VERACYTE, INC. Q1 FY2025 earnings call

• Marc Stapley noted Q1 results with 18% revenue growth, driven by testing revenue. Decipher had 37% volume growth and Afirma 10% volume growth. - Strategic initiatives include growing existing tests, expanding across the care continuum, international expansion, and novel cancer solutions. - Progress on Decipher: 37% volume growth, broad-based expansion across biopsy NCCN risk categories, record number of ordering providers. - Progress on Afirma: 10% volume growth, resolution of lab benefit manager coverage issue, upcoming independent analysis leveraging GRID database. - Key advancements in CLIA lab, including transitioning Afirma to v2 transcriptome and launching Prosigna as an LDT for U.S. breast cancer market. - MRD platform progress: submitted tech assessment to MolDX, data from TOMBOLA clinical trial, and progress on Percepta Nasal Swab with NIGHTINGALE study close to 95% enrolled.

Veracyte's Q1 2025 total revenue was $114.5 million, a 18% year-over-year growth. Testing revenue grew 19% year-over-year or 21% after adjusting for Envisia. Decipher had a 37% year-over-year volume growth, resulting in approximately 22,600 tests and 33% revenue growth. Afirma saw 10% year-over-year volume growth, with revenue growth lower due to prior period collection benefits and lab benefit manager coverage policy changes in 2024. Product revenue was $3.6 million, up 1% year-over-year, and biopharmaceutical and other revenue was $3.6 million, up 19% year-over-year. Testing gross margin was 74%, up approximately 200 basis points, product margin was 60%, up materially from prior year, and biopharmaceutical and other gross margin was 27%, up 18% year-over-year.

• Second quarter outlook: Testing revenue expected to step up sequentially, gross margin expected to modestly step down sequentially. Product revenue expected to be ~$2.5 million, biopharma and other revenue ~$1.5 million. - 2025 guidance: Reiterates testing revenue guidance of $470 million to $480 million, raises adjusted EBITDA margin guidance for the year to 22.5% from 21.6% previously, estimates 2025 GAAP and non-GAAP tax rate to be in the mid-single-digits.

• French subsidiary Veracyte SAS filed for bankruptcy, impacting IVD product development timelines. - Uncertainties related to tariffs and reagent price increases potentially affecting costs. - Macroenvironment challenges impacting the business.

Q: How do you feel about the portfolio as it stands today and is there a desire to round out the portfolio? And how would you respond to those who believe the value assigned to pipeline initiatives are limited?

A: Marc Stapley stated they've been focused on portfolio management, expanding within indications, channels, and indications. The portfolio is broad with a rich pipeline. Regarding pipeline value, MRD and nasal swab are long-dated growth drivers with milestones and massive markets.

Q: Can you talk about how you are ensuring organizational readiness both commercially and operationally for launches and how do you sort of think about investment into some of the areas that you still need?

A: Marc Stapley mentioned getting products to market with evidence generation. John Leite added thoughtfulness in analytical platform, C2i acquisition leverage, and channel synergies. Rebecca Chambers noted lab readiness and balancing investment with financial profile.

Q: Can you walk us through the guide moving parts, including Envisia impact, Marseille impact, and biopharma pullout? And how should we expect Afirma growth?

A: Rebecca Chambers explained the guide is for testing only. Afirma had 10% volume growth, revenue growth lower due to prior factors, and expects high-single digit revenue growth for the year.

Q: How does the data shared from TOMBOLA position your MRD test as differentiated in bladder relative to currently marketed assays? And what about COGS and reimbursement?

A: Marc Stapley said the test's lead time to detection is a key differentiator. Rebecca Chambers noted MRD indication has ~85% Medicare population, efforts to drive down sequencing costs, and confidence in adjusted EBITDA accretive path and launching with reimbursement.

Q: On Decipher, could you share color on digital pathology efforts and timelines to market?

A: Marc Stapley said more data is better for physicians, research is ongoing, and no immediate commercial opportunity seen yet but continuing research.