Veracyte Inc.

05/06/2026 | Press release | Distributed by Public on 05/06/2026 06:08

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, or our Annual Report.
As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth herein under the heading "Special Note Regarding Forward-Looking Statements" and in the section titled "Risk Factors" under Part II, Item 1A of this report and under Part I, Item 1A of our Annual Report. Historical results are not necessarily indicative of future results.
When used in this report, all references to "Veracyte," the "company," "we," "our" and "us" refer to Veracyte, Inc., together with its consolidated subsidiaries, unless otherwise noted.
The following is a non-exhaustive list of Veracyte and its affiliates' trademarks and/or registered trademarks in the United States and certain other countries: Afirma, Decipher, Envisia, GenomeDx, GRID, Percepta, Prosigna, TrueMRD, Veracyte, and the Veracyte logo. nCounter is the registered trademark of Bruker Spatial Biology, Inc. and used by Veracyte under license.
Overview
We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer. Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and predictive treatment decisions, as well as the detection of disease recurrence. Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients across our global markets.
In the United States, we currently offer tests in prostate cancer (Decipher Prostate), thyroid cancer (Afirma), breast cancer (Prosigna) and bladder cancer (Decipher Bladder). In addition, we are planning to offer our Prosigna test for breast cancer as an LDT in 2026.
We serve global markets with two complementary models. In the United States, we offer LDTs through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas. Additionally, outside of the United States, we provide IVD tests to patients through distribution to laboratories and hospitals that can perform the tests locally. Our international distribution of IVDs is currently focused on our Prosigna test and, in the future, we intend to offer Decipher Prostate as an IVD test. We believe our broad menu of advanced diagnostic tests, combined with our ability to deliver them globally, differentiates us in the diagnostics industry.
We are aiming to expand our role across the cancer continuum with the addition of our minimal residual disease, or MRD platform, TrueMRD platform, and our assays. This will broaden our portfolio of tests to help monitor the success of a therapeutic or surgical intervention, and support the determination of the best course of action for each patient.
Macroeconomic Factors
Recent macroeconomic factors, such as interest rate fluctuations and inflation in the United States and other markets, evolving international trade policies and government actions relating to tariffs, as well as volatility in the global banking and finance systems, geopolitical challenges and other measures that restrict international trade, have resulted in volatility in the capital and credit markets globally. Moreover, the continued fluctuation and reduced valuation of the U.S. dollar compared to other currencies has impacted and may continue to impact our results of operations. We intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions as appropriate. In addition, macroeconomic effects of regional conflicts like those in the Middle East and between Russia and Ukraine may adversely impact our business and operating results. Finally, the ongoing conflict in the Middle East and related political, military and security conditions in and around Israel may disrupt our Israel business operations and employees that we acquired through our acquisition of 100% of the outstanding equity interests of C2i, or the C2i Acquisition.
The extent of the impact of macroeconomic factors on our future liquidity and operational performance will depend on future developments and their impact on our customers' operations and our sales and renewal cycles. We may also be adversely
affected by further changes in central bank policies and fluctuations in interest rates, rates of inflation, and changes in foreign currency exchange rates. See "Risk Factors" for further discussion.
Factors Affecting Our Performance
Reported Total Test Volume
Our performance currently depends on the number of tests that we perform and report as completed in our CLIA-certified laboratories and the number of tests purchased by our customers, which we refer to as our reported total test volume. Factors impacting our reported total test volume include, but are not limited to:
•the number of samples that we receive that meet the medical indication for each test performed;
•the quantity and quality of the sample received;
•receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests;
•the patient's ability to pay or provide necessary insurance coverage for the tests performed;
•the time it takes us or our customers to perform our tests and report the results, including as a result of supply chain challenges (including quality and supply of single-source reagents and consumables);
•the seasonality inherent in our business, such as the impact of workdays per period, weather-related disruptions, timing of industry conferences and timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers;
•fluctuations in demand for our product test kits, including as a result of higher average selling prices and overall spending constraints across our industry; and
•our ability to obtain prior authorization or meet other requirements instituted by payers, benefit managers, or regulators necessary to be paid for our tests.
Continued Adoption of and Reimbursement for our Products
Revenue growth depends on our ability to secure coverage decisions, achieve broader reimbursement from third-party payers, obtain prior authorization, expand our base of prescribing physicians and increase our penetration in existing accounts. Because some payers consider our products experimental and investigational, we may not receive payment for tests and payments we receive may not be at acceptable levels. We expect our revenue growth to increase if more payers make a positive coverage decision and as payers enter into contracts with us, which should enhance our revenue and cash collections.
Our sales teams are aligned under our general manager-based structure to focus on specific products and markets. If we are unable to expand the base of prescribing physicians and penetration within these accounts at an acceptable rate, or if we are not able to execute our strategy for increasing reimbursement and associated collections, we may not be able to effectively increase our revenue. We expect to continue to see pressure from payers to limit the utilization of tests, generally, and we believe more payers are deploying cost containment tactics, such as requiring prior authorization, reduction of the payer portion of reimbursement and employing laboratory benefit managers to reduce utilization rates. Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates. Changes or implementation of government regulations or reimbursement policies, including under the Protecting Access to Medicare Act of 2014, or PAMA, could result in lower reimbursement rates for our tests. Any such reductions could negatively affect our revenues and margins.
Integrating Acquisitions
Revenue growth, operational results and advances to our test offering strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets and other strategic transactions that we may pursue may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.
New Product Development
A significant aspect of our business is our investment in development activities, including activities related to the development of new tests, as well as modifications and enhancements to our current tests, including the ongoing development of our Prosigna LDT test and TrueMRD platform. In addition to these development activities, we also perform clinical evidence studies which are critical to gaining clinician adoption of our tests, driving favorable coverage decisions by payers, as well as gaining guideline inclusion for such tests.
How We Recognize Revenue
We recognize revenue in accordance with the provisions of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers, or ASC 606. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.
Testing Revenue
We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the cash amount that will ultimately be collected. In determining the amount to accrue for a delivered test, we consider factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and us, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions. Upon ultimate collection, the amount received is compared to previous estimates and the amount accrued is adjusted accordingly.
Generally, cash we receive is collected within 12 months of the date the test is billed. We cannot provide any assurance as to when, if ever, or to what extent, any of these amounts will be collected. Notwithstanding our efforts to obtain payment for these tests, payers may deny our claims, in whole or in part, and we may never receive payment for these tests. Our ability to increase our testing revenue will depend on our ability to penetrate the market, obtain positive coverage policies from additional third-party payers, obtain reimbursement and/or enter into contracts with additional third-party payers for our current and new tests, and increase reimbursement rates for tests performed. Finally, should the judgments underlying our estimated reimbursement change, our accrued revenue and financial results could be negatively impacted in future periods.
We bill list price regardless of contract rate, but only recognize revenue from amounts that we estimate are collectible and meet our revenue recognition criteria. Revenue may not be equal to the billed amount due to a number of factors that we consider when determining revenue accrual rates, including differences in reimbursement rates, the amounts of patient co-payments and co-insurance, the existence of secondary payers, claims denials and the amount we expect to ultimately collect. Finally, when we increase our list price, it will increase the cumulative amounts billed but not positively impact accrued revenue. In addition, payer contracts generally include the right of offset and payers may offset payments prior to resolving disputes over tests performed.
Generally, we determine accrual rates by calculating an average of reimbursement from all payers for tests performed over a four-quarter period as it reduces the effects of temporary volatility and seasonality. The periods selected to determine accrual rates typically are at least six months old because it takes a significant period of time to collect from some payers. We may also determine accrual rates based on other factors such as coverage decisions, contracts, or more recent reimbursement data as appropriate.
The average test reimbursement rates will change over time due to a number of factors, including medical coverage decisions by payers, the effects of contracts signed with payers, changes in allowed amounts by payers, our ability to successfully win appeals for payment, and our ability to collect cash payments from third-party payers and individual patients. Historical average reimbursement is not necessarily indicative of future average reimbursement.
We incur expense for tests in the period in which the test is conducted and recognize revenue for tests in the period in which our revenue recognition criteria are met.
Product Revenue
Our product revenue consists primarily of international sales of the Prosigna breast cancer IVD and related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer, either on its own or together with other resources that are readily available to the customer, and is separately identified in the contract. Performance obligations are considered satisfied once we have transferred control of a
product to the customer, meaning the customer has the ability to use and obtain the benefit of the product. We recognize product revenue for satisfied performance obligations only when there are no uncertainties regarding payment terms or transfer of control. Shipping and handling costs incurred for product shipments are charged to our customers and included in product revenue. Revenue is presented net of the taxes that are collected from customers and remitted to government authorities.
Financial Overview
Revenue
Through March 31, 2026, we derived the majority of our revenue as testing revenue from the sale of Decipher Prostate and Afirma tests, delivered primarily to physicians in the United States. We generally invoice third-party payers upon delivery of a patient report to the prescribing physician. As such, we take the assignment of benefits and the risk of cash collection from the third-party payer and individual patients. Third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows for the periods presented:
Three Months Ended March 31,
2026 2025
Medicare 34 % 33 %
UnitedHealthcare 13 % 13 %
47 % 46 %
In the above table, Medicare Advantage plans are included with their associated private payer amounts and Medicare amounts do not include Medicare Advantage.
Cost of Testing Revenue
The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, customer service, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses. We expect cost of testing revenue in absolute dollars to increase as the number of tests we perform increases. However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, implementation of new technologies and other cost reductions. As we introduce new tests, initially our cost per test will be high as we expect to run suboptimal batch sizes, quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.
Cost of Product Revenue
Our cost of product revenue consists primarily of costs of diagnostic kit components and reagents, labor, delivery costs and royalties for licensed technologies included in our products. Subsequent to the restructuring proceedings affecting Veracyte SAS in August 2025, the costs of diagnostic kit components and reagents and labor costs are paid to a third-party contract manufacturer. As our Prosigna test kits are sold in various configurations with different numbers of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.
Intangible Asset Amortization - Cost of Revenue
Our finite-lived intangible assets, acquired in business combinations, are being amortized over 5 to 15 years, using the straight-line method. Intangible asset amortization - cost of revenue includes amortization of finite-lived intangible assets related to developed and product technology utilized in our current product and service offerings and customer backlog.
Research and Development
Research and development expenses primarily include compensation expense, direct research and development expenses such as laboratory supplies and costs associated with setting up and conducting clinical studies at domestic and international sites, software development expenses, professional fees, depreciation and amortization, other miscellaneous expenses and
allocation of facility and information technology expenses. Further, research and development expenses include costs to collect clinical samples and conduct clinical studies to develop and support our products and pipeline, as well as develop future technology. We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the three months ended March 31, 2026 and the year ended December 31, 2025 in support of our early-stage products, including support for the development and validation of our TrueMRD platform, as well as our Prosigna LDT test, the development of new IVD products and discovery. Going forward, we expect to incur significant expense as we invest in the continued development of our innovation engine, early-stage products including our TrueMRD platform, required clinical studies and the development of current IVD tests.
Selling and Marketing
Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 120 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians. The business units have dedicated marketing support, as well as a marketing operations team that serves the commercial organization broadly. Prosigna sales outside of the U.S. are led by country managers and sales teams that call on laboratories and breast cancer oncologists.
General and Administrative
General and administrative expenses include compensation expenses for executive officers and administrative, billing personnel, professional fees for legal and audit services, occupancy costs, depreciation and amortization, and other expenses such as information technology, acquisition related costs and miscellaneous expenses, offset by allocation of facility and information technology expenses to other functions. We expect general and administrative expenses to continue to increase as we build our infrastructure to scale revenue growth, and to decline as a percentage of revenue thereafter.
Intangible Asset Amortization - Operating Expenses
Our finite-lived intangible assets, acquired in business combinations, are being amortized over 5 to 15 years, using the straight-line method. Intangible asset amortization - operating expenses includes amortization of finite-lived intangible assets related to developed technology utilized in the development of future product and service offerings, trade names and customer relationships.
Other Income (Loss), Net
Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts and our short-term investments, realized and unrealized gains and losses on foreign currency transactions, settlement of escrow claims and, prior to the restructuring proceedings affecting Veracyte SAS in August 2025, French tax credits.
Results of Operations
Comparison of the three months ended March 31, 2026 and 2025 (in thousands of dollars, except percentages and test volume):
Three Months Ended March 31,
2026 2025 Change %
Revenue:
Testing revenue $ 135,091 $ 107,309 $ 27,782 26%
Product revenue 3,679 3,580 99 3%
Biopharmaceutical and other revenue 301 3,584 (3,283) (92)%
Total revenue 139,071 114,473 24,598 21%
Cost of revenue:
Cost of testing revenue 33,306 28,260 5,046 18%
Cost of product revenue 1,891 1,422 469 33%
Cost of biopharmaceutical and other revenue 8 2,698 (2,690) (100)%
Intangible asset amortization - cost of revenue 2,707 2,585 122 5%
Total cost of revenue 37,912 34,965 2,947 8%
Gross profit 101,159 79,508 21,651 27%
Operating expenses:
Research and development 27,098 17,720 9,378 53%
Selling and marketing 27,156 24,454 2,702 11%
General and administrative 23,680 33,808 (10,128) (30)%
Intangible asset amortization - operating expenses 579 622 (43) (7)%
Total operating expenses 78,513 76,604 1,909 2%
Income from operations 22,646 2,904 19,742 680%
Other income, net 7,328 4,524 2,804 62%
Income before income taxes 29,974 7,428 22,546 304%
Income tax provision 1,267 381 886 233%
Net income $ 28,707 $ 7,047 $ 21,660 307%
Other Operating Data:
Diagnostic tests reported 45,248 38,078 7,170 19%
Product tests sold 2,367 2,577 (210) (8)%
Total test volume 47,615 40,655 6,960 17%
Depreciation and amortization expense $ 5,430 $ 5,362 $ 68 1%
Stock-based compensation expense $ 12,761 $ 10,958 $ 1,803 16%
Revenue
Revenue increased $24.6 million for the three months ended March 31, 2026 compared to the same period in 2025. This was primarily due to a $27.8 million increase in testing revenue partially offset by a $3.3 million decrease in our biopharmaceutical and other revenue. The 26% growth in testing revenue was primarily driven by a 19% volume increase, as well as improved ASP and prior period collections. The Biopharmaceutical and other revenue decrease was due to the discontinuation of biopharmaceutical services, contract manufacturing or contract development services previously conducted in France, following the restructuring proceedings affecting Veracyte SAS, as of August 2025.
Product revenue was flat for the three months ended March 31, 2026 compared to the same periods in 2025.
Cost of revenue
Comparison of the three months ended March 31, 2026 and 2025 is as follows (in thousands of dollars, except percentages):
Three Months Ended March 31,
2026 2025 Change %
Cost of testing revenue:
Laboratory supplies and reagents expense $ 12,314 $ 13,067 $ (753) (6) %
Sample collection expense 3,288 2,825 463 16 %
Compensation expense 9,804 5,611 4,193 75 %
Cytopathology services 1,662 1,455 207 14 %
Depreciation and amortization 709 430 279 65 %
Other expenses 2,566 1,500 1,066 71 %
Allocations 2,963 3,372 (409) (12) %
Total $ 33,306 $ 28,260 $ 5,046 18 %
Cost of product revenue:
Product costs $ 1,401 $ 109 $ 1,292 1,185 %
License fees and royalties 313 324 (11) (3) %
Depreciation and amortization 70 178 (108) (61) %
Other expenses 104 614 (510) (83) %
Allocations 3 197 (194) (98) %
Total $ 1,891 $ 1,422 $ 469 33 %
Cost of biopharmaceutical and other revenue:
Compensation expense $ - $ 1,240 $ (1,240) (100) %
Depreciation and amortization 8 48 (40) (83) %
Other expenses - 996 (996) (100) %
Allocations - 414 (414) (100) %
Total $ 8 $ 2,698 $ (2,690) (100) %
Intangible asset amortization - cost of revenue $ 2,707 $ 2,585 $ 122 5 %
Cost of testing revenue increased $5.0 million, or 18%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase in cost of testing revenue was due to increased volume in testing, higher staffing to support higher volume, the build out of infrastructure related to current and future growth expectations, primarily related to Decipher Prostate and Afirma tests, and the assignment of customer service expenses directly to cost of revenue. These increases were partially offset by lab efficiencies and lower allocated expenses.
Cost of product revenue increased $0.5 million, or 33%, for the three months ended March 31, 2026 compared to the same periods in 2025. The increase for the three months ended March 31, 2026 is primarily related to the transition to contract manufacturing of Prosigna kits.
Cost of biopharmaceutical and other revenue includes labor costs, laboratory supplies and pass-through expenses incurred. Cost of biopharmaceutical and other revenue for the three months ended March 31, 2026 decreased by $2.7 million compared to the same periods in 2025, driven primarily by a continued decline in biopharmaceutical services, as well as contract development and manufacturing services projects as a result of the restructuring proceedings affecting Veracyte SAS that were underway throughout 2025.
Research and development
Research and development expense increased $9.4 million, or 53%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to a $6.0 million increase from the assignment of research and
development related software expenses previously accounted for in general and administrative and partially allocated. This was due to the addition of the Chief Development and Technology Officer and that these expenses are now fully dedicated to product development objectives. General and administrative expense allocations and compensation expense associated with added headcount and annual merit increases also increased. Spend supporting direct research and product development expense related to our ongoing development costs for our CLIA tests and MRD strategies increased but was partially offset by the impact of the deconsolidation of Veracyte SAS in August 2025.
Selling and marketing
Selling and marketing expense increased $2.7 million, or 11%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to annual merit increases and headcount additions. Direct marketing expense increased primarily due to website design costs and expenses related to the anticipated launch of new tests.
General and administrative
General and administrative expense decreased by $10.1 million for the three months ended March 31, 2026, compared to the same period in 2025. The results were impacted primarily by a $6.0 million decrease related to the assignment of software development expenses, previously included in General and administrative expense allocations, directly to research and development, the assignment of customer service expenses directly to cost of revenue, as well as a decline in professional fees related to lower legal, audit and tax fees in the quarter. These decreases were offset by fewer allocations and reductions in the revaluation of contingent consideration related to the acquisition of C2i recognized in the prior year. General and administrative expenses related to occupancy costs and information technology costs, excluding software development, are allocated to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location.
Other income, net
Other income, net, increased $2.8 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to the settlement of escrow claims of $4.2 million and an increase of $0.7 million from interest income, partially offset by a decrease of $1.5 million due to foreign currency revaluation.
Income tax expense
We recorded income tax expense of $1.3 million and $0.4 million for the three months ended March 31, 2026 and 2025, respectively.
Given our current earnings, we believe that, within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance recorded against the deferred tax assets held may be reversed. A reversal would result in an income tax benefit for the quarterly and annual period in which we determine to release the valuation allowance. However, the exact timing and amount of a valuation allowance release are subject to change on the basis of the level of profitability that we actually achieve.
Liquidity and Capital Resources
As of March 31, 2026, we had cash and cash equivalents and short-term investments of $439.1 million. During the three months ended March 31, 2026, our cash and cash equivalents and short-term investments increased by $26.2 million. Historically, we have obtained financing primarily through sales of our equity securities. Beginning in 2023, our operations have been financed primarily by cash flows generated by our revenue. For the three months ended March 31, 2026, we had net income of $28.7 million, but we may not sustain profitability in the future. As of March 31, 2026, we had an accumulated deficit of $348.9 million.
We expect to continue to generate cash and our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, and general corporate expenses associated with the growth of our business. However, we may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements. If we are not able to generate cash flows from our revenue to finance our cash requirements, we will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements. If we are not able to secure additional financing
when needed, or on terms that are favorable to us, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives, or forgo potential acquisitions or investments. In addition, we may have to work with a partner on one or more of our products or development programs, which could lower the economic value of those programs to us. Moreover, ongoing instability in the global credit markets or the banking system may impact our liquidity both in the short term and long term.
Our material cash requirements include the following obligations:
Operating Leases
We lease office and laboratory facilities in the U.S., including in South San Francisco and San Diego, California and Austin, Texas. Effective August 2025, in connection with the restructuring proceeding in Veracyte SAS, we are no longer a party to the lease in Marseille, France. The lease terms of our leases as of March 31, 2026 extend to March 2040 and contain extension of lease term and expansion options. As of March 31, 2026, the leases have a weighted average remaining lease term of 11.0 years and total future minimum lease payments of $71.4 million.
Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2026 and 2025 (in thousands of dollars):
Three Months Ended March 31,
2026 2025
Net cash provided by operating activities $ 35,215 $ 5,362
Net cash used in investing activities (127,961) (51,818)
Net cash used in financing activities (6,629) (6,484)
Cash Flows from Operating Activities
Cash provided by operating activities for the three months ended March 31, 2026 was $35.2 million. Our net income of $28.7 million includes non-cash charges of $12.8 million of stock-based compensation expense, $5.4 million of depreciation and amortization, of which $3.3 million was related to intangible asset amortization, non-cash lease expense of $0.7 million, amortization of discount on short-term investments of $0.6 million, non-cash gains of $0.4 million from the revaluation of contingent consideration, loss of $0.4 million on the disposal of fixed assets, and $0.1 million from the effect of foreign currency changes on operations. Cash used as a result of changes in operating assets and liabilities was $11.7 million, primarily composed of a decrease in accrued liabilities and deferred revenue of $6.1 million, an increase in accounts receivable of $5.6 million, an increase in prepaid expenses and other current assets of $1.3 million, an increase in supplies of $0.9 million, a decrease in operating lease liabilities of $0.3 million partially offset by an increase in accounts payable of $2.6 million.
Cash provided by operating activities for the three months ended March 31, 2025 was $5.4 million. Our net income of $7.0 million includes non-cash charges of $11.0 million of stock-based compensation expense, $5.4 million of depreciation and amortization, of which $3.2 million was related to intangible asset amortization, non-cash lease expense of $0.9 million, non-cash gains of $2.0 million from the revaluation of contingent consideration and $1.6 million from the effect of foreign currency changes on operations. Cash used as a result of changes in operating assets and liabilities was $14.5 million, primarily composed of a decrease in accrued liabilities and deferred revenue of $8.9 million, an increase in accounts receivable of $7.1 million, an increase in prepaid expenses and other current assets of $2.9 million, and an increase in supplies and inventory of $2.3 million partially offset by an increase in accounts payable of $7.1 million.
Cash Flows from Investing Activities
Cash used in investing activities for the three months ended March 31, 2026 was $128.0 million, consisting of the purchase of $125.0 million of short-term investments and $3.0 million used in the purchase of property, plant and equipment.
Cash used in investing activities for the three months ended March 31, 2025 was $51.8 million, consisting of $50.0 million from the purchase of short-term investments and $1.8 million used in the purchase of property, plant and equipment.
Cash Flows from Financing Activities
Cash used in financing activities for the three months ended March 31, 2026 was $6.6 million, consisting of $9.4 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $2.7 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our Employee Stock Purchase Plan, or ESPP.
Cash used in financing activities for the three months ended March 31, 2025 was $6.5 million, consisting of $9.5 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $3.0 million in proceeds from the exercise of options to purchase our common stock and the purchase of stock under our ESPP.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 1, Organization, Description of Business and Summary of Significant Accounting Policies, in the notes to our condensed consolidated financial statements included elsewhere in this report.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the 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 liabilities at the date of the 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 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 and any such differences may be material. We believe that the accounting policies discussed in our Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report.
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