Veracyte raises 2025 revenue outlook to $510M while accelerating double-digit growth investments

Earnings Call Insights: Veracyte, Inc. (VCYT) Q3 2025

MANAGEMENT VIEW

* Marc Stapley, CEO, highlighted "another outstanding quarter" with core testing business revenue up 18% year-over-year after adjusting for Envisia, supported by 26% volume growth in Decipher and 13% in Afirma. Total revenue grew 14% year-over-year to approximately $132 million. Stapley emphasized, “our adjusted EBITDA margin reached a record 30%, representing a 650 basis point improvement from the prior year and far exceeding our expectations.” He also announced the company will reach its annual 25% adjusted EBITDA margin goal a year ahead of internal plans and is now accelerating investments in strategic projects.
* CEO Stapley detailed Decipher’s progress, with approximately 26,700 tests delivered in Q3 and noted, “Decipher's clinical utility is increasingly recognized by physicians for patients across all risk categories.” He cited significant traction in high-risk localized prostate cancer and new research validating Decipher’s predictive power in advanced disease, including metastatic patients.
* Decipher’s optional Molecular Features Report, launching next year, will add PORTOS and PTEN signatures, aiming to further extend the test’s clinical utility. Stapley stated, “Signatures like PORTOS and PTEN will be available in the optional Molecular Features Report when it launches next year.”
* Afirma posted 13% volume growth, attributed to new account wins and increased utilization. The operational transition to the v2 transcriptome workflow is on track for year-end completion.
* The company is enthusiastic about its whole genome-based TrueMRD platform for minimal residual disease and recurrence testing, with proof of concept in muscle invasive bladder cancer targeted for launch with reimbursement in the first half of 2026.
* Rebecca Chambers, CFO, stated, “Q3 was another exceptional quarter with $131.9 million in revenue, an increase of 14% over the prior year period.” Chambers highlighted record adjusted EBITDA margin of 30.1% and confirmed, “we are raising our 2025 total revenue guidance to $506 million to $510 million from our prior guidance of $496 million to $504 million.”

OUTLOOK

* Veracyte raised its 2025 total revenue guidance to $506 million to $510 million, up from $496 million to $504 million. Testing revenue guidance increased to $484 million to $487 million compared to the previous $477 million to $483 million range. Adjusted EBITDA margin guidance for the year was also raised to exceed 25% from the previous 23.5%. Testing revenue growth is now estimated at 16%, up from the prior 14%-15% range. Chambers indicated, “We expect adjusted EBITDA margin to be approximately 25% in the fourth quarter and in future years, barring any specific incremental investments we decide to make.”
* The company plans accelerated investment in its breast channel, MRD, and Prosigna launch, with a focus on maintaining its best-in-class financial profile.

FINANCIAL RESULTS

* Total revenue for Q3 was $131.9 million, a 14% increase over the prior year. Testing revenue was $127.8 million, up 17% year-over-year. Total testing volume reached approximately 43,700 tests, an increase of 19% over the prior year and included 17,000 Afirma tests. Testing ASP was $2,925, a decrease of 2% compared to the prior year, with the decline attributed to prior period collections and Afirma Laboratory Benefit Manager impact. Product revenue was $3.3 million, up 4% year-over-year. Biopharmaceutical and other revenue dropped to $800,000 due to the restructuring of Veracyte SAS.
* Non-GAAP gross margin was 73%. Testing gross margin was 74%. Product margin rose to 52%. Biopharmaceutical and other gross margin was negative 36% due to SAS restructuring.
* GAAP net income was $19.1 million, which included a $6.7 million loss related to the deconsolidation of Veracyte SAS. Adjusted EBITDA was $39.7 million, or 30.1% of revenue. Cash from operations was $44.8 million, with $366 million in cash and cash equivalents at quarter end.

Q&A

* Douglas Schenkel, Wolfe Research, LLC: Asked about discordant results between Decipher and digital pathology AI (DPAI) scores and clinician management. CEO Stapley responded that physicians focus on Decipher as the "gold standard" when discordant results occur, and emphasized the need for robust clinical evidence before broader adoption of DPAI.
* Schenkel inquired about balancing margin trajectory and investment. CFO Chambers said, “This Q4 guide implies we hire a number of heads that we're working on hiring. We spend some money on clinical trials that we're hoping to spend and also, we start to scour the landscape for the best breast sales leader. As we have talked about previously, looking ahead, we really do plan on managing to that approximate 25% adjusted EBITDA target going forward.”
* Puneet Souda, Leerink Partners LLC: Asked about sustained Decipher growth above 20% in 2026 and MRD market strategy. CEO Stapley stated Decipher and Afirma still have significant TAM runway and reiterated confidence in "durable double-digit growth durably for the foreseeable future, and that includes 2026." Chief Medical Officer Febbo emphasized confidence in the MRD test’s clinical evidence and commercial channel.
* Lu Li, UBS: Asked about Q4 flatness and margin benefits from Afirma v2. CFO Chambers cited $2.5 million of prior period collections in Q3 not implied in Q4 guidance, holiday timing, and residual French revenue as factors. She noted gross margin benefits from v2 will be fully realized in 2026.
* Subhalaxmi Nambi, Guggenheim: Asked about competition and Prosigna launch. CEO Stapley acknowledged Decipher took more share than expected and confirmed plans for a commercial Prosigna LDT in mid-2026, with timing dependent on OPTIMA trial data.
* Additional questions addressed molecular features’ role in Decipher, MRD indication selection, and capital allocation. Management reiterated strategic, measured investment and highlighted strong cash generation.

SENTIMENT ANALYSIS

* Analysts generally raised questions on sustainability of growth, competitive differentiation, and investment cadence, with a neutral to slightly positive tone as they sought clarity on margin progression and pipeline execution.
* Management maintained a confident and assertive tone in both prepared remarks and Q&A. CEO Stapley used phrases such as “we see a long runway ahead” and "we have continued to advance our robust pipeline," while CFO Chambers described the company’s position as “a wealth of riches” and emphasized, “we are accelerating them.”
* Compared to the previous quarter, management's tone remained confident, with an increased emphasis on accelerating investments following profitability outperformance. Analysts’ tone remained neutral, with recurring focus on market penetration, margin sustainability, and pipeline development.

QUARTER-OVER-QUARTER COMPARISON

* Raised 2025 revenue guidance to $506 million-$510 million from $496 million-$504 million in Q2. Testing revenue guidance also increased, and adjusted EBITDA margin guidance was moved above 25% from 23.5%.
* Q3 saw a shift toward accelerated investment in critical projects, whereas Q2 commentary focused on pipeline progress and maintaining profitability while ramping investment in the second half. The EBITDA margin in Q3 reached 30%, up from 27.5% in Q2.
* Analysts' questions in Q3 focused more on margin sustainability and competitive positioning, while Q2 included more on new launches and market expansion.
* Management reinforced confidence in durable double-digit growth and readiness to scale investment, highlighting strategy continuity and growing momentum in both core and pipeline businesses.

RISKS AND CONCERNS

* Management discussed the risk posed by discordant results between Decipher and digital pathology-based AI scores, but emphasized the need for robust evidence before broader clinical adoption.
* The restructuring and liquidation of Veracyte SAS impacted biopharma revenue and gross margin, which management described as one-time in nature.
* Analysts questioned the impact of competitive entrants in Decipher’s market and the operational execution of the upcoming Prosigna launch, with management assuring measured channel buildout and evidence-driven product launches.

FINAL TAKEAWAY

Veracyte delivered a robust Q3 2025, highlighted by strong revenue growth, record adjusted EBITDA margin, and raised full-year guidance. The company’s disciplined portfolio focus and evidence-driven strategy continue to drive adoption and market expansion for Decipher and Afirma, while accelerated investment in the breast channel, MRD, and Prosigna pipeline projects positions Veracyte for sustained long-term double-digit growth. Management’s confidence is underpinned by strong cash generation, a best-in-class financial profile, and a commitment to measured strategic investment as new products and capabilities come to market in 2026 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vcyt/earnings/transcripts]

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