Q4 2023 Castle Biosciences Inc Earnings Call

February 28, 2024

Today's call is being recorded.

We will begin today's call with opening remarks, and introductions followed by a question and answer session.

I would now like to turn the call over to Kim in a C grade Vice President Investor Relations and corporate Affairs. Please go ahead.

Thank you operator, good afternoon, everyone welcome to castle Biosciences fourth quarter and full year 2023 financial results Conference call. Joining me today is castle's founder President and Chief Executive Officer, Derek Muscled, and Chief Financial Officer, Frank Stokes.

Good afternoon and welcome to.

Information recorded on this call speaks only as of today February 28, 2024, therefore, if you're listening to the replay or reading a transcript of this call any time sensitive information may no longer be accurate.

Castle Biosciences fourth quarter, and full year 2023 conference call.

A reminder, today's call is being recorded.

Speaker Change: We'll begin today's call with opening remarks, and introductions followed by a question and answer session.

Recording of todays call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call.

Speaker Change: Now I'd like to turn the call over to Kim in a C grade Vice President Investor Relations and corporate Affairs. Please go ahead.

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 and similar items referenced in our earnings.

Kim: Thank you operator, good afternoon, everyone welcome to castle Biosciences fourth quarter and full year 2023 financial results Conference call.

Kim: With me today is castle's founder President and Chief Executive Officer, Derek muscle and Chief Financial Officer, Frank Stokes information recorded on this call speaks only as of today February 28, 2024. Therefore, if you are listening to the replay or reading the transcript of this call any time sensitive information.

Release issued today and statements containing projections regarding future events or our future financial or operational performance, including our anticipated 2020 for total revenue and our 2025 outlook our expectations regarding reimbursement for our products and the impact of our investments and growth.

Kim: <unk> may no longer be accurate.

Kim: Recording of todays call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call.

<unk> and expanded commercial team.

Forward looking statements are based upon current expectations and involve inherent risks and uncertainties. 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.

Kim: 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 and similar items referenced in our earnings.

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, 2023 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.

Kim: <unk> and expanded commercial team.

Kim: Forward looking statements are based upon current expectations and involve inherent risks and uncertainties. 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.

<unk> 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 and assessing our revenue and operating performance.

Kim: 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, 2023 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.

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 Companys website I will now turn the call over to Derek.

Kim: 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 include non-GAAP financial measures such as adjusted revenue adjusted gross margin and adjusted EBITDA that have not been calculated in accordance with generally ask.

Thank you Camilo and good afternoon, everyone.

Happy to report that we closed an outstanding fourth quarter, achieving very strong results for 2020 with.

With fourth quarter revenue.

$56 1 million.

Kim: Sept, It 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.

We grew revenue, 50% year over year for the full year to $219 8 million nearly $45 million above the midpoint of our expectations at the beginning of 2020.

We've now grown revenue at a 43% CAGR rate over the last five years.

Kim: 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.

Our track record of consistent execution.

We also achieved impressive test volume results by delivering a total of 7420, our total test reports in 2020, representing 59% growth compared to 2022.

Derek J. Maetzold: Thank you, Tim Hello, and good afternoon, everyone.

Furthermore, the fourth quarter marked the second consecutive quarter, which we achieved positive cash flow from operations and positive adjusted EBITDA.

I'm happy to report that we closed outstanding fourth quarter, achieving very strong results for 2023 with fourth quarter revenue of $66 $1 million, we grew revenue, 60% year over year for the full year to $219 $8 million.

In 2023, we achieved numerous accomplishments.

I'd like to take this opportunity to highlight some of them.

We opened our new state of the Outloud, Vittorio and Pittsburgh, Pennsylvania.

Derek J. Maetzold: The $45 million above the midpoint of our expectations at the beginning of 2023.

Received advanced diagnostic laboratory test or <unk> status for our decision Dx QC tests, bringing our total to five tests that have been designated as <unk>.

Derek J. Maetzold: We've now grown revenue at a 43% CAGR rate over the last five years and continuing our track record of consistent execution.

Derek J. Maetzold: We also achieved impressive test volume results by delivering a total of 7420, our total test reports in 2023, representing 59% growth compared to 2022.

Expanded our significant body of evidence across our entire portfolio.

Make progress across our pipeline initiatives and won multiple awards for being a top workplace.

None of our accomplishments would be possible without the hard work and strong execution of the entire casualty.

Derek J. Maetzold: Furthermore, the fourth quarter marked the second consecutive quarter, which we achieved positive cash flow from operations and positive adjusted EBITDA.

Thank you Manav.

As I just mentioned, we expanded our significant body of evidence across our entire test portfolio in 2023, I want to touch base on data specifically on decision Dx melanoma.

Derek J. Maetzold: In 2023, we achieved numerous accomplishments.

Speaker Change: I'd like to take this opportunity to highlight some of them.

We opened our new state of the Art Laboratory in Pittsburgh, Pennsylvania.

We have demonstrated clinical validity and utility and patient impact and 50 peer reviewed publications and studies to test in more than 10000 patients, including two 2023 publications, demonstrating an association with clinical use of our test and improve patient outcomes.

Speaker Change: Received advanced diagnostic laboratory test or <unk> status for our decision yes.

Speaker Change: C test bringing.

Speaker Change: Bringing our total to five tests that have been designated as ABL. Please.

Speaker Change: Standard are significant body of evidence across our entire portfolio make progress across our pipeline of initiatives and won multiple awards for being a top workplace.

Our first publication is from our collaboration with the National Cancer Institute Seer program with an unselected prospectively tested real world patient population, which show that testing with decision Dx melanoma was associated with lower melanoma specifics that overall mortality relative to untested patients.

Speaker Change: None of our accomplishments would be possible without the hard work and strong execution of the entire casualty and I can't thank them enough.

Speaker Change: As I just mentioned, we expanded our significant body of evidence across our entire test portfolio in 2023.

That is patients who received decision Dx melanoma as part of their clinical care live longer.

Speaker Change: I wanted to touch base on Vegas, specifically on decision Dx melanoma.

Speaker Change: We have demonstrated clinical validity and utility and patient impact and 50 peer reviewed publications and studied the test in more than 10000 patients, including two 2023 publications demonstrating in association with the clinical use of our test and improved patient outcomes.

Specifically decision Dx melanoma testing was associated with a 29% lower melanoma specific mortality and a 17% lower overall mortality relative to patients who did not receive decision Dx melanoma as part of their clinical care.

The second publication is from an independent multi center study of Sentinel lymph node negative patients showing that patients who received routine imaging after high risk decision Dx melanoma test scores had an earlier recurrence diagnosis with.

Speaker Change: First publications from our collaboration with the National Cancer Institute Seer program in an unselected prospectively tested real world patient population, which showed that testing organization Dx melanoma was associated with lower melanoma specifics that overall mortality relative to untested patients.

With lower tumor burden.

Leading to better clinical outcomes, including improved overall survival.

Speaker Change: That is patients who receive decision Dx melanoma as part of their clinical care live longer.

We believe these studies demonstrate the clear positive impact testing and Suezmax melanoma has on patient outcomes and further decision Dx melanoma is the only melanoma prognostic tests shown to be associated with improved patient survival.

Speaker Change: Specifically decision Dx melanoma testing was associated with a 29% lower melanoma specific mortality and a 17% lower overall mortality relative to patients who did not receive decision Dx melanoma as part of their clinical care.

Now let me take you through execution strategy highlights from the fourth quarter and the fiscal year and then Frank will provide additional financial highlights before we turn to your questions.

Speaker Change: The second publication is from an independent multi center study of Sentinel lymph node negative patients showing that patients who receive routine imaging after high risk decision Dx melanoma test scores I had an earlier recurrence diagnosis with.

Let's start with our core dermatology business, which continues to perform extremely well for decision Dx melanoma and decision Dx SCC combined test volume was 44772 in 2023% to 33% increase over 2022, we are very pleased with our volume performance.

Speaker Change: With lower tumor burden.

Speaker Change: Leading to better clinical outcomes, including improved overall survival.

And believe these two core dermatology offerings continued to represent a significant growth opportunity. We continue to see overlap between clinicians to order our decision Dx melanoma test and those who adopt decision Dx SCC in fact during the year ended December 31, 2023, approximately 78.

Speaker Change: We believe these studies demonstrate the clear positive impact testing with fusion Dx melanoma has on patient outcomes and further decision Dx melanoma is the only melanoma prognostic tests.

Known to be associated with improved patient survival.

Speaker Change: Now let me take you through execution strategy highlights from the fourth quarter and the fiscal year and then Frank will provide additional financial highlights before we turn to your questions.

<unk> of all commissions ordering decision Dx SCC had also ordered our decision Dx melanoma test during the same period. We believe this is evidence of our high unmet clinical need that our tests are designed to address coupled with the fact that clinicians who diagnose and manage early stage cutaneous melanoma skin cancer.

Speaker Change: Let's start with our core dermatology business, which continues to perform extremely well for decision Dx melanoma and decision Dx SCC combine test volume was 44772 in 2023% to 33% increase over 2022, we are very pleased with our volume performance.

Also diagnose other skin cancers, like cutaneous squamous cell carcinoma.

Our decision Dx melanoma, we delivered 33330 test reports in 2023% to 20% year over year increase consistent with prior years, our third and fourth quarter test volume reflected normal seasonality. We believe the documented clinical impact our test has in improving outcomes in pace.

Speaker Change: I believe these two core dermatology offerings continues to represent a significant growth opportunity. We continue to see overlap between clinicians to order our decision Dx melanoma test and those who adopt decision Dx SCC in fact during the year ended December 31, 2023, approximately 78.

<unk> diagnosed with cutaneous melanoma, including improved survival, coupled with our prior commercial expansion investments have been and continue to be significant drivers of growth.

Speaker Change: <unk> of all conditions ordering decision Dx SCC that also ordered our decision Dx melanoma test during the same period. We believe this is evidence of a high unmet clinical needs that our tests are designed to address coupled with the fact that clinicians who diagnose and manage early stage cutaneous melanoma skin cancer.

Moving on to our decision Dx SCC test, we continue to see very strong test report volume momentum with 11442 test reports delivered in 2023, an increase of 92% compared to 2022.

Speaker Change: Also diagnose other skin cancers, <unk> squamous cell carcinoma.

As with our growth in decision Dx melanoma, we believe that our strong growth for decision Dx SCC is due in large parts of the combination of the high clinical need in the high risk patient population, coupled with the value that our tests provides.

We continue to expand on a body of evidence surrounding the test for instance, a study published just last month in the journal of clinical and aesthetic dermatology found that using decision Dx SCC to guide decisions surrounding adjuvant radiation therapy or <unk> could result in significant Medicare health care savings of up to approximately.

Speaker Change: <unk> diagnosed with cutaneous melanoma, including improved survival, coupled with our prior commercial expansion investments have been and continue to be significant drivers of growth.

Speaker Change: Moving on to our decision Dx SCC test, we continue to see very strong test report volume momentum with 11442 test reports delivered in 2023, an increase of 92% compared to 2022.

$972 million annually.

Data show that integrating the objective decision Dx SCC test into the management of patients diagnosed with high risk SCC, who are <unk> eligible.

Speaker Change: As with our growth in decision Dx melanoma, we believe that our strong growth for decision Dx SCC is due in large parts of the combination of the high clinical need in the high risk patient population coupled with the value that our test provides we continue to expand in the body of evidence surrounding the test for instance, a study published.

Eligible.

Unify those who may safely avoid AARP, leading to an improvement not only in health outcomes, but also a reduction in the cost in the Medicare population.

I would now like to turn to our tissue ciphertext I'll remind you that as part of our strategic growth plans, we acquired certain aspects in the tissue side for tests in December of 2021 <unk>.

Just last month in the journal of clinical anesthetic dermatology found that using decision Dx SCC to guide decisions surrounding adjuvant radiation therapy or <unk> could result in significant Medicare health care savings of up to approximately $972 million annually.

The adoption of a tissue cyber bears esophagus test has exceeded our expectations to date.

As you May recall this test expanded our estimated in market commercial use time by $1 billion and we believe that it contributes to long term value creation and also positions us to make a meaningful impact on patient care and other areas with unmet clinical needs.

Speaker Change: The data showed that integrating the objective decision Dx SCC test into the management of patients diagnosed with high risk SCC, who are <unk> eligible.

Speaker Change: <unk>.

We delivered 9100 tissue cyber test reports in 2023 compared to 2128 test reports in 2022, which is more than 300% growth.

Speaker Change: Identify those who may safely avoid.

Speaker Change: <unk>, leading to an improvement not only in health outcomes, but also a reduction in the cost in the Medicare population.

Speaker Change: I would now like to turn to our tissue soccer tests I'll remind you that as part of our strategic growth plans, we acquired certain optics in the tissue diaper test in December of 2021.

We continue to be extremely pleased with the reception of tissue cycle by the gastro neurology clinician community and based on current volume growth trends.

We plan to expand this commercial team modestly in the second quarter of 2024.

Speaker Change: The adoption of the tissue side for bears esophagus test has exceeded our expectations to date.

As you May recall, we had multiple data analysis during 2023, bringing our total to 14 peer reviewed publications demonstrating the ability and performance of our tissue diaper test and risk stratify patients with various esophagus disease to guide risk appropriate treatment plan decisions.

Speaker Change: As you May recall this test expanded our estimated in market commercial use time by $1 billion and we believe that it contributes to long term value creation and also positions us to make a meaningful impact on patient care in other areas with unmet clinical needs.

Speaker Change: We delivered 9100 tissue cyber test reports in 2023 compared to 2128 test reports in 2022, which is more than 300% growth.

Turning to our mental health business, we delivered 10921 IV genetic test reports in 2023 compared to 3249 test reports in 2022, which is more than 200% growth.

Speaker Change: We continue to be extremely pleased with the reception of tissue cycled by the gastro neurology constant community and based on current volume growth trends.

We believe a significant driver of growth is our differentiated tests for the treatment of mental health conditions, including identifying drug drug drug G and lifestyle factors to improve medication responser emission rates and a large underpenetrated mental health market.

Speaker Change: We plan to expand his commercial team modestly in the second quarter of 2024.

Speaker Change: As you May recall, we had multiple data analysis during 2023, bringing our total 2014 peer reviewed publications demonstrating the ability and performance of our tissue diaper test and risk stratify patients with various esophagus disease to guide risk appropriate treatment plan decisions.

In fact, rearward evidenced confirmed the consistent impact of objects are medication response, and remission rates in patients with major depressive disorder or mbd, specifically the study found that real world patient outcomes. We're strongly aligned to the result of a previously published randomized control trial, which showed that patients who have <unk>.

Turning to our mental health business, we delivered 10921, either get access reports in 2023 compared to 3249 test reports in 2022, which is more than 200% growth.

Medication management was guided by IGN X or 265 times more likely to achieve remission of depressive symptoms compared to patients, whose medications was not guided by our test.

Speaker Change: We believe a significant driver of growth is our differentiated tests for the treatment of mental health conditions, including identifying drug drug drug G and lifestyle factors to improve medication responser emission rates and a large underpenetrated mental health market and.

Moving onto our inflammatory disease pipeline initiative to develop a genomic test or a series of tests aimed at predicting response to systemic therapy in patients with moderate to severe atopic dermatitis psoriasis and related conditions.

Speaker Change: In fact, rearward evidenced confirmed the consistent impact of objects are medication response, and remission rates in patients with major depressive disorder or mbd, specifically the study found that real world patient outcomes are strongly aligned to the result of a previously published randomized controlled trial, which showed that patients who is mehdi.

Last quarter, we shared some early promising discovery data the data demonstrated that patients with moderate to severe atopic dermatitis, we're able to show that using our noninvasive method of tissue sampling coupled with gene expression profiling can separate out responders and non responders.

Furthermore, our inflammatory skin disease pipeline tests could help distinguish atopic dermatitis psoriasis and mitosis <unk> skin lesions to help ensure proper therapy selection based upon an individual patient's molecular profile.

Speaker Change: Patient management was guided by IGN X four to six five times more likely to achieve remission of depressive symptoms compared to patients with medication was not guided by our test.

We expect to provide you with additional development updates in the second half of 2024 with the tests targeted for launch by the end of 2025, assuming a positive outcome of our discovery development and validation efforts.

Speaker Change: Moving on to our inflammatory disease pipeline initiative to develop a genomic test or a series of tests aimed at predicting response to systemic therapy in patients with moderate to severe atopic dermatitis psoriasis and related conditions last quarter. We shared some early promising discovery data the data demonstrated that patients with moderate to.

I will now turn the call over to Frank who will provide details relating to our financial results and outlook.

Thank you Derek and good afternoon, everyone reiterating their cinema, we're excited with the strong year, we had in 2023 and the momentum we are carrying forward.

Speaker Change: Severe atopic dermatitis, we're able to show that using our noninvasive method of tissue sampling coupled with gene expression profiling can separate out responders and non responders.

The fourth quarter of 2023, we delivered total revenue of $66 1 million or 72% increase over the fourth quarter of 2022, and we delivered $219 8 million for the full year, 2023% to 60% increase over 2022, the increase was driven by higher Asps and test volume growth.

Speaker Change: Furthermore, our inflammatory skin disease pipeline tests could help distinguish atopic dermatitis psoriasis and mitosis vanguardia skin lesions to help ensure proper therapy selection based upon an individual patient's molecular profile.

Speaker Change: We expect to provide you with additional development updates in the second half of 2024 with the tests targeted for launch by the end of 2025, assuming a positive outcome of our discovery development and validation efforts now.

Adjusted revenue, which excludes the effects of revenue adjustments in the current period related to tests delivered in prior periods was $70 2 million for the quarter and $224 3 million for the full year 2023.

Speaker Change: I will now turn the call over to Frank who will provide details relating to our financial results and outlook.

For 2024, we anticipate generating total revenue of $235 million to $240 million driven by further consistent execution on our growth plans.

Frank Stokes: Thank you Derek and good afternoon, everyone reiterating their cinema, we're excited with the strong year, we had in 2023 and the momentum we are carrying forward.

Our gross margin here in the fourth quarter was 77, 8% compared to 69, 4% in the fourth quarter of 2022, and our gross margin for the full year was 75, 4% compared to 76% in 2022.

Frank Stokes: The fourth quarter of 2020, we delivered total revenue of $66 1 million or 72% increase over the fourth quarter of 2022, and we delivered $219 8 million for the full year, 2023% to 60% increase over 2022, the increase was driven by higher Asps and test volume growth.

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 82, 3% for the quarter and 79, 9% for the year compared to 74.

Frank Stokes: Adjusted revenue, which excludes the effects of revenue adjustments in the current period related to tests delivered in prior periods was $70 2 million for the quarter and $224 $3 million for the full year 2023.

6% and 77% for the same periods in 2022.

Frank Stokes: For 2024, we anticipate generating total revenue of $235 million to $240 million driven by further consistent execution on our growth plans.

Turning to expenses, our total operating expenses, including cost of sales for the quarter ended December 31, 2023 were $71 8 million compared to $61 2 million for the prior year and were $287 8 million for the full year compared to $209 $9 million for 2022 sales and marketing.

Frank Stokes: Our gross margin here in the fourth quarter was 77, 8% compared to 69, 4% from the fourth quarter of 2022, and our gross margin for the full year was 75, 4% compared to 76% in 2022.

<unk> expense increased by $27 1 million or 31, 2% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to higher personnel costs.

Frank Stokes: 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 82, 3% for the quarter and 79, 9% for the year compared to 74.

General and administrative expenses increased by $10 1 million or 17, 9% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to higher personnel costs and higher information technology and software related costs.

Frank Stokes: 6% and 77% for the same periods in 2022.

Frank Stokes: Turning to expenses, our total operating expenses, including cost of sales for the quarter ended December 31, 2023 were $71 8 million compared to $61 2 million for the prior year and were $287 $8 million for the full year compared to $209 $9 million for 2022 sales and marketing.

R&D expense increased by $1 7 million in the fourth quarter and by $8 $7 million for the full year of 2023 compared to 2022, primarily consisting of higher personnel costs and higher clinical studies expense, partially offset by lower expense from advisory boards and consulting services.

Frank Stokes: <unk> expense increased by $27 1 million or 31, 2% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to higher personnel costs.

Total noncash stock based compensation expense, which is allocated among cost of sales R&D expense and SG&A expense totaled $51 $2 million for the year ended December 31, 2023, compared to $36 3 million for the year ended December 31 2022.

Frank Stokes: General and administrative expenses increased by $10 1 million or 17, 9% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to higher personnel costs and higher information technology and software related costs.

We expect material increases in stock based compensation expense in future periods attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. We expect to complete an annual grant of equity awards to our employees in March of 2024.

Frank Stokes: R&D expense increased by $1 $7 million in the fourth quarter and by $8 $7 million for the full year 2023, compared to 2022, primarily consisting of higher personnel costs and higher clinical studies expense, partially offset by lower expense from advisory boards and consulting services.

Interest income was $10 6 million for the full year 2023 compared to $4 million in 2022, primarily result of higher interest rates and our purchases of marketable investment securities beginning in the third quarter of 2022.

Frank Stokes: Total noncash stock based compensation expense, which is allocated among cost of sales R&D expense and SG&A expense totaled $51 $2 million for the year ended December 31, 2023, compared to $36 $3 million for the year ended December 31 2022.

Our net loss for the fourth quarter of 2023 was $2 6 million compared to a net loss of $20 6 million for the fourth quarter of 2022, and our net loss for the full year 2023 was $57 5 million compared to a net loss of $67 1 million for 2022.

Frank Stokes: We expect material increases in stock based compensation expense in future periods attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. We expect to complete an annual grant of equity awards to our employees in March 2024.

Diluted loss per share for the fourth quarter was 10 <unk>.

Compared to diluted loss per share of <unk> 78 in the fourth quarter of 2020 to Duluth.

Diluted loss per share for the full year of 2023 was $2 14 compared.

Compared to diluted loss per share of $2 58 for 2022.

Frank Stokes: Interest income was $10 $6 million for the full year 2023 compared to $4 million in 2022, primarily result of higher interest rates and our purchases of marketable investment securities beginning in the third quarter of 2022.

Adjusted EBITDA for the fourth quarter was $9 4 million compared to negative $10 4 million for the comparable period in 2022, an improvement of $19 8 million for the full year 2023, adjusted EBITDA was negative $4 4 million compared to negative $42 6 million in 2022, an improvement of 38.

Frank Stokes: Our net loss for the fourth quarter of 2023 was $2 6 million compared to a net loss of $26 million for the fourth quarter of 2022, and our net loss for the full year of 2023 was $57 5 million compared to a net loss of $67 1 million for 2022.

$2 million.

Net cash provided by operating activities was $18 6 million for the fourth quarter.

Net cash used in operating activities was $5 6 million.

Frank Stokes: Diluted loss per share for the fourth quarter was 10 <unk>.

For the year ended December 31, 2023, we expect the first quarter of 2004 to be a net operating cash use quarter due to annual cash bonus payments and certain health care benefit payments that are not expected to recur during the remaining three quarters of 2024.

Frank Stokes: Compared to diluted loss per share of <unk> 78 in the fourth quarter of 2022.

Frank Stokes: Diluted loss per share for the full year 2023 was $2 14 compared to diluted loss per share of $2 58 for 2022.

Frank Stokes: Adjusted EBITDA for the fourth quarter was $9 4 million compared to negative $10 4 million for the comparable period in 2022, an improvement of $19 8 million.

Net cash used in investing activities was $16 $2 million for the 12 months ended December 31, 2020, threes and consisted primarily of purchases of marketable investment securities of $189 1 million in purchases of property and equipment of $13 $6 million partially.

Frank Stokes: For the full year 2023, adjusted EBITDA was negative $4 4 million compared to negative $42 6 million in 2022, an improvement of $38 2 million.

Offset by the maturity of marketable investments investable securities of $186 $5 million.

Frank Stokes: Net cash provided by operating activities was $18 6 million for the fourth quarter.

We increased our cash position by more than $13 million in the fourth quarter of 2023 compared to the third quarter of 2023, ending the year with cash cash equivalents in marketable securities of $243 $1 million.

Frank Stokes: And net cash used in operating activities was $5 6 million.

Frank Stokes: For the year ended December 31, 2023, we expect the first quarter of 2004 to be a net operating cash use quarter due to annual cash bonus payments and certain health care benefit payments that are not expected to recur during the remaining three quarters of 2024.

And the current high interest rate environment, we believe our strong financial position allows us to continue to invest in our business and execute on our strategic growth plans and maintain our competitively.

Frank Stokes: Net cash used in investing activities was $15 $2 million for the 12 months ended December 31, 2023, and consisted primarily of purchases of marketable investment securities of $189 $1 million and purchases of property and equipment of $13 6 million, partially offset by the maturity of marketable investments.

In 2024, we expect our capital allocation priorities remain consistent. These include the continued assessment and evolution of our commercial team.

Focused R&D efforts to build evidentiary support and develop test.

And as a lesser priority exploring strategic opportunities our current therapeutic areas in conclusion, our 2023 financial and operational results were outstanding we delivered strong growth in both revenue and test report volume as we continue to execute on our growth initiatives I'll now turn the call back over there.

Frank Stokes: <unk> securities of $186 5 million.

Frank Stokes: We increased our cash position by more than $13 million in the fourth quarter of 2023 compared to the third quarter of 2023, ending the year with cash cash equivalents and marketable securities of $243 $1 million.

Thank you Frank we believe our success in 2023 has allowed us to enter 2020 forward momentum and the potential to further position the company as an industry leader I.

In the current interest rate environment, we believe our strong financial position allows us to continue to invest in our business and execute on our strategic growth plans and maintain our competitively.

I would like to conclude today by thanking our castle team.

Our excellent progress in 2023 is due to their accomplishments and dedications to the patients that we serve this concludes our remarks.

Frank Stokes: In 2024, we expect our capital allocation priorities remain consistent. These include the continued assessment and evolution of our commercial team.

Thank you again for your continued interest in castle Biosciences, operator, we are now ready for Q&A.

Frank Stokes: Focused R&D efforts to build evidentiary support and develop test.

Frank Stokes: And as a lesser priority exploring strategic opportunities our current therapeutic areas in conclusion, our 2023 financial and operational results were outstanding we delivered strong growth in both revenue and test report volume as we continue to execute on our growth initiatives I'll now turn the call back over to Dave.

Thank you.

In order to allow everyone in the queue and opportunity to address the cash flow management team.

Please limit your time on the Q1 question and one follow up if you have additional questions. Please return to the key.

Dave: Thank you Frank we believe our success in 2023 has allowed us to enter 2020 forward momentum and the potential to further position the company as an industry leader.

Please standby, while we keep time for Q&A.

Dave: I would like to conclude today by thanking our castle team.

SaaS person you have online is Kyle mixon of Canaccord.

Dave: Our excellent progress in 2023 is due to their accomplishments and dedications to the patients that we serve this concludes our remarks.

Your line is open.

Hey, Thanks, guys for the questions. Congrats on the quarter I wanted to start with the 24 guidance and the underlying growth in terms of logic test business. If you back out circ revenue and 23, you might have had like $160 million to $170 million core revenue. If you annualize the sequential growth in the fourth quarter, you got about maybe 17, 19% annual growth.

Speaker Change: Thank you again for your continued interest in castle Biosciences, operator, we are now ready for Q&A.

Speaker Change: Thank you.

Speaker Change: In order to allow everyone in the queue.

Speaker Change: To address the cash flow management team.

Speaker Change: Please limit your time to one question and one follow up if you have additional questions. Please return to the queue.

Add that to the core revenue base. There I guess, you maybe like $200 million revenue next year.

Thank you Dan the guide would imply that the new tests like tissue side variety genetics like don't grow next year.

Speaker Change: Please standby, while we keep time for Q&A.

Current year, so maybe just talk about what the core growth of the Durham tests FCC looks like this year and if theres anything that you anticipate happening in 234 that causes growth decelerate a bit caliber levels. Thanks.

Speaker Change: First person you have on the line is Kyle Mixon of Canaccord. Your line is open.

Yes sure.

Sure.

I might need to.

Right right down I Wouldnt tracking your math there, yes, you should.

You should recall that the 'twenty two 'twenty three actual results have a full year of FCC revenue.

Included.

The 2024 expectation only has this quarter for FCC, we're taking out our SCC test for.

Speaker Change: Add that to the core revenue base there to get you maybe like $200 million revenue next year.

Out of that guidance for the rest of the year Q2, three and four.

Speaker Change: Thank you Dan the guide would imply that the new test like tissue side variety genetics like don't grow next year I guess this current year. So maybe just talk about what the core growth of the Durham tests X FCC looks like this year and if theres anything that you wanted to be happening in 'twenty 'twenty four that causes growth decelerate a bit however levels. Thanks.

So to apples, if you want to apples to apples the growth you need to sort of either back out FCC from 2023 or kind of think about what it would look like for 'twenty for just in order to avoid having to reduce or change guidance negatively.

<unk>.

Dan: Alright, yes, sure Kyle I don't.

The FCC is no longer reimbursed.

We just we take it out for the rest of the year and that would be.

Dan: Sure.

Speaker Change: I might need to.

As we talked about in the past call that would be just a terrible outcome for patients I mean, we've already got significant evidence that we've published showing that.

Speaker Change: Right right down I Wouldnt tracking your math there yet.

Speaker Change: Should you should recall that the 'twenty two 'twenty three actual results have a full year of FCC revenue.

<unk> is widely used is really bad for patients and if you properly use only where it's appropriate.

Speaker Change: Included.

Speaker Change: 2024 expectation only has this quarter for FCC, we're taking out our SCC test for.

Our tests can save the system about $900 million a year, so that would be a poor outcome for health care costs for patients, but we are we are assuming we don't have that coverage for the rest of the year.

Speaker Change: Out of that guidance for the rest of the year Q2, three and four.

Speaker Change: So to apples, if you want a apples to apples the growth you need to sort of either backup FCC from 2023 or kind of think about what it would look like for 24, just in order to avoid having to reduce or change guidance negatively if.

Okay. That's helpful. And then just the second part no. We don't we don't we don't see we don't think that just decipher.

Or the other tests are not grow and we expect those test to continue to grow.

Speaker Change: If the FCC is no longer reimbursed.

Yes, I think that you kind of clarify.

Speaker Change: We've taken out for the rest of the year and that would be.

It's going on.

The dynamics in the guidance demonstrate just follow up on them.

Speaker Change: As we've talked about in the past call that would be just a terrible outcome for patients I mean, we've already got significant evidence that we've published showing that.

Simple one on gross margins.

I guess going forward, if we are kind of like taking out FCC for little while shall.

<unk> is widely used it's really bad for patients and if you properly used only where it's appropriate.

Should we model like a lower gross margin.

What we've seen in the past quarters could you still have the volume, but <unk> got such great low Eighty's gross margins, what's the right way to think about that.

Speaker Change: Our test can save the system about $900 million a year, so that would be a poor outcome for health care costs for patients, but we are we are assuming we don't have that coverage for the rest of the year.

Forward and then maybe just related to cash.

Could you guys did you say that you can generate cash this year based on what you've done in the past couple of quarters.

Legally.

Speaker Change: Okay. That's helpful and then just a second.

Let me take the first part.

Speaker Change: We don't we don't we don't see we don't think that just decipher.

Yeah.

As you know better than we do call when Youre not paid appropriately for our service you provided us a negative impact on great gross margin. So if we were to not have coverage for one or any of our test and that would impact that gross margin.

Speaker Change: What were the other tests are not growing.

Speaker Change: Those tests continue to grow.

Speaker Change: Yes, I think that you kind of clarify.

Speaker Change: What's going on.

Speaker Change: The dynamics in the guidance that was great just follow up on them.

With appropriate coverage in place we think those margins are stable. If you recall, our our long range guidance was gross adjusted gross margins, Let me correct that adjusted gross margins in the 80% range. So.

Speaker Change: Simple one on gross margins.

Speaker Change: I guess going forward, if we are kind of like taking out FCC for a little while shall.

Speaker Change: Should we model like a lower gross margin.

Speaker Change: What we've seen in the past you saw the volume, but like you've had such great Hello, Ladies gross margins, what's the right way to think about that.

Those those should be stable.

This quarter will be a cash use quarter from operations I would expect.

Speaker Change: Forward and then maybe just related to cash I mean could you guys did you say that you could generate cash this year based on what you've done in the past couple of quarters.

And then the rest of the year.

It will depend on what the reimbursement picture looks like.

Okay. That's helpful.

Speaker Change: Hum.

Speaker Change: <unk>.

Thanks.

Speaker Change: Let me take the first part.

Thanks, Paul Thank you.

Speaker Change: As you know better than we do call when Youre not paid appropriately for our service you provided us a negative impact on greater gross margin. So if we were to not have coverage for one or any of our tests, then that would impact that gross margin.

We now have CDN Ravi, let's keep in mind.

Hey, guys can you hear me okay.

Yes, we got you.

Okay.

As brands offer students, we can ask a quick two parter on.

Speaker Change: With appropriate coverage in place we think those margins are stable. If you recall, our our long range guidance was gross adjusted gross margins, Let me I should correct that adjusted gross margins in the 80% range. So.

Tissue cipher alright.

Alright.

Kind of a delay.

Question on tissue safer.

Speaker Change: Those those should be stable.

Yes.

Speaker Change: This quarter will be a cash use quarter from operations I would expect.

Can you hear me.

Yes, we can hear you.

Hello.

Speaker Change: And then the rest of the year.

Okay got it sorry about that.

Speaker Change: It will depend on what the reimbursement picture looks like.

Just a quick two parter on tissue cipher you mentioned in your last call that some of the key performance drivers were of that.

Speaker Change: Okay. That's helpful. Brian.

Newly diagnosed or re scoped patient population of about 400000 patients.

Brian: Thanks, Scott Thank you.

Speaker Change: We now have Sudan Ravi Keith.

And then secondly, the need for.

Speaker Change: Hey, guys can you hear me okay.

The patients in the non dysplastic groups, making up about 95% of the overall patient population.

Speaker Change: Yes, we got you.

Okay.

Speaker Change: As Brandon on for Susan.

I just wanted to clarify what impact did that have in the fourth quarter.

Brandon: To ask a quick two parter on.

Brandon: Tissue cipher alright.

And what are your expectations for both of those drivers going into 2024. Thank you.

Alright.

Brandon: Kind of a delay.

Yes.

Brandon: Quite a few have partnered on tissue cipher.

We as I think we share we think the market there may be a little bit bigger than we had anticipated when we first were looking at tissue cipher.

Speaker Change: Can you hear me.

Speaker Change: Yes, we can hear you.

Speaker Change: Hello.

Okay got it sorry about that.

The right population for us to think about there is the surveillance endoscopy. So patients that are having a surveillance endoscopy or an upper upper Gi endoscopy for Barrett to <unk>.

Speaker Change: Just a quick two parter on tissue cipher you mentioned in your last call that some of the key performance drivers were of that.

Speaker Change: Newly diagnosed or re scoped patient population of about 400000 patients.

And we've got really good data now that says are about $417000 or so of those a year, which is a higher number than we thought now the second piece of that so that's the total pool.

Speaker Change: And then secondly, the need for.

Speaker Change: The patients in the non dysplastic groups, making up about 95% of the overall patient population.

But we are not.

Speaker Change: I just wanted to clarify what impact did that have in the fourth quarter.

Were not appropriate well it would not be useful to physicians to test on <unk>.

Speaker Change: And what are your expectations for both of those drivers going into 2024. Thank you.

Patients who have that procedure.

And then comeback from Pat Biology, with high grade dysplasia, and Thats about five or five or 6% of those cases are high grade dysplasia.

Speaker Change: Yes.

Speaker Change: We as I think we shared we think the market there may be a little bit bigger than we had anticipated when we first were looking at tissue safer.

The reason is just that at that point, that's going to be concerning it up that the physician is going to want to go ahead to ablate that patient so.

Speaker Change: The right population for us to think about there is the surveillance endoscopy. So patients that are having a surveillance endoscopy or an upper upper Gi endoscopy for Barrett to <unk>.

You can kind of take if you want to use round numbers take 90% of the $4 17, and that's the that's the group. We think we are appropriate for each year now that's a that's more of a.

Speaker Change: And we've got really good data now that says are about 417000 or so of those a year, which is a higher number than we thought now the second piece of that so that's the total pool.

You would want to think of that as most with incidents type measure because there are certainly more patients than that that have barrett, but if theyre not having that surveillance endoscopy, then theyre not theyre not candidates or we wouldn't be wouldn't be able to test. That's the tissue. We test is the is the pitch biopsy tissue from the surveillance endoscopy.

Speaker Change: But we are not.

Speaker Change: Were not appropriate well it would not be useful to physicians to test on.

Speaker Change: Patients who have that procedure.

Speaker Change: And then come back from pathology with high grade dysplasia, and that's about five or five or 6% of those cases are high grade dysplasia and the reason is just that at that point, that's going to be concerning enough that the physician is going to want to go ahead to ablate that patient so.

Thank you.

Your next question comes from Gena Wang with Scotia.

Bank.

Hey, Thanks for taking the question and congrats on the year.

Starting out with the SEC, just kind of a decision Dx SCC.

Speaker Change: You can kind of take it if you want to use round numbers take 90% of the $4 17.

You talked about the overlap with the decision Dx melanoma in terms of I think over 70% of the orders are coming.

Speaker Change: And that's the that's the group we think we are appropriate for each year now that's a that's more of a.

And for both.

Speaker Change: You would want to think of that as most are in incidents type measure because there are certainly more patients than that that have barrett, but if theyre not having that surveillance endoscopy, then they're not they're not candidates or we wouldn't be wouldn't be able to test. That's the tissue. We test is the is the pitch biopsy tissue from the surveillance endoscopy.

There is overlap just kind of curious given that you've had that SEC.

Commercially available now over a year, just curious kind of what youre seeing from the the same store sales at DLL standpoint.

Based on you know with the.

And then their experiences with SEC kind of if you're seeing any trends in terms of reordering patterns and things like that.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Tom Gina from Scotia Bank.

<unk> Derek here.

Hey, Thanks for taking the questions and congrats on the year.

We haven't.

<unk> disclosed in following todays press release as far as I recall.

Tom Gina: Maybe starting out with the SEC, just kind of a decision Dx SCC.

We do expect and did expect early on that clinicians who diagnose.

Tom Gina: You talked about the overlap with the decision Dx melanoma in terms of I think over 70% of the orders are coming.

Skin cancer of cutaneous melanoma will also be the same.

Speaker Change: And for both.

Speaker Change: There is overlap just kind of curious given that you've had that SEC.

<unk> oriented dermatologists, who were diagnosed with skin cancer squamous cell carcinoma. So we assume there'll be significant kind of overlap from a perspective I will refer battology customer be seeing these kinds of patients and two it was also our belief that if these clinicians who adopt that are we're using our decision Dx.

Speaker Change: Commercially available now over a year, just curious kind of what youre seeing from the the same store sales if you will standpoint.

Speaker Change: Based on you know with the physicians and their experiences with SEC kind of if you're seeing any trends in terms of reordering patterns and things like that.

Melanoma test appropriately for medical necessary purposes.

<unk>.

Derek J. Maetzold: <unk> Derek here.

Be more open to I guess seeing how the use of our tests for squamous cell carcinoma would go ahead and fill it or we see is a significant unmet needs.

Speaker Change: We haven't disclosed it and following todays press release as far as I recall.

Speaker Change:

What I think we're seeing is the.

Derek J. Maetzold: We do expect and did expect early on that clinicians who diagnose.

Is the is the actual.

Spirit of our expectation, which is good by the way.

Derek J. Maetzold: Skin cancer of cutaneous melanoma will also be the same.

I think the other aspect here is to say.

Why and the Wi part to me is that in patients with high risk squamous cell carcinoma. There is theres, a pinch point here and as Frank mentioned earlier.

Medically oriented dermatologists, who were diagnosed with skin cancer squamous cell carcinoma. So we assume there'll be significant kind of overlap from a perspective I will restore matala customer be seeing these kinds of patients and two it was also our belief that if these clinicians who adopted our we're using our decision Dx.

99% of the patients that we test today are eligible under guidelines for adjuvant radiation therapy or <unk>.

<unk> adjuvant radiation therapy has been recognized as an effective treatment for high risk patients for I think at least two or three decades.

Derek J. Maetzold: Melanoma tests appropriately for medical necessary purposes.

Derek J. Maetzold: <unk>.

Be more open to I guess seeing how the use of our tests for squamous cell carcinoma would go ahead and feel like what we see is a significant unmet needs.

We've.

Published data recently presented at last summer to the Medicare contractors, demonstrating that not only can our test to identify patients who are in this high risk category, who will have a low risk of progression or a high risk of progression comparatively population based estimate but also able to go ahead and demonstrate that we can find.

Derek J. Maetzold: Otherwise I think we're seeing is the is the has the actual experience of our expectation which is good by the way.

I think the other aspect here is to say.

Why and the Y part to me is that in patients with high risk squamous cell carcinoma.

Who are eligible for AARP, who actually have a very very low likelihood of getting any kind of response and the benefit to that of course is avoiding.

Derek J. Maetzold: There's this pinch point here and as Frank mentioned earlier.

Derek J. Maetzold: 99% of the patients that we test today are eligible under guidelines for adjuvant radiation therapy, or <unk> and adjuvant radiation therapy has been recognized as an effective treatment for high risk patients for at least two or three decades.

Radiation complications the therapy itself.

At least based upon a publication back in January of this year the use of our test in these <unk> eligible patients.

Talc rule out unnecessary intervention, probably saved the Medicare Trust fund north of $900 million, which is a great way to improve healthcare outcomes by reducing complications without benefit and of course cost extraction.

Derek J. Maetzold: We've.

Derek J. Maetzold: Published data recently presented at last summer to the Medicare.

Derek J. Maetzold: Contractors, demonstrating that not only can our test to identify patients who are in this high risk category, who will have a low risk of progression or a high risk of progression comparatively population based estimate but also able to go ahead and demonstrate that we can find people who are eligible for AARP, who actually have a very very low likelihood of getting any kind of response.

Got it.

And then just to follow up on the tissue side for obviously, great to see that product.

You know outperforming your expectations.

Curious looking back what do you think are the key drivers of the outperformance other than you know that market being actually bigger than you had initially estimated.

Derek J. Maetzold: And the benefit to that of course is avoiding.

Derek J. Maetzold: Radiation complications the therapy itself.

While it took away one of the drivers but okay.

Derek J. Maetzold: At least based upon a publication back in January of this year the use of our tests and these <unk> eligible patients.

I think that that what we saw during diligence prior to the acquisition.

Derek J. Maetzold: <unk> rule out unnecessary intervention, probably saved the Medicare Trust fund north of $900 million, which is a great way to improve health care outcomes by reducing complications without benefit and of course cost extraction.

Was a fairly rapid.

Sort of head nodding, yes, I would call it.

From the gas urologists that we.

Contact during diligence about market interest is what's the critical unmet need really like and I think to a T. There was good recognition, saying hey, we have this FDA approved device radiofrequency ablation tool or tools that we use in people with high risk at Arris disease on pet.

<unk> Iris pathology and this tool is going to be very very effective at really stopping progression to esophageal cancer in its tracks.

But the problem is is that we also recognize that because we don't <unk> with people with non dysplastic <unk> esophagus disease.

That ends up being a larger population of people, who actually progress to cancer because it is surveying them.

And so the ability of our test to say Hey, you can take a non dysplastic bearish disease, which has a lower chance. There's a population of progressing compared to a high risk on pathology Barrett patient and we can we can we can demonstrate with our test with a risk of progression is actually higher or the same as depending on what study where it looks at.

<unk> as a high risk technology patient that therefore, the use of an intervention like RFA ablation would be a fantastic way to it too.

To basically halt those patients likelihood of progressing and so that was a fairly easy concept to present to gastroenterologists during diligence and I think the <unk>.

<unk> sort of.

Under sizing the market opportunity during diligence a couple of years ago and that obviously, having impact in terms of volume. The other area is that the assumptions we made in terms of.

Physician interest and really getting to a better treatment plan for their patients is being realized.

Awesome. Thank you so much.

We now have the next question from Nathan Cali from Stephens, Inc.

Hey, guys. This is Jacob on for Mason, Thanks for the questions here.

Just one on SCC real quick so on the.

Updated <unk> guidelines, including decision Dx SCC do you, perhaps have any insight into what level of inclusion or what the language would have to look like and NCC and guidelines to meet the threshold of the <unk> draft LCD based on how its currently written or maybe what are different ways that SEC could be included in the <unk>.

<unk> guidelines, but for whatever reason still not be covered.

So we don't have any insight.

In terms of how that might be considered or discussed I can tell you. What we think is probably appropriate maybe.

So within the within our current squamous cell carcinoma, and CCN guidelines. There is a table that sort of defines patients in the categories of risk.

Having one or more of these.

Clinical pathologic factors puts you in kind of the high risk patient population and having.

<unk> subset or multiple factors puts you in what they call the very high risk patient population both of those populations.

Are eligible for <unk> radiation therapy.

We would think it's probably appropriate given how it's structured and the NCC guidelines to basically add.

Our decision Dx SCC test result, as a molecular factor and that sort of clinical pathologic and now molecular factor table, putting people in the categories of high risk or very high risk disease that to me makes the most logical sense under the current structure.

So that might be an expectation, we would kind of half because it seems to be the easiest way to to have a clinician contemplate.

The value of our tests.

The second question is if the <unk> LCD finalizes as is what is that mean I guess, what's your question if I got it right Jacob.

I would think that one that nobody has any experience with this labor cost LCD to see how.

Different inclusions are approached.

With different test, but I assume if it was included somewhere like I, just described and that should be considered a.

Cover tests lease based upon.

I don't want to say just just natural common logic, there, but that seems to make the most sense.

Yes that makes that makes sense and that's helpful. Thanks for that color there.

And then one follow up here on your pipeline atopic dermatitis test.

Mentioned it on the call that you plan on launching it by the end of 2025 and.

Maybe maybe some additional data this year.

But just on in terms of reimbursement for that test is there a foundational LCD in place that you could obtain Medicare coverage for or would it have to go through the whole submission draft to final LCD process.

That's an excellent question. So there is no.

Foundational LCD or even test specific LCD covering.

These kinds of tasks that could help guide.

With systemic therapy, one should use for psoriasis or atopic dermatitis patients. So that would be is that doesn't exist at all today.

<unk>.

However, it's also important to understand that.

That we think that the inflammatory skin disease test is likely to be a younger population anyway. So you are looking at different reimbursement opportunities besides sort of Medicare playing an important role relative to say melanoma skin cancer.

Okay.

We now have six months.

Okay.

Hi, everyone. This is Tom Peterson on for Catherine Thanks for taking our questions and congrats on a solid quarter and a solid 2023.

Maybe one for Frank just start.

How should we be thinking about opex growth in 2024, and I heard your comment thoughts are today that cash flow from operations came in.

Year end 'twenty four but.

Given the reimbursement outlook I guess, how confident are you in achieving the net positive cash from operations target in 2025, and you had previously thought.

Hey, Thanks for the question as we said before we still we haven't changed or amended that long range target guidance that we gave.

I guess, a year and a half ago, maybe at this point so we're still on track for that.

You'll see opex growth will be will be lower than revenue growth.

But like other companies, we continue to see pressure on on costs in.

Inflation is real so it impacts every every aspect of your business at this point so.

Yes, there is.

Growth to grow the business Theres growth as a result of inflation in the economy and then.

There is also we are working hard to be financially disciplined to make sure we manage to that so.

So still maintaining the guidance we gave in.

Feel good about getting there.

We now have.

Thomas Flaten with Lake tank.

Hey, Thanks, Congrats on the quarter, just just to clarify Frank.

As implied in an answer you gave earlier, but if <unk> finalized is as it is.

You will continue accepting FCC claims, even though youre not going to get paid on them is that is that a.

A fair assumption.

We haven't.

That's a bigger question Thomas.

You stop making the test available.

If it is not being appropriately reimbursed.

I don't know that we've made that decision I think that.

There's a lot that goes into that it's it is a valuable test it's important for patients we're seeing every day.

Literally thousands of doctors.

It's changing the way they are treating their patients.

You and I talked about it my Dad's 85, and if you had a small squamous.

Cancer is on his head and that.

Just because it was a little bit over a centimeter and the doctor wants to do had above the shoulders radiation therapy.

Tough I mean thats.

That'd be that'd be tough to put a patient through so.

We haven't made any decisions about keeping or dropping.

Availability of the tests, but.

We would have to have to wrestle with that at some point if it if it got there I guess.

Got it and you mentioned expanding the tissue sorry for Salesforce and I think last time, you mentioned specific numbers 24 reps is that is that going up to 30 can you give us. Some some quantify can you quantify that and then.

I have a follow on to that any changes youre, making to the IV genetic sales team.

So I don't agree with.

Discuss the numbers, we are targeting growth.

We're planning on working towards as a as a early second quarter expansion firemen I don't think we've disclosed numbers that we can all work now.

And then on IV genetics, Thomas we're keeping an eye on that one as you saw from the report were getting were very pleased with the traction we're getting there.

Again, it's just it's such a test.

Test makes such a difference to the physicians, who are ordering and their patients.

And we really would like to.

Increase the size of the megaphone for that it's a.

Great test and it's it gets good traction, but we're also.

Neil.

Reiterating earlier answer we're also being very careful on on.

On operating expenses and trying to balance that so we will likely not seeing the volume growth that we could possibly see there, but we're making sure that we also don't have up.

A big increase in cash usage.

We now have Mark Massaro.

You May proceed with your question.

And even after Max Thank you for taking the question.

Just keep it to one.

So I think we can publication in <unk> also.

Recognizing that you did how much in steady I actually see fairly recently earlier this year.

Additional evidence of Readouts should we be expecting on the SEC.

So we had discussed.

I guess back in the summer time, though we have presented data.

That had been published in abstract form to both Medicare contractors that we'll reviewing our SCC test.

One piece of data was.

A sort of request I guess, you would say from the Mol Dx program to really you have a more clearer understanding of the independent value that our FCC tests ads on top of and CCM, our BD right staging systems and so.

A publication.

That focuses on that has been accepted and where she'll come out shortly.

One significant piece of data that we think answers.

A significant portion if not all of them. They can be all is too aggressive there how the <unk>.

Questions I guess, you could call those in their draft LCD. The other article which has also been accepted and we presented this data last summer or last fall certainly to both Medicare and also commissions.

Our focus is on the on the.

<unk>.

Newer data of our test too.

Take patients who are eligible for adjuvant radiation therapy identify the proportion of patients who get a really strong benefit from that intervention.

And more importantly, perhaps from a healthcare system and patient care perspective identify the majority of patients who appear to get no benefit from age of radiation therapy, and as such that it allows a clinician and a patient in a shared decision making process to say hey, you are eligible for.

Based upon the decision Dx SCC test result, however.

Say it was that low risk class <unk> test result.

You have a low likelihood of progressing so it's not zero, but it's a lower likelihood than I thought you would you would be at risk for relative to your clinical and pathological factors and by the way.

Our class one test result, and this test from Castle also also demonstrates that you have a very low likelihood of actually receiving any benefit for magic radiation therapy. So that study has also been accepted and again it should be out shortly so I think those are some are some noteworthy near term publication milestones.

Not only important for the.

Clinical use of our tests with clinicians thinking through where do I use. This test how do we use how get value out of it but also hopefully for both of the Medicare contractors.

Okay, great. Thanks for taking the question.

Youre welcome.

Thanks.

Thank you.

We have no further questions. So I would like to hand, it back to Patrick for any final remarks.

This concludes our fourth quarter and full year 2023 earnings call.

We thank you again for joining us today and for your continued interest in castle Biosciences.

Thank you.

This concludes our fourth quarter full year earnings call.

You may now disconnect your line and please enjoy the rest of your day.

Q4 2023 Castle Biosciences Inc Earnings Call

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