000181833112/312021Q3FALSE0.0000100018183312021-01-012021-09-300001818331us-gaap:CommonClassAMember2021-01-012021-09-300001818331us-gaap:WarrantMember2021-01-012021-09-30xbrli:shares00018183312021-11-08iso4217:USD00018183312021-09-3000018183312020-12-31iso4217:USDxbrli:shares0001818331cmlf:SeriesA1RedeemableConvertiblePreferredStockMember2020-12-310001818331cmlf:SeriesA1RedeemableConvertiblePreferredStockMember2021-09-300001818331cmlf:SeriesA2RedeemableConvertiblePreferredStockMember2021-09-300001818331cmlf:SeriesA2RedeemableConvertiblePreferredStockMember2020-12-310001818331cmlf:SeriesBRedeemableConvertiblePreferredStockMember2020-12-310001818331cmlf:SeriesBRedeemableConvertiblePreferredStockMember2021-09-300001818331cmlf:SeriesCRedeemableConvertiblePreferredStockMember2020-12-310001818331cmlf:SeriesCRedeemableConvertiblePreferredStockMember2021-09-300001818331us-gaap:CommonClassAMember2020-12-310001818331us-gaap:CommonClassAMember2021-09-300001818331us-gaap:CommonClassBMember2021-09-300001818331us-gaap:CommonClassBMember2020-12-310001818331cmlf:DiagnosticTestMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331cmlf:DiagnosticTestMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331cmlf:DiagnosticTestMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331cmlf:DiagnosticTestMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331cmlf:DiagnosticTestMember2021-07-012021-09-300001818331cmlf:DiagnosticTestMember2020-07-012020-09-300001818331cmlf:DiagnosticTestMember2021-01-012021-09-300001818331cmlf:DiagnosticTestMember2020-01-012020-09-300001818331us-gaap:ProductAndServiceOtherMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331us-gaap:ProductAndServiceOtherMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331us-gaap:ProductAndServiceOtherMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331us-gaap:ProductAndServiceOtherMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331us-gaap:ProductAndServiceOtherMember2021-07-012021-09-300001818331us-gaap:ProductAndServiceOtherMember2020-07-012020-09-300001818331us-gaap:ProductAndServiceOtherMember2021-01-012021-09-300001818331us-gaap:ProductAndServiceOtherMember2020-01-012020-09-3000018183312021-07-012021-09-3000018183312020-07-012020-09-3000018183312020-01-012020-09-300001818331srt:AffiliatedEntityMember2021-07-012021-09-300001818331srt:AffiliatedEntityMember2020-07-012020-09-300001818331srt:AffiliatedEntityMember2021-01-012021-09-300001818331srt:AffiliatedEntityMember2020-01-012020-09-300001818331us-gaap:CommonClassAMember2021-07-012021-09-300001818331us-gaap:CommonClassAMember2020-07-012020-09-300001818331us-gaap:CommonClassAMember2020-01-012020-09-3000018183312021-06-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-06-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-06-300001818331us-gaap:AdditionalPaidInCapitalMember2021-06-300001818331us-gaap:RetainedEarningsMember2021-06-300001818331us-gaap:RetainedEarningsMember2021-07-012021-09-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-07-012021-09-300001818331us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-07-012021-09-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-09-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-09-300001818331us-gaap:AdditionalPaidInCapitalMember2021-09-300001818331us-gaap:RetainedEarningsMember2021-09-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-12-310001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-12-310001818331us-gaap:AdditionalPaidInCapitalMember2020-12-310001818331us-gaap:RetainedEarningsMember2020-12-310001818331us-gaap:RetainedEarningsMember2021-01-012021-09-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-01-012021-09-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-01-012021-09-300001818331us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-3000018183312020-06-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-06-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-06-300001818331us-gaap:AdditionalPaidInCapitalMember2020-06-300001818331us-gaap:RetainedEarningsMember2020-06-300001818331us-gaap:RetainedEarningsMember2020-07-012020-09-3000018183312020-09-300001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-09-300001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-09-300001818331us-gaap:AdditionalPaidInCapitalMember2020-09-300001818331us-gaap:RetainedEarningsMember2020-09-3000018183312019-12-310001818331us-gaap:CommonStockMemberus-gaap:CommonClassAMember2019-12-310001818331us-gaap:CommonClassBMemberus-gaap:CommonStockMember2019-12-310001818331us-gaap:AdditionalPaidInCapitalMember2019-12-310001818331us-gaap:RetainedEarningsMember2019-12-310001818331us-gaap:RetainedEarningsMember2020-01-012020-09-30xbrli:purecmlf:segment0001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorAMember2021-07-012021-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorAMember2020-07-012020-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorAMember2021-01-012021-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorAMember2020-01-012020-09-300001818331us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercmlf:PayorAMember2021-01-012021-09-300001818331us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercmlf:PayorAMember2020-01-012020-12-310001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorBMember2020-07-012020-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorBMember2020-01-012020-09-300001818331cmlf:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-07-012021-09-300001818331cmlf:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-07-012020-09-300001818331cmlf:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-01-012021-09-300001818331cmlf:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorDMember2020-07-012020-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorDMember2021-01-012021-09-300001818331us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercmlf:PayorDMember2020-01-012020-09-300001818331us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercmlf:PayorDMember2021-01-012021-09-300001818331cmlf:PayorEMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember2020-01-012020-12-310001818331us-gaap:CostOfGoodsTotalMembercmlf:SupplierAMemberus-gaap:SupplierConcentrationRiskMember2021-07-012021-09-300001818331us-gaap:CostOfGoodsTotalMembercmlf:SupplierAMemberus-gaap:SupplierConcentrationRiskMember2020-07-012020-09-300001818331us-gaap:CostOfGoodsTotalMembercmlf:SupplierAMemberus-gaap:SupplierConcentrationRiskMember2021-01-012021-09-300001818331us-gaap:CostOfGoodsTotalMembercmlf:SupplierAMemberus-gaap:SupplierConcentrationRiskMember2020-01-012020-09-3000018183312020-01-012020-03-310001818331cmlf:GovernmentAssistanceCARESActProviderReliefFundMember2020-01-012020-03-310001818331cmlf:GovernmentAssistanceCARESActEmployeeRetentionCreditMember2020-01-012020-03-310001818331cmlf:GovernmentAssistanceCARESActProviderReliefFundMember2021-01-012021-09-3000018183312021-07-220001818331cmlf:PublicWarrantsMember2021-07-220001818331cmlf:PrivatePlacementWarrantsMember2021-09-300001818331cmlf:PrivatePlacementWarrantsMember2021-07-220001818331us-gaap:CommonClassAMember2021-07-22cmlf:day0001818331cmlf:ClassACommonStockEqualsOrExceedsThresholdOneMember2021-01-012021-09-300001818331cmlf:ClassACommonStockEqualsOrExceedsThresholdTwoMemberus-gaap:CommonClassAMember2021-09-300001818331cmlf:ClassACommonStockEqualsOrExceedsThresholdTwoMemberus-gaap:CommonClassAMember2021-01-012021-09-300001818331cmlf:Sema4OpCoIncMember2021-01-012021-09-300001818331cmlf:Sema4OpCoIncMember2021-09-300001818331cmlf:Sema4OpCoIncMember2021-07-220001818331us-gaap:CommonClassAMembercmlf:Sema4OpCoIncMember2021-07-222021-07-220001818331us-gaap:CommonClassAMembercmlf:Sema4OpCoIncMember2021-07-220001818331us-gaap:CommonClassBMembercmlf:Sema4OpCoIncMember2021-07-222021-07-220001818331cmlf:Sema4OpCoIncMember2021-02-092021-02-090001818331cmlf:Sema4OpCoIncMember2021-02-090001818331cmlf:Sema4OpCoIncMember2021-07-222021-07-220001818331cmlf:MergerAdditionalCapitalMembercmlf:Sema4OpCoIncMember2021-07-220001818331us-gaap:PrepaidExpensesAndOtherCurrentAssetsMembercmlf:Sema4OpCoIncMember2021-07-220001818331us-gaap:CommonClassBMembercmlf:Sema4OpCoIncMember2021-07-220001818331cmlf:DiagnosticTestThirdPartyInsuranceMember2021-07-012021-09-300001818331cmlf:DiagnosticTestThirdPartyInsuranceMember2020-07-012020-09-300001818331cmlf:DiagnosticTestInstitutionalCustomersMember2021-07-012021-09-300001818331cmlf:DiagnosticTestInstitutionalCustomersMember2020-07-012020-09-300001818331cmlf:DiagnosticTestSelfPayMember2021-07-012021-09-300001818331cmlf:DiagnosticTestSelfPayMember2020-07-012020-09-300001818331cmlf:DiagnosticTestThirdPartyInsuranceMember2021-01-012021-09-300001818331cmlf:DiagnosticTestThirdPartyInsuranceMember2020-01-012020-09-300001818331cmlf:DiagnosticTestInstitutionalCustomersMember2021-01-012021-09-300001818331cmlf:DiagnosticTestInstitutionalCustomersMember2020-01-012020-09-300001818331cmlf:DiagnosticTestSelfPayMember2021-01-012021-09-300001818331cmlf:DiagnosticTestSelfPayMember2020-01-012020-09-3000018183312021-10-012021-09-300001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331cmlf:PublicWarrantMemberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331cmlf:PublicWarrantMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331cmlf:PublicWarrantMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueInputsLevel3Membercmlf:PublicWarrantMemberus-gaap:FairValueMeasurementsRecurringMember2021-09-300001818331us-gaap:FairValueMeasurementsRecurringMembercmlf:PrivateWarrantMember2021-09-300001818331us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercmlf:PrivateWarrantMember2021-09-300001818331us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercmlf:PrivateWarrantMember2021-09-300001818331us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercmlf:PrivateWarrantMember2021-09-300001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001818331us-gaap:MeasurementInputPriceVolatilityMember2021-09-300001818331us-gaap:MeasurementInputRiskFreeInterestRateMember2021-09-3000018183312021-07-222021-09-300001818331us-gaap:EquipmentMember2021-09-300001818331us-gaap:EquipmentMember2020-12-310001818331cmlf:EquipmentHeldUnderCapitalLeaseMember2021-09-300001818331cmlf:EquipmentHeldUnderCapitalLeaseMember2020-12-310001818331us-gaap:LeaseholdImprovementsMember2021-09-300001818331us-gaap:LeaseholdImprovementsMember2020-12-310001818331us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-09-300001818331us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-12-310001818331cmlf:BuildingHeldUnderCapitalLeaseMember2021-09-300001818331cmlf:BuildingHeldUnderCapitalLeaseMember2020-12-310001818331us-gaap:ConstructionInProgressMember2021-09-300001818331us-gaap:ConstructionInProgressMember2020-12-310001818331us-gaap:ComputerEquipmentMember2021-09-300001818331us-gaap:ComputerEquipmentMember2020-12-310001818331cmlf:FurnitureFixturesAndOtherEquipmentMember2021-09-300001818331cmlf:FurnitureFixturesAndOtherEquipmentMember2020-12-3100018183312021-01-012021-06-3000018183312020-01-012020-06-300001818331us-gaap:CostOfSalesMember2021-07-012021-09-300001818331us-gaap:CostOfSalesMember2020-07-012020-09-300001818331us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001818331us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001818331us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-300001818331us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001818331us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001818331us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001818331us-gaap:CostOfSalesMember2021-01-012021-09-300001818331us-gaap:CostOfSalesMember2020-01-012020-09-300001818331us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300001818331us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001818331us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-300001818331us-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-300001818331us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001818331us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-3000018183312017-06-010001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2021-09-300001818331cmlf:RelatedPartyTSAAgreementMembersrt:AffiliatedEntityMember2020-12-310001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2021-09-300001818331cmlf:RelatedPartyServiceAgreementsMembersrt:AffiliatedEntityMember2020-12-310001818331us-gaap:CostOfSalesMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331us-gaap:CostOfSalesMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331cmlf:RelatedPartyExpensesMembersrt:AffiliatedEntityMember2021-07-012021-09-300001818331cmlf:RelatedPartyExpensesMembersrt:AffiliatedEntityMember2020-07-012020-09-300001818331us-gaap:CostOfSalesMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331us-gaap:CostOfSalesMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331cmlf:RelatedPartyExpensesMembersrt:AffiliatedEntityMember2021-01-012021-09-300001818331cmlf:RelatedPartyExpensesMembersrt:AffiliatedEntityMember2020-01-012020-09-300001818331cmlf:DECDLoanAgreementMember2017-06-300001818331cmlf:DECDLoanAgreementMember2017-06-012017-06-300001818331cmlf:DECDLoanAgreementMember2021-09-300001818331cmlf:DECDLoanAgreementMember2020-12-310001818331cmlf:MasterLoanAgreementMember2020-01-012020-12-310001818331cmlf:MasterLoanAgreementMember2020-08-310001818331cmlf:MasterLoanAgreementMember2020-08-012020-08-310001818331cmlf:MasterLoanAgreementMember2020-12-310001818331cmlf:MasterLoanAgreementMember2021-01-012021-09-300001818331cmlf:MasterLeaseAgreementMember2020-12-012020-12-310001818331cmlf:MasterLeaseAgreementMember2020-12-310001818331cmlf:MasterLeaseAgreementMember2020-12-312020-12-310001818331cmlf:MasterLeaseAgreementMember2021-07-012021-07-310001818331srt:MinimumMember2021-01-012021-09-300001818331srt:MaximumMember2021-01-012021-09-300001818331srt:MinimumMember2021-09-300001818331srt:MaximumMember2021-09-30cmlf:vote0001818331cmlf:A2017StockIncentivePlanMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300001818331cmlf:A2021PlanMember2021-07-220001818331cmlf:A2021PlanMember2021-01-012021-09-300001818331cmlf:A2021PlanMember2021-07-222021-07-220001818331cmlf:A2021PlanMember2021-07-012021-09-300001818331us-gaap:EmployeeStockMember2021-09-300001818331us-gaap:EmployeeStockMember2021-01-012021-09-300001818331cmlf:A2017StockIncentivePlanMember2021-01-012021-09-300001818331us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001818331cmlf:A2017StockIncentivePlanMemberus-gaap:CommonClassAMember2021-01-012021-09-300001818331us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001818331us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001818331us-gaap:EmployeeStockOptionMembersrt:MinimumMember2020-01-012020-09-300001818331us-gaap:EmployeeStockOptionMembersrt:MaximumMember2020-01-012020-09-300001818331us-gaap:EmployeeStockOptionMember2021-09-300001818331us-gaap:EmployeeStockOptionMembersrt:MinimumMemberus-gaap:CommonClassAMember2020-09-300001818331us-gaap:EmployeeStockOptionMembersrt:MaximumMemberus-gaap:CommonClassAMember2020-09-300001818331us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2021-01-012021-09-30cmlf:employeecmlf:consultant0001818331us-gaap:StockAppreciationRightsSARSMember2021-07-012021-09-300001818331us-gaap:StockAppreciationRightsSARSMember2021-09-3000018183312021-07-222021-07-220001818331us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2021-07-012021-09-300001818331us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2020-07-012020-09-300001818331us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2021-01-012021-09-300001818331us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2020-01-012020-09-300001818331us-gaap:WarrantMember2021-07-012021-09-300001818331us-gaap:WarrantMember2020-07-012020-09-300001818331us-gaap:WarrantMember2021-01-012021-09-300001818331us-gaap:WarrantMember2020-01-012020-09-300001818331us-gaap:RedeemableConvertiblePreferredStockMember2021-07-012021-09-300001818331us-gaap:RedeemableConvertiblePreferredStockMember2020-07-012020-09-300001818331us-gaap:RedeemableConvertiblePreferredStockMember2021-01-012021-09-300001818331us-gaap:RedeemableConvertiblePreferredStockMember2020-01-012020-09-300001818331us-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2021-11-150001818331us-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMemberus-gaap:PrimeRateMember2021-11-152021-11-150001818331us-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2021-11-152021-11-15

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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 001-39482
CMLF-20210930_G1.JPG
Sema4 Holdings Corp.
(Exact name of registrant as specified in its charter)
Delaware
85-1966622
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut
06902
(Address of Principal Executive Offices) (Zip Code)
(800) 298-6470
Registrant's telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, par value $0.0001 per share SMFR The Nasdaq Global Select Market
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share SMFRW 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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
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. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer x Smaller reporting company x
Emerging growth company x
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The registrant had outstanding 241,261,362 shares of Class A common stock as of November 8, 2021.



Table of Contents
Page
3
4
4
6
7
9
11
29
45
46
48
48
92
92
92
92
93
96
2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “anticipate,” “believe,” “estimate,” “may,” “expect” and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission, or the SEC, or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about:
our estimates of the sufficiency of our existing capital resources combined with future anticipated cash flows to finance our operating requirements
our expected losses;
our expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities;
unforeseen circumstances or other disruptions to normal business operations, including supply chain interruptions and manufacturing constraints, arising from or related to COVID-19;
our expectations for generating revenue or becoming profitable on a sustained basis;
our expectations or ability to enter into service, collaboration and other partnership agreements;
our expectations or ability to build our own commercial infrastructure to scale market and sell our products;
actions or authorizations by the U.S. Food and Drug Administration or other regulatory authorities;
risks related to governmental regulation and other legal obligations, including privacy, data protection, information security, consumer protection, and anti-corruption and anti-bribery;
our ability to obtain and maintain intellectual property protection for our product candidates;
our ability to compete against existing and emerging technologies;
our stock price and its volatility;
our ability to attract and retain key personnel;
third-party payor reimbursement and coverage decisions;
our reliance on third-party laboratories and service providers for our test volume in connection with our diagnostic solutions and data programs;
our expectations for future capital requirements; and
our ability to successfully implement our business strategy.
The forward-looking statements contained in this report reflect our views and assumptions only as of the date that this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
3

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
Part I - Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
September 30, 2021 (unaudited) December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 461,276  $ 108,132 
Accounts receivable 21,257  32,044 
Due from related parties 413  289 
Inventory 31,174  24,962 
Prepaid expenses 20,205  4,557 
Other current assets 4,186  4,124 
Total current assets $ 538,511  $ 174,108 
Property and equipment, net 60,333  63,110 
Restricted cash 900  10,828 
Other assets 3,613  3,596 
Total assets $ 603,357  $ 251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 43,079  $ 38,591 
Due to related parties 1,425  1,425 
Current contract liabilities 493  1,783 
Other current liabilities 26,369  31,643 
Total current liabilities $ 71,366  $ 73,442 
Long-term debt, net of current portion 11,000  18,971 
Stock-based compensation liabilities —  131,989 
Other liabilities 21,699  22,852 
Warrant liability 46,629  — 
Earn-out contingent liability 61,400  — 
Total liabilities $ 212,094  $ 247,254 
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at September 30, 2021 and December 31, 2020, respectively
—  51,811 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at September 30, 2021 and December 31, 2020, respectively
—  46,480 
4

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at September 30, 2021and December 31, 2020, respectively
—  118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at September 30, 2021 and December 31, 2020, respectively
—  117,324 
Redeemable convertible preferred stock
—  334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
—  — 
Class A common stock: $0.0001 par value, 380,000,000 shares authorized, 240,190,402 shares issued and outstanding at September 30, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 2020
24  — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
—  — 
Additional paid-in capital
926,253  $ — 
Accumulated deficit
(535,014) (330,051)
Total stockholders’ equity (deficit)
391,263  (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
$ 603,357  $ 251,642 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share amounts)
(unaudited)
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Revenue
Diagnostic test revenue (including related party revenue of $20 and $86 for the three months ended September 30, 2021 and 2020, respectively and $90 and $186 for the nine months ended September 30, 2021 and 2020, respectively)
$ 41,410  $ 37,893  $ 148,973  $ 113,759 
Other revenue (including related party revenue of $65 and $0 for the three months ended September 30, 2021 and 2020, respectively and $153 and $0 for the nine months ended September 30, 2021 and 2020, respectively)
1,768  715  5,421  1,606 
Total revenue
43,178  38,608  154,394  115,365 
Cost of services (including related party expenses of $656 and $452 for the three months ended September 30, 2021 and 2020, respectively and $1,942 and $1,485 for the nine months ended, September 30, 2021 and 2020 respectively)
58,752  36,530  180,195  111,754 
Gross (loss) profit
(15,574) 2,078  (25,801) 3,611 
Research and development
17,831  19,083  82,916  41,540 
Selling and marketing
22,121  12,735  69,937  33,154 
General and administrative
33,230  24,342  147,941  39,627 
Related party expenses
847  1,933  3,532  6,239 
Loss from operations
(89,603) (56,015) (330,127) (116,949)
Other income (expense), net:
Change in fair market value of warrant and earn-out contingent liabilities 122,171  —  122,171  — 
Interest income
27  63  57  473 
Interest expense
(683) (637) (2,128) (1,826)
Other income (expense), net
(520) (26) 5,064  2,645 
Total other income (expense), net
120,995  (600) 125,164  1,292 
Income (loss) before income taxes
$ 31,392  $ (56,615) $ (204,963) $ (115,657)
Income tax provision
—  —  —  — 
Net income (loss) and comprehensive income (loss)
$ 31,392  $ (56,615) $ (204,963) $ (115,657)
Weighted average shares outstanding of Class A common stock for basic earnings
185,680,394  124  63,121,738  124 
Weighted average shares outstanding of Class A common stock for diluted earnings
210,330,946  124  63,121,738  124 
Basic net income (loss) per share, Class A common stock
$ 0.17  $ (456,573) $ (3.25) $ (932,718)
Diluted net income (loss) per share, Class A common stock
$ 0.15  $ (456,573) $ (3.25) $ (932,718)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
Three months ended September 30, 2021
Redeemable Convertible Preferred Stock Class A Common Stock Class B Common Stock
Shares Amount Shares Par value Shares Par value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)
Balances at June 30, 2021
171,535,213 $ 334,439  4,458 $   1,383,736 $   $ 1,483  $ (566,406) $ (564,923)
Net income —  —  —  —  —  —  —  31,392  31,392 
Conversion of Preferred Stock (171,535,213) (334,439) 148,543,062  15  —  —  104,517  —  104,532 
Conversion of Class B Common Stock —  —  1,309,320  —  (1,383,736) —  (744) —  (744)
Net equity infusion from the Business Combination —  —  90,333,562  —  —  510,742  —  510,751 
Stock based compensation modification reclassification —  —  —  —  —  —  304,837  —  304,837 
Stock based compensation expense —  —  —  —  —  —  5,418  —  5,418 
Balances at September 30, 2021
$   240,190,402 $ 24  $   $ 926,253  $ (535,014) $ 391,263 
Nine months ended September 30, 2021
Redeemable Convertible Preferred Stock Class A Common Stock Class B Common Stock
Shares Amount Shares Par value Shares Par value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)
Balances at December 31, 2020 171,535,213 $ 334,439  124 $   130,557 $   $   $ (330,051) $ (330,051)
Net loss —  —  —  —  —  —  —  (204,963) (204,963)
Stock option exercises —  —  4,334  —  1,253,179  —  1,483  —  1,483 
Conversion of Preferred Stock (171,535,213) (334,439) 148,543,062  15  —  104,517  —  104,532 
Conversion of Class B Common Stock —  —  1,309,320  —  (1,383,736) —  (744) —  (744)
Net equity infusion from the Business Combination —  —  90,333,562  —  —  510,742  —  510,751 
Stock based compensation modification reclassification —  —  —  —  —  —  304,837  —  304,837 
Stock based compensation expense —  —  —  —  —  —  5,418  —  5,418 
Balances at September 30, 2021
$   240,190,402 $ 24  $   $ 926,253  $ (535,014) $ 391,263 
7

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
Three months ended September 30, 2020
Redeemable Convertible Preferred Stock Class A Common Stock Class B Common Stock
Shares Amount Shares Par value Shares Par value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)
Balances at June 30, 2020
147,038,267 $ 217,115  124 $   $   $   $ (147,753) $ (147,753)
Net loss —  —  —  —  —  —  —  (56,615) (56,615)
Issuance of Preferred Series C, net of issuance costs 24,496,946  117,324  —  —  —  —  —  —   
Balances at September 30, 2020
171,535,213 $ 334,439  124 $   $   $   (204,368) (204,368)
Nine months ended September 30, 2020
Redeemable Convertible Preferred Stock Class A Common Stock Class B Common Stock
Shares Amount Shares Par value Shares Par value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)
Balances at December 31, 2019 147,038,267 $ 217,115  124 $   $   $   $ (88,711) $ (88,711)
Net loss —  —  —  —  —  —  —  (115,657) (115,657)
Issuance of Preferred Series C, net of issuance costs 24,496,946  117,324  —  —  —  —  —  —   
Balances at September 30, 2020
171,535,213 $ 334,439  124 $   $   $   (204,368) (204,368)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended September 30,
2021 2020
Operating activities
Net loss
$ (204,963) $ (115,657)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
16,012  8,147 
Stock-based compensation expense
182,454  30,073 
Change in fair value of warrant and contingent liabilities
(122,171) — 
Provision for excess and obsolete inventory
1,122  — 
Non-cash lease expense
1,174  2,203 
Loss on extinguishment of debt 301  — 
Change in operating assets and liabilities:
Accounts receivable
10,787  (3,159)
Inventory
(7,334) (8,105)
Prepaid expenses and other current assets
(15,710) 516 
Due to/from related parties
(124) 617 
Other assets
(17) 1,174 
Accounts payable and accrued expenses
4,685  (537)
Contract liabilities
(1,290) (135)
Other current liabilities
(3,375) 10,068 
Net cash used in operating activities
(138,449) (74,795)

Investing activities
Purchases of property and equipment
(4,344) (17,310)
Development of internal-use software assets
(8,749) (3,165)
Net cash used in investing activities
(13,093) (20,475)

Financing activities
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs —  117,326 
Proceeds from PIPE issuance 350,000  — 
Proceeds from equity infusion from the merger, net of redemptions 442,684  — 
Legacy Sema4 Shareholder payout (230,665) — 
Payment of transaction costs     (51,760) — 
Stock Appreciation Rights payout (3,795) — 
Repayment of long-term debt (8,741) — 
Capital lease principal payments (2,960) (3,384)
Long-term debt principal payments (1,000) — 
Proceeds from long-term debt —  6,000 
Exercise of stock options 995  — 
Net cash provided by financing activities
494,758  119,942 

Net increase in cash, cash equivalents and restricted cash
343,216  24,672 
Cash, cash equivalents and restricted cash, at beginning of period
118,960  115,006 
Cash, cash equivalents and restricted cash, at end of period
$ 462,176  $ 139,678 
9

Table of Contents
Sema4 Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Supplemental disclosures of cash flow information
Cash paid for interest
$ 2,128  $ 1,826 
Cash paid for taxes
$ 50  $ — 
Purchases of property and equipment in accounts payable and accrued expenses
$ 193  $ 268 
Software development costs in accounts payable and accrued expenses
$ 1,228  $ 1,629 
Assets acquired under capital leases obligations
$ 641  $ 5,637 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization and Description of Business
Mount Sinai Genomics Inc., a Delaware corporation (“Legacy Sema4”) provides genomics-related diagnostic and information services and pursues genomics medical research. Legacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Legacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the Legacy Sema4 began to provide diagnostic testing services in response to the recent novel coronavirus (“COVID-19”) outbreak. Legacy Sema4 serves patients and bills third-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in New York, California, Florida, Connecticut and New Jersey.
On July 22, 2021 (the “Closing Date”), CM Life Sciences, Inc. (“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated February 9, 2021. On the Closing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.
The Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).
Prior to the Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and (ii) Sema4 Holdings and its subsidiary following the consummation of the Business Combination.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto as of and for the years ended December 31, 2020, 2019 and 2018.
The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to state fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results of operations or cash flows for a full year or any subsequent interim period.
The Company’s historical financial information includes costs of certain services historically provided by Icahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to the Transition Services Agreement ("TSA") and service agreements.
11

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Except as described elsewhere in Note 2 and in Note 3, “Business Combination”, there have been no material changes to the Company’s significant accounting policies as described in the unaudited condensed consolidated financial statements for the periods ended September 30, 2021 and 2020.
Although the Company has incurred recurring losses in each year since inception, the Company expects its cash and cash equivalents will be sufficient to fund operations for at least the next twelve months from the date of filing of this Form 10-Q.
Segment Information
The Company operates and manages its business as one reportable operating segment based on how the Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), assesses performance and allocates resources across the business.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. 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 unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events. These estimates include, but are not limited to, the transaction price for certain contracts with customers, the capitalization of software costs and the valuation of stock-based awards, inventory, warrant liability and earn-out contingent liability. Actual results could differ materially from those estimates, judgments and assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents are deposited with high-quality financial institutions. The Company has balances in financial institutions that exceed federal depository insurance limits. Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists. The Company has not experienced any losses on its deposits of cash and cash equivalents.
The Company assesses both the customer and, if applicable, the third-party payor that reimburses the Company on the customer’s behalf when evaluating the concentration of credit risk. Significant customers and payors are those that represent more than 10% of the Company’s total annual revenues or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable as of September 30, 2021 and December 31, 2020 were primarily from large managed care insurance companies and a reference laboratory. There was no individual customer that accounted for 10% or more of the Company’s revenue or accounts receivable for any of the periods presented. The Company does not require collateral as a means to mitigate customer credit risk.
For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:
Revenue Accounts Receivable
Three months ended September 30, Nine months ended September 30,
As of
September 30,
As of
December 31,
2021 2020 2021 2020 2021 2020
Payor A 23  % 22  % 19  % 34  % 17  % 10  %
Payor B
* 10  % * 13  % * *
Payor C
15  % 16  % 13  % 15  % * *
Payor D
* 12  % 10  % 11  % 10  % *
Payor E
* * * * * 20  %
*less than 10%
12

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 8% and 12% for the three months ended September 30, 2021 and 2020, respectively and 10% and 9% of purchases of lab supplies, reagents and kits for the nine months ended September 30, 2021 and 2020, respectively. This risk is managed by maintaining a target quantity of surplus stock.
Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. COVID-19 has had, and continues to have, an extensive impact on global health and economic conditions. Many jurisdictions, including those in which the Company has current operations, have implemented measures to combat the spread of COVID-19, such as travel restrictions and shelter in place orders. In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.
Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of COVID-19 and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, the Company entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 strains. While test volumes have since improved, the Company continues to experience changes in the mix of tests due to the impact of COVID-19. COVID-19 could continue to have a material impact on the Company’s results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law, which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. During 2020, as part of the stimulus provided by the CARES Act, the Company received $5.4 million, comprised of $2.6 million received under the Provider Relief Fund (“PRF”) distribution, which was recognized in other income, net in the statements of operations and comprehensive loss, and $2.8 million received under the Employee Retention Credit (“ERC”) distribution, which was recorded in the other liabilities and reflected in this balance as of September 30, 2021 and December 31, 2020.
During 2021, the Company received an additional $5.6 million under the PRF distribution, which was recognized in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of amounts invested in money market funds. Carrying values of cash equivalents approximate fair value due to the short-term nature of these instruments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the condensed consolidated balance sheets that sum to the total of the same amounts shown on the condensed consolidated statements of cash flows (in thousands):
As of
September 30, 2021
As of
December 31, 2020
Cash and cash equivalents $ 461,276  $ 108,132 
Restricted cash 900  10,828 
Total $ 462,176  $ 118,960 
Restricted cash as of September 30, 2021 consists of money market deposit accounts that secure an irrevocable standby letter of credit that serves as collateral for security deposit operating leases (see Note 9).
Warrant Liability
As of the consummation of the Merger in July 2021, there were 21,995,000 warrants to purchase shares of Class A common stock outstanding, including 14,758,333 public warrants and 7,236,667 private placement warrants. As of September 30, 2021, there were 21,994,972 warrants to purchase shares of Class A common stock outstanding, including 14,758,305 public warrants and 7,236,667 private placement warrants outstanding. Each warrant expires five years after the Business Combination or earlier upon redemption or liquidation, and entitles the holder to purchase one share of Class
13

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
A common stock at an exercise price of $11.50 per share, subject to adjustment, at any time commencing on September 4, 2021.
The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $18.00 as described below:

in whole and not in part;
at a price of $0.01 per public warrant;
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before sending the notice of redemption to warrant holders.
The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $10.00 as described below:

in whole and not in part;
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the common stock;
if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
if the closing price of the common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
The private placement warrants were issued to CMLS Holdings, LLC, Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock issuable upon the exercise of the private placement warrants were not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.
The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant terms and applicable authoritative guidance in accordance with ASC 480-Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Earn-out contingent liability
In connection with the Merger, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 19,021,576 earn-out shares and earn-out Restricted Stock Units (“RSUs”). Based on an assessment of the earn-out shares for the Legacy Sema4 stockholders, the Company considered ASC 480 and ASC 815 and accounted for the
14

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
earn-out shares as a liability. The Company subsequently measures the fair value of the liability at each reporting period and reports the changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
The Company determined the fair value of the earn-out shares issued to the Legacy Sema4 stockholders as of September 30, 2021 was $61.4 million.
As for the earn-out RSUs for the Legacy Sema4 option holders, the vesting of such arrangement is conditioned on the satisfaction of both the service requirement and on the satisfaction of a market-based requirement. Therefore, the Company accounts for this arrangement in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and no amounts have been recorded in relation to the earn-out RSU during the quarter because they were not granted to the option holders during the three and nine months ended on September 30, 2021.
The estimated fair value of the earn-out is determined using a Monte Carlo valuation analysis.
Capitalized Internal-Use Software Costs
We capitalize certain costs related to the development of our software applications for internal use. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. We periodically assess whether triggering events are present to review internal-use software for impairment. To the extent that we change our estimates related to internal-use software, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Emerging Growth Company
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recently Adopted Accounting Pronouncements
Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when the counterparty is a customer. In addition, ASC Topic 808 (“ASC 808”), Collaborative Arrangements precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. Adoption of ASU 2018-18 did not have an impact on the Company’s unaudited condensed consolidated financial statements as the Company is not currently a participant in any such collaborative arrangements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize right-of-use assets and lease liabilities for most leases on their balance sheets. Expense recognition for lessees under ASU 2016-02 is similar to current lease accounting. ASU 2016-02 will require enhanced disclosures to help the financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend on its classification as a finance or operating lease. As an emerging growth company, the provisions of ASU 2016-02 are effective for the
15

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Company for annual and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is evaluating the transition options permissible under ASU 2016-02 and plans to adopt through a cumulative adjustment to retained earnings on the date of adoption. Significant implementation matters being addressed by the Company include documenting the new lease accounting process, and determining incremental borrowing rate and complete population of the leases for evaluation. The Company is evaluating the effect this ASU will have on its financial statements, related disclosures and ongoing financial reporting. The Company expects implementation of this ASU to result in the recognition of right-of-use assets and corresponding lease liabilities in its balance sheets, principally related to office and facility leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new credit losses standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, contract assets recognized as a result of applying ASC 606, loans and certain other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in earlier recognition of credit losses than under today’s incurred loss model. As an emerging growth company, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the standard. ASU 2018-15 will require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 also requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. Additionally, ASU 2018-15 requires the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs on the balance sheets in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The amendments in ASU 2018-15 are effective for the Company in annual reporting periods beginning after December 15, 2020 and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is expecting to prospectively apply amendments to all implementation costs incurred after the date of adoption.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and clarifying and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently assessing the impact of adopting this new accounting guidance will have on its financial statements and related disclosures.
3. Business Combination
As discussed in Note 1, on July 22, 2021, the Company consummated the Business Combination and received net cash proceeds of $510.0 million.
Pursuant to the Business Combination, the following occurred:
Holders of 10,188 shares of CMLS’s Class A common stock sold in its initial public offering (the “public shares”) exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from CMLS’s initial public offering (the “IPO”), which was approximately $10.00 per share, or $101,880 in aggregate.
16

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Each share of CMLS’s Class B common stock was automatically converted into common stock of the Company.
Each share of the Legacy Sema4 Class B common stock was converted into 1/100th of a share of Legacy Sema4 Class A common stock and each share of Legacy Sema4 common stock and preferred stock was canceled and received a portion of the merger consideration, resulting in certain Legacy Sema4 stockholders receiving $230,665,220 of cash and the Legacy Sema4 stockholders receiving an aggregate of 178,336,298 shares of common stock of the Company.
Pursuant to subscription agreements entered into on February 9, 2021, certain investors agreed to subscribe for an aggregate of 35,000,000 newly-issued shares of common stock at a purchase price of $10.00 per share for an aggregate purchase price of $350,000,000 (the “PIPE Investment”). Concurrently with the closing of the Business Combination, the Company consummated the PIPE Investment.
After giving effect to the Merger, the redemption of public shares and the conversion of the CMLS Class B common stock as described above, and the consummation of the PIPE Investment, there were 240,190,402 shares of the Company’s common stock issued and outstanding.
The Company recorded $51.8 million of transaction costs which consist of direct, incremental legal, professional, accounting, and other third-party fees that were directly related to the execution of the Merger in additional paid-in capital. Upon consummation of the Merger, $9.0 million of the transaction costs relates to costs incurred by Legacy Sema4 and reclassed to offset against equity from prepaid expense and other current assets.
4. Revenue Recognition
Diagnostic Revenue
The majority of the Company’s revenue is generated from diagnostic services provided to three groups of customers: patients with third-party insurance coverage; patients without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics and reference laboratories. Revenue from diagnostic testing services is recorded at the estimated transaction price, subject to the constraint for variable consideration, upon transfer of control of the service.
Other Revenue
The Company enters into both short-term and long-term project-based collaboration service agreements with third parties, whereby the Company provides diagnostic testing, research and related data aggregation reporting services. The consideration to which the Company is entitled pursuant to its collaboration service agreements generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones during the contract term. Non-refundable upfront payments are generally received in advance of performing the services and, therefore, are recorded as a contract liability upon receipt. Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved. Revenue for such collaboration service agreements is recognized over time using an input measure based on costs incurred to satisfy the performance obligation.
17

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Disaggregated revenue
The following tables summarize the Company’s revenue disaggregated by type of customer (in thousands):
Three months ended September 30,
2021 2020
Diagnostic test revenue
Patients with third-party insurance
$ 36,738  $ 31,627 
Institutional customers
3,656  5,796 
Self-pay patients
1,016  470 
Total diagnostic test revenue
41,410  37,893 
Other revenue
1,768  715 
Total
$ 43,178  $ 38,608 
Nine months ended September 30,
2021 2020
Diagnostic test revenue
Patients with third-party insurance
$ 123,395  $ 103,422 
Institutional customers
23,075  8,948 
Self-pay patients
2,503  1,389 
Total diagnostic test revenue
148,973  113,759 
Other revenue
5,421  1,606 
Total
$ 154,394  $ 115,365 

Reassessment of variable consideration
Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates estimated variable consideration quarterly.
For the three months ended September 30, 2021, the quarterly change in estimate resulted in a net $0.6 million adjustment for tests in which the performance obligation of delivering the test results was met in prior periods. The change in estimate is a result of changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met and settlements with third party payors. For the three months ended September 30, 2020, the quarterly change in estimate did not result in material adjustments to the Company’s previously reported revenue or accounts receivable amounts.
Remaining performance obligations
Due to the long-term nature of the collaboration service agreement, the Company’s obligations pursuant to such agreement represent partially unsatisfied performance obligations as of September 30, 2021. The revenues under existing collaboration service agreements with original expected durations of more than one year are estimated to be approximately $10.7 million. The Company expects to recognize the majority of this revenue over the next 4 years.
Contract assets and liabilities
Contract assets consist of the Company’s right to consideration that is conditional upon its future performance. Contract assets arise in collaboration service agreements for which revenue is recognized over time but the Company’s right to bill the customer is contingent upon the achievement of contractually-defined milestones.
Contract liabilities consist of customer payments in excess of revenues recognized. For collaboration service agreements, the Company assesses the performance obligations and recognizes contract liabilities as current or non-current based upon forecasted performance.
18

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shown in the table below (in thousands):
Contract
Assets
Contract
Liabilities
December 31, 2020
$ 2,028  $ 3,811 
Contract asset additions
832  — 
Customer prepayments
—  1,723 
Revenue recognized
105  (2,076)
September 30, 2021
$ 2,965  $ 3,458 
The decrease in contract liabilities as of September 30, 2021 is primarily due to the execution of the performance obligations during the period. The Company presents contract assets and contract liabilities with respect to customer contracts on a net basis on its condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020, $0.5 million and $1.8 million is recorded as current contract liabilities, respectively.
Revenues recognized that were included in the contract liability balance at the beginning of each period were $0.3 million and $0.1 million, respectively, for the three months ended September 30, 2021 and September 30, 2020 and $2.1 million and $0.3 million for the nine months ended September 30, 2021 and September 30, 2020.
Costs to fulfill contracts
Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to ISMMS. Amounts are generally prepaid and then expensed in line with the pattern of revenue recognition. Prepayment of amounts prior to the costs being incurred are recognized on the condensed consolidated balance sheets as current or non-current based upon forecasted performance.
As of September 30, 2021 and December 31, 2020, the Company had outstanding deferred costs to fulfill contracts of $2.2 million and $3.0 million, respectively. As of September 30, 2021 and December 31, 2020, all outstanding deferred costs were recorded as prepaid expenses and other current assets.
Amortization of deferred costs was $0.3 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively and $0.9 million and $0.7 million for the nine months ended September 30, 2021 and 2020, respectively. The amortization of these costs is recorded in the cost of services on the condensed consolidated statements of operations and comprehensive loss.
5. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The following hierarchy lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active or model-derived valuations whose significant inputs are observable.
Level 3: Unobservable inputs that are significant to the measurement of fair value but are supported by little to no market data.
19

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, capital leases, warrant liability, earn-out contingent liability and long-term debt. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short-term nature of these accounts.
The Company’s capital leases and long-term debt are classified within Level 1 of the fair value hierarchy because such long-term debt and capital lease agreements bear interest at rates for instruments with similar characteristics; accordingly, the carrying value of these liabilities approximate their fair values.
The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis (in thousands):
As of September 30, 2021
Total Level 1 Level 2 Level 3
Financial Assets:
Money market funds
$ 451,784  $ 451,784  $ —  $ — 
Total financial assets
$ 451,784  $ 451,784  $ —  $ — 
Financial Liabilities:
Public warrant liability
$ 31,287  $ 31,287  $ —  $ — 
Private warrant liability
15,342  —  15,342  — 
Earn-out contingent liability 61,400  —  —  61,400 
Total financial liabilities
$ 108,029  $ 31,287  $ 15,342  $ 61,400 
As of December 31, 2020
Total Level 1 Level 2 Level 3
Financial Assets:
Money market funds
$ 92,940  $ 92,940  $ —  $ — 
Total financial assets
$ 92,940  $ 92,940  $ —  $ — 

As of September 30, 2021 and December 31, 2020, money market funds are classified within Level 1 of the fair value hierarchy as the fair value is based on quoted prices in active markets.

The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were originally issued in the IPO and warrants sold in a private placement to CMLS Holdings LLC (the “Private Warrants”). The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since the Public Warrants and Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as non-current liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss at each reporting date. As of September 30, 2021, the Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets. The Private Warrants are classified within Level 2 of the fair value hierarchy as management determined the fair value of each Private Warrant is the same as that of a Public Warrant because the terms are substantially the same.

The contingent obligation to issue earn-out shares for Legacy Sema4 stockholders was accounted for as a liability and required remeasurement at each reporting date. The estimated fair value of the total earn-out shares as of September 30, 2021 is determined based on a Monte Carlo simulation valuation model. The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and Company’s common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics. The key assumptions utilized in the valuation included the Company’s stock price of $7.59, expected volatility of 67.5%, risk-free rate of 0.24%, and an expected term of 1.8 years. The earn-out contingent liability is categorized as Level 3 of the fair value hierarchy as the Company utilizes unobservable inputs in estimating volatility rate. Initial fair value determined and recorded at the
20

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Closing Date was $143.1 million and a gain of $81.7 million was recorded in the change in fair market value of warrant and earn-out contingent liabilities in the condensed consolidated statements of operations and comprehensive loss based on re-measurement performed as of September 30, 2021.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
6. Property and Equipment
Property and equipment consisted of the following (in thousands):
As of
September 30,
2021
As of
December 31,
2020
Laboratory equipment $ 24,276  $ 22,818 
Equipment under capital leases
21,384  20,743 
Leasehold improvements
21,650  16,736 
Capitalized software
23,135  14,631 
Building under capital lease
6,276  6,276 
Construction in-progress
1,660  4,673 
Computer equipment
4,840  4,118 
Furniture, fixtures and other equipment
3,222  3,214 
Total property and equipment
106,443  93,209 
Less: accumulated depreciation and amortization
(46,110) (30,099)
Property and equipment, net
$ 60,333  $ 63,110 
For the three months ended September 30, 2021 and 2020, depreciation and amortization expense was $5.5 million and $3.1 million. For the nine months ended September 30, 2021 and 2020, depreciation and amortization expense was $16.0 million and $8.1 million, respectively. This included software amortization expense of $1.4 million and $0.8 million for the three months ended September 30, 2021 and 2020 and $4.0 million and $2.0 million for the nine months ended September 30, 2021 and 2020, respectively. Depreciation and amortization expense is included within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,
2021 2020
Cost of services $ 3,679  $ 1,983 
Research and development
1,500  182 
Selling and marketing
— 
General and administrative
311  902 
Total depreciation and amortization expenses
$ 5,491  $ 3,067 
Nine months ended September 30,
2021 2020
Cost of services $ 10,824  $ 5,805 
Research and development
4,197  692 
Selling and marketing
— 
General and administrative
989  1,650 
Total depreciation and amortization expenses
$ 16,012  $ 8,147 

7. Related Party Transactions
On June 1, 2017, the Company signed a contribution and funding agreement and other agreements with ISMMS, whereby ISMMS contributed certain assets and liabilities related to the Company’s operations, provided certain services to
21

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
the Company, and also committed to funding the Company up to $55.0 million in future capital contributions in exchange for equity in the Company, of which $55.0 million was drawn as of December 31, 2019. Following the transaction, the Company commenced operations and began providing the services and performing research.
For three and nine months ended September 30, 2021 and 2020, the Company incurred certain related party costs. Expenses recognized under the TSA totaled $0 and $1.7 million for the three months ended September 30, 2021 and 2020, respectively and $1.4 million and $5.5 million for the nine months ended September 30, 2021 and 2020 and are presented within related party expenses in the condensed consolidated statements of operations and comprehensive loss. The Company had TSA payables due to ISMMS of $0 and $0.6 million as of September 30, 2021 and December 31, 2020, respectively. These amounts are included within due to related parties on the Company’s condensed consolidated balance sheets.
Expenses recognized pursuant to other service arrangements with ISMMS totaled $1.5 million and $0.6 million for the three months ended September 30, 2021 and 2020 and $4.1 million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively. These amounts are included in either cost of services or related party expenses on the condensed consolidated statements of operations and comprehensive loss depending on the particular activity to which the costs relate. Payables due to ISMMS for the other service arrangements were $1.4 million $0.8 million as of September 30, 2021 and December 31, 2020, respectively. These amounts are included within due to related parties on the Company’s condensed consolidated balance sheets.
Total related party costs are included within cost of services and related party expenses in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,
2021 2020
Cost of services $ 656  $ 452 
Related party expenses
847  1,933 
Total related party costs
$ 1,503  $ 2,385 

Nine months ended September 30,
2021 2020
Cost of services $ 1,942  $ 1,485 
Related party expenses
3,532  6,239 
Total related party costs
$ 5,474  $ 7,724 
8. Long-Term Debt
2016 Funding Commitment
In June 2017, ISMMS assigned a loan funding commitment from the Connecticut Department of Economic and Community Development (“DECD”) to the Company (the “DECD Loan Agreement”). The DECD Loan Agreement, as amended, provides for a total loan commitment of $15.5 million at a fixed annual interest rate of 2.0% for a term of 10 years. The Company is required to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023. The final payment of principal and interest is due in July 2028. This commitment is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement.
The outstanding loan balance from the DECD Loan Agreement was $11.0 million as of September 30, 2021 and December 31, 2020.
2020 Master Loan Agreement
In August 2020, the Company entered into a loan and security agreement with a bank (the “Master Loan Agreement”), in which the Company received a loan of $6.3 million and deposited the proceeds into a deposit account held by the bank.
22

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in November 2020. Interest payments were fixed at an annual interest rate of 4.75%.
The Company recorded the $6.3 million proceeds as restricted cash on the condensed consolidated balance sheets at December 31, 2020. The outstanding loan balance was $6.1 million at December 31, 2020. In July 2021, the Company terminated the Master Loan Agreement by paying off the full amount, including $5.4 million principal and interest and $0.1 million in early payment penalties assessed pursuant to the terms of the agreement which is included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
2020 Master Lease Agreement
In December 2020, the Company entered into a lease agreement with a lender whereby the Company agreed to sell certain equipment and immediately lease back the equipment, resulting in proceeds of $3.6 million. Per the terms of the agreement, a financial institution issued an irrevocable standby letter of credit to the lender for $3.6 million. The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in February 2021. Interest payments were fixed at an annual interest rate of 3.54%.
The Company was required to maintain an aggregate amount on deposit equal to at least 105% of the value of any outstanding letters of credit issued by the financial institution on the Company’s behalf. The letter of credit was required to be in place until all obligations had been paid in full. Further, the Company was required to furnish annual audited financial statements and other financial information to the lender on a regular basis. The Company was in compliance with the covenants as of December 31, 2020.
The Company recorded the $3.6 million proceeds as restricted cash on the condensed consolidated balance sheets at December 31, 2020. The outstanding loan balance was $3.6 million at December 31, 2020. In July 2021, the Company terminated the Master Lease Agreement by paying off the full amount, including $3.3 million principal and interest and early payment penalties of $0.2 million assessed pursuant to the terms of the agreement which is included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
Maturities of Long-Term Debt
As of September 30, 2021, long-term debt matures as follows (in thousands):
2021 (remainder of year)
$ — 
2022 — 
2023 875 
2024 2,131 
2025 2,174 
Thereafter 5,820 
Total maturities of long-term debt
11,000 
Less: current portion of long-term debt
— 
Total long-term debt, net of current maturities
$ 11,000 
9. Commitments and Contingencies
Operating Leases
The Company’s operating leases consist of office and lab space leases and a ground lease associated with a building under capital lease. The Company has entered into leases of office and lab space with ISMMS, including month-to-month leases in place during the nine months ended September 30, 2021 and 2020. Pursuant to the terms of a lease agreement, the Company was required to have issued an irrevocable standby letter of credit to the lessor for $0.9 million, which was included in restricted cash on the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.
23

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Future minimum payments under non-cancelable operating leases as of September 30, 2021 are as follows (in thousands):
2021 (remainder of year)
$ 1,076 
2022 4,383 
2023 4,474 
2024 4,562 
2025 4,684 
Thereafter 50,239 
Total operating lease obligations
$ 69,418 
Rent expense related to non-cancelable operating leases was $1.4 million for the three months ended September 30, 2021 and 2020, respectively. Rent expense related to month-to-month operating leases was $0.3 million and $0.9 million for the three months ended September 30, 2021 and 2020. Rent expense related to non-cancelable operating leases was $4.3 million and $4.0 million for the nine months ended September 30, 2021 and 2020, respectively. Rent expense related to month-to-month operating leases was $0.9 million and $2.4 million for the nine months ended September 30, 2021 and 2020.
Capital Leases
The Company entered into various capital lease agreements to obtain laboratory equipment that contain bargain purchase commitments at the end of the lease term. The terms of the capital leases range from 3 to 5 years with interest rates ranging from 1.9% to 12.0%. The leases are secured by the underlying equipment. The Company also leases a building used for office and laboratory space in which the building is accounted for as a capital lease and the land is as an operating lease.
Property and equipment under capital leases was $27.7 million and $27.0 million as of September 30, 2021 and December 31, 2020, respectively. Accumulated amortization on capital lease assets was $12.6 million and $9.7 million on September 30, 2021 and December 31, 2020, respectively.
For all capital leases, the portion of the future payments designated as principal repayment is recorded as a capital lease obligation on the Company’s condensed consolidated balance sheets in accordance with repayment terms. Future payments under capital leases as of September 30, 2021, are as follows (in thousands):
2021 (remainder of year)
$ 1,225 
2022 4,808 
2023 3,584 
2024 2,763 
2025 2,451 
Thereafter 51,886 
Total capital lease obligations
66,717 
Less: amounts representing interest
(44,271)
Present value of net minimum capital lease payments
22,446 
Less : current portion
(3,515)
Capital lease obligations, net of current portion
$ 18,931 
Interest expense related to capital leases was $0.6 million for the three months ended September 30, 2021 and 2020 and $1.7 million for the nine months ended September 30, 2021 and 2020.
24

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Contingencies
The Company is a party to various actions and claims arising in the normal course of business. The Company does not believe that the outcome of these matters will have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows. However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s condensed consolidated financial condition or results of operations.
The Company was not a party to any material legal proceedings as of September 30, 2021, nor is it a party to any legal proceedings as of the date of issuance of these condensed consolidated financial statements.
10. Stock-Based Compensation
Stock Incentive Plans
The Company’s 2017 equity Incentive Plan (the “2017 Plan”), as amended in February 2018, allowed the grant of options, restricted stock awards, stock appreciation rights and restricted stock units. No options granted under the 2017 Plan are exercisable after 10 years from the date of grant, and option awards generally vest over a four-year period.
The 2017 Plan was terminated in connection with the adoption of the Company's 2021 Equity Incentive Plan (the "2021 Plan"). Any awards granted under the 2017 Plan that remained outstanding as of the Closing Date and were converted into awards with respect to the Company’s Class A common stock in connection with the consummation of the Business Combination continue to be subject to the terms of the 2017 Plan and applicable award agreements, except for a modification of the repurchase provision, which is discussed further below.
On July 22, 2021, in connection with the Business Combination, the 2021 Plan became effective and 32,734,983 authorized shares of common stock were reserved for issuance thereunder. This Plan will be administered by the Compensation Committee of the Company’s Board of Directors, including determination of the vesting, exercisability and payment of the awards to be granted under this Plan. No awards granted under the 2021 Plan are exercisable after 10 years from the date of grant. The Company did not make any grants under the 2021 Plan during the three and nine month period ended September 30, 2021.
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) became effective in connection with the Business Combination. The 2021 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. A total of 4,804,011 shares of common stock have been reserved for future issuance under the 2021 ESPP. On each January 1 of each of 2022 through 2031, the aggregate number of shares of common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to one percent (1%) of the total number of shares of all classes of common stock issued and outstanding on the immediately preceding December 31. The Company did not make any grants of purchase rights under the 2021 ESPP during the three and nine month periods ended September 30, 2021.
Stock Option Activity
Under the 2017 Plan, the Company had a call option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement (the “2017 Plan Call Option”). The options granted under the 2017 plan were accounted for as liability awards due to the 2017 Plan Call Option. The Company had a history of repurchase practice and the intention to repurchase the vested options. Therefore, fair value of the liability awards were remeasured at each reporting period until the stockholder bears the risks and rewards of equity ownership for a reasonable period of time, which the Company concludes is at least six months.
Upon consummation of the Business Combination, the Company’s Board of Directors waived the Company’s right under the 2017 Plan Call Option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement. As such, the Company modified the liability awards to equity awards and reclassified the modification date fair value of the awards to shareholders’ equity in the unaudited condensed consolidated financial statements as of July 22, 2021. An incremental expense of $0.4 million resulting from the modification event was recorded in the three months ended September 30, 2021.
25

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
The following summarizes the stock option activity, which reflects the conversion of the options granted under the 2017 Plan into awards with respect to the Company Class A common stock in connection with the consummation of the Business Combination (in thousands, except share and per share amounts):
Class A Common Stock
Stock Options Outstanding
Weighted Average Exercise Price
Balance at December 31, 2020
32,339,970  $ 0.54 
Options granted under 2017 Plan 241,112  $ 1.90 
Options exercised (1,257,513) $ 0.85 
Options forfeited and canceled (2,477,613) $ 1.18 
Balance at September 30, 2021
28,845,956  $ 0.49 
Options exercisable at September 30, 2021
22,851,188  $ 0.33 
The estimated fair value of the stock option awards as of September 30, 2021 and September 30, 2020, was estimated using the Black-Scholes option pricing model with the following assumptions:
Nine months ended September 30,
2021 2020
Expected volatility 49.60  % 65.00  %
Expected term (in years)
5.00
2.00 - 4.50
Risk-free interest rate
0.71  %
0.15% - 0.27%
Dividend yield
0.00  % 0.00  %
Fair value of Class A common stock
$11.60
$0.89 - $1.85
As of September 30, 2021, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $25.5 million. The Company expects to recognize the unrecognized compensation cost on a graded-vesting basis over a weighted-average period of 1.5 years.
Stock Appreciation Rights (SAR) Activity
The Company historically granted SAR to one employee and one consultant with exercise condition of a liquidation event. As a result of the Business Combination, settlement of the outstanding vested SARs in exchange for a cash payment and to cancel the outstanding unvested SARs was agreed upon and an expense of $3.8 million related to the vested SAR was recognized by the Company during the three months ended September 30, 2021. There were no outstanding SARs as of September 30, 2021.
Stock-based compensation expense for all awards granted and outstanding is included within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,
2021 2020
Cost of services $ 3,699  $ 3,506 
Research and development
3,160  6,583 
Selling and marketing
2,263  2,758 
General and administrative
8,889  16,606 
Total stock-based compensation expense
$ 18,011  $ 29,453 
26

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements

Nine months ended September 30,
2021 2020
Cost of services $ 23,162  $ 3,500 
Research and development
40,977  6,687 
Selling and marketing
20,722  2,865 
General and administrative
97,593  17,021 
Total stock-based compensation expense
$ 182,454  $ 30,073 
11. Redeemable Convertible Preferred Stock
There were no shares of Redeemable Convertible Preferred Stock outstanding as of September 30, 2021. Redeemable Convertible Preferred Stock as of December 31, 2020 consisted of the following (in thousands, except share data):
Redeemable Convertible Preferred Stock Shares Authorized Shares Issued and Outstanding Amount Aggregate Liquidation Preference
Series A-1 55,399,943  55,399,943  $ 51,811  $ 55,000 
Series A-2
64,718,940  49,700,364  46,480  49,342 
Series B
41,937,960  41,937,960  118,824  204,302 
Series C
24,497,317  24,496,946  117,324  121,397 
Total Redeemable Convertible Preferred Stock 186,554,160  171,535,213  $ 334,439  $ 430,041 
Prior to the completion of the Business Combination, there were no significant changes to the terms of the Convertible Preferred Stock. Upon closing of the Merger, each share Preferred Stock (as defined in the Proxy Statement) was cancelled and received a portion of the merger consideration, resulting in certain Legacy Sema4 preferred stockholders receiving $230.0 million of cash and an aggregate of 148,543,062 shares of common stock. The Company recorded the conversion at the carrying value of the Redeemable Convertible Preferred Stock at the time of Closing.
12. Common Stock
There were 240,190,402 shares of Sema4 Holdings Class A common stock and 124 shares of Legacy Sema4 Class A common stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. There were 0 and 130,557 shares of Class B common stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.
13. Income Taxes
Income taxes for the three and nine months ended September 30, 2021 and September 30, 2020 are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The Company’s estimated annual effective tax rate was 0.0% for the three and nine months ended September 30, 2021 and September 30, 2020. The primary reconciling item between the federal statutory rate of 21.0% for these periods and the Company’s overall effective tax rate of 0.0% was related to the effects of the valuation allowance recorded against the full amount of its net deferred tax assets.
A valuation allowance is required when it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The realization of deferred tax assets depends on the generation of sufficient future taxable income during the period in which the Company’s related temporary differences become deductible. The Company has recorded a full valuation allowance against its net deferred tax assets as of September 30, 2021 and September 30, 2020 since management believes that based on the earnings history of the Company, it is more likely than not that the benefits of these assets will not be realized.
27

Table of Contents
Sema4 Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
14. Net Income (Loss) per Share
Basic and diluted loss per share attributable to common stockholders was calculated as follows (amounts in thousands, except for share and per share amounts):
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Numerator:
Net income (loss) attributable to common stockholders
$ 31,392  $ (56,615) $ (204,963) $ (115,657)
Denominator:
Denominator for basic earnings per share-weighted-average common shares
185,680,394  124  63,121,738  124 
Effect of dilutive securities:
Employee stock options
24,650,552  —  —  — 
Denominator for diluted earnings per share-adjusted weighted-average common shares
210,330,946  —  —  — 
Basic earnings/(loss) per share $ 0.17  $ (456,573) $ (3.25) $ (932,718)
Diluted earnings/(loss) per share
$ 0.15  $ (456,573) $ (3.25) $ (932,718)
As a result of the Merger, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding prior to the Merger by multiplying them by the conversion ratio of 123.8339 used to determine the number of shares of common stock into which they converted. The common stock issued as a result of the redeemable convertible preferred stock conversion upon closing of the Merger was included in the basic and diluted earnings/(loss) per share calculation on a prospective basis.
Prior to the consummation of the Merger, the Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as there were outstanding Class B common stock and redeemable convertible preferred stock that were participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. As the securities were all converted into Sema4 Holdings Class A common stock upon consummation of the Merger, all outstanding Legacy Sema4 Class B common stock has been retroactively converted to the Sema4 Holdings Class A common stock.
The following tables summarize the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been anti-dilutive:
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Outstanding options to purchase Class A common stock —  12,796,144  28,846,080  12,769,144 
Outstanding warrants
21,994,972  —  21,994,972  — 
Outstanding earn-out shares
16,331,812  —  16,331,812  — 
Total
38,326,784  12,796,144  67,172,864  12,769,144 
15. Subsequent Events
On November 15, 2021, the Company entered into a Loan and Security Agreement (the “SVB Agreement”) with Silicon Valley Bank (“SVB”), whereby SVB agreed to provide a $125,000,000 revolving credit facility (“Revolver”) with a maturity date of November 15, 2024. Any borrowings under the Revolver will bear interest at a floating rate that is the greater of either (a) Wall Street Journal Prime Rate (the “Prime Rate”) plus 0.75% (the “Prime Rate Margin”) or (b) 4.00%. The Revolver also requires an unused line fee of 0.25% per annum payable quarterly. The Revolver is secured by certain assets of the Company and its subsidiary, Sema4 Opco, Inc.



28

Table of Contents
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 our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our audited financial statements for the year ended December 31, 2020 and the related notes incorporated by reference in our audited financial statements appearing in the definitive proxy statement filed by CM Life Sciences, Inc. with the SEC on July 2, 2021 (the “Proxy Statement”). This discussion contains forward-looking statements and involves numerous risks and uncertainties. Actual results may differ materially from the results described in or implied by the forward-looking statements. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from these forward-looking statements.
Unless the context otherwise requires, references herein to the “Company,” “Sema4” or “we,” “us” or and “our” refers to Mount Sinai Genomics Inc. d/b/a Sema4 (“Legacy Sema4”), prior to the consummation of the Business Combination (the “Closing,” and such date of the consummation of the Business Combination, the “Closing Date”) and to Sema4 Holdings Corp. (“Sema4 Holdings”) and its subsidiary following the Business Combination.
Overview
We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. By leveraging leading data scientists and technology, our platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
We were established out of Icahn School of Medicine at Mount Sinai (“ISMMS”), and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale. We have since established and deployed our comprehensive and integrated genomic and clinical data platform and established a mature diagnostic testing business. We now maintain a database that includes more than 11.9 million de-identified individual clinical records, many with genomic profiles. We also manage a data asset over 39.2 petabytes in size, expanding at 1.4 petabytes per month with an accelerating growth rate.
Currently, we derive the majority of our revenue from our diagnostic test solutions. Our diagnostic business generates revenue and engages with patients primarily through our Women’s Health and Oncology solutions.
Our Women’s Health solutions sequence and analyze an industry-leading number of genes and use interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision-making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach. Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. We believe our Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Beginning in May of 2020, we also expanded our diagnostic testing services to include testing for the presence of COVID-19.
We have also expanded beyond diagnostic testing to enter into collaboration service agreements with third parties to provide diagnostic testing, research, and related data aggregation reporting services. We have established and continue to seek strategic relationships with pharmaceutical and biotech, or biopharma, companies to enable innovation across the entire drug lifecycle, from next-generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development.
Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
Number of accessioned and resulted tests
We believe the number of accessioned and resulted tests in any period is an important indicator of the growth in our diagnostic testing services and correlates with long-term patient relationships and the size of our genomic database. A test is accessioned when we receive the test at our laboratory, enter the relevant information about the test into our computer
29

Table of Contents
system and the test sample is routed to the appropriate workflow. Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for review.
Success obtaining and maintaining reimbursement
Our ability to increase the number of billable tests and our revenue therefrom will depend on our success in achieving reimbursement for our tests from third-party payors. Reimbursement by a payor may depend on several factors, including a payor’s determination that a test is appropriate, medically necessary, cost-effective, and has received prior authorization. Since each payor makes its own decision as to whether to establish a policy or enter into a contract to provide coverage for our tests, as well as the amount it will reimburse us for a test, seeking these approvals is a time-consuming and costly process.
In cases where we or our partners have established reimbursement rates with third-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third-party payors regularly. As a result in the past we have needed additional time and resources to comply with the requirements.
We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for, our current and any future tests we may develop or acquire. If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue and our future business prospects may be adversely affected.
Ability to lower the costs associated with performing our tests
Reducing the costs associated with performing our diagnostic tests is both our focus and a strategic objective. We source, and will continue to source, components of our diagnostic testing workflows from third parties. We also rely upon third-party service providers for data storage and workflow management.
Increasing adoption of our services by existing and new customers
Our performance depends on our ability to retain and broaden the adoption of our services with existing customers as well as our ability to attract new customers. Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights.
Investment in platform innovation to support commercial growth
We are seeking to leverage and deploy our Centrellis and Traversa platforms to develop a pipeline of future disease-specific research and diagnostic and therapeutic products and services. We have limited experience in the development or commercialization of clinical or research products in connection with our database and our Centrellis platform.
We operate in a rapidly evolving and highly competitive industry. Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies on time. As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships. These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived.
We expect to incur significant expenses to advance these development efforts, but they may not be successful. New potential services may fail at any stage of development and, if we determine that any of our current or future services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional services, our growth potential may be impaired.
Key Performance Indicators
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations
30

Table of Contents
and financial condition together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report.
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships. Thus, test volumes drive database diversity and enable potential identification of variants of unknown significance and population-specific insights. The number of tests that we accession and result are key indicators that we use to assess the operational efficiency of our business. A test is accessioned when we receive the test at our laboratory, the relevant information about the test is entered into our computer system and the test sample is routed through the appropriate workflow. Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for reviews.
During the nine months ended September 30, 2021, we accessioned approximately 480,291 tests in our laboratories, 271,354 tests of which were for COVID-19, compared to the period ended September 30, 2020, in which we accessioned approximately 197,593 tests in our laboratories, 47,578 of which were for COVID-19. We resulted approximately 481,896 tests in our laboratories, 272,973 tests of which were for COVID-19, compared to the period ended September 30, 2020, in which we resulted approximately 214,554 tests in our laboratories, 67,675 of which were for COVID-19. This 143% and 125% increase in accessioned and resulted volumes, respectively, from 2020 to 2021 largely resulted from newly entered service agreements for COVID-19 testing as well as an increase in non-COVID-19 institutional testing. The volume of resulted tests during the periods may include tests accessioned in prior periods that are completed and delivered during the period.
COVID-19 Impact
COVID-19 has had, and continues to have, an extensive impact on the global health and economic environments.
While test volumes have since improved, we continue to experience changes in the mix of tests due to the impact of COVID-19. We anticipate that demand for COVID-19 tests will eventually decrease as vaccines continue to be developed and deployed to the general population. However, no additional decline is expected for our other revenue streams for the remainder of 2021. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat it and the economic impact on local, regional, national and international markets and supply chains. Therefore, COVID-19 could continue to have a material impact on our results of operations, cash flows, and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act, (“CARES Act”), was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. We received $5.4 million in 2020 as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund (“PRF”), distribution and $2.8 million received under the Employee Retention Credit (“ERC”), distribution. In 2021, we received an additional $5.6 million under the PRF distribution.
PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. We have concluded it is probable that all terms and conditions associated with the PRF distribution have been met. As a result, we recorded the PRF distributions in other income (expense), net in the statements of operations, and comprehensive loss during the periods in which we received the distributions.
ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loan under the CARES Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. At the time of applying for the ERC, we concluded that it was reasonably possible the eligibility requirements would be met; however, due to a change in circumstances, we are re-evaluating our position. As such, we deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities on the balance sheets.
31

Table of Contents
Components of Results of Operations
Revenue
We derive the majority of our revenue from diagnostic testing services, which primarily relate to Women’s Health, Oncology, and COVID-19. We also recognize revenue from collaboration service agreements with biopharma companies and other third parties under which we provide diagnostic testing and related data aggregation reporting services.
In accordance with the Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), we recognize revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which we expect to be entitled to in exchange for those goods or services.
Diagnostic Test Revenue
We primarily generate revenue from performing diagnostic testing services for three groups of customers: patients with third-party insurance coverage; patients without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics, state governments, and reference laboratories. Customers are billed upon delivery of test results. The amount of revenue recognized for diagnostic testing services depends on several factors, such as contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions, and other business and economic conditions and trends. To date, the majority of our diagnostic test revenue has been earned from patients with third-party insurance coverage.
In accordance with the ASC 606, revenue is recognized at the point in time in which test results are delivered to customers in an amount that reflects what we expect to collect in exchange for our services.
Other Revenue
We generate revenue from providing diagnostic testing and related data aggregation reporting services under both short-term and long-term project-based collaboration service agreements with third parties. The terms of these contracts generally include non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term.
In accordance with the ASC 606, we recognize revenue for collaboration service agreements over time, based on costs incurred during the contract period.
With respect to existing collaboration service agreements, our revenue may fluctuate due to the pattern in which we may deliver our services, our ability to achieve milestones, the timing of costs incurred, changes in estimates of total anticipated costs that we expect to incur during the contract period, and other events that may not be within our control. Our ability to increase our revenue will depend on our ability to enter contracts with third-party partners.
Cost of Services
The cost of services reflect the aggregate costs incurred in performing diagnostic testing and collaboration services. These costs include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits), stock-based compensation, shipping and handling fees, costs of third-party reference lab testing and third-party providers of genetic counseling and phlebotomy services, amortization of software development costs and equipment and allocated facility costs associated with testing. Allocated facility costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. The cost of services are recorded as the services are performed.
We expect the cost of services to generally increase in line with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements. However, we expect the cost per test to decrease over the long term due to the efficiencies we may gain from improved utilization of our laboratory capacity, automation, and other value engineering initiatives. These expected reductions may be offset by new tests which often have a higher cost per test during the introductory phases before we can gain efficiencies. The cost per test may fluctuate from quarter to quarter.
Research and Development Expenses
Research and development expenses represent costs incurred to develop our technology and future test offerings. These costs are principally associated with our efforts to develop the software we use to analyze data and process customer orders. These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based
32

Table of Contents
compensation, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research. Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed.
We generally expect our research and development expenses to continue to increase as we innovate and expand the application of our platforms. However, we expect research and development expenses to decrease as a percentage of revenue in the long term, although the percentage may fluctuate from period to period due to the timing and extent of our development and commercialization efforts and fluctuations in our compensation-related charges.
Selling and Marketing Expenses
Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries, and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing, and medical education. Selling and marketing costs are expensed as incurred.
We generally expect our selling and marketing expenses to continue increasing in absolute dollars as we expand our commercial sales and marketing teams and increase marketing activities. However, we expect selling and marketing expenses to decrease as a percentage of revenue in the long term, subject to fluctuations due to the timing and magnitude of these expenses.
General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, strategy, and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and regulatory matters; maintaining compliance with requirements of Nasdaq and of the SEC; director and officer insurance premiums and investor relations. We expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate due to compensation-related charges.
Related Party Expenses
Related party expenses consist of amounts due to ISMMS for expenses under our TSA which expired at the end of the first quarter of 2021, and other service agreements. Additional information can be found in Legacy Sema4’s audited financial statements in Note 7, “Related Party Transactions” included within the Proxy Statement and our unaudited condensed consolidated financial statements in Note 7, “Related Party Transactions” included within this Quarterly Report.
We expect related party expenses to decrease as we establish our own internal and external resources to fulfill the administrative and other services we have historically procured from ISMMS.
Interest Income
Interest income consists of interest earned on money market funds.
Interest Expense
Interest expense consists of interest costs related to our capital leases and our long-term debt arrangements.
Other Income (expense), Net
Other income (expense), net primarily consists of funding received under the CARES Act and, gains and losses on equipment disposals. We recognized $2.6 million of the $5.4 million of funding received under the CARES Act as other income, net on the statements of operations and comprehensive loss during the nine months ended September 30, 2020 and recognized $5.6 million of additional funding received under the CARES Act during the first quarter of 2021 and the amount is included in other income, net for the period ended nine months ended September 30, 2021. In addition, the loss
33

Table of Contents
incurred due to early payment penalties recognized upon extinguishment of debt of $0.3 million is included in other income (expense), net.
Comparison of the three months ended September 30, 2021 and 2020
The following table sets forth our results of operations for the periods presented (in thousands):
Three months ended September 30,

2021 2020

(in thousands)
Revenue

Diagnostic test revenue
$ 41,410  $ 37,893 
Other revenue
1,768  715 
Total revenue
43,178  38,608 
Cost of services 58,752  36,530 
Gross (loss) profit
(15,574) 2,078 
Research and development 17,831  19,083 
Selling and marketing 22,121  12,735 
General and administrative 33,230  24,342 
Related party expenses 847  1,933 
Loss from operations
(89,603) (56,015)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities 122,171  — 
Interest income
27  63 
Interest expense
(683) (637)
Other income (expense), net
(520) (26)
Total other income (expense), net
120,995  (600)
Income (loss) before income taxes 31,392  (56,615)
Income tax provision —  — 
Net income (loss) and comprehensive income (loss)
$ 31,392  $ (56,615)
Revenue
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Diagnostic test revenue $ 41,410  $ 37,893  $ 3,517  %
Other revenue 1,768  715  1,053  147  %
Total revenue $ 43,178  $ 38,608  $ 4,570  12  %
Total revenue increased by $4.6 million, or 12%, to $43.2 million for the three months ended September 30, 2021, from $38.6 million for the three months ended September 30, 2020.
Diagnostic test revenue increased by $3.5 million, or 9%, to $41.4 million for the three months ended September 30, 2021, from $37.9 million for the three months ended September 30, 2020. The increase was primarily attributable to an increase in overall volumes, excluding COVID-19 tests of 36%, partially offset by the change in the mix of tests performed and corresponding reduced reimbursement rates. Oncology testing volume increased by 166%. Women’s health testing volume, including carrier screening and NIPT testing, increased by 33%, which was partially offset by a lower average selling price.
Other revenue increased by $1.1 million, or 147%, to $1.8 million for the three months ended September 30, 2021, from $0.7 million for the three months ended September 30, 2020. The increase was primarily attributable to fulfillment of performance obligations under a single arrangement for which there was no revenue in the third quarter of 2020 and has now generated $0.7 million in revenue in the third quarter of 2021.
34

Table of Contents
Cost of Services
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Cost of services $ 58,752  $ 36,530  $ 22,222  61  %
Cost of services increased by $22.2 million, or 61%, to $58.8 million for the three months ended September 30, 2021, from $36.5 million for the three months ended September 30, 2020. The increase was primarily driven by the following components: a $13.3 million increase in reagents and laboratory supplies expense due primarily to the increase in accessioned volumes; a $4.8 million increase in overall personnel-related expenses driven by an increase in average headcount; a $2.3 million increase in occupancy and depreciation expenses in connection with our laboratory move at the end of 2020 and the Stamford laboratory facility commencing operations in the first quarter 2021; a $0.8 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements for testing data; and a $0.7 million increase in expenses for logistical costs due to higher accessioned volumes. The cost of services are expected to scale over time as we undertake various strategic initiatives.
Research and Development
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Research and development $ 17,831  $ 19,083  $ (1,252) (7) %
Research and development expense decreased by $1.3 million, or 7%, to $17.8 million for the three months ended September 30, 2021, from $19.1 million for the three months ended September 30, 2020. The decrease was primarily attributable to a $3.4 million decrease in stock-based compensation expense, offset by a $1.8 million increase in depreciation expenses; and a $0.4 million increase in software expenses.
Selling and Marketing
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Selling and marketing $ 22,121  $ 12,735  $ 9,386  74  %
Selling and marketing expense increased by $9.4 million, or 74%, to $22.1 million for the three months ended September 30, 2021, from $12.7 million for the three months ended September 30, 2020. The increase was primarily attributable to the expansion of our commercial footprint and the following cost components: a $5.7 million increase in personnel-related expenses driven by increased headcount; a $1.5 million increase in information technology-related expenses; and a $2.1 million increase in consulting service expenses to support revenue cycle transformation initiatives.
General and Administrative
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
General and administrative $ 33,230  $ 24,342  $ 8,888  37  %
General and administrative expense increased by $8.9 million, or 37%, to $33.2 million for the three months ended September 30, 2021, from $24.3 million for the three months ended September 30, 2020. The increase was primarily attributable to an increase in expenses of $8.7 million for professional services incurred in connection with the Business Combination; an increase in personnel-related costs of $5.6 million driven by an increase in headcount; a $1.7 million
35

increase in insurance expenses driven by transitioning to obtaining standalone insurance policies separate from ISMMS; and a $0.7 million increase in software expenses due to increased cloud storage requirements. These increases were partially offset by a decrease in stock-based compensation expense of $7.7 million and a $0.5 million decrease in occupancy expenses due to our laboratory move from New York City to Stamford, Connecticut.
Related Party Expenses
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Related party expenses $ 847  $ 1,933  $ (1,086) (56) %
Related party expenses decreased by $1.1 million, or 56%, to $0.8 million for the three months ended September 30, 2021, from $1.9 million for the three months ended September 30, 2020. The decrease was primarily attributable to the discontinued fees related to information technology support pursuant to the TSA with ISMMS as a result of the termination of the agreement in the first quarter of 2021 and a decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the TSA.
Interest Income
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Interest income $ 27  $ 63  $ (36) (57) %
Interest income decreased by $0.1 million, or 57%, to a nominal amount for the three months ended September 30, 2021, from $0.1 million for the three months ended September 30, 2020. The decrease was due to declines in interest rates on money market deposit accounts.
Interest Expense
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Interest expense $ (683) $ (637) $ (46) %
Interest expense increased by $0.1 million, or 7%, to $0.7 million for the three months ended September 30, 2021, from $0.6 million for the three months ended September 30, 2020. The increase was driven by new loans executed in the second half of 2020.
Other Income (expense), Net
Change
Three months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Other income (expense), net
$ (520) $ (26) $ (494)
NM% (1)
__________________
(1) Not Meaningful (“NM”)
Other income (expense), net increased by $0.5 million, to $0.5 million for the three months ended September 30, 2021, from a nominal amount for the three months ended September 30, 2020. The increase in the expense was primarily attributable to penalty payments of $0.3 million related to debt that was repaid earlier than the maturity date during the three months ended September 30, 2020.
36

Comparison of the nine months ended September 30, 2021 and 2020
The following table sets forth our results of operations for the periods presented (in thousands):
Nine months ended September 30,

2021 2020

(in thousands)
Revenue

Diagnostic test revenue
$ 148,973  $ 113,759 
Other revenue
5,421  1,606 
Total revenue
154,394  115,365 
Cost of services 180,195  111,754 
Gross (loss) profit
(25,801) 3,611 
Research and development 82,916  41,540 
Selling and marketing 69,937  33,154 
General and administrative 147,941  39,627 
Related party expenses 3,532  6,239 
Loss from operations
(330,127) (116,949)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities 122,171  — 
Interest income
57  473 
Interest expense
(2,128) (1,826)
Other income (expense), net
5,064  2,645 
Total other income (expense), net
125,164  1,292 
Loss before income taxes (204,963) (115,657)
Income tax provision —  — 
Net income (loss) and comprehensive income (loss)
$ (204,963) $ (115,657)
Revenue
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Diagnostic test revenue $ 148,973  $ 113,759  $ 35,214  31  %
Other revenue 5,421  1,606  3,815  238  %
Total revenue $ 154,394  $ 115,365  $ 39,029  34  %
Total revenue increased by $39.0 million, or 34%, to $154.4 million for the nine months ended September 30, 2021, from $115.4 million for the nine months ended September 30, 2020.
Diagnostic test revenue increased by $35.2 million, or 31%, to $149.0 million for the nine months ended September 30, 2021, from $113.8 million for the nine months ended September 30, 2020. The increase was primarily attributable to a 303% increase in COVID-19 test volumes and overall increase in volumes of 125%, partially offset by the change in the mix of tests performed and reduced reimbursement rates. COVID-19 testing was introduced in May of 2020 which had a minor impact on volume during the nine months ended September 30, 2020, compared to approximately 272,973 tests in the nine months ended September 30, 2021. There was also an increase in large carrier screening tests performed during the nine months ended September 30, 2020.
Other revenue increased by $3.8 million, or 238%, to $5.4 million for the nine months ended September 30, 2021, from $1.6 million for the nine months ended September 30, 2020. The increase was primarily attributable to growth in collaboration service activities due to the execution of a third-party contracts which generated $2.9 million in revenues in 2021 compared to $0.7 million in 2020, partially offset by reduced revenues recognized related to an existing third-party contract.
37

Cost of Services
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Cost of services $ 180,195  $ 111,754  $ 68,441  61  %
Cost of services increased by $68.4 million, or 61%, to $180.2 million for the nine months ended September 30, 2021, from $111.8 million for the nine months ended September 30, 2020. The increase was primarily driven by the following cost components: a $19.7 million increase in stock-based compensation expense primarily driven by the increase in fair value of the liability-classified awards until the Closing Date; a $12.8 million increase in personnel-related expenses driven by an increase in average headcount; a $4.6 million increase in costs driven by temporary hires contracted to perform COVID-19 testing activities; a $3.6 million increase in logistical expenses as a result of an increase in operations; a $16.6 million increase in reagents and laboratory supplies expense due primarily to the 125% increase in volumes; a $2.8 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements from New York City to Stamford, Connecticut for testing data; a $1.2 million increase in the inventory obsolescence reserve for expiring COVID-19 testing kits; a $2.9 million increase in occupancy expenses and a $4.0 million increase in depreciation expenses in connection with our laboratory move at the end of 2020, with production activities commencing at the Stamford facility in the first quarter of 2021.
Research and Development
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Research and development $ 82,916  $ 41,540  $ 41,376  100  %
Research and development expenses increased by $41.4 million, or 100%, to $82.9 million for the nine months ended September 30, 2021, from $41.5 million for the nine months ended September 30, 2020. The increase was primarily attributable to the following cost components: a $34.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the Closing Date; a $4.0 million increase in depreciation expenses; a $2.1 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development; a $0.6 million increase in other personnel-related expenses driven by an increase in headcount.
Selling and Marketing
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Selling and marketing $ 69,937  $ 33,154  $ 36,783  111  %
Selling and marketing expenses increased by $36.7 million, or 111%, to $69.9 million for the nine months ended September 30, 2021, from $33.2 million for the nine months ended September 30, 2020. The increase was primarily attributable to the following cost components: an $17.9 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the Closing Date; a $11.9 million increase in personnel-related expenses driven by increased headcount; a $2.8 million increase in consulting service expenses to support revenue cycle transformation initiatives; a $2.0 million increase in information technology-related expenses; a $0.8 million increase in other administrative expenses; and a $1.0 million increase in travel and business expenses.
38

General and Administrative
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
General and administrative $ 147,941  $ 39,627  $ 108,314  273  %
General and administrative expenses increased by $108.3 million, or 273%, to $147.9 million for the nine months ended September 30, 2021, from $39.6 million for the nine months ended September 30, 2020. The increase was primarily attributable to the following cost components: an $80.6 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the Closing Date; a $13.9 million increase in professional services incurred in connection with the Business Combination transaction; a $9.8 million increase in personnel-related expenses driven by an increase in average headcount including executive headcount; a $1.3 million increase in software expenses due to increased cloud storage requirements; and a $3.5 million increase in insurance expenses driven by transitioning to obtaining standalone insurance policies separate from ISMMS. These increases were partially offset by a $1.2 million decrease in occupancy expenses in connection with our laboratory move from New York City to Stamford, Connecticut.
Related Party Expenses
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Related party expenses $ 3,532  $ 6,239  $ (2,707) (43) %
Related party expenses decreased by $2.7 million, or 43%, to $3.5 million for the nine months ended September 30, 2021, from $6.2 million for the nine months ended September 30, 2020. The decrease was primarily attributable to the following cost components: a $1.5 million decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the transition services agreement which ended in the first quarter of 2021; and a $0.9 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS.
Interest Income
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Interest income $ 57  $ 473  $ (416) (88) %
Interest income decreased by $0.4 million, or 88%, to $0.1 million for the nine months ended September 30, 2021, from $0.5 million for the nine months ended September 30, 2020. The decrease was due to declines in interest rates on money market deposit.
Interest Expense
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Interest expense $ (2,128) $ (1,826) $ (302) 17  %
Interest expense increased by $0.3 million, or 17%, to $2.1 million for the nine months ended September 30, 2021, from $1.8 million for the nine months ended September 30, 2020. The increase was driven by new capital lease obligations for our Stamford laboratory facility which commenced operations in 2021.
39

Other Income, Net
Change
Nine months ended September 30, 2020 to 2021
2021 2020 $ %
(dollars in thousands)
Other income, net
$ 5,064  $ 2,645  $ 2,419  91  %
Other income, net increased by $2.5 million or 91% to $5.1 million for the nine months ended September 30, 2021, from $2.6 million for the nine months ended September 30, 2020. The increase in other income, net was primarily attributable to the $5.6 million in funding that we received and recognized as other income under the CARES Act in the first quarter of 2021, partially offset by $0.3 million in penalties related to an early repayment of debt. This is compared to $2.6 million in funding received in 2020.
Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Non-GAAP financial measures. Other limitations include that Non-GAAP financial measures do not reflect:
all expenditures or future requirements for capital expenditures or contractual commitments;
changes in our working capital needs;
provision for income taxes, which may be a necessary element of our costs and ability to operate;
the costs of replacing the assets being depreciated, which will often have to be replaced in the future;
the non-cash component of employee compensation expense; and
the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of services, excluding stock-based compensation expense, and COVID-19 costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.
40

The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the three months ended September 30, 2021 and 2020:
Three months ended September 30,
2021 2020
(in thousands)
Revenue $ 43,178  $ 38,608 
Cost of services 58,752  36,530 
Gross (Loss) Profit
(15,574) 2,078 
Gross Margin (36) % 5  %
Add:
Stock-based compensation expense 3,699  3,506 
Adjusted Gross (Loss) Profit
$ (11,875) $ 5,584 
Adjusted Gross Margin
(28) % 14  %
The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the nine months ended September 30, 2021 and 2020:
Nine months ended September 30,
2021 2020
(in thousands)
Revenue 154,394  115,365 
Cost of services 180,195  111,754 
Gross (Loss) Profit
(25,801) 3,611 
Gross Margin (17) % 3  %
Add:
Stock-based compensation expense 23,162  3,500 
COVID Costs (1)
  3,179 
Adjusted Gross (Loss) Profit
$ (2,639) $ 10,290 
Adjusted Gross Margin
(2) % 9  %
__________________
(1)Represents labor costs with respect to laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our laboratory from COVID-19. However, we were adversely affected by the decrease in volume in Women's Health and other products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to COVID-19 in the seco