CareDx Inc (CDNA) 2025 Q4 法說會逐字稿

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 Hannah, 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 an isolation from GAAP measures. Our 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 am going to highlight some of our accomplishments from the fourth quarter and then detail our key growth drivers for 2026. Then I will 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 three 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 two 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 two months to five 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 declining by more than 60% over the course of 2025 through September, and overall zero-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 claims 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 2025, we delivered meaningful improvements in cash conversion and reimbursement reflecting stronger execution across billing, collections, and appeals.

I will 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 are 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 the 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 are about applying our platform to new high-impact markets.

This year, I am placing a significant emphasis on advancing our cell therapy pipeline, which we have referred to as Transplant+. 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+ 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 US 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. In patients with a positive AlloHeme result at six months post-transplant, there was 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, CLIA 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 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, seven 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 multi-site systems. Our pipeline for 2026 implementations is strong.

Importantly, we are 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 roughly 40% in login-related issues, which meaningfully improves the experience for clinicians. We are 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 two 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 are not Epic Aura 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 timeline 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 three 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 multi-omics 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 in transplant care, while reinforcing our commitment to advancing personalized medicine.

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 would 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 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 $14.80. 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 product 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 one-time 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 three-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 will 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 product 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 were 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 one-time 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 $2,841 to $2,753. As a result of that change and the anticipated impact of the LCD, we are modeling revenue per test to start at $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 period collections, with the majority occurring in the first quarter. In 2026, we expect our accrual window to age into the 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 margin 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-Ks. After several demanding years in executive finance leadership roles, I feel it is 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 have accomplished and believe the company is well positioned for the future. I am 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 would 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 seven 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 am proud of the progress we have made, not just in our financial performance, but in building the foundation for what comes next. We have 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 has 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 are 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 would like to open the call for questions. Operator?

(Operator Instructions) Brandon Couillard, Wells Fargo.

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

Thanks for the question, Brandon. We are not assuming transplant procedural volume increases in our guide. And we think it is too early to say right now what the lift from Epic Aura will be. We have seen nice growth in the handful of accounts that we have integrated with over the past month or two. 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 six months of integration under our belt with 10-plus sites, that we will be able to give more guidance on what we think the longer-term impact of those Epic integrations will be.

Okay, that's fair. And then I would like to just focus on the Patient and Digital Solutions business, which has really accelerated in the last two quarters. The guide consolidated it with products. So could you break out the Patient and Digital Solutions piece, sort of the sustainability of kind of 40% growth that we saw in the back half of 2025? And what does the margin profile of this business look like today given it's mostly software? Thanks.

Thank you. It's Keith. On the Patient and Digital Solutions, we are assuming we are going to grow the Product, Patient, and Digital Solutions collectively in the range of 8% to 12% next year. We are 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 will know more and have more to discuss around that.

The margin 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 I 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's great. That creates the variability on that side of the business.

Did that answer your question, Brandon?

Yes, sir.

Mark Massaro, BTIG.

This is Vivian on for Mark. Thanks for taking the questions. So I just have 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. Just wanted to check if there was anything else going on there. Thanks.

Vivian, that is a great question. Let me walk you through an illustrative example of how we model this at the midpoint of the guide, and I will 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. That goes between 220,000 and 228,000 tests.

So to Brandon's question, that will go between 10% to 14% annual growth in line on the high end of that range earlier in the year, obviously, as we try to predict what is going to happen over the next four quarters. 14% growth on the high end.

In terms of seasonality in testing volumes, we modeled a 1,000-test step-up from Q4 2025 to Q1 2026, a 2,000-test step-up in Q2. We have seasonality out; we are flat from Q2 to Q3, and a 2,000-test step-up in Q4. Remember, we had a 3,000 tests step-up in Q4 of last year. So we are a little bit light to that, as we are earlier in the year and we are 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 2026. 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, and 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 that is 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, and 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 businesses. So I would take last year's revenue, and I would take that range around 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. Did I answer your question?

Yes. That was perfect, and thank you much for the transparency, Keith.

I just have one follow-up. As far as the SHORE manuscript publication, I was just curious as far as any dialogue you have had with MolDX since then. I think it is our understanding that this was the prospective study that they were looking for. So if any nuggets to find there or any sense of where you might be in the review queue? Thanks.

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 publication was going to be in press 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 the last point of your question, we continue to anticipate that the LCD will be finalized sometime midyear. So we are 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 one year of the draft being issued, which was July 15, 2025. So we are somewhere in the June to July timeframe that the LCD will be finalized.

Tycho Peterson, Jefferies.

Maybe just on the Epic. I know you are kind of doing Epic Beaker in the lab, and you have 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 in reimbursement? Over what time frame do you think you will get there?

Internally, in terms of the reimbursement to last question first, Tycho -- first, thank you for your question. This is Keith. Internally, we are targeting -- the team is driven towards a three-year goal on the $2,000 test. Obviously higher than our guide, and that is what we are working on internally.

Part of doing this is making sure that all of 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 so you file for 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 is highly important that we integrate and streamline these operations so that can happen on a clean claim.

Got it.

Let me just expand on this. You did not ask this, Tycho, but we are 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 six lab information systems. So that is a lot to do.

And that is 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 am probably talking $6 million would be a recurring fee. So my bogey is about $6 million. There is $4 million that is cost to implement that software, to be less recurring.

And then Epic would tell you, A, you are going to get a lift on your volume, right, because it is easier to order and access the test, and therefore, you get that. B, you are going to get better information, have cleaner claims, and you are going to offset that expense. Right? So it does not 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 is how we are thinking about it in terms of the P&L and the contribution down the road.

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 are taking ahead of the commercial launch for AlloHeme next year?

Yes. Thanks for the question, Tycho. I mean, I think there is 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 two years in a row. But certainly, we have not 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 will start educating centers on that data through personal promotion.

And then we will 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 will get it submitted. And that gives us enough time to generate revenue and coverage in the 2028 timeframe.

So that is how I am thinking about the cascade of activities. Of course, in the background, we are 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 are 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 is 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.

Andrew Brackmann, 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 are seeing there? And as we sort of think about the halo effect for the rest of the business, how 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? Thanks.

Thanks, Andrew. That is a great question. I mean, I think that we have been gaining share of the addressable 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 were not 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 demand 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 immunosuppression meds, and that is attractive to these centers especially as they use more medically complex organs. And so we are seeing that growth.

On the product side, we continue to benefit from this transition toward NGS for HLA typing away from PCR, and that is a global transition that we are leading. We are the market leader in that space. We have expanded the number of countries that we sell in around the globe.

And then in the US 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 are continuing to innovate in that business, and that is what is driving the Lab Products business forward.

Okay. 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? Thanks.

Yes. It is a great question, Andrew. I think first and foremost for us is growing our core business, right? So we see -- we continue to see opportunities to grow, and where we do, we are going to in the core. And you see our sales and marketing spend increasing throughout the year. And we feel like we have 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 are going to be opportunistic around M&A when we see something that fits within the CareDx portfolio and our strategy. Right now, we are very focused, though, on AlloHeme and our cell therapy pipeline as our core area of investment and capital allocation.

Bill Bonello, Craig-Hallum.

Thanks a lot for taking my question. And 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?

Yeah. Thanks for the question, Bill. The $7,500,000 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 timepoint bundle for heart transplant, and then that bundle would pay for only one test per date of service.

And so whether that is AlloSure or AlloMap, I think, is TBD. But in general, when we model that, we assume we were going to get paid for 12 timepoints for one product, and which is what the current draft LCD states. And in that scenario, where today, we do five to six HeartCares on average in the first year, that impact was awash more or less.

Okay. So just as a follow-up, if that proposal is -- you have got the SHORE data out there that you have 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 is in the draft. Right? And so we provided that scenario around what would happen if the LCD is finalized as it is written today. We are 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 2026 guidance.

Yes. I mean, the news from the last call to this call is that we thought it would be done in Q1. Now, we think it is going to be done in the middle of the year. But we do not have any new information as to what would happen in the LCD. But we will have calls with you. This will happen as John goes on vacation on the July 4, so you can just expect it to happen right before the July 4.

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

No, that was a once and done, so it does not include any one-time cash bonus in lieu of equity in 2026.

Okay, but continue to expect sort of a lower level of staff compensation expense or how should we think about that?

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

Andrew Cooper, Raymond James.

Thanks for the question. 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 can you give a little bit of the magnitude of how much sort of surveillance uptick or reuptake you are seeing relative to penetration in that for-cause space or additional adoption in that for-cause space?

Thanks for the question, Andrew, and for joining the call. The growth has been relatively distributed between the two categories. I think that there has been a significant amount of literature, including the Nature Medicine paper from 2024, talking about different for-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 for-cause setting where you see the use of AlloSure in cases where, for example, a patient has undergone rejection already and you are trying to dial in the immune dosage and see those cell-free levels come down. So we are seeing consistent growth and utilization in both settings.

Of course, surveillance was important for 2025 and contributed to the growth for the year, but we do see for-cause testing increasing.

Okay. Helpful. And then one last one on the EBITDA trajectory. Even if we add back sort of the $4 million in one-time spend out of that $10 million investment you talked about, looks like the midpoint of the guide is a little bit shy of 10% EBITDA margin.

John, I think I heard you say the targets from the Investor Day back in 2024 are still on the table. So how do we think about that ramp to sort of 20% EBITDA margin targets for 2027 that you talked about given the 2026 starting point?

Let me take this. So the way we are thinking about this internally -- and this, obviously, there is a lot of moving pieces in running a company and whether or not you have to get ahead with investment or not having investment. We feel like we are making a few strategic investments that make the top line much stickier. So we think that is worth doing.

But we think about the gross profit dollars, and 50% of the incremental dollars should go down to the investors. So if you are at $440 million, you are going to grow 15% the next year, half of that growth drops down to EBITDA, is how we think about, like, a disciplined growth profile.

Does that make sense?

Yeah, I will stop there.

Yeah. So, I mean, we still believe we will get to 20%. Veracyte said, like, 28%. Business we ran prior to coming over here. And we feel like long term we will get significantly -- we will get to 20% in this business. I mean, we have a recurring testing model. We have 250 transplant centers. But getting to salesforce, we have accelerated the investment in the salesforce 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 and the messaging around marketing, et cetera.

Mason Carrico, Stephens Inc.

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

Yeah. 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 do not always utilize the testing to the extent that they had intended to in the protocol. Like, patients miss blood draws or something does not get ordered, et cetera.

And so there is still substantial growth that can occur in those existing centers that have already adopted a protocol. That is number one.

Number two, as I shared previously, we continue to see for-cause testing growing, and so we anticipate 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 it is 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.

All good. All right, thank you guys.

Yi Chen, H.C. Wainwright & Co.

Hi. Thanks for taking the question. 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 am 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 BMI, then the other eligibility of donors, but maybe some headwinds in the reduction of kidney disease in general and then, therefore, the need for transplant. I am curious how you see that market moving forward.

Yeah. Thanks, Eduardo. It is an interesting question, and we agree with your assessment generally. Although I would say that there are upwards of 400,000 patients in the US on dialysis today that could get a kidney transplant, and then 100,000 on the transplant waitlist. So we do not 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 cannot get their BMI down to an acceptable level where in historic studies, it is shown that they do better post-transplant, then they are ineligible to get that organ. And so there are many patients today on the transplant waitlist that are actively being put on GLP-1s to prep them for the transplant procedure.

And my understanding from the clinicians I have talked to is that this has been a favorable development for those populations, and that they are 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.