Q2 2024 Veracyte Inc Earnings Call
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Unknown Executive: Good day, and thank you for standing by. Welcome to the Veracyte second quarter 2024 financial results call.
Speaker Change: Good day and thank you for standing by welcome to the second quarter 'twenty 'twenty four financial results call. At this time, all participants are in a listen only mode.
Unknown Executive: At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shayla Gorman, Senior Director, Investor Relations. Please go ahead.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
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Speaker Change: I would now like to hand, the conference over to your first speaker today.
Speaker Change: Women Senior director Investor Relations. Please go ahead.
Shayla Gorman: Good afternoon, everyone, and thank you for joining us today for a discussion of our second quarter 2024 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer. Veracyte issued a press release earlier this afternoon detailing our second quarter 2024 financial results. This release, along with a business and financial presentation, is available in the Investor Relations section of our website at www.veracyte.com. Before we begin, I'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities laws.
Speaker Change: Good afternoon, everyone and thank you for joining yesterday for a discussion of our second quarter 2024 financial result, with.
Speaker Change: With me today are Marc Stapley birthday, Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer.
Speaker Change: <unk> issued a press release earlier this afternoon detailing our second quarter 2024 financial result, that's released along with our business and financial presentation is available in the Investor Relations section of our website at <unk> Dot com.
Shayla Gorman: Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. Additionally, we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
Speaker Change: Before we begin I'd like to remind you that various statements that we may make during this call will include forward looking statements as defined under applicable securities laws forward looking statements are subject to risks and uncertainties and the company can give no assurance they will prove to be correct. Additionally, we are not under any obligation to provide further up.
Speaker Change: Based on our business trends or our performance during the quarter.
Shayla Gorman: To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including Veracyte's most recent Forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in today's earnings release accessible from the IR section of Veracyte's website. This quarter, we have updated our non-GAAP measures to exclude stock-based compensation to provide a better comparison to our peers and help investors gain a better understanding of our performance.
Speaker Change: I understand the risks and uncertainties that could cause actual results to differ we refer you to the documents that Variscite files with the Securities and Exchange Commission, including verify its most recent 10-Q and 10-K.
Speaker Change: In addition, this call will include certain non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release accessible from the IR section of Aerospace website. This.
Speaker Change: This quarter, we have updated our non-GAAP measures to exclude stock based compensation to provide better comparison to our peers and help investors gain a better understanding of our performance.
Shayla Gorman: Furthermore, all comparisons to prior periods are to the updated non-GAAP metrics that exclude stock-based compensation. We have included a schedule of the non-GAAP adjustments for prior periods in today's earnings presentation, available on the Investor section of our website. I will now turn the call over to Marc Stapley, Veracyte's CEO.
Speaker Change: Further all comparisons to prior periods are to the updated non-GAAP metrics that exclude stock based compensation.
Speaker Change: <unk> included a schedule of the non-GAAP adjustments for prior periods in today's earnings presentation available on the investors section of our website I will now turn the call over to Marc Stapley has various sites CEO.
Marc Stapley: Thanks, Shayla, and thanks to everyone for joining us today. I couldn't be more pleased to share with you the drivers of what I believe is Veracyte's best quarter to date. Importantly, we saw an acceleration of demand for both Decipher and Affirma that exceeded even our highest expectations coming into the quarter. As a result, we delivered second-quarter revenue of $114.4 million, growing 27% compared to the prior year period. Testing revenue grew 31% over the prior year period, well ahead of our expectations. With our disciplined focus and strong fiscal management, this over-performance on top-line growth contributed to our most profitable quarters to date. We generated $5.7 million in GapNet income, and our adjusted EBITDA margin was an industry-leading 21%.
Marc Stapley: Thanks, Sheila and thanks, everyone for joining us today.
Marc Stapley: I couldnt be more pleased to share with you the drivers of what I believe is verify its best quarter to date.
Marc Stapley: Importantly, we saw an acceleration of demand for both the <unk> that exceeded even our highest expectations coming into the quarter.
Marc Stapley: As a result, we delivered second quarter revenue of $114 4 million growing 27% compared to the prior year period.
Marc Stapley: <unk> revenue grew 31% over the prior year period, well ahead of our expectations.
Marc Stapley: With our disciplined focus and strong fiscal management. This over performance on top line growth contributed to our most profitable quarter to date.
Marc Stapley: We generated $5 7 million and GAAP net income.
Marc Stapley: And our adjusted EBITDA margin was an industry leading 21%.
Marc Stapley: I have previously stated that I believe a well-run specialty diagnostics company like ours could achieve 25% adjusted EBITDA margins. And as you can see, we are well on our way to reaching that level of profitability. Before I get into this quarter's performance, I want to remind you that we are highly focused on five strategic imperatives. One, continued growth in Decipher, to continued growth in Farmer. 3.
Marc Stapley: I have previously stated that I believe are well run specialty diagnostics company like ours could achieve 25% adjusted EBIT margin.
Marc Stapley: And as you can see we are well on our way to reaching that level of profitability.
Marc Stapley: Before I get into this quarter's performance I want to remind you that we are highly focused on five strategic imperatives.
Marc Stapley: Launch of multiple IVD products to expand geographically. For example, for Solving New Cancer Challenges and Five, serving more of the patient journey. Regarding number three, I am pleased to share that we have just submitted our existing ProSigna end-counter test for approval under the IVDR framework. Recall that this is a foundational step that we expect to enable the launch of future IVD testing for oncology around the world and drive the commercialization of our IVD portfolio. Turning to number four, we're making good progress on solving new cancer challenges with Nightingale, our pivotal trial for nasal cancer. And with respect to number five, we continue to forge our way across the patient journey with the development of our first MRD test for muscle-invasive bladder cancer using our whole genome platform, a platform that is extensible across multiple indications.
Marc Stapley: One continued growth in decipher.
Marc Stapley: Continued growth in Afirma.
Marc Stapley: <unk> launch of multiple IBD products to expand geographically.
Marc Stapley: For solving new cancer challenges.
Marc Stapley: And five serving more of the patient journey.
Speaker Change: Regarding number three I am pleased to share that we just submitted our existing pro Cigna and counter tests for approval under the IBD All framework Rick.
Marc Stapley: Call that this is a foundational step the we expect to enable the launch of future IBD testing oncology around the world and drive the commercialization of our IBD portfolio.
Marc Stapley: Turning to number four we're making good progress on solving new transfer challenges with 19 Gal a pivotal trial for nasal swab.
Marc Stapley: And with respect to number five we continue to forge our way across the patient journey with the development of our first <unk> test for muscle invasive bladder cancer using a whole genome platform a platform that is extensible across multiple indications.
Marc Stapley: We expect these three longer-term strategic imperatives will layer on new revenue growth S-curves a number of years from now on top of what we believe is durable Decipher and Affirma growth. Now, turning to the current quarter.
Marc Stapley: We expect these three longer term strategic imperatives will layer on new revenue growth as Scott has a number of years from now on top of what we believe is durable decipher in afirma growth.
Marc Stapley: I have talked before about the power of our Veracyte Diagnostics Platform, which I believe is behind our strong performance and impressive growth. This unique approach relies on broad sets of genomic and clinical data, deep bioinformatics and AI capabilities, and a powerful evidence generation engine.
Marc Stapley: Now turning to the current quarter.
Marc Stapley: I have talked before about the power of our verify diagnostics platform.
Marc Stapley: Which I believe is behind our strong performance and impressive growth.
Marc Stapley: This unique approach relies on broad sets of genomic and clinical data.
Marc Stapley: Deep bio informatics and AI capabilities.
Marc Stapley: And a powerful evidence generation engine.
Marc Stapley: This flywheel for growth builds increasingly strong and differentiated evidence for clinical validity and utility that ultimately drives guideline inclusion and, combined with our proven commercial and managed care excellence, ensures broad adoption and reimbursement for our on-market diagnosis. Evidence of this can be seen in the positive trend in ASP we've delivered, driven by our managed care and billing teams, ensuring that patients who are indicated for diagnostic testing are able to access those tests, and that we are paid appropriately and timely when our products are selected by physicians for those patients.
Marc Stapley: This flywheel for growth built increasingly strong and differentiated evidenced the clinical delivery and utility, but ultimately drive guideline inclusion and combined with our proven commercial and managed care excellence ensures broad adoption and reimbursement for on market diagnostics.
Marc Stapley: Evidence of this can be seen in the positive trend in ASP, we've delivered driven by our managed care and billing teams ensuring that patients who are indicated for diagnostic testing are able to access those tests.
Marc Stapley: And then we are paid appropriately and timely when our products are selected by physicians for those patients.
Marc Stapley: Our ASP has grown at a 5% CAGR over the last two years as we focused on gaining new contracts and resolving prior payment challenges. Another key to the Veracyte Diagnostics Platform is the flywheel of evidence generation led by our clinical and medical teams. The Fuels Adoption and Guidelines Inclusion, The outstanding decipher and affirmer volume growth that we're seeing is a direct result of this flywheel in action, together with the execution of our talented commercial team.
Marc Stapley: Our ASP has grown at a 5% CAGR over the last two years as we focused on gaining new contracts and resolving prior payment challenges.
Marc Stapley: Another key to the verify diagnostics platform is a flywheel of evidence generation led by our clinical and medical teams.
Marc Stapley: The fuels adoption and guideline inclusion.
Marc Stapley: The outstanding Decipher NFL volume growth that we're seeing is a direct result of this flywheel in action.
Marc Stapley: Whether with the execution of our talented commercial teams.
Marc Stapley: Specifically, on urology testing, for the second year in a row, we saw a step function change in demand for Decipher during the second quarter. Sequentially, Decipher Prostate grew by 3,400 tests as we delivered approximately 19,900 tests in the quarter, a new record, now reaching more patients in a single month than we did in a whole quarter when we acquired Decipher in 2021. Importantly, volume growth, which equated to 32% year over year, was driven by both new physician adoption and deeper penetration into existing accounts.
Marc Stapley: Specifically on urology testing for the second year in a row, we saw a step function change in demand for this site for during the second quarter.
Marc Stapley: Sequentially decipher prostate grew by 3400 tests as we delivered approximately 19900 tests in the quarter, a new record now reaching more patients in a single month and we did it in a whole quarter when we acquired deciphered in 2021.
Marc Stapley: Importantly, volume growth, which equated to 32% year over year was driven by both new physician adoption and deeper penetration into existing accounts.
Marc Stapley: This is another favorable data point that gives us confidence that Decipher has plenty of headroom for durable future growth, with the majority of the market still unpenetrated. The updated NCCN guidelines published in February were a significant catalyst to adoption, as decipher prostate received the highest evidence level rating among molecular tests in the guidelines and was included in the principles of risk stratification section, which details treatment implications based on the NCCN classification and decipher score.
Marc Stapley: It is another favorable data point that gives us the confidence to decipher has plenty of headroom for durable future growth with the majority of the market is still under penetrated.
Marc Stapley: The updated end CCN guidelines published in February where significant catalysts to adoption as decisive prostate received the highest evidenced level racing among molecular tests and the guideline and was included in the principles of risk stratification section, which details treatment implications based on the end CCN classification and decipher.
Marc Stapley: Score.
Marc Stapley: This result underscores both the mountain of evidence behind the test as well as its broad utility for patients diagnosed with prostate cancer, from those who are low risk and on active surveillance to those who are intermediate risk all the way up to NCCN high-risk patients and patients after surgery. Even with the level of evidence behind the Decipher prostate test today, we are committed to continuing to support additional research to advance prostate cancer science.
Marc Stapley: This result, underscores both the mountain of evidence behind the test as well as its broad utility for patients diagnosed with prostate cancer.
Marc Stapley: Those who are low risk and on active surveillance.
Marc Stapley: So those who are intermediate risk all the way up to NCC in high risk patients and patients after surgery.
Marc Stapley: Even with the level of evidence behind the decipher prostate test today, we are committed to continuing to support additional research to advanced prostate cancer science.
Marc Stapley: In the second quarter alone, there were three newly published Decipher prostate test studies, including a real-world data population-based analysis of Decipher linked to the National Cancer Institute's SEER database demonstrating the test's clinical utility. And we are very eager to be able to offer prognostic and predictive insights to patients with metastatic disease. A cohort for whom more information can make an even greater difference at pivotal moments in their cancer journey. Given that WPS issued their Local Coverage Determination, or LCD, for metastatic prostate cancer last week, we now expect the finalization of the Palmetto LCD soon.
Marc Stapley: In the second quarter alone.
Marc Stapley: Three newly published decipher prostate test studied including our real World data population based analysis of decipher links to the National Cancer Institute Seer database, demonstrating the test clinical utility.
Marc Stapley: And we are very eager to be able to offer prognostic and predictive insights for patients with metastatic disease.
Marc Stapley: Our cohorts, a and more information can make an even greater difference at pivotal moments in their cancer journey.
Marc Stapley: Given the WPS issued a local coverage determination or LCD for metastatic prostate cancer last week, we now expect the finalization of the Palmetto LCD soon.
Marc Stapley: This will provide an additional vector for growth accounting for an estimated 30,000 of the 300,000 newly diagnosed prostate cancer patients annually. Moving to Affirma, we also reported a new quarterly volume record with approximately 15,700 test results, or 17% year-over-year growth. This performance for a test that has been on the market for over a decade is a testament to our diagnostic platform and commercial approach and supports our positive outlook for our long-term growth profile, fueled by both Decipher and Affirm.
Marc Stapley: This will provide an additional vector for growth accounting for an estimated 30000 of the 300000 newly diagnosed prostate cancer patients annually.
Marc Stapley: Moving to Afirma, we also reported a new quarterly volume record with approximately 15700 test results or 17% year over year growth.
Marc Stapley: This performance for test has been on the market for over a decade is a testament to our diagnostic platform and commercial approach and supports our positive outlook for long for a long term growth profile fueled by both decipher underfunded.
Marc Stapley: The differentiated level of evidence for the performance of the AFIRMA test, alongside the ease of use for physicians, drove volume increases with growth coming from new customers and our current customer base. Our Research Use Only or RUO Affirmer Grid Offering is another way we continue to further our leadership in the endocrinology market. This tool provides physicians with additional data to advance the science around thyroid nodules and cancer. This quarter at Endo 2024, the annual meeting of the Endocrine Society. Three studies leveraging information from a firmer grid were presented, highlighting the importance of this tool in helping to unlock new molecular insights from thyroid tumors, which may ultimately further personalize treatment of the disease.
Marc Stapley: The differentiated level of evidence for the performance of the Afirma test alongside the ease of use for physicians drove volume increases with growth coming from new customers and our current customer base.
Marc Stapley: Our research use only or are you a firm a grid offering is another way we continue to further our leadership in the endocrinology market.
Marc Stapley: This tool will provide physicians with additional data to advance the science around thyroid nodules in cancer.
Marc Stapley: This quarter at Endo 2020 for the annual meeting of the Endocrine Society three.
Marc Stapley: <unk> three studies leveraging information from a further grid were presented highlighting the importance of this tool in helping to unlock new molecular insights from Fireeye tumors, which may ultimately further personalized treatment of the disease.
Marc Stapley: This quarter, approximately half of physicians ordering a Firma chose to receive the RUO Firma grid information, demonstrating a high level of interest in contributing to research. We also achieved a significant milestone in June, as Maldi-X finalized an expanded local coverage determination for Affirma, adding reimbursement for Medicare and Medicare Advantage patients with Bethesda V thyroid nodules or those that are suspicious for cancer. There are up to 30,000 patients with nodules classified as Bethesda V annually, of which we assume approximately one-third will be covered under Medicare and Medicare Advance.
Speaker Change: This quarter approximately half of physicians ordering afirma chose to receive the EUR from our great information.
Marc Stapley: Demonstrating a high level of interest in contributing to research.
Marc Stapley: We also achieved a significant milestone in June as <unk> finalized an expanded local coverage determination for afirma, adding reimbursement for Medicare and Medicare advantage patients with Bethesda, five thyroid nodules or those that are suspicious for cancer.
Marc Stapley: They are up to 30000 patients with nodules classified as Bethesda, five annually of which we assume approximately one third will be covered under Medicare and Medicare advantage.
Rebecca Chambers: This is an important step in both expanding our market for a firmer and furthering our leadership in endocrinology. Our confidence in continued growth driven by Decipher and Affirma has only increased with this quarter's outstanding performance. With durable market share gains, further penetration into existing accounts, expanded indications, and more use cases in our available markets, we are making progress towards 80% penetration for both prostate and thyroid cancer molecular tests, from 35% and 60%, respectively, coming into the year.
Marc Stapley: This is an important step in both expanding our market for afirma as well as furthering our leadership in endocrinology.
Marc Stapley: Our confidence in continued growth driven by deciphered Afirma has only increased with this quarter's outstanding performance.
Marc Stapley: With durable market share gain further penetration into existing accounts expanded indications of more use cases in our available market, we are making progress towards the 80% penetration for both prostate and thyroid cancer molecular tests.
Marc Stapley: From 35% and 60% respectively coming into the year.
Rebecca Chambers: Further, paired with the ASD improvements and the Decipher and Affirma Volume Catalysts delivered this year so far, there is compelling evidence that we are primed to continue to deliver robust revenue growth for the foreseeable future, near-term, mid-term, and even long-term, especially in the case of Desai. We plan on underpinning this growth with continued profitability and cash generation, while also investing in future innovation. With that, I will now turn to Rebecca to review our financial results for the quarter and our heightened expectations for 2020.
Marc Stapley: Further paired with the ASP improvements in the decipher in Afirma volume catalysts delivered this year so far.
Marc Stapley: There is compelling evidence that we are primed to continue to deliver robust revenue growth for the foreseeable future.
Speaker Change: Near term mid term and even long term, especially in the case of <unk>.
Marc Stapley: We plan on underpinning this growth with continued profitability and cash generation, while also investing in future innovation.
Marc Stapley: With that I will now turn to Rebecca to review, our financial results for the quarter and heightened expectations for 2024.
Rebecca Chambers: Thanks, Marc. Q2 was a fantastic quarter with $114.4 million in revenue, an increase of 27% over the prior year period. We grew total volume to approximately 39,000 tests, a 23% increase over the same period in 2023. Testing revenue during the quarter was $107 million, an increase of 31% year-over-year, driven by Decipher and Affirmative Volume, along with ASP Group. Total testing volume was approximately 36,000
Rebecca Chambers: Thanks, Mark Q2 was a fantastic quarter with $114 4 million in revenue an increase of 27% over the prior year period. We grew total volume to approximately 39000 tests, a 23% increase over the same period in 2023.
Rebecca Chambers: Testing revenue during the quarter was $107 million, an increase of 31% year over year, driven by decipher in Afirma volume along with ASP.
Rebecca Chambers: Total testing volume was approximately 36000 tests testing ASP was approximately $2950, which included approximately $4 million of prior period collections. It is important to recognize that while these adjustments are for tests delivered in prior periods. This result is driven by sustainable efficiencies in our bill.
Rebecca Chambers: The Testing ASP was approximately $2,950, which included approximately $4 million of prior period collections. It is important to recognize that while these adjustments are for tests delivered in prior periods, this result is driven by sustainable efficiencies in our billing and collections process. Adjusting for the impact in the quarter, testing ASP would have been approximately $2,850. Second quarter product volume was approximately 3000 tests, and product revenue was $3.9 million. We continue to expect supply chain issues to suppress supply of the ProSigna encounter tests in the second half of this year and perhaps beyond.
Rebecca Chambers: And collections processes.
Rebecca Chambers: Adjusting for the impact in the quarter testing AFP would've been approximately $2850.
Rebecca Chambers: Second quarter product volume was approximately 3000 tests and product revenue was $3 $9 million, we continue to expect supply chain issues to suppress supply of the Prosigna and counter tests in the second half of this year and perhaps beyond.
Rebecca Chambers: Biopharmaceutical and other revenue was $3.6 million, down 22% year over year. Moving to gross margin and operating expenses, I will highlight our non-GAAP results. Our non-GAAP metrics exclude, where applicable, the amortization of acquired and tangible assets, stock-based compensation, other acquisition-related expenses, restructuring costs, and certain other adjustments.
Marc Stapley: Biopharmaceutical and other revenue was $3 6 million down 22% year over year.
Speaker Change: Moving to gross margin and operating expenses I will highlight our non-GAAP results, our non-GAAP metrics exclude where applicable the amortization of acquired intangible assets stock based compensation and other acquisition related expenses restructuring costs and certain other adjustments.
Rebecca Chambers: Non-gap gross margin was 71%, up approximately 350 basis points compared to the prior year period. Testing growth margin was 74%, up 250 basis points compared to the prior year period due to ASP improvements and prior period cash collection. Product margin was 52% due to favorable manufacturing variance.
Marc Stapley: non-GAAP gross margin was 71% up approximately 350 basis points compared to the prior year period.
Marc Stapley: Testing gross margin was 74% up 250 basis points compared to the prior year period due to ASP improvements in prior period cash collections.
Marc Stapley: Product margin was 52% due to favorable manufacturing variances.
Rebecca Chambers: With investments in service support in the second half of the year, we expect product margin to be below historical averages. Biopharmaceutical and other gross margin was negative 4% down year over year due to lower fixed cost absorption. In July, we executed our voluntary reduction plan in Marseilles, which is expected to benefit our cost structure going forward.
Marc Stapley: With investments in service support in the second half of the year, we expect product margin to be below historical averages biopharmaceutical and other gross margin was negative 4% down year over year due to lower fixed cost absorption in July we executed our voluntary reduction plan in Marseille, which is expected to benefit our cost.
Rebecca Chambers: However, given our anticipated second half revenue, we expect full-year biopharm and other gross margin to be at or slightly below the second quarter level. Non-GAAP operating expenses were up 14% year-over-year to $59 million. Research and development expenses increased by $3.5 million to $14.6 million due to personnel additions with the C2I acquisition and increased costs related to our Nightingale clinical studies. Sales and marketing expenses declined by $800,000 to $21.9 million due to lower personnel costs from the Ambizia sales force reduction, partially offset by higher commissions.
Marc Stapley: Going forward, however, given our anticipated second half revenue, we expect full year biopharma and other gross margin to be at or slightly below the second quarter level.
Marc Stapley: non-GAAP operating expenses were up 14% year over year to $59 million research and development expenses increased by $3 5 million to $14 6 million given personnel additions with the <unk> acquisition and increased costs related to our Nightingale clinical studies.
Marc Stapley: Sales and marketing expense declined by $800000 to $21 $9 million due to lower personnel costs from the <unk> sales force reduction, partially offset by higher commissions.
Rebecca Chambers: G&A expenses were up $4.7 million to $22.6 million, driven by higher variable compensation given our updated full-year outlook and other personnel costs. Moving to profitability metrics, As Marc shared, we are proud of our Q2 results. We recorded a gap net income of $5.7 million, inclusive of a $3 million restructuring charge in relation to our Marseilles location. We delivered adjusted EBITDA of $24 million, or 21% of revenue, well on our way to our goal of sustained 25% adjusted EBITDA margin. We also generated $29.6 million of cash from operations and ended the quarter with $235.9 million of cash and cash equivalents.
Marc Stapley: G&A expenses were up $4 7 million to $22 $6 million driven by higher variable compensation, given our updated full year outlook and other personnel costs.
Marc Stapley: Moving to profitability metrics as Mark shared we are proud of our Q2 results. We recorded GAAP net income of $5 $7 million inclusive of a $3 million restructuring charge in relation to our Marseille location.
Rebecca Chambers: Turning now to our 2024 Outlook, we are excited to raise our total revenue guidance to $432 million to $438 million from our prior guidance of $402 to $410 million. This reflects a significant improvement in the outlook for our testing business with revenue growth of approximately 25%, a substantial increase compared to our prior guidance of 15 to 18%. We are also raising our cash guidance and expect to end 2024 with between $260 million and $270 million in cash, cash equivalents, and short-term events.
Rebecca Chambers: Moving to the third quarter, we are forecasting a sequential decline in total revenue, given typical seasonality and the impact of prior year period cash collections in the second quarter. We expect Q4 revenue to be a sequential step up from Q3. Additionally, we anticipate adjusted EBITDA margins in the second half of the year to be slightly above the first half of the year as we sustain our fiscal discipline. I am thrilled with our strong start to 2024 and our commitment to driving revenue growth with a focus on profitability and continued cash generation. I am further grateful for the contributions of all of our employees towards our vision of helping cancer patients globally. Now, we'll go into the Q&A portion of the call. Operator, please open the line.
Marc Stapley: To be slightly above the first half of the year as we sustain our fiscal discipline I.
Speaker Change: I am thrilled with our strong start to 2024, and our commitment to driving revenue growth with a focus on profitability and continued cash generation I am further grateful for the contributions of all of our employees towards our vision of helping cancer patients globally will now go into the Q&A portion of the call.
Speaker Change: <unk>. Please open the line.
Unknown Executive: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile the Q&A list. Our first question is from the line of Mason Carrico with Stevens Inc. Your line is now open.
Speaker Change: Thank you at this time, we will conduct the question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile the Q&A roster.
Marc Stapley: Okay.
Mason <unk>: Our first question is from the line of Mason <unk> with Stephens, Inc. Your line is now open.
Marc Stapley: Hey guys, thanks for taking the questions here. Marc or Rebecca, could you remind us what steps you still need to take or go through, I guess, once this metastatic LCD is finalized in order to secure coverage and what you're thinking about the timeline there?
Mason: Hey, guys.
Mason <unk>: Thanks for taking the questions here.
Mason: Martin Rebecca could you remind us what steps you still need to take or go through I guess once this metastatic LCD is finalized in order to secure coverage and how youre thinking about the timeline there.
Marc Stapley: Yeah, happy to. Once we get the finalization from Palmetto, which would cover Meridian as well, we'll have to go through the technology assessment process, which will take a number of months. And then, obviously, we've got to train ourselves for it and make sure we do a structured rollout as they work with physicians to make sure they understand the metastatic test and how it's to be deployed. And then we've got to go through the billing process. So we think of this as a 2025 activity, more so than 2024, with really starting in the first half and obviously ramping up as the year goes on.
Speaker Change: Yes happy to.
Marc Stapley: A reminder that there are roughly 30,000 patient incidences per year of metastatic disease that could apply here, and roughly 2 thirds or so would be Medicare or Medicare Advantage. The other element of this is that, of course, we'd have to work through commercial payers as well. And that takes a little bit.
Speaker Change: So once we get the Finalization from Palmetto, which would come in iridium as well.
Speaker Change: We will have to go through the tech assessment process.
Marc Stapley: Which will take a number of months and then obviously we've got to.
Speaker Change: Train our sales force and make sure we do a structured rollout.
Speaker Change: As they work with.
Marc Stapley: And just to be abundantly clear on this, Mason, there's currently nothing embedded in our 2024 guide for metastatics.
Unknown Executive: Perfect. Okay, that's helpful.
Marc Stapley: And then on cash generation during the quarter, the balance sheet's in great shape. Could you talk about how you're thinking about capital allocation going forward? What are some of the key internal investments you're making here? How does M&A fit in? Do you plan on adding commercial heads anywhere throughout the organization?
Marc Stapley: Yeah, you know, if you think about organically, the investments that we're making, we've been making all the investments that we feel like we need to make. We've been generating positive cash flow for a little while now, and obviously, this quarter was very strong.
Marc Stapley: But we're not, we've not been holding back is probably the best way to say in terms of adding commercial, you know, teams. We're getting tremendous leverage out of the commercial team. We've got every sales rep we need. We, you know, we're adding a couple here and there, wherever we need to launch new territories. And then, you know, on the R&D side, we're investing in three long-term growth drivers and programs that are each roughly equal, give or take a few million dollars in terms of the investment that we're making in each of them.
Speaker Change: Roughly equal give or take a few million dollars in terms of the investment that we're making in each of them and together they account for more than half of our R&D spend.
Marc Stapley: And together, they account for more than half of our R&D spend. So organically, I don't think our positive cash generation really changes much around our strategies and focus. In terms of M&A and that type of activity, again, I don't think it really changes much.
Speaker Change: Organically I don't think our positive cash Jennifer generation really changes much around our strategy and focus in terms of M&A in that type of activity.
Speaker Change: Again, I don't think it really changes much we've always said that.
Marc Stapley: We've always said, you know, the type of targets that we'd be interested in would be something that has a clear path to reimbursement and, you know, positive growth and revenue generation. We don't want to take on multi-year R&D projects. We've got enough of those that we're working on ourselves. And so there's not a lot of, you know, I'd say suitable targets out there.
Speaker Change: Type of targets that we'd be interested in would be something that has a clear path to reimbursement.
Speaker Change: Positive.
Speaker Change: Both in revenue generation.
Speaker Change: We don't want to take on multi year R&D projects, we got enough of those that we're working on ourselves.
Marc Stapley: So theres no.
Marc Stapley: I would say suitable targets out there having said that we always kick the tires, we always take a look at whatever comes our way and given how well we've been performing on the strength of our balance sheet. As you can imagine we get a lot of inbounds.
Marc Stapley: Having said that, we always kick the tires, we always take a look at whatever comes our way. And given how well we've been performing on the strength of our balance sheet, you can imagine we get a lot of inbound. So, no change in our approach here, and we'll continue to generate positive cash flow going forward and deploy it. We're right in the middle of or about to start our 2025 budgeting process, so we haven't even decided on the capital allocation for next year. I understand. Thank you.
Marc Stapley: So no change in our approach here.
Marc Stapley: We will continue to positive generate positive cash flow going forward and deploy it.
Marc Stapley: We're right in the middle or about to start off 2025 budgeting process. So we haven't even decided the capital allocation for next year.
Unknown Executive: Understood. Thank you, guys.
Speaker Change: Understood. Thank you guys.
Nathan: Thanks Nathan.
Speaker Change: Thank you.
Unknown Executive: Our next question comes from the line of Tejas Savant with Morgan Stanley. Your line is now open.
Speaker Change: Our next question comes from the line of Tejas Savant with Morgan Stanley. Your line is now open.
Marc Stapley: Hello, this is Yuko on the call for Tejas. Thank you for taking our question. With IP litigation increasingly coming into focus, particularly in light of twin-strand IP licensing by ExactSciences, what are the implications, if any, for your MRD portfolio strategy? Could we see you participate in any patent pool sharing along the lines of what we saw between Personalis and Myriad recently?
Marc Stapley: Yeah, great question. So, as you know, we acquired our C2I business in early this, part of this year, and as we mentioned, when we did that, we took a very specific approach of looking for an asset that is a whole genome-based approach, because really, primarily, it fits with our Veracyte Diagnostics platform of more data is better, and so for every time you run the sample, you get a whole genome, and you'll see, you've seen us leverage that kind of approach with Decipher and now Affirma with Grid.
Marc Stapley: So, that was the primary purpose. Secondarily, of course, we looked at the freedom to operate in the IP landscape, and that approach gives us a lot more room than, I think, some of the targeted approaches that you're seeing a lot of this activity around, and so we don't feel, we don't believe that that is a, I mean, you know, you never know, but we don't believe that that is an area of concern for us, because specifically of the approach that we've taken.
Marc Stapley: You know, going forward, I don't think there's necessarily any need for us to get involved in patent pools and so on, and, you know, we'll see where this whole space evolves over time.
Marc Stapley: Got it. Thank you for that. And with respect to Bethesda Pfeiffer Pharma, with about a third of the population coming from Medicare, how quickly do you think that commercial payers could come on board following reimbursement? Have you started to have discussions with payers already?
Speaker Change: But have you started to have discussion with payers already.
Marc Stapley: Yeah, I mean, over a period of time, there has already been some element of commercial payers paying for Bethesda Five. So now Medicare has caught up with that, and then there are some that aren't.
Speaker Change: Yes, yes.
Speaker Change: Over a period of time, there has already been some element of commercial payers are paying for the first of five <unk>.
Speaker Change: Medicare has caught up with that and then there's some that are obviously now with the LCD, we're able to go to those commercial payers and leverage that to try and drive an update and policy. So we will continue that activity you know it takes a long time, there's a lot to go and do a lot of blocking and tackling and there are other big priorities too so Bethesda five remember.
Marc Stapley: Obviously, now with the LCD, we're able to go to those commercial payers and leverage that to try and drive an update in policy. So we'll continue that activity. You know, it takes a long time. There's a lot to go and do, a lot of blocking and tackling, and there are other big priorities too. Bethesda Five, remember, is about 30,000 patients. So we're getting some of that already.
Speaker Change: <unk> is about 30000 patients.
Speaker Change: So we're getting some of that already and I was just going to add in the volume number that we say for pharma.
Rebecca Chambers: Yeah, and I was just going to add, in the volume number that we cite for AFIRMA, Bethesda 5 samples are included in that that are being run and reimbursed for, well, that are being run for AFIRMA at this point in time, and then the commercial component is also embedded in that ASP for AFIRMA. So just so you can have an understanding of where we're at.
Speaker Change: Is the five samples are included in that that are being run and reimburse for wells that are being run.
Speaker Change: For Afirma at this point in time and then the the commercial component is also embedded in that ASP for Afirma. So just so you can have an understanding of where we're at.
Unknown Executive: Got it. Thank you very much.
Speaker Change: Got it thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you.
Unknown Executive: Our next question comes from the line of Andrew Brackmann with William Blair. Your line is now open.
Speaker Change: Our next question comes from the line of Andrew Brachman with William Blair. Your line is now open.
Marc Stapley: Hi, everyone. This is Maggie Bowie on for Andrew today. Thanks for taking our questions. Um, maybe just to start on the Decipher front, just as you think about the levers of growth in the back half of the year and into 2025, how much of that should come from elevated incidence versus account penetration and then versus share gains?
Maggie Buoy: Hi, everyone. This is Maggie buoy on for Andrew today, Thanks for taking our question.
Marc Stapley: Yeah, great question. I actually don't think it's really to do with incidence, although the incidences of prostate cancer are going up. If you look at some of the data there, it's kind of a high single-digit growth in the incidences. Of course, metastatic for us enables us to target that entire 300,000 a year annual incidence of prostate cancer now, so it gives us the final piece of that puzzle.
Marc Stapley: What we're seeing and what we believe that we're going to continue to see is both penetration in the market. If you remember, at the beginning of this year, we said the market was about 35% penetrated, so there's a lot of white space to go after there, so further penetration of that market and even further share gains. It's pretty evident in the numbers that we're posting. We're seeing a combination of both, and they're both significant drivers.
Marc Stapley: I mentioned this in my prepared remarks, but I do think the NCCN level 1B guidelines and the specific table around that are a significant driver of what we're seeing as a step function increase this quarter and maybe a new normal, too early to tell in terms of the growth curve. But certainly, it stepped up in Q2 like it did this time last year when we got the first NCCN. So clearly, a significant factor in growth, and this is why we've said, plus obviously the ASP gains that Rebecca talked about, this is why we said we felt very comfortable with the durability of the growth in December. Absolutely.
Rebecca Chambers: Yes, absolutely. I was going to add in the ASP gains, but I think it's really important to note, Maggie, that we had two major catalysts for Decipher really present themselves over the course of the first quarter, which were manifested in the second quarter, as Marc cited, and I think those were really great wins for the internal team, which drove both the publications in support of NCCN Level 1, as well as the conversations with the major payer that we cited.
Unknown Executive: And then maybe just one on the pipeline. Could you set us up on MRD and then just what we should be expecting in terms of catalyst and data generation for the MRD assay, and just how we should be thinking about the next six quarters or so before it comes to market?
Maggie Buoy: Catalysts and data generation for the Mardi assay and just how we should be thinking about the fixed.
Speaker Change: Six quarters or so before it comes to market.
Marc Stapley: Yeah, thanks for reminding us of the timing there. And then remember, the MRD, our approach is, well, this is a platform, a whole genome platform that can address multiple indications. And you can imagine us, you know, thinking about the indications that we're currently in, as well as new indications. We are starting with our first, and it's more than a proof of concept, but think of it as our pilot MRD launch in muscle-invasive bladder cancer.
Maggie Buoy: Yes.
Speaker Change: Thanks for reminding us of the timing there and then remember the MLD. Our approach is while this is a platform of whole genome platform that can address multiple indications.
Speaker Change: And you can imagine us thinking about the indications that we're currently in as well as new indications. We are starting with our first and it's more of a proof of concept to think of it as a pilot launch in muscle invasive bladder cancer.
Marc Stapley: And so we will launch that test in 2026. You will see us do it. We'll obviously have to do the technical assessment, get the reimbursement, again, train the sales force, very similar to what we talked about for Decipher Metastatic. But, you know, we got to run some samples there and do some of that activity, as well as, you know, set it up in our CLIA lab. Regarding the automation for whole genome sequencing, we don't do that today, so we have to ingest that into our lab.
Maggie Buoy: And so we will launch that test in 2026.
Maggie Buoy: You will see US do well you have to do the tech assessment get the reimbursement again train the sales force very similar to what we talked about for decided to metastatic.
Maggie Buoy: But we got to run some samples there and do some of that activity as well as set up in our CLIA lab.
Speaker Change: Regarding the automation for we don't do whole genome today.
Speaker Change: Today, So we have to ingest that into our lab, we do transcriptome today. So we're going to have to add that workflow and do the necessary activities around that so that's why it takes a little bit longer to get that launched and so I think what you will probably share with you first is when we've done that.
Marc Stapley: We do transcriptome today, so we're going to have to add that workflow and do the necessary activities around that. So that's why it takes a little bit longer to get that launched. And so I think what we'll probably, you know, share with you first is when we've done that tech assessment, and we're clearly seeing that path to reimbursement.
Speaker Change: Our tech assessment, and we are clearly seeing that path to reimbursement.
Unknown Executive: Great! Thank you so much.
Unknown Executive: Our next question comes from the line of Mike Mattson with Needham and Company. Your line is now open.
Marc Stapley: Hey Marc, hey Rebecca, this is Joseph on for Mike. So I guess the first question is just around AffirmaGrid. Mark, you talked about the three studies presented at Endo in your prepared remarks. Just taking a look at those abstracts, it seems like GRID is kind of driving some new discoveries in thyroid cancer research. I'm just wondering if any of those kind of molecular insights that have been found or could be found could be implemented in an updated Affirmo or an add-on clinical test in the future. I'm just wondering how GRID RUO could progress in the future.
Marc Stapley: Yeah, it's a great question, and I can draw comparisons here to Decipher and what we've seen there. But let me just start by reminding everybody that GRID is our whole transcriptome approach. It's fueled by the fact that we run a whole transcriptome. It's ordered roughly half of the time in both Affirma and Decipher's cases, and it's clearly fueling new research. And you cited the three that came out at ENDO 2024.
Marc Stapley: And included in that were things like new biomarkers or groups of biomarkers that people are doing analysis on, researchers are doing analysis on to determine if there are correlations there. And that is really what GRID can do. We've seen that with Decipher where there have been some specific biomarkers that have been used multiple times. And I'm trying to remember the name; Portos is one of them in Decipher where there have been a number of publications around that.
Marc Stapley: And so I think you're going to see similar things with Affirma. It's really helping to renew investment and research around endocrinology and thyroid cancer. And it's wonderful to see that. And whether those end up being commercial tests in the future is to be determined. But again, remember from our standpoint, the fact that we run a whole transcriptome means we always have that data for every patient. So it'd be nice to see some new tests in the future, potentially, but I'll wait and see how that pans out.
Unknown Executive: Okay, okay, great. Yeah, that's very helpful.
Marc Stapley: And just maybe a quick one. Do you have an approximation for Nightingale in terms of, you know, data release for clinical utility? Or is that kind of too far out to put a quarter down, or not? for an approximation.
Marc Stapley: Yeah, too far out really to put a quarter down. It's one of our long-term growth drivers, as you know, and what we need to actually do is complete the study, that's step number one, analyze the data at several points along the way, see when we have the clinical utility, take the product that we have, get it published, take it to Maldi-X, and go forward from there. And so it's multiple years before we get to that point. We're still enrolling for Nightingale at this point. We've still got close to 100 sites enrolling, and as I said last quarter, I'm not going to predict when that finishes, but we're progressing.
Maggie Buoy: Take that we feel that we have take it too.
Maggie Buoy: Get it published take it to multi X and go forward from there and so it is multi years before we get to that point, we're still enrolling for 19 Gal at this point, we still got close to 100 sites enrolling and as I said last quarter I'm not going to predict when that finishes, but we're progressing.
Unknown Executive: Absolutely. Okay. Well, congrats on the quarter. Great. Thank you.
Speaker Change: Absolutely, okay, well congrats on the quarter.
Speaker Change: Great. Thank you.
Unknown Executive: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be called. Our next question comes from the line of Prashant Kota with Goldman Sachs. Your line is now open.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: Our next question comes from the line of Chris Schott Coda with Goldman Sachs. Your line is now open.
Unknown Executive: Hey guys, congrats on the quarter, really strong results. A lot of questions have already been asked, but just going back to Affirma, how are you thinking about the ASP trajectory given the addition of GRID and Bethesda V classifications? So, for example, once GRID potentially becomes available for patients as opposed to RUO.
Speaker Change: Hey, guys congrats on the quarter really strong results.
Speaker Change: A lot of questions have already been asked but just going back to our firm.
Speaker Change: How are you thinking about ASP trajectory given the addition of grid in Bethesda five.
Speaker Change: Classification. So for example, once grid is potentially becomes available for patients as opposed to <unk>.
Speaker Change: Yes.
Marc Stapley: Maybe I'll tackle that last part, and then, Rebecca, you can hit the ASP. But I see GRID as a research-use-only tool for the foreseeable future. I don't think that will become a clinical tool. It could lead to, as we mentioned earlier, some clinical discoveries that end up in a clinical setting in the future, but I don't see that right now. It's a firmer clinical test, as we have it, and then the research-use-only grid to power it.
Speaker Change: Maybe I'll talk about and I'll start and then Rob.
Speaker Change: Becky you can hit the ASP, but see grid as a research use only tool for the foreseeable future I don't think that becomes a clinical tool.
Rob: Could lead to as we mentioned earlier, some clinical discoveries, but it ended up in a clinical setting in the future.
Rebecca Chambers: Yeah, so on the ASP front, obviously, the Bethesda 5, the Bethesda 5 updated LCD is great news for us, as Marc highlighted in the script. And in parallel, obviously, the large payer on the Decipher side in the first quarter is also another positive trend for us on ASP. So when I think about ASP in general, I would like to think about it more at the total testing level and the high-level positive trends that we have to that end.
Rebecca Chambers: We've cited a 5% CAGR over the last two years on ASP. And, you know, I think when it comes down to it, these are the things that we need to continuously do to drive ASP growth above and beyond the volume growth that we're delivering. And so you can do the rough math on, you know, a third of the 30,000 patients being Medicare for Bethesda 5, and back into, you know, if you assume whatever our penetration level is and share level is for a firm, you can back into the absolute dollar magnitude there. But it won't necessarily be hugely impactful, but it is another important driver, if you will, to that continued ASP gain over a multi- Thank you.
Unknown Executive: Got it, that's really helpful. And then, as far as evidence generation for your tests goes, are there any notable upcoming studies we should be aware of, aside from Nightingale?
Marc Stapley: Always. The level of activity around Decipher continues to be very, very broad. Studies that we're involved in, as well as many studies where we're aware of them, but we're not necessarily driving them, and others are. Again, fueled by Grid in many respects. And so you should expect to see more there. There's always a nice steady cadence of studies, and now I think that should pick up with Grid for Affirma. And then in other indications, between lung and breath, there's a lot of activities going on. So yeah, nothing that I would point to right now as specifically notable. Just keep an eye on the steady rollout.
Unknown Executive: Great! Thank you so much.
Unknown Executive: Our next question comes from the line of Thomas Deborsey with Nefron Research. Your line is now open.
Marc Stapley: Hi, thanks for taking the question. I was just wondering, I guess, kind of a combination of the level of investment in C2I in the quarter or for the year and or how you are kind of thinking about your adjusted EBITDA margin trajectory from here. I know you haven't given long-term guidance towards, you know, that margin, but obviously, the level of spend on C2I can obviously be, you know, unsealing on that level. So any additional commentary you have in terms of how you balance
Marc Stapley: Yeah, great question. I'm glad you brought that up. If you think about C2I, one of the things that it's important to note is we certainly didn't take on the burn rate of the company as a standalone company because we're adopting a very different approach to how we're utilizing that MRD capability and platform. And we've already kicked off our first project or product, if you like, as we talked about earlier. And so what's happened is that we now have legacy Veracyte team members working very closely with the C2I team on that project.
Marc Stapley: And we have C2I team members working on other Veracyte projects, so those expenses have become very mingled. And so we don't even talk about or think about the C2I expense run rate or burn anymore. It's just now part of Veracyte.
Rebecca Chambers: If you think about that investment in MRD, which is really the bulk of what the C2i team brought to the table, that is, as I said earlier, there are three big projects: MRD, the nasal swab with our Nightingale study in particular, and then we have our three IBD projects or products that we're launching. If you take each of those, they're roughly similar in size, give or take a couple of million dollars either way, and together, all three make up more than half of our total R&D. So, yeah, I don't see a significant change in the trajectory of spend that we've been tracking for R&D given that acquisition or anything else. And then I'll let Rebecca do it... Yeah.
Speaker Change: We've got more than half of our total R&D spend.
Speaker Change: So I don't see a significant change in the trajectory of spend that we've been tracking for R&D, given that acquisition or anything else and then I'll, let Rebecca yes. So I think that plays very nicely into the adjusted EBITDA.
Rebecca Chambers: So, I think that plays very nicely into the adjusted EBITDA. I look forward to your perspective as well, Thomas. You know, I think Marc highlighted that we don't see meaningful changes in said trajectory. That being said, we also commented in our prepared remarks that the adjusted EBITDA in the second half would be slightly higher than the adjusted EBITDA in the first half and that we're going into our 2025 budgeting season. And so, therefore, we can't necessarily comment on when or, you know, the duration to get to that 25% adjusted EBITDA goal, but obviously, we're headed in the right direction.
Thomas: Look forward perspective, as well Thomas I think mark highlighted that we don't see meaningful changes in that trajectory.
Speaker Change: That being said, we also commented in our prepared remarks that the second half would that adjusted EBITDA in the second half would be slightly higher than the adjusted EBITDA in the first half and that we're going into our 2025 budgeting season.
Thomas: And so therefore, we can't necessarily comment on when or the duration to get to that 25% adjusted EBITDA goal, but obviously were headed in the right direction, we're incredibly proud of.
Rebecca Chambers: We're incredibly proud of the portfolio approach we take to managing this company, and, philosophically, I don't think anything will change on a go-forward basis. In any given year, you can obviously have puts and takes, but, you know, we've abided by this philosophy now for many, many years, both here and elsewhere, and I don't foresee that changing.
Thomas: The portfolio approach, we take to managing this company and philosophically I don't think anything will change on a go forward basis in any given year you can obviously have puts and takes but.
We have abided by the philosophy now for many many years, both here and elsewhere and I don't foresee that changing.
Marc Stapley: Thanks. I do want to just point out that, you know, the 21% adjusted EBITDA for the quarter is, I think, a significant milestone. And it's great to see it, and it's what we've been heading towards, that kind of level of profitability and growth, and it's about, I think it's about 600 basis points higher than we achieved in Q1. So really, really impressed to see that, and it's certainly something that we want to sustain and grow from.
Thomas: I do want to just punctuate that.
Thomas: 21% adjusted EBITDA for the quarter I think is a significant milestone for us.
Thomas: And it's great to see it and so what we've been we've been heading towards that kind of a level of profitability and growth.
Thomas: I think it's about 600 basis points higher than we achieved in Q1, so really really impressed to see that and it's certainly something that we want to sustain and grow from.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Marc Stapley: I am showing no further questions at this time. I would now like to turn it back to Marc for closing remarks.
Speaker Change: I am showing no further questions at this time I would now like to turn it back to Mark for closing remarks.
Marc Stapley: Thank you, Lauren. I appreciate it.
Marc Stapley: So in closing, I believe that our decipher revenue growth of 43% year over year, a firmer revenue growth of 21% year over year, our 21% adjusted EBITDA margin, and almost $27 million of cash generation in the quarter sets us apart. Add to that the durable growth in both tests that we're experiencing and our three incremental long-term growth drivers, and Veracyte clearly has a very unique profile in the diagnostics industry that is not getting the attention I believe is warranted in the space.
Marc Stapley: Molecular diagnostics are proving their value when supported by evidence, and I believe that Veracyte is leading that charge. I want to thank all of the approximately 850 employees at Veracyte who have contributed to this excellent performance over many years to make a difference in the lives of over 500,000 patients that we have served to date with our advanced diagnostic technology. I look forward to updating you again on our Q3 earnings call. Thank you.
Unknown Executive: Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect.