CareDx, Inc. Stock

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.

acquired investments in the VAERS? Yes, they're currently representing around 10% of our revenue, and we do envision investing behind the company and continuing to scale. We have a project ongoing to integrate them into Epic, and Epic is going really well for us. So we do think that that long-term will have, you further support for them. So, you know, we will evaluate it, but we do believe we should be running at 20% EBITDA margins long-term. We do believe that. And that is, there isn't a discussion we have in the business where we don't talk about profitability as well as revenue and how to balance that. But could there be a need to put FI to $10 million into something and that would potentially impact our margins for a year or something like that as we were ramping ASP. That could happen, but we're going to evaluate that in our annual operating planning, which we've already started and we'll have more to talk about, you know, if not on the Q3 call, on the Q4 call.

Your next question comes from the line of Bill Bonello with Craig Hullam.

Your line is open. You may go ahead. Hey guys. Thank you for providing the color, particularly the bridge with all the moving parts. I just want to see if I have my math right here, and I hope you can follow me, but if I sort of add and... subtract all the moving parts it looks to me like the non-academic acquisition raise for the second half of the year is about 17 to 18 million. If we take out the LCD impact, it's maybe about 10 million. If we take out the raise in patient and digital, it looks like you're keeping guidance for transplant testing roughly flat in the back half of the year? Do I have my math about right there?.

I don't think so. Let me walk. through some numbers and see if you you have those right we had 23 million in product and we have 24 million in specialty oncology so that should have been right in line with where we talked on the last quarter we said 45 to 50 million so that should add up to 47 million in Then the out of period number is all on our testing services. We had seven and a half, our guide last quarter on out of period in Q2 was seven and a half million and we had 15 and a half million. So we had an $8 million in this quarter. And then I increased, I think our cash collections our AR, I think we're going to have 8 million in Q3 and 4 million in Q4. And then our testing number for our transplant business at the midpoint of the guide is 376 million. So the 376 plus a 24 in specialty oncology is what gets you to 400 on testing services. And then we'll have 72 million on patient digital and 23 million on products.

And that gets you to 495.

Yep. Okay. That's helpful. I think the difference might be I was backing out the beat from this quarter. But anyway, we can follow up. I guess more importantly, can you give us any color on you know, similar color as you did on sort of the moving parts that impacted your adjusted EBITDA guide and maybe how we should be thinking about gross margin?.

So our gross margin without out of period is around 70, 71%. And so we are, so the difference between that and 74% what we reported is due to the out of period. We continue to do, you know, very well on the margin. So I think we're pretty comfortable in that, you know, I would say 69 to 71% range excluding out a period. But our margins on our testing business alone is in the high almost 80%. So we're at 79% margins and that's what I have in the guide. The margins on specialty oncology, I'm guiding at 63%.

We're in the middle of putting them on our system and so they generally can get to 65% margin right now so i have a little bit of prudency as so the key word is on the margins there Is that helpful? And then the margins on patient and digital I have at 26% at the midpoint.

Yep. And it seems like from an EBITDA standpoint, based on the guides, you probably have been effectively able to get... get rid of a, you know, you're not, you're not stuck with a bunch of overhead that was being covered by the products business.

Yes, the, you know, the sale of the products business, you can, you know, we have someone on our board who loves this stuff. But, you know, we talked about the cash cycle. We had like a 70-day improvement in our cash cycle moving, you know, to just CALEA only because that business had high inventory and, you know, things like that. that you would have in a kit business. And so there's just a lot of overhead, like my regulatory team, took 3X the number of people to do the same amount of work on the kid business that we do on the CLIA business, do the high regulatory and burden on a IBD kid business. So you, almost no matter what you do, you need 15 to 20 people in a kid business just on the regulatory and quality.

side. Perfect. All right. Thank you. That was really helpful.

Thank you, Bill. Just a reminder, if you would like to ask a question, please press star 1 to raise your hand. Your next question comes from the line of Yi Chen with H.C. Wainwright & Co.

The line is open. Please go ahead. Thank you for taking my questions. So for the second quarter, you reported $16 million in prior period revenue. So can you talk about what are your expectations regarding prior period recognized revenue in the second half, particularly considering the $16 million? final LCD will be effective August the 30th. And also the 58,000 volume of tests in the second quarter, are they generally all covered under the new final LCD? Thank you.

Yes, so I don't, the LCD does, it goes into effect at the end of August. And so I'm not, you know, and I think our tests are covered, you know, for five years and any impact the LCD we feel, you know, we have covered in our guide. So I'm not, I'm not I'm not worried there. On the out of period, the Q3 and Q4, which I stated in my prepared remarks, I have out of period revenue in Q3, guiding to 8 million. And then Q4, four million. Does that answer your question? Yes, thank you. Okay. We did in terms of the $58,000. I think the more important question there is when we raised the $58,000, the guide does have $58,000 in Q3.

So we lifted the guide from the prior quarter of $56,600 in Q3. We lifted that from $56,600 to $58,000. on the testing side on transplant.

a follow-up on Navarro's. So once you've fully incorporated the operations of Navarro's, would you have a dedicated sales team just focused on NavDX products? Yes.

Yes, thanks, Yuchen. There is a dedicated sales team focused just on the NavDx products today. And we talked about, you know, as a part of the acquisition announcement that we would be expanding that team. to really ensure that we were reaching all of the providers that could potentially order the test and driving up the utilization of the product on a per-patient basis.

Okay. Thank you. Great. Thank you. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

All right. Good afternoon, everyone. I'm Evie Koslosky, Head of the Life Science Tools and Diagnostics team here at Goldman Sachs. I'm joined here today with CareDx. So thank you. Thank you for coming.

Thanks so much for having us, Evie. We really appreciate it. I'm John Hanna. I'm the CEO here at CareDx, and I'm joined by Keith Kennedy, our COO and CFO.

Great. So I guess just to kind of kick things off, your strategy since joining the company as CEO, John, has been to transform CareDx into a precision oncology leader. I guess, can you talk through the strategy, and what this means at a high level and key initiatives that you have in place to kind of achieve this precision medicine goal?

Yes. Thanks so much. We really view CareDx as a precision diagnostics leader. And so when I got to the company, we did the typical thing as a management team to take a review of the entire business and understand like what are our strengths and weaknesses, and where do we really want to play, and where can we win as an organization. And in that strategic review, we identified that really the core competencies of the company are around building belief in molecular testing as the standard of care with health care providers, pulling through repeat testing in indications where patients are having tests ordered by a provider, over a set schedule and we have a team that interacts directly with the patients to schedule those blood draws and pull through the testing. And then lastly, it's around evidence generation, which again gets back to that concept of building belief, but also driving reimbursement for these tests.

And so we looked at our full portfolio and all the businesses we were in and decided that our testing services, our patient and digital solutions, which includes our software products and our pharmacy, which are all geared toward health care providers that are ordering our testing. We're very synergistic with one another. But our IVD business, our lab products business did not fit into that category. And thus, we pursued a strategy to divest the lab products business, accelerate our pipeline, and in particular, our AlloHeme asset, which is our lead pipeline asset in AML and MDS for relapse detection and then do inorganic growth in the form of the acquisition of Naveris, which is a fantastic business, focused on viral-mediated cancers. And so we have really transformed the portfolio of the company to being one that is truly a leader in precision medicine diagnostics.

Great. And I did want to touch on the Naveris acquisition. Really, this allowed you to expand your reach within the MRD market. Just help us understand how this fits into your broader portfolio, and why CareDx is the right owner for this asset?

Yes. We think about our strategy as wanting to be #1 in the markets that we are in, which I think is really important because inevitably, as the leader in the market, you're going to end up spending less in sales and marketing to acquire another sample than you would be if you were #3 or 4 in that indication. Second, we want to be in indications where there's a high cost and burden of disease and where the patients are managed by a subspecialty group of concentrated group of providers, and where there is repeat testing where we can use our core competencies to pull through that repeat testing. And lastly, markets that we can service, what I would describe as the CareDx way with our solution selling strategy, including software and pharmacy.

And the Naveris product set, NavDx fit that profile in that it is the market leader in head and neck cancer MRD. This is a relatively concentrated group of providers in particular, the ENT surgeons that initially diagnose and treat those patients, and it is a repeat testing in a high cost and burden. So we felt like as a company, we have core competencies that we could lend to that business to really drive and accelerate its growth, and it fits very well with our other solutions. I'll also add, the other thing about Naveris that made it very attractive to us, especially as an initial acquisition was that it was a relatively derisked asset, right? The product has already gone through development, validation studies. There's about 56 publications out there in the peer-reviewed literature on the product, and it's already obtained Medicare coverage. So we thought this really hit our sweet spot around driving clinical belief and awareness, generating evidence and pulling through the testing that our core competencies could really be lend to this product set.

Okay. Great. And I guess from a strategic perspective, MRD is a very competitive industry, but Naveris has maybe a more specific niche within the viral-mediated cancer. I guess -- how does this like more niche application give you a competitive advantage in the market?

Yes. And I think the key here is we've selectively decided to enter the MRD market, both in AML and in viral-mediated cancers, where we have a technological competitive advantage. In AML and heme-oncology, our asset there is really focused on patients who have undergone a hematopoietic stem cell transplant, and we're monitoring for relapse in that indication. And that's an assay and a technology that's proprietary to CareDx that has a great validation study around it. Similarly, here in viral-mediated cancers, the technology to detect tumor tissue, viral modified tumor tissue is proprietary to Naveris and has a patent portfolio protecting it. And so we think we have the right to win in those markets and have a strong technological differentiation of our products.

Great. I think you mentioned the acquired [Audio gap] how should we think about the longer-term margin goals if you're able to drive scale?

Yes. They generated 65% margins in the first quarter this year. We're doing the high 70s on our testing service business, and I expect that business to do in the mid-70s long term. We probably have a nice lift, not as much uplift as we have in our CLIA testing on the solid organ side, but we do have upside there. And we think operationally, there are some things we can do at scale that a smaller subscale business can't do in terms of the operating margins. And then on the OpEx side of the house, we think clinical trials and evidence generation will be a key item. Sales and marketing would be a key item, but on the G&A side, we think we can put a lot of those services on our platform.

Great. I mean you mentioned that at a clinical data. Is there anything like any key catalysts that, I guess, we should keep in mind within the MRD market, new indications you would look to expand into? And then, I guess, any other growth drivers that we should think about within this asset?

Yes. So the company has already obtained coverage for head and neck and anal cancer MRD. I think the next significant catalyst would include first coverage in the gynecological indication for MRD. And there was some development work to be done on the assay there and then ultimately, validation and submission for coverage, which has not happened yet. And then second, an area that is really unique to Naveris is the indication for aid to diagnosis. And this is the indication where you're using the assay to help diagnose HPV-positive cancer. And that is differentiated because other assays are not used in that regard. So today, you have standard HPV testing, which just tells you that the patient have or not have the HPV virus.

The Naveris test is specific for viral-mediated malignancy. And so in a setting of let's take head and neck cancer, for example, where the patient shows up with either persistent sore throat or difficulty swallowing, and they attempt to biopsy a lesion in the throat, which can be difficult to access for an ENT surgeon, the test can supplement that diagnostic process and lead to a more accurate diagnosis or yield more malignancy diagnoses where tissue may be unattainable or non-diagnostic. And so the company has already gone through the process of requesting coverage in that indication. That's a net new indication, which will require new coverage policy. So it will take time, but I view that as being the other really significant catalysts from an evidence perspective or coverage perspective that will drive revenue growth for the company.

We really like this aid-to-diagnosis indication because it allows you to capture the patient at the time of diagnosis. So you could imagine a head and neck surgeon, utilizing the diagnostic test, diagnosing the patient and getting a baseline value of the NavDx test, which is both qualitative and quantitative in its results. And then after definitive treatment with surgery, radiation, chemotherapy, continuing to monitor the patient quarterly with the testing for recurrence. And so we think that's a great model to pull through the testing, and we're really excited about the opportunity there.

Awesome, awesome. Very exciting. The other recent portfolio change was divesting the lab products business, which you mentioned in April. I guess how are you thinking about strategically reinvesting the proceeds from this and/or your management focus back into your core competencies?

Yes. So we announced that we're reinvesting that in Naveris. So we sold the lab products business for over 3x revenue, and we generated $170 million in proceeds. We'll probably net $160 million after expenses, and that's the price we paid for Naveris. So we feel like it's almost a 1:1 exchange there for a smaller TAM, smaller growth rate, international high regulatory business into CLIA. Our business is really CLIA generated in the U.S., so it puts us more management focus in on the CLIA side of the business, higher margin, higher growth rate.

Yes, and I'll just add there. We have an exceptional team that manages that lab products business, and I've really appreciated all the work that, that team has done over the years to create who really is the market leader in HLA typing globally, both PCR kits for disease donor typing and NGS kits for recipient typing. And we believe that this divestiture puts that business in the hands of a company, Eurobio that we have had a long-standing partnership with, and we think has the scale and core competencies to execute on that business really with a focus that we didn't have, right?

So we're going to turn our focus back to the testing services. And then, of course, on the acquisition side, the team at Naveris has done an excellent job building that business to where it is today, operating at a cash flow breakeven. It did roughly 70-ish percent revenue growth year-over-year last year. We guided in the call, 30% to 40% growth over the next 3 years. And we are very excited to have that team join CareDx when the deal closes because there's a tremendous amount of talent there and people that are really, really dedicated to serving patients that have head and neck and other viral-mediated cancers.

Great. And I guess shifting gears to AlloHeme. Earlier this year, you published results from the ACROBAT study. I guess as you work towards launching AlloHeme as part of your transplant plus strategy, how should we be thinking about next steps, and then what needs to be accomplished before the planned launch?

Yes, we're really excited about this indication. AML is an indication that is not really serviced by MRD or relapse detection assays today. Those are predominantly monitored with bone marrow biopsies, which, as you can appreciate, is not done that frequently because of the invasiveness of that procedure and other types of testing that are utilized in this space like short tandem repeat assays are not very sensitive for picking up relapse detection. So we initiated a clinical trial in this space several years ago.

It was a two-year follow-up trial that had a number of sites, I think 11-plus sites involved, over 200 patients. And what we found was that the test had a really amazing sensitivity and specificity for detecting relapse and gave the clinicians a lead time of over 30 days of identifying relapse before traditional methods, whether it be STR or bone marrow biopsy or just clinical presentation into the practice of having relapse. And so there's a lot of excitement in the marketplace about this assay, and its utilization and the ability to then treat patients presumably before clinical presentation of disease. And thus, we're trying to get to market as quickly as possible.

So in February, when we shared the readout of that data on our investor call, what we said was, first and foremost, we need to get the data published because clinicians, especially in oncology, they treat based on publication data. They want to see the performance of the product. So we are working toward getting that submitted likely this quarter and -- with the hope that it gets in print before the end of the year. The second thing we're doing is completing all the analytical verification work for the assay. So this is the technical work where you look at interlocked variability of the assay, operator variability, run to run, et cetera, split samples run them 2, 3 times and see do I get the same result.

We have a lot of confidence in the robustness of this assay. So that's not a concern, but you do have to do all the work and then submit it to New York State to get approval. Additionally, that analytical verification work is a large part of the evidence packet that gets submitted for coverage. And so our goal internally is to have both the New York State submission and the coverage submission completed before the end of this year. We will launch in Q1 2027 commercially, probably around the time of the tandem cell therapy and stem cell transplant conference and then presumably look to get the product covered and reimbursed sometime in 2028.

Okay. Awesome, very exciting. I guess from a commercial perspective, how are you thinking about the care sites for AlloHeme relative to the penetration you currently have in your existing portfolio? And then what are your strategies for clinical education and expanding relationships with those oncologists?

Yes, that's a great question. We have been focused this year on medical education. So our team, our franchise team that is driving AlloHeme forward is predominantly a medical team, MSLs, medical affairs, clinicians that are -- that were running the trial, working closely with the site and now are analyzing the data both for the initial publication and subsequent publications and then using that data to educate clinicians that perhaps were not in the trial and didn't enroll and participate. So that we have broad clinician awareness of the product before we even launch commercially. As we said in the investor call, there are about 200 sites across the country that do stem cell transplantation. So these patients have high-risk AML, high risk for recurrence, they get a stem cell transplant.

Those 200 sites are very much overlap with the 200, 250 sites that do solid organ transplants across the country. So we have coverage in these sites, but not always with the heme-onc side of the business. And so we'll be standing up a team to focus on this initially and drive the initial adoption of the product in those sites in a way that is measured, of course, because we don't have coverage yet for the product. So we don't want to go crazy right on tests that are not getting paid for. But I do think market adoption is really important, even ahead of reimbursement, especially when you have a novel assay like this that is really building a new market.

Yes. And as we think about sort of some of those investments, like I guess, how should we think about how large the OpEx spending related to this is ahead of getting coverage. You've already completed the ACROBAT study, but then any additional investments in the commercial team?

Yes, as John mentioned, I think majority of the spend will be on the commercial and medical affairs side and less on the infrastructure side, the incremental cost for things like Epic, legal or accounting and things like that, I think, are marginal nominal. I think the financial KPIs around this product will be in line with our testing service KPI, so you'll think of gross margins and EBITDA margins in line with our testing products.

Okay. And then are there any learnings, I guess, from Naveris' existing commercial team in coverage pathway that I guess you can actually apply to AlloHeme?

Yes, absolutely. I mean it is an MRD assay, so it will follow the same coverage pathway. And so we've certainly talked with the team there through the integration planning process about their submission. Obviously, we have a very seasoned team at CareDx from a market access perspective. So we understand the coverage processes and really ensure that the design of the ACROBAT trial was adequate to get coverage for that product. So we feel really good about where it is. And again, it doesn't hurt that the data is really strong in the product.

Definitely. You guys have been very busy. You're also working on expanding AlloSure into liver. So I guess are there any targets in terms of timing of data from the MAPLE study or expected launch-related updates that we should look out for?

Yes, we haven't given any time lines on that. We're still collecting follow-up data from that study. But I think there is a huge unmet medical need here in liver. There's no molecular [Audio gap] for monitoring for rejection. We think that this is indication where the volume of transplantation continues to grow more rapidly than other solid organs and the use of marginal livers is significant in that space. And so we see a lot of perfusion technology there, driving the use of more organs in liver transplantation. And when I go out to centers across the country that have abdominal transplant programs, most of them that do kidney also do liver. And oftentimes, when I talk with the surgeons there, the #1 thing they asked me is, when are you going to launch in liver, right?

And I tell them, what I say here, which is we have a trial, right? We're completing the validation follow-up. We're going to publish that data. And then hopefully, we'll have a robust package that enables us to really define what is the intended use population of that product, and how should it be utilized in the market because it's different in every organ, right? So for example, in kidney transplantation, our protocol was 7 tests in the first year and then quarterly thereafter. But in heart and lung, it's 11 tests in the first year, it's monthly. And so the follow-up cadence and management of those patients and the cadence at which they do other serum-based monitoring test varies organ by organ.

Okay. I mean you touched on this a little bit, but I guess, maybe talk through some of the benefits of AlloSure kind of already fitting seamlessly into your existing workflow and relationships. I guess being able to use the infrastructure that you already have in place?

Yes, absolutely. I mean the same for AlloHeme, right, or Naveris, like we feel like we have built infrastructure for workflow optimization inside of specialty clinics. That includes the investment we made in Epic Aura, so that we can provide direct ordering and reporting into the EMR system. Our CareDx Cares team, which is distributed across the country really serves two functions. One is supporting workflow inside of the practice around ordering and reporting. And then the second is around engagement of patients pull-through and schedule those blood draws. And so we're very focused on workflow as a company. And in our last earnings call, I talked about this as our commercial strategy, having really two motions. One is clinical differentiation and the second is workflow optimization. And so everything we do that is field-facing is oriented around those two activities.

Okay. Great. And I guess, turning to your existing portfolio. You have impressive penetration within transplant centers, I guess. How do we think about the opportunities for CareDx to kind of continue growing test volumes even in environments where transplant volume is maybe more muted?

Yes, the secular market has been rather flat the past two years. And we've seen this in the past with transplantation. You tend to have a flat market for a couple of years, and then it will suddenly grow by 10%. And then it will be flat for couple of years, then it'll step up another 10%. And I think some of that is related to just the capacity, right? The surgical suite capacity, the bed capacity in the centers. You build up a program to 300-plus transplants and then they got to take a deep breath and say, "Okay, do we have enough resources to do more than this." And so we're seeing that dynamic play out in the marketplace. But despite that relatively flat year-over-year rate, we're growing at 17% year-over-year in our testing volume. But I really attribute this to selling deeper into existing accounts. And what we've seen over the past 1.5 years or so is a focus on building belief and awareness in molecular testing as the standard of care across heart, kidney and lung transplantation, which has allowed us to outpace the growth of the market substantially.

And in particular, in heart, as more data gets published showing that heart care is prognostic, both for graft dysfunction and CV-related mortality, the utilization of the testing is increasing, and clinicians are doing fewer biopsies, which is great for patients because getting a cardiac biopsy is not a pleasant experience, and the data shows that it doesn't help detect rejection any better than using molecular testing at all. In kidney, we're seeing growth in the business, both in the return of surveillance adoption across the country, but also in for-cause testing. And in our last call, I said that 50% of our kidney transplant volume is for-cause testing. I mean the patient has some clinical sign or symptom that leads to the test being ordered.

And we have been very focused on for-cause indications as a company and helping both elucidate how the test can be used in for-cause settings, but also published data on for-cause use cases for example, the transition from dual therapy of tacrolimus and prednisone to monotherapy belatacept, which is a standard, but a broadly utilized practice across kidney transplant centers because belatacept has a lower toxicity profile than tacrolimus. And therefore, they believe that the patients survive longer without complications if they can get them onto that monotherapy. The lower toxicity comes with less efficacy, though, right? And so you want to monitor those patients closely to ensure that they don't have a rejection event. And so these types of for-cause use cases or what we have focused on in the marketplace, and it's allowing us to grow both the surveillance utilization and the for-cause utilization hand-in-hand.

Okay, okay. The other thing I wanted to touch on, we're approaching about a year since the draft LCD from MolDX on transplant testing. I guess what's your latest thinking around timing of when we could get a final decision? And then maybe remind us of the various scenarios that could play out from a financial perspective on the business.

Great. Yes. So we still anticipate that the policy will be finalized in the first half of this year, sometime around the anniversary of the draft date, which was mid-July. Generally, CMS follows their own rules to get these out within a year or they withdraw the draft. We think this one will get finalized. There's been no indication otherwise from the contractor or from the agency. In our public remarks and discussions with investors, we have laid out a scenario that is consistent with the draft itself because that's all we really have to go by. Here's what the draft says, which is that kidney testing would be paid in a bundle of four tests in the first year. And because we believe, over time, patients will get more than four tests in the first year. We assigned a $7.5 million headwind to that in year -- on an annualized basis.

And then heart testing, the policy said that it would pay for heart testing in a bundle of 12 in the first year; and then two, in each subsequent year. And today, we do, on average, four tests in year 2 and 3 for heart transplant patients, which would create another $7.5 million headwind. So a total of $15 million on an annualized basis. And we built into our guidance assuming it finalizes midway through the year, $7.5 million as a headwind for the second half of the year of reimbursement. Importantly, as I've been articulating for the past year, this should not impact volume or utilization of the product, right? We focus on promoting the use of the test consistent with the clinical validation study, which is in kidney 744 and in heart 1244. And then number two, supporting the clinicians and ordering the test the way that they feel is appropriate for their patient population.

So not every kidney program in the country that does surveillance testing orders 7 tests in the first year. Some of them do 5, some of them do 4, some of them do 6, right? It's up to their schedule on how they manage the follow-up of their patients. And we're not going to change the way that we promote that because it is important, I think, for us to drive total penetration and adoption of the products in the marketplace, and we recognize that Medicare fee-for-service is only a small slice of our overall business, right? So if a private payer is going to pay for kidney testing on a per claim basis, we want to ensure that if the physician wants to order 7, they order all 7 and all 7 will get [Audio gap].

[Audio gap] to follow suit, or you think that they would have their own [Audio gap]

They will continue to make their own coverage decisions. We have not seen any evidence in the marketplace that commercial payers follow these very esoteric Medicare coverage policies with bundled payments. That is not spilled over into the private pay market yet.

Okay. Great. And then you recently you're starting to do these Epic integrations, I guess. How much of an upside could this be to your current guidance? And what has the feedback been on the centers where you're already integrated?

The feedback has been very good. We're in the early innings of this. We're hoping to lift from about 4 to 6 a quarter in a perfect world, I'd like to have the team up to 8 to 10 a quarter. And our pipeline of implementations right now is around 16 centers, and we expect that to continue throughout the rest of the year. Generally, people have seen uplift from Epic likes to guide around 10%. Exact in a world had very high because of the channel they went after. I don't think we'll have that high of an output, obviously, but I do feel there will be an uplift. And I've told the Street that we get to 20% implementation. I'll come out and talk about what that looks like. My concern right now is that I talk about this too early and people start projecting this to occur and then we disappoint to buy side.

Fair. So your team has also done a lot of work kind of improving the revenue cycle management. I guess, when should we start to see the benefits of the out-of-period revenue start to stabilize? And then how much work do you think is left to be done on those initiatives?

Yes. We have said publicly, we're targeting internally the team to get to $2,000 per test -- average payment per test, and we are -- in February, on the Q4 call, I came out and said that we would average around $1,400 a test, came out in April on the Q1 call and said we ended the year at $1460, and hopefully, as the year progresses, you're going to [Audio gap] per test and migrate into what I [Audio gap] quarter, which people look at as the average sales price or ASP.

Okay. And then your long-range plan targets 20% EBITDA margin. I guess beyond the divestiture of the lab products business, what specific operational steps or infrastructure consolidations are required over the next several years to kind of achieve this profitability milestone.

Internally, we're focused on shifting our R&D resources to end to innovation. And as part of that, there's operational aspects of how you go to market, which requires consolidating your lab information systems, you'll see a lot of lab companies. You'll hear Neo talk about their consolidating the lung systems, you'll hear about us talk about it. The reason for that is there's a lot of very bespoke operating platforms and diagnostics, and that is evolving and software is evolving. So we're all going to this sort of technological revolution of building the chassis upon which you can launch a product quicker.

And when physicians experience something that causes friction, you want to change that. In order to change that, that involves a lot of software engineering, and we're all designing our systems in order to move quickly, and we're doing the same. So we have an Epic Aura implementation going. We have Epic Enterprise, which were in the second lab company after Exact to do that, and then we're doing a lab consolidation project. And all that is geared towards aligning the operations behind the commercial go-to-market motion.

Okay. And how are you thinking about capital allocation moving forward? I mean you have a new $100 million share repurchase authorization. So I guess, how do you plan to balance this with future M&A or organic investments?

That's a great question. We get this in every investor meeting. So we're trying to be very balanced and disciplined about this approach. We still feel like investing in organic growth, specifically in our CLIA markets. That is the right and most optimal place to generate ROIC for the investors. However, we do feel our stock is very undervalued relative to our own internal intrinsic models that John and I look at. So when we have excess cash, which we are generating at an increasing, rate, we have been buying back the stock. So we feel this is an opportunity to reduce our share count, continue to reward employees, but at the same time, reward our investors. That's how we're looking at it.

Great. And then with about a minute left, I mean, what do you feel is the most underappreciated part of the CareDx story? And what are you most excited about, I guess, in the next year?

Yes. I think the most underappreciated part of the story is just the; a, the tremendous impact that these products have on patients in both transplantation, heme and viral-mediated cancers. And given that outsized impact that they have, just the earnings potential of the company. Our tests are utilized on a very high frequency and have strong reimbursement. And we think that creates tremendous earnings power for the company. And that's why we felt really good about the 3-year LRP that we put in place and continue to talk about to investors.

What I'm most excited about, of course, is the pipeline, right? A, the integration of Naveris and really taking our core competencies around building belief, pulling through repeat testing and generating evidence and applying them to the Naveris products and to the market; and then two, in AlloHeme, building a new market for relapse monitoring in AML. And these are things that we get super excited about all the time. Sometimes we say we can't believe people pay us to do this because it's so much fun. But I think that what you're going to see here is a really strong growth company through the end of the decade.

Great. It's a great place to end. Thank you so much.

Yes, thank you so much for having us.

Thanks for having us.

Thank you, it was good.

Hello, everyone. Thank you for joining us, and welcome to CareDx Q1 2026 Financial Results Earnings Call. [Operator Instructions] I will now hand the conference over to Caroline Corner, Investor Relations. Caroline, please go ahead.

Thank you, operator. Good afternoon. Thank you for joining us today. Earlier today, CareDx released financial results for the first quarter of 2026 ending March 31, 2026. The results are currently available on the company's website at www.caredx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer; Keith Kennedy, Chief Operating Officer and Chief Financial Officer; and Dr. Jeffrey Teuteberg, Chief Medical 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. Any 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 is included in our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, April 28, 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 a 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 comparable 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, Caroline. Good afternoon, and thank you all for joining today's call. Since I joined CareDx in 2024, I have been singularly focused on transforming this company into a precision diagnostics market leader. Today, I'm going to highlight 2 portfolio actions we have taken to accelerate our growth strategy, including the divestiture of our Lab Products business, which we announced on April 15, and the acquisition of Naveris announced today.

In my prepared remarks, I'm going to briefly review our strategy in solid organ transplant that is propelling the growth in our core business. I'll then cover the 2 portfolio actions in more detail. After that, Keith will walk through the financials and our updated outlook for 2026.

At CareDx, our growth strategy is focused on extending our leadership in precision medicine testing services and Patient and Digital Solutions by addressing markets where our core competencies give us the right to win. We are addressing clinical markets where we hold a clear #1 position. These markets are characterized by patients with a high cost and burden of disease that warrants repeat molecular testing to inform clinical management. These patients are managed by a concentrated group of subspecialty providers and that we service through our solution selling approach that integrates digital solutions and pharmacy to support clinical workflows and patient engagement and adherence to our testing services.

Our organic growth strategy is anchored on 3 connected drivers: First is our pipeline programs. Innovation is central to how we maintain leadership and extend our model into new markets and grow our TAM. Q1 marked continued progress across our pipeline with advancement in both new clinical programs and platform capabilities that extend our core monitoring model over time. In 2026, we are advancing 3 key pipeline initiatives. First, during the quarter, we advanced our lead cell therapy program, AlloHeme, with clinical data from the ACROBAT study. The ACROBAT data have now been presented at both Tandem and EBMT, and we anticipate publication submission in the second quarter.

In solid organ transplant, we are progressing our program to expand AlloSure into liver transplantation. Liver transplantation is unique in its biology and clinical management. And in our MAPLE trial, we are gathering follow-up data for patients enrolled in the study to validate our solution for this important indication. Strategically, AlloSure Liver would extend our core monitoring model into a new organ system, enabling total addressable market while remaining tightly aligned with the same workflow-driven repeat testing solutions-based approach that underpins our core business.

Additionally, late last year, we announced the launch of HistoMap Kidney, which extends molecular insights to the moment of biopsy and complements our existing blood-based kidney monitoring. For example, when a kidney transplant patient undergoes a biopsy, clinicians typically rely only on histology, looking at tissue under a microscope to assess what may be happening in the graft. HistoMap Kidney adds a molecular layer, providing additional biological context that can be evaluated alongside traditional pathology. During the quarter, we continued to make progress toward the planned HistoMap kidney launch, including submission of our second clinical validation manuscript and advancing our CLIA readiness. Together, AlloHeme, AlloSure Liver and HistoMap demonstrate how we are innovating on our core platform to extend our leadership into new clinical markets.

Second, our go-to-market strategy is focused on building belief in molecular testing as the standard of care in solid organ transplant and simplifying the workflow for health systems to drive operational efficiencies in their practice and adherence to testing protocols while improving the quality and consistency of how customers experience working with CareDx. We are executing this through 2 primary go-to-market initiatives. First is emphasizing the clinical differentiation of our solutions, where we lead with indication-specific strategies tailored to how transplant clinicians make decisions. With HeartCare, our focus is on informing prognosis and treatment decisions, leveraging our SHORE data. In kidney, we are expanding the context of use for AlloSure beyond surveillance with a focus on 4-cause testing indications, which currently account for 50% of our kidney testing volume. In lung, we continue to build adoption by promoting early findings from our ALAMO registry. This approach allows us to drive relevance within each indication rather than relying on a single commercial message across markets.

The second initiative is driving workflow improvements and ease of use, which is increasingly critical to scale. We are embedding our solutions more deeply into clinical workflows through a combination of center-based software, Epic Aura integrations and Epic Enterprise LIMS infrastructure. Together, these capabilities are designed to support more consistent ordering, reporting and cash collection by reducing friction within transplant center workflows. As we look ahead, we are targeting approximately 50% of testing volume through Epic integrated sites by year-end, reflecting our belief that workflow integration is central to sustained adoption. We made continued progress on this strategy during the quarter with 9 centers live and 16 additional integrations underway. While still early, these integrations are showing early signs that they reduce friction for care teams and enable increased adherence to center-specific testing protocols.

These initiatives are supported by continued investment in sales, medical education and patient engagement through our CareDx Cares team with a clear emphasis on improving the customer experience. We are deploying resources to accelerate growth. And today, we have over 120 field support team members that assist transplant centers with their workflow and assist patients with blood collection. Overall, our go-to-market approach reflects a clear strategic intent to establish molecular testing as the standard of care by combining clinical differentiation, workflow simplicity and scalable execution.

Our evidence generation strategy is intentionally designed to support how we scale the business and extend our leadership position. The objective is to advance the clinical utility of our on-market products, inform how clinicians use molecular testing over time and support expansion into new indications in a disciplined way. In solid organ transplant, studies such as ALAMO and HARBOR focus on demonstrating longitudinal utility and monitoring relevance. MERIT is a meaningful step beyond that. MERIT is an interventional study, which evaluates how molecular insights can actively inform therapeutic decision-making. Strategically, this is important because it makes molecular testing integral to clinical action, reinforcing its role within routine care pathways. In cell therapy and heme oncology, we are advancing our transplant plus strategy starting with ACROBAT, which serves as the foundation for the clinical validation of AlloHeme and our entrance into AML and MDS markets. We are also extending that same molecular monitoring model into DLBCL and multiple myeloma in our ACRO study evaluating CAR-T persistence. This work focuses on understanding expansion and persistence kinetics in real-world CAR-T care. Strategically, this study helps define where molecular monitoring can add value in a rapidly evolving market, which may become an important part of our future pipeline.

We announced in March the launch of VANTx, our AI-enabled clinical insights platform, which adds an intelligence layer to clinical decision-making. In practical terms, consider a kidney transplant patient who is undergoing routine molecular testing as a part of follow-up care. Over time, those results such as serial AlloSure measurements are generated alongside clinical data already captured in the care workflow. With VANTx, centers can securely aggregate and analyze center-specific molecular and clinical data across cohorts, enabling more consistent interpretation of trends over time. The supporting algorithms are informed by CareDx's large clinical study databases, including SHORE and KOAR, helping translate real-world longitudinal data into scalable program level insights. Together, these efforts reflect a consistent strategy, extend molecular monitoring in adjacent clinical settings in a disciplined way, prioritizing evidence, clinical relevance and timing.

Last week, CareDx's precision medicine testing services were featured in more than 50 abstracts, including 16 oral presentations at the International Society for Heart and Lung Transplantation Annual Meeting. Drawing on data generated from across approximately 95 transplant centers, this breadth reflects one of the largest coordinated bodies of real-world longitudinal molecular monitoring data presented at a national transplant meeting. The data spanned both heart and lung transplantation and included findings from large prospective registries such as SHORE and ALAMO as well as early interventional work supporting MERIT. Across these studies and key features of the highlighted abstracts on this slide, the consistent theme was the clinical relevance of longitudinal molecular signals over time, supporting risk stratification, earlier signal detection and more informed post-transplant management. The scientific momentum we highlighted at ISHLT reinforces our broader strategy and the growth drivers we've discussed, demonstrating how molecular monitoring is becoming increasingly embedded in clinical practice.

Next, I'd like to briefly turn to the divestiture of our Lab Products business, an important step in our recent portfolio actions. This transaction simplifies the company to what we do best: Precision medicine testing services; and digital and patient solutions. The lab products business includes manufacturing, regulatory and commercial operations that are distinct from our U.S.-based testing services platform. By separating these activities, we are streamlining our operating model and allowing each business to move forward with greater focus and alignment. Strategically, this reinforces our testing services and Patient and Digital Solutions core business, which are driving growth. In the first quarter, they delivered 48% and 33% revenue growth, respectively. Financially, the transaction provides upfront cash consideration of $170 million at closing, improving our financial flexibility and supporting our capital allocation strategy. At the same time, the transaction positions the Lab Products business for continued success under EuroBiooscientific, a long-standing partner and global IVD manufacturer with scale and distribution capabilities. Keith will walk through the pro forma financial impacts of the transaction in more detail in his remarks.

Now on to the big news. We announced today an agreement to acquire Naveris. This is a thoughtful and deliberate step in our growth strategy. Along with our AlloHeme and CAR-T organic pipeline in oncology, we are taking a very selective and differentiated approach to solid tumor MRD with a category-defining and indication-leading platform with Naveris. Importantly, this is not a move to broadly pursue MRD as a category, rather is it a targeted addition in a specific viral-mediated cancer space where longitudinal molecular monitoring is already reimbursed, embedded in specialty workflows and aligned with how we operate our core business today.

Naveris' platform is built around a tumor-naive blood test used across the care continuum from diagnosis through MRD surveillance.

First, I'd like to share a little bit about the business at a high level. To date, the company has performed more than 130,000 commercial tests, has approximately 2,000 active ordering physicians and is operated by a strong U.S.-based team of approximately 100 employees. The testing is currently covered for approximately 100 million lives, including Medicare and has advanced diagnostic laboratory test, or ADLT designation with an $1,800 Medicare reimbursement per test. For 2025, the estimated unaudited revenue is $34 million, and we expect it will grow by 30% to 40% or greater over the next 3 years.

The Naveris testing platform uses a proprietary and differentiated tumor tissue modified viral DNA or TTNV approach to detecting tumor-derived viral DNA in a blood sample. The liquid biopsy platform is tumor-naive by design, meaning it does not require access to tumor tissue. As a result, testing can be performed through a simple blood draw, while also differentiating malignant signal from transient or benign HPV infection without reliance on having a tissue sample.

The platform is built on an ultrasensitive digital PCR technology combined with proprietary analytical methods supporting both strong clinical performance and scalable operations. Multiple indications for Naveris testing are supported by a large and growing body of evidence that now totals 56 peer-reviewed publications. In a large multicenter real-world observational study of 543 cancer patients reflecting use in routine clinical practice, the Naveris test demonstrated strong performance with a negative predictive value of 98% and a positive predictive value of 95% during post-treatment MRD surveillance.

As shown in the Kaplan-Meier curve on the right, patients with persistent negative TTMV DNA results during surveillance experienced improved recurrence-free and overall survival compared with those with one or more positive tests. And the median lead time to identify recurrence was 4 months ahead of standard of care methods. Based on these findings, the study authors recommended post-treatment monitoring and guideline-specified routine surveillance intervals.

Viral-driven cancers represent a growing specialty oncology market with HPV playing a central role across multiple solid tumors. According to U.S. population level data from the CDC, HPV is associated with the majority of cases of several of these tumor types, reaching approximately 80% of head and neck cancers and close to 90% of anal cancers, Naveris' 2 lead indications. Importantly, the incidence of HPV-associated cancers continues to increase, demonstrated here by the growth in head and neck cancer on the right. The Naveris platform is validated across multiple viral-mediated cancer indications. In aid to diagnosis, Naveris is validated in head and neck and planned validation in anal cancers. In MRD surveillance, Naveris is clinically validated and Medicare covered in head and neck and anal cancers and has planned validation in gynecological cancers.

And now I would like to ask our Chief Medical Officer, Dr. Jeffrey Teuteberg, to walk us through the patient journey for head and neck cancer diagnosis and molecular MRD monitoring. Jeff?

Thank you, John. I'm excited to join the call and share what we see to be a significant opportunity for a differentiated solution to address an unmet medical need in viral-mediated cancers. Today, I'm going to focus my comments on head and neck cancer, where the Naveris adoption is greatest and illustrate how Naveris fits into the workflow and management of these patients.

Patients with head and neck cancer typically start their journey after being referred to an ENT surgeon with symptoms that may include chronic sore throat, pain or difficulty swallowing or a neck mass. The ENT surgeon will first examine the patient, perform laryngoscopy and imaging and then obtain tissue via biopsy or fine needle aspiration. Importantly, these methods can be inconclusive and an HPV diagnosis can be missed if tissue samples are inadequate or nondiagnostic. Peer-reviewed evidence has shown that Naveris is highly accurate, aiding in the diagnosis of HPV-positive head and neck cancer. When utilized in conjunction with traditional approaches, more patients are correctly classified as HPV positive, which is important because making an accurate diagnosis of HPV positivity is critical to downstream therapeutic decision-making. HPV-positive patients almost always undergo surgical resection, followed by chemotherapy, radiation or both under the care of a multidisciplinary team. Naveris testing may be utilized to inform treatment response through its unique quantitative tumor tissue modified viral DNA score, which correlates with tumor burden. The TTMV DNA score has the potential to inform both the duration and intensity of therapy for which studies are ongoing.

Following definitive treatment, Naveris molecular testing is positioned as a longitudinal monitoring tool. In this context, serial blood-based monitoring is used to complement routine follow-up, enabling a repeat assessment of the molecular signal over time as part of standard surveillance workflows. The MRD surveillance protocol for Naveris testing aligns with guideline recommended physician follow-up time points, including quarterly for years 1 and 2 and semiannually for years 3, 4 and 5 for a total of 14 tests per patient over the first 5 years post treatment, followed by annual testing thereafter. Currently, Naveris is the only Medicare-covered assay for HPV-positive head and neck and anal cancer MRD. Care is delivered by specialists at accredited centers consistent with NCCN and CAP aligned practices where patients are followed closely for multiple years due to risk of recurrence. And now I'll hand it back to John.

Thank you, Jeff. With that context on the technology, patient journey and the reimbursement framework already in place, I want to step back and talk about the size and quality of the opportunity in front of us with Naveris.

HPV-driven solid tumors are a large and growing portion of the overall specialty oncology testing market. Today, we estimate the U.S. total addressable market to be approximately $4.5 billion, split across 2 distinct clinical applications. The first is molecular residual disease surveillance, which represents roughly $1.5 billion of TAM. This is where Naveris is focused today with clinical validation and Medicare coverage and in the early stages of clinical adoption.

The second is aid to diagnosis, representing an additional $3 billion opportunity that has yet to be tapped. In totality, at CareDx, we are building a differentiated multi-indication precision medicine portfolio to drive growth. In solid organ transplant, we've established leadership across heart, kidney and lung with liver progressing from development into validation. In specialty oncology, we're applying our core competencies in high-value indications. That includes viral-mediated cancers and hematologic malignancies like AML and MDS. Importantly, this diversified portfolio approach allows us to continue on our strong growth trajectory by extending our precision medicine testing services and patient and digital solutions into new indications.

When taken together, we estimate the total addressable market for solid organ transplant and specialty oncology now exceeds $12 billion. The result is a diversified growth profile across specialty markets. Naveris extends our platform into a large specialty oncology market where our model already applies and where we can lead. It allows us to stay disciplined about where we compete, focusing on indications where molecular monitoring is differentiated and scalable. As we evaluated this opportunity, we were particularly focused on the long-term impact of our growth and returns to shareholders, and we have strong conviction that this investment can deliver both within the framework of our existing operating model.

This brings us to the core takeaway. CareDx is the right company to scale Naveris. We have the proven platform, the operational discipline and the specialty focus that can turn this expanded portfolio opportunity into durable growth and profitability. And now I'd like to turn the call over to Keith to review our Q1 financials and 2026 guidance. Keith?

Thank you, John. I plan to cover our first quarter 2026 financial results and our updated 2026 guidance. You may access our earnings presentation at caredx.com by clicking through to our Investor page.

Turning to the financial highlights section of our earnings presentation for the first quarter of 2026 and our year-over-year results. Total revenue increased 39% to $118 million. Testing volume increased 17% to 54,900 tests. Testing services revenue increased 48% to $91 million or $1,660 per test. Patient Digital Solutions revenue increased 33% to $16 million. Lab products revenue declined 4% to $10 million. Our non-GAAP gross margins increased to 73%. Non-GAAP operating expenses of $69 million or 59% of revenue, including approximately $2 million incremental bonus accrual for performance above plan. Our GAAP net income of $3 million, GAAP net income per basic and diluted share of $0.05 and adjusted EBITDA of $19 million increased 300% plus. Cash collections increased 52% to $121 million. Cash flow from operations were $4 million this quarter and $72 million over the last 4 quarters. And we ended the quarter with $198 million in cash and cash equivalents and no debt. In the first quarter, we collected $14 million in excess of December 31 receivables. This out-of-period revenue contributed $260 per reported test. Excluding this revenue, our revenue per test was $1,405.

Turning to guidance. We are raising 2026 revenue guidance to $447 million to $465 million, representing a 20% increase year-over-year at the $456 million midpoint of the range and adjusted EBITDA of $43 million to $57 million, a 58% increase year-over-year at the $50 million midpoint of the range. Our full year guidance covers the business in our hands today, including our products business.

After I cover our annual guidance, I'll provide details for our products business embedded in our annual guidance, which hopefully will provide a preliminary insights into the financial carve-out. We applied the following assumptions in modeling our full year guidance, consistent with non-GAAP measures. We believe testing volume will range between 224,000 and 229,000 tests for the year, representing a 13% increase year-over-year at the 226,500 midpoint of the range. Based on our experience and seasonality in our business, we expect to see a step-up in volume of approximately 1,700 tests from Q1 to Q2, flat from Q2 to Q3 and another step-up in volume of 1,800 tests from Q3 to Q4. Our guidance assumes revenue for each line of business calculated on a year-over-year basis at the midpoint of the following ranges: Testing Services revenue of $337 million to $351 million, a 25% increase at the $344 million midpoint. Patient and digital revenue of $63 million to $66 million, a 13% increase at the $65 million midpoint; and product revenue of $45 million to $50 million, flat at the $48 million midpoint.

For testing services, we included a slide on revenue per test in our earnings presentation. We expect our revenue per test to increase 10% year-over-year to the midpoint of our guide, 7% due to an increase in our average accrual rate and 3% due to the combination of cash collections and excess of receivables, offset by our estimate of the LCD price impact.

In modeling to the midpoint of our guide, we assume average accrual rate per test to increase from $1,405 per test in Q1 to $1,460 by year-end; out-of-period revenue of $7.5 million in Q2, $5 million in Q3 and none in Q4; and the LCD to negatively impact revenue, not volume, by $7.5 million in the second half of 2026.

Per quarter, we model gross margins in the range of 68% to 71% and operating expenses of $68 million to $70 million, including higher bonus accrual of approximately $2 million per quarter, and we anticipate depreciation recorded in operating expenses to be approximately $9 million for the full year. As mentioned in our press release, in April, the Board of Directors authorized a common stock repurchase program of up to $100 million of shares over a period of up to 24 months.

Turning to our Lab Products divestiture. As John mentioned, we signed a definitive agreement to divest this business, which we expect to close by the end of the third quarter and net approximately $160 million in cash equal to the $170 million sales price, net of $10 million in estimated transaction expenses. As I said earlier, our full year guidance covers the business in our hands today, including our products business. In the first quarter of 2026, our products business generated approximately $10 million in revenue and less than $1 million in adjusted EBITDA.

To provide context on the carve-out of our products business, the following slide in our earnings presentation illustrates the following. On the left, we prepared a chart showing our revenue mix by service line for 2025 and the full year guidance at the midpoint of the range. Our 2026 guidance includes $48 million in lab products revenue or flat year-over-year and $409 million in core business revenue, including testing, patient and digital services or 23% growth year-over-year.

The table to the right of this slide provides assumptions built into our 2026 guide for our products business, which is our best estimate at this time, but we expect to vary depending on when the transaction closes, transition services we provide to the buyer, et cetera. In a perfect world, both parties would like to achieve a clean close at quarter end or June 30, but we are allowing for slippage into Q3. Our 2026 guidance assumes Lab Products generates $45 million to $50 million in annual revenue, $26 million to $30 million in gross profit, $21 million to $24 million in operating expenses, approximately $0.5 million in depreciation and contributes $3 million to $9 million in EBITDA. We are reviewing our post-close expense structure, and we'll have more to say on the carve-out after we close.

For modeling purposes, we provided the quarterly ranges underlying our 2026 guide, which we will update post close. For example, we modeled $5 million to $6 million in quarterly operating expenses for the Lab Products business. Hopefully, this is helpful detail. I'll now turn the call back over to John.

Thank you, Keith. In summary, I want to thank all the team here at CareDx and Naveris and look forward to the path forward. We think these actions taken together are advancing our growth strategy as a company, optimizing our portfolio and extending our leadership in precision medicine diagnostics.

Thank you, and I will now turn the call back over to the operator. Operator?

[Operator Instructions] Your first question comes from the line of Tycho Peterson with Jefferies.

This is Lauren on for Tycho. Two quick ones for me. First, on the $4.5 billion TAM for MRD. How much of this market right now is immediately accessible to you guys through your existing infrastructure? And what new clinical channels must be established for the 30% to 40% projected annual growth? And then second, on the digital solutions business. As you guys are growing this out in the solution selling strategy, what's the attach rate for digital solutions among your high-volume transplant center customers?

Yes. Thanks so much for the question, Lauren. As we outlined in the prepared remarks, $1.5 billion of the TAM is currently in the MRD space and covered in head and neck and anal cancers. And from a channel access perspective, the Naveris team has done a great job building a channel into the specialty providers that diagnose and monitor those patients, including ENTs predominantly in head and neck and then medical oncologists that they work with. And so we don't anticipate having to build a net new channel. Naveris has already built that channel. And with CareDx capabilities in driving repeat testing, building workflow optimization, Epic integration, we think we can accelerate that revenue and volume growth rate.

Your second question on the attachment rate of digital solutions, we said previously that 70% of transplant centers across the U.S. use at least one of the CareDx patient or digital solutions, and that continues to be true today. And as we've shared previously, the more solutions a transplant center has, the more embedded we become into their workflow. And therefore, the more testing we see and revenue generated from those centers.

Our next question comes from the line of Brandon Couillard from Wells Fargo.

John, on Naveris, just curious how long these assets have been on your radar screen. It looks like they also operate 2 labs, one in Massachusetts, one in North Carolina. Would your expectation to keep both? And R&D spend must be pretty lean here. Would this be a type of situation where maybe we could spend an extra $10 million or $20 million and get a lot of juice out of that commercially or with the R&D pipeline? Or would you expect to keep operating this business near breakeven to slightly profitable?

On the labs, we will -- they operate and have CLIA licenses in both their labs. It's not really that material at this point, but -- and they're in the middle of automating some of their workflows. So we will be spending a lot of time really helping them on their cost per test and continuing to drive that as well as the revenue cycle management. And over time, we'll evaluate the lab strategy.

Yes. And I think, Brandon, on the R&D spend, the company operates incredibly efficiently. There's a high number of active clinical trials in addition to the 56 publications that have already been published on the study on the products. Right now, there's a focus on the aid to diagnosis indication, both in head and neck and anal cancer to unlock that larger portion of the TAM and then development work really around the gynecologic indication in MRD. But by and large, I think the vast majority of the spend and investment here is really around workflow, commercial infrastructure and pulling through those 14 time points of testing over the first 5 years post definitive treatment for those patients. And that's what we're going to be focused on. And that's really the core competencies that make this deal work and why Naveris selected, quite frankly, CareDx as their partner going forward.

Super. And then John, it would be great to get your kind of macro view on the transplant procedure environment right now. I mean, volume growth is still pretty sluggish here. Curious how much longer you can keep growing your own testing volumes at double digits and if this type of environment persists? And to what degree at all does your guidance assume that procedure volumes pick up as we move through the year?

Yes, it's hard to predict. As you know, Brandon, it seems like in the transplant market, the procedure volumes accelerate and then fall back and accelerate and fall back. And we saw some acceleration at the end of the first quarter, particularly in kidney, but we're monitoring that closely. And as you're aware, we're coming toward the end of the first reporting period in the IOTA program, and we keep hearing chatter in the market about a focus on increasing transplant volumes as a result of that program, but we're not seeing it nationwide in terms of total volume growth that's in select centers. So we're very focused on supporting those centers that are in the IOTA program around hitting their goals as they move into this first reporting cycle.

As we test patients, our patient population of unique patients we're testing is growing as a result of year-over-year. Once you get a transplant, you're followed for years in getting testing. So even if the underlying transplant volume is flat, the growth rate is going to be significantly higher in surveillance testing.

Our next question comes from Mark Massaro at BTIG.

On the acquisition of Naveris. I wanted to ask a couple on that deal. So the first one is, where is the GYN cancer indication in terms of development? How quickly do you think that could launch?

The second one is, I understand there's 100 employees at the company. How many are in commercial? And did I hear you right that you don't expect to expand their commercial?

And then the third one is on the reimbursement. I think the reimbursement rate is $1,800 per test under an ABLP. When do you think that might reset, if ever? And is that locked through the end of this year? And how are you thinking about that going forward?

Mark, thanks for the questions. The GYN indication is still in development. There's a greater heterogeneity of HPV-driven proteins in GYN than in the other indications. And so that's a development program within the company that will continue and that we don't have a specific time line around today.

From a commercial channel perspective, what I was saying in the response to Brandon's question is that the channel exists today -- or I'm sorry, Lauren's question, there is a channel today. We certainly anticipate supporting expanding that channel, right? Driving growth requires more reach and frequency with providers and building belief. And so we will do that. But that's part of our model here, and we think it's very doable to maintain the profile, the financial profile that we anticipate with the asset.

The 1,800 ADLT, as you know, ADLT status, you report data every year, and that reimbursement rate has been consistent for the company. So we're not expecting any change in that rate.

Yes. Understood. And then I figured I'd ask an unrelated question to the Naveris acquisition. What is your latest thinking around the timing of the LCD for transplant from the MolDx Group? Is that perhaps mid-'26? Or I know we're approaching mid-'26. So how are you thinking about that?

Yes, it still continues to be mid-'26, given that the draft issuance date was July 15 and CMS generally holds themselves to publishing a final or retiring the draft within 1 year of the draft issuance. So we still anticipate we could see the LCD here sometime at the end of the second quarter or early third quarter.

Our next question comes from the line of Andrew Brackmann from William Blair.

I also wanted to ask on Naveris. So certainly, it checks a lot of the boxes that you outlined with respect to the specialty markets that you're concentrating on, both organically and with potential M&A. But can you maybe just sort of unpack the operational learnings from the transplant business that you can apply here? You talked about driving the repeat ordering, driving the Epic integration. But I guess what specifically are the operational learnings that you sort of found over the last few years here that you can apply to this business?

Yes. Thanks for the question, Andrew. And I'll ask Jeff to jump in here as well. I think because it's not just operational. It's also around provider education, right, and awareness of the data, the use of the products, you want to share a little bit?

Yes. I mean I think as people get more familiar and more comfortable with using these noninvasive tests rather than their typical invasive tests or even radiographic tests, we'll see the utility of this because a lot of times, patients go to physicians, and it's hard to diagnose these recurrence by physical exam and the radiology can be equivocal, particularly right after treatment when you have things like PET/CT scans lighting up because there's so much metabolic activity from a recent surgery. So there's lots of really good uses for this test. I think people, as they start to use it, we'll start to see more and more utility.

And operationally?

Operationally, I think just they're not of scale. So their ability to buy things at scale the way we're able to do that, to deploy automation, have engineers and things like that. So we do believe there's potentially up to 1/3 of the cost per test you can do by automation and just price negotiations and things like that. We have line of sight at we looked at during the diligence and things like that. And then on Epic, obviously, it's too small of a company on their own to invest in something like that. But adding that to our Epic instance and turbocharger is something that we can do quite easily without incremental cost. So we're excited about that opportunity, supported by the commercial initiatives and the go-to-market strategy.

Yes. And I talked a little bit about our customer service team and the CareDx Cares team and really supporting workflow within a specialty practice or subspecialty practice because oftentimes, these practices are just rate limited by the amount of labor that they have, the amount of support staff, and it becomes overwhelming. And so ordering a diagnostic test is not top of mind because they've got a slew of patients waiting in the waiting room to get in and see the clinician. And so ensuring that there is very streamlined workflow and we're supporting them and we're engaging patients after the order has been set and pulling through access to the blood is really critical. And these are things that we have built expertise on at CareDx, and we think we can port over to the Naveris business.

Perfect. I appreciate all that color. And then if I could just follow up. Obviously, I'm sure you did a lot of diligence around the competitive environment for this asset. Can you maybe just sort of talk about how you guys are viewing sort of the specific indications that they're in right now? Any potential emergence that you have on your radar? And I guess bigger picture, how do you sort of maintain the niche that they establish?

Yes. Thanks, Andrew. Certainly, we did diligence on the competitive environment, and we operate in competitive markets today. But Naveris has a differentiated technology, and that technology makes it a preferential tool in the monitoring and diagnosis of these patients with HPV-driven cancers. And so that made us very comfortable with the transaction, and we think we can sustain that competitive advantage and market-leading position that the company has today.

Our next question comes from the line of Mason Carrico from Stephens Inc.

Could you provide a bit more detail on the financials of Naveris? What was the 2025 growth rate off of 2024, maybe how it ramped throughout the year? And then on that 30% to 40% growth rate going forward, how much of that is volume driven versus ASP?

I'm going back to '24. I have the '25 in front of me. Of course, you're asking about '24. Sorry about that, Mason. Go ahead to John, and I'll come back to you on that one, all right?

Yes. I think, Mason, obviously, there's a mix of ASP and volume growth, but volume has been the key driver here for the company given that it's relatively early in the adoption cycle in the market. I would say that we feel very comfortable with the 30% to 40% growth rate going forward, and that's why we provided commentary that we anticipate that to persist over the next 3 years.

Mason, the growth from '24 to '25 was 75% top line growth.

Got it. Okay. And John, could you just update us on maybe where you think market penetration stands today for cell-free DNA testing in transplant? Maybe your estimate across organ types? And I guess, how much growth runway remains ahead of you here?

Yes. I think that the growth runway remains significant, right? There are still, as with many of these markets, factions that don't use molecular testing at all, right? And as an organization, dating back to mid-'24, we started to focus on reinstituting surveillance testing in kidney. Over the past several quarters, we've also been focused on for-cause indications in kidney because there are many. And as I shared in my prepared remarks, we're now seeing roughly 50% of that volume be for cause today. And so we still think there's substantial runway in kidney. We continue to see growth in heart care and, in particular, AlloMap as a product growing sequentially quarter-over-quarter even after being on the market for over 20 years now, which is incredibly impressive and I think indicative of the strength of the evidence and data and utility of the product. And then in lung, we feel like we're still early days in adoption. And so we are eager to see data from ALAMO published such that we can continue to drive adoption even in its limited levels that we see in lung transplant centers today and have that grow into sustained utilization. So we've got a lot of work still to do in this space, and we think there's a lot of runway still to go in solid organ transplant.

Your next question comes from the line of John Wilkin with Craig-Hallum.

Just one bigger picture one on Naveris. As you think about any potential need to have a broader portfolio as you go into that channel, I guess, one, do you believe that you need to have that? And two, if so, how do you get there?

Thanks, John. That's a great question. I think today, we feel really confident in the portfolio that the company has, and it is the market leader in both head and neck and anal cancers. And certainly, you could foresee having a service that augments it for non-HPV-driven cancers, but that's not our focus today. And so I think as we go through the close process, we integrate the business, we continue to execute on the large opportunity ahead of the company, we'll come back and update you if we have different thinking around broadening the portfolio.

Great. And then am I correct in assuming that there's no contribution from Naveris currently included in revenue guidance for the year?

That's correct.

Our next question comes from the line of Tom DeBourcy with Nephron Research.

Just I wanted to focus on transplant, specifically the ASP improvements that you're clearly seeing. And so I think, Keith, you mentioned, I guess, ASPs moving towards $1,450, $1,460 by the end of this year. And just wanted to understand how much of that is driven by, I guess, better claims submissions or less rejections versus, I guess, the push towards getting 50% of volume through Epic Aura?

Yes. So we don't have any Epic Aura uplift built into our guide. And our cash collections per test are exceeding our revenue per test. And as we laid out in July of last year, we started transitioning to shrinking the look-back period in our rev rec policies. And as our -- as we are improving automation and workflows and revenue cycle management, and obviously, that's driving significant cash, which quarterly is exceeding our expectations. So we're really excited about that. But you're going to see that flow into revenue per test as the year goes on. So you'll see out-of-period revenue or revenue that comes in reflected of exceeding our AR at the beginning of that quarter. And you'll see that start to flow into AR into rev rec and AR so that levels out. And that's why I'm giving you out-of-period revenue sort of forward-looking view so that you know how I'm transitioning that. And obviously, that's up higher than it was last quarter because our out-of-period revenue was so high this quarter, and it continues into April.

Understood. And then just as a follow-up question, in hematological malignancies or blood cancer MRD with AlloHeme and potentially AlloCell, I think the existing plan had been to leverage existing transplant center relationships given stem cell transplants and other. Is that still the current plan? Or does the addition of Naveris change that, I guess, sales rep strategy?

Yes. Thanks for the question, Tom. The acquisition of Naveris doesn't change that strategy. I think that we have a very focused strategy around AlloHeme given that it's not yet Medicare covered. And so 2027 is going to be very focused on clinical education around the product and early adoption and building toward Medicare coverage for the product, and then we'll think longer term around what the channel looks like.

Our next question comes from the line of Yi Chen from H.C. Wainwright.

[indiscernible]

We have reached the end of our Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the CareDx Q4 2025 Financial Results Earnings Call. [Operator Instructions]

I will now hand the call over to Caroline Corner Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. Thank you for joining us today. Earlier today CareDx released financial results for the fourth quarter and full year 2025 ending December 31, 2025. These results are currently available on the company's website at www.caredx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer; Keith Kennedy, Chief Operating Officer; and Nathan Smith, 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. Any 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 filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, February 24, 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 a 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 comparable 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, Caroline, and welcome to everyone joining today's call. 2025 was a transformative year for CareDx. We advanced our market leadership across heart, lung and kidney transplantation with an expanded commercial footprint, including a broader sales and medical presence to execute our solution selling strategy that drove growth across all business segments.

We launched new products to further differentiate our offerings, such as AlloSure Heart for Pediatrics to service the entire heart transplant market; AlloSure Plus, our AI-derived model for kidney transplant risk assessment; and HistoMap Kidney, our first tissue-based gene expression classifier for identifying rejection subtype. We generated meaningful evidence to further build clinical belief in our molecular testing solutions, including multiple published manuscripts from the large prospective SHORE and KOAR registries in heart and kidney transplantation, respectively.

At the same time, we invested in critical infrastructure, including significantly advancing our revenue cycle management function through automation and AI deployment and launching EPIC Aura designed to improve our customers' experience with test ordering and reporting by reducing sample holds and supporting faster, more reliable test processing. our innovation strategy and disciplined execution have set us on a path to achieve the long-range plan we laid out in October 2024. I believe CareDx is well positioned for our next phase of innovation, scale and sustained growth as a leading precision diagnostics company.

In my prepared remarks today, I'm going to highlight some of our accomplishments from the fourth quarter and then detail our key growth drivers for 2026. Then I'll turn it over to Nathan to review the quarter and full year 2025 financial highlights and our full year 2026 financial guidance.

Briefly, our fourth quarter financial performance was strong. We delivered revenue of $108 million, representing 25% year-over-year growth. Testing volume accelerated to 17% growth year-over-year. We maintained a 69% non-GAAP gross margin and generated positive adjusted EBITDA of $7 million in the quarter. We continue to be disciplined in our capital allocation and maintain a strong balance sheet.

In the first quarter, we returned capital to shareholders through an additional $12 million of share repurchases. In total, in 2025, we have repurchased approximately 9% of our outstanding shares. We ended the quarter with approximately $200 million in cash, cash equivalents and marketable securities and no debt, providing significant financial flexibility. Overall, I believe our results reflect disciplined execution, improving cash generation and a solid foundation as we continue to execute our growth strategy.

Now on to the business highlights. Testing services growth was strong across all 3 organs: heart, lung and kidney. Revenue was $78 million for the fourth quarter, an increase of 23% year-over-year. We delivered approximately 53,000 tests in the fourth quarter, up 17% from the prior year. Kidney testing continued to lead our growth, supported by both increased surveillance protocol adoption and expanded for-cause use of AlloSure Kidney at transplant centers. Generally, when a center initiates a surveillance testing protocol, they will start newly transplanted patients on that testing schedule. As centers restarted their surveillance protocols throughout the year, it had a gradual layering effect of increasing test volumes, leading to a strong fourth quarter.

Although the number of kidney transplants was relatively flat year-over-year in 2025, we are encouraged by the year 2 IOTA proposed rule, which reinforces the need to increase kidney transplants, including through the use of expanded organs that are considered medically complex. Based on CMS' forecasted growth rates, IOTA may be an additional tailwind for our testing services business, where our growth rate is already outpacing the market. We believe the proposed framework aligns well with our portfolio and positions testing services to benefit as IOTA progresses into its second year.

In heart transplantation, during the fourth quarter, we announced the publication of the third manuscript of the Surveillance HeartCare Outcomes Registry, or SHORE in the Journal of Heart and Lung Transplantation. This large multicenter study analysis included 1,934 heart transplant recipients across 59 centers and demonstrated that HeartCare's combined molecular testing provides independent prognostic information beyond biopsy alone.

Patients with an abnormal HeartCare result at any time from 2 months to 5 years post transplant were associated with approximately threefold increase in the 30-day risk of graft dysfunction and cardiovascular death, even when there was no biopsy evidence of rejection. These findings reinforce the clinical value of HeartCare in identifying higher-risk patients who may benefit from closer monitoring and more personalized post-transplant management, further strengthening the scientific foundation of our heart transplant franchise.

Over the course of 2025, we progressed from stabilizing our revenue cycle management function to demonstrating clear RCM strength. After installing our new team in the first half of '25, collections improved consistently in the third quarter and accelerated in the fourth quarter. For the year, reimbursement improved materially with claim rejection rates declined by more than 60% over the course of 2025 through September and overall 0 pay claims improved by approximately 10% through the same period. These improvements were supported by increased automation, streamlined workflows and more effective appeals execution, driving what we expect to be more predictable and durable revenue capture.

Just as important, we improved the patient experience. We are more proactively managing prior authorizations, timely claim submission and appeals to help patients receive their insurance benefits and diminish uncertainty. We believe this disciplined execution strengthens provider and patient confidence in CareDx as their laboratory of choice. Across '25, we delivered meaningful improvements in cash conversion and reimbursement, reflecting stronger execution across billing, collections and appeals.

I'll turn now to Patient and Digital Solutions, which includes our transplant pharmacy, software tools and remote patient monitoring services. Our solution selling strategy is working. We delivered a strong fourth quarter with revenue of $17 million, up 47% year-over-year. Our integrated patient and digital offerings continue to meaningfully deepen customer relationships. As we continue to engage our customers with these solutions, we're seeing the benefits of tighter integration across the transplant journey, improving the experience for patients and care teams while reinforcing the value of our overall precision medicine platform.

Turning to Lab Products business. We delivered solid performance in the fourth quarter with revenue of $13 million, up 17% year-over-year, reflecting continued demand across both domestic and international markets. Growth was supported by ongoing adoption of our HLA typing and analysis solutions as well as stronger customer engagement at key scientific forums. During the quarter, we continued to advance our product portfolio, including launching AlloSeq Tx11 and Score 7.0, which are designed to improve workflow efficiency, scalability and regulatory alignment for transplant laboratories.

AlloSeq Tx11 is our next-generation HLA typing solution, featuring enhanced Class II loci coverage to improve donor-to-recipient matching in both solid organ and stem cell transplantation. We also achieved important regulatory milestones, including IVDR certification for AlloSeq Tx and QTYPE in Europe, positioning the Lab Products business for sustained growth and broader global adoption going forward.

Looking ahead to 2026, I want to lay out our key growth drivers for the year that will allow us to sustain a high level of product innovation and extend our leadership position in existing markets through our solution selling strategy. These initiatives span our pipeline advancement, go-to-market strategy and evidence generation. And together, they reinforce our ability to rapidly launch, iterate and scale products across the platform. Importantly, this is a connected operating model designed to fuel growth and extend our leadership over time. These drivers are not just about scaling what we do today, they're about applying our platform to new high-impact markets.

This year, I'm placing a significant emphasis on advancing our cell therapy pipeline, which we have referred to as Transplant Plus. On our February 12 investor call, we announced pivotal clinical validation results for AlloHeme, our first AI-powered NGS surveillance solution designed to predict relapse in patients with AML and MDS following allogeneic cell transplantation. AlloHeme represents an important milestone in our Transplant Plus strategy, positioning CareDx to expand beyond solid organ transplant and into cell therapy, hematology and oncology, areas where there remains a significant unmet need for sensitive, noninvasive relapse detection.

The data were generated from the ACROBAT Study, a prospective multicenter trial conducted across 11 U.S. transplant centers and demonstrating strong clinical performance recently presented at the Tandem 2026 Annual Meeting. In this analysis, AlloHeme identified relapse a median of 41 days earlier than clinical detection with 85% sensitivity and 92% specificity and patients with a positive AlloHeme result at 6 months post-transplant showed a 12-fold higher risk of relapse compared to patients with negative results. These findings underscore the potential of a universal blood-based surveillance approach to provide earlier risk insight than traditional bone marrow-based or marker-specific methods.

Strategically, we expect AlloHeme to broaden the long-term growth opportunity for CareDx by extending our molecular surveillance expertise into a large and growing cell therapy market. In the call, I laid out our anticipated pathway to commercialization, starting with publishing the results of the ACROBAT trial, CLA readiness in 2026, followed by commercial introduction in early 2027 and anticipated payer coverage in 2028. While still early, we believe AlloHeme has the potential to become a foundational component of a broader molecular monitoring platform for cell therapy and hematologic malignancies, consistent with our disciplined data-driven approach to innovation and portfolio expansion. Advancing our cell therapy pipeline is a top priority for 2026, and I plan to share more updates on this work throughout the year.

Turning to go-to-market. I view our operational excellence initiatives and placing the customer experience at the center of everything we do as a key part of our go-to-market strategy. That message has resonated across the country with the more than 50 transplant centers I visited with personally over the last year. In 2026, we are placing a significant focus on Epic integrations to make the customer experience simple and streamlined. Our pipeline of customers willing to integrate is significant, and we believe these integrations will drive further volume growth.

As of today, 7 transplant centers are fully live on our Epic Aura instance, making us one of the fastest implementers to date according to Epic's team. An additional 14 transplant centers are in active implementation with several more expected to formally kick off in the near term, including large multisite systems. Our pipeline for 2026 implementations is strong.

Importantly, we're beginning to see early operational and commercial benefits from these integrations. As anticipated, Epic Aura implementations are improving the quality of electronic order data and early indications show a roughly 40% reduction in log-in related issues, which meaningfully improves the experience for clinicians. We're also encouraged by early signs of growth at initial live sites where active levels have increased following go-live. While it is still early, these signals reinforce our confidence that Epic integrations can support improved adoption, operational efficiency and long-term growth as implementation continues to scale.

In addition, in 2026, we are migrating our LIMS infrastructure to Epic Enterprise Solutions. This is a strategic infrastructure decision that allows us to establish a platform for lab test workflow and reporting that has 2 key advantages. First, the flexible infrastructure allows us to more rapidly launch new products in our lab, such as our cell therapy products, which I view as key to future growth.

Second, we are able to exchange data with Epic centers more seamlessly for patient treatment purposes even if we're not an Epic or integrated with the center. For example, if we need medical records to verify a patient's date of birth, today, we have to call the center and ask for that information. With Epic Enterprise, we can reach into the EMR and pull the data seamlessly to help eliminate interruptions in the time line of patient test results or claim billing.

Turning to clinical evidence. Evidence is the foundation for building clinical belief in our testing solutions as the standard of care in solid organ transplantation. We think about evidence generation in 2026 across 3 dimensions: First is translational research under the umbrella of our ImmuneScape program. This January, we announced our strategic collaboration with 10x Genomics to launch ImmuneScape, a multiomics research platform that we believe represents a significant advancement in our precision transplant medicine innovation pipeline. This initiative leverages 10x's cutting-edge single cell and spatial biology technologies to decode the complex immune mechanisms underlying transplant rejection, particularly antibody-mediated rejection and microvascular inflammation.

ImmuneScape builds on our existing diagnostic portfolio, including our recently launched HistoMap Kidney platform and is designed to generate high-resolution biological insights that may inform our future clinical diagnostic development pipeline. By mapping immune cell populations and pathways at higher resolution, this collaboration positions us to drive the discovery of next-generation diagnostic solutions that can better predict therapeutic response and improve treatment selection while reinforcing our commitment to advancing personalized transplant care.

Second, observational studies are a core pillar of our 2026 strategy because they demonstrate the real-world utility of our testing services and their impact on physician behavior. We expect continued publications across kidney, heart and lung that are critical to building belief, reinforcing adoption and supporting market access. Large registries such as KOAR, SHORE and ALAMO allow us to show longitudinal clinical utility across diverse populations and care settings. Importantly, this real-world evidence also fuels innovation by informing new algorithms, refined thresholds and expanded clinical context of use, creating a durable engine designed to promote product differentiation and long-term growth.

And lastly, as the use of our products matures and new insights are generated around the impact they may have on guiding interventions in clinical practice, we are launching interventional trials in heart and kidney designed to demonstrate how molecular insights actively can inform treatment decisions and improve patient management. Trials like HARBOR and MERIT are designed to show that our testing is not just informative but actionable within clinical workflows. We believe this level of evidence strengthens differentiation, supports guideline inclusion and reimbursement and creates a foundation for new contexts of use. Together, these interventional efforts have the potential to help establish as the standard of care and support durable, scalable growth across our platform.

And now I'd like to hand it off to Nathan to cover our Q4 and 2025 financial highlights and our 2026 guidance. Nathan?

Thank you, John, and good afternoon, everyone. In my remarks today, I will discuss our fourth quarter and full year 2025 results before turning to 2026 guidance. Unless otherwise noted, all financial measures discussed are non-GAAP. For further information, please refer to GAAP and non-GAAP reconciliations per our press release, earnings presentations and recent SEC filings.

Starting with financial highlights for the fourth quarter. Total revenue for the quarter was $108.4 million, an increase of 25% from the same quarter of the previous year. Testing services revenue for the quarter was $78.4 million, an increase of 23% from the same quarter of the previous year. Testing services volume was approximately 53,000, an increase of 17% from the same quarter of the previous year. Average revenue per test for the quarter was $1,480. That included $5.1 million in cash collections in excess of receivables on historical claims, consistent with our guidance for the quarter.

Patient and Digital Solutions revenue for the fourth quarter was $16.8 million, an increase of 47% from the same quarter of the previous year. Lab Products revenue for the fourth quarter was $13.3 million, an increase of 17% from the same quarter of the previous year.

Non-GAAP gross profit for the fourth quarter was $74.3 million, representing a gross margin of 68.5%. Fourth quarter non-GAAP operating expenses were $70 million, including a $6.7 million onetime cash bonus instead of equity awards for nonexecutives.

We reported adjusted EBITDA for the fourth quarter of $6.5 million, a decrease of 34% compared to the last year. Our adjusted EBITDA includes approximately $7 million of operating expenses for compensation in lieu of equity grants for nonexecutives in the fourth quarter of 2025, reflecting our continued focus on managing shareholder dilution and achieving a 3-year average employee equity burn rate consistent with industry benchmarks as outlined in our 2025 proxy statement.

Turning to cash. We collected $115.8 million in the fourth quarter, representing an increase of 37% over the same quarter in 2024. During the fourth quarter, we repurchased $12 million of common stock, acquiring 773,000 shares at an average price of $15.79 per share.

And now I'll turn to financial highlights for the full year. We reported full year 2025 revenue of $379.8 million, an increase of 14% year-over-year. Testing Services revenue was $274.5 million, an increase of 10% from last year. Testing volumes of approximately 200,000 increased 14% year-over-year. Patient and Digital Solutions revenue for the full year was $56.9 million, up 31% year-over-year. Lab Products revenue was $48.4 million for the full year, an increase of 19%.

Non-GAAP gross profit for the year was $263.1 million, representing a 14% increase over 2024. Gross margins for 2025 was 69.3%, consistent year-over-year. Non-GAAP operating expenses totaled $240.1 million or 63% of revenue, in line with the prior year as a percent of revenue. Adjusted EBITDA for the year was $31.7 million, representing a 14% increase over 2024 and as noted earlier, lower by $6.7 million due to the onetime cash bonus in lieu of equity.

Continued execution of initiatives to transform our RCM processes helped drive cash collections of $405.6 million for the full year 2025, a 32% increase compared to the previous year. These collections drove a $22.5 million year-over-year reduction in accounts receivable and a 42% annual improvement in DSO, which decreased from 71 days to 41 days. During the year, we bought back $88 million of common stock, purchasing 5.8 million shares at an average price of $15.16 a share. We ended the year with $201.4 million in cash, cash equivalents and marketable securities, 50.9 million shares outstanding and no debt.

Turning now to guidance for the full year 2026. In line with what we shared previously, if the draft local coverage determination for solid organ transplant is finalized, we expect a full year negative revenue impact of approximately $15 million. We expect the LCD policy to be finalized midyear, and we included a $7.5 million or half year impact to revenue and adjusted EBITDA in our guidance.

With that, we expect full year 2026 revenue of $420 million to $444 million. The midpoint of 2026 guidance represents approximately 14% year-over-year growth. For Testing Services, we expect full year Testing Services revenue of $306 million to $326 million. We expect full year testing volume of 220,000 to 228,000 tests. The midpoint of the 2026 guidance represents approximately 12% year-over-year growth.

Turning to average revenue per test. On January 1, 2026, our new PLA code went into effect that reduced AlloSure Kidney reimbursement by 4% from $28.41 to $27.53. As a result of that change and the anticipated impact of the LCD, we are modeling revenue per test to start at approximately $1,400 in the first quarter and the full year blended revenue per test in the low $1,400s.

In the first half of 2026, we expect to recognize approximately $5 million in revenue from prior periods with the majority occurring in the first quarter. In the second half of 2026, we expect our accrual window to age into a new normal of cash collection. From that point forward, we expect any impact from prior period cash collections will be immaterial.

Turning to Patient and Digital Solutions and Lab Products. We expect full year 2026 revenue to be $114 million to $118 million. Working down the P&L, we expect full year non-GAAP gross margins to be approximately 69% to 71% for the full year 2026. We expect our 2026 adjusted operating expenses to be in the range of $68 million a quarter, plus or minus $1 million. That would be approximately 63% of revenue, plus or minus 1%. Included in our adjusted operating expenses is approximately $10 million related to strategic investments in enterprise systems, including Epic Enterprise LIMS, which we believe will be an important contributor to future growth.

Turning to adjusted EBITDA. We are assuming 2026 annual depreciation expense of $9 million that will be added back to operating profit, resulting in full year 2026 adjusted EBITDA to range between $30 million and $45 million, representing an approximate 20% increase over the full year 2025 at the midpoint. The first quarter is typically our softest EBITDA quarter due to the annual reset of employee benefit costs, including 401(k) matching and payroll taxes. In addition, the first quarter of 2026 will reflect the first full quarter impact of recent hires. As a result, we expect adjusted EBITDA on an absolute dollar basis to be in the high single digits in the first quarter.

Lastly, I want to share that I decided to transition from my role following the completion of our filing of our Form 10-K. After several demanding years in executive finance leadership roles, I feel it's important to step back and dedicate meaningful time to my family. This decision is personal and not a reflection of my confidence in the business. I am proud of what we've accomplished and believe the company is well positioned for the future. I'm deeply grateful to John and the entire CareDx team for the opportunity to serve alongside such talented and dedicated people in advancing our mission.

And now I'd like to turn the time back to John.

Thank you, Nathan, and thank you for your contributions to the company. We wish you the best in your future endeavors. Alongside this news, I would like to announce the appointment of Keith Kennedy as the company's Chief Operating Officer and Chief Financial Officer. Keith will oversee the company's finance organization effective February 26. Keith brings 7 years of public company CFO experience. And under his leadership, we expect to continue modernizing the company's financial systems to deliver sustained profitable growth.

Lastly, as I reflect on 2025, I'm proud of the progress we've made, not just in our financial performance, but in building the foundation for what comes next. We've strengthened our platform through solution selling, expanded evidence generation and the infrastructure required to scale innovation. Recently, I spoke with a transplant clinician who told me that what's changed most is not just having better data, but having insights they can actually act on earlier, more confidently and with less friction in their workflow. That conversation captures what we're building at CareDx.

As we move into 2026 with continued investment in observational evidence, interventional trials and new markets like cell therapy, we believe we are entering a new phase of precision medicine, one defined by faster product iteration, deeper clinical impact and durable long-term growth.

And with that, I'd like to open the call for questions. Operator?

[Operator Instructions] Your first question comes from Brandon Couillard of Wells Fargo.

Maybe just starting with the volume guidance for the year, I think 12% seems like somewhat of a low bar relative to the 17% exit rate. Can you just talk about the contribution from Epic Aura? John, are you assuming that transplant procedures get any better over the course of the year?

Thanks for the question, Brandon. We're not assuming transplant procedural volume increases in our guide. And we think it's too early to say right now what the lift from Epic Aura will be. We've seen nice growth in the handful of accounts that we've integrated with over the past month or 2, but that signal is a little too early to give a guide around what we think the lift will be for the full year. I anticipate that when we get to our Q2 call, and we have at least 6 months of integration under our belt with 10-plus sites that we'll be able to give more guidance around what we think the longer-term impact of those Epic integrations will be.

Okay. That's fair. And then I'd like to just focus on the patient Digital Solutions business, which has really accelerated in the last 2 quarters. the guide consolidated it with products. So could you break out the Patient Digital Solutions piece, sort of the sustainability of kind of 40% growth that we saw in the back half of '25? And what does the margin profile of this business look like today given it's mostly software?

Thank you. It's Keith. On the Patient Digital Solutions, we're assuming we're going to grow the product, Patient and Digital Solutions collectively in the range of 8% to 12% next year. We're early in the year. These businesses have outperformed, as you saw last year, every quarter. So we have high hopes that these guys are going to deliver a better return. And so hopefully, on the first call, we'll know more and have more to discuss around that. in terms of the margin profile of that business, that ranges anywhere on the software side into the mid-60s, so 60%, 70% margins in the software business.

And then on the products business, that goes anywhere from, say, 50% to 60%, and that depends on the absorption, which is one of the things I've been working on is taking some of the manufacturing in-house and controlling our manufacturing and overhead. So as you're making these kits, it's a pretty manual process. I've been working on technology around that so that, that can normalize that around the margin. So you can imagine if you're not in the middle of building kits and then you're absorbing that expense into the P&L, and that creates the variability on that side of the business. Does that answer your question, Brandon?

Yes, sir.

Your next question comes from the line of Mark Massaro of BTIG.

This is [ Vivian ] on for Mark. So I just had one on the guidance. Could you just walk us through some of the assumptions of the high end versus the low end? I just wanted to confirm if that was primarily being driven by the Medicare LCD? Or is there any other swing factors to call out? I think I heard you on the prior period collections and pricing reset as well. I just wanted to check if there was anything else going on there.

Vivian, that's a great question. Let me walk you through an illustrative example of how we model this at the midpoint of the guide, and I'll try to show you the low and high end of the range and how we think about it. The midpoint of our revenue guide is $432 million, and we have a $12 million band on the low and the high end. As I turn to Testing Services, the midpoint of the testing volume, which drives that business is 224,000 tests, which represents 12% year-over-year growth. Our band around that on the high and the low end is 4,000 tests or 1,000 tests per quarter. So that goes between 220,000 and 228,000 tests.

So to Brandon's question, that will go between 10% and 14% annual growth in line on the high end of that range earlier in the year. Obviously, as we try to predict what's going to happen over the next 4 quarters, it's 14% growth on the high end. In terms of seasonality and testing volumes, we modeled a 1,000 test step-up from Q4 2025 to Q1 2026. 2,000 test step-up in Q2. We have seasonality we're flat from Q2 to Q3 and a 2,000 test step-up in Q4.

Remember, we had 3,000 test step-up in Q4 of last year. So we're a little bit light to that as we're earlier in the year, and we're watching how the momentum picks up in the business. Based on the continued success in RCM, we anticipate recognizing $5 million in out-of-period revenue in the first half of '26. And I assume that we would generate $3 million in the first quarter and $2 million in the second quarter of '26.

And to the earlier point, as we discussed this out-of-period revenue, if you spread the $5 million over the 224,000 tests at the midpoint of our guide, our 2026 revenue per test is higher by $22 per test. The revenue guide includes, to your point, Vivian, $7.5 million in revenue reduction, as Nathan outlined from the implementation of the LCD, spreading the $7.5 million over the 224,000 tests at the midpoint. Our 2026 anticipated revenue per test is negatively impacted by $33 per test.

Again, this is built into the guidance, impacting revenue and adjusted EBITDA. Our guidance assumes testing revenue per test of approximately $1,410 per test at the midpoint with a range bound of plus or minus $20 per test. And I conservatively I hope to beat that, but we are -- that's the range bound on that number in terms of the guide build. Again, our revenue per test is lower by $33 per test associated with the LCD and higher by $22 from the out-of-period revenue.

On the product patient digital solutions, back to Brandon's point, we modeled the revenue at $116 million at the midpoint, plus or minus $2 million. This represents a 10% increase for these service lines, range bound at 8% to 12%. And I would apply that equally to those business. I would take last year's revenue, and I would take that range bound 8% to 12% and apply that to each of those businesses.

Turning to gross margin. As Nathan mentioned, we anticipate a midpoint of 70% gross margins with a range of 69% to 71% based on the calculated revenue and gross profit that I just covered. And on the OpEx line, the midpoint of the guide range assumes that we average quarterly OpEx spend of $68 million, plus or minus $1 million.

I will note, we obviously can control expenses. 60% of our expenses are labor, but we are investing for the future. And so we think that is a pretty range bound where we plan to end up in terms of OpEx spend on the year. Adjusted EBITDA ranges from $30 million to $45 million. And as Nathan mentioned, it includes a $9 million add-back for depreciation, which is included in operating expenses. So hopefully, Vivian, that will give you a good foundation for the build to the midpoint and the range bound. Does that answer your question?

Yes. Yes, that was perfect for the transparency, Keith. I guess I had one follow-up. As far as the SHORE manuscript publication, I was just curious as far as any dialogue you've had with MolDx since then. I think it's our understanding that this was the prospective study that they were looking for. So just any nuggets to flag there or any sense of where you might be in the review queue?

Thanks, Vivian. We provided an extensive comment letter to the draft local coverage determination back in August of last year. And that comment letter included the data that was published in the SHORE 3 manuscript. That data had previously been presented at a conference, and we were relatively confident that, that publication was going to be impress in the near term. And so we included that data. And then, of course, once that publication came out in press, we shared it with the MolDx team.

But I think on your -- the last point of your question, we continue to anticipate that the LCD will be finalized sometime midyear. So we're not really in the queue necessarily for like a new LCD, really the rules around draft coverage determinations contemplate that they should be finalized within 1 year of the draft being issued, which was July 15, 2025. So we anticipate somewhere in the June to July time frame that the LCD will be finalized.

Your next question comes from the line of Tycho Peterson of Jefferies.

Maybe just on the Epic. I know you're kind of -- you're doing Epic Beaker the lab and you've talked about this can really help with appeals because a lot of those get timed out. Can you maybe just help us think about that opportunity, quantify it? And what is the path to ultimately get to 2,000 reimbursement? Over what time frame do you think you'll get there?

Internally, in terms of the reimbursement, the last question, first, Tycho. First, thank you for your question. This is Keith. We are -- internally, we're targeting the team is driven towards a 3-year goal on the 2,000 test, obviously higher than our guide, and that's what we're working on internally. Part of doing this is making sure that all these workflows are executed in such a way that when claims are denied, you have met all and checked all the boxes. So getting eligibility checks that you file the right insurance company, making sure you get the prior auth filed in time and those things. That is a moving target.

And the only way to really do this effectively at this high volume is to have real-time information that informs your initial claim. And so this is where we think getting to that 2,000 or even higher, it's highly important that we integrate and streamline these operations so that, that can happen on a clean claim.

Let me just expand on this. You didn't ask this, Tycho, but we're spending $10 million to essentially upgrade and integrate between Epic -- this includes Epic Aura, Epic Enterprise, okay? So this is their full feature and function. So similar to what Exact has in their operation. And this includes integrating 6 lab information systems. So that is a lot to do, and that's going to take us about 18 months to get all this done. We are phasing this in a multiple phase approach. And of that money, I'm probably talking $6 million would be a recurring fee. So my bogey is about $6 million. There's $4 million that is cost to implement that software to be less recurring.

And then Epic would tell you, a, you're going to get a lift on your volume, right, because it's easier to order and access the test, and therefore, you get that. B, you're going to get better information to have cleaner claims and you're going to offset that expense, right? So it doesn't take a heavy lift to make $5 million up or even $10 million in terms of, say, a $500 million revenue company at the time. So that's how we're thinking about it in terms of the P&L and the contribution down the road.

Okay. That's certainly helpful. And then I guess just thinking on kind of the back of the Acrobat data and the commercial readiness activities ahead of launch. Can you maybe just talk about other kind of gating factors and steps you're taking ahead of the commercial launch for AlloHeme next year?

Yes. Thanks for the question, Tycho. I mean I think there's a broad clinician education effort that we need to engage in around the product, right? So we presented data at the Tandem meeting and at the hematology meeting in the fourth quarter now for 2 years in a row. But certainly, we haven't educated every clinician that could potentially order the product. And so what we want to do is have an intense focus on making sure that the manuscript gets submitted so that we can get that data and evidence in print. We'll start educating centers on that data through personal promotion.

And then we'll complete our CLIA readiness, which allows us to prepare our technology assessment packet and submit for reimbursement, which I anticipate will get done this fiscal year. We'll get it submitted, and that gives us enough time to generate revenue and coverage in the 2028 time frame. So that's how I'm thinking about the cascade of activities. Of course, in the background, we're also working on our broader cell therapy pipeline.

So I talked in the call on the 12th about persistence monitoring in CAR-T therapy, right? So we have another product in that indication that we're working on and several other product ideas that the team is kicking around to really fill out that portfolio, along with the broader set of solutions that we offer like digital products to bone marrow transplant centers. So there's a fair amount of work for us to do around education and really priming the market for the launch of this product so that the volume can accelerate rather rapidly, and we can see this be a market-leading product in the cell therapy space.

Your next question comes from the line of Andrew Brackmann of William Blair.

Maybe back to Brandon's question around sort of the digital solutions business. Can you maybe just sort of unpack for us sort of what specifically is driving the strength that you're seeing there? And as we sort of think about the halo effect for the rest of the business, are you sort of thinking about this as being sort of a leading indicator for share wins in the Testing Services side of the business as well?

Yes. Thanks, Andrew. That's a great question. I mean I think that we have been gaining share of the addressable market in Testing Services, and that is a testament to the 17% year-over-year growth we experienced in the fourth quarter. And I really think Jessica, our Chief Commercial Officer, has done an outstanding job rebuilding this commercial team and field team around solution selling. So that when we walk into a transplant center, we are focused on what are their challenges for the year, what are their goals and how can we help support them have success, and that is driving the sale of the Patient and Digital Solutions.

Previously, the company had teams split between testing and digital. They weren't selling together. And so you lost some of that synergy. And when Jessica came in, she really turned that around, and you can see now the acceleration of that digital and patient solutions. Collectively, in those businesses, we see a lot of demand for our MedActionPlan product, which is a patient discharge planning tool and medication therapy management tool. We see a lot of interest in our XynQAPI platform, which is our quality reporting tool that has been updated to include the IOTA calculation so that centers can see in real time where they are in terms of their IOTA scores. So on the digital side, those are driving.

And then on the pharmacy side, we have a very elegant solution where our pharmacy is a transplant-focused pharmacy. So we understand the issues that these patients go through with their transplant immune suppression meds, and that's attractive to these centers, especially as they use more medically complex organs. And so we're seeing that growth. On the product side, we continue to benefit from this transition toward NGS for HLA typing away from PCR. And that's a global transition that we're leading. We're the market leader in that space. We've expanded the number of countries that we sell in around the globe.

And then in the U.S. market, we continue to innovate by launching products like AlloSeq Tx11 with greater resolution in that matching process. And then I talked a little bit on the call about our goal of launching what we call AlloSeq Nano, which is a nanopore sequencing platform. So we're continuing to innovate in that business, and that's what's driving the lab products business forward.

Okay. I appreciate all that color. And then if I could, just one on the balance sheet. I think you ended the year just over $200 million in cash. You bought back close to $90 million in stock last year. Can you just talk to us about capital allocation priorities, how you sort of weigh potential tuck-in M&A versus continued share buybacks for 2026?

It's a great question, Andrew. I think first and foremost for us is growing our core business. right? So we continue to see opportunities to grow and where we do, we're going to invest in the core. And you see our sales and marketing spend increasing throughout the year. And we feel like we've invested significantly in that space, which gave us the freedom to go ahead and buy back some shares at a lower share price. Obviously, we're going to be opportunistic around M&A when we see something that fits within the CareDx portfolio and our strategy. Right now, we're very focused though on AlloHeme and our cell therapy pipeline as our core area of investment and capital allocation.

Your next question comes from the line of Bill Bonello of Craig-Hallum.

Congratulations, I think, Keith, on assuming more responsibility. So question on the $7.5 million LCD impact. You walked it through in detail in Q2. But can you just remind us again, does that $7.5 million assume that AlloMap Heart is essentially no longer reimbursed as part of HeartCare, so that piece of the draft policy?

Yes. Thanks for the question, Bill. The $7.5 million is a half year impact of what I laid out as the first scenario in the Q2 call, which is the LCD is implemented as it is written today, the draft LCD. And that LCD contemplated there being a 12 time point bundle for heart transplant and then, that bundle would pay for only one test per date of service. And so whether that's AlloSure or AlloMap, I think, is TBD. But in general, when we model that, we assumed we were going to get paid for 12 time points for 1 product and which is what the current draft LCD states. And in that scenario, where today, we do 5 to 6 heart cares on average in the first year, that impact was a wash more or less.

Okay. That's -- just as a follow-up, if that proposal is -- you've got the SHORE data out there that you've presented to them. If that piece of the policy is changed, should we be thinking about the LCD as potentially being actually a net positive for you guys?

Well, I think all that we know today, Bill, is what's in the draft, right? And so we provided that scenario around what would happen if the LCD is finalized as it's written today. We're not going to provide guidance around any modifications to that draft. I think we have a strong sense of how 2026 is going to play out, and we included that $7.5 million headwind in our '26 guidance.

Yes. I mean the news from the last call to this call is that we thought it would be done in Q1. If now, we think it's going to be done in the middle of the year, but it's -- we don't have any new what would happen in the LCD. But we will have calls with you. This will happen as John goes on vacation on the 4th of July. So you can just expect it will happen right before the 4th of July.

Perfect. And then just the last thing the EBITDA guide, does that also assume a similar level of onetime cash bonus? Or was that a sort of once-and-done thing?

No, that was a one and done. So it does not include any onetime cash bonus in lieu of equity in 2026.

But continue to expect sort of a lower level of stock compensation expense? Or how should we think about that?

Yes. I think that we are targeting to have somewhere around a 4% or sub 4% burn rate for 2026. And so yes, a slightly lower stock compensation expense than what we experienced in '25.

Your next question comes from the line of Andrew Cooper of Raymond James.

A lot already asked. So maybe first, starting with some of the growth. I mean, I know you mentioned surveillance and for-cause growth contributing to the number here in 4Q. But could you give a little bit of the magnitude of how much sort of surveillance uptick or reuptake you're seeing relative to penetration in that f4-cause space or additional adoption in that cause space?

Yes. Thanks for the question, Andrew, and for joining the call. The growth has been relatively distributed between the 2 categories. I think that there has been a significant amount of literature, including the Nature Medicine paper from 2024, talking about different f-cause uses of AlloSure in kidney transplantation. And the result of that has been a reemergence of its use in surveillance testing, but also in the fore-cause setting where you see the use of AlloSure in cases where, for example, a patient has undergone rejection already and you're trying to dial in the immune suppression dosage and see those cell-free levels come down. So we're seeing consistent growth in utilization in both settings. Of course, surveillance was important for 2025 and contributed to the growth for the year, but we do see fore-cause testing increasing.

Okay. Helpful. And then want to ask one on the EBITDA trajectory. Even if we add back sort of the $4 million in onetime spend out of that $10 million investment you talked about, it looks like the midpoint of the guide is a little bit shy of 10% EBITDA margins. John, I think I heard you say the targets from the Investor Day back in '24 are still on the table. So how do we think about that ramp to sort of 20% EBITDA margin targets for '27 that you've talked about given the '24 starting -- sorry, '26 starting point?

Let me take this? Yes, sure. So the way we're thinking about this internally, and this -- obviously, there's a lot of moving pieces in running a company and whether or not you got to get ahead with that with investment or not having investment. We feel like we're making a few strategic investments that make the top line much stickier. So we think that's worth doing. But we think about the gross profit dollars and that 50% of the incremental dollars should go down to the investors. So if you're at $440 million and you're going to grow 15% for next year, half of that growth drops down to EBITDA is how we think about like a disciplined growth profile. Does that make sense?

Yes. I will stop there.

Yes. So I mean we still believe we'll get to 20%. Like Veracyte is at like 28% business we ran prior to coming over here. And we feel like long term, we will get significantly -- we'll get to 20% in this business. I mean we have a recurring testing model. We have 250 transplant centers, but getting the sales force, we've accelerated the investment in the sales force higher than the volume growth, but that is not a long-term trend. We are not going to be doing that year after year. in that business. I see it as more as a stepwise function as we get the commercial organization aligned in the messaging around marketing, et cetera.

Your next question comes from the line of Mason Carrico of Stephens Inc.

Could you give some color on what the testing volume guide baked in around incremental kidney protocol adoption this year? I realize there's a lag between when they're established and kind of when the benefit shows up in volumes. But do you think you can hit your testing volume target based on what's in place today? Are additional protocols upside? Just any color there would be great.

Yes. Thanks, Mason. I think we build the guide around how much growth potential we see in the marketplace. Even within centers that did implement protocols during 2025, many of them don't always utilize the testing at the extent that they had intended to in the protocol, like patients miss blood draws or something doesn't get ordered, et cetera. And so there's still substantial growth that can occur in those existing centers that have already adopted a protocol. That's number one.

Number two, as I shared previously, we continue to see cause testing growing. And so we anticipate that, that trend will continue through 2026. And then third, yes, we believe there are more protocols to go get -- we have many centers that we still are talking to about implementing their protocols and how they want to go about doing that in particular populations in their center. And so we will continue that effort. And all of that in aggregate gives us confidence in our guide on volume for the year that there is that opportunity to go get.

Got it. And maybe somewhat of a follow-up to that. Could you give us an idea of what percentage of total kidney transplants could be attributed to centers that have protocols in place today?

I don't have that number off the top of my head, Mason. We'd have to go back and look into that.

Your final question comes from the line of Yi Chen of H.C. Wainwright & Co.

This is Eduardo on for Yi. I guess a general question based on the evolution of the use of GLP-1s and the growing clinical evidence that they could have a meaningful impact on reducing kidney disease. I'm curious what your thoughts are and its impact on the evolution of kidney transplants because you get some tailwind, right, because you could also lower BMIs and the eligibility of donors, but maybe some headwinds in the reduction of kidney disease in general and then therefore, the need for transplant. I'm curious how you see that market moving forward.

Yes. Thanks, Eduardo. It's an interesting question, and we agree with your assessment generally. Although I would say that there are upwards of 400,000 patients in the U.S. on dialysis today that could get a kidney transplant and then 100,000 on the transplant waitlist. So we don't see any diminishing demand for kidney transplantation as a function of GLP-1s anytime in the near future. But certainly, as you point out, GLP-1s are advantageous to driving more transplantation.

As you know or may know, one of the key kind of metrics around determining whether a recipient is eligible for undergoing a transplant is their BMI. And so if a patient can't get their BMI down to an acceptable level where in historic studies, it's shown that they do better post transplant, then they're ineligible to get that organ. And so there are many patients today on the transplant wait list that are actively being put on GLP-1s to prep them for the transplant procedure.

And our understanding, my understanding from the clinicians I've talked to that this has been a favorable development for those populations and that they're going to continue to use those therapies, especially as newer, more effective therapies come out for those individuals. So thanks for the question.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and thank you for standing by. At this time, I would like to welcome everyone to the CareDx Investor Webinar Call. [Operator Instructions]

I would now like to turn the conference over to Natasha Wagner. You may begin.

Hello, and thank you for joining us. I'm Natasha Wagner, VP of Corporate Communications at CareDx. Welcome to our investor webcast focused on AlloHeme, advancing AI-enabled relapse monitoring in AML and MDS post-cell therapy, positioning CareDx to lead in precision medicine for cell therapy.

I'd like to start today's call by reminding everyone of our safe harbor statement. These slides and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements regarding the future business plans and objectives, potential growth opportunities, competitive position, industry environment and potential market opportunities of CareDx, together with its subsidiaries, CareDx or the company, CareDx's ability to generate revenue and increase the commercial success of its current and future testing services, products and patients and digital solutions and the outcome or success of CareDx's clinical trial collaborations and registry studies are forward-looking statements.

The words believe, may, will, potentially, estimate, continue, anticipate, intend, could, should, would, project, plan, target, contemplate, predict, expect and the negative and plural forms of these words and similar expressions are intended to identify that CareDx has based these forward-looking statements on its own estimates and assumptions and its current expectations and projections about future events.

These forward-looking statements are based upon information that is currently available to CareDx and its current expectations speak only as of the date hereof and are subject to numerous risks and uncertainties, all of which are difficult to predict and many of which are beyond CareDx's control that could cause actual results to differ materially from those projected, including general, economic and market factors and global economic and marketplace uncertainties among others discussed in CareDx's filings with the Securities and Exchange Commission, the SEC, including, but not limited to, the quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2025, filed by CareDx with the SEC on November 4, 2025, and other reports that CareDx has filed with the SEC.

In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. CareDx undertakes no obligation to update publicly or revise any forward-looking statements for any reason after the date of this presentation or to conform these statements to actual results or to changes in CareDx's expectations.

This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.

Certain data in this presentation was obtained from various external sources and neither the company nor its affiliates, advisers or representatives has verified such data with independent sources. Accordingly, neither the company nor any of its affiliates, advisers or representatives makes any representations as to the accuracy or completeness of that data or undertakes any obligation to update such data after the date of this presentation. Such data involves risks and uncertainties and is subject to change based on various factors.

The trademarks included herein are the property of the owners thereof and are used for the reference purposes only. Such use should not be construed as an endorsement of the products or services of the company.

Today, we have on the line John Hanna, President and CEO of CareDx; Marica Grskovic, Chief Strategy Officer of CareDx; Dr. Jeffrey Teuteberg, Chief Medical Officer of CareDx; and Dr. Ran Reshef, Professor of Medicine at Columbia University and Director of Translational Research, Blood and Marrow Transplantation Program at Herbert Irving Comprehensive Cancer Center.

And now I would like to hand it off to John Hanna. John?

Thank you, Natasha. Good morning. I'm John Hanna, President and CEO of CareDx. I'd like to take a moment to remind you that everything we do here at CareDx is centered around our vision of a world where every patient receives the transplant they need to live longer, fuller lives. And to achieve that vision, we are on a mission as an organization to create life-changing solutions that enable transplant patients to thrive. This mission is what has led to the development of AlloHeme, an innovative solution that extends our long-standing leadership in transplant care.

For more than 25 years, CareDx has invested in technology innovations to transform the care of transplant patients globally. Today, we support the transplant ecosystem with end-to-end solutions at scale. We provide IVD kits that enable over 200,000 HLA typing and matching tests annually, helping match deceased donor organs to transplant recipients and stem cell donors to recipients.

70% of U.S. transplant centers use at least one CareDx software solution, including organ waitlist management software, quality reporting software and remote patient monitoring. We fill over 150,000 prescriptions each year for patients managing lifelong immunosuppression therapy, and we have performed more than 1 million molecular assays to monitor for organ rejection for transplant patients. This depth and longitudinal engagement with transplant patients is what differentiates CareDx and it's the foundation for everything we're building next.

CareDx is the market leader in solid organ transplantation. We provide IVD kits, software and patient solutions and testing services across the full care continuum of solid organ transplant, spanning kidney, liver, heart, lung and multi-organ transplants. Today, we support more than 200 transplant centers across the U.S., giving us unmatched reach and long-standing clinical relationships. And importantly, solid organ transplantation continues to be a growth market, driven by catalysts such as federal policy to incentivize more transplantation and technological advances such as machine perfusion.

Our long-standing commitment to innovation in solid organ transplantation is what has allowed us to capture over 70% of the service to market. In October 2024, at our Investor Day, we introduced our development road map we call Transplant Plus, which is our path to extending beyond solid organ transplant.

Today, we're holding this investor call to further share more about the next exciting frontier for CareDx in our Transplant Plus portfolio, cell therapy. Cell therapy is an ideal indication for CareDx's first transplant plus indication. First, these are high severity of disease patients with hematologic malignancies where our diagnostics can help inform life or death treatment decisions. They are high-cost patients who typically have undergone cancer treatment and cell therapy procedures that have cost the health system over $1 million. The patients are managed by a highly specialized and concentrated group of cell transplant and cell therapy centers typically at academic medical centers. And fourth, it is a space where we are first to market and can take a leading role in shaping the diagnostic paradigm.

When we talk about cell therapy, there are 2 primary therapies we are focused on for patients with hematologic malignancies. The first on the left is allogeneic hematopoietic cell transplants, or HCT. In allogeneic HCT, stem cells come from a donor. Patients receive -- first receive chemotherapy to eradicate the cancer and then donor stem cells are infused or to reestablish the bone marrow and immune system function. This approach is typically used in settings where patients are at higher risk of disease relapse and clinicians are aiming for a durable disease response.

The second on the right is chimeric antigen receptor T cells or CAR-T cell therapies. In this setting, the patient's own T cells are collected and genetically modified to express chimeric antigen receptor, which allows them to bind to and attack cancer cells. The patient is treated with chemotherapy to eliminate disease cells, then the CAR-T is reinfused in the patient.

Our Transplant Plus focus in cell therapy is on the patient populations that follow a solid organ transplant-like longitudinal care pathway at highly specialized cell transplant and cell therapy centers. These patients are typically followed closely over time, particularly in the first year with structured surveillance to assess post-treatment status and identify complications, including cancer relapse. This type of concentrated and specialized market where patients are monitored longitudinally is where CareDx has deep experience, supporting health systems across the patient journey, coordinating specialized care and enabling clinically actionable disease monitoring solutions.

Since the introduction of the first commercial CAR in 2017, the cell therapy market has grown significantly with an estimated 20,000 patients undergoing allogeneic HCT and CAR-T therapy in 2025. The pie chart on the left shows that when you look at the cell therapy market through the lens of the number of patients diagnosed annually with the type of hematologic malignancy that may be eligible for an allogeneic HCT or CAR-T, it is over half of the overall annual incidence of roughly 190,000 heme malignancies today.

While not all of these eligible patients are treated with cell therapy today, the growth in the use of cell therapies is rapidly outpacing the growth in these heme malignancies. For example, AML diagnoses are growing at approximately 2% annually, whereas on the right, we show that allogeneic HCT, typically used in AML, is forecasted to grow at more than 4x that rate at a 9% CAGR from 2024 through 2028. CAR-T use is expanding at an exceptional pace as new innovations continue to press the field ahead and is expected to grow at 30% over the same period.

The combination of durable disease incidence growth and rapidly increasing adoption for cell therapy is an important part of why we're focused here. And we're also focused here for a practical reason. These are settings where clinicians need an accurate monitoring solution and where either molecular insight may help inform clinical decision-making, including the potential to identify relapse risk sooner than conventional clinical assessment. By focusing on allogeneic HCT and CAR-T as our initial Transplant Plus solutions, CareDx is poised to be the molecular diagnostic solutions leader in a rapidly advancing field.

Within our focus scope in cell therapy, AML remains one of the clearest unmet needs because despite the importance of relapse surveillance, there still is not a universally applicable commercial molecular approach used broadly across patients. That's why our focus centers on AML and MDS in the post-transplant setting, where relapse risk remains a major concern and clinicians are seeking a reliable, longitudinal monitoring solution to guide care.

In other hematologic diseases like DLBCL, ALL and multiple myeloma, molecular tools for relapse detection are already established or emerging, and we're not trying to compete in those MRD approaches. The distinction is simple. Clonal proliferation tracking and high-sensitivity variant detection are forms of tumor monitoring. They detect and track tumor-derived signals. What we've built is innovative and that we're measuring something different. Our Transplant Plus solutions are aimed at cell therapy treatment monitoring in a tumor-naive way that are universally applicable to all patients. So we view our solutions as complementary, not competitive. Tumor monitoring answers one set of questions and what we're developing is intended to help answer a different set of questions that matter in longitudinal post cell therapy care and therapy management.

Bottom line, we're addressing a clear gap in AML and MDS relapse surveillance post-transplant and entering areas that are not served today by other players. And our focus on cell therapy enabled us to service a targeted market of approximately 200 bone marrow transplant centers that perform HCT and CAR-T infusions in the U.S.

For the rest of our discussion today, we are going to focus on AlloHeme, our novel monitoring solution designed for cancer relapse prediction following allogeneic HCT in AML and MDS patients. Cancer relapse after allogeneic HCT is the #1 cause of patient mortality and monitoring needs to be improved in order to allow clinicians to monitor more frequently and act rapidly to treat these patients that have relapse. That's why AlloHeme is built around a peripheral blood sample. From that blood sample, we use next-generation sequencing to measure micro changes in cell populations over time. We're looking at how the cellular populations change longitudinally in a way that can signal increasing relapse risk. Those measurements are then analyzed through a proprietary AI-derived algorithm that incorporates longitudinal data from whole blood and cell lineages to help predict relapse.

And the output is intentionally straightforward and clinically usable, a positive or negative result similar to commonly used MRD solutions. That's what makes AlloHeme distinct, blood-based, longitudinal and designed specifically for the post-allogeneic HCT monitoring reality in AML and MDS patients.

And now I would like to turn the call over to Dr. Jeff Teuteberg, our Chief Medical Officer at CareDx. Jeff?

Thank you, John. So today, I'm going to briefly walk you through the AML and MDS patient journey, and I will then review the role of relapse surveillance.

After diagnosis and risk assessment, most patients start treatment with induction therapy. Induction is the initial phase of chemotherapy intended to reduce disease burden and when possible, achieve remission.

The next step is often consolidation of therapy. Consolidation is additional chemotherapy or other therapeutics given after induction to reduce risk of relapse by addressing residual disease that may not be detectable through routine clinical assessment. However, if a patient is considered at high risk for recurrence, they may be considered for an allogeneic stem cell transplant. This procedure is performed in specialized transplant programs operating under rigorous quality and safety standards and where they are monitored closely for recurrence, which I will detail on the next slide.

The cadence for relapse monitoring is intensive, and it's driven by a simple reality. Relapse is the primary clinical concern in this population and the leading cause of post-transplant mortality. In his latest report, the Center for International Blood and Marrow Transplant Research found a 2-year post-transplant relapse rate of 30% to 35% in AML and 35% to 45% in MDS. In the early months after transplant, follow-up is frequent and structured. This surveillance consists of regular clinic visits paired with routine blood testing. Clinicians are monitoring for multiple issues at once, engraftment and recovery, graft-versus-host disease, infectious complications and most importantly, signs of relapse. Even beyond the first year post-transplant, relapse surveillance continues.

Importantly, despite frequent clinic visits and blood work, the most informative assessments for relapse, a bone marrow biopsy is performed much less often because it is invasive, uncomfortable and logistically burdensome. Thus in practice, a physician may only perform a couple of bone marrow biopsies in the first year, the timing of which varies by center and by patient. Hence, there is a critical gap in post-transplant surveillance. The assessments performed most frequently, clinical visits and routine blood work are not sensitive to early relapse. And the most sensitive test of bone marrow biopsy is performed infrequently. So even though these patients are monitored intensively, there is a clear unmet need for molecular surveillance that is noninvasive, easy to obtain and to incorporate into real-world follow-up and provides earlier insight into relapse risk. Importantly, surveillance doesn't stop at 1 year and doesn't always occur at the transplanting center, thus surveillance often needs to be extended to shared care sites.

Despite the advances in allogeneic transplantation, relapse remains the leading cause of death, accounting for nearly 50% of the mortality beyond 100 days post transplant. The ideal surveillance for relapse would need to meet 3 criteria. It needs to be sensitive, noninvasive and universal.

Let's start with sensitivity. Existing tools for relapse monitoring after allogeneic transplant have meaningful constraints. Chimerism testing, for example, short tandem repeat PCR is widely used and can be valuable for certain purposes, but it is not designed for sensitive relapse detection. MRD approaches searching for cancer variants with multiparameter flow cytometry can be powerful, but in practice is often limited by sensitivity due to the tumor heterogeneity of AML and MDS. In contrast, AlloHeme is highly sensitive for the detection of relapse.

Next, MRD testing often requires a bone marrow biopsy to reach the level of sensitivity required for detection of relapse. However, AlloHeme provides a noninvasive alternative via a simple blood draw.

Finally, MRD approaches can be highly effective, but only when a predefined target such as a specific mutation is known. Without that target, the test simply can't be used to monitor for relapse in a patient. That's why when we say universal, we mean non-bespoke, an approach that can be applied broadly across patients without requiring a specific mutation or tumor signature to be identified upfront. With AlloHeme, knowledge of pre-identified mutations or tumor-specific markers are not needed. Thus, AlloHeme meets all 3 of these criterias. It is sensitive, noninvasive and universal. While existing tools clearly have a role, we strongly believe there is a need for a highly sensitive, noninvasive and universally applicable surveillance test that can be broadly applied across post-transplant patients, and that is what AlloHeme is designed to provide.

I would now like to introduce Dr. Ran Reshef, Professor of Medicine and Director of Translational Research for the Blood and Marrow Transplantation Program at the Herbert Irving Comprehensive Cancer Center at Columbia University. Dr. Reshef is a co-PI on the ACROBAT trial and presented the findings of the study this past week at the 2026 Tandem Meetings of the American Society for Transplantation and Cellular Therapy and the Center for International Blood and Marrow Transplant Research. Thank you, Dr. Reshef.

Thanks, Jeff. Thanks for the introduction, and thanks for having me here today. It gives me great pride to share some of the results that I presented this past weekend at the Tandem Meetings, which is the Annual Meeting of the Association for Transplant and Cell Therapy in combination with the Center for International Blood and Marrow Transplant Research. So it is the primary international conference for the transplant community.

So we have presented some results from the ACROBAT study in the past, but those were interim and preliminary results. And at this point, I presented the 2-year analysis of the AlloHeme test, which, as Jeff alluded to, is a peripheral blood-based test that enables robust relapse surveillance after hematopoietic stem cell transplantation. And I presented these data on behalf of the 11 centers that participate in this study, and there was a high degree of interest. I think the room was packed and it was certainly one of the more populated sessions in the conference this past weekend.

So just to reiterate a little bit and maybe expand on what Jeff had already mentioned, we do allogeneic transplants with a curative intent in a broad range of hematologic malignancies and in fact, even in several types of non-malignant conditions, including sickle cell disease, thalassemia, congenital immunodeficiencies and a variety of other diseases. It is a procedure that's done with a curative intent. So there's no good substitute for it for most patients with acute leukemia or MDS, which are the 2 primary indications for this procedure. Other approaches are not considered curative. Even with all of the overwhelming number of targeted therapies and immunotherapies that have emerged, we don't have very good curative options within those newly approved and novel therapies. So allogeneic transplant remains to be the primary tool if we want to achieve cures.

This also explains the growth trends that Jeff had shown with more than 10,000 allogeneic transplants performed in the U.S. annually, which translates into approximately 60,000 allogeneic transplants worldwide. So it is very commonly used and continues to grow over time.

Survival after allogeneic transplant remains limited. So the most recent numbers that I'm familiar with show that it's about a 62% five-year overall survival rate after an allogeneic transplant, if you look across all patients and all diseases, which means that nearly more than 1/3 of the patients ultimately die after transplant. And when you look at the primary causes of death, you could see this in the left side of the screen here. Nearly 50% of the deaths after the first 100 days post transplant are from disease relapse. We have made tremendous progress in this field in controlling some of the other complications such as graft-versus-host disease, where we have much better therapies and prophylactic strategies than we had in the past.

We've made tremendous progress in controlling infectious complications. We have very good monitoring assays to detect very, very low levels of viral reactivations. We have better prophylactic medications for viruses and bacteria nowadays. So we've limited a lot of the morbidity and mortality from non-relapse complications, but have not moved the needle significantly and everything that has to do with relapse of the primary disease.

Most of the maintenance studies after transplant have not been successful. Some of the interventions are very aggressive, such as donor lymphocyte infusions and potentially use of CAR-T cells, which is largely experimental still in the post-transplant setting. So we need better surveillance methods. And we've had surveillance methods to detect early relapse for many, many years. But those are primarily focused on an assay that Jeff mentioned, which is the short tandem repeat PCR, which is a way to measure the percentage of donor versus recipient cells in a sample, whether that's a bone marrow sample or a peripheral blood sample. It is a method that's kind of borrowed from identity testing, from police work, from law and order types of scenaries where you need to identify small amounts of DNA. So it's basically the same type of assay, but it has very limited sensitivity.

It is accessible, although it is more sensitive in bone marrow, so it does require bone marrow biopsies to be done frequently in these patients. And again, the level of sensitivity is really insufficient. And this table says 1% to 5%. I think 1% is really a very conservative way to describe the sensitivity. It is often much lower than 1% or much higher than 1%. So -- and additional methods to do early surveillance for relapse look at specific disease parameters. So when we look at flow cytometry in diseases like AML and MDS, it is extremely limited because each patient has a slightly different phenotype. It is a highly operator-dependent, disease-specific and patient-specific assay that has not been standardized for AML or MDS. There's some level of standardization in ALL that's now considered appropriate for use in clinical trials even as an FDA endpoint. But for the majority of patients undergoing transplant, this is not a useful assay.

When we look at other assays such as qPCR or next-generation sequencing, you usually need to know the patient's underlying mutation panel and these assays are much more sensitive in the bone marrow and still have some limitations of sensitivity and are very difficult to standardize. So these are mostly assays that have been developed per institution and are applied specifically to very small patient populations and have not been standardized across the board.

So we certainly need a better assay, and this is what AlloHeme basically is. So AlloHeme is next-generation sequencing-based and it uses a large array of single nucleotide polymorphism, several hundreds of them across all somatic chromosomes. So it does not require any prior knowledge of the tumor characteristics. And it, in fact, can even be used in nonmalignant diseases because it is simply a better and more accurate measurement of the proportion of cells coming from the donor versus the recipient in a sample.

And what you can see here is the study that we designed together with CareDx in order to study this new assay, which is called AlloHeme. This is a prospective observational study that was conducted in 11 centers and has enrolled 285 patients across 11 sites between 2021 and 2023, with really the design targeted to develop the AI-based algorithm to come up with a final version of the assay and then assess its performance by monitoring these patients over time and seeing whether we're able to detect relapse prior to that actually happening and showing any clinical signs, symptoms or other lab abnormalities.

You can see that at this point, we have all patients in the study completing 2 years of follow-up, which makes it a very mature and robust data set. The trial enrolled patients with AML, MDS and ALL, as you can see, and the testing schedule that was built into the study shows that it's biweekly in the first 3 months, then monthly in the next 3 months and then quarterly testing from month 9 to month 24. At that point, many patients after allogeneic transplant are already doing well and not coming to their transplant center frequently. So the study tailored the testing schedule to that situation.

Here, you could see the patient disposition. So ultimately, out of 227 subjects enrolled in AML and MDS cohort, which is what I presented at the conference, we ended up with 198 subjects in the analytical cohort. So a number of patients were excluded from this presentation, and that's, first of all, the ALL cohort, given that ultimately, the enrollment on that cohort was relatively small and the number of events, meaning the number of relapses that occurred on that cohort was also fairly small.

ALL is a disease where I would have to say we probably use a little bit less transplant today than we used to as opposed to AML and MDS, where the use of transplant has been dramatically growing simply because we've been transplanting older and sicker individuals with the current transplant techniques. You can also see that several patients were excluded simply because of early events or early withdrawals or a couple of patients with some issues of study protocol compliance, simply not having sufficient number of sequential tests to analyze. So in these 198 patients, you could see that we have observed 40 relapses and 118 patients completed 2 years of follow-up. And we've had, unfortunately, of course, as we're used to in the field of transplant, several patients who died from non-relapsed mortality.

So the primary analysis that we've done here is what's called the landmark analysis, meaning that at the 2 months milestone, 3 months milestone and 6 months milestone, we assess the predictive power of the test. And as you could see here in the red curves, patients who tested AlloHeme positive at or before each one of these time points had a dramatically higher risk of relapse compared to those who tested negative. And these are the type of hazard ratios that you would like to see in a highly predictive assay running between 5.9 and even 11.9 when you get to the 6 months milestone, meaning that the predictive power of a positive test is extremely good and it's an excellent marker of impending relapse.

That translated also into a maybe more important parameter for the transplanters, which is relapse-free survival. So we include survival here as part of a composite endpoint. And you can see that the performance of the assay is excellent when looking at this outcome as well with hazard ratios between 4.1 and 6.2 depending on the specific landmark and with very high degree of statistical significance.

So this is a diagnostic assay. So the main purpose of the study was to evaluate its assay performance, which is the most important thing for future users. And when we look at this overall assay performance over a 2-year period, you can see that the area under the ROC curve is 0.89 with a sensitivity of 85% and specificity of 92%, which is truly exquisite for this type of assay. And especially that we're looking at the peripheral blood assay, so we're sparing these patients that need to undergo sequential bone marrow biopsies by getting this level of sensitivity and specificity simply from a blood test. And most critically, for a monitoring tool, the negative predictive value that you can see here is 95%. So it gives us and the patients the very high confidence that a negative test truly reflects a deep remission with a very low chance of relapse.

You can see that we have a few false negatives and a few false positives, 6 false negatives and 9 false positives specifically. We took a deeper dive into those to see what was the true -- the potential cause for false negativity or false positivity. And that was a very interesting dissection of the data. Among the 6 false negatives, we found that 4 cases simply missed the last AlloHeme test before relapse. So the issue was more protocol compliance with sending the blood test in for a variety of reasons. These things are sometimes missed. And as you can see here, it's also listed in the bullets. We didn't have perfect compliance with the testing schedule. We used a median of 11 tests per patient versus the recommended 14 tests in the protocol, meaning that just by better compliance and adherence to the testing schedule, you might be able to eliminate some of the false negative tests.

Even more interestingly, the false positive, the 9 false positives showed 3 patients who actually received some sort of therapy to mitigate the risk for relapse without knowing that there is a positive AlloHeme test because the results were not reported to the centers. But there was some other reason for investigators at these institutions taking care of these patients to do something like donor lymphocyte infusion or starting maintenance therapy perhaps because of a perception that patients had high-risk disease. So these are not true -- these are not really false positives because something was done to these patients to potentially mitigate the risk of relapse and bring it down.

In addition to that, we did find one patient who had a relapse beyond the 24-month milestone. So that was not captured by the study as a relapse, but it's certainly not a false positive. It is a true positive. So some of the false negatives and false positives were truly a result of certain elements of study design, using a 24-month cutoff, whereas in the real world, we're looking for a longer chance of relapse potentially in some of these patients. And of course, some degree of protocol compliance and compliance with a study, blood sampling schedule.

What's very important is, of course, a lead time. It's not useful to have a test that is detecting relapse at the same time that relapse occurs. But as you could see here in the swimmers plot, we have a median of 41 days before clinical relapse when AlloHeme gives us a positive signal. And that's a sufficient time in order to use an intervention, either start some sort of therapy, which can be a hypomethylating agent. It could be a donor lymphocyte infusion. It could be early withdrawal of immune suppression. We have multiple types of strategies that can address a low level of relapse. And we simply, with current strategies, miss that opportunity because we don't have tests that are sensitive enough.

And you can also see that in some patients, most likely in the MDS patients, which -- when relapses may not relapse in such a floored and aggressive way, we sometimes get several months and up to 1 year ahead of relapse kind of a heads up that gives us sufficient time to do something about it.

Some tables with numbers that I'm not going to go through in a very high level of detail, but we've looked -- this was a large enough study to look across subgroups, and you could see that whether it's AML or MDS, whether the donor was related or unrelated, whether it was someone with positive MRD prior to transplant or not and various other transplant variables, the area under the curve and the levels of sensitivity and specificity are very similar across the board. This can be used as a universal test agnostic to other various transplant variables.

Then we went ahead to do a very important comparison of how does this compare with what we currently do in the real world. And for this, the team at CareDx actually went back to the centers and got them to report what is their real-world use of chimerism assays, which would be the current standard of care prior to implementing an AlloHeme test. And as you can see here, the real-world assays get a sensitivity of about 60% as opposed to the 85% sensitivity of AlloHeme. And the median lead time is actually 0, which means that most patients actually have their first positive assay by the current standard of care at the same time that they already have clinical clear evidence of relapse. So basically no ability to predict this ahead of time.

Since the real-world chimerism is done in various institutions by different methods, some people use the STR-PCR like we do at Columbia, but some institutions have developed other assays. So this was a pretty heterogeneous mix of testing. We also tried to do a more consistent modeling of what would this look like if we, let's say, use an STR-PCR that has a 1% cutoff, just using the AlloHeme test, but instead of using its actual sensitivity, which is 0.02%, just modeling it at a 1% cutoff. And you can see here again that the sensitivity goes down to 53%. So it is very similar or even worse than what the real-world data shows us for the current standard of care.

In addition to that, we also realized that in the real world, people don't just use chimerism tests. People use bone marrow biopsies to look at flow cytometry and use a variety of molecular testing, which I've alluded to their limitations earlier. They're mostly patient-specific and nonstandardized and institution-specific. And you can see that with all of these tests, as reported by the sites, we have a very low sensitivity and that's pretty typical for what we actually see in the real world. Like we kind of know that these tests are not very sensitive ahead of the actual relapse. They are most of the time positive simply when it's already clear that the patient has an active relapsed disease.

One more thing to mention is that these tests primarily rely or almost exclusively rely on bone marrow aspirates, which we can't really do on a weekly basis or every other week. It's a very, very high burden for patients. And I think the next example kind of shows how we could certainly spare patient's frequent bone marrow biopsy. So this is just one case study from the ACROBAT trial, a 77-year-old female with high-risk AML. At that age, almost any AML is considered adverse-risk with very high-risk characteristics, including mutations in TP53, multiple monosomy and abnormal 17p, which is another TP53 locus. And when this patient came into transplant, she was in complete remission, but was already known to be -- to have minimal detectable disease. She had a transplant from a male matched unrelated donor with a non-myeloablative conditioning regimen, which is the only regimen we can use at this age group, and she had a GVHD prophylaxis that is building on post-transplant cyclophosphamide, which has become the standard -- the most standard GvHD prophylaxis regimen nowadays.

You can see here if we go from left to right over time, that transplant is considered day 0. And usually, we do the first assessment of minimal disease or in any one of those assays around day 30. In this case, it was day 32. And we usually do a bone marrow biopsy. So it's a fairly aggressive and invasive procedure for a patient who just spent most likely a full month in the hospital to get a transplant. And you can see that this patient was negative by the standard STR-PCR, the standard chimerism assay and also by flow cytometry, was initially also negative by AlloHeme at day 43, but then AlloHeme became positive on day 54. At the same time, peripheral blood testing on this patient was negative. And since we don't do bone marrow biopsies too frequently, this patient only had her next bone marrow biopsy around day 99.

And at that point, the relapse was already obvious. She had 8% blasts on immunohistochemistry. And very interestingly, the standard chimerism by STR-PCR was unable to detect this relapse even when it was clearly positive by morphology and immunohistochemistry, whereas the AlloHeme test gave this patient a 45 days lead time prior to this active relapse. And this is really just a randomly picked example. We have multiple other examples on the ACROBAT study on how we were able to detect relapse earlier if we had the AlloHeme test available.

So just to conclude, AlloHeme is a blood-based robust tool for early relapse detection. We now have 2-year follow-up of this ACROBAT study, where we have very high accuracy, an area under the curve of 89% and a 95% negative predictive value. It gives us a median lead time of 41 days before clinical relapse, and it clearly outperforms any of the other MRD methods that are currently used as a standard of care. It is a simple and effective strategy to identify high-risk patients. I would even have to say that the turnaround time that CareDx are designing to launch is going to be much shorter since the current tests done at institutions, for example, STR-PCR at Columbia takes more than a week since economically, you have to batch these samples. And when you do them centrally in the lab like CareDx, you're expecting -- we will be expecting a turnaround time of about 3 days.

So I'm very happy that I was able to share these results with you here today on this call, and I will turn this back over to Jeff.

Thank you, Dr. Reshef, for your time this morning and walking us through the results of the ACROBAT trial and sharing your perspectives on the data.

I'm going to turn back now to the importance of AlloHeme for CareDx. And I want to reiterate that allogeneic HCT is a growing market, and it's growing for several structural reasons. The underlying AML and MDS patient population is increasing, driven in part by demographic trends such as an aging population. At the same time, we're seeing more guideline-driven referrals as molecular risk stratification becomes more routine in clinical decision-making and helps identify patients who may benefit from allogeneic transplantation, similar to the case study that Dr. Reshef walked us through.

Donor availability has also broadened over time, including greater use of options such as haploidentical and matched unrelated donors, and HCT transplant protocols have continued to evolve to support older and more medically complex patients. And overall, outcomes have improved with advances in graft-versus-host disease management and supportive care for infections and other complications, which has helped reduce non-relapse mortality and improve survivorship in allogeneic HCT patients.

Based on this growth trajectory, we estimate the TAM for AlloHeme to be approximately $1 billion. When we model the eligible population, we apply HCT eligibility assumptions, approximately 70% for AML patients and 45% for MDS based on guideline-informed recommendations and external references. Those assumptions are intended to represent a framework for sizing purposes and is what we show here on the chart for 2030 incidences across AML and MDS and the applied HCT eligibility.

Now real-world HCT use varies meaningfully based on patient factors, clinical practice patterns and center-specific dynamics. So this TAM size is the opportunity, not a statement about current clinical practice.

Our testing cadence assumptions are grounded in the ACROBAT study design, and our pricing assumptions are informed by analogous testing models in related transplant and molecular monitoring settings. The key takeaway is this, as the allogeneic HCT market expands and post-transplant survivorship increases, the monitored population grows with it, driving a rising need for a sensitive and noninvasive post-transplant monitoring tool and that expanding need is exactly what supports our investment in AlloHeme and the broader Transplant Plus opportunity.

As we look ahead, we're excited to be entering a very attractive market. And today, I want to outline our path to commercialization and revenue contribution for AlloHeme as a part of our broader portfolio. In 2026, our focus is on laying the critical foundation for launch. That begins with publication of the ACROBAT study, which we view as an essential step before entering the market. In parallel, we will complete our CLIA readiness activities, including analytical verification of the assay so that it can be run within our CLIA-certified laboratory. Together, those steps position us for an early 2027 commercial launch alongside submission for Medicare and private payer coverage.

Looking further ahead, we anticipate and estimate that coverage decisions will begin in 2028. As that milestone is reached, we expect to see AlloHeme begin to contribute to revenue growth while we continue to drive adoption and build additional clinical and real-world evidence over time.

Importantly, our plan is to serve the cell therapy and allogeneic HCT market in much the same way we've successfully served the solid organ transplant market through a set of integrated solutions and wraparound services. That includes HLA typing of donor cells and recipients, software tools and patient solutions such as our pharmacy and molecular relapse monitoring, all designed to fit naturally into cell therapy transplant center workflows.

This is not a newly serviced market for CareDx. We already support cell therapy patients today through our lab products business with HLA typing. Our MedActionPlan, discharge planning software, is broadly used in the cell therapy market today. And we have other platforms such as Ottr Cellular, our EMR solution for bone marrow centers, that has already been adopted in several centers across the U.S. What this creates is a familiar model for transplant centers, a coordinated set of services that support adoption, streamlined care delivery and enhance both provider and patient experience as CareDx begins to service the cell therapy market.

I want to thank you all very much for attending today's webcast on our AlloHeme assay and our Transplant Plus portfolio more broadly. I would now like to ask the operator to open up the line for questions. Operator?

[Operator Instructions] Your first question comes from the line of Andrew Brackmann with William Blair.

This was a really, really informative session here. So as we sort of think about AlloHeme fitting in into the current tool belt of tests that are used here, forgive me if I'm wrong, but it seems that there's really not one standardized tool here for monitoring patients. So is the goal for AlloHeme over time to be that standardized tool? And if so, what more data is going to be needed to drive that conversion in your view? Is that clinical utility or outcome studies? And just sort of how do we think about the investments that you're putting in there?

Yes. Thanks so much for the question, Andrew. And yes, I think you're spot on there as Dr. Reshef presented. There is a great deal of variability in the tools that are used today to monitor for relapse detection post allogeneic HCT. And so our vision is a centralized lab services product out of our CLIA lab that can provide that standardization in monitoring for relapse.

And then I think to your question around what drives full adoption in the marketplace, it's certainly clinical utility evidence. So today, we presented clinical validation data where clinicians were blinded to the AlloHeme test result. And as we introduce this product into the market, I anticipate that clinician researchers, both in single centers and in multicenter studies will publish on their experience of using AlloHeme to detect relapse earlier and then intervene on that relapse and the change or improvement in health outcomes that it delivers.

Next question comes from the line of Bill Bonello with Craig-Hallum.

I guess sort of a take on where Andrew was going, but with a little more specificity. So is the thinking here that if AlloHeme is being used, bone marrow testing will not be needed at all? Or should we think of this as more complementary to bone marrow or sort of physician choice? And then I guess the other piece of that is, was there any -- you showed real-world experience on bone marrow. Did the patients in this study also get bone marrow testing via NGS? And how did the accuracy of AlloHeme compare to the bone marrow?

Yes. Thanks for the question, Bill. Dr. Reshef, if you're comfortable answering that, I'd gladly defer to you.

Yes, absolutely. So I do think that this level of performance of the assay is ready for clinical use and replacing current strategies. So also to respond to Andrew's previous question a little bit, most institutions still use STR-PCR. The other ones are more kind of specific institutionally driven and mostly rely on specific tumor mutations, which are very difficult to assess in a standardized manner or apply broadly.

So the STR-PCR current chimerism assay are very poor. We do know that they correlate with relapse. I've published about this more than 12 or 13 years ago. There are multiple publications, but they don't have this level of sensitivity or specificity and they don't give you proper lead time. They have a huge amount of false negativities and false positivities. I think that the assay already is showing adequate sensitivity and specificity to predict relapse. To launch a test and make it clinically useful, you don't necessarily need to create an intervention that would reverse the fate of these patients. That would be the next step. And that will need to be studied prospectively and ideally either by sponsored trials from companies developing specific medications for this setting or by academic institutions who will examine what -- how their own strategies perform.

The approach to relapse can be therapeutic if a patient had already relapsed that fails 90% of the time. It can be prophylactic without knowing if the patient is going to relapse, which places the patient at risk. And it can be preemptive. And that's really the novel thing about using AlloHeme. We don't have currently an assay that would allow us to examine preemptive strategies by risk stratifying patients to who is at the highest risk of relapse. And I think this is kind of the perfect niche for this assay.

Next question comes from the line of Brandon Couillard with Wells Fargo.

What's the optimal sort of testing frequency here? Should we interpret the ACROBAT study as establishing some type of protocol? I think the trial was supposed to be standardized on 14 tests maybe in 1 year and on average, maybe patients actually got 11. Just help us kind of understand where you see that shaking out and what's contemplated in that $1 billion TAM number? And then how should we expect the reimbursement process to go? Would it crosswalk to existing solid organ test? What's the comparable there?

Thanks, Andrew (sic) [ Brandon ]. I appreciate the question. Yes, we believe that the 14 test protocol is the appropriate protocol for use of the product, given the rate of relapse and the standard of care in terms of how these patients are monitored in clinic. And as Dr. Reshef shared, there's a perception among the PIs of the study that had all sites follow that protocol with 14 tests instead of the average of 11 that the performance characteristics may have improved for the assay. So when we estimate the TAM size, we did include the 14 time points.

From a coverage and pricing perspective, I think this product follows all other similar products. There is an established coverage process for technology assessment in the Medicare population and as well with private payers that we'll submit through. And ultimately, when this assay is on market, we will apply and obtain a code for it and go through the standard pricing process for the code.

Next question comes from the line of Tom DeBourcy with Nephron Research.

I just want to go back for a second to -- this may not be the right term, but I guess, the tumor-naive nature of the test. And I was just curious, at each time point, are you detecting a certain number, hundreds, thousands, whatever SNPs? Or I guess, at the first time point, do you use that information as, I guess, incremental knowledge in the AI algorithm around, I guess, detecting the patient's cancer? So just, I guess, a question more around, I guess, how the testing itself works?

Yes. Thanks, Tom. I'm going to ask Marica to take this one.

Sure. So the assay works by different -- by using hundreds of SNPs, as we already said. And the algorithm does rely on longitudinal patient testing results. So it's really a combination of molecular biology and AI-derived algorithm that gives you that high sensitivity that ultimately will be patient-specific, but it's tumor naive, as you pointed out.

And there are no further questions at this time. That concludes today's call. Thank you all for joining, and you may now disconnect.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the CareDx Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]

I'd now like to turn the conference over to Tina Jacobsen, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. Thank you for joining us today. Earlier today, CareDx released financial results for the third quarter 2025 ending September 30, 2025. The result is currently available on the company's website at www.caredx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer; and Nathan Smith, 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. Any 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 are included in our filings with the Securities and Exchange Commission.

The information provided in this conference call speaks only to the live broadcast today, November 4, 2025. 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 a 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 comparable GAAP financial measures may be found in today's earnings release, which is posted to our website.

I will now turn the call over to John.

Thank you, Tina, and welcome to everyone joining today's call. We had a strong third quarter on many fronts, including record volume and record revenue in testing services, patient and digital solutions and our lab products businesses. Our strategy of solution selling is working.

At CareDx, our mission is clear: to create life-changing solutions that enable transplant patients to thrive. We are uniquely positioned as the only company serving transplant patients from end to end, delivering innovative diagnostics, digital tools and patient support that span the entire transplant journey. Our strategy is rooted in putting patients and their care teams at the center of everything we do, and you'll see this reflected in our product innovations, operational excellence and the way we partner with transplant centers worldwide.

At the core of this strategy lies an exceptional team. The true driving force behind our success. To further strengthen the outstanding group here at CareDx and advance our mission, I was delighted to announce in October the appointment of Suresh Gunasekaran, President and CEO of UCSF Health to our Board of Directors. With over 2 decades of experience leading major academic medical centers, including some of the largest solid organ and bone marrow transplant programs in the United States, Suresh brings to the organization the voice of our customers, offering invaluable perspectives as we advance our strategy to become the solutions provider to transplant centers.

In addition, I was also pleased to welcome last month Dr. Jeff Teuteberg, our new Chief Medical Officer. Jeff is one of the most forward-thinking clinicians in transplantation. He is internationally recognized for his track record of clinical innovation, research and patient advocacy and is joining us from Stanford University where he was section chief of heart failure, cardiac transplant and mechanical circulatory support since 2017. Jeff has held prominent roles in the American Society of Transplantation and as the President of ISHLT or the International Society of Heart and Lung Transplant. His deep experience will be instrumental as we strive to establish noninvasive molecular testing as the standard of care in solid organ transplantation and launch our next generation of precision medicine assays in stem cell transplant.

The expertise and vision of these leaders reinforce our commitment to innovation in both new products and how we go to market and engage our customers.

Now on to the third quarter results. Total revenue of $100.1 million grew 21% year-over-year. Adjusted EBITDA was $15.3 million, more than double Q3 last year. We repurchased an additional 2 million shares during the quarter at an average price of $12.87. Year-to-date, we have repurchased approximately 9% of shares outstanding. Today, we are raising 2025 revenue guidance to $372 million to $376 million, a reflection of our strong performance in the third quarter. We are also raising adjusted EBITDA guidance to $35 million to $39 million. Nathan will provide additional details on the guide in his prepared remarks.

In Testing Services, revenue was $72.2 million for the third quarter, an increase of 19% year-over-year. We delivered approximately 50,300 tests in the third quarter, up 13% year-over-year, with growth across all 3 organs: heart, kidney and lung. I personally visited 20 transplant centers in the third quarter. I spoke with the clinicians and transplant program administrators to understand how our existing and future solutions can help improve the care of their patients. Their feedback was clear. Our team is highly engaged, consistently puts patients first and is executing on the right priorities.

I also spent time with our local commercial teams, gaining valuable insights into where our solution selling strategy is working and where we can further improve. These conversations reinforce my confidence in our strategy and our people and left me inspired and optimistic about the significant growth opportunities ahead.

This week at the American Society of Nephrology meeting, or ASN, we are launching HistoMap Kidney, a breakthrough tissue-based molecular test that exemplifies our commitment to end-to-end transplant care. By integrating advanced histopathology with molecular insights, we're empowering clinicians to make more precise and timely decisions for their patients. This is just one example of how CareDx is bridging the gap between diagnostics and patient outcomes, reinforcing our leadership in delivering comprehensive solutions across the transplant continuum. HistoMap Kidney is built on the Banff human organ transplant gene set, a research tool adopted by transplant researchers globally and leverages gene expression profiling for deeper insights into immune activity and rejection phenotypes to inform clinical decision-making.

We built HistoMap Kidney to address a critical unmet need in transplant care. If a patient's kidney function declines after transplant, clinicians need clarity on the type of rejection. With HistoMap Kidney, doctors can use the original biopsy tissue to obtain a precise molecular readout, confirming the subtyping rejection from an FFPE sample. By providing objective actionable data, HistoMap Kidney helps reduce uncertainty in biopsy interpretation, gives clinicians and patients greater confidence in their diagnosis and next steps. It will be available starting in early '26 in a clinical study and then for commercial use later in the year.

Also at ASN Kidney Week, CareDx Technologies will be showcased in 5 abstracts covering AlloSure and our AI-derived integrated risk assessment algorithm, AlloSure Plus. The abstracts will present new insights, including biomarker interpretation in the early post-transplant period, including in the setting of delayed graft function and new evidence supporting the use of AlloSure in combination with clinical data to predict antibody-mediated rejection.

Further, AlloSure Kidney will be featured in new analyses from the KOAR registry, demonstrating its ability to predict long-term outcomes and in research demonstrating the use of AlloSure Kidney to facilitate the transition to immune suppression monotherapy in kidney transplant patients. Belatacept monotherapy is preferred by clinicians because of its demonstrated improved clinical efficacy and tolerability as compared to traditional regimens. This emerging evidence suggests AlloSure can be utilized to optimize immune suppression strategies and improve long-term outcomes for transplant recipients.

In addition, an ASN abstract from Henry Ford Hospital in Detroit addresses whether donor kidney volume impacts AlloSure levels or 1-year graft function. This is particularly relevant in pediatric transplantation where size mismatch between donor and recipient has been a concern. The study found that kidney size did not significantly affect AlloSure levels or graft function at 1 year, reinforcing the reliability of our noninvasive monitoring tools across a broad range of donor and recipient characteristics. These new data reflect our commitment to advanced transplant care through rigorous science and innovation. We are proud to see our technologies validated across diverse clinical settings in patient populations and look forward to continuing to deliver meaningful solutions that improve transplant outcomes.

Keeping with our commitment to evidence generation, I want to highlight a major milestone in heart transplantation. Just 2 weeks ago, the second study from the SHORE registry was published in the Journal of the American College of Cardiology Heart Failure. This is the largest prospective analysis of antibody-mediated rejection, or AMR, in heart transplantation ever published. The SHORE study evaluated over 2,200 heart transplant patients across 59 U.S. centers, analyzing nearly 25,000 biopsies and almost 9,000 paired AlloSure heart samples. This is truly a landmark data set.

What's most exciting is that SHORE validates HeartCare, which brings together AlloMap and AlloSure Heart as a noninvasive, clinically proven approach to heart transplant surveillance and context-driven decision-making. The data show that AlloSure Heart results are highly specific for diagnosing AMR. Elevated AlloSure Heart levels were strongly associated with biopsy-proven AMR and higher values correlated with more severe rejection. And when AlloSure is modestly elevated, a positive AlloMap can help identify those at risk for acute cellular rejection. These findings demonstrate that HeartCare can optimize biopsy utilization and clinical decision-making in heart transplant care.

Lastly, on the topic of evidence generation, I'm particularly proud of our leadership in response to the draft LCD policy for molecular testing for solid organ allograft rejection that was published in July. Our team delivered a comprehensive evidence-based comment letter that champions patient access to personalized care. We submitted the letter to policymakers ahead of the public comment period closed on August 31, and it remains accessible at caredx.com/lcdcommentletter.

We consider the draft policy to be a significant step forward in affirming coverage for surveillance testing without a tie to protocol biopsy. However, we noted that limits placed on surveillance testing conflict with clinical guidelines and restrict clinician decision-making in scenarios where patients have elevated risk of rejection.

Specialty societies, key opinion leaders, advocacy groups, policymakers and patient stakeholders also submitted comment letters emphasizing concerns with the proposed limits. We urge policymakers to maintain coverage for combination molecular tests such as AlloMap Heart and AlloSure Heart. Our comments provided the latest evidence in clinical data, which demonstrates the testing with AlloMap Heart and AlloSure Heart, identifies rejection with greater accuracy than gene expression testing or donor-derived cell-free DNA testing alone, resulting in improved patient outcomes.

We continue to anticipate that the draft policy will be finalized in early 2026. On our earnings call last quarter, we commented on the likelihood of potential outcomes and the associated financial impacts and those expectations are unchanged today. We plan to provide an update on our long-range planned financial assumptions once the policy has been finalized. We remain committed to supporting the transplant community and have not and do not anticipate to observe any business impact as the draft policy comments are being evaluated and the policy is being finalized.

Moving on to our initiatives to drive operational excellence. Placing our customer at the center of everything we do has driven us to improve our enterprise infrastructure and business processes to operate more efficiently. We continue to push forward with the launch of our EPIC instance to make it easier for healthcare providers to order CareDx testing and receive test results. We have 8 EPIC Aura transplant center connection projects in process now and are officially live at Boston Children's, the U.S.'s leading pediatric heart transplant program. Feedback from that pilot implementation has been exceptional. Because our EPIC order set is tailored to transplant centers, it makes the center's workflow simple and fast. Since going live at Boston Children's, AlloSure Plus results are now available directly through EPIC Aura. Medical records are received automatically with each order and the center has seen a 20% reduction in order turnaround time and a 60% reduction in specimen holds. This is a great example of how we're making the clinician and patient experience better, not just faster.

We continue to expect roughly 10% of our total volume will be serviced through EPIC Aura integrations by year-end, and roughly 50% of total volume will be serviced through EPIC Aura integrations by year-end 2026.

This quarter, we also made remarkable progress on revenue cycle management. Building on last year's foundational updates to the team and workflows, we've now begun automating key RCM processes with AI, streamlining claims submission, accelerating appeals and reducing manual intervention across the board. The investments are already delivering measurable results. This isn't just operational fine-tuning. This is a strategic move to unlock operational efficiency to drive margin expansion and support scalable growth as our testing volumes increase.

In the third quarter, we achieved improvements across all of our RCM KPIs compared to our benchmark periods, including an over 200% improvement in total appeals volume, a 60% improvement in claims submission time, a 600 basis point improvement in overall 0 pays, and a 1,300 basis point reduction in claims rejection rate. We believe these wins are key leading indicators for the growth and predictability of average revenue per test and are beginning to emerge in our financial statements. Cash collections in the third quarter were exceptional with collections accelerating to 124% of testing services revenue. Nathan will provide additional color on our expectations for revenue per test in his prepared remarks.

I'll now turn to Patient and Digital Solutions, which includes our transplant pharmacy, software tools and remote patient monitoring services. In the third quarter, we reported revenue of approximately $15.4 million, representing 30% growth compared to last year. Our solution selling strategy is driving strong results. By delivering integrated Patient and Digital Solutions, we're unlocking new growth opportunities for testing services, deepening customer loyalty and strengthening our brand equity. For example, at the largest kidney program and Pediatric Institute in Georgia, we have become the pharmacy of choice for the kidney transplant program to help more efficiently and effectively manage their post-transplant patients as they ramped up their kidney transplant volume and initiated an AlloSure Kidney surveillance protocol.

Next, in lab products, which includes PCR kits for rapid disease donor HLA typing, NGS kits for transplant recipient HLA typing globally, and IVD monitoring assays for solid organ and stem cell transplant recipients outside the U.S., revenue of $12.5 million was up 22% year-over-year. We just returned from ASHI, the American Society of Histocompatibility and Immunogenetics Annual Conference, where we showcased CareDx's continued investment in creating life-changing solutions. This year at ASHI, we launched AlloSeq Tx11, our next-generation HLA typing solution with enhanced Class II coverage and expanded non-HLA markers to support broader transplant organ profiling. AlloSeq Tx11 is designed for flexibility working with low-quality samples preventing allele dropouts and reducing the need for retesting. We also introduced Score 7.0, our modernized analysis software for QType, built for scalability and regulatory alignment and supporting future ABO typing and IVDR compliance.

In addition, we announced that AlloSeq TX and QType have received IVDR certification in the European Union, underscoring our commitment to delivering high-quality regulatory compliance solutions for transplant centers worldwide. Our well-attended user group meeting entitled ABO Histocompatibility in transplantation, current status, unmet needs and future directions, featured leading experts from the Brigham and Women's Hospital, LifeLink Foundation and the University of Alberta. The session addressed the clinical relevance of ABO antibodies in transplant rejection, genotype versus phenotype discrepancies and the importance of advancing ABO blood typing for improved patient outcomes.

Additionally, we announced our validation of a rapid ABO genotyping assay, which demonstrated 100% concordance with established methods and enables faster, more accurate blood group determination by integrating ABO and HLA genotyping into a single workflow we're helping transplant centers expand donor eligibility and streamline organ allocation, delivering real-world impact for patients and providers. This is the degree of innovation that defines CareDx and supports our confidence in continued strong lab products growth.

Before I hand it over to Nathan, I want to reflect on our recent progress. Each achievement this quarter is a direct result of our strategy in action and underscores the importance of keeping patient needs at the center of every decision. Our progress isn't just measured in numbers, but in real-world impact we're having on transplant patients, their families and the clinicians who care for them. The growth we're seeing is not just the result of isolated initiatives, but of a cohesive approach where each decision and investment is anchored in delivering meaningful value for patients and their care teams. These growth drivers clearly demonstrate how our investments in innovation, optimizing our go-to-market approach, building and amplifying evidence generation and enhancing operational excellence through RCM progress and EPIC Aura integration are translating into meaningful impacts for patients, providers and the broader transplant community. They serve as proof points that our strategy is working and that we are building lasting value for all stakeholders, including our shareholders.

Our leadership team has a proven track record of disciplined capital allocation and operational execution. We are confident that these strategic investments will yield a strong return, fueling high-quality, durable growth for years to come. There is no shortage of work left to be done, but I'm proud of our execution so far this year and anticipate continued progress.

Now I will turn the call over to Nathan to discuss our detailed financial results and guidance. This is Nathan's first call as our CFO of CareDx. I'm thrilled to have him on the team and look forward to his leadership as we execute on our strategic and financial goals. Nathan?

Thank you, John, and good afternoon, everyone. It's an honor to be here, and I'm grateful for the opportunity to contribute to the value creation that's ahead for CareDx.

Starting with financial highlights and key performance indicators for the third quarter compared to the prior year quarter, total revenue of $100.1 million increased 21% with all 3 business segments generating record quarterly revenue. Testing Services revenue of $72.2 million increased 19% on reported test volume of approximately 50,300, an increase of 13%. Revenue per test of 1,436 increased 5%. Revenue per test includes $5.9 million in revenue recognized from cash collections in excess of receivables on historical claims. This positive benefit was driven by the success of our revenue cycle management function that improved our cash collections on those historical claims. We will be using the revenue per test metric that minimizes the back and forth of adjustments and better reflects the fundamentals of our business.

Continuing on Patient and Digital Solutions revenue of $15.4 million, increased 30% due to further adoption of the CareDx pharmacy as the pharmacy of choice for transplant patients. Lab product revenue of $12.5 million increased 22% driven by our distributed NGS transplant test kits and our PCR-based rapid HLA typing kits. Gross profit of $70.9 million reached a high watermark, increasing 190 basis points to 70.9%. This improvement was driven principally by top line performance and input cost discipline. Our non-GAAP operating expenses of $57.9 million declined to 58% of revenue, down from 63% of revenue. Adjusted EBITDA of $15.3 million increased significantly driven by revenue growth and operating leverage.

Now turning to cash. We collected $119 million this quarter. Our RCM team achieved record collections of approximately $90 million from testing services. Those record collections drove $19 million in sequential reduction in our accounts receivable and a significant 38% improvement in DSOs, which improved from 71 to 44 days. That performance underscores the transformative impact of our investments to accelerate claim collection in RCM. We closed the third quarter with $194.2 million in cash and cash equivalents, following a $25.6 million share repurchase during the period. We exited the quarter with 51.4 million shares outstanding and no debt.

I'll turn next to guidance. With the strong performance in the third quarter, we now expect full year 2025 revenue of $372 million to $376 million. We also expect full year non-GAAP gross margins to be approximately 70%.

Turning to adjusted EBITDA. We are raising full year guidance range to $35 million to $39 million compared to the previous range of $29 million to $33 million to reflect the strong operating results in the third quarter. Updated full year guidance implies fourth quarter revenue of $101 million to $105 million. That assumes fourth quarter testing volume will range between 52,000 to 54,000 tests. The strong momentum of RCM wins and cash collections are driving greater predictability and increasing our confidence in continued average revenue per test improvement. In October, we had the highest cash collections for testing services in the company's history. In Q4 2025, we expect to recognize revenue per test of $1,400 to $1,420, inclusive of $4 million to $6 million of collections in excess of receivables. We are taking a prudent approach to guidance on this metric to allow for potential variations in payer mix, coverage and contracts.

Now turning to the other revenue lines. We expect Patient and Digital revenue of $15 million to $16 million, and lab products revenue of $12 million to $12.5 million. We expect fourth quarter non-GAAP gross margins of approximately 70%. And finally, we anticipate fourth quarter adjusted EBITDA to range between $10 million to $14 million.

To conclude my remarks, the momentum of the business at CareDx is robust. We are delivering a unique combination of top line expansion, margin improvement and OpEx management. Results in Q3 are a testament to the execution and our ability to scale efficiently while controlling costs.

I'll now turn the time back over to John.

Thanks, Nathan. In closing, everything we've discussed today from our strategic execution to our operational progress reflects our unwavering commitment to putting patients first as the only transplant company offering end-to-end care. The growth we're delivering is a direct result of strategies shaped by that North Star, and the impact is evident in the lives we touch, the partnerships we build and the innovations we bring to the transplant community. We remain focused on advancing the standard of care, deepening our relationships with clinicians and centers and driving sustainable value for all our stakeholders.

With the right strategy, the right team and a clear sense of purpose, we are well positioned to lead the field and realize the full potential of CareDx.

And with that, I'd like to open the call for questions.

[Operator Instructions] Our first question will come from the line of Andrew Brackmann with William Blair.

This is Maggie Boeye on for Andrew. You highlighted some of the wins on the revenue cycle management side of things and then some of the impact that has already shown up here both for the third and fourth quarter thus far. How should we be thinking about the durability of those impacts on ASPs moving forward? And then as you sort of think about additional products which might exist, how do we think about the runway for further ASP lift from revenue cycle management initiatives moving forward?

Yes, I'll take the first part of that and the durability of ASPs. Yes, as I mentioned in my prepared remarks, third quarter was a record quarter for us in terms of cash collections, and we saw that same momentum going into fourth quarter in October. Just over the last 6 months, we have seen an overall increase in our base revenue per test increased by 5%. So what gives me confidence in the durability of that ASP is the strong cash collections on the historical claims that will ultimately increase that base ASP that we'll be recognizing on future claims. These RCM victories increase the predictability of our revenues per test over time, we see that momentum continuing through the fourth quarter and into 2026.

Great. And then maybe just one on the EPIC Aura integration. I appreciate the comments so far on how it's been trending with your first pilot in Boston. But just -- how do we think about the rollout of the integration for the other accounts you have planned, both for 2025 and 2026? We've seen a lot of labs thus far have the major tailwind from these integrations. So anything you can talk about there about what you're expecting?

Yes. Thanks for the question, Maggie. I'm going to ask Keith to fill that one.

Thanks, Maggie. We have about 150 active discussions going on with hospitals and transplant centers across the country right now, and we anticipate going live at about 40 centers in '26. We agree there's typically a 10% uplift in volume once you go live, and we are tracking 3 major KPIs on each integration as we go, and we expect to sort of report and show that next year as we do these. But right now, we don't have enough implementations to give you real world evidence as to what that uplift is, but we were really excited to see that we had a 20% reduction in order turnaround time, which is really important to the centers.

We're the leading transplant solid organ testing company in the United States and really globally with the fastest turnaround time. So I was glad to see that we could further improve that. And then we had a 60% reduction in specimen holds, which contributes to the turnaround time and the improvement in that. So all really, really good things for our relationships and what we think it will impact volumes going forward.

Our next question will come from the line of Mark Massaro with BTIG.

This is Vidyun on for Mark. Congrats on the nice quarter here. I just have a quick one. Were there any prior period collections in the quarter? Apologies if I missed it.

Yes. And Vidyun, thanks for joining us today. Yes, there were, as I mentioned in my prepared remarks, we had approximately $5.9 million in cash collections that exceeded our historical claims. It was a positive benefit.

Okay. Understood. And then just one follow-up on the ASP. I heard you on the Q4 ASP guide. Just should we be thinking about that kind of $1,400 level of the new floor moving forward? And just in terms of the remaining upside in ASP, what kind of framework we should be using to think about it? I think your denial rate is about 40% right now. So just where do you think this can go at peak?

Yes. Again, thank you, Vidyun, great questions there. So as I mentioned previously, the range that we guided to for fourth quarter is between $1,400 and $1,420 for our ASP, which you should be using in your models. Then as we think about the framework to be using, as we described, we're looking at this framework as a revenue per test. And so we're taking total revenue divided by total reported test, and that's the way we're looking at it because it removes the variability that we see in these out-of-period adjustments.

Our next question comes from the line of William Bonello with Craig-Hallum.

A couple of questions. I'm just going to take another crack at that because I just want to make sure. So I think what you're saying is what we calculate as the ASP or the revenue per test is the revenue per test going forward. That's how we should think about it. But then you use the language of cash collections exceeding historical claims. Historically, I think you talked about prior period collections, sort of beyond what you would normally expect. I'm just trying to understand you're calling out is consistent with what you've called out in the past. Or if you're looking at that call out in a slightly different way. And if you're sort of saying, look, going forward, we're not going to be giving that call out. Apologize, I'm just a little confused by it.

Yes. Thanks, Bill. It's John. Appreciate the question and the clarity. We're certainly going to call it out because we're going to be transparent. You can see it on the books. So we did have the $5.9 million in prior period revenue that we collected, but we -- as you know, when RCM function really starts cranking like we've got it going, we're going to collect this cash, which we view to be indicative of future period ASP. And so this quarter, we had cash collection that was 124% of our revenue that we booked in the quarter. And as those claims age into the accrual window, we're going to continue to see that ASP propped up. So we're pointing toward revenue per test as the metric to look at because it's more indicative of what you're going to see in future quarters from the company.

Yes. Okay. I think that makes sense. And I mean there's evidence on prior period adjustments, good guys and bad guys, right? So okay. So nothing unusual is the bottom line about the [ $500 million ] in this period.

That's correct.

Okay. That's helpful. And then just a different topic. I'm just curious, John or anybody if you have any sort of on the macro environment, if you have any thoughts on the overall trends we're seeing in transplant volume. Obviously, your volume growth is staying pretty strong, but the overall transplant volume seems to have really been low for a while now. And I know we don't see an immediate correlation to your volumes, but you would think at some point, if we don't see a recovery in transplant volume, that might influence the overall testing volumes. I'm just curious if you have thoughts on what's going on with the overall transplant demand or volume? And then just how you think about that in terms of your growth going forward?

Thanks, Bill. I appreciate the question. I'll first address our volumes, and then I'll talk about the macro. So as you know, this market is really just at the early innings of penetration. So we anticipate that our growth rates will continue to outpace the growth of the market overall for the foreseeable future. And when we think that that's not the case, we'll update you. But for right now, for as far as I can see, that's going to continue to be the scenario.

In general, in the macro environment, we've seen transplant volumes across all three solid organs remain relatively flat year-over-year, maybe like 1% up or down depending on the organ. We had anticipated that we would see some acceleration here in the back half of the year, particularly in kidney transplant volumes that has not yet materialized. And we speculate that some of that is a function of the media that has been attracted to this space and questioning the practices of some of the various entities that participate in the transplant market, and that has dampened the acceleration in kidney transplant volume that we would have expected from the IOTA program. Now remember, that program is a 6-year program. And so we've got a lot of runway to go on the impact of that policy given that we're only 1 quarter into a 6-year program. So I still have confidence that we're going to see growth in the kidney transplant numbers over the course of this next 2 to 3 years as this comes to play. But you're right, it has not materialized as we had anticipated it would starting here in the third quarter of '25.

Our next question will come from the line of Tycho Peterson with Jefferies.

Couple on the models. So on the guidance, you obviously narrowed guidance last quarter, now you're raising. Can you maybe just talk on for the fourth quarter, how much of that is price collections, volume, just some of the nuances behind the guidance raise? And then any preliminary thoughts on '26 you can share?

Yes, thanks, Tycho, and appreciate the question. Yes, let me clarify a little bit on that. As we guided to, let's talk about volume. We guided to fourth quarter volume of 52,000 to 54,000 with the midpoint being at 53,000. That would represent the midpoint approximately almost 17% increase year-over-year. On the price element, we guided a price of $1,400 to $1,420. That price is inclusive of $4 million to $6 million in the cash collection benefit that we anticipate to receive, and that's based upon our early read of collections in our record month in October. And then for the other line items, we guided towards both on product, pharmacy and digital. It leads us to our overall revenue of $100 million to $105 million with $103 million being the midpoint.

And on '26, any comments?

In terms of '26, we're going to defer any discussion on 2026 until after the clarity on the LCD.

Okay. And then on net price collections, any color on modality? How much traction is it for Kidney versus HeartCare versus Lung?

HeartCare is our mature product, and we get a higher reimbursement rate on HeartCare. But with our kidney product, that's our fastest-growing product now where we don't get as well reimbursed there. But we are seeing wins with our rev cycle management teams and improving those collection rates with kidney. So I would say that the mix -- the product reimbursement mix doesn't have a significant impact, maybe 1 or 2 to 3 percentage points on the total price.

Okay. And then I appreciate the comments earlier on IOTA. I guess, so how are you thinking about when that really does start to become more of a meaningful tailwind? I mean I know it's kind of over 5 years, but when do you think that really kicks in?

I mean our expectation was that it was going to kick in beginning this quarter. There has been, as I described, some media turmoil around transplantation, particularly as regards this concept of like jumping the wait list, right? So going down the wait list to find a better match for an organ. And the centers, I think, slowed down some of their aggressiveness in transplantation in that regard because of the media attention to the issue. I believe that we've seen the government clarify their policy on that topic with the transplant centers and the OPOs that should lighten up the conservatism and allow them to get back to driving kidney transplantation more aggressively like we anticipate as a result of the IOTA program getting started. So I think here, as we go into the fourth quarter, we'll see a pickup and then into '26 more materially.

Okay. Last one is just if the LCD goes through, is the $15 million surveillance headwind only for Medicare? Or is that all patients? And if it's just for Medicare, and that will require a protocol change for surveillance at the testing centers, I guess, what prevents all centers from adjusting to the new protocol?

Yes, that's a great question. Thanks for that one, Tycho. So we have not seen any impact on utilization of the testing as a result of the LCD and we did not model a change in clinician behavior and ordering. So the $15 million that we provided in the scenario that we described last quarter is really just a reimbursement headwind. We don't anticipate and we are not going to message to clinicians that they change their behavior around utilization of the product because as you can see in the LCD, there is room to change that policy. So if the evidence emerges that suggests that patients should get 7 tests in the first year in specific scenarios or in general because it improves patient outcomes, then that policy may be modified. At that point in time, we wouldn't want to have to go back and reconvince clinicians that they should do 7 tests instead of 4. So we continue to promote the utilization of the product as it was validated under the ARTS protocol, which is 7 tests in the first year and 4 in every subsequent year.

Our next question will come from the line of Mason Carrico with Stephens.

This is Harrison on for Mason. I wanted to start, if you could provide some insight into the delta in patient testing frequency at centers with protocols in place versus those without protocols. And for some of the centers that were early in readopting protocols has testing frequency trended consistently higher towards your established testing protocols.

Harrison, thanks for the question. Certainly, since we reinitiated promotion of kidney surveillance protocols and protocols testing in August of '24, we've seen growth in surveillance testing. And we commented last quarter that the growth in kidney surveillance or the growth in kidney volume in general was nearly 20% year-over-year and that's a function of the readoption of those surveillance protocols and utilization of the testing.

There are many, many centers more beyond just the 60 that have adopted formal protocols that utilize surveillance testing at their centers from CareDx, you have centers where perhaps there's 5 clinicians and 3 of them do kidney surveillance and 2 of them don't, right, and only order for cause. So there's heterogeneity in the use of the product even within some centers. And so we have seen significant growth in the use of AlloSure Kidney across the market, and we believe that the bulk of that growth is a result today of readoption and reinitiation of those 60 surveillance protocols that we called out last quarter.

Got it. And then I know we've done IOTA a couple of times on this call, but have you seen any notable shifts in center behaviors now that, that model is rolled out anything such as increase in compromised organs? Have you seen early signs of these centers leaning more into blood-based monitoring?

I think we saw in the first half of the year and second half of last year, increasing adoption of blood-based monitoring for surveillance in anticipation of the start of the IOTA program. But in the third quarter, we have not seen growth in transplant volume in kidney transplant as a result of IOTA program.

And to your comment around or your question around compromised organs, this gets to the point I made on the earlier question about these volumes. The criticism that has been made in the media is around going down the wait list and providing compromised organs to patients that are down list rather than giving it to the patient at the top of the list because it's not a great match, right? Or that patient is 35 years old and rather giving them a compromised organ that's only going to last 10 years, wait for a better organ that's going to last then 30 or 40 years, right? So the media on this topic, I think, has somewhat sensationalized an issue that is not really an issue because as you know, when you have these compromised organs, they often go to patients that otherwise would not get an organ. And that's where we anticipate the IOTA program is going to drive growth in transplantation and the need for more intensive surveillance monitoring of those compromised organs. We have not seen that come to fruition as of yet, albeit we're only three months into the initiation of this program.

Our next question will come from the line of Brandon Couillard with Wells Fargo.

Dave (sic) [ John ], I just want to clarify one more time the prior period impact. So if I think about this right, the $6 million in the third quarter and then the other $4 million to $6 million in the fourth quarter, that's incremental relative to the prior guidance, right, which you increased $4 million at the midpoint, but then you've got kind of $12 million of good guys that will be incremental versus the prior guide, correct?

Thanks, Brandon, for the question. We're including the prior period revenue in the guide. And so we raised the guide as a function of the collection of those -- that prior period revenue.

Okay. And John, we've talked about kind of the weaker market to liver transplant procedure volumes. Perhaps that's why you've sort of come in towards the lower end of your sequential volume growth expectations in 3Q and kind of the implied 4Q guidance. I just want to make sure it's more of a softer market as opposed to a competitive dynamic. Could you speak to that element?

Yes, absolutely. I don't think it's a competitive dynamic or a softer market. I think it was just a function of the seasonality in the business. Like we had a really exceptional July, and then we saw things just soften in August and September, and we expected a pickup and it didn't occur. And therefore, we're maybe like 0.5 point off of where we expected to end the quarter, 1 point or 0.5 point off from where we expected to end the quarter based on what we did in July from a volume perspective. But it's not a function of a competitive dynamic. If anything, we're gaining accounts and really gaining accounts that as I described previously, went away from surveillance testing to for cause testing and now have turned back on surveillance, which is driving our growth in the kidney business line, in particular, where we saw another quarter of nearly 20% growth year-over-year in our kidney business.

And then just one on the pipeline, the HistoMap Kidney launch next year. Do you expect that to be a revenue driver? Or what do you need to generate in terms of data to reimbursement for that product?

I do think it will -- thanks for the question, Andrew (sic) [ Brandon ]. I do think it will generate revenue for the company, albeit nowhere near AlloSure sized revenue because this is a test that will only be utilized in the setting of a patient having an elevated AlloSure, they get a biopsy and then they order the gene expression testing off of the biopsy. And so we think this is a really valuable product, particularly as we see new -- potentially new CD38, anti-CD38 therapies coming to market for antibody-mediated rejection and clinicians will want to know the subtype of rejection genomically of that patient from the tissue prior to treating the patient therapeutically. So we see a really interesting scenario there, kind of akin to comprehensive genomic profiling in the oncology market. So we're excited about HistoMap Kidney coming into play. We certainly will be striving to have that product reimbursed. And in the current LCD, there is a pathway for that, particularly in the language where it says in the setting of an inconclusive biopsy. And so that's our thinking today related to the product. But we'll provide guidance around 2026 revenues in our Q4 call likely.

Our next question will come from the line of Yi Chen with H.C. Wainwright.

This is Katie on for Yi. Could you quantify the impact the SHORE study had on test adoption or volume growth? And do you think that's a lasting impact on adoption trends? Or was that more of a short-term burn boost following that publication?

Thanks, Katie, for the question. The SHORE data has had a significant impact on the adoption of HeartCare in heart transplantation, dating back to April of 2024 at the ISHLT meeting where some of the initial data was first presented and we saw significant strength in our heart transplant business throughout the year 2024, and then coming into 2025. And so what you're seeing now is the product of multiple analyses of that data set in different contexts of use.

The first publication was focused on the utilization of biopsy and biopsy reduction. The second SHORE paper that was just published was focused on antibody-mediated rejection. And then the third SHORE paper, which has yet to be published, but the manuscript has been submitted is focused on long-term outcomes and graft survival and the prognosis of graft survival utilizing HeartCare. And we're very excited to see that publication in press hopefully before the end of the year.

And that will conclude our question-and-answer session and today's call. Thank you all for joining. You may now disconnect your lines.