PERSONALIS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 filed with theSecurities and Exchange Commission (the "SEC") onFebruary 25, 2021 (the "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled "Special Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements and in Part II, Item 1A, "Risk Factors" for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report.
Overview
We are a growing cancer genomics company transforming the development of next-generation therapies by providing more comprehensive molecular data about each patient's cancer and immune response. We designed our NeXT Platform to adapt to the complex and evolving understanding of cancer, providing our biopharmaceutical customers with information on all of the approximately 20,000 human genes, together with the immune system, in contrast to many cancer panels that cover roughly only 50 to 500 genes. In parallel with the development of our platform technology, we have also pursued business within the population sequencing market, and we have provided whole genome sequencing services under contract with theU.S. Department of Veterans Affairs (the "VA") Million Veteran Program (the "VA MVP"), which has enabled us to innovate, scale our operational infrastructure, and achieve greater efficiencies in our lab. We delivered the 125,000th whole human genome sequence dataset to the VA MVP inJune 2021 with over 50,000 of these genomes delivered in the past 12 months alone. InSeptember 2020 , we announced receipt of a new task order from the VA MVP with an approximate value of up to$31 million . The cumulative value of task orders received from the VA MVP since inception is approximately$176 million , approximately$159.2 million of which we had recognized as revenue as ofJune 30, 2021 . InAugust 2020 , we launched NeXT Liquid Biopsy, which is a liquid biopsy assay that analyzes all of the approximately 20,000 human genes versus the more narrowly focused liquid biopsy assays that are currently available. By combining technological innovation, operational scale, and regulatory differentiation, our NeXT Platform is designed to help our customers obtain new insights into the mechanisms of response and resistance to therapy as well as new potential therapeutic targets. Our platform enhances the ability of biopharmaceutical companies to unlock the potential of conducting translational research in the clinic rather than with pre-clinical animal models or cancer cell lines. We also announced inJanuary 2020 a diagnostic test, NeXT Dx Test, which is based on our NeXT Platform, that we envision being used initially by both leading clinical cancer centers as well as biopharmaceutical companies. Most recently, inDecember 2020 , we launched two new capabilities that are integrated into our NeXT Platform: our Systemic HLA Epitope Ranking Pan Algorithm ("SHERPA") machine learning-based tool for the comprehensive identification and characterization of cancer neoantigens, as well as our Neoantigen Presentation Score ("NEOPS") for predicting cancer immunotherapy response. SHERPA enables the development of new neoantigen-based diagnostic biomarkers, such as our NEOPS, and novel personalized therapies. OnJanuary 29, 2021 , we completed a follow-on equity offering in which we issued and sold 3,950,000 shares of common stock at a public offering price of$38.00 per share. We received net proceeds of$141.1 million after deducting underwriting discounts and commissions. The underwriters exercised their option to purchase an additional 592,500 shares shortly thereafter, resulting in additional net proceeds to us of$21.2 million after deducting underwriting discounts and commissions. In total, we raised net proceeds of$162.3 million after deducting underwriting discounts and commissions. We also incurred$0.3 million of offering costs, including legal, accounting, printing and other offering-related costs. Our operations have been impacted by the ongoing COVID-19 pandemic. As ofJune 15, 2021 , the Governor ofCalifornia terminated executive orders that put into place the Stay Home Order and the Blueprint for a Safer Economy. The Governor also phased out the vast majority of executive actions put in place sinceMarch 2020 as part of the pandemic response. We had previously substantially closed our office facilities and limited access to our laboratory facilities to protect our employees and to comply with the now-terminated health orders. We are beginning to welcome back a select number of employees to our office facilities, consistent with our latest health and safety protocols and applicable government regulations and guidance. The previous shelter-in-place order and health orders have negatively impacted productivity, disrupted our business, and slowed research and development activities due to us limiting access to our laboratory space that would otherwise be used by our research and development group, and, to the extent such orders return in similar or more stringent form, they may continue to cause such effects on our operations. The health orders have disrupted, and may continue to disrupt if they return in similar or more stringent form, the ability of our suppliers to fulfill our purchase orders in a timely manner or at all. Additionally, we are aware of increased demand in the market for certain consumables used in COVID-19 test kits and vaccines. We use such consumables in our operations, and we have faced, and may face in the future, difficulties in acquiring such consumables if our suppliers prioritize orders related to COVID-19. Several of our customers, including the VA MVP, were delayed in sending us samples in the prior year due to the inability to collect or ship samples during the COVID-19 pandemic, and these and additional customers may be disrupted from collecting samples or sending purchase orders and samples to us in the future. Many of our customers, potential customers and potential partners have also put in place policies restricting visitors from other companies, and therefore our sales team and members of management have been unable to meet such parties in person, which may result in reduced acquisition of new customers, fewer orders from existing customers, and fewer potential partnering opportunities. We have yet to see a return to pre-pandemic conditions on this front. If a COVID-19 outbreak were to occur among our 23 -------------------------------------------------------------------------------- laboratory employees, we may significantly curtail our laboratory operations or pause operations altogether until the imminent health risk to our employees subsided. Such disruptions in our operations, and our customers' and suppliers' operations, may continue to adversely affect revenue and operating results. The global COVID-19 pandemic continues to rapidly evolve and to present serious health risks. While authorities in many areas have lifted or relaxed pandemic-related restrictions, in some cases they have subsequently re-imposed various restrictions after observing an increased rate of COVID-19 cases; for example, inDecember 2020 , state and local authorities inCalifornia reinstated shelter-in-place orders in light of the increasing rate of COVID-19 cases and shortage of intensive care unit beds across the state. More recently, inJuly 2021 , theCounty of San Mateo issued a formal recommendation to wear a mask indoors as precaution against COVID-19 amidst a rise in local COVID-19 cases and increased circulation of the Delta variant and, onAugust 2, 2021 , the County issued a new health order requiring all individuals to wear face coverings when indoors in workplaces and public settings regardless of vaccination status, with certain limited exceptions. Our primary operations and headquarters are located inSan Mateo County . There is no guarantee when or if all such restrictions and recommendations will be eliminated, such that we and our customers, manufacturers and suppliers will be able to safely resume operations consistent with our pre-COVID-19 operations. Vaccines against COVID-19 have been approved by the FDA and other regulatory authorities for emergency use, but there is uncertainty as to how quickly and to what extent the vaccines will impact the COVID-19 pandemic. While the extent of the impact of the current COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results.
Components of Operating Results
Revenue
We derive our revenue primarily from sequencing and data analysis services to support the development of next-generation cancer therapies and to support large-scale genetic research programs. We support our customers by providing high-accuracy, validated genomic sequencing and advanced analytics. Many of these analytics are related to state-of-the-art biomarkers, including those relevant to immuno-oncology therapeutics such as checkpoint inhibitors. Our revenue is primarily generated through contracts with companies in the pharmaceutical industry, healthcare organizations, and government entities. Our ability to increase revenue will depend on our ability to further penetrate this market. To do this, we are developing a growing set of state-of-the-art products, advancing our operational infrastructure, expanding our international presence, building our regulatory credentials, and expanding our targeted marketing efforts. Unlike diagnostic or therapeutic companies, we have not to date sought reimbursement through traditional healthcare payors. We sell through a small direct sales force. We derive a substantial portion of our current and expected future revenue from sales of our DNA sequencing and data analysis services to the VA MVP. Our contract with the VA MVP does not include specific testing turnaround times. Therefore, we have the ability to modulate the volume of samples processed for the VA MVP up or down to complement sample volumes from all other customers, which can vary from period to period. We have one reportable segment from the sale of sequencing and data analysis services. Substantially all of our revenue to date has been derived from sales inthe United States . Costs and Expenses Cost of Revenue Cost of revenue consists of raw materials costs, personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, depreciation and maintenance on equipment, and allocated facilities and information technology ("IT") costs. We expect cost of revenue to increase as our revenue grows, and in the short term cost of revenue may outpace revenue growth as we invest in expanding our laboratory capacity, but over time the cost per sample processed is expected to decrease due to economies of scale we may gain as volume increases, automation initiatives, and other cost reductions.
Research and Development Expenses
Research and development expenses consist of costs incurred for the research and development of our products. These expenses consist primarily of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, costs of purchasing samples for research purposes, depreciation and maintenance on equipment, and allocated facilities and IT costs. We include in research and development expenses the costs to further develop software we use to operate our laboratory, analyze the data it generates, and automate our operations. These expenses also include costs associated with our collaborations, which we expect to increase over time.
We expense our research and development expenses in the period in which they are incurred. We expect to increase our research and development expenses as we continue to develop new products.
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--------------------------------------------------------------------------------Selling, General and Administrative Expenses
Selling expenses consist of personnel costs (salaries, commissions, bonuses, stock-based compensation, payroll taxes, and benefits), customer support expenses, direct marketing expenses, and market research. Our general and administrative expenses include costs for our executive, accounting, finance, legal, and human resources functions. These expenses consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), corporate insurance, audit and legal expenses, consulting costs, and allocated facilities and IT costs. We expense all selling, general and administrative expenses as incurred. We expect our selling expenses will continue to increase in absolute dollars, primarily driven by our efforts to expand our commercial capability and to expand our brand awareness and customer base through targeted marketing initiatives with an increased presence both within and outsidethe United States . We also expect general and administrative expenses to increase as we scale our operations.
Interest Income and Interest Expense
Interest income consists primarily of interest earned on our cash and cash equivalents and short-term investments. Since the first quarter of 2020, our interest income has been adversely impacted by declines in yields on debt securities. While our average balances of cash and cash equivalents and short-term investments have increased as compared to the same periods in the prior year (due primarily to our follow-on equity offerings), we expect that our interest income will not materially increase in the near future given the current low interest-rate environment. Interest expense in the second quarter and first six months of 2021 is the recognition of imputed interest on noninterest bearing loans.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency exchange gains and losses, and realized gains or losses associated with sales of marketable securities. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Results of Operations
The following sets forth, for the periods presented, our unaudited condensed
consolidated statements of operations and selected financial data (in thousands,
except share and per share data):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenue $ 21,670 $ 19,495 $ 42,551 $ 38,656
Costs and expenses
Cost of revenue 13,502 14,823 26,956 29,945
Research and development 11,687 6,465 21,183 12,855
Selling, general and administrative 11,428 7,705 21,849 14,979
Total costs and expenses 36,617 28,993 69,988 57,779
Loss from operations (14,947 ) (9,498 ) (27,437 ) (19,123 )
Interest income 103 246 198 756
Interest expense (65 ) - (65 ) (2 )
Other income (expense), net (36 ) 1 (48 ) 9
Loss before income taxes (14,945 ) (9,251 ) (27,352 ) (18,360 )
Provision for income taxes 8 4 5 34
Net loss $ (14,953 ) $ (9,255 ) $ (27,357 ) $ (18,394 )
Net loss per share, basic and diluted $ (0.34 ) $ (0.29 ) $ (0.63 ) $ (0.58 )
Weighted-average shares outstanding,
basic and diluted 43,960,794 31,731,628 43,113,195 31,538,329
June 30, December 31,
2021 2020
Cash and cash equivalents, and short-term investments
203,290
Working capital 320,222 180,083
Total assets 383,340 244,842
Long-term obligations 10,506 9,261
Total liabilities 44,593 49,897
Total stockholders' equity 338,747 194,945
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Revenue
The following table shows revenue by customer type (in thousands):
Three Months Ended June 30, Change Six Months Ended June 30, Change
2021 2020 2021 2020
VA MVP $ 13,507 $ 14,750 (8%) $ 26,717 $ 29,506 (9%)
All other customers 8,163 4,745 72% 15,834 9,150 73%
Total revenue $ 21,670 $ 19,495 11% $ 42,551 $ 38,656 10%
The following table shows concentration of revenue by customer:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
VA MVP 62% 76% 63% 76%
Pfizer Inc. 15% 10% 14% *
* Less than 10% of revenue
VA MVP
The decrease of $1.2 million and $2.8 million in revenue from the VA MVP during
the second quarter and first six months of 2021 was primarily due to a decrease
in the volume of samples we tested in each period. We expect the substantial
majority of our remaining backlog of $16.8 million with the VA MVP to be
converted into revenue during the next quarter.
All other customers
The increase of$3.4 million in revenue from all other customers during the second quarter of 2021 was driven primarily by strong demand from large pharmaceutical customers for our NeXT Platform products which resulted in an increase in the volume of samples we tested during the period. Revenue derived from our NeXT Platform products exceeded$4.5 million during the second quarter of 2021 and was approximately$2.6 million in the second quarter of 2020. We also recognized$0.3 million in additional revenue from our biobank customer in the second quarter of 2021 as compared to the second quarter of 2020, as sample receipts from the customer were sharply reduced in the second quarter of 2020 due to the COVID-19 pandemic. The increase of$6.7 million in revenue from all other customers during the first six months of 2021 was driven primarily by strong demand from large pharmaceutical customers for our NeXT Platform products, which resulted in an increase in the volume of samples we tested during the period. Revenue derived from our NeXT Platform products exceeded$9.0 million during the first six months of 2021 and was approximately$3.0 million during the same period of the prior year. Costs and Expenses Three Months Ended June 30, Change Six Months Ended June 30, Change 2021 2020 2021 2020 (in thousands) (in thousands)
Cost of revenue$ 13,502 $ 14,823 (9%)$ 26,956 $ 29,945 (10%) Research and development 11,687 6,465 81% 21,183 12,855 65% Selling, general and 48% administrative 11,428 7,705 21,849 14,979 46% Total costs and expenses$ 36,617 $ 28,993 26%$ 69,988 $ 57,779 21% Cost of revenue The decreases in cost of revenue in the second quarter and first six months of 2021, as compared to the comparable year ago periods, was primarily due to favorable customer mix and efficiencies within our laboratory operations. Raw materials costs were lower, relative to revenue, for non-VA MVP customer orders, resulting in favorable customer mix for the second quarter and first six months of 2021. We also observed more efficient sample processing overall during each period, including less labor and overhead required per sample processed, which was favorable for both VA MVP and non-VA MVP orders. The cost components related to the$1.3 million decrease in cost of revenue during the second quarter of 2021 were a$0.7 million decrease in raw materials due to the favorable customer mix, a$0.4 million decrease in indirect costs due to a higher utilization of our laboratory for research and development activities, and a$0.2 million decrease in the cost of laboratory supplies and consumables. The cost components related to the$3.0 million decrease in cost of revenue during the first six months of 2021 were a$2.0 million decrease in raw materials due to the favorable customer mix, a$0.8 million decrease in the cost of laboratory supplies and consumables, and a$0.4 million decrease in indirect costs due to a higher utilization of our laboratory for research and development activities, which were partially offset by a$0.2 million increase in personnel-related costs. 26 --------------------------------------------------------------------------------
Research and development
The$5.2 million increase in research and development during the second quarter of 2021 was primarily due to the development of new products and lab automation efforts and consisted of an increase of$3.6 million in personnel-related costs primarily related to increased headcount, a$1.0 million increase in sample processing costs incurred in our laboratory for new product development, a$0.5 million increase in IT and facilities costs, and a$0.1 million increase in consulting fees. The$8.3 million increase in research and development during the first six months of 2021 was primarily due to development of new products and lab automation efforts and consisted of an increase of$5.8 million in personnel-related costs primarily related to increased headcount, a$1.2 million increase in sample processing costs incurred in our laboratory for new product development, a$1.1 million increase in IT and facilities costs, and a$0.2 million increase in consulting fees.
Selling, general and administrative
The$3.7 million increase in selling, general and administrative during the second quarter of 2021 was primarily due to a$2.5 million increase in personnel-related costs primarily related to increased headcount, a$0.6 million increase in professional services (including corporate insurance, audit fees, and legal expenses), and a$0.6 million charge in connection with the modification of stock options held by a non-employee board member. The$6.9 million increase in selling, general and administrative during the first six months of 2021 was primarily due to a$5.0 million increase in personnel-related costs primarily related to increased headcount, a$1.2 million charge in connection with the modification of stock options held by two non-employee board members, and a$0.9 million increase in professional services (including corporate insurance, audit fees, and legal expenses), which were partially offset by a$0.2 million decrease in travel-related costs due to pandemic-related travel restrictions and other costs.
Interest Income, Interest Expense, and Other Income (Expense), Net
Three Months Ended June 30, Change Six Months Ended June 30, Change
2021 2020 2021 2020
Interest income $ 103 $ 246 (58%) $ 198 $ 756 (74%)
Interest expense (65 ) - (65 ) (2 )
Other income (expense), net (36 ) 1 (48 ) 9
Total $ 2 $ 247 $ 85 $ 763 Interest income and interest expense
The decreases in interest income during the second quarter and first six months of 2021 was driven by declines in yields on debt securities, partially offset by higher average cash and investment balances subsequent to our follow-on equity offerings inAugust 2020 andJanuary 2021 . Interest expense in the second quarter and first six months of 2021 is the recognition of imputed interest on noninterest bearing loans. Other income (expense), net
Other expense for the second quarter and first six months of 2021 consisted of foreign currency transaction losses and remeasurements. Other income in the second quarter and first six months of 2020 consisted of foreign currency remeasurements.
Liquidity and Capital Resources
The following tables present selected financial information and statistics as of
and for the six months ended
As of June 30,
2021 2020
Cash and cash equivalents, and short-term investments $ 328,907 $ 105,233
Property and equipment, net 14,258 12,650
Contract liabilities 11,460 28,952
Working capital 320,222 77,084
Six Months Ended June 30,
2021 2020
Net cash used in operating activities
(129,649 ) (7,650 )
Net cash provided by financing activities 168,859 1,644
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-------------------------------------------------------------------------------- From our inception throughJune 30, 2021 , we have funded our operations primarily from$279.0 million in net proceeds from our follow-on equity offerings inJanuary 2021 andAugust 2020 ,$144.0 million in net proceeds from our IPO inJune 2019 , and$89.6 million from issuance of redeemable convertible preferred stock, as well as cash from operations and debt financing. As ofJune 30, 2021 , we held cash and cash equivalents in the amount of$70.1 million and short-term investments in the amount of$258.8 million . We have incurred net losses since our inception. We anticipate that our current cash and cash equivalents and short-term investments, together with cash provided by operating activities, are sufficient to fund our near-term capital and operating needs for at least the next 12 months. We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If our available cash balances, net proceeds from the offerings and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our services or other risks described in this Quarterly Report on Form 10-Q, such as the COVID-19 pandemic, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all.
Our short-term investments portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.
During the six months endedJune 30, 2021 , cash used in operating activities of$37.7 million was a result of$27.4 million of net loss and the net negative change in operating assets and liabilities of$21.8 million ($9.6 million of which was related to reductions in outstanding customer prepayments as we fulfilled the related revenue contracts,$5.0 million due to prepayments of insurance and other service contracts, and$2.9 million due to an increase in customer accounts receivables), partially offset by non-cash adjustments to net income of$11.5 million (the most significant non-cash expenses for us in the six months endedJune 30, 2021 were$6.7 million of stock-based compensation and$2.9 million of depreciation and amortization). During the six months endedJune 30, 2020 , cash used in operating activities of$24.0 million was a result of$18.4 million of net loss and the net negative change in operating assets and liabilities of$12.1 million ($7.0 million of which was related to reductions in outstanding customer prepayments as we fulfilled the related revenue contracts), partially offset by non-cash adjustments to net income of$6.5 million (the most significant non-cash expenses for us in the six months endedJune 30, 2020 were$3.1 million of stock-based compensation and$2.8 million of depreciation and amortization). During the six months endedJune 30, 2021 , cash used in investing activities of$129.6 million was due to a$125.1 million net investment of cash into short-term investments and$4.5 million acquisitions of property and equipment. Cash provided by financing activities of$168.9 million during the same period consisted of$162.3 million net proceeds from ourJanuary 2021 follow-on equity offering,$5.1 million proceeds from loans, and$2.6 million proceeds from stock option exercises and purchases under our ESPP, partially offset by$0.8 million repayments of loans and$0.3 million of offering costs. During the six months endedJune 30, 2020 , cash used in investing activities of$7.7 million was due to a$6.8 million net investment of cash into short-term investments and$0.9 million acquisitions of property and equipment. Cash provided by financing activities of$1.6 million during the same period was the proceeds from stock option exercises and purchases under our ESPP.
Material Cash Requirements
From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of raw materials, laboratory supplies and consumables to be used in the sequencing of customer samples. However, we generally do not have binding and enforceable purchase orders beyond the short term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project. We currently expect our capital expenditures to support our growth initiatives globally to increase in 2021, as compared to capital expenditures in 2020. Such expenditures are expected to consist primarily of laboratory equipment and computer equipment. We anticipate fulfilling such expenditures with our existing cash and cash equivalents and short-term investments, which amounted to$328.9 million as ofJune 30, 2021 . Our noncancelable operating lease payments were$15.9 million as ofJune 30, 2021 . The timing of these future payments, by year, can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 7, "Leases." During the second quarter of 2021, we entered into two noninterest bearing loans to finance the purchase of$5.5 million of computer hardware, internal use software licenses, and related ongoing support. We made a payment of$0.8 million during the second quarter of 2021 and have a remaining payment of$1.04 million due in 2021. We are required to make payments of$1.84 million in each of 2022 and 2023. Further discussion of this transaction can be found in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 6, "Loans." 28 -------------------------------------------------------------------------------- Certain of our customers prepay us for a portion of the services that they expect to order from us before they place purchase orders and we deliver those services. In some cases, this prepayment can be substantial and may be paid months or a year or more in advance of these customers providing samples to us and before our delivery of the services to which some or all of the deposit relates. As ofJune 30, 2021 , we had approximately$11.5 million in customer deposits, including$10.5 million from one customer. We are generally not required by our contracts to retain these deposits in cash or otherwise and we have generally used these deposits to make capital expenditures and fund our operations. When a customer that has prepaid us for future services cancels its contract with us, reduces the level of services that it expects to receive, or we determine that a prepayment is no longer necessary, we will repay that customer's deposit. We do not expect such repayments to require material amounts of cash.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance withU.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that the assumptions and estimates associated with revenue recognition and stock-based compensation have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in our Annual Report on Form 10-K for the fiscal year ended
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recent Accounting Pronouncements
See the sections titled "Summary of Significant Accounting Policies-Recent Accounting Pronouncements" and "-Recent Accounting Pronouncements Not Yet Adopted" in Note 2 to our unaudited condensed consolidated financial statements for additional information.
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