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…

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…

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.