CareDx, Inc. (CDNA) Earnings Call Transcript & Summary

Thank you. Hello, everyone. Thank you for joining us and welcome to the CARE DX Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Nina Deka, CARE DX Head of Investor Relations. Nina, please go ahead.

Thank you, Operator. Good afternoon. Thank you for joining us today. Earlier today, CARE-DX released financial results for the second quarter 2026, ending June 30th, 2026. Our results and our earnings presentation are available on the company's website at CAREDX.com. Joining me on today's call are John Hanna, President and Chief Executive Officer, and Keith Kennedy, Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements. All key statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. Information concerning the risks, uncertainties, and other factors that could cause results to differ from these forward-looking statements is included in our filing with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, July 30, 2026. We disclaim any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. This call will also include discussion of certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute or in isolation from GAAP measures. Reconciliations of our non-GAAP financial measures to the most directly compatible GAAP financial measures may be found in today's earnings release, which is posted on our website. With that, I will now turn the call over to John. Thank you, Nina.

Good afternoon, and thank you for joining us today Two years ago. We set out to transform care DX into a leading precision medicine diagnostics company Today that transformation is largely complete We deepened our leadership in transplantation. We sharpened the portfolio Exiting non core businesses to focus on our highest value opportunities opportunities, and we extended that same solutions approach into specialty oncology and cell therapy, new markets with the same proven model. The CARDIACS model is built on longitudinal molecular testing that informs clinical decision-making, supported by robust clinical evidence, integrated workflows, and patient engagement. It's repeatable and differentiated, and it connects everything we do across transplant, specialty oncology, and cell therapy. Our growth strategy is working. We are pursuing markets where our core competencies give us the right to win, where we can hold a clear number one position, and where patients face a high cost and burden of disease, warranting repeat molecular testing to inform clinical decision making. In these markets, our solution-selling model creates value and stickiness with clinicians and patients. Today, in my prepared remarks, I'm going to share an update on progress with our pipeline, the integration of our strategic acquisition of NAVDX, and our execution on the quarter in solid organ transplantation. Innovation remains central to how we plan to maintain our leadership position, extend our model into new markets, and grow our TAM. We continue to advance ALAHEEM, our recurrence monitoring test for patients undergoing cell therapy to treat AML and MDS hematologic malignancies. During the second quarter, investigators from the ACROBAT trial submitted the Allaheim Clinical Validation Manuscript to a peer-reviewed journal. One of the most compelling findings from the ACROBAT study was Alekhine's ability to predict relapse ahead of standard of care. Alekhine predicted relapse a median of 41 days before clinical relapse was diagnosed. This lead time may provide an opportunity for earlier clinical intervention, potentially enabling clinicians to take action before overt relapse occurs. These data support the potential role of Alekheme as a blood-based surveillance tool for risk stratification and earlier detection. Publication of these results is an important milestone in our evidence generation strategy, helping to build clinical confidence in Allaheim and support future adoption. We believe the publication represents a key step toward our reimbursement objectives, including future coverage submissions to both private and Medicare payers. We remain on track to complete CLIA readiness activities before year end, positioning Allaheim for a planned 2027 commercial launch. Allaheem represents the organic expansion of the CareDx model into cell therapy, a market where we believe we have a first mover advantage and are positioned to win by creating meaningful value for patients and providers. HistoMAP Kidney also continues to advance toward launch. HistoMAP adds a molecular layer to tissue biopsy assessment to complement AlloSure Kidney blood-based monitoring. Last week, investigators from the University of Wisconsin published new data in the journal Transplantation, evaluating histomap kidney in 138 kidney transplant biopsy specimens, including 42 patients with microvascular inflammation that is donor-specific antibody negative. and CD4-. DSA- and CD4-MVI was recognized in the 2022 Banff classification as a distinct rejection phenotype that can appear low risk by conventional biopsy assessment, yet may progress to rejection and graft loss. In the study, histamapt kidney distinguished patients with MVI pathology with markedly different outcomes. with more than three times the rate of graft loss at six years in the histoMAP high-risk group compared with the low-risk group, supporting the potential of histoMAP kidney to provide clinically meaningful information beyond conventional biopsy assessment. HistoMAPIN is an example of how we are establishing clinical differentiation and providing molecular solutions to our customers from non-invasive blood-based monitoring to prognostic tissue analysis of high-risk patients undergoing biopsy. We intend to launch histamate kidney in a clinical study this year and make it available more broadly commercially in 2027. In addition to our pipeline programs, we have significantly expanded our TAM with the recent NAVDX acquisition in specialty oncology. NavDx adds a clinically differentiated solid tumor MRD platform to the CareDx portfolio. We are already seeing encouraging momentum as we integrate the business. Since closing the acquisition on July 1st, we've made meaningful progress executing the integration priorities that support the strategic rationale for the transaction. Our focus has been on three areas where we believe CARE-DX's core competencies can drive growth and create value. First, leveraging our commercial capabilities in evidence generation, building belief in molecular testing as a standard of care, and patient support infrastructure to expand adoption of NavDX. Second, applying our workflow expertise, including Epic integration and connectivity capabilities to simplify the customer experience and support incorporation into routine clinical practice. And third, integrating revenue cycle management and reimbursement capabilities to create a scalable operational foundation and support broader market access. Together, these initiatives reflect the core value creation opportunity behind the acquisition, combining NavDX's differentiated technology with CareDX's commercial reach, workflow expertise, and operational scale. In July, I had the fortune to attend the 2026 American Head and Neck Society Annual Meeting in Boston and meet with head and neck surgeons, radiation oncologists, and medical oncologists from over 60 institutions across the U.S. Their conviction for using NavDX in their practice is strong, and they were enthusiastic about how our solutions address their key challenges with broader adoption. At the event, over 30 presentations and sessions focused on circulating tumor HPV DNA or other biomarker-related topics. New data were presented from a nationwide cohort of approximately 40,000 patients with HPV-driven cancers. The study focused on patients whose NAVDX test became positive during surveillance monitoring, indicating molecular recurrence of disease. The authors evaluated the clinical significance of the NAVDX quantitative score, a differentiating feature of the test, in predicting response to treatment, otherwise known as salvage therapy. The data demonstrated that lower NAVDX scores at the time of molecular recurrence were associated with higher rates of ctDNA clearance and faster clearance to undetectable levels, supporting the role of NAVDX in predicting response to salvage therapy. These findings suggest the test kinetics may provide prognostic information, helping clinicians better understand how patients respond to treatment in the recurrent setting. Also at AH&S, we hosted a symposia featuring leading clinicians of the Californian Head and Neck Cancer Consortia, who recently published consensus recommendations on the use of circulating tumor HPV DNA in head and neck cancer. The session drew strong engagement from the head and neck oncology community. 33 experts across 15 institutions reached a strong consensus that circulating tumor HPV DNA is a valuable tool for diagnosis and surveillance, and that serial testing should be performed throughout the years following definitive treatment. This is an important milestone. When leading clinicians converge on consensus recommendations for how a technology should be used, it signals that molecular testing is becoming an established part of how these patients are managed in clinical practice. Moving on to solid organ transplant, we continue to see molecular testing increasingly integrated in the clinical decision-making across transplant care. As the evidence base grows, clinicians are using molecular insights not only to detect rejection, but also to assess rejection risk evaluate treatment response, and support longitudinal patient management. At the American Transplant Congress, the largest transplant meeting of the year, we continued to build belief in molecular testing as a standard of care by advancing our evidence generation strategy with new data that support both adoption of AlloShore surveillance testing and the expansion of its use into new, cause context of use. At ATC, CARDIAC's data were featured in more than 30 abstracts and nine oral presentations spanning kidney, heart, lung, and multi-organ transplantation, with findings generated from studies conducted across more than 110 transplant centers in the United States. One of the clearest themes at ATC was the continued evolution of alloshore kidney beyond surveillance, increasingly being evaluated for risk assessment, treatment response, and long-term graph outcomes, not just to identify injury. Thank you. One of the most notable studies presented at ATC evaluated more than 1,100 kidney transplant recipients from the KOR Registry and examined how AL-Assure trajectories during the first four months of surveillance testing following transplant related to long-term outcomes. findings were striking. Approximately 35% of patients with persistently elevated Alloshore levels experienced rejection and had a nine-fold higher risk of graft loss compared to patients with consistently low Alloshore levels. Patients whose elevations resolved over time had outcomes similar to those who were never elevated at all. In other words, it's not a single result that matters, but the trajectory over time, which is exactly the insight that longitudinal molecular monitoring with AlloSure is designed to provide. In the for-cause setting, we saw AlloSure used as the endpoint to judge whether a therapy is working. In a single center prospective study, patients with persistent chronic antibody-mediated rejection were followed with serial AlloSure testing through monthly to Sluzumab infusions. Corner-specific antibodies declined and kidney function stabilized, yet AlloSure did not change over 12 months, and follow-up biopsies confirmed that antibody-mediated rejection was still present. The conventional markers suggested that patients were improving. AlloSure confirmed by biopsy, showed the injury was ongoing. That raises real questions about how sensitive conventional markers are for monitoring treatment response. And it supports AlloSure as a potential surrogate endpoint in clinical trials of transplant therapies. Taken together, these data speak to our growth model. More patients monitored over time, more clinical context of use where a treating physician needs an objective molecular answer and a growing role for Allishore in how new transplant therapies are evaluated. The data presented at ATC reinforced both the strength of our evidence generation engine and the leadership position we have built in transplant diagnostics. Separately, this quarter marked another milestone with the publication of our second K-OR analysis in the esteemed Journal of the American Society of Nephrology. In more than 1,250 kidney transplant recipients across 56 U.S. centers, roughly a third of patients saw their AlloShore levels rise over time, and those elevations mattered. Patients with elevated AlloShore levels faced a nearly four to six times higher risk of losing their transplant. Most of these elevations appeared subclinically before any measurable decline in kidney function, meaning Allishaw identified patients at risk well before other measures. And on the other end, patients who stayed consistently low represented a clearly low-risk group with low rates contraction, graft dysfunction, or graft loss. This is what Alishor makes possible, identifying risk earlier and supporting more informed clinical decision Together with the ATC data, these Allishore kidney findings continue to differentiate our platform, reinforce our leadership in transplant, and demonstrate why monitoring with Allishore is becoming a routine part of how transplant patients are managed. Another development announced on July 16th was the finalization of the Medicare local coverage determination for solid organ transplant molecular testing. The policy affirms coverage for surveillance testing across kidney, heart, and lung transplant and reinforces the role of AlloSure and Allomap in post-transplant patient management. In addition, what we find encouraging is that the foundational policy extends beyond existing coverage. establishes a pathway for histoMAP coverage for molecular assessment in situations where conventional biopsy findings may be indeterminate or discrepant with clinical presentation, which is supported by the histamab data published this quarter. The policy also establishes a framework that can support future innovation in additional organs such as liver transplant. As a reminder, today nearly 500,000 Americans are on kidney dialysis, and approximately 100,000 Americans are on a transplant wait list. Improving access to transplantation will require the field to make greater use of available donor organs, manage increasingly high-risk recipients, and ultimately support emerging transplant solutions, such as gene-edited organs and xenotransplantation. As transplant medicine evolves, tools that can assess immunological activity, detect injury earlier, and support clinical decision-making become increasingly important. We believe the final policy acknowledges that molecular diagnostics are an integral part of transplant management, not only for today's standard of care surveillance with AlloSure and Allomap, but also for the next generation of transplant innovation.

With that, I'd like to turn the call over to Keith to review our financial results and outlook for the remainder of the year. Keith? Thank you, John. I'm planning to cover our second quarter 2026 financial results and our updated 2026 guidance. Turning to the financial highlights section of our earnings presentation for the second quarter of 2026 and our year over year results. total revenue increased 52% to 132 million. Testing services revenue increased 61% to 100 million or $1,720 per test. Testing volume increased 17% to 58,000 tests. Non-GAAP gross margins increased to 74%. adjusted EBITDA increased 19 million to 25 million or 19% of revenue. we repurchased 570,000 shares for $12.2 million, or 21.50 per share. We ended the quarter with $374 million in cash and cash equivalents. no debt and we close the sale of the lab products business on June 30th recognizing a gain on the sale of $113 million with a $104 million which is included in GAAP operating income, but excluded from operating income for non-GAAP reporting. Turning to slide 13 and our Q2 revenue performance. Total revenue increased 52% to 132 million. Testing services revenue increased 61% to 100 million, including 15.6 million in out of period revenue. Patient and digital solutions revenue increased 50% to $19 million, driven principally by our pharmacy. Lab products revenue increased 8% to 13 million. Turning to the next slide, non-GAAP gross margins increased to 74 percent. Non-GAAP gross profit of 98 million increased 63%. Non-GAAP operating expenses of 75 million, or 57% of revenue, including approximately 7 million of incremental transaction related payments, and bonus accrual for performance above plan. Adjusted EBITDA increased to 25 million or 19% of revenue. Our GAAP operating income includes 113 million gain from the sale of our lab products business, net income of a hundred eleven million. Or two dollars and fifteen per basic share. Or two dollars and fifteen per basic two dollars and seven cents per diluted share. We are now connected electronically with approximately 90 percent of our transplant customers by test volume with 50 percent of test volume from integrated EMRs. and 40% through our care portal. We are live today with 17 transplant centers using Epic Aura, and we expect to be live with 30 to 40 centers by the end of the year. Turning to the next slide, cash collections increased 49% to 136 million. over the last four quarters. And we ended the quarter with 374 million in cash and cash equivalents and no debt. Turning the guidance starting on slide 16, we are raising 2026 revenue guidance to 490 to 500 million, representing a 30% increase year over year at the $495 million midpoint of the range and adjusted EBITDA from $66 to $78 million or 15% of revenue at the $72 million midpoint of the range. Our guidance includes the addition of specialty oncology in the second half of 2026 and testing services. We applied the following assumptions or estimates in modeling our full-year guidance consistent with non-GAAP measures. testing volume between 258,000 and 266,000, representing a 31% increase year over year. at the 262,000 midpoint of the range. The midpoint of our guidance assumes Q3 testing volume of 72,600 tests with transplant volumes of 58,000. and specialty oncology volume of 14,600. for Q4, the midpoint of our guidance, assumes testing volume increase sequentially 5% 76,300 tests with transplant volumes of 60,000 and specialty oncology volumes of 16,300 tests. And our Q3 and Q4 specialty oncology volumes reflect a 30% increase over the prior year. We removed the 7.5 million LCD impact embedded in our prior guidance. Our non-GAAP gross margin range in the guidance is 71 to 73%. operating expenses. Of two hundred and ninety three to two hundred ninety seven million or approximately sixty percent of revenue. and in our 2026 depreciation expense of approximately 10 million plus or minus 1 million. Our full year guidance assumes revenue for each service calculated at the midpoint of the range includes testing services revenue of 400 million, inclusive of 24 million in specialty oncology revenue. patient and digital revenue of 72 million and product revenue of 23 million Our guidance excludes the cost or expense to complete the sale of our products, business, and the acquisition of Nevaris. Turning to slide 17, our guidance includes $23 million of lab products revenue in the first half of 26. and specialty oncology revenue of $24 million in the second half of 26. As I stated earlier, we completed the divestiture of our lab products business, generating 172 million in consideration. and $113 million gain on the sale. The gain is included in GAAP results and excluded from non-GAAP results. Turning to slide 18, this slide illustrates the blended ASP and revenue per test for testing services including transfer So the oncology and modeling to the midpoint of our guide range, The chart on the left shows the blended ASP and revenue per test for transplant only, and shows that we are on or ahead of plan in transplant. The chart on the right shows the blended ASP and revenue per test for testing services. We expect revenue per test of $1,527, including $1,367 for ASP and $160 for out-of-period revenue. And modeling to the midpoint of our guide, we assume transplant average ASP per test of one of $1,455 in Q3 and $1,465 in Q4 at the midpoint of our guidance. and specialty oncology average ASP per test of $770 in Q3 and $795 in Q4, also at the midpoint of our guidance. and out of period revenue of eight million in q3 and four million in q4 Hopefully this is helpful detail. I'll now turn the call back over to John.

Thank you, Keith. We have transformed CareDx into a differentiated precision molecular diagnostics company with a unique set of core competencies that position us for continued profitable growth. performance reflects that our strategy is working, and we look forward to building on our momentum as we integrate NAVDX and launch into cell therapy. Before closing, I'd like to briefly again welcome the entire NavDX team to CareDX. The work they do is incredibly meaningful for patients all across the country. I'd now like to ask the operator to open the queue for Q&A.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tycho Peterson with Jefferies. Your line is open. Please go ahead.

This is Matt on for for Tyco, maybe just to start given updated CMS policy was finalized a couple of weeks ago for for our short term. John, I'd love to just get any updated color. I know it's only been a short period of time here, but feedback from the field, either docs or the commercial team, any kind of early trends post the finalization of that update where it's calling out. And then you're good to see the removal of the headwind in the back half of the year. I mean, how do we think about this going forward? Could there potentially actually be some tailwinds now that this final is finalized? pathway for histamap coverage over time, but would love just kind of your updated thoughts post-finalization here. Thanks.

Hey, Matt, thanks so much for joining the call. Yes, we believe that the policy ultimately you know, reflects the reality of the evidence supporting these products and the evidence supporting surveillance testing in kidney. So we were pleased that the agency affirmed coverage for surveillance testing. We don't have any kind of feedback from the field, as I've shared before. This is really a payment policy. It's not anything that we talk with clinicians about in the field other than kind of instructions on how to order and how to submit their requisition forms, and we didn't anticipate that it would have an impact on volume. So certainly, you know, the positive outcome here, both for the existing products, but also for the future, right? As we mature our histo map program, we publish additional evidence and prepare for CLIA launch, we'll be in position to submit that dossier for coverage of the product.

All right, great. And then appreciate all the color on the moving pieces related to the guide. Maybe just on the specialty oncology piece. I think the back half. Guide assumes bonds are up kind of 30% year over year. I think at the time of the bill, you said 3040% the next few years. So is that just conservative starting point? At one point, I think 1Q was up low 40s for them, any color on what volumes did there in 2Q. And then just on ASPs, I think the back half blended ASPs, 780 for specialty oncology. we think about scope to drive that higher here into 27 and maybe just refresh us on some of the levers you have at your disposal to move ASPs up higher into next year as well. Thank you.

Matt, great question. We, the guide is, as Carolyn likes to tell me, prudent. We do still believe this is a 30-40% growth. We'd like to obviously by the end of the year show that we're doing better than where I am in the guide right here. But we are just taking over the business at this point and we are intending in a process right now to move them to our billing system. And so we are trying to do that in the fourth quarter. And so that is, you know, a big undertaking to do that. But we think we have a lot of workflows that we spent a lot of time on and that are working very, very well. So we think moving them to our claims processing, they outsource their claims processing. And so they have, you know, people internally, but they mostly rely on an external firm to do that. And I need to get some time, you know, some reps with doing the billing before I, you know, feel confident in moving that number up. So I am trying to be prudent. I do believe that number should move up to $1,000 to $1,100. They get $1,800 from Medicare. And I think as we publish more and more evidence and, you know, we continue to do that. to bill and collect under our system. I do think that will move up, and I'll have more to talk about when we do the Q4 guide as well, and in the October call, hopefully.

Is that helpful? Your next question comes from the line of Mason Carrico with Stevens, Inc. Your line is open. You may now go ahead.

Hey guys, thank you for taking the questions. Looks like another solid quarter for the transplant business. Could you just talk about some of the factors that have driven and, I guess, continue to drive the acceleration and volume growth there? House surveillance testing trending, that forecast volumes continue to ramp. Any additional insight into those drivers would be great.

I think so much for joining Mason. Yes, surveillance testing continues to gain ground as does for cause. You know, we have done a really nice job helping with improved workflow in the practices, which is growing the average number of surveillance tests per patient in the first year and first three years post transplantation. So our clinical liaison team, patient liaison team that are out there supporting the blood draw process and ensuring that the orders are submitted and the results are reviewed and the practices have really done a remarkable job at that and we're seeing that factor into the growth. And then as I described in the prepared remarks, the testing in new contexts of use in the for cause setting continues to expand such that we're seeing both for cause and surveillance testing grow year over year and sequentially.

And we remain at 50. We remain a little over 50% Mason on poor cause on kidney.

Perfect. Okay. Thank you. And then a higher level question. As we kind of think about the new go forward business, the growth outlook there obviously looks positive. And you've raised your adjusted EBITDA margin guidance for the year, but I'm just curious how you're thinking about the ability to continue expanding EBITDA margin in 2027, or maybe how you're prioritizing continuing to ramp profitability from 2026 levels and balancing that against any.