VERACYTE, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Q3 Performance: Q3 2024 was a record quarter with revenue of $115.9 million, up 29% YOY. Testing revenue grew 34% YOY.
• Decipher Update: Record 21,250 tests in Q3, up 36% YOY. New data from VANDAAM and STAMPEDE studies highlighted Decipher's utility. Metastatic indication launch expected in back half of 2025.
• Afirma Update: Close to 15,100 tests in Q3, up 12% YOY. Expanded LCD for Afirma went into effect, expected to be a moderate ASP tailwind in 2025.
• Strategic Imperatives: Focus on expanding Decipher's market, strong Afirma growth, and long-term drivers like IVD products, MRD testing, and Percepta Nasal Swab. Paused Envisia CLIA test due to low penetration.
• MRD Update: Progressing towards launch of MRD test in muscle invasive bladder cancer in H1 2026.

Segment Performance

• Testing Revenue: Q3 2024 testing revenue was $109.5 million, up 34% year-over-year. Volume was approximately 36,800 tests. Decipher had 21,250 tests in Q3, up 36% YOY. Afirma had close to 15,100 tests, up 12% YOY.
• Product Revenue: Q3 product revenue was $3.2 million, down 21% YOY due to supply challenges.
• Biopharma and Other Revenue: $3.1 million, down 23% YOY.
• Gross Margin: Non-GAAP gross margin was 71%, testing gross margin was 74%, product margin was 44%, biopharmaceutical and other gross margin was 3%.

Guidance

• Revenue: Raised 2024 total revenue guidance to $442 million to $445 million from prior $432 million to $438 million.
• Cash: Expect to end 2024 with $280 million to $285 million in cash, cash equivalents, and short-term investments.
• Adjusted EBITDA: Full year 2024 adjusted EBITDA margin expected to be slightly more than 20%.

Risks

• Supply Chain Issues: Impact on product revenue, with muted expectations for 2025.
• Regulatory and Reimbursement Challenges: Uncertainties around tech assessments and reimbursement for new indications like metastatic Decipher.
• Market Competition: Potential challenges from competitors in the diagnostics space.

Question and Answer

Q: High-level on next steps for Veracyte?

A: Focus on existing products, strategic initiatives, and scaling talent.

Q: Decipher volume growth drivers?

A: NCCN guidelines, new physicians, existing physicians increasing orders, commercial payers.

Q: Testing volume growth for 2025?

A: Afirma high-single-digit growth, Decipher's metastatic indication ramping in back half of 2025.

Q: Profitability and cash deployment?

A: Leverageable sales team, focus on R&D for strategic initiatives, careful cash deployment.

Q: Decipher metastatic benefit quantification?

A: ~30,000 new incidences annually, ramp-up with commercial payers, similar ASP trajectory as localized.

Q: Product revenue supply chain?

A: Managing demand, transition year for product business, muted growth in 2025.

Q: Decipher market building for metastatic?

A: Training sales force, same customer base, measured rollout.

Q: Hurricanes impact?

A: Small dent, largely recovered.

Q: NIGHTINGALE study timing?

A: Stopped guiding, continuing enrollment.

Q: Pricing sustainability?

A: Managed-care team, prior-period collections, but watch for flattening.

Q: MRD launch timing?

A: H1 2026 for bladder, platform for other indications.

Q: Decipher growth rate for 2025?

A: Not guided yet, but tailwinds from NCCN, commercial payers, metastatic indication.

Q: Commercial payer pressures?

A: Decipher and Afirma have strong evidence, growing commercial coverage.

Q: Sales force growth and productivity?

A: 6 months for reps to be productive, gradual scaling.

Q: IVD product updates?

A: PCR, NGS, Nasal Swab in development, transition year in 2025.