CareDx, Inc.

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 CARE DX third quarter 2025 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I'd now like to turn the conference over to Tina Jacobson, Vice President of Investor Relations. Please go ahead.

Thank you, Alperator. 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 4th, 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 Cardiacs and advance our mission, I was delighted to announce in October the appointment of Suresh Gunasekron, President and CEO of UCSF Health, to our Board of Directors. With over two 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 Teutoburg, 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 is the president of ISHLT, or the International Society of Heart and Lung Transplants. His deep experience will be instrumental as we strive to establish non-invasive 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 to $376 million, a reflection of our strong performance in the third quarter. We are also raising adjusted EBITDA guidance to $35 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 three 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 reinforced 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 Histomath 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 CARE-DX is bridging the gap between diagnostics and patient outcomes, reinforcing our leadership in delivering comprehensive solutions across the transplant continuum. Histamaptic 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 the 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, histamap 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 five abstracts covering Allosure, and our AI-derived integrated risk assessment algorithm, Alisher 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 Alisher in combination with clinical data to predict antibody-mediated rejection. Further, Allisher kidney will be featured in new analyses from the K.O.R. Registry, demonstrating its ability to predict long-term outcomes, and in research demonstrating the use of Allisher 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 in 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 one-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 Allisher levels or graft function at one 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 advance 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 two weeks ago, the second study from the SURE 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 SURE 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 SURE validates heart care, which brings together AlloMAP and AlloSure Heart as a non-invasive, 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 heart care 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 close on August 31st. and it remains accessible at caretx.com slash LCD comment letter. 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 urged policymakers to maintain coverage for combination molecular tests such as Alimap Heart and Alisher Heart. Our comments provided the latest evidence and clinical data which demonstrates that testing with Alimap Heart and Alisher 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 plan 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 CARE-DX testing and receive test results. We have eight 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, Alisher Plus results are now available directly through EpicAura. 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 EpicAura integrations by year end, and roughly 50% of total volume will be serviced through EpicAura 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 claim 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 zero 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 Allisher kidney surveillance protocol. Next, in lab products, which includes PCR kits for rapid deceased 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 CARE-DX's continued investment in creating life-changing solutions. This year at ASHI, we launched ALICEAK-TX11, our next-generation HLA typing solution with enhanced Class II coverage and expanded non-HLA markers to support broader transplant organ profiling. Alisig TX11 is designed for flexibility, working with low-quality samples, preventing allele dropouts, and reducing the need for retesting. We also introduced SCORE7, our modernized analysis software for Q-type, built for scalability and regulatory alignment and supporting future ADO typing and IVDR compliance. In addition, we announced that Allacy TX and Q-Type 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 EpicAura 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 and 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 at 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 am 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 three 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 close 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 a strong performance in the third quarter, we now expect full-year 2025 revenue of $372 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 to $39 million compared to the previous range of $29 to $33 million to reflect the strong operating results in the third quarter. Updated full-year guidance implies fourth quarter revenue of $101 to $105 million. That assumes Full 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 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 to $16 million and lab products revenue of $12 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 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 op-ex 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.

We will now begin the question and answer session. In order to ask a question, simply press star, followed by the number one on your telephone keypad. Our first question will come from the line of Andrew Brackman with William Blair. Please go ahead.

Hi, everyone. This is Maggie Bui on for Andrew. Thanks for taking our questions. 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 if 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?

Yeah, 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 six months, we have seen an overall increase in our base revenue per test increase 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. Now, these RCM victories increase the predictability of our revenues per test over time, and we see that momentum continuing to the fourth quarter and into 2026. Great.

Thanks for that. And then maybe just one on the Epic Aura integrations. 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 seen major tailwinds from these integrations. So can anything you can talk about there about what you're expecting? Thanks.

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

You know, we have about 150 active discussions going on with hospital 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 three 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 for 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 Well, we think it will impact volumes going forward.

Great. Thanks so much. Our next question will come from the line of Mark Massaro with VTIG. Please go ahead.

Hey, guys. This is Vivian on for Mark. Thanks for taking the questions, and congrats on the nice quarter here. I just had a quick one. Were there any prior period collections in the quarter? Apologies if I missed it.

Yes, Vivian, 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 want to 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 at the new floor moving forward? And just in terms of the remaining upside on ASP, what's the new framework we should be using to think about it? I think your denial rate is at about 40% right now. So, just where do you think this can go at peak?

Thanks. Yeah. Again, thank you, Vivian. Great questions there. So, as I mentioned previously, the range that we guided to for fourth quarter is between 1400 and 1420 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.

Perfect. Understood. Thanks for taking the questions. Our next question comes from the line of William Bonello with Craig Hallam. Please go ahead.

Hey, a couple of questions. Thanks. 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, you know, 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 you know, prior period collections sort of beyond what you would normally expect. And I'm just trying to understand if what 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. I apologize. I'm just a little confused by it.

Yeah, thanks, Bill. Hey, 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 book. So we did have the $5.9 million in prior period revenue that we collected. But we, as you know, when the 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 here. to look at because it's more indicative of what you're going to see in future quarters from the company.

Yeah, okay. I think that makes sense. And, I mean, there's always prior period adjustments, good guys and bad guys, right? Right. Okay, so nothing unusual is the bottom line about the $5.9 million in this period. That's correct. Okay, that's helpful. And then just a different topic. Just curious, Jen 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, you know, staying pretty strong, but the overall transplant volume seems to have, you know, really been low for a while now. And I know we don't see an immediate correlation to your volumes, but you would think that 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, you know, 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, you know, the media that has been attracted to this space and questioning the practices of some of the, you know, 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 six-year program, and so we've got a lot of runway to go on the impact of that policy, given that we're only one quarter into a six-year program. So I still have confidence that we're going to see growth in the kidney transplant numbers over the course of this, you know, next two to three 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. Please go ahead.

Okay, thanks. A couple on the model. So on the guidance, you know, 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, you know, volume, just some of the nuances behind the guidance rates? And then any preliminary thoughts on 26 you can share? Sure.

Yeah, I'll take it. Thanks, Tycho, and I appreciate the question. Yes, let me clarify a little bit on that. As we guide it to, let's talk about volume. We guide it to fourth quarter volume of $52,000 to $54,000, with the midpoint being at $53,000. That would represent the midpoint approximately a almost 17% increase year over year. On the price element, we guided the price of $1,400 to $1,420. That price is inclusive of $4 to $6 million in 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 products. It leads us to our overall revenue of $100 to $105 million, with 103 being the midpoint.

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? You know, how much traction is it for kidney versus heart care versus lung?

You know, heart care is our mature product, and we get a higher reimbursement rate on heart care. 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 in improving those collection rates with kidney. So I would say that the mix, the product reimbursement mix, doesn't have a significant impact, maybe one or two to three 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 five years, but when do you think that really kicks in?

I mean, our expectation was that it was going to kick in, you know, 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, you know, 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, you know, 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. You know, 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, you know, from adjusting to the new protocol?

Yeah, that's a great question. Thanks for that one, Tycho. 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 seven 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 seven tests instead of four. So we continue to promote the utilization of the product as it was validated under the ARTS protocol, which is seven tests in the first year and four in every subsequent year.

Okay, that's helpful. Thanks.

Thank you.

Our next question will come from the line of Mason Carrico with Stevens. Please go ahead.

Hi, good afternoon. This is Harrison on for Mason. I wanted to start, if you could provide some insight into the delta inpatient 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?

Hi, Harrison. Thanks for the question. Certainly, since we reinitiated promotion of kidney surveillance protocols and protocol 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, you know, there's five clinicians and three of them do kidney surveillance and two of them don't, right, in only order of four calls. 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 Allisher kidney across the market, and we believe that, you know, 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. Thanks. And then I know we've hit on IOTA a couple times on this call, but have you seen any notable shifts in center behaviors now that that model is rolled out? You know, anything such as increase in compromised organs? Have you seen early signs? Are 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. 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, you know, going down the wait list and 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 them 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.

Got it. Thanks for taking the questions.

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

Hey, thanks. Good afternoon. Dave, I just want to clarify one more time the prior period impact. If I'm thinking about this right, the $6 million in the third quarter and then the other $4 to $6 million in the fourth quarter, that's incremental relative to the prior guidance, right? Which you increased $4 million at the point, but then you've got kind of $12 million of good guidance. That would be incremental versus the prior guide, correct?

Thanks, Brandon, for the question. We're including the prior period revenue in the guide. That's right. And so we raise the guide. as a function of the collection of that prior period revenue.

Okay. And, John, we've talked about kind of the weaker market, the weaker transplant procedure volumes. Perhaps that's why you've sort of come in toward the lower end of your sequential volume growth expectations and Q3Q and kind of the implied 4Q guide. 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, please?

Yeah, absolutely. I don't think it's a competitive dynamic or a softer market. I think it was just a function of the, you know, 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, you know, half a point off of where we expected to end the quarter. One point or half a 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, you know, 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 Hizmat Kitty launch next year, do you expect that to be a red driver? What do you need to generate in terms of data to reimburse it for that product?

Thanks. I do think it will. Thanks for the question, Andrew. I do think it will generate revenue for the company, albeit, you know, nowhere near Allishore-sized revenue because this is a test that will only be utilized in the setting of a patient having an elevated Allishore 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 histamap 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.

Great. Thank you.

Our next question will come from the line of Yi Chen with HC Wainwright. Please go ahead.

Hi. 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 boost following that publication?

Thanks, Katie, for the question. You know, the SHORE data has had a significant impact on the adoption of heart care in heart transplantation dating back to April of 2024 at the ISHLP 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. What you're seeing now is the product of, you know, 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 short 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 heart care. And we're very excited to see that publication in press, hopefully before the end of the year.

Thank you. I appreciate that.

Thank you.

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