On February 22, 2024 Guardant Health, Inc. (Nasdaq: GH), a leading precision oncology company, reported financial results for the quarter and full year ended December 31, 2023 (Press release, Guardant Health, FEB 22, 2024, View Source [SID1234640387]).

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Fourth Quarter 2023 Financial Highlights
•Revenue of $155.1 million for the fourth quarter of 2023, an increase of 22% over the fourth quarter of 2022
•Reported 46,400 tests to clinical customers and 9,500 tests to biopharmaceutical customers in the fourth quarter of 2023, representing increases of 29% and 16%, respectively, over the fourth quarter of 2022
Full Year 2023 Financial Highlights
•Revenue of $563.9 million for the full year 2023, an increase of 25% over the full year 2022
•Reported 172,900 tests to clinical customers and 29,900 tests to biopharmaceutical customers in the full year 2023, representing an increase of 39% and 15%, respectively, over the full year 2022
•Lowered full year 2023 operating expenses and improved free cash flow compared to full year 2022
•Ended the year with $1.2 billion in cash, cash equivalents and marketable debt securities
Recent Operating Highlights
•Improved ASPs with Guardant360 LDT CMS reimbursement increased from $3,500 to $5,000 effective January 1, 2024
•Published first paper for Shield demonstrating improved adherence with blood-based CRC screening
•Collaborated with US Oncology Network and leading community oncology practices to increase the use of biomarker testing to identify patients who would benefit from therapies
•Appointed Terilyn Juarez Monroe as chief people officer
"2023 marked another strong year for Guardant. This was underscored by our team’s exceptional execution to deliver strong clinical volumes, which grew nearly 40%," said Helmy Eltoukhy, co-founder and co-CEO. "We also surpassed an important milestone by achieving cash flow breakeven in our Therapy Selection business by year-end. Looking ahead to 2024, we are well positioned for continued growth across our oncology product portfolio and have a strong foundation to deliver long-term shareholder value."
"We are continuing to make steady progress with FDA on our PMA submission for Shield and look forward to the upcoming Advisory Committee Panel as the next phase of the review process," said AmirAli Talasaz, co-founder and co-CEO. "2024 will be a pivotal year for our screening business as we prepare to launch our Shield IVD test following expected FDA approval. We are excited to see the impact our test will have to CRC screening when it is broadly launched later this year."
Fourth Quarter 2023 Financial Results
Revenue was $155.1 million for the fourth quarter of 2023, a 22% increase from $126.9 million for the corresponding prior year period. Precision oncology revenue grew 25%, to $142.2 million for the fourth quarter of 2023, from $113.8 million for the corresponding prior year period, driven predominantly by an increase in clinical and biopharma testing volume, which grew 29% and 16%, respectively, over the prior year period. Development services and other revenue was $12.9 million for the fourth quarter of 2023, compared to $13.1 million for the corresponding prior year period.
Gross profit, or total revenue less cost of precision oncology testing and cost of development services and other, was $92.5 million for the fourth quarter of 2023, an increase of $12.8 million from $79.8 million for the corresponding prior year period. Gross margin, or gross profit divided by total revenue, was 60%, as compared to 63% for the corresponding prior year period. Precision oncology gross margin was 60% in the fourth quarter of 2023, as compared to 62% in the prior year period. The reduction is primarily due to changes in product mix. Development services and other gross margin was 60% in the fourth quarter of 2023, as compared to 74% in the prior year period. The change is primarily due to the cost of processing an increased volume of Shield LDT tests, for which we are currently booking minimal revenue.

Operating expenses (research and development expense, sales and marketing expense, and general and administrative expense) were $206.6 million for the fourth quarter of 2023, as compared to $225.9 million for the corresponding prior year period. Other operating expense was $83.4 million for the fourth quarter of 2023, related to a non-recurring legal accrual. No such other operating expense was recorded for the corresponding prior year period. Non-GAAP operating expenses were $183.1 million for the fourth quarter of 2023, as compared to $201.2 million for the corresponding prior year period.
Net loss was $187.0 million for the fourth quarter of 2023, as compared to $139.9 million for the corresponding prior year period. Net loss per share was $1.58 for the fourth quarter of 2023, as compared to $1.36 for the corresponding prior year period. The year-over-year increase in net loss is primarily due to the non-recurring $83.4 million legal accrual, partially offset by a $32.0 million year over year improvement in loss from operations, excluding the legal accrual impact, and a $11.7 million increase in interest income.
Non-GAAP net loss was $75.9 million for the fourth quarter of 2023, as compared to $119.6 million for the corresponding prior year period. Non-GAAP net loss per share was $0.64 for the fourth quarter of 2023, as compared to $1.17 for the corresponding prior year period.
Adjusted EBITDA loss was $78.4 million for the fourth quarter of 2023, as compared to a $109.8 million loss for the corresponding prior year period.
Free cash flow for the fourth quarter of 2023 was negative $82.8 million, as compared to negative $100.8 million for the corresponding prior year period. Cash, cash equivalents and marketable debt securities were $1.2 billion as of December 31, 2023.

Full Year 2023 Financial Results

Revenue was $563.9 million for 2023, a 25% increase from $449.5 million for the corresponding prior year period. Precision oncology revenue grew 31%, to $514.2 million for 2023, from $392.0 million for the corresponding prior year period, driven predominantly by an increase in clinical and biopharma testing volume, which grew 39% and 15%, respectively, over the prior year period. Development services and other revenue decreased by 14%, to $49.7 million for 2023, from $57.5 million for the corresponding prior year period, primarily due to the timing and amount of milestones related to our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers, and a reduction in royalty revenue.

Gross profit, or total revenue less cost of precision oncology testing and cost of development services and other, was $336.9 million for 2023, an increase of $43.7 million from $293.2 million for the corresponding prior year period. Gross margin, or gross profit divided by total revenue, was 60%, as compared to 65% for the corresponding prior year period. Precision oncology gross margin was 60% in the year of 2023, as compared to 62% in the prior year period. The reduction is primarily due to changes in product mix. Development services and other gross margin was 57% in the year of 2023, as compared to 86% in the prior year period. The change is primarily due to the inclusion of the full year 2023 cost of processing Shield LDT samples as part of our screening market development activities, for which we are currently booking minimal revenue, compared to the inclusion of the fourth quarter only cost in 2022.
Operating expenses (research and development expense, sales and marketing expense, and general and administrative expense) were $818.2 million for 2023, as compared to $837.6 million for the corresponding prior year period. Other operating expense was $83.4 million for 2023, related to the non-recurring legal accrual discussed above. No such other operating expense was recorded for the corresponding prior year period. Non-GAAP operating expenses were $729.2 million for 2023, as compared to $736.6 million for the corresponding prior year period.
Net loss was $479.4 million for 2023, as compared to $654.6 million for the corresponding prior year period. Net loss per share was $4.28 for 2023, as compared to $6.41 for the corresponding prior year period. The year-over-year improvement in net loss is primarily due to a $99.8 million fair value adjustment related to the Joint Venture acquisition recorded in 2022, a $87.5 million positive change in unrealized gains and losses, a $63.1 million year over year improvement in loss from operations, excluding the legal accrual impact, and a $29.3 million increase in interest income, partially offset by the $83.4 million legal accrual discussed above, and a $23.8 million increase in impairment on non-marketable equity securities.
Non-GAAP net loss was $352.3 million for 2023, as compared to $435.4 million for the corresponding prior year period. Non-GAAP net loss per share was $3.15 for 2023, as compared to $4.26 for the corresponding prior year period.
Adjusted EBITDA loss was $344.2 million for 2023, as compared to a $403.4 million loss for the corresponding prior year period.
Free cash flow for 2023 was negative $345.5 million, as compared to negative $386.9 million for the corresponding prior year period.

2024 Guidance
Guardant Health expects full year 2024 revenue excluding screening to be in the range of $655 to $670 million, representing growth of 16% to 19% compared to full year 2023, and full year 2024 non-GAAP gross margin excluding screening to be in the range of 60% to 62%. Guardant Health expects total non-GAAP operating expenses to be in the range of $740 to $750 million, representing a 1% to 3% increase compared to full year 2023, and free cash flow to be in the range of negative $320 to $330 million in 2024, an improvement compared to the full year 2023.
Webcast Information
Guardant Health will host a conference call to discuss the fourth quarter and full year 2023 financial results after market close on Thursday, February 22, 2024 at 1:30 pm Pacific Time / 4:30 pm Eastern Time. A webcast of the conference call can be accessed at View Source The webcast will be archived and available for replay for at least 90 days after the event.
Non-GAAP Measures
Guardant Health has presented in this release certain financial information in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and also on a non-GAAP basis, including non-GAAP cost of precision oncology testing, non-GAAP cost of development services and other, non-GAAP cost of screening, non-GAAP gross profit, non-GAAP gross profit excluding cost of screening, non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP other operating expense, non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss per share, basic and diluted, adjusted EBITDA, and free cash flow.

We define our non-GAAP measures as the applicable GAAP measure adjusted for the impacts of stock-based compensation and related employer payroll tax payments, contingent consideration, amortization of intangible assets, fair value adjustments on marketable equity securities, impairment of non-marketable equity securities and other related assets, fair value adjustments of noncontrolling interest liability, and other non-recurring items.
Adjusted EBITDA is defined as net loss adjusted for interest income; interest expense; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization expense; stock-based compensation expense and related employer payroll tax payments; contingent consideration; fair value adjustments of noncontrolling interest liability; and other non-recurring items. Free cash flow is defined as net cash used in operating activities in the period less purchase of property and equipment in the period.

We believe that the exclusion of certain income and expenses in calculating these non-GAAP financial measures can provide a useful measure for investors when comparing our period-to-period core operating results, and when comparing those same results to that published by our peers. We exclude certain items because we believe that these income and expenses do not reflect expected future operating performance. Additionally, certain items are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. We use these non-GAAP financial measures to evaluate ongoing operations, for internal planning and forecasting purposes, and to manage our business.

These non-GAAP financial measures are not intended to be considered in isolation from, as substitute for, or as superior to, the corresponding financial measures prepared in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of our recorded costs against its revenue. In addition, our definition of the non-GAAP financial measures may differ from non-GAAP measures used by other companies.