Castle Biosciences, Inc.

Joining me today are Castle's founder, president, and chief executive officer, Derek Massild, and chief financial officer, Frank Stokes. Information recorded on this call speaks only as of today, August 4, 2025. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call. Before we begin, I would like to remind you that some of the statements made today will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our financial outlook, TAM, intended use populations, and similar items referenced in our earnings release issued today, and statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2025 total revenue, our expectations regarding reimbursement for our products, opportunities for growth, the clinical value of our tests, Impacts of seasonality and other trends, the timing of targeted milestones, our M&A strategy, our ability to capitalize on strategic opportunities, including our recent side base and revised transactions, and the impact of our investments and growth initiatives, including our ability to achieve long-term growth and drive stockholder values. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties, and there can be no assurances that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's annual report on Form 10-K for the year ended December 31, 2024 and its quarterly report on Form 10-Q for the quarter ended June 30, 2025 under the heading Risk Factors. and in the company's other documents and reports filed or to be filed with the Securities and Exchange Commission. These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, adjusted gross margin, and adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. We believe these metrics provide useful supplemental information in assessing our revenue and operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the investor relations page of the company's website. I will now turn the call over to Derek.

Thank you, Camilla, and good afternoon, everyone. Following a strong first quarter, our team closed out a very successful second quarter that was ahead of our expectations. We believe this strength reflects the clinical value our tests provide to clinicians and their patients. Thanks to the strong execution by the entire CASEL team, we delivered revenue of $86.2 million and total test report volume of 26,574, with tests for our core revenue drivers growing 33% year-over-year compared to the second quarter of 2024. Additionally, we are pleased to have maintained strong gross margins and a healthy balance sheet in the quarter with $275.9 million in cash, cash equivalents, and marketable securities. This financial strength positions us well to continue investing in our near-term growth initiatives, including expanding our body of clinical evidence and commercial team optimization efforts, along with strategic investments and pipeline developments to support longer-term growth. Today, I will walk you through business highlights from the second quarter, and then Frank will provide additional financial highlights for return to your questions. On to our quarterly highlights. For DecisionDx Melanoma, we delivered 9,981 test reports during the quarter, which resulted in a sequential increase of approximately 16% compared to the first quarter of 2025, and a year-over-year increase of approximately 4% compared to the second quarter of 2024. On an absolute number basis, this is the largest second quarter over first quarter sequential increase in volume for DecisionDx melanoma we have seen since our IPO in 2019. We expect continued solid growth in the second half of the year, and as a result, we are reiterating our expectations for high single-digit volume growth for DecisionDx melanoma for the full year 2025 compared to the full year 2024. CASEL has invested in generating a substantial body of evidence to support the clinical performance and use of our decision DX melanoma test. We're particularly proud of our ongoing collaboration with the National Cancer Institute's Surveillance Epidemiology and End Results Program Registries, or NCIC for short, which was initiated back in 2021 and continues to evolve. Prior studies have shown that clinicians use decision DX melamella to inform both avoiding sentinel lymph node biopsy surgical procedures in low-risk patients and initiation of surveillance imaging and referrals to medical oncology in high-risk patients, which enables early detection of recurrences and earlier initiation of therapy. Early detection has been shown to improve outcomes to a greater extent when therapy is initiated with a smaller metastatic tumor burden. which improves net health outcomes. In fact, during the second quarter, we presented novel research aimed at enhancing the clinical management of patients with cutaneous melanoma at the 2025 American Society of Clinical Oncology Annual Meeting. This NCI SEER study presented an updated matching of patients who received Decision EX melanoma as part of their clinical care to those who did not. This large real-world cohort included 13,560 patients with cutaneous melanoma whose treatment plan was managed with the results of our DecisionDx melanoma test. This represents the largest real-world study of gene expression profile testing to date. The clinical use of DecisionDx melanoma was associated with a 32% reduction in mortality risk compared to untested patients. meaning patients whose treatment plan did not include the use of our DecisionDx melanoma test. These results provide further evidence of our test association with improved patient survival. Moving on to our DecisionDx SCC test, we are very pleased with our volume and performance, delivering 4,762 test reports in the second quarter of 2025. As a reminder, DecisionDx SCC reimbursement for the second quarter reflects a Novitas Local Coverage Determination Policy, or LCD, that went into effect for dates of service on or after April 24, 2025, and included non-coverage language for our DecisionDx SCC test. That said, early in the third quarter, we submitted our DecisionDX SCC reconsideration requests for both the Novitas and MoldeX LCDs. Under CMS guidelines, MACs have up to 60 days to accept or reject a reconsideration request. Importantly, we have already received notification from Novitas that, based upon CMS guidelines, our reconsideration request was determined to be a valid request and was accepted as such. We are still awaiting notifications from Moldex. Well, this is not an indication of the likelihood of coverage. It is a step forward in the process. It's important to note that as is the case for development of a new LCD, there is no specified timeline for a final reconsideration decision. We expect to keep you informed of updates as appropriate. Now, let's turn to our gastroenterology franchise. TissueCypher continued its strong momentum in the second quarter, delivering 9,170 test reports compared to 4,782 in the same period of 2024. This represents a 92% year-over-year growth compared to the second quarter of 2024. We continue to believe the growth drivers for TissueCypher in 2025 and beyond include first and foremost a recognition of the unmet clinical need And two, continued commercial optimization, which includes a strong focus on education and awareness. Lastly, moving on to our pipeline initiatives. In June, we entered into an exciting collaboration and license agreement with Sidebase, a Swedish-based public company that focuses on advanced electrical impedance spectroscopy, or EIS, technology, which includes both desktop and point-of-care instruments. The initial goal of the collaboration is to advance the development of a diagnostic test that predicts flares in patients diagnosed with atopic dermatitis. A U.S. market with an estimated patient population of up to 24 million people. We expect that, should our development program be successful, this test will enable us to meet another significant unmet clinical need for many of the clinicians who have already adopted our decision DX melanoma and SCC tests for use in skin cancers. Staying with this atopic dermatitis theme, I'm pleased to provide an update regarding our internally developed pipeline test. As we've talked about in the past, we have a program underway to see if our novel specimen collection technique, coupled with gene expression profiling, would be successful in identifying a genomic signature that could predict treatment responses to patients who are diagnosed with moderate to severe atopic dermatitis and eligible for or seeking systemic therapy, be it an injectable biologic or an oral therapy. Based upon our analysis to date, we believe that our development program has been successful. Specifically, we have identified a signature which has been validated in an independent patient cohort that identifies patients who are likely to have strong relief from the atopic dermatitis symptoms, specifically in their response as measured by three core indexes. First is an improvement in their eczema area and severity index, or EZ score as it's known. Second is improvement in itch symptoms. And third is a reduction in flares. Assuming continued success with our validation assessments, we expect to launch this pipeline test by the end of 2025. Lastly, our revised acquisition brings a robust technology pipeline, which has the potential to increase our current GI offerings. Specifically, we believe there is an opportunity to create a multi-LMIX approach for improved test value in Barrett's esophagus, as well as a non-endoscopic sample collection device for pipeline opportunities to potentially expand screening and diagnostic support for patients with Barrett's esophagus and other GI diseases. And with that, I will now turn the call over to Frank.

Thank you, Derek, and good afternoon, everyone. Reiterating Derek's sentiment, we are pleased to report strong second quarter financial results. Net revenues for the three months into June 30, 2025 decreased by $0.8 million, or 1%, to $86.2 million compared to the three months ended June 30, 2024, due to a $12.5 million decrease in revenue from our dermatological tests, offset by an $11.7 million increase in revenue from our non-derm tests. The $12.5 million decrease in net revenue for our dermatological tests was primarily attributable to our DecisionDx SCC test. and the $11.7 million increase in net revenues from our non-derm tests was largely attributable to our tissue cipher tests. While we do not typically disclose revenue by test, we estimate that revenue from DecisionDx SCC for the second quarter of 2025 was just above $15 million. If you exclude DecisionDx SCC revenue from both the second quarter of 2025 and 2024, our normalized revenue growth for the second quarter of 2025 would be approximately 23%. We are providing this information for this quarter due to the specific circumstances regarding decision DX-FCC non-coverage decision, which went into effect during the second quarter of 2025. Adjusted revenue, which excludes the effects of revenue adjustments in the current period related to tests delivered in prior periods, was $86.2 million for the second quarter of 2025, a decrease of 1% compared to the second quarter of 2024. For total revenue for 2025, we are raising our revenue guidance to $310 to $320 million up from the previously provided range of $287 to $297 million, which reflects the DecisionDx SCC LCD with a date of service effective date of April 24, 2025. Again, we do not disclose revenue by test, but for an apples-to-apples comparison for 2025 revenue growth, if you exclude DecisionDx SCC revenue from both our 24 and 25 totals, our normalized revenue growth range in 2025 would be approximately 21 to 26%. Our gross margin during the second quarter of 2025 was 77.3% compared to 80.7% in the second quarter of 2024. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 79.5% for the quarter compared to 83.2% for the same period in 2024. Turning to expenses, our total operating expenses, including cost of sales for the second quarter of 2025, were $90.4 million compared to $82 million for the second quarter of 2024. Sales and marketing expenses for the quarter were $35.1 million compared to $32.7 million for the same period in 2024. The increase is mainly due to higher organizational and business development activities costs and higher sales-related travel expenses. General and administrative expenses were $22.9 million for the quarter compared to $18.4 million for the same period in 2024. The increase is primarily attributable to higher personnel costs and higher information technology related costs. Higher personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Cost of sales expenses were $17.6 million in the second quarter of 2025 compared to $14.5 million in the second quarter of 2024, primarily due to higher personnel costs, higher lab services costs, and higher expenses for lab supplies. Increases in personnel costs reflect a higher headcount due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustments for existing employees. Higher expenses for lab services and lab supplies also reflects higher test report volumes. R&D expenses were $12.8 million for the quarter, compared to $14.1 million for the same period in 2024, primarily due to lower expenses for clinical trials. Total non-cash stock-based compensation expense, which is allocated among cost of sales, R&D, and SG&A, was $11.2 million for the second quarter of 2025, down from $13.2 million in the second quarter of 2024. Our net income for the second quarter of 2025 was $4.5 million, compared to net income of $8.9 million for the second quarter of 2024. Diluted earnings per share was 15 cents compared to diluted earnings per share of 31 cents in the second quarter of 2024. Adjusted EBITDA for the second quarter was $10.4 million compared to $21.5 million for the comparable period in 2025. Net cash provided by operating activities was $20.8 million for the second quarter of 2025 and $14.8 million for the six months into June 30, 2025. We continue to expect to deliver positive net cash flow from operations for 2025. Net cash used in investing activities was $50.8 million for the six months ended June 30, 2025, and consisted primarily of purchases of marketable investment securities of $92.8 million. Our asset acquisition provides purchases of property and equipment and purchases of debt securities classified as held to market, partially offset by the maturity of marketable investment securities. As of June 30, 2025, we had cash, cash equivalents, and marketable securities of $275.9 million. As we look beyond Previz and the license agreement of Sybase, we look to put the strength of our balance sheet to work through a disciplined and strategic approach to capital deployment, focusing on investing our capital for stockholder value. As it relates to M&A, our strategy is centered on complementing our existing portfolio to drive mid- to long-term value creation. In today's dynamic reimbursement environment, we consider diversification, expanding both our test portfolio and payer mix, while also maintaining a disciplined approach with an aim to ensure any transaction supports near and midterm profitable growth. Our key M&A priorities at this time include, one, pursuing opportunities where a test is already on the market and has established reimbursement, two, favoring tests that complement our current portfolio and or offer high clinical value in adjacent therapeutic areas, And finally, exploring areas where we can develop pipeline tests that enhance the value we deliver to existing customers. In conclusion, I'm pleased with our excellent financial results in the second quarter, continuing our longstanding history of strong execution and performance excellence. I'll now turn the call back over to Derek.