GENEDX HOLDINGS CORP. 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 endedDecember 31, 2020 and the related notes incorporated by reference in our audited financial statements appearing in the definitive proxy statement filed byCM Life Sciences, Inc. with theSEC onJuly 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 toMount Sinai Genomics Inc. d/b/aSema4 ("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 toSema4 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 ofIcahn School of Medicine at Mount Sinai ("ISMMS"), and commenced operations inJune 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 ourWomen's Health and Oncology solutions. OurWomen'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 receiveNew 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 endedSeptember 30, 2021 , we accessioned approximately 480,291 tests in our laboratories, 271,354 tests of which were for COVID-19, compared to the period endedSeptember 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 endedSeptember 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. InMarch 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 theProvider 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 toWomen'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 theSEC ; 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 ourTSA 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 9 % 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 endedSeptember 30, 2021 , from$38.6 million for the three months endedSeptember 30, 2020 . Diagnostic test revenue increased by$3.5 million , or 9%, to$41.4 million for the three months endedSeptember 30, 2021 , from$37.9 million for the three months endedSeptember 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 endedSeptember 30, 2021 , from$0.7 million for the three months endedSeptember 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 --------------------------------------------------------------------------------
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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
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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) 7 %
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 $0.3 million related to debt that was repaid
earlier than the maturity date during the three months ended September 30, 2020 .
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Table of Contents Comparison of the nine months endedSeptember 30, 2021 and 2020 The following table sets forth our results of operations for the periods presented (in thousands): Nine months ended September 30, 2021 2020 (in thousands) Revenue Diagnostic test revenue$ 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 endedSeptember 30, 2021 , from$115.4 million for the nine months endedSeptember 30, 2020 . Diagnostic test revenue increased by$35.2 million , or 31%, to$149.0 million for the nine months endedSeptember 30, 2021 , from$113.8 million for the nine months endedSeptember 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 endedSeptember 30, 2020 , compared to approximately 272,973 tests in the nine months endedSeptember 30, 2021 . There was also an increase in large carrier screening tests performed during the nine months endedSeptember 30, 2020 . Other revenue increased by$3.8 million , or 238%, to$5.4 million for the nine months endedSeptember 30, 2021 , from$1.6 million for the nine months endedSeptember 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 --------------------------------------------------------------------------------
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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.
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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.
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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.
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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 inWomen'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 second quarter of 2020. Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest expense, net, depreciation and amortization, stock-based compensation expenses, transaction costs, other income (expense), net, change in fair market value of warrant and earn-out contingent liabilities and COVID-19 costs. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall operating performance. 41 -------------------------------------------------------------------------------- Table of Contents The following is a reconciliation of our net loss to Adjusted EBITDA for the three months endedSeptember 30, 2021 and 2020: Three months ended September 30, 2021 2020 (in thousands) Net Income (loss)$ 31,392 $ (56,615) Interest expense, net (1) 656 574 Depreciation and amortization 5,491 3,067 Stock-based compensation expense 18,011 29,453 Transaction costs (2) 391 -
Change in fair market value of warrant and earn-out contingent liabilities (3)
(122,171) -
Other (income) expense, net (4) 343 26
Adjusted EBITDA $ (65,887) $ (23,495)
__________________
(1)Represents the total of Interest Expense related to our capital leases and
interest-bearing loans and Interest Income on money market funds.
(2)Represents professional service costs incurred in connection with pursuing
the Business Combination transaction that did not meet the requirement for
capitalization.
(3)For the three months ended September 30, 2021 , represents the change in fair
market value of the liabilities associated with our public warrants and private
placement warrants and the earn-out shares issuable under the terms of the
Merger Agreement.
(4)For the three months ended September 30, 2021 , consists primarily of
penalties related to early extinguishment of debt.
The following is a reconciliation of our net loss to Adjusted EBITDA for the
nine months ended September 30, 2021 and 2020:
Nine months ended September 30,
2021 2020
(in thousands)
Net loss $ (204,963) $ (115,657)
Interest expense, net (1) 2,071 1,353
Depreciation and amortization 16,012 8,147
Stock-based compensation expense 182,454 30,073
Transaction costs (2) 5,496 -
Change in fair market value of warrant and earn-out contingent liabilities (3)
(122,171) -
Other (income) expense, net (4) (5,241) (2,645)
COVID-19 costs (5) - 3,179
Adjusted EBITDA $ (126,342) $ (75,550)
__________________
(1)Represents the total of Interest Expense related to our capital leases and
interest-bearing loans and Interest Income on money market funds.
(2)Represents professional service costs incurred in connection with pursuing
the Business Combination transaction that did not meet the requirement for
capitalization.
(3)For the nine months ended September 30, 2021 , represents the change in fair
market value of the liabilities associated with our public warrants and private
placement warrants and the earn-out shares issuable under the terms of the
Merger Agreement.
(4)For the nine months ended September 30, 2021 and 2020, consists primarily of
funding received under the CARES Act Provider Relief Fund , offset by penalties
related to early extinguishment of debt occurred in three months ended September
30, 2021 .
(5)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 suffered significantly due to 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 second
quarter of 2020.
Going Concern, Liquidity and Capital Resources
On July 22, 2021 , we completed the Business Combination with CMLS and received
net cash proceeds of $510 million . Management determined that the cash proceeds
received from the Business Combination provides us with sufficient liquidity to
meet our obligations for at least twelve months from the date of this Quarterly
Report.
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Accordingly, the unaudited condensed consolidated financial statements included
in this Quarterly Report have been prepared on a basis that assumes we will
continue as a going concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the ordinary course of business.
Material Cash Requirements for Known Contractual Obligations and Commitments
The following is a description of commitments for known and reasonably likely
cash requirements as of September 30, 2021 and December 31, 2020 . We anticipate
fulfilling such commitments with our existing cash and cash equivalents, which
amounted to $461.3 million and $108.1 million as of September 30, 2021 and
December 31, 2020 , respectively, or through additional capital raised to finance
our operations; see "-Going Concern, Liquidity and Capital Resources".
Our future minimum payments under non-cancellable operating lease agreements
were $69.4 million as of September 30, 2021 and $73.3 million as of December 31,
2020 . The timing of these future payments, by year, can be found in Legacy
Sema4's audited financial statements in Note 9, "Commitments and Contingencies"
included within the Proxy Statement and our unaudited condensed consolidated
financial statements in Note 9, "Commitments and Contingencies," included within
the Quarterly Report respectively.
Our future payments under capital leases were $66.7 million as of September 30,
2021 . The timing of these future payments, by year, can be found in Legacy
Sema4's audited financial statements in Note 9, "Commitments and Contingencies"
included within the Proxy Statement and our unaudited condensed consolidated
financial statements in Note 9, "Commitments and Contingencies," included within
this Quarterly Report, respectively.
Cash Flows
Nine months ended September 30,
2021 2020
(in thousands)
Net cash used in operating activities $ (138,449) $ (74,795)
Net cash used in investing activities (13,093) (20,475)
Net cash provided by financing activities 494,758
119,942
Operating Activities Net cash used in operating activities during the nine months endedSeptember 30, 2021 was$138.4 million , which was primarily attributable to a net loss of$205.0 million and a change in fair value of the warrant and earn-out liabilities of$122.2 million , partially offset by non-cash depreciation and amortization of$16.0 million and non-cash stock-based compensation expense of$182.5 million . The net change in our operating assets and liabilities primarily reflected a$10.8 million decrease in accounts receivable due to a decrease in COVID-19 test volume performed during the second and third quarter of 2021, a$7.3 million increase in inventories driven by a higher volume of purchases to support increasing testing volumes, a$15.7 million increase in prepaid expenses and other current assets mainly driven by new insurance policy premiums paid during the nine months period, a$4.7 million increase in accounts payable and accrued expenses due to the timing of vendor payments of large vendors, and a$3.4 million decrease in other current liabilities mainly driven by the repayment of capital leases and decrease in compensation related accruals. Net cash used in operating activities during the nine months endedSeptember 30, 2020 was$74.8 million , which was primarily attributable to a net loss of$115.7 million , partially offset by non-cash depreciation and amortization of$8.1 million and non-cash stock-based compensation expense of$30.1 million . The net change in our operating assets and liabilities primarily reflected an increase in inventory of$8.1 million and an increase in other current liabilities of$10.1 million . Investing Activities Net cash used in investing activities during the nine months endedSeptember 30, 2021 was$13.1 million , which was attributable to$4.3 million in purchases of property and equipment and$8.7 million of costs related to development of internal-use software assets. Net cash used in investing activities during the nine months endedSeptember 30, 2020 was$20.5 million , which was attributable to$17.3 million in purchases of property and equipment and$3.2 million of costs related to development of internal-use software assets. 43 -------------------------------------------------------------------------------- Table of Contents Financing Activities Net cash provided by financing activities during the nine months endedSeptember 30, 2021 was$494.8 million , which was attributable to the consummation of the Merger including:$350.0 million from PIPE investment proceeds;$442.7 million from an equity infusion from the Merger, net of redemptions; offset by$230.7 million in the cash payments to certain LegacySema4 stockholders; payment of transaction costs of$51.8 million ; and$3.8 million of stock appreciate rights pay-outs. These amounts were further offset by an$8.7 million repayment of long-term debt and$3.0 million of capital lease principal payments. Net cash provided by financing activities during the nine months endedSeptember 30, 2020 was$120.0 million , which was attributable to$117.3 million in proceeds, net of issuance costs from the issuance of Series C redeemable convertible preferred stock, and$6.0 million in cash proceeds from the issuance of long-term debt, partially offset by$3.4 million in principal payments on our capital lease obligations. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC . Critical Accounting Policies and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Except as described in Note 2, "Summary of Significant Accounting Policies - Recent Accounting Pronouncement Issued but Not Yet Adopted," to our unaudited condensed consolidated financial statements included in this Quarterly Report, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Legacy Sema4's audited consolidated financial statements and notes thereto included within the Proxy Statement. JOBS Act Accounting Election We are considered an "emerging growth company" within the meaning of the JOBS Act. The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Following the completion of the Business Combination, we will remain an emerging growth company until the earliest of (1)September 1, 2025 , (2) the last day of the fiscal year in which we have total annual gross revenue of at least$1.07 billion , (3) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded$700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. Recent Accounting Pronouncements Additional information on recent accounting pronouncements can be found in Legacy Sema4's audited financial statements in Note 2, "Summary of Significant Accounting Policies" included within the Proxy Statement and our unaudited condensed consolidated financial statements in Note 2, "Summary of Significant Accounting Policies." Included within the Quarterly Report. 44 -------------------------------------------------------------------------------- Table of Contents Internal Controls In connection with the preparation of Legacy Sema4's audited financial statements included in the Proxy Statement, we identified material weaknesses in our controls, which existed as ofDecember 31, 2020 . Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. During 2021, we made the following enhancements to our control environment: •InMay 2021 , we hired a permanent Chief Accounting Officer with substantial technical accounting and internal controls experience, whose responsibilities include working with our Chief Financial Officer, existing employees and third-party consultants to improve the design, implementation, execution and supervision of our controls. •We added accounting and information technology employees with appropriate experience, certification, education and training to the organization to strengthen our internal accounting team, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. This includes hiring a Corporate Controller, whose primary responsibilities include working with third-party consultants to improve the design, implementation, execution, and supervision of our controls. We expect to continue evaluating our needs for additional personnel. We expect to provide enhanced training to existing and new employees in order to enhance the level of communication and understanding of controls with personnel that provide key information and perform key roles within our financial accounting and reporting group. •We engaged outside consultants to assist in the design, implementation, and documentation of internal controls that address the relevant risks, are properly designed, and provide for appropriate evidence of performance of the internal controls; and •We engaged outside consultants to assist us in the evaluation of our Enterprise Resource Planning ("ERP") system in order to mitigate the internal control gaps and limitations with the current configuration, and to enhance the information technology general controls environment. Our remediation activities are continuing during 2021. In addition to the above actions, we expect to engage in additional activities, including, but not limited to: •Hiring more technical accounting resources to enhance our control environment; •Engaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures until we have sufficient technical accounting resources; •Implementing business process-level controls across all significant accounts and information technology general controls across all relevant systems. This includes providing training for control owners that will present expectations as it relates to the control design, execution and monitoring of such controls, including enhancements to the documentation to evidence the execution of the controls; and •Implementing improvements to our ERP system to enhance the accuracy of our financial records, enable the enforcement of systematic segregation of duties, and to improve our information technology general controls environment. We continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our controls. As we continue to evaluate, and work to improve our controls, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates. Our cash, cash equivalents, and restricted cash consists of bank deposits and money market funds, which totaled$118.9 million and$115.0 million atDecember 31, 2020 and 2019, respectively, and$462.2 million as ofSeptember 30, 2021 . Such interest-bearing instruments carry a degree of risk? however, because our investments are primarily high-quality credit instruments with short-term durations with high-quality institutions, we have not been exposed to, nor do we anticipate 45
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Table of Contents being exposed to, material risks due to changes in interest rates. A 100 basis point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and restricted cash. Our loans and financing obligations are recorded at amortized cost and are set at fixed interest rates. As a result, fluctuations in interest rates would not impact our financial statements. However, the fair value of our debt will generally fluctuate with movements of interest rates. Additional information on our long-term debt can be found inSema4's audited financial statements in Note 8, "Long-Term Debt" andSema4's unaudited condensed consolidated financial statements in Note 8, "Long-Term Debt."
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