Veracyte, Inc. Canaccord Genuity's 46th Annual Growth Conference

Yeah, happy to do so, and thanks for having us today, Kyle. Before doing so, I would like to refer you all to our safe harbor statement that will cover today's statements. That can be found on our investor relations webpage at www.veracyte.com. With that, happy to answer your question. The second quarter was a milestone quarter for us. We had anticipated two product launches during the quarter, which came to bear. We launched Prosigna for our breast cancer market, as well as MIBC for MRD with our TrueMRD tests. Those were quite exciting launches.

We also, in the second quarter, delivered $150 million of revenue and raised our guide accordingly and we're quite pleased with the quarter, albeit some of the dynamics in the quarter, which I know we'll get into, were a little bit different than expected, but all in all, a strong pricing story, and a very reasonable volume growth story. Additionally, we generated adjusted EBITDA of over 29% in the quarter, more than $40 million of cash. While not every single data point was absolutely perfect during the quarter, the vast majority were incredibly strong. There's some dynamics here and there that we'll get into, but overall, it was an incredibly solid quarter, specifically really showing the strength of our pipeline with multiple data readouts across the three products.

Yeah, happy to do so. Our philosophy is that a well-run molecular diagnostic company should be able to sustain an adjusted EBITDA of around 25%, and at the same time invest in long-term growth drivers, right? The profitability profile of this franchise is not to be at the expense of revenue growth. Revenue growth is, we're delivering 14%-16% revenue growth this year, so obviously very nice revenue growth. We are investing heavily in our long-term and medium-term growth drivers. That's why we don't flow more down, because effectively, we want to sustain this business for a long period of time, and that sustainability really comes through incremental investment in our Prosigna franchise, in our MRD franchise, in international, and a longer term duration. We believe that doing so gives us the best of both worlds.

We get the revenue growth from high ROIC projects that we're investing in, as well as delivering strong cash generation and profitability to shareholders and effectively sustaining ourselves. That philosophy came about quite from effectively when we joined the company back in 2021. We looked at all the different investments that the company was making across numerous different products, looked at the, effectively, the return on those investments, and we shut down a lot in our portfolio. We shut down, I think, five products in total. Those products were those that we didn't necessarily felt had the ROIC profile that was required. We doubled down on Decipher and Afirma, returned Afirma to growth. We invested in an MRD franchise, which effectively we bought in 2024.

We invested in the Prosigna product, and so we've really set ourselves up for sustaining this revenue growth profile and also quite the attractive profitability profile. It all came through active portfolio management and active strategic plan, which we deliver to the organization, to the board year in, year out, and have that high financial hurdle philosophy in doing so.

Yeah, happy to do so. Decipher was an acquisition of the company back in 2021 and has developed and sustained an amazing growth for many quarters and years. The second quarter was no different. You're absolutely right, Kyle, that we did dip to a 17% volume growth, and that was not totally unexpected because the comp was so challenging. The second and third quarter comp last year both were incredibly hard. We called that out on the first quarter call. We did miss by about 700 tests in the quarter, which is just over a day. That was primarily in the low-risk setting. The low-risk setting is about 20% of total volume, that is growing more mid-single digits, whereas the other 80% is growing 20%.

What changed there was in December of last year, the NCCN guidelines were updated to take genomic classifiers out of the low-risk recommendation. That has happened before, and we didn't necessarily see that impact, so we didn't expect to see an impact, but we did, obviously. We updated our volume guide for the year to be 1,000 tests lower in low risk only, which again, on a base of more than 120,000 is really not a huge deal, but I think given Decipher has been such a longstanding 20-plus percent grower, I think did dip below a magic number that folks were paying attention to. We do believe Decipher growth is very sustainable on a unit basis. We've always talked about it on a unit basis. We have consistently grown 20,000 tests plus or minus 1,000 each and every year.