Natera, Inc. (NTRA) Earnings

Management highlights

### Key Commercial Milestones - Total test volume hit a new company record of ~1,044,000 units in Q2 2026, marking the second consecutive quarter exceeding 1 million units. - Signatera achieved multiple industry-first regulatory milestones: U.S. FDA approval as a companion diagnostic for muscle-invasive bladder cancer, Japanese PMDA approval for colorectal cancer, and EU IVDR certification for >20 solid tumor types. It also received an NCCN Category 1 recommendation (the highest designation) for bladder cancer, with specific language calling out Natera's personalized tumor-informed assay. - The enhanced Panorama NIPT test for women's health launched in May 2026, achieving 100% detection of trisomy 21 cases in low fetal fraction patients in prospective validation, and has generated strong physician reception and new account wins. - A final expanded Medicare LCD for Prospera organ transplant surveillance was published, covering more annual tests than the initial draft proposal across kidney, heart, and lung transplants, with an August 30, 2026 effective date. ### Clinical Pipeline & R&D Progress - Natera has opened more than 70 prospective clinical studies for Signatera (encompassing internal sponsored trials, pharma partnerships, and academic collaborations), with the pace of data readouts expected to accelerate meaningfully through 2027 and 2028. - The first internally sponsored interventional trial in the Signal portfolio, Signal ER101, is now open for enrollment. The trial tests whether MRD-guided treatment escalation can avoid unnecessary overtreatment with expensive, toxic CDK4/6 inhibitors for early-stage HR-positive HER2-negative breast cancer, with additional interventional trials across major tumor types launching in coming months. - The pivotal FIND study for early colorectal cancer detection is on track to complete full enrollment in Q3 2026, with ~24,000 average-risk adults enrolled to date. Data readout is planned for 2027. Natera expects to spend ~$100 million on early cancer detection R&D in 2026, with no near-term revenue contribution. ### Operational & Financial Highlights - Days Sales Outstanding (DSO) decreased by 4 days sequentially to an average of 57 days, with strong cash conversion and positive operating cash flow for the quarter. - Operating losses narrowed year-over-year, even as R&D investment continued at a high pace. 2026 SG&A is relatively stable after 2025's commercial team expansion, with the expanded team now hitting full productivity.

Guidance

- Management raised full-year 2026 revenue guidance to a new range of $2.85 billion to $2.91 billion, representing a $100 million increase at the midpoint and implies 31% full-year revenue growth. The upward revision reflects stronger-than-expected Signatera volume and better-than-expected women's health performance that offset typical Q2 seasonal softness. - Full-year 2026 operating expenditure (OpEx) guidance is held steady from prior ranges, despite heavy R&D investment in early cancer detection and new clinical trials. Gross margin guidance is held steady, with recent ASP improvements offset by higher COGS from newly launched products that have not yet reached scale. - Signatera ASP for the remainder of 2026 is guided to remain stable at the current $1,275 level, as the ASP benefits from recent FDA approval, NCCN recommendations, and new MolDX coverage expansions are expected to primarily flow through in 2027. The long-term Signatera ASP target of $2,000 remains unchanged. - Natera expects to generate positive full-year 2026 operating cash flow, even while in aggressive growth mode. Q3 2026 Signatera volume growth is not expected to match the 34,000 unit sequential gain of Q2 (which was amplified by Q1 weather impacts), but management expects to outperform the prior all-time record sequential gain of ~25,000 units, with Q3 off to a strong start.

Segment performance

Natera reported total Q2 2026 revenue of $753 million, representing 38% year-over-year (YoY) growth (40% YoY growth excluding revenue true-ups). Gross margin for the quarter was 65%, with a 50 basis point sequential improvement over Q1 2026 after adjusting for true-ups, driven by average selling price (ASP) improvements. 1. **Oncology (Signatera MRD testing)**: Processed 283,000 clinical MRD units in Q2 2026, representing 56% YoY growth and a 34,000 unit sequential increase over Q1 2026 (the largest sequential gain in company history). Sequential growth was partially amplified by weather-related Q1 volume suppression. Signatera ASP increased to ~$1,275, with a long-term target of $2,000. This segment is the fastest growing contributor to total revenue, accounting for approximately 38% of total test volume in Q2 2026. 2. **Women's Health**: Achieved high single-digit YoY growth on a seasonally adjusted basis, outperforming typical seasonal softness in Q2. Growth was driven by new account wins from Fetal Focus adoption and the launch of the enhanced Panorama NIPT test. The enhanced Panorama test reduced the overall no-call rate from 2% to 0.5%, closing a key historical product gap. 3. **Organ Health (Prospera)**: Volume continued to ramp quarter-over-quarter, with a finalized expanded Medicare local coverage determination (LCD) for transplant surveillance expected to drive further volume and ASP growth in the second half of 2026.

Risks & headwinds

- Actual future results may differ materially from forward-looking guidance due to regulatory delays, unexpected changes in payer coverage policies, slower-than-expected clinical study enrollment or data readout, and competitive entry into the MRD and prenatal testing markets. - The timing and outcome of MolDX coverage decisions for the 7 pending Signatera indication submissions cannot be predicted with precision, and unfavorable or delayed decisions could limit near-term ASP and volume growth. - Newly launched products (including enhanced Panorama, Fetal Focus, and Latitude) have higher current COGS that suppress near-term gross margins, and COGS reduction optimization projects may deliver lower savings or take longer than expected to implement. - Revenue true-ups for reimbursement remain an ongoing factor, though they have trended down in absolute terms and as a percentage of revenue, as expected.

Analyst Q&A

• Q: What is the main driver of Signatera's strong recent growth, and how sustainable is this growth going forward? /

  A: Management notes that near-term momentum got a boost from the recent FDA approval halo effect, but long-term growth is driven by multi-year investments in commercial and medical affairs teams, cutting-edge technology, extensive high-quality clinical evidence, and a focus on customer user experience. Q2's 34,000 unit sequential gain is not expected to be repeated immediately, but management expects to outperform the prior 25,000 unit sequential growth record, with Q3 off to a strong start.

• Q: How has competition from new MRD entrants impacted Natera's growth, and what is the competitive dynamic? /

  A: Management states competition is not new — Natera has operated with competing MRD products on the market for over three years, and has still delivered 56% YoY Signatera growth. The overall MRD market is still very early, with mid-single-digit current penetration, so there is enough room for multiple players, and Natera's investments in clinical data and commercial scale leave it best positioned to capture the large remaining upside. Natera continues to close competitive gaps when needed to maintain its lead.

• Q: What is the expected timing and ASP impact of the 7 pending Signatera indication submissions to MolDX? /

  A: Management expects rolling coverage approvals for these submissions over the next 12 to 18 months, with the bulk of approvals falling in the first half of 2027. The total incremental ASP uplift from these new coverage approvals is estimated at $150 to $200, which would be a significant step toward the long-term $2,000 ASP target. The MolDX review process is strict, which acts as a competitive moat that benefits Natera's large body of high-quality clinical data.

• Q: What is driving women's health's better-than-expected Q2 growth, and is Natera gaining market share? /

  A: Management confirms Natera is benefiting from meaningful share gain in women's health. Recent product launches (Fetal Focus and the enhanced Panorama test that closed the historical low fetal fraction no-call gap) have positioned Natera better than ever competitively. The product enhancements and strong sales execution offset the typical Q2 seasonal softness, leading to the high single-digit YoY growth that beat market expectations.