Veracyte, Inc. Q3 FY2025 earnings call

• Decipher delivered ~26,700 tests in Q3, 14th consecutive quarter of over 25% YOY volume growth, with high ordering providers and orders per physician.
• Afirma saw 13% volume growth, with transition to new v2 transcriptome workflow on track to complete by year-end, enabling more patients to get test results.
• Progress on MRD platform with multiple studies in various cancers, including muscle invasive bladder cancer, colorectal cancer, etc., and receiving samples for NEO-BLAST trial.
• Prosigna on track to launch as LDT for U.S. breast cancer market mid-2026, with clinical outcomes data from OPTIMA PRELIM study and other preoperative studies highlighting its utility.
• Adjusted EBITDA margin reached a record 30%, exceeding expectations and ahead of internal plans.

Veracyte's core testing business saw 18% revenue growth year-over-year after adjusting for Envisia, with Decipher achieving 26% volume growth and Afirma 13% volume growth. Total revenue for the quarter was approximately $132 million, up 14% year-over-year. Testing revenue was $127.8 million, up 17% year-over-year. Decipher contributed to volume growth, and Afirma was transitioning to a new workflow. Product revenue was $3.3 million, up 4% year-over-year, while biopharmaceutical and other revenue decreased due to Veracyte SAS restructuring. Non-GAAP gross margin was 73%, with testing gross margin at 74% and product margin at 52%.

• Raised 2025 total revenue guidance to $506 million to $510 million from prior $496M-$504M.
• Raised testing revenue guidance to $484 million to $487 million from prior $477M-$483M, reflecting strong year-to-date performance.
• Adjusted EBITDA margin guidance for 2025 exceeded 25%, up from previous 23.5%, with expectation of maintaining ~25% margin in future years barring specific incremental investments.

• Risks associated with competitive technologies like DPAI, including potential discordant results and need to manage physician confusion over interpretation.
• General risks from securities filings related to uncertainties that could cause actual results to differ from forward-looking statements.

Q: Doug Schenkel from Wolfe Research asked about digital pathology, how clinicians manage discordant results and internal digital pathology efforts.

A: Marc Stapley stated clinicians focus on the gold standard Decipher, John Leite mentioned commercial side revisiting evidence for Decipher, and Phil Febbo talked about internal development program with comprehensive data set and driving molecular features research.

Q: Puneet Souda from Leerink Partners asked about Decipher 2026 growth and Veracyte's MRD position.

A: Marc Stapley said Decipher has significant growth opportunity with double-digit durable growth expected, and Phil Febbo expressed confidence in MRD's performance with clinical trials and evidence generation.

Q: Kyle Mikson from Canaccord asked about Afirma underappreciation and molecular features for Decipher.

A: Rebecca Chambers said Veracyte is above average estimates, John Leite talked about molecular features meeting unmet need in treatment heterogeneity, and Marc Stapley described it as a repeatable formula enabled by GRID.

Q: Lu Li from UBS asked about 2025 guide and breast investment.

A: Rebecca Chambers discussed prior period collections and holiday impact, John Leite talked about Prosigna sales channel building.

Q: Subha Nambi from Guggenheim asked about competitive landscape for Decipher and Prosigna LDT.

A: Marc Stapley said Decipher took more share than expected, and he confirmed Prosigna LDT launch mid-2026 with focus on OPTIMA trial data.

Q: Benjamin Mee from Stephens asked about MRD urologist overlap and Decipher growth in high-risk patients.

A: John Leite said high overlap of urologists, and Marc Stapley discussed Decipher's growth in high-risk localized patients driven by metastatic data.

Q: Andrew Brackmann from William Blair asked about TrueMRD indication expansion and portfolio acquisition appetite.

A: Marc Stapley talked about TrueMRD indication expansion based on channel advantage, and said M&A is considered but VC approach is maintained.

Q: Andrew Cooper from Raymond James asked about EBITDA timing, OpEx, and Molecular Features Reports.

A: Rebecca Chambers discussed revenue outperformance and spend timing, John Leite talked about Molecular Features Reports complementing clinical decisions.