Castle Biosciences, Inc.

to Castle Bioscience's third quarter 2025 results conference call. Joining me today are Castle's founder, president, and chief executive officer, Derrick Matfield, chief financial officer, Frank Stokes, and senior vice president medical, Dr. Matthew Goldberg, board certified dermatologist and dermatopathologist. Information recorded on this call speaks only as of today, November 3rd, 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, including statements about expected addressable markets Statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2025 total revenue and the impact of our investment and growth initiatives, including our ability to achieve long-term growth and drive stockholder value. 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. Please refer to the risk factors in our most recent SEC filings for more information. 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 U.S. GAAP. 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. Today, I would like to start with some exciting news. Earlier today, we announced the launch of ADVANCE-AD-TX, our first-in-class test designed to guide systemic treatment selection for patients with moderate to severe atopic dermatitis. Before I get into our test, let me talk about the critical need facing patients with moderate to severe atopic dermatitis. Patients with moderate to severe atopic dermatitis have spent, in many cases, years on topical therapeutics and have reached the point that they are ready to cross the threshold of switching to an advanced systemic therapeutic. There are also patients who are already on an advanced systemic therapeutic but continue to experience significant symptoms. Today, there are two general classes of advanced systemic therapies. biologic therapies that primarily impact the TH2 pathway, or those that broadly inhibit multiple pathways, including the TH2 pathway. This latter class of drugs are known as Janus kinase inhibitors, or JAK inhibitors for short. All of these systemic therapies require prior authorization for initiation of a prescription. They are expensive and they carry, as do all therapies, the potential for adverse events The question facing these patients and their clinicians is which class of therapy is going to be more effective for that individual, that specific patient. We know from longitudinal prescription data that most patients start in a Th2 targeted biologic therapy today. And while these work well on many patients, around 40 to 45% of patients require adding on additional therapies or switching altogether. This lines up with data from studies that have shown anywhere from 20 to 50% of atopic dermatitis disease is driven by both Th2 and additional immune dysregulation pathways, such that a Th2 targeted therapy may not address all of the molecular underpinnings that are driving that patient's unique disease. We conducted a prospective study across 49 U.S. clinical study sites. to see if we could identify a test for use in patients ages 12 and older with moderate to severe atopic dermatitis who may exhibit differential responses to one of these two therapeutic classes based upon the underlying biology that drives their disease and drives their symptoms. And we were successful. Specifically, we discovered, developed, and validated a gene expression profile test that evaluates the expression of 487 genes that are spread across 12 known immune, inflammatory, and skin-related pathways that are associated with inflammatory skin conditions such as atopic dermatitis. So let's talk about what we found. This initial validation study identified patients with a JAK inhibitor responder profile and those who have a Th2 molecular profile. In patients with a JAK inhibitor responder profile, Study data showed that these patients who were treated with a JAK inhibitor were significantly more likely to achieve a 90% improvement in their baseline disease severity as measured by the eczema area and severity index scale, also known as EASI, achieve complete clearance on the validated investigator global assessment scale, report no itch, and remain flare-free by three months compared to JAK inhibitor responder patients who were treated with a TH2 targeted therapy. What a great step forward in improving patient outcomes. This is a new opportunity in atopic dermatitis for our dermatologic clinician customers and their patients, and I cannot express how grateful I am to our clinical investigators, to our clinical research department, our scientists and bioinformatics colleagues, and all those who are able to bring forward an objective test that will potentially enable, for the first time, the implementation of precision medicine in the management of atopic dermatitis. So let's turn to the market size and our approach to clinical availability over the next six to 12 months. First, on sizing. Using multiple data sources, focusing on one-year prevalence, we estimate that there are approximately 13.2 million individuals who are ages 12 and older with moderate to severe atopic dermatitis in the U.S. using a reasonable ASP at maturity, we estimate that this target patient population represents an approximately $33 billion total addressable market opportunity in the U.S. alone. With our established leadership in dermatologic testing, we believe that we are well positioned to introduce and scale advanced ADTX efficiently by leveraging our existing laboratory, logistics, and commercial infrastructure. Excitingly, our qualitative market research and physician feedback have been very encouraging. Specifically, approximately 80% of clinicians sampled stated that they would definitely or probably use advanced ADTX, highlighting the value of matching treatments to immune profiles. Addressing this unmet need, our goal with advanced ADTX is to enable stronger responses, fewer relapses, faster improvement in symptoms, improve quality of life, and ultimately reduce healthcare costs. Finally, let's turn to reimbursement. We are pursuing multiple pathways to accelerate patient access to advanced ADTX, recognizing that we're effectively building a new market and must evaluate all available options. We expect revenue contribution to be immaterial in 2026 as we build our reimbursement from ground zero. We expect to keep you informed of updates as appropriate. This being said, between models of reimbursement, the large market opportunity, and the fact that our dermatology commercial teams will be introducing our advanced ADTX test to the same customers who used our DecisionDx melanoma and DecisionDx SCC test, we will clinically launch advanced ADTX on a limited access model this month, November 2025, and expect to expand in a phased manner throughout 2026. In part, so our commercial team can primarily focus on our DecisionDx melanoma test. In summary, the launch of Advanced ADTX marks another important milestone in expanding our commitment to, as well as expanding the value that we bring to our dermatological customers. Now, I will walk you through business highlights from the third quarter, and then Frank will provide additional financial highlights before we turn to your questions. I'm pleased to report that the momentum we established in the first half of the year continued into the third quarter. We believe our outstanding third quarter performance underscores the strength of our operating model, the success of our strategic initiatives, and their unwavered commitment to improving patient care. Revenue reached $83 million, and we delivered total test report volume of 26,841, with tests for our core revenue drivers growing 36% compared to the third quarter of 2024. For DecisionDx melanoma, we delivered 10,459 reports in the quarter, representing a 12% year-over-year increase. Notably, DecisionDx melanoma achieved another significant milestone by surpassing 10,000 reports in a single quarter for the first time in the company's history. We reiterate our previously provided expectation to deliver high single-digit volume growth for DecisionDx melanoma for the full year 2025 compared to the full year 2024. Moving on to our DecisionDx SCC test, we delivered 4,186 test reports in the third quarter of 2025. This high level of volume was achieved without proactive marketing, which we believe underscores the core clinical value and strength of our growing clinical evidence supporting the test. We submitted LCD reconsideration requests early in the third quarter to both Novitas and Palmetto Moldex and received notification from both Medicare contractors that, based upon CMS guidelines, our reconsideration requests were determined to be valid requests and were accepted as such. I'll remind you that this is not an indication of life-sensitive coverage, and there is no specified timeline for a final reconsideration decision. During the quarter, we were pleased to see new peer-reviewed evidence further validating the clinical utility of our decision DXSCC test. One study expands on the clinical value or utility of our decision DXSCC test by adding a third use, predicting local recurrence in NCC and high-risk SCC patients. This use builds on the test's established capabilities of predicting metastatic risk and response to adjuvant radiation therapy. making decision DXSCC an even more comprehensive test for post-surgical management. Additionally, the studies show that decision DXSCC significantly outperformed both the American Joint Committee on Cancer, or AJCC, and the Brigham and Women's Hospital, or BDWH, staging systems in stratifying risk for local recurrence and metastasis in the NCCN high-risk patient group. This study demonstrates the superior risk stratification power of DecisionDx-SCC compared to traditional staging methods. A separate study of 244 clinicians was also published in the third quarter. Results from this study showed strong alignment between DecisionDx-SCC risk classes and clinical decision making. Specifically, class 2A and 2B results were consistently used by physicians to drive management decisions for use of imaging, and adjuvant radiation therapy with use that is similar to clinical and pathologic factors that are deemed very high-risk factors by staging systems and recommended by national guidelines for decisions to use these two interventions. Importantly, these findings reinforce the practice-changing impact that DecisionDx SCC has had on patient care. By enabling risk-aligned escalation or de-escalation of care, DecisionDx SCC helps clinicians personalize treatment strategies avoid unnecessary over-treatment, and address the clear limitations of traditional staging systems. Our growing body of evidence underscores DecisionDx STC's critical role in improving patient outcomes and guiding treatment pathways for high-risk STC while supporting smarter, more efficient healthcare decision-making. Now, let's turn to our gastroenterology franchise. TissueCypher delivered 10,609 test reports in the third quarter, compared to 6,073 test reports in the same period of 2024, representing 75% year-over-year growth. TissueCypher, like our DecisionDx melanoma test, achieved a significant milestone this quarter by exceeding 10,000 test reports in a single quarter for the first time, and we believe this suggests clinicians are increasingly recognizing its value. We remain highly focused on building education and awareness to drive continued adoption of our tissue cipher test. As such, we were very encouraged by new data presented at the American Forge Society's annual meeting that reinforced the important role of tissue cipher in Barrett's esophagus management. In a real-world study from four surgical practices involving 85 patients with non-dysplastic Barrett's esophagus, tissue cipher identified 15% of patients as intermediate or high-risk for progression to high-grade dysplasia or esophageal adenocarcinoma. By definition, these patients with nondisplastic disease were not identified as high-risk by pathology alone. Importantly, the probability of progression for patients receiving intermediate and high-risk tissue cipher scores was similar to or even exceeded the five-year risk of progression associated with low-grade dysplasia. This is a critical finding because low-grade dysplasia is the threshold at which society guidelines recommend escalating care, such as increased surveillance frequency or endoscopic eradication therapy. These results underscore TissueCypher's ability to deliver clinically meaningful insights. By providing individualized risk stratification, the test enables physicians to escalate care for patients truly at risk while confidently de-escalating care for those at low risk. This supports more personalized care strategies, helps to prevent over-treatment, and improves the potential to intervene earlier in patients at the highest risk of progression. Lastly, I want to thank each and every member of the CASEL team for the continued hard work and unwavering commitment to improving patient care. And with that, I will now turn the call over to Frank.

Thank you, Derek, and good afternoon, everyone. Reiterating Derek's sentiment, we're very pleased with our strong third quarter results and the continued positive momentum we are seeing with our business. Net revenues for the three months ended September 30, 2025 were $83 million. For total revenue for 2025, we are raising our revenue guidance to $327 to $335 million, up from the previously provided range of $310 to $320 million. Our gross margin during the third quarter of 2025 was 74.7% compared to 79.2% in the third 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 with 76.8% for the quarter compared to 81.9% for the same period in 2024. Turning to expenses, our total operating expenses including cost of sales for the third quarter of 2025 were $89.8 million compared to $80.7 million for the third quarter of 2024. Sales and marketing expenses for the quarter were $32.8 million, compared to $29.8 million for the same period in 2024. This increase is mainly due to higher personnel costs, higher expenses associated with travel, and higher marketing expense. General and administrative expenses were $23.1 million for the quarter, compared to $20.7 million for the same period in 2024. This increase is primarily attributable to higher personnel costs and higher information technology-related costs. Higher personnel costs reflects headcount expansions in our administrative support functions, as well as merit and annual inflationary wage adjustments for existing employees. Cost of sales expenses were $18.7 million in the third quarter of 2025, compared to $15.6 million in the third quarter of 2024, primarily due to higher personnel costs, higher expenses for lab supplies, and higher lab service expense. 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 adjustment for existing employees. Higher expense for lab services and lab supplies also reflects higher test report volumes. R&D expenses were $13 million for the quarter, compared to $12.3 million for the same period in 2024, primarily due to higher personnel costs driven by increased headcount to support continued business growth. Total non-cash stock-based compensation expense which is allocated among cost of sales, R&D expense, and SG&A expense was $12.1 million for the third quarter of 2025 compared to $13 million in the third quarter of 2024. Our net loss for the third quarter of 2025 was $.5 million compared to net income of $2.3 million for the third quarter of 2024. Diluted loss per share was two cents compared to diluted earnings per share of eight cents in the third quarter of 2024. Adjusted EBITDA for the third quarter was $9.2 million compared to $21.6 million for the comparable period in 2024. This further demonstrates our ability to translate strong top line performance into meaningful bottom line results. Net cash provided by operating activities was $22.6 million for the third quarter of 2025 and $37.4 million for the nine months ended September 30, 2025. We continue to expect to deliver positive net cash flow from operations for 2025. Net cash used in investing activities was $69.2 million for the nine months ended September 30, 2025, and consisted primarily of purchases of marketable investment securities of $151.3 million, purchases of property and equipment, our asset acquisition of previse, and purchases of debt securities classified as held to market, partially offset by the maturity of marketable investment securities. As of September 30, 2025, we had cash, cash equivalents, and marketable securities of $287.5 million. Our consistent top-line performance, strong margin profile, and disciplined expense management all contribute to our healthy cash position. In conclusion, we delivered another exceptional quarter, and our strong near-to-date performance further reinforces our confidence in the strength of our business and growth opportunities ahead of us. I'll now turn the call back over to Derek.