Natera, Inc.

Welcome everyone to Natera's 2024 fourth quarter financial results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ask a question at that time, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference call is being recorded today, February 27, 2025. I would now like to hand the call over to Mr. Michael Brophy, Chief Financial Officer. Please go ahead, sir.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter of 2024. On the line, I am joined by Steve Chapman, our CEO, Saltman Moskovich, President, Clinical Diagnostics, John Fesco, President and Chief Business Officer, and Alex Haleshin, General Manager of Oncology. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.natera.com. A replay of the call will also be posted to our IR site as soon as it's available. Starting on slide two, during the course of this conference call, we will make forward-looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook, market size, partnerships, clinical studies, expected results, opportunities and strategies, and expectations for various current and future products, including product capabilities, expected release dates, reimbursement coverage, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we refile from time to time with the SEC, including our most recent Form 10-K or 10-Q and the Form 8-K filed with today's press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, February 27th, 2025. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. The chair disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. We will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-on-year comparison. And now, I'd like to turn the call over to Steve. Steve?

Thanks, Mike. Let's get to the highlights on the next slide. 2024 was a transformational year for Natera, and I think the Q4 results demonstrate that we ended the year with a lot of momentum coming into 2025. Revenues in the quarter were $476 million, up 53% year-on-year, and $4 million above our January pre-announcement of $472 million. Volumes were up 26% compared to Q4 of last year, and included an excellent showing for signatory unit growth. I'm pleased to report that gross margins in the quarter were 63%, which is significantly above the 51% we posted just one year ago and highlights the progress we made on both COGS and realized pricing in 2024. Finally, we generated roughly 46 million of cashflow in Q4, wrapping up the full year with about 86 million in total cashflow generation. On top of the financials, we discussed a series of milestones across the business in the last few months. We announced our innovation roadmap and shared several impressive data sets at the ASCO GI Conference in January. Most notably, we announced the 80702 data in colorectal cancer that underscores the predictive abilities of Signatera. We also had our first readout in early cancer detection, and we are excited to share some additional data on that program on today's call. In women's health, the Green Journal published our clinical validation study for our fetal RHD test, which demonstrated excellent test results. We also have two meaningful novel studies coming down in Oregon Health later this year that we look forward to discussing today. We are also pleased to see NCCN strengthen its position on cell-free DNA testing across several tumor types, as well as an expansion of the Medicare coverage for patients with stage 1 through 3 lung cancer. This makes Signatura more accessible to a population with a significant unmet need for risk stratification and recurrence monitoring. Great, let's jump into some of the business trends on the next slide. As discussed in the pre-announcement, volumes exceeded expectations in Q4 with strengths across the portfolio. These longer-term slides really highlight the progress we've made in just a few years, with Q4 volumes up more than two and a half times since 2020. In women's health, we delivered very strong organic growth as we continued to deliver a stream of new features and data sets. This was augmented by the Invitae win, which helped as well. Organ health volumes were up almost 50% year-on-year as volumes continued to ramp across the portfolio. Of course, Signatera had a transformational year with clinical volumes up approximately 60% versus Q4 of 2023 and nearly 15,000 units of growth over Q3 of 2024. Looking back over 2024, we can see in retrospect that the 24-month overall survival data presented at ASCO GI early last year proved to be a critical catalyst for broader adoption, and early returns suggest that the three-year overall survival data presented at ESMO is having a similar impact. We will spend more time on the 702 data later in the call, but the feedback has been positive, and in Q1, we're once again tracking to one of our strongest volume quarters ever for Signatera. Total revenue growth continued to accelerate as well in Q4, which came in above our pre-announcement, as I mentioned at the top of the call. Volume growth has also been strong, but revenues grew almost twice as fast as volumes as our ASPs continue to improve across the board. Signature clinical ASPs improved to roughly $1,100 in Q4, and we continue to see steady progress for both Panorama and Horizon ASPs. We launched a significant effort in late 2022 to better secure reimbursement for all the covered services we provide, including significantly increasing staffing and automation tools. Those efforts continue to bear fruit in Q4 and give us confidence in modeling ASPs for the 2025 guide, as Mike will discuss later in the call. We're excited about our ASP increases thus far, but looking several years out, we think we have the potential to double the revenue from the volumes we are already running today as we expand coverage and reimbursement. While ASPs have continued to climb, The cost of goods sold per unit has continued to fall, driving the significant improvement in gross margins in 2024. We had about a 3% true-up benefit to margins in the quarter, which represents excellent execution from our team in driving receipts above prior estimates. Even stripping out those true-ups yields a gross margin of 59% in Q4, which is another record for the company. While we do have a number of initiatives on tap to reduce costs further in 2025, I'm very pleased that the major COGS projects that have consumed significant R&D resources over the last few years are now launched, which frees up resources to focus on delivering new products, features, and clinical evidence. As we ramp revenues and gross margins, we've been able to generate cash even as we began to increase investments in our platform. This longer-term slide shows the evolution of the company since early 2022 when we were making investments that are now generating significant benefits for both our patients and shareholders. While the $46 million in cash flow represents a significant new record for Natera, it's worth noting that we actually made an approximately $20 million asset acquisition during the quarter. Though I'd argue the operational cash flow in the quarter was approximately $65 million in Q4. On our current trajectory, we could begin to generate meaningful cash flows in 2025. I think the last two quarters have been a critical case study in the efficiency of our business model and the ROICs we are now seeing on investments in R&D and SG&A. The major clinical trials we are running, the new features we are launching, and the investments we are making to further refine our service to patients and physicians are translating to additional volume growth, and our traction on gross margins makes every new unit increasingly valuable. So, we want to take advantage of our position by taking the cash flows we are generating and reinvesting them in the business in 2025. We feel strongly that this approach has the potential to enhance the growth profile of the business in 2026 and beyond. Part of these investments have been in teams tasked with expanding payer coverage and unlocking new insights from the massive amounts of data we generate every day. I'd like John Fesco to now expand on each of these initiatives. John?