalent Account (without interest) on the applicable dividend payment date with the amount of any such cash paid. Any Dividend Equivalents granted in connection with the RSUs issued hereunder, and any amounts that may become distributable in respect thereof, shall be treated separately from such RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A.
5.2    Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
5.3    Unsecured Promise. The RSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.
ARTICLE II.
VESTING; FORFEITURE AND SETTLEMENT
6.1    Vesting; Forfeiture. The RSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. In the event of Participant’s Termination of Service for any reason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Dividend Equivalents (including any Dividend Equivalent Account balance) will vest or be forfeited, as applicable, upon the vesting or forfeiture of the RSU with respect to which the Dividend Equivalent (including the Dividend Equivalent Account) relates.

Exhibit A
6.2    Settlement.
(a)    RSUs and Dividend Equivalents (including any Dividend Equivalent Account balance) will be paid in Shares as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than 60 days after the RSU’s vesting date.
(b)    Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)); provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.
(c)    If a Dividend Equivalent is paid in Shares, the number of Shares paid with respect to the Dividend Equivalent will equal the quotient, rounded down to the nearest whole Share, of the Dividend Equivalent Account balance divided by the Fair Market Value of a Share on the day immediately preceding the payment date.
ARTICLE III.
TAXATION AND TAX WITHHOLDING
7.1    Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
7.2    Tax Withholding.
(a)    The Company shall withhold, or cause to be withheld, Shares otherwise vesting or issuable under this Award (including the RSUs or Dividend Equivalents) in satisfaction of any applicable withholding tax obligations. The number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a fair market value on the date of withholding no greater than the aggregate amount of such liabilities based on the maximum individual statutory withholding rates in Participant’s applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income.
(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs and the Dividend Equivalents, regardless of any action the Company or any Affiliate takes with respect to any tax withholding obligations that arise in connection with the RSUs or Dividend Equivalents. Neither the Company nor any Affiliate makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of Shares. The Company and the Affiliates do not commit and are under no obligation to structure the RSUs or Dividend Equivalents to reduce or eliminate Participant’s tax liability.
ARTICLE IV.
OTHER PROVISIONS
8.1    Adjustments. Participant acknowledges that the RSUs, the Shares subject to the RSUs and the Dividend Equivalents are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
A-2
Exhibit A
8.2    Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
8.3    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
8.4    Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
8.5    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
8.6    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the RSUs and the Dividend Equivalents will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
8.7    Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
8.8    Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
8.9    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the RSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.
A-3
Exhibit A
8.10    Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Affiliate or interferes with or restricts in any way the rights of the Company and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an Affiliate and Participant.
8.11    Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
* * * *
A-4

Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Helmy Eltoukhy, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Guardant Health, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
November 6, 2023
/s/ Helmy Eltoukhy
Helmy Eltoukhy
Co-Chief Executive Officer
(Principal Executive Officer)

Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, AmirAli Talasaz, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Guardant Health, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
November 6, 2023
/s/ AmirAli Talasaz
AmirAli Talasaz
Co-Chief Executive Officer
(Principal Executive Officer)

Exhibit 31.3
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Bell, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Guardant Health, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
November 6, 2023
/s/ Michael Bell
Michael Bell
Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Guardant Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date:
November 6, 2023
/s/ Helmy Eltoukhy
Helmy Eltoukhy
Co-Chief Executive Officer
(Principal Executive Officer)
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Guardant Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date:
November 6, 2023
/s/ AmirAli Talasaz
AmirAli Talasaz
Co-Chief Executive Officer
(Principal Executive Officer)
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Exhibit 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Guardant Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date:
November 6, 2023
/s/ Michael Bell
Michael Bell
Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.