VERACYTE, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: 2024 was a record year with Q4 revenue of $119 million (21% year-over-year growth) and full year revenue of $446 million (23% year-over-year growth). Testing revenue grew 28% year-over-year, with 10 consecutive quarters of 20% or greater testing revenue growth.
• Decipher: Market leader with over 80,000 tests in 2024, Q4 volume growth of 45%. Land and expand approach in prostate cancer with 40%-55% annual volume growth across NCCN risk categories. 85 clinical studies demonstrate clinical utility.
• Afirma: Volume growth 12% in 2024, Q4 volume 16,300 tests (8% year-over-year growth). Expanded LCD for Afirma in July 2024 boosted Bethesda V/VI revenues. Endocrinology market ~65% penetrated, expecting high-single-digit growth in 2025.
• Other Initiatives: NIGHTINGALE study for nasal swab ~85% enrolled. MRD platform development for muscle invasive bladder cancer, submitted tech assessment to MolDx. French subsidiary under review for potential divestment to focus on core strategies.

Segment Performance

• Testing Revenue: Q4 2024 testing revenue was $112.2 million, a 24% year-over-year increase. Full year 2024 testing revenue reached $423 million, a 28% year-over-year growth. Testing now accounts for nearly 95% of the business.
• Decipher: In Q4 2024, Decipher volume was over 22,400 tests, a 45% year-over-year growth. Full year 2024 volume was over 80,000 tests, a 36% year-over-year growth. Low-risk Decipher volume now represents 20% of total Decipher volume.
• Afirma: Q4 2024 Afirma volume was over 16,300 tests, an 8% year-over-year growth. Full year 2024 volume was up 12% year-over-year. Revenues for Bethesda V and VI in Q4 2024 grew over 80% year-over-year.
• Product and Biopharmaceutical Other: Q4 2024 product revenue was $3 million (down 18% year-over-year) and biopharmaceutical other revenue was $3.5 million (down 17% year-over-year) due to supply and manufacturing challenges.

Guidance

• 2025 Testing Revenue: Forecasted at $470-480 million, representing 12%-15% year-over-year growth excluding Envisia impact.
• Adjusted EBITDA: 2024 adjusted EBITDA margin was 20.6%, with 2025 expected to improve by approximately 100 basis points.
• Metastatic Decipher: Launch in the back half of 2025, with ramping up as sales teams engage with customers, balanced with focus on localized business.
• Afirma: High-single-digit growth driven by volume, not significant ASP tailwind.

Risks

• French Subsidiary: Veracyte is considering not funding Veracyte SAS, which may lead to bankruptcy proceedings, potentially impacting Prosigna supply unless a buyer is found.
• MRD Reimbursement: Uncertainty in reimbursement timeline for MRD platform, with potential tail risks due to dynamic regulatory environment.
• Supply Chain: Ongoing supply and manufacturing challenges for Prosigna affecting product revenue.

Question and Answer

• **Q: Balance between investment/growth and margin/cash flow?

A: Marc Stapley discussed portfolio rationalization and focus on core franchises (Decipher, Afirma) bridging to long-term growth drivers like MRD, international expansion, while managing portfolio decisions to free up resources for strategic investments.**

• **Q: Afirma growth drivers?

A: Rebecca Chambers noted high-single-digit growth driven by volume, with expanded LCD coverage contributing, not significant pricing impact.**

• **Q: Metastatic Decipher revenue cadence?

A: Marc Stapley stated launch in back half of 2025, ramping up as sales teams engage, with deliberate balance to not distract from localized business.**

• **Q: Decipher volume growth 2025?

A: Marc Stapley highlighted market opportunity, share gain potential, and NCCN guidelines supporting growth, with Decipher volume growth part of testing revenue guidance.**

• **Q: MRD reimbursement timeline?

A: Marc Stapley and Rebecca Chambers mentioned submitted tech assessment to MolDx in current quarter, with ongoing engagement with regulators, but potential tail risks.**